43854 Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities, and Action Plan By signaling to corrupt leaders that there will be no safe haven for stolen assets, StAR would constitute a formidable deterrent to corruption in developing countries. StAR would also serve to bring in the other side of the corruption equation, as stolen assets tend to be stashed in developed country financial centers. June 2007 Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities, and Action Plan © 2007 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. 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Allotherqueriesonrightsandlicenses,includingsubsidiaryrights,shouldbeaddressedtotheOfficeof thePublisher,WorldBank,1818HStreetNW,Washington,DC20433,USA,fax202-522-2422, e-mail pubrights@worldbank.org. Table of Contents Acknowledgments............................................................................................................................................................................iv Executive Summary...........................................................................................................................................................................1 1. Why StAR? Why Now?...............................................................................................................................................................5 2. Estimates of the Size of the Problem and Potential Benefits from Tackling High-level Corruption.....................8 2.1 Global Estimates..................................................................................................................................................................9 2.2 Country-level Estimates...................................................................................................................................................10 2.3 The Development Impact of StAR...................................................................................................................................11 3. How Stolen Money is Hidden..................................................................................................................................................13 4. Legal Framework: The UN Convention Against Corruption (UNCAC)..........................................................................15 5. Findings from Country Case Studies....................................................................................................................................18 5.1 Synopsis of Country Case Studies.................................................................................................................................18 5.1.a Nigeria.........................................................................................................................................................................18 5.1.b Peru..............................................................................................................................................................................19 5.1.c The Philippines..........................................................................................................................................................20 5.2 Asset Theft Facilitated by Lack of Transparency and Low Public Accountability.............................................22 5.3 Domestic Political Will and International Cooperation Key to Asset Recovery.................................................23 5.4 Monitoring Use of Recovered Assets Impeded by Weak Systems and Fungibility............................................24 5.5 Challenges Ahead.............................................................................................................................................................26 6. An Action Plan..........................................................................................................................................................................30 6.1 Action Plan Matrix.............................................................................................................................................................31 6.2 UNODC-WBG Joint Program...........................................................................................................................................33 6.2.a Building Global Partnerships on StAR...............................................................................................................33 6.2.b Building Institutional Capacity and Providing Technical Assistance at the Country Level..................34 6.2.c Implementation and Monitoring of UNCAC......................................................................................................36 Appendix A. Options to Improve Public Financial Management.........................................................................................38 Appendix B. What Other Agencies are Doing...........................................................................................................................41 Appendix C. Focal Point Questionnaire.....................................................................................................................................45 References........................................................................................................................................................................................47 Note: All dollar amounts are in U.S. dollars, unless otherwise indicated. iv Stolen Asset Recovery (StAR) Initiative: Acknowledgments ThisreportwaspreparedjointlybytheUnitedNationsOfficeonDrugsandCrime(UNODC)andthe World Bank. The World Bank effort was led by Brian Pinto (PRMED), with valuable contributions from Daniel Kaufmann (WBI); Victor A. Dumas and Francis Rowe (PRMED); Theodore S. Greenberg (FPDFI); William L. Dorotinsky and Richard Messick (PRMPS); and Scott White (LEG). The UNODC effort was led by Francis Maertens (DPA), Dimitri Vlassis (DTA/CCS), and Stuart C. Gilman (DO/GPAC), with valuable contributions from Rick McDonnell and Delphine Schantz (DO/GPML) and Oliver Stolpe (DO/GPAC). The report was prepared under the overall leadership and supervision of Dr. Ngozi Okonjo-Iweala (former Finance Minister of Nigeria) and Danny Leipziger (PRMVP). Guidance from Juan Jose Daboub (MDD), Vikram Nehru (PRMED), Sanjay Pradhan and Randi Ryterman (PRMPS), and Joachim von Amsburg (EACPF) is gratefully acknowledged. ThreecountrycasestudiesonNigeria,Peru,andthePhilippineswerecommissionedasanalytical background papers in support of the StAR Initiative. The Nigeria case study was prepared by Dr. NgoziOkonjo-Iweala.ThePerucasestudywaspreparedbyVictorA.Dumas.ThePhilippinescase study was prepared by Professor Leonor Briones. For further information regarding the StAR Initiative, please contact Randi Ryterman, Sector Manager PRMPS (Rryterman@worldbank.org). Challenges, Opportunities, and Action Plan 1 Executive Summary The theft of public assets from developing countries is a huge and serious problem: · The cross-border flow of the global proceeds from criminal activities, corruption, and tax evasion is estimated at between $1 trillion and $1.6 trillion per year. · Corruptmoneyassociatedwithbribesreceivedbypublicofficialsfromdevelopingandtransition countries is estimated at $20 billion to $40 billion per year--a figure equivalent to 20 to 40 percent of flows of official development assistance (ODA). These estimates, while imprecise, give an idea of the large magnitude of the problem and the need for concerted action to address it. Indeed, the coming into force in 2005 of the landmark UN Convention Against Corruption (UNCAC), which devotes a chapter to asset recovery, signals the growing global consensus for urgent action. Assetsstolenbycorruptleadersatthecountry-levelarefrequentlyofstaggeringmagnitude.The truecostofcorruptionfarexceedsthevalueofassetsstolenbytheleadersofcountries.Thiswould includethedegradationofpublicinstitutions,especiallythoseinvolvedinpublicfinancialmanagement andfinancialsectorgovernance,theweakeningifnotdestructionoftheprivateinvestmentclimate, and the corruption of social service delivery mechanisms for basic health and education programs, withaparticularlyadverseimpactonthepoor.This"collateraldamage"intermsofforegonegrowth andpovertyalleviationwillbeproportionaltothedurationofthetenureofthecorruptleader. While the traditional focus of the international development community has been on addressing corruption and weak governance within the developing countries themselves, this approach ignores the "other side of the equation": stolen assets are often hidden in the financial centers of developed countries; bribes to public officials from developing countries often originate from multinational corporations; and the intermediary services provided by lawyers, accountants, and company formation agents, which could be used to launder or hide the proceeds of asset theft by developing country rulers, are often located in developed country financial centers. Addressing the problem of stolen assets is an immense challenge. Even though countries as diverse as Nigeria, Peru, and the Philippines have enjoyed some success in asset recovery, the process has been time-consuming and costly. · Generalizing from the experience of these countries, developing countries are likely to encounter serious obstacles in recovering stolen assets. · Evenwherethepoliticalwilltopursuestolenassetsexists,limitedlegal,investigative,andjudicial capacity and inadequate financial resources could hamper the process. · Jurisdictionswherestolenassetsarehidden,oftendevelopedcountries,maynotberesponsiveto requests for legal assistance. 2 Stolen Asset Recovery (StAR) Initiative: The Stolen Asset Recovery (StAR) initiative is being launched jointly by the UN Office on Drugs and Crime (UNODC) and the World Bank Group (WBG) to respond to this problem.Given thenatureoftheproblem,successwilldependcriticallyuponforgingandstrengtheningpartner- shipsamongdevelopedanddevelopingcountries,aswellasotherbilateralandmultilateralagencies with an interest in the problem. The development pay-off to the StAR initiative is expected to be significant. Even a portion of recovered assets could provide much-needed funding for social programs or badly needed infrastructure. Every $100 million recovered could fund full immunizations for 4 million children or provide water connections for some 250,000 households. The total benefit would far exceed that associated with the asset restitution itself, assuming that the released funds are well spent. First, a StAR program that transmits the signal that there is no safe haven for stolen assets will embodya powerful deterrent effect. Second, over the long run, one would expect significant and lasting benefits, assuming the asset recovery effort is accompanied by institutional reform and better governance. Indeed, without improvements in governance, a StAR initiative will not have lasting benefits. The UNODC-WBG StAR initiative is an integral part of the World Bank Group's recently approved Governance and Anti-Corruption Strategy, which recognizes the need to help develop- ing countries recover stolen assets. The international legal framework underpinning StAR is provided by the UN Convention Against Corruption, the first global anticorruption agreement, whichenteredintoforceinDecember2005.UNODCisboththecustodianandtheleadagencysup- portingtheimplementationofUNCAC,aswellastheSecretariattotheConferenceofStateParties. The Action Plan presented in this report responds to feedback received from consultations with developed and developing countries, as well as lessons from the experience of Nigeria, Peru, and the Philippines: · Theft of public assets is facilitated by a lack of transparency and public accountability. · Developing countries need to strengthen their legal, financial, and public financial manage- ment systems. · Even when political will exists in victim countries, legal differences across jurisdictions or the unwillingness of developed countries to help can derail asset recovery. A fundamental premise of the Action Plan is that a successful effort on stolen asset recovery calls for global action: · Political will and legal reform are also needed in developed countries, not just in developing countries. Both sets of countries need to ratify and implement the UN Convention Against Corruption (UNCAC). · Time is of the essence. Prolonging the process of asset recovery will take a toll on the credibility ofthevictimcountry.Apromptresponseisneededfromcountrieswherestolenassetsarehidden. · Global cooperation is needed to ensure that new financial havens do not replace the existing ones and developing countries receive the legal support they need. Challenges, Opportunities, and Action Plan 3 Examples of proposed actions include: · Implementation of UNCAC, including developing and strengthening partnerships with multilateral and bilateral agencies in pursuit of this effort. · Developing a pilot program aimed at helping countries recover the stock of stolen assets by providing the needed legal and technical assistance. This could include help on filing a request formutuallegalassistanceandadviceonexpertsneeded.NeithertheWBGnorUNODCwould get directly involved in the investigation, tracing, law enforcement, prosecution, confiscation, and repatriation of stolen assets--activities that may be best suited for government-to-government assistance or private sector assistance, working with the rele- vant government authorities. · Offering countries alternatives for monitoring recovered assets, within an overall framework of public financial management reform, to ensure transparency and effective use of those assets. Such monitoring would be on a voluntary basis, with the agreement of all the countries concerned, in keeping with the fundamental principle of the return of stolen assets as embod- ied in UNCAC. · Building global partnerships on StAR. At the 2007 IMF-World Bank Spring Meetings, during a side-event introducing the StAR Initiative, representatives of developed and developing countries and multilateral development banks expressed strong support for the Initiative. The consensus was that StAR is an idea whose time has come and that every country or international agency must do its part to make it succeed.Indeed,acollectiveglobaleffortisessentialforsuccessandunequivocallytransmitting the signal that corruption does not pay. In this sense, StAR was described as the "missing link" in an effective anti-corruption effort. By putting corrupt leaders on notice that stolen assets will be traced,seized,confiscated,andreturnedtothevictimcountry,StARwouldconstituteaformidable deterrenttocorruption.Workinginclosepartnershipwiththeinternationaldevelopmentcommunity, UNODC and the WBG hope to make a positive difference to developing countries through the StAR Initiative. 4 Stolen Asset Recovery (StAR) Initiative: Working in close partnership with the international development community, the United Nations Office on Drugs and Crime and the World Bank Group hope to make a positive difference to developing countries through the StAR initiative. Challenges, Opportunities, and Action Plan 5 1 .Why StAR? Why Now? Inrecentyears,countriesasfar-flunganddiverseasNigeria,Peru,andthePhilippineshaveenjoyed somesuccessinsecuringtherepatriationofassetsstolenbytheircorruptformerleaders.Success, however, has been neither easy nor quick. Consider the Philippines. In 1986, the Republic of the Philippines filed a request for mutual assistance with the Swiss authorities in connection with the repatriation of Marcos deposits in Swiss banks. Twelve years elapsed before these deposits were transferredtoescrowaccountsinthePhilippineNationalBank(PNB)andanothersixyearspassed before the concerned $624 million was transferred to the Philippine Treasury. In between, several major legal hurdles had to be crossed, including presenting evidence that the monies were the product of embezzlement, diversion of public property, and plundering of the public treasury. Only after the Philippine government won a ruling that the monies could be moved out of Switzerland without a final conviction of Mrs. Marcos under article 74A of the International Mutual Assistance on Criminal Matters Act (IMAC) was the money moved to the Philippine National Bank in 1998. It was released to the Philippine Treasury in 2004 following a Philippine Supreme Court decision ordering the forfeiture of the Marcos Swiss deposits in July 2003.1 Quiteapartfromthehurdlesfacedbydevelopingcountriesinassetrecovery,atleastthreeother sets of events have shone a spotlight on the problem of assets stolen by corrupt leaders. First, starting in 1997, several important pieces of international legislation against corruption, bribery, and transnational organized crime have been adopted. The landmark UN Convention Against Corruption (UNCAC), which came into force in December 2005, includes a chapter exclusively devoted to asset recovery, attesting to the need to address this problem urgently. Second, the 9/11terroristattackoftheUnitedStatesin2001hasintensifiedthecampaignagainstthefinancing of terrorism and money laundering. The main financial centers of the world, in being seen as a safe haven for the stolen assets of corrupt leaders, criminals, and terrorists, face a higher reputational risk today than they did 10 years ago. Third, developing countries themselves are gearing up to recover stolen assets and use the proceeds to fund development programs and facilitate the achievement of the Millennium Development Goals (MDGs). Consider the 2001 NyangaDeclarationontherecoveryandrepatriationofAfrica'swealthbytherepresentativesof 1. Drawn from a December 12, 2006 statement by the Philippines' Ombudsman to the first meeting of the State Parties to the UN Convention Against Corruption (UNCAC) in Amman, Jordan. 6 Stolen Asset Recovery (StAR) Initiative: TransparencyInternationalin11Africancountries,whichexplicitlyrefersto"...Nigeria'sPresident Olusegun Obasanjo's address to the UN General Assembly in September 1999 calling for the creationofaninternationalconventionfortherepatriationofAfrica'swealthillicitlyappropriated and kept abroad."2 This support was more broadly manifested during the first session of the Ad hocCommitteenegotiatingUNCAC,whendevelopingcountriesfromallregionsdecidedtomake asset recovery a high priority of the Convention. Whilethereisclearlypositivemomentumandsupportforrecoveryofstolenassets,thechallenges areimmense.Differencesinlegalsystemsacrossjurisdictionswherethetheftoccursandmoney is laundered and parked present a formidable impediment to asset recovery. So far, countries havelargelypursuedtheircasesonabilateralbasisandwithgreatdifficulty.Andwhiletheentering intoforceofUNCACisabigstepforward,halftheG-8countrieshaveyettoratifyit.Moreover,there istheissueofbuildingcapacityindevelopingcountrieshopingtoinvokeUNCAC.Thefollowing are likely to be impediments: · Countriesthatseektherecoveryofstolenassetsmaynothaveadomesticregimetodealwith money laundering and the forfeiture of stolen assets. These countries usually lack the capacity in their criminal justice system to produce adequate and appropriate requests for international legal assistance. · Death,thefugitivestatus,andimmunityofpersonsengagedinlootingassetscouldimpedethe process, as could the continuing political influence and power of former corrupt officials. Even when the conditions are right for pursuing asset recovery, some developed countries may not cooperate because they do not trust the requesting country or lack confidence in their rule of law or for political reasons.3 Against this background of positive momentum yet immense challenge, the World Bank Group (WBG), in partnership with the United Nations Office of Drugs and Crime (UNODC), is launching theStolenAssetRecovery(StAR)initiative.Therolesoftheseinstitutionswillbeframedbytheir respective mandates: in the case of UNODC by its responsibility as the custodian of UNCAC and Secretariat to the Conference of State Parties; and in the case of the WBG, by the recently approved Governance and Anti-Corruption (GAC) strategy, which recognizes the need for global action on stolen asset recovery.4 The objective of the UNODC-WBG partnership is three-fold: · Usebothinstitutions'conveningpowertoenhancecooperationbetweendevelopedanddeveloping countriesonStARandpersuadeallcountriestoratifyandimplementUNCAC.Thisagendawill be pursued in close partnership with other agencies working on related topics. 2. See http://ww1.transparency.org/pressreleases_archive/2001/nyanga_declaration.html 3. The term "requesting" or "sending" country in the context of stolen asset recovery typically refers to developing countries from which assets were stolen and "sent" to developed country havens ("receiving countries"). The former then request the latter to return the stolen assets. 4. The World Bank Group's Board unanimously endorsed the Governance and Anti-Corruption strategy paper on March 20, 2007. See World Bank (2007). Challenges, Opportunities, and Action Plan 7 · Build partnerships aimed at enhancing legislative, investigative, judicial, and enforcement capacity in developing countries to enable them to successfully recover the stock of stolen assets kept either in the home country or secreted abroad, while deterring the new flow. · Help concerned developing countries--when voluntarily agreed within the legal framework of UNCAC--monitor the use of recovered assets, as was done in Nigeria (discussed in section 5). While UNCAC is clear that recovered assets should be returned, in some cases recovery efforts could be enhanced by voluntary agreements on monitoring to ensure that recovered assets are used transparently for developmental purposes. The WBG's experience with public expenditure tracking can be put to use in helping monitor the use of recovered assets, at the election of the country in question.5 A StAR role for the WBG would thus be an integral part of its Governance and Anti-Corruption (GAC) Strategy, with its focus on financial sector governance, transparent and sound public financial management, global collective action, and the deterrence of corrup- tion by public officials. 5. This is discussed further in section 5. 8 Stolen Asset Recovery (StAR) Initiative: 2 Estimates of the Size of the Problem and Potential .Benefits from Tackling High-level Corruption This section presents global and country-level estimates of theft by corrupt leaders. The theft of public assets involves two key steps: stealing assets, and then laundering the proceeds--either at home or abroad--to avoid detection and make them appear legitimate. Global estimates are derived from estimates of sums of money laundered worldwide. Country-level estimates linked tothenamesofspecificrulersareobtainedfromTransparencyInternational,whichhascompiled the data from various sources.6 Given the nature of the activity, accurate measurement of the amount of illegal monies involved ateithertheglobalorcountry-levelmaynotbefeasible.Anothersourceofambiguitystemsfrom differingdefinitionsofcorruptionandthescopeoftheactivitiesincludedinthevariousestimates of illegal monies, not all of which involve cross-border flows. Thus the theft of public assets by corruptleaders--thefocusofthispaper--whichisusuallyreferredtoasgrandcorruption,maysimply be the tip of the iceberg. For example, the billions looted by the corrupt leader of an oil exporting developing country, while visible and significant enough to warrant action in its own right, may be only one part of an extensive network of corruption that infects the whole economy, creating a pyramid of corruption. This could include public sector companies, the financial system, and petty corruption associated with policemen and factory inspectors. These various interpretations of the scope of corruption need to be kept in mind when reviewing estimates of the sums of money involved in illegal activity. Before proceeding to estimates of the sums of illegal and corrupt monies, it is worth stressing thatthetruecostofcorruptionfarexceedsthevalueofassetsstolenbytheleadersofcountries. This would include the degradation of public institutions, especially those involved in public financial management and financial sector governance, the weakening if not destruction of the private investment climate, and the corruption of social service delivery mechanisms for basic 6. See Transparency International's 2004 Global Corruption Report, chapter 1, p. 13. Introduction available at http://www.transparency.org/publications/gcr/download_gcr/download_gcr_2004 Challenges, Opportunities, and Action Plan 9 health and education programs with a particularly adverse impact on the poor. This "collateral damage" in terms of growth and poverty alleviation will be proportional to the duration of the tenure of the corrupt leader. 2.1 GLOBAL ESTIMATES Numerous studies have attempted to estimate the sums of money being laundered worldwide. Besidessufferingfromseriousflawsinestimationtechniques,attemptstoderivecompleteestimates are hampered by the fact that the volume of laundered money is not restricted to assets corruptly acquired by country leaders. Money laundering (ML) services could also be demanded by those evadingtaxesorinvolvedinthetradeofillegalarmsornarcotics.Theestimatesavailable,therefore, needtobetakenas,atbest,roughapproximations.Severalestimatesprovidetheupperorlower bounds, ranging from: · 2 to 5 percent of global GDP (Camdessus 1998), which amounts to $800 billion to $2 trillion in current U.S. dollars, as an estimate of the total funds involved in various illegal activities.7 · $3.4 trillion as an upper bound (cited in Reuter and Truman 2004). This number is based on estimates of the unobserved economy, which is a broad definition of illegal and legal activities excludedfromGDPin21OECDcountries,basedonSchneiderandEnste(2000)andSchneider (2002). · $20 billion to $40 billion (2001 Nyanga Declaration). This is an estimated stock of assets acquired by corrupt leaders of poor countries, mostly in Africa, and stashed overseas. · $500 billion in criminal activities, $20 billion to $40 billion in corrupt money, and $500 billion in tax evasion per year (Baker and others 2003; Baker 2005). This adds up to roughly $1 trillion, with half coming from developing and transition economies. · 25 percent of the GDP of African states lost to corruption every year, amounting to $148 billion (U4Anti-CorruptionResourceCentre2007).Thisestimateislikelytoencompassthefullrange of corrupt actions, from petty bribe-taking done by low level government officials to inflated publicprocurementcontracts,kickbacks,andraidingthepublictreasuryaspartofpublicasset theft by political leaders. Of the above numbers, all are annual flows, except those cited in the 2001 Nyanga Declaration by the representatives of Transparency International in 11 African countries. It notes that $20 billion to $40 billion "...has over the decades been illegally and corruptly acquired from some of the world's poorest countries, most of them in Africa, by politicians, soldiers, businesspersons and other leaders, and kept abroad in the form of cash, stocks and bonds, real estate and other assets."8Thisstockfigureismuchlowerthanwhatonemightexpect,giventheflowof25percent of African GDP often cited as being lost in total corruption, which amounts to $148 billion per year in current dollars.9 7. This figure has been widely quoted in the literature; however, a documented basis for it could not be found. IMF (2001, p. 10) quotes an FATF estimate of flows associated with drug trafficking at 2 percent of global GDP, so by assumption, 2 to 5 percent is likely to be referring to total flows. 8. http://ww1.transparency.org/pressreleases_archive/2001/nyanga_declaration.html 9. However, neither a precise source nor an underlying methodology for this number could be pinned down. It appears to have become a "fact" as a result of being repeatedly cited. 10 Stolen Asset Recovery (StAR) Initiative: Baker (2005) presents global estimates of annual money laundering based on a "bottom up" approach. The funds needing money laundering are divided into the three components: criminal, including drugs, counterfeited goods and money, human trafficking, illegal arms trade, and unrecorded oil sales; corrupt, essentially accruing to Politically Exposed Persons (PEPs), the focus of this paper, from illegal activities like bribery, extortion, fraud, and embezzlement from national treasury; and proceeds linked to tax evasion.10 Baker estimates the sums involved from these three components at a global level of between $1 and $1.6 trillion annually, with roughly half coming from developing and transitional economies.11 Whilethenumbersarealarming,oneshouldguardagainstcloakingthemwithanauraofscientific precision in view of the weaknesses in the estimation methods used. Reuter and Truman (2004, p. 16) acknowledge that "At best, the various estimates suggest that there is substantial potential demand for money-laundering services, but there is little basis for concluding whether it amounts to hundreds of billions or trillions of US dollars." And IMF (2001, p. 12, para. 24) notes in like vein: "Measurements based on reported crimes underestimate the amount of financial system abuse, while estimates based on underground activity clearly exaggerate it." 2.2 COUNTRY-LEVEL ESTIMATES Directly relevant to this paper are estimates of the total stock of assets stolen by the corrupt leaders of various countries, which in an individual context, are often highly significant. Table 1, basedonTransparencyInternational(2004),focuseson10ofthenotoriouscasesofthepastfew decades. As the TI report cautions, the political leaders shown are not necessarily the 10 most corruptleadersoftheperiodunderconsiderationand"...theestimatesoffundsallegedlyembezzled are extremely approximate." Indeed, the sources cited by TI (2004) are chiefly journalistic. The only number coming from an official country source is that for Fujimori, from the Office of the Special State Attorney for the Montesinos/Fujimori Case, Peru. The third column of the table gives the estimated total stock of stolen assets, lower and upper bound, in billions of U.S. dollars, based on TI (2004). The fourth column gives average annual nominal GDP in dollars over the period the corrupt leader ruled. The final columns convert the stockof stolenassetsinto anequivalentannualflow,expressed as a percentage of average annual GDP,givingboththelowerandupperboundfortheannualrateoftheft.12Accordingtothenumbers intable1,Jean-ClaudeDuvalierallegedlystoletheequivalentof1.7to4.5percentofHaitianGDP for every year he was in power. The only other two kleptocrats to come close as a percentage of GDP were Ferdinand Marcos and Sani Abacha.13 10. Politically Exposed Persons (PEPs) are defined in the Glossary to the Financial Action Task Force Forty Recommendations (FATF 2003, p. 14) as "individuals who are or have been entrusted with prominent public functions in a foreign country, for example, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials. Business relationships with family members or close associates of PEPs involve reputational risks similar to those with PEPs themselves. The definition is not intended to cover middle ranking or more junior individuals in the foregoing categories." The document is available at http://www.fatf-gafi.org/dataoecd/7/40/34849567.PDF 11. For details, see Baker (2005, pp. 165­73 and table 4.4, p. 172). Bottom-up or micro methods are also discussed in Reuter and Truman (2004, pp. 19­23). They note that the estimates are subject to serious flaws. 12. For example, in the case of Suharto, the number of 0.6 is obtained as {[(15/31)/86.6] X 100}, where 31 is the number of years for which Suharto ruled Indonesia. 13. The term "kleptocrat" is used to describe corrupt heads of state and other politically exposed persons (PEPs). Challenges, Opportunities, and Action Plan 11 TABLE 1. ESTIMATES OF FUNDS ALLEGEDLY EMBEZZLED FROM 9 COUNTRIES Annual theft as percent of average Average nominal GDP Stolen annual assets GDP Lower Upper Political leader Country ($billion) ($billion) bound bound Mohamed Suharto (1967­98) Indonesia 15 to 35 86.6 0.6 1.3 Ferdinand Marcos (1972­86) Philippines 5 to 10 23.9 1.5 4.5 Mobutu Sese Seko (1965­97) Zaire 5 8.8 1.8 1.8 Sani Abacha (1993­98) Nigeria 2 to 5 27.1 1.5 3.7 Slobodan Milosevic (1989­2000) Serbia/Yugoslavia 1 12.7 0.7 0.7 Jean-Claude Duvalier (1971­86) Haiti 0.3 to 0.8 1.2 1.7 4.5 Alberto Fujimori (1990­2000) Peru 0.6 44.5 0.1 0.1 Pavlo Lazarenko (1996­97) Ukraine 0.114 to 0.2 46.7 0.2 0.4 Arnoldo Alemán (1997­2002) Nicaragua 0.1 3.4 0.6 0.6 Joseph Estrada (1998­2001) Philippines 0.07 to 0.08 77.6 0.04 0.04 Average % of GDP 0.9 1.8 Source: TI (2004) for first three columns; World Bank staff for the rest. Note: The GDP calculations for Indonesia cover 1970­98, and for Zaire, 1970­97. 2.3 THE DEVELOPMENT IMPACT OF STAR ThefirstsourceofdevelopmentimpactorbenefitfromtheStARinitiativewouldcomefromtheasset restitutionitself,byreleasingmuch-neededfundsfordevelopment.However,thisbenefitwillaccrue onlyiftherecoveredassetsareusedwell,tosupporttheattainmentoftheMillenniumDevelopment Goals (MDGs) or invest in badly needed infrastructure, for example. As the country case studies in section5willshow,transparentandeffectiveuseofrecoveredassetscannotbetakenforgranted. Consider these examples of the development impact that could result from restitution of stolen assets. Table 2 contains unit cost estimates of key inputs in various health programs used by the World Bank's Africa Region in its operational work, as well as infrastructure projects. The cost estimates suggest that every $100 million restituted to a developing country could fund: · 3.3­10 million insecticide-treated bednets, which are twice as effective as regular bednets; or · First-line treatment for over 600,000 people for one year for HIV/AIDS; or · 50­100 million ACT treatments for malaria; or · Full immunizations for 4 million children; or · Approximately 250,000 water connections for households; or · 240 kilometers of two-lane paved road. 12 Stolen Asset Recovery (StAR) Initiative: TABLE 2. COST ESTIMATES FOR BASIC HEALTH PROGRAMS AND INFRASTRUCTURE Item Estimated cost 1. Insecticide-treated bednets (ITNs) $10­30 per net (cost varies depending upon taxes and internal transport costs) 2. HIV/AIDS treatment $150 per person per yeara 3. Malaria treatment · 10 cents per full dosage where chloroquine is effective (drugs only) · $1 to $2 per full dosage (artemisinine combination treatment, ACT, drugs only) 4. Immunizations · $0.50 DPT (diphtheria, pertussis, and tetanus; three doses of vaccine) · $1.50 (vaccines for a fully immunized child, including DPT; BCG, against a form of TB; tetanus; and measles. Total cost approx. $25, including health service delivery) 5. Water $400 per connected household 6. Roads $410,000 per kilometer of two-lane paved road Source: Items 1­4: Africa Region, the World Bank, drawn from estimates used in operational work. Items 5­6: Fay and Yepes (2003, table 6). Note: These cost estimates are subject to high variance. a. First-line anti-retroviral treatment, ART. Cost in rich countries is $1,000. Donor assistance factored in. Second-line treatment is much more expensive. Thetotalbenefitwouldfarexceedthatassociatedwiththeassetrestitutionitself,assumingthat the released funds are well spent. First, a StAR program that transmits the signal that there is no safe haven for stolen assets will embody a powerful deterrent effect. Second, over the long run, one would expect significant and lasting benefits, assuming the asset recovery effort is accompanied by institutional reform. The potential benefit from institutional reform is illustrated by the case of the Philippines. Former President Marcos is estimated to have siphoned off between $5 billion and $10 billion by the time he was forced out in 1986; he ruled the country as a dictator for the last 14 of the 21 years he was in power. Even taking the lower end of the range and assuming a modest nominal interestof5percent,the$5billionwouldhaveaccumulatedtoover$13billionbytoday,amounting to approximately 22 percent of the country's external debt at the end of 2006. The channels wherebythemoneywasallegedlystolenwerediverse,includingthetakeoverofprivatecompanies; creation of monopolies for sugar, coconuts, shipping, construction, and the media; fraudulent government loans; bribes from companies; and skimming off foreign loans and raiding the public treasury. These channels suggest that the total costs in all likelihood far exceeded the $5 billion to $10 billion estimate. These costs would include the degradation of public institutions, including public financial management, the judiciary and financial sector supervision, a poor investment climate, macroeconomic uncertainty, and a tainted and unstable financial system--all of which are inimical to growth and poverty reduction and a stimulus to capital flight. This example high- lightstheneedtoembedStARinabroaderstrategytoimprovepublicgovernance,asenvisaged in the WBG's Governance and Anti-Corruption Strategy. Challenges, Opportunities, and Action Plan 13 3 .How Stolen Money is Hidden Stolen assets can be hidden either at home or abroad. The focus of this paper is on the cross- border component of public assets stolen from developing countries. Such assets are often hiddeninbankslocatedinthefinancialcentersofdevelopedcountries,althoughfinancialhavens have begun to appear in emerging market countries as well. Further, multinational corporations from developed countries are often the source of bribes paid to public officials in developing countries. The crimes of bribery, corruption, and money laundering are inextricably linked;indeed,moneylaundering(ML),understoodashidingorobscuringthesource,ownership, control, and movement of assets, could be seen as the last link in a long chain of corrupt acts. Money laundering seeks to lower the chances of detecting stolen funds, as well as breaking the direct link between the kleptocrat or politically exposed person (PEP) and the stolen assets by disguising ownership. Money laundering is a diverse activity that can range from simple wire transactions to complex mechanisms that rely on shell banks, undisclosed trusts, and hedge funds, often set up with advisers from developed countries. The money laundering process is usually described as involving three main stages: placement, layering, and integration. · Placement is the process of separating the illicit funds from their illegal source and placing them into one or more financial institutions, domestically or internationally. · Layering is the process of separating criminal proceeds from their source by using layers of financial transactions designed to hide the audit trail and provide anonymity. · Integration schemes place the laundered proceeds back into the legitimate economy in such a way that they appear to be normal business funds. Figure 1 illustrates the money laundering process (see p. 14). The FATF's annual typologies reports describe in detail the variety and "creativity" behind ML mechanisms.14 An interesting feature is that different types of crime tend to rely on different 14.Given the speed with which mechanisms for ML evolve, the FATF has a Typologies Working Group, which brings together experts from law enforcement and the regulatory authorities of FATF members to share information on the latest trends in ML and terrorist financ- ing and the effectiveness of counter-measures. 14 Stolen Asset Recovery (StAR) Initiative: typesoflaunderingmechanisms.UsingreportsfromtheFATFandtheEgmontGroup,Reuterand Truman (2004) tabulate the laundering mechanism employed by each particular type of crime.15 They find that out of 580 cases analyzed, nearly 25 percent of them used wire transfers as the launderingmechanismand13percentusedfrontcompanies.Theyalsofindthat,whiledrugtraf- ficking tends to use the full spectrum of alternatives, bribery and corruption rely heavily on wire transfers and use significantly fewer typologies of laundering mechanisms. These differences indicate that in order to reduce the frequency of crimes like bribery and corruption, special attention should be given to wire transfers.16 FIGURE 1. THE MONEY LAUNDERING PROCESS 1 2 . PREDICATE CRIMES . PLACEMENT · Corruption and bribery · Initial introduction of · Fraud criminal proceeds into the · Organized crime stream of commerce · Drug and human trafficking · Most vulnerable stage of · Environmental crime money-laundering process · Terrorism · Other serious crime 4 3 . INTEGRATION . LAYERING · Last stage in the laundering · Involves distancing the process money from its criminal · Occurs when the laundered source: proceeds are distributed - movement of money to back to the criminal different accounts · Creates appearance - movement of money to of legitimate wealth different countries · Increasingly difficult to detect Source: Levi, Dakolias, and Greenberg (2007, Part III). 15. The Egmont Group is an informal international gathering of financial intelligence units. 16. Although new mechanisms are likely to arise in response to counter-measures! Challenges, Opportunities, and Action Plan 15 4 Legal Framework: The UN Convention . Against Corruption (UNCAC) Theprecedingdescriptionofmoneylaunderingbringsoutthecriticalimportanceofcooperation between developed countries, especially the financial center jurisdictions (which often serve as havens for assets stolen by PEPs) and the developing countries from which assets are stolen. A recurring and serious impediment to cooperation has been the difference in legal systems between these two sets of countries. Inrecentyears,someprogresshasbeenmadeintermsofadoptingnewinternationalinstruments governing proceeds of corruption and corrupt behavior on the part of legal entities (companies) and individuals that pay the bribes:17 · Organization of American States Inter-American Convention Against Corruption (OAS Convention), entered into force in 1997 · OECD Convention on Combating Bribery of Foreign Public Officials, entered into force in 1999 · Council of Europe's Criminal Law Convention on Corruption, entered into force in 2002, and the Civil Law Convention on Corruption, entered into force in 2003 · Convention of the European Union on the Fight Against Corruption, involving officials of the European Communities or officials of member states, various protocols adopted in 1995, 1997, 1998, and 2003 (focused more narrowly on EU interests) · African Union Convention on Preventing and Combating Corruption, adopted in Mozambique in 2003. As of November 2004, only 4 of the 53 states had ratified the convention; it requires 15 ratifications to come into force. · UN Convention Against Transnational Organized Crime, entered into force in 2003. So far, 147 countries have signed, with 126 ratifications/acceptances/approvals/accessions (UN Web site) · FATF noncooperation list, to put pressure on countries to fight money laundering.18 In what is seen as a watershed, the UN Convention Against Corruption, UNCAC, entered into force in December 2005 as the first legally binding global anti-corruption agreement. As of November2006,140countrieshadsignedtheConventionand92hadratifiedit.ThisConvention 17. See Webb (2005). 18. See http://www.fatf-gafi.org/document/4/0,2340,en_32250379_32236992_33916420_1_1_1_1,00.html 16 Stolen Asset Recovery (StAR) Initiative: is a strong affirmation that urgent, global action is needed on the problem of stolen assets; in fact, a whole chapter is dedicated to asset recovery. Looking forward, UNCAC provides a state- of-the-artunifyinglegalframeworkforStARacrossdevelopedanddevelopingcountries.UNCAC contains 71 Articles (see box 1). Its legal architecture includes:19 · Prevention:Thisembraceswide-rangingmeasuresdirectedatboththepublicandprivatesectors, including the establishment of anti-corruption bodies and enhanced transparency in the financing of elections, citizens' rights, and the involvement of civil society in raising public awareness of corruption and what can be done about it. It includes mandatory consideration ofestablishingFinancialIntelligenceUnits(FIUs)responsibleforanalyzingsuspiciousfinancial transaction reports filed by financial institutions. · Criminalization:TheConventionrequirescountriestocriminalizeawiderangeofacts,including bribery, embezzlement of public funds, money laundering, and obstruction of justice. It also recommends that other acts be criminalized, such as trading in influence. · International cooperation: UNCAC promotes cooperation between law enforcement agencies, the protection of witnesses, and the removal of bank secrecy as a barrier for prosecution. It also provides for mutual legal assistance in gathering and transferring evidence for use in courtandtoextraditeoffenders.Countriesarealsorequiredtohelptrace,freeze,andconfiscate the proceeds of corruption. · Asset recovery: "The return of assets...is a fundamental principle of this Convention, and States Parties shall afford one another the widest measure of cooperation and assistance in this regard." Box 1 summarizes key articles of UNCAC, as well as the impediments developing countries are likely to face in availing of its provisions. 19. The Convention, along with a list of countries that have signed or ratified it, is available at http://www.unodc.org/pdf/crime/conven- tion_corruption/signing/Convention-e.pdf. Challenges, Opportunities, and Action Plan 17 BOX 1. KEY ARTICLES OF UNCAC Article 8 mandates that states parties shall promote integrity among their public officials, inter alia, by con- sidering the establishment of codes or standards of conduct. Article 8, paragraph 5 obliges each state party to endeavor, in order to prevent the embezzlement of public funds, to establish measures requiring public officials to declare their assets, benefits, and outside activities from which a conflict of interest may result with respect to their functions. Article 9 provides that states parties shall establish transparent, competitive, and objective systems of procurement and shall promote transparency and accountability in the management of public finances. Article 12 requires states parties to take measures to prevent corruption and to enhance accounting and auditing standards in the private sector. Article14mandatestheestablishmentofdomesticregulatoryandsupervisoryregimesforbanksandnonbank financial institutions in order to combat money laundering, including through international cooperation, and recommends measures to monitor the cross-border movement of cash and monetary instruments in order to prevent the transfer of illicit assets abroad. Article 23 mandates the criminalization of the laundering of proceeds of crime. Article 26 requires states parties to establish the criminal, civil, or administrative liability of legal persons for participation in the offences established in accordance with the Convention. Article 31 mandates the establishment of a basic regime for domestic freezing and confiscation of assets as a prerequisite for international cooperation and the return of assets. Article 40 requires states parties to ensure that their bank secrecy laws do not obstruct domestic criminal investigations of offences established in accordance with the Convention. Article 43 obligates states parties to extend the widest possible cooperation to one another in the investigation andprosecutionofoffencesdefinedintheConvention.ThustheConventionrequiresthatwhenrequested,states parties must take measures to identify, trace, and freeze or seize proceeds of crime, property, equipment, or other instrumentalities. Article46providesthatstatespartiesshallaffordoneanotherthewidestmeasureofmutuallegalassistance in investigations, prosecutions, and judicial proceedings, including for the purpose of the return of assets. Article 51 states: "The return of assets [derived from corruption] is a fundamental principle of [UNCAC] and State Parties shall afford one another the widest measure of cooperation and assistance in this regard." Article 52 requires states to take reasonable steps to determine the identity of the beneficial owners of funds deposited into high value accounts and to conduct enhanced scrutiny of accounts sought or maintained by or on behalf of individuals who are, or have been, entrusted with prominent public functions and their family members and close associates (essentially, due diligence with regard to PEPs). Article 55 requires a state party to enforce a confiscation order from another state party or begin its own proceedings to obtain a domestic order of confiscation and, if granted, give effect to it. Article 57 requires the return of confiscated property to a requesting state party--in cases of public fund embezzlement or laundering of embezzled funds--on the basis of final judgment in the requesting state; however, this condition can be waived by the requested state. Article 57 also requires the return of confiscated property to a requested state in cases of other offences (including money laundering) covered by the Convention when confiscation was properly executed on the basis of a final judgment--which may be waived--and upon reasonable establishment of prior ownership by the requesting state or recognition of damage by the requested state (Art. 57, para. 3b). Article 57, paragraph 5 provides that states parties may give special consideration to bilateral agreements on a case-by-case basis to address the final disposal of confiscated property. Source: UN Convention Against Corruption, adopted by General Assembly resolution 58/4 of October 31, 2003. It came into force on December 14, 2005. 18 Stolen Asset Recovery (StAR) Initiative: 5 .Findings from Country Case Studies Three country case studies on Nigeria, Peru, and the Philippines were prepared on stolen asset recoveryaspartofthebackgroundforthisreport.Drawinguponthesecasestudies,thissection summarizes the key findings and challenges related to StAR. The reason for selecting these countries from the several that have suffered the consequences of grand corruption is two-fold: the relatively easy availability of documentation, and some success in recovering stolen assets. The section starts by providing a synopsis of each country's experience. It then presents the main findings organized around three topics: theft and spiriting away of assets; asset recovery efforts;andmonitoringuseofrecoveredassets.Thesectionconcludesbydefiningthechallenges flowing from the findings. 5.1 SYNOPSIS OF COUNTRY CASE STUDIES 5.1.a Nigeria20 General Sani Abacha, who had governed Nigeria for five years from 1993 to 1998, died on June 8, 1998 of a reported heart attack. He is estimated to have looted from $3 billion to $5 billion overthefiveyearsofhisrule.21Hisdeathpromptedtheopeningofinvestigations,firstbyGeneral AbdusalamiAbubakarandthenbyPresidentOlusegunObasanjo,intoAbacha'scriminaldealings, culminatingincampaignstorecovertheassetsstolenbyhimandhisassociatesandhiddenboth within and especially outside the country. Abachaisallegedtohaveusedfourmethodsforplunderingpublicassets:outrighttheftfromthe public treasury through the central bank; inflation of the value of public contracts; extortion of bribes from contractors; and fraudulent transactions. The corruptly acquired proceeds were laun- deredthroughacomplexwebofbanksandfrontcompaniesinseveralcountriesandlocalities,but principally Nigeria, the UK, Switzerland, Luxembourg, Liechtenstein, Jersey, and the Bahamas. 20. Based on a case study by Ngozi Okonjo-Iweala, commissioned as an analytical background paper in support of the StAR Initiative. 21. Table 1, based on TI (2004), lists the range as $2 billion to $5 billion. Challenges, Opportunities, and Action Plan 19 The chronology of events leading to eventual repatriation was as follows: · In 1998 a Special Police Investigation was launched to investigate Abacha's theft. · OnMay26,1999,GeneralAbubakarissuedDecreeNo.53,whichfacilitatedthedomesticrecovery of $800 million in cash and assets from the Abacha family and associates. · President Obasanjo, who assumed office in May 1999, redoubled the effort to find more of the stolen assets. In September 1999, the Nigerian government engaged a Swiss legal firm, Monfrini and Partners, to assist with tracing and recovering of monies held abroad. · Swiss authorities accepted a request for Mutual Legal Assistance on December 1999, leading to the issuance of a general freezing order. · Beforethefundscouldberepatriated,however,SwisslawrequiredNigeriatopresenttheSwiss authorities with a final forfeiture judgment reached in the Nigerian courts. This proved legally and politically daunting. In a landmark ruling rendered in 2004, Monfrini and Partners got around this hurdle by arguing successfully that, since there was adequate proof of the criminal origin of the Abacha funds, Swiss authorities could waive the final forfeiture requirement. · It took Nigeria five years to obtain a repatriation decision from the Swiss authorities due to numerous appeals brought by the Abachas, who employed large numbers of lawyers to block or slow down the case. · Afteraseriesofnegotiations,whichledtotheselectionoftheWorldBankasabonafidethird party for the monitoring of recovered assets, repatriation finally took place in September and November 2005 and early 2006, for a total of $505.5 million. · With a grant from the Swiss government, the World Bank mobilized Nigerian civil society organizations to participate in the review and analysis of the use of the looted funds. The review found that the funds had generally been used to increase budget spending in support of the MDG areas, as promised. 5.1.b Peru22 During the 10 years President Alberto Fujimori was in office (1990­2000), the intelligence police chief, Vladimiro Montesinos, methodically bribed judges, politicians, and the news media. On September 14 2000, cable Channel N broadcast a video showing Montesinos bribing Congressman Alex Kuori with $15,000. This event was followed by investigations that led to Fujimori'sresignationanduncoveredanetworkofcorruptionthathadtakencontrolofthecountry, undermining the institutional governance systems that existed in the country (the Constitution, elections, rule of law, free press, independent judiciary). During Fujimori's administration, more than$2billionwasallegedlystolenfromthestate.23Afterhisresignation,theinterimgovernment led by President Valentín Paniagua redesigned the legal and institutional framework. A new Anti-corruption System was put in place, which included the creation of prosecution agencies and anti-corruption courts, as well as a series of innovations to the judicial system: the establishment of a negotiated justice system (plea bargaining), special criminal proceedings, and procedural instruments. 22. Based on a case study by Victor A. Dumas, commissioned as an analytical background paper in support of the StAR Initiative. 23. Table 1, based on TI (2004), suggests $600 million as being looted by Fujimori, citing as its source the Office of the Special State Attorney for the Montesinos/Fujimori case, Peru. 20 Stolen Asset Recovery (StAR) Initiative: The main source of theft by Montesinos and his cronies was through the extortion of bribes in awarding national defense procurement contracts. These bribes were hidden from the public based on a legal provision that allowed the executive to deny disclosure of the bidding process on the grounds of "national security." For laundering their proceeds, Montesinos and his cronies used shell companies based in tax haven jurisdictions that were managed by trustees. The main events during the Peruvian asset recovery experience were as follows: · In November 2000, two months after the scandal broke and with Montesinos on the loose, Swiss authorities froze $48 million linked to him and his cronies. · Thatsamemonth,FujimoriappointedaSpecialProsecutortoinvestigatetheMontesinosaffair. Fujimori then proceeded to leave the country and seek asylum in Japan. · Between December 2000 and January 2001, the Peruvian government introduced the afore- mentioned legislative and judicial reforms, which proved fundamental to the advancement of investigations, the dismantling of the prevailing corruption network, and the repatriation of part of the stolen assets. · In March 2001, the Cayman Islands froze nearly $33 million, which was repatriated to Peru in August 2001. · In June 2001, Montesinos was captured in Caracas and extradited to Peru. · In August 2002, after almost two years of investigation and litigation, Swiss authorities returned $77.5 million to the Peruvian government. · InJanuary2004,afterthesignatureofabilateralagreement,theUnitedStatesrepatriatedto Peru $20 million in funds that it forfeited from Montesinos and one of his associates. · All the repatriated assets went into a special fund called FEDADOI, which was managed by a board of five members appointed from different government ministries. · Although guidelines and detailed procedures were defined to ensure the transparent use of the nearly $185 million in recovered assets, these resources ended up mainly supplementing the budgets of the institutions that had a member on the FEDADOI board. 5.1.c The Philippines24 Ferdinand Marcos started accumulating his ill-gotten wealth in 1965, when he was first elected president. He was reelected four years later but declared Martial Law in September 1972, before his second term was completed. The Martial Law regime continued until February 1986, when Marcoswastoppledbytheso-calledpeaceful"PeoplePowerRevolution".Heisestimatedtohave siphoned off between $5 and $10 billion. This ill-gotten wealth was accumulated through six channels: outright takeover of large private enterprises; creation of state-owned monopolies in vital sectors of the economy; awarding government loans to private individuals acting as fronts for Marcos or his cronies; direct raiding of the public treasury and government financial institutions; kickbacks and commissions from 24. Based on a case study by Leonor Briones, commissioned as an analytical background paper in support of the StAR Initiative. Challenges, Opportunities, and Action Plan 21 firms working in the Philippines; and skimming off foreign aid and other forms of international assistance. The proceeds of corruption were laundered through the use of shell corporations, whichinvestedthefundsinrealestateinsidetheUnitedStates,orbydepositingthefundsinvarious domesticandoffshorebanksunderpseudonyms,innumberedaccountsoraccountswithcodenames. The asset recovery efforts of the Philippines extended over 18 years before achieving some success. The following were the landmark events:25 · February 28, 1986--The Presidential Commission on Good Government (PCGG) was launched and made responsible for recovering assets stolen by Marcos. Informal representations were made to the U.S. and Swiss courts to freeze Marcos assets abroad. · March 25, 1986--Swiss authorities froze Marcos assets in Switzerland. · April 7, 1986--PCGG filed a request for mutual assistance with the Swiss Federal Police Department under the provisions of the International Mutual Assistance on Criminal Matters Act (IMAC). This was not accepted, on the grounds of being "indeterminate and generic." · December 21, 1990--The Swiss Federal Supreme Court authorized the transfer of Swiss banking documents on Marcos deposits in Geneva, Zurich, and Fribourg to the Philippine government. It gave the Philippine government one year in which to file a case for the forfeiture of the deposits in Philippine courts, failing which the freeze would be lifted. · December 17, 1991--PCGG filed civil case 141 in Sandiganbayan,26 seeking to recover the Marcos assets. · August 10, 1995--PCGG filed with the District Attorney in Zurich a Petition for Additional Request for Mutual Assistance asking for asset repatriation even before the rendering of a final judgment in the Philippines. It also showed that the Marcos assets in Switzerland were a product of embezzlement, fraud, and the plunder of the public treasury. · August 21, 1995--Examining Magistrate Peter Cosandey granted the request and ordered all Marcos-related securities and accounts transferred to an escrow account with the Philippine National Bank (PNB). However, the Zurich Superior Court of Appeals denied the Order. · December 10, 1997--The Swiss Federal Supreme Court upheld Cosandey's Order. In April 1998, the Swiss deposits were transferred to an escrow account in PNB. · July 15, 2003--The Philippine Supreme Court issued a forfeiture decision in respect of the Marcos Swiss deposits. · February 4, 2004--PCGG remitted to the Bureau of the Treasury the amount of $624 million pertaining to the deposits. 25. Drawing upon Marcelo (2005) and the statement by the Ombudsman of the Republic of the Philippines delivered on December 12, 2006 to the first meeting of the State Parties to UNCAC in Amman, Jordan. 26. This is a special court in the Philippines that has jurisdiction over criminal and civil cases involving graft, corrupt practices, and other offenses committed by public officers and employees. 22 Stolen Asset Recovery (StAR) Initiative: 5.2 ASSET THEFT FACILITATED BY LACK OF TRANSPARENCY AND LOW PUBLIC ACCOUNTABILITY Sixmainfindingsarepresentedinthissection.Thesearesupportedbytheevidenceprovidedby the background country case studies. Finding 1: Lack of transparency and low public accountability facilitate the looting of public assets.Typically,adherencetoprinciplesofopen,accountablegovernmenttendstobeweak, with deficiencies in the system of checks and balances and key public institutions, limited freedom of civil society organizations to monitor public activity, and low respect for--or out- right flouting of--the rule of law. Itisnotacoincidencethatattheheightofthelooting,allthreecountrieshadgovernmentalsystems inplacethatlackedtransparencyandpublicaccountability.Thisfirstfindingstressestheimportance of promoting open, accountable government, building institutional capacity, and implementing a system of checks and balances in developing countries. Finding2:Despitehighlevelsofcorruption,smallstepstowardaccountabilityandtransparency may significantly reduce the theft of public assets. Table 1 (page 11) shows that while Marcos looted between 1.5 and 4.5 percent of annual GDP, and while Abacha stole between 1.5 and 3.7 percent, Fujimori/Montesinos were able to steal only about 0.1 percent of GDP for every year in power.27 A closer look at how assets were stolen reveals importantdifferencesbetweenMarcosandAbacha,ontheonehand,andMontesinos/Fujimorion the other. MarcosandAbachaunabashedlyraidedthepublictreasurybyhavingtruckloadsofforeign currency stolen from the central bank. They also had a significantly smaller network of cronies than did Montesinos/Fujimori, mainly because the complete lack of accountability reduced the need to get others "on board" in order to accomplish their criminal purposes. The Peru case shows how large amounts had to be "invested" by Montesinos and Fujimori in bribing judges and media sources, in order to accomplish their looting.28 The Peru case study also shows that the processes used by Montesinos/Fujimori to spirit away assets were far more sophisticated than moving truckloads of cash or wiring funds out of the central bank. In Peru, most of the theft was made through the extortion of bribes from public contractors, particularly regarding the pur- chase of materiel for the armed forces and police. This stealing pattern was made possible by classifying such purchases as a state secret; this made it difficult for Congress or any other pub- lic institution to exercise oversight. 27. The magnitude of the theft from the Philippines shows that grand corruption, while more likely in countries rich in natural resources, is by no means confined to such countries. 28. This raises the question of whether the $600 million allegedly looted by Fujimori was net of bribes paid to others. There is no infor- mation on this. If net, then actual theft would have been higher. Challenges, Opportunities, and Action Plan 23 In short, established processes of open and accountable government, a system of checks and balances, public accountability, and strong institutional capacity can keep corrupt leaders in check and should be the first line of defense against asset theft. Finding 3: The main techniques used to launder the proceeds of corruption include wire transfers, the use of shell corporations in bank secrecy jurisdictions, and direct deposits in the form of cash or bearer instruments. This narrow spectrum of laundering techniques, as opposed to the broader one employed in other illegal activities like drug trafficking, suggests that concentrating efforts on monitoring a specific set of transactions and related institutions might have a significant deterrent effect on corrupt leaders.29 5.3 DOMESTIC POLITICAL WILL AND INTERNATIONAL COOPERATION KEY TO ASSET RECOVERY Any successful asset recovery effort must have its origin in the domestic political will to go after the stolen assets as an integral part of a process of basic governance reform. Finding 4: Strong domestic political will to embark on the long and winding road to asset recovery is fundamental to successful asset recovery. The willingness and ability to intro- duce legislative reforms and prosecute former corrupt officials, despite the power and influ- ence they might still wield, are unambiguous signals that the government is serious about asset recovery. The three case studies analyzed were selected because they are to some extent success stories onstolenassetrecovery.Itwouldbeinterestingtocomparetheirexperiencewiththatofcountries that suffered a different fate (such as Kenya's so far unsuccessful effort to recover funds allegedly embezzled by Daniel Arap Moi).30 The Government of the Philippines sustained an effort over 18 years to recover part of Marcos's loot. The case studies on Abacha and Fujimori/Montesinos stress the importance of introducing domestic reforms that can boost domestic asset recovery and/or provide overseas investigators with a minimum critical amount of information to launch the process of asset repatriation. The introduction of judicial reforms in Peru like the Negotiated Justice System, and General Abubakar's Decree No. 53 of 1999 in Nigeria that led to the domestic confiscation of nearly $800 million in assets stolen by Abacha and his cronies, underline this important point.31 29. However, new techniques are constantly evolving in response to counter-measures and as financial technology becomes more sophisticated. 30. Scher (2005) highlights the lack of domestic political will as one of the reasons for Kenya's unsuccessful attempt to recover assets allegedly stolen by Moi. 31. To the extent that such measures are ad hoc, they should be seen only as the first step in more basic institutional and legal reform. 24 Stolen Asset Recovery (StAR) Initiative: Finding5:Littlecanbeachievedwithouttheeffectivecooperationandgoodwillofcountries where proceeds of corruption are hidden. The importance of international cooperation becomes evident when contrasting the eighteen- year Philippine saga in recovering Marcos's loot with the three to five years it took Peru and Nigeria to recover assets stolen by Montesinos and Abacha, respectively. The fact that Swiss authorities issued a general freezing order against Abacha with only a limited amount of initial evidence, and their decision to investigate Montesinos and freeze $48 million on November 3, 2000, even before Peru formally requested it, illustrates a positive shift in the attitude toward international cooperation in stolen asset restitution. 5.4 MONITORING USE OF RECOVERED ASSETS IMPEDED BY WEAK SYSTEMS AND FUNGIBILITY The three country case studies exhibit mixed results in monitoring the use of recovered assets. Box 2 highlights some of the features of each country's monitoring framework. In Nigeria, monitoring followed sound practice but experienced difficulties in the presence of constraints. Recovered assets in the Philippines were suspected of being been poorly used. In Peru, while the spending superficially adhered to standard budgetary procedures, the allocation was decided not by Congress, but by a five-member board susceptible to special interests. The experiences of these three countries illustrate one major point: Finding 6: To varying degree, the monitoring program in each case study country fell short, either because sound international practice in public financial management was not followed or systems were weak. Adhering to sound practice in public financial management is complicated because resources are fungibleandsystemstendtobeweak;butaboveallbecausetrackingsystemstendtobeperceived as intrusive and therefore require political will to implement. MonitoringtheuseofrecoveredassetsinthecontextofStARandUNCACcantakeplaceonlyon avoluntarybasis;theunilateralimpositionofmeasuresregardingthemonitoringoffundswould be a violation of UNCAC. The international legal framework, as well as the technical and political difficulties inherent in public financial management, is likely to make the monitoring of the use of funds in the context of StAR a difficult challenge. Challenges, Opportunities, and Action Plan 25 BOX 2. MONITORING THE USE OF RECOVERED ASSETS: EXPERIENCE OF NIGERIA, PERU, AND THE PHILIPPINES Nigeria Nigeria received some $500 million in 2005 from Switzerland as part of the restitution of assets stolen by Sani Abacha and kept in Swiss banks. The stated purpose for the money was for incremental funding of MDG- related activities in the budget (such as health, education, and rural infrastructure programs) within the context ofthegovernment'snewNationalEconomicEmpowermentandDevelopmentstrategy(NEEDs).Nigeriafollowed good practice principles in using these resources as general revenues, and expending them through its usual publicfinancialprocesses.However,thefundswereoriginallyexpectedtobereceivedin2004andweretherefore included in the 2004 budget. With the delay in restitution, the incremental 2004 spending was eventually financed through new debt; the monies were received only in 2005. This caused complications in tracking spending. Weaknesses of the Nigerian public financial management system also made tracking of spending difficult, including shortcomings in Nigeria's public audit system that should itself have monitored fund use. Nevertheless,aWorldBankPublicExpenditureReviewfoundthatthefundshadgenerallybeenusedinaccordance with stated policy. Nigeria has since adopted a virtual poverty fund approach for monitoring the use of funds resulting from debt relief in support of the MDGs, where existing budget classification systems are used to identify the specific activities receiving additional funds. This enables total spending on those activities, from all sources, to be monitored. Peru Peru recovered approximately $180 million over a five-year period beginning in 2001. On October 28, 2001, the government set up the Fund for Special Administration of Money Obtained Illicitly to the Detriment of the State (FEDADOI). The goal of the fund was to provide a framework that would allow the appropriate and transparent management of the proceeds of corruption recovered by the state. While money from the fund went through normal budgetary channels, the specific allocations were determined by board members of FEDADOI. Spendingitemswerenotclearlysetoutinadvanceandthefundswereusedtosupplement the annual fiscal budget of agencies that had an appointed member on the FEDADOI board. Questionable spending allo- cations resulted. For example, the Interior Ministry received over $9 million in 2004 that were used for the payment of vacations for both active and retired police personnel outstanding from fiscal years 1995 and 1996. The Philippines The largest single cash remittance from looted Marcos funds was made in February 2004, when $624 million was taken out of escrow and remitted to the Philippines Treasury. All receipts from assets recovered went through an off-budget fund called the "Agrarian Reform Fund," to be spent on agrarian reform programs. In October 2006, the Commission on Audit noted that a significant portion of the recovered assets were used to finance excessive, unnecessary expenses unlikely to benefit the agrarian reform beneficiaries. Monies were also found to have been used to procure items at inflated prices, while many spending items were not among the approved priority projects. 26 Stolen Asset Recovery (StAR) Initiative: 5.5 CHALLENGES AHEAD Thissectionoutlinesthechallengesrelatedtotheabovefindings.Thefirstchallengeisbasedon Findings 1 and 2, on the importance of open and accountable public processes and strong public institutions. Challenge 1: Developing countries seeking to recover stolen assets need to strengthen their public institutions and promote a system of checks and balances that increases accountability and transparency. The international donor community should assist these countries in the development of open and accountable government. While responding to this challenge is primarily the responsibility of the developing countries themselves, the international community could play an important role in helping countries that genuinely want to get out of the corruption trap. The WBG's GAC platform and UNODC's global efforts fit squarely into this agenda. It stands to reason that stolen assets are most vulnerable to detection during the initial place- ment overseas as part of the laundering process (see figure 1). This assumption, combined with Finding 3 on the favored techniques for laundering stolen assets, suggests that financial centers in developed countries need to speed up the implementation of guidelines that would increase thechancesofdetectionduringthisinitialstageandinapplyingsanctionswhentheseguidelines are not followed. This leads to the second challenge: Challenge 2: Jurisdictions need to implement requirements on due diligence (including "know yourcustomer" norms) and should comply with the FATF 40 +9 Recommendations on Anti- Money Laundering and Combating the Financing of Terrorism, particularly in the case of Politically Exposed Persons (PEPs), as well as transactions involving wire transfers.32 Domestic political will, while necessary for success in StAR, may not suffice. Countries that suffer from widespread corruption and the looting of assets are also likely to be less able to respond rapidly when such crimes are detected because of the weakening of public institutions. The lack of resources and institutional capacity to conduct investigations, file requests for mutual legal assistanceinreceivingcountries,andpaytheonerousfeesofinternationallawfirmserectbarriers toassetrecovery.Thenextchallengefocusesondevelopingassistanceprogramsforsuchcountries. 32. The Financial Action Task Force (FATF) is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. The FATF Standards are comprised of the Forty Recommendations on Money Laundering and the Nine Special Recommendations on Terrorist Financing. For more information see http://www.fatf-gafi.org/pages/0,3417,en_32250379_32235720_1_1_1_1_1,00.html Challenges, Opportunities, and Action Plan 27 Challenge 3: Effective and efficient mechanisms are needed that will enable developing countries to quickly respond to asset theft and provide them with the necessary technical assistance in this complex process. Manydevelopingcountrieslackthecapacitytoprepareindictments,collect,preserveandpresent evidence,properlyadjudicatecasesandobtainconvictions,aswellastracetheproceedsofcorruption and obtain valid freezing and confiscation orders. More broadly, an important roadblock exists because of the limited capacity of the law enforcement, prosecutorial, and judicial authorities--in short, the criminal justice system--to effectively prevent asset looting and recover stolen assets in a manner that meets internationally accepted legal standards. The related challenge is to capitalize on the attention StAR is receiving in the international com- munityandpushfortheratificationandimplementationofUNCAC.Respondingtothischallenge willgoalongwaynotonlyinrecoveringassetsbutalsoindeterringassettheftinthefirstplace. Challenge 4: All countries need to be persuaded to ratify UNCAC. State parties to the Convention need to domesticate UNCAC and monitor its implementation. Asset recovery entails an extensive list of complications and difficulties that include completing investigations in two different jurisdictions, legal differences between common law and civil law countries, complying with confiscation procedures in the law, burden of proof and dual criminality conditions, to name just a few. UNCAC is a big step forward in addressing many of these issues. If countries adhere to UNCAC and domesticate its provisions while also funding agencies in chargeofprosecutingandinvestigatingassetrecoverycases,thencorruptleadersaremuchless likely to find a safe haven for the proceeds of their theft. HalftheG-8countrieshavenotyetratifiedtheConvention,norhavesomeofthemostimportant financial centers. Further, UNCAC does not yet have a monitoring mechanism; the Conference of State Parties held in Amman in December 2006 agreed on a self-assessment mechanism that is nonintrusive, does not produce any form of ranking, and complements other existing international and regional review mechanisms. This review method is less stringent than those established in othermultilateralagreementsliketheCouncilofEuropeCriminalLawConventiononCorruption or those included in the OECD Convention against Bribery. Challenge5:Aframeworkneedstobedevelopedformonitoringtheuseofrecoveredassets that adheres to sound principles of pubic financial management, conforms to UNCAC, and offers countries a menu of options tailored to their specific institutional constraints and/or any terms set down in the treaties between the restituting and recipient countries. 28 Stolen Asset Recovery (StAR) Initiative: The following basic principles would need to be reflected in formulating a framework:33 · All public expenditures need to be monitored, not just expenditures financed with recovered assets. Budget resources are fungible, so in practice it may be difficult to show that recovered assetshavebeenusedforadditionalspendingintheareaslaidoutinagovernment'smedium-term spending plan.34 Measuring only the spending resulting from recovered assets will not, there- fore, provide insights into the government's efforts to redirect spending into priority areas as a result of repatriating assets. In order to achieve the enduring value of a more transparent, robust public finance system, the focus of improvements in the public financial management system should be comprehensive, extending beyond recovered assets. · Ring-fencingofrecoveredfundstoseparatethesefromregularbudgetaryoperationsmaynot be effective, and such parallel public finance systems could weaken mainstream systems. The Paris Declaration on Aid Effectiveness, for example, recognizes the importance of strengthening overall country public financial management (PFM) systems, not simply those handling donor funds. Strengthening a country's overall PFM system helps assure that all public funds are used as intended, regardless of source. Strengthening country PFM systems will help prevent, detect, and deter the theft of public assets, in addition to tracking public expenditures. If country public financial management systems are weak, the decision should not be to go with a parallel system but to instead use some combination of country and parallel systems. Over time, this combination will improve country systems. This would be consistent with the concept of using country systems for donor funds. The challenge is to identify specific weaknesses and thendevelopsupplementalmeasuresthatstrengthencountrysystemsandprovidesomeassurance ofproperfunctioning.Incaseswherebudgetsystemsareparticularlyweak,short-termadaptations to existing budget systems may be made to produce the requisite data on the spending items desired for use by recovered assets. A virtual poverty fund is an example of such a short-term bridging mechanism (such as in Nigeria). The existing budget system is used to tag and track spending items without setting up of separate institutional arrangements.35 Appendix A provides options for supplementing PFM systems where specific aspects are deemed weak. Box 3 details the steps involved in monitoring public assets. 33. See also Veglio and Siegenthaler (2007). 34. For example, the government may reduce its own spending in the areas identified as uses for recovered assets. 35. Other examples of bridging mechanisms include controlling the use of cash releases for certain spending items rather than providing global allocations to ministries, and simply improving coverage of what is being currently reported in the budget. Challenges, Opportunities, and Action Plan 29 BOX 3. STEPS IN MONITORING PUBLIC ASSETS There are some basic principles that should be followed for ALL assets, including looted assets. These are: · Officially(publicly)recordingreceiptoftheasset(amount,value,dateofreceipt,dateofavailabilityforuse) · Safeguarding of the asset once received · Official declaration of intended use of the asset (specific uses, amounts, time period of availability, entity responsible for executing the activity and expending the asset and accountable for results), customarily through the approved budget · Official recording of actual expenditure (amount, object of expenditure, date) · Official reporting of actual expenditure (amount, object of expenditure, date) and results achieved · Official audit of financial statements and results to verify accuracy of reporting, identify weaknesses, and assure that appropriate processes were followed (procurement, hiring, accounting, and the like) · Official response to material weaknesses identified in audit findings (corrective actions to be taken and actually taken). Source: Authors. 30 Stolen Asset Recovery (StAR) Initiative: 6 .An Action Plan Preliminary consultations with high-ranking officials in the finance and development ministries of developed countries, including the G-8, have indicated strong support for the StAR initiative. African countries have been concerned about the restitution of stolen assets at least since 1999, when Nigeria's President Obasanjo's address to the UN General Assembly included a plea for an international convention for the repatriation of Africa's wealth illicitly appropriated and kept abroad.36Atthe2007IMF-WorldBankSpringmeetings,duringaside-eventintroducingtheStAR initiative, representatives of developed and developing countries and multilateral development banks present there expressed unanimous support for the initiative. The consensus was that StAR is an idea whose time has come and that every country or international agency has to play its part in ensuring the initiative's success; indeed, a collective global effort is essential for success and unequivocally transmitting the signal that corruption does not pay. In this sense, StAR was described as the "missing link" in an effective anti-corruption effort. By putting corrupt leaders on notice that stolen assets will be traced, seized, confiscated, and returned to the victim country, StAR would constitute a formidable deterrent to corruption. The Action Plan presented next reflects feedback from various stakeholders on the essential ingredientsforasuccessfuleffort,whichtoalargeextentoverlapwiththeinsightsandchallenges emerging from the country case studies presented above: · Politicalwill,legalreform,andenhancementofinvestigativecapacityareneededindeveloped countries, not just the developing countries. The former should see stolen asset recovery as a development issue (because it is a signal against corruption while also providing a source of development funds). · Time is of the essence. For most developing countries, prolonging the process of asset recovery will take a toll on credibility and give kleptocrats an excuse to claim victimization. A prompt, proactive response is needed from countries where stolen assets are stashed. 36. Cited in the 2001 Nyanga Declaration mentioned above. Challenges, Opportunities, and Action Plan 31 · A global partnership must be formed to ensure that new financial havens do not replace the existing ones and that developing countries receive the legal support they need. · Civil society and the media in developing countries should be brought into the process of monitoring the use of recovered assets, where feasible. 6.1 ACTION PLAN MATRIX At the simplest level, there are two ways to help developing countries recover stolen assets. One is to lower the hurdles they face when seeking the return of assets located in other jurisdictions. The second is to strengthen laws and institutions governing asset recovery in these countries. Thus actions can be grouped under two headings: reducing barriers in developed countries to recover stolen assets; and strengthening the ability of developing countries to recover them. In addition, to ensure transparency, monitoring the use of recovered assets on a voluntary basis, with the agreement of all the countries concerned, is likely to be needed. Table 3 presents a matrixofrecommendedrelevantactionsunderthetwoheadingsthatcouldbetakenbydeveloped (G-8 and OECD) and developing countries, other stakeholders, and UNODC and the WBG. It reflectsfeedbackfromvariousconsultationsandthechallengesemergingfromthecountrycase studies outlined above. The following points are worth noting about the Action Plan: first, a successful StAR effort requires that the G-8 and OECD lead by example, which would include ratification of UNCAC by those countries that have not already done so and actively facilitating requests for mutual legal assistance from developing countries regarding stolen asset recovery. Second, given UNCAC's position as the state-of-the-art international legal framework underpinning asset recovery (see section4),ratificationandimplementationofUNCACbyallcountriesisgivenspecialprominence. Third, the critical need for concerted global action by all countries and relevant agencies is emphasized by including a role for financial system regulators and the nonfinancial sector. Fourth, the last row of the table focuses on joint actions by UNODC and the WBG, which fall into threeparts:assistanceforindividualcountry-levelefforts;usingtheirconveningpowertoadvocate for stolen assets recovery; and sponsoring a forum for sharing experiences among developing countries in stolen asset recovery. In addition to what is presented in the table, there are several multilateral and bilateral agencies that are already playing an important role directly or indirectly in stolen asset recovery. The next section discusses specific actions that the UNODC and WBG need to take in order to benefit from the work and expertise of these agencies, including actively involving them in the effort. The next sectionalsodiscussesspecificactions--suchasonmonitoringtheuseofrecoveredfunds--thatmay drawuponthecomparativeadvantageofoneoftheseinstitutions:theWBG,inthisparticularcase. 32 Stolen Asset Recovery (StAR) Initiative: TABLE 3. ACTION PLAN MATRIX Reduce barriers in Strengthencapacityof developed countries developingcountries G-8 and OECD · Leadbyexampleandplaystrongadvocacyrole · Fundprogramsordirectlyprovidedeveloping intheglobalarena countrieswithtechnicalassistancethatwould · RatifyandimplementUNCAC enhancethecapacityofthecriminaljustice · Monitorprogresson2004G-8Justiceand system--lawenforcement,prosecutorial,and HomeAffairsMinisters'Declarationonrecover- judicialauthorities--toeffectivelyprevent ingproceedsofcorruption assetlootingandrecovertheproceedsof · Proactivelyassistdevelopingcountriesinrecov- corruptioninaccordancewithinternationally eringstolenassetsinwhateverform(including acceptedlegalstandards. bankaccounts,stocks,andrealestate) · ComplywithallFATFrecommendations,espe- ciallythoseonpoliticallyexposedpersons (PEPs)andKnowYourCustomer(KYC)norms · Putpressureonemergingmarketcountries servingashavensforstolenassetstoratifyand implementUNCAC. · Consideradoptingmeasurestopermitnon- convictionbasedconfiscation,enforcementof foreignconfiscationjudgmentsandothereffec- tivemechanismstoassistinassetrecovery Developing countries · Ensurecompleteratificationandimplementa- tionofUNCAC · Fund,staff,andensureindependenceof FinancialIntelligenceUnits(FIUs) · ComplywithallFATFrecommendations, especiallythoseonpoliticallyexposedpersons (PEPs)andKnowYourCustomer(KYC)norms · StrengthenFIUsandcapacitytothwart moneylaundering · Developcapacitytorespondtoandfileinter- nationalmutuallegalassistancerequests · Adoptandimplementeffectiveconfiscation measures,includingnon-convictionbased confiscationlegislation · Enhancetransparencyandaccountabilityof publicfinancialmanagement(PFM)systems · Createandstrengthennationalanti- corruptionagencies Financial system · Enforcepenaltiesforfinancialinstitutionsdoing regulating agencies businesswithcorruptindividualsandPEPs withoutduediligence · ComplywithFATF40+9recommendations · Establishclearguidelines,regardingthetreat- mentofPEPs · Strengthenanti-moneylaunderingregimesby enforcingKYC,recordkeeping,andreporting requirements,especiallyinrelationtoPEPs. Nonfinancial private · Provide training for specialized units in sector and NGOs developing countries in asset recovery · Engage civil society and media to help in monitoring use of recovered assets. UNODC and World · Form Friends of StAR group composed of influential individuals from developed Bank Group and developing countries to monitor progress and advise on the StAR initiative · Sponsor forum for sharing worldwide experience in stolen asset recovery · Provide technical assistance to five to six developing countries on implementing UNCAC · Encourage receiving countries to incorporate civil society and media in monitoring. Challenges, Opportunities, and Action Plan 33 6.2 UNODC-WBG JOINT PROGRAM The UNODC and WBG are working to formulate a joint effort on stolen asset recovery within the framework of global collective action envisaged in the above matrix. The WBG role would be defined by its mandate under the Governance and Anti-Corruption strategy approved by the BoardinMarch2007.Likewise,theUNODCrolewouldbedefinedbyitsdesignationasthecustodian for UNCAC and the Secretariat for the Conference of State Parties to UNCAC. The UNODC and WBG would not be involved directly in the investigation, tracing, law enforcement, prosecution, confiscation,andrepatriationofstolenassets:theexperienceofcountriessuchas Nigeriasuggests that these activities may be best suited for government-to-government assistance or private sector assistance,workingwiththerelevantgovernmentauthorities. The discussion below examines in more detail three sets of important actions from the above matrix: building global partnerships on StAR; building institutional capacity at the country level; and implementing and monitoring UNCAC. 6.2.a Building Global Partnerships on StAR UNODC and the WBG have established a joint working group to take the StAR initiative forward. Animportantobjectiveistoincludeotherinstitutionswithaninterestinassetrecovery;aconcerted, global effort is vital for success. Appendix B briefly describes what other official, multicountry agencies are doing in this field. An immediate action that could be pursued in this context is to convene a meeting of experts on confiscation and asset recovery, along with representatives fromselecteddevelopingcountries,toshareexperiencesandidentifygoodpracticesthatcanbe shared more broadly. A broader partnership will also be needed to implement coordinated, international requests to freeze assets in relation to a specific Politically Exposed Person (PEP). One of the biggest chal- lenges facing developing countries is in getting other countries to freeze stolen assets. These requests are usually made before criminal or civil investigations have been initiated, often with- out knowing bank account transaction information and sometimes while the government official is still covered by some form of domestic immunity. The problem is that a PEP could easily move funds from one jurisdiction to another in order to escape detection and freezing. UNODC and WBG, in partnership with other agencies and individual governments, could seek to establish a uniform request methodology for victim governments to use in making simultaneous interna- tional requests for assistance in freezing stolen assets. A related initiative involves the creation of a StAR Focal Point List, to help sending countries to knowwhomtocontactinreceivingcountriesforimmediateassistanceinthecaseofanemergency. Thespeedofelectroniccommunications(includingwiretransfers)andtheperishabilityofevidence require real-time assistance. The G-8 and others have established 24-hour contact systems to handle terrorism, computer crime, and other issues. There is no list or system for contacting 34 Stolen Asset Recovery (StAR) Initiative: designated national officials who can act as focal points to help countries handle stolen asset cases, especially those involving PEPs, other government officials, and those who might have bribedpublicofficials.TheUNODCandWBGcanworkwithotheragenciestoestablisha24-hour, seven-day Focal Point List of officials in countries who can respond to emergency requests for assistance. Appendix C contains a draft questionnaire that can be used to help identify focal points and the information needed to provide responses. The StAR Focal Points can serve as a channel for international PEP freeze requests. AnotherinitiativepertainstotheformationofaFriendsofStARGroup(FSTAR).Thecooperation oftheinternationalcommunityisneededtoensurethatfinancialcentersmeetcertainminimum levelsoftransparencyandagreetocooperatewithlawenforcementauthoritiesfromotherjuris- dictions. FSTAR would be an advisory group consisting of distinguished and influential individuals from countries with a special interest or expertise in stolen asset recovery, with the following terms of reference: · Serve as a forum to understand the problems faced by countries in the areas of confiscation, assetrecovery,andinternationalcooperationinanti-moneylaunderingandstolenassetrecovery, and develop recommendations to solve these problems. · Advocate for ratification and implementation of UNCAC, particularly in developed (receiving) countries. 6.2.b Building Institutional Capacity and Providing Technical Assistance at the Country Level First, at the individual country level, the UNODC-WBG effort would follow a two-track approach consisting of short-run immediate actions and longer-run institution building interventions. Defining what is needed would depend upon the specific country context and the dimensions of the stolen asset problem. Immediate actions are likely to include technical assistance to the country on filing a request for mutual legal assistance, how to approach receiving countries, and advising on contracts with lawyers and forensic accountants working with the relevant country authorities. UNODC and WBG would identify five to six countries for targeted technical assistance on imple- menting UNCAC and enhancing the capacity of the criminal justice system to effectively prevent assetlootingandapproachassetrecoveryconsistentwithinternationallyacceptedlegalstandards. This technical assistance will also target the recommended actions for developing countries in table 3: · Bring about complete ratification and implementation of UNCAC (see p. 37) · Fund, staff, and ensure independence of Financial Intelligence Units · Strengthen FIUs and anti-money laundering capacity · Develop capacity to respond to and file international mutual legal assistance requests · Enhance transparency and accountability of public financial management systems · Create and strengthen domestic anti-corruption agencies. Challenges, Opportunities, and Action Plan 35 Second,lastingbenefitsfromaStARprogram--includingensuringthatrecoveredassetsareusedwell-- requires developing countries to strengthen public institutions and promote checks and balances in order to enhance public accountability and transparency. In particular, the focus needs to be on public financial management and financial sector governance. There are many ongoing efforts inthisregardonwhichtheStAReffortcanpiggyback,suchastheWBG'sGACPlatform.Financial sector governance is of particular interest. This involves strengthening financial intelligence units (FIUs) and other institutions working on Anti-Money Laundering and the Combating the Financing of Terrorism (AML/CFT). The World Bank Group's Financial Market Integrity Department,FPDFI,iscurrentlyworkingonenhancingthecapacityofinstitutionsresponsiblefor transparency in the financial sector, especially financial intelligence units, and exploring the free exchange of expertise and information between Anti-Corruption Agencies and Anti-Money Laundering authorities. This work is being done in collaboration with other agencies. Third, actions are being explored to make it easier for countries to recover stolen assets, such as: · Identifying components of a standard financial investigation training program to combat money laundering and assist asset recovery · Developinganinvestigativetemplateforgovernmentofficialstofollowinexigentcircumstances. · Developing an international network of 24-hour StAR Focal Point contact persons in capitals, who can respond to emergency requests for legal assistance, as discussed above. Fourth, once the assets are repatriated, the WBG would offer its services to help monitor the use of thefunds,basedonitsexperienceinexpendituretrackingsystems.Suchinvolvementinmonitoring would be purely voluntary, in keeping with the fundamental principle of the return of stolen assets as embodied in UNCAC. The WBG is likely to have a comparative advantage in such mon- itoring. In the context of UNCAC, the WBG could offer a menu of alternatives to countries willing to pursue the monitoring of recovered assets in conjunction with the broad reform of their pub- lic financial management (PFM) system. Based on accumulated experience with countries, the overall goal should be to continue to strengthen country PFM systems directly, both as a preventivemeasureagainstassettheftandmisuseandassurancethatadditionalresourcesfrom any source (including asset recovery) are well used. Lessons learned from successful, sustained publicfinancialmanagementreformemphasizescountryownershipandaharmonizedandcoor- dinated approach to reform.37 The involvement of other donors is critical to the process. Moreover, the experience of Nigeria and the Philippines makes a strong case for involving civil society and the media in monitoring the use of recovered stolen assets, where feasible. 37. See IMF­World Bank (2005), "Update on the Assessments and Implementation of Action Plans to Strengthen Capacity of HIPCs to Track Poverty-Reducing Public Spending." 36 Stolen Asset Recovery (StAR) Initiative: 6.2.c Implementation and Monitoring of UNCAC As noted above, UNODC is the custodian and lead implementation agency for UNCAC. Actions being considered as part of the UNODC­WBG partnership in the area of UNCAC implementation are as follows: · WBG assistance in the 2007 Conference of States Parties to be hosted by Indonesia · WBGparticipationintheUNODC/UNCACworkinggroupsontechnicalassistance,implementation, and asset recovery · UNODCandWBGjointtechnicalassistanceonadaptingdomesticlegalframeworksforconsistency with UNCAC. Challenges, Opportunities, and Action Plan 37 APPENDIXES APPENDIX A. Options to Improve Public Financial Management APPENDIX B. What Other Agencies are Doing APPENDIX C. Focal Point Questionnaire 38 Stolen Asset Recovery (StAR) Initiative: APPENDIX A. Options to Improve Public Financial Management Supplemented "Enhanced" Function Parallel country system country system "Pure" country system Budgeting Parallelprojectbudgets, Regularnationalbudget Usingexistingbudgetclassifi- Expendituresandfinancing inmanycasesnot procedures,supplemented cationsystem,selecteditems includedinnationalbudget includedinthecoun- bymoredetailedor ofexpendituremightbe andapprovedaspartof try'sbudget. reclassified"project "tagged"asbeneficiariesof regularbudgetprocedures. budgets." additionalfundsandtracked moreclosely.Acombination Wherenationalprocedures ofprogram,administrative, allowforearmarkingofmulti- economic,geographic,and yearfundsandcarry-forward functionalclassifications tofutureyears,thesemight mightbeusedfortracking beusedtoattainproject specificpolicyobjectives. objectivesmoreeasily. Banking Fundsretainedin -- Asubaccountmightbecreated TreasurySingleAccount, commercialbanksor withintheTreasurySingle commonlyincentralbank. outsidecountry. Accounttonotionallyprevent co-minglingofprojectfunds withgeneralfunds. Payment ProjectImplementation Contractingwithprivate Useoftreasurysystem,with Useoftreasurysystemto Unit(PIU)payment ornonprofitentitytoact technicalassistance,training, processpayments. processing,parallelto asfiscalintermediary, newhardwareorsoftware; countryprocess. processingpayments oradditionalstrengthened (suchastheUN)but procedures. operatingwithinthe treasurysystem. Or,usingcountrysystem withcontinuousauditing. Program PIU,embeddedwith Contractwiththirdparty Consultantsor"termstaff" management ministryorprogram, tomanageprojecton reportingtoprogram typicallywithhigher behalfofgovernment. managersandlineministry salaries.PIUstaff/ staffhiredforprojectperiod consultantsareproject toprovideadditionalcapaci- managersand/or ty. managersoffunctions suchasprocurement, financialmanagement. Challenges, Opportunities, and Action Plan 39 Supplemented "Enhanced" Function Parallel country system country system "Pure" country system Internal Special project proce- National rules, proce- Use of additional staff or National rules, procedures, controls dures and manuals dures, and manuals, consultants to ensure and manuals. developed and used. supplemented by addi- adherence to/compliance tional rules or proce- with national rules, proce- dures in areas where dures, and manuals. these are considered weak (such as additional internal control audits, additional physical audits). Accounting Using World Bank-sup- Use national system Using existing national Using existing national plied chart of accounts of classification and chart of accounts and chart of accounts and or other international account. Supplement budget classification, budget classification, standard. it with additional possibly with project-relat- and accounting system. classification system ed spending "tagged" in Separate, project-only and if needed, account- treasury for easier report- financial management ing system (essentially ing and tracking. information system this means operating operational. two systems simultane- Some investment in classifi- ously); or contract cation improvements, train- with third party to ing, software, or hardware support government might be needed. accounting. (In practice, it is highly problematic to manage two separate sets of books through one sys- tem. Local capacity might be overwhelmed.) Financial Reporting formats, Operate two reporting National reporting formats, National reporting formats, reporting information require- systems simultaneously: possibly with enhancements frequency, and content. ments, and report fre- national reporting applicable to all funds quency to meet World formats, and World (formats, training, hard- Bank requirements; Bank-defined reporting ware/software). sometimes multiple formats and information requirements such as requirements. for financial oversight, disbursement, and project management. 40 Stolen Asset Recovery (StAR) Initiative: Supplemented "Enhanced" Function Parallel country system country system "Pure" country system Record- PIU record-keeping. Third-party maintenance National record keeping, Existing country record- keeping of records (contracted using government staff, keeping arrangements. by the World Bank or with training, system government). improvements. Audit Private audit firm Parallel audit supple- National audit system National audit procedures. (internal and contracted to conduct menting national audit (internal and external) external) audits. procedures. twinned with private firm or with another country's Supreme Audit Institution. Training, system improve- ments might be needed as part of enhancements. Procurement Bank procurement Contracting with private National procurement National procurement procedures. or nonprofit entity to system, with additional procedures. act as procuring agent training in good practices, on behalf of govern- perhaps twinned with pri- ment for project imple- vate or nonprofit agents for mentation, or twinning training, but primarily using with national procure- national procedures. ment agents, but using national procurement procedures. Oversight Special or no oversight Government oversight, Funds subject to national Project funds subject to arrangements by with parallel donor oversight procedures by national oversight proce- ministry or parliament oversight arrangements. line ministry, MoF, and par- dures by line ministry, MoF, over project expendi- liament, supplemented by and parliament. tures. Oversight done additional oversight (such primarily by donor as additional transparency agencies. requirements, Project Oversight committee). Challenges, Opportunities, and Action Plan 41 APPENDIX B. What Other Agencies are Doing Several organizations, official and private, are gearing up to play a role at the international level in StAR. The following are selected examples of the work being done by official, multicountry agencies. The list is in alphabetical order and is by no means exhaustive. Camden Assets Recovery Inter-Agency Network (CARIN) CARINisaninformalgovernmentforfeitureorganization.Itsprimarypurposeistobuildaninformal international network for law enforcement and prosecutorial/juridical officers who are asset forfeiturepractitioners.CARINcurrentlyhas33member-states,coveringmostofEurope,including two members that are European Union-wide police and juridical assistance organizations (Europol and Eurojust). CARIN has set up a secure Web site, accessible only to law enforcement agencies, to list forfeiture laws. CARIN's objectives include: · Establishing centralized yet informal points of contact for forfeiture assistance in every member country, both within the law enforcement and the prosecutorial or quasi-judicial arms of government, depending upon the system. · Promoting the exchange of information and good practices between CARIN members · Focusing upon and promoting the forfeiture of all assets that are currently within the scope of existing ratified international agreements · Facilitating training in forfeiting the proceeds and instrumentalities of crime · Encouraging members to establish national asset recovery offices within their jurisdictions. Commission for Africa TheCommissionforAfrica'scentralpurposeistogeneratenewideasandactionforastrongand prosperous Africa. The Commission, in a 2005 report, notes that the basis for securing progress in stolen asset recovery is to be found in taking action in four linked areas: · Introducing measures to prevent the theft of assets at source · Improving systems to identify funds that have been acquired illicitly · Facilitating the power of relevant national authorities to freeze and confiscate assets · Creating instruments to hand back funds to the jurisdiction from which they were looted. 42 Stolen Asset Recovery (StAR) Initiative: Council of Europe Framework Decision, 2006/783/HA, October 6, 2006 Thisisanimportantstepbecauseitprovidesamechanismforthemutualrecognitionofconfiscation orders within the European Union. It applies to corruption, money laundering, participation in a criminal organization, and other crimes. It sets out the rules under which a member state shall recognizeandexecuteinitsterritoryaconfiscationorderissuedbyacourtcompetentincriminal matters of another member state. Execution under the Framework requires a confiscation order, together with a standardized certificate to be used by all member states. Financial Action Task Force (FATF) In June 2003, as part of the revision of its Forty Recommendations on Money Laundering (FAFT 2003),FATFaddedcorruptionandbriberyasnecessarypredicateoffensesforanti-moneylaundering regimes (Recommendation 1). This requires countries to provide for the availability of provisional measures and confiscation in corruption and bribery money laundering cases (Recommendation 3),whilealsoenlargingtheareasofinternationaljudicialandadministrativecooperationavailable under the Recommendations. While the UN Conventions against Illicit Traffic in Narcotic Drugs and Psychotropic Substances and Transnational Organized Crime are referenced in FATF's June 2003 Recommendations, UNCAC was not included, as it was not yet in force. In June 2006, FATF amended the Joint Assessment Methodology to require assessors to look at the general framework in a country, including whether there are appropriate measures to prevent and combat corruption and their participation in UNCAC, as well as in the OECD Convention on Combating Bribery of Foreign Public Officials in International BusinessTransactions,theGroupofStatesagainstCorruption(GRECO),theAfricanUnionConvention onPreventingandCombatingCorruption,andtheInter-AmericanConventionagainstCorruption.38 G-8 Efforts AusefulsummaryofG-8effortsintheareaofstolenassetsrecoveryiscontainedinthe"Statement On Fighting High-Level Corruption," issued in St Petersburg, July 16, 2006.39 This statement starts with an expression of renewal of commitment by the Leaders of the G-8 to fight corruption and improve transparency and accountability. Corruption is seen as a threat to the agenda on global security and stability, open markets and free trade, economic prosperity, and the rule of law. Transparency in public financial management and accountability have been pursued by the G-8 through,amongotherchannels,the2004SeaIslandcommitmenttolaunchfourcompacts,andthe 2005 Gleneagles commitment to increase support for the Extractive Industries Transparency Initiative (EITI) and countries implementing it. The G-8 have committed to seek, when appropriate andinaccordancewithnationallaws,todenyentryandsafehaventopublicofficialsfoundguiltyof corruption, enforce anti-bribery laws rigorously, and establish procedures and controls to conduct enhancedduediligenceonaccountsof"politicallyexposedpersons." 38. For more information on FATF see their Web site at: http://www.fatf-gafi.org/ pages/0,2966,en_32250379_32236836_1_1_1_1_1,00.html. See also their "Handbook for Countries and Assessors," which addresses assessing and making recommendations on forfeiture of proceeds from crimes (http://www.fatf-gafi.org/ dataoecd/3/26/36254892.pdf). 39. Much of what follows in this subsection is based on verbatim excerpts from the July 2006 G-8 Statement. Challenges, Opportunities, and Action Plan 43 TheG-8JusticeandHomeAffairsMinistershaveundertakentoadvancerecoveryoftheproceeds of high-level, large-scale corruption, taking into account final disposal of confiscated property, where appropriate, including through holding G-8 regional asset recovery workshops and the creation of best practices for modalities of disposition and return of recovered assets. The G-8 commitment to implement and promote the FATF recommendations, the UN Convention on Transnational Organized Crime, and the UN Convention Against Corruption was emphasized. In the statement, the G-8 leaders committed to: · Continue to investigate and prosecute corrupt public officials and those who bribe them · Work with all the international financial centers and G-8 private sectors to deny safe haven to assets illicitly acquired by individuals engaged in high-level corruption by pressing all financial centers to attain and implement the highest international standards of transparency and exchange of information · Implement fully the commitment to seek, when appropriate and in accordance with national laws, to deny entry and safe haven, to public officials found guilty of corruption · Support the global ratification and implementation of the UNCAC and call upon those states thathavenotalreadyratifiedtheUNCACtodosoattheearliestdatepossible.Ensurevigorous implementation of the OECD Anti-bribery Convention by parties to the Convention, including through ensuring that domestic law adopted in this framework is effectively implemented and through further effective peer review evaluation. Fight vigorously against money laundering, including by prosecuting money laundering offences and by implementing the revised recom- mendations of the FATF-related customer due diligence, transparency of legal persons, and arrangements that are essential to tackling corruption. The Organisation for Economic Co-operation and Development (OECD) The OECD's assistance on asset recovery issues has focused largely in the areas of training/knowledge-product and research, as part of its larger anti-corruption activities.40 OECD producedajointreportwiththeAsianDevelopmentBankthatspecificallyaddressesassetrecovery and is entitled, "Mutual Legal Assistance, Extradition and Recovery of Proceeds of Corruption in Asia and the Pacific."41 This report was produced as part of the Anti-Corruption Action Plan for Asia and the Pacific, a joint initiative with the Asian Development Bank.42 The OECD has also examined the issue of asset recovery as part of its Development Assistance Committee (DAC), in the context of learning events that it has organized on improving donor effectiveness in combating corruption.43 40. More information on OECD's anti-corruption activities can be found at: http://www.oecd.org/topic/0,2686,en_2649_37447_1_1_1_1_37447,00.html 41. This report is available at: www.oecd.org/corruption/asiapacific; http://www.oecd.org/document/9/0,2340,en_34982156_34982460_37892041_1_1_1_1,00.html. Another report, "Denying Safe Haven to the Corrupt and the Proceeds of Corruption," is also available. 42. More information on this initiative can be found at its Web site: http://www.oecd.org/pages/0,2966,en_34982156_34982385_1_1_1_1_1,00.html 43. See, for example, http://www.oecd.org/dataoecd/41/32/34098324.PDF, for a paper on recovery of assets presented at a conference organized by OECD-DAC with Transparency International. The final report of this conference is available at this site: http://www.oecd.org/dataoecd/34/10/34542653.pdf. 44 Stolen Asset Recovery (StAR) Initiative: Work on the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (ratified by 30 countries) is carried out by the Investment Committee, Working Group on Bribery (experts from 36 member countries). The Working Group can be an important vehicle for raising political awareness regarding asset recovery of member countries and for providing cooperation to World Bank members through OECD Regional Dialogues. Organization for Security and Co-operation in Europe (OSCE) The Organization for Security and Co-operation in Europe (OSCE) has also addressed the issue of asset recovery to a limited extent as part of a knowledge product on anti-corruption ("Best Practices in Combating Corruption").44 44. Full text of this manual is available at: http://www.osce.org/publications/eea/2004/05/13568_67_en.pdf Challenges, Opportunities, and Action Plan 45 APPENDIX C. Focal Point Questionnaire Questionnaire for Designating Focal Points and Obtaining Information Regarding Legal Tools and Procedures to Identify, Trace, and Seize Corruption Proceeds 1. Has your country ratified the United Nations Convention against Corruption? Did your country take any reservations? 2. What type of information does your government need from a requesting government in order to successfully assist in the identification, tracing, or seizure of stolen assets? 3. Does your government require the initiation of a formal investigation or proceeding by the requesting state in order to provide assistance? 4. How is a formal request for assistance initiated? 5. What type of assistance is available in response to a formal request? 6. What are your government's internal procedures for responding to a formal request? 7. Can a foreign government make a request directly to an individual agency without going through a central point of contact? 8. What evidence is necessary for your government to open its own criminal investigation or initiate a civil action regarding stolen or embezzled assets? 9.Doforeigngovernmentshavetheabilitytodirectlybringcivilactionsinyourdomesticcourts? 10. Please identify all offices or agencies within your government that may become involved in an investigation relating to the repatriation of stolen foreign assets, and describe their authorities and potential activities in this area. Please identify those agencies that can respond directly to foreign requests, and describe the required circumstances and procedures for such assistance. 46 Stolen Asset Recovery (StAR) Initiative: 11. Pleaseidentifyagovernment-widefocalpointthatforeigngovernmentscancontactona24-hour, 7-day basis for technical and legal assistance in stole and embezzled asset matters. Please identify telephone and fax numbers as well as e-mail addresses. 12. Please identify points of contact for each of the agencies discussed in Question 10, including telephone numbers, fax numbers, and e-mail addresses. 13. In order to repatriate assets to a foreign government, it is generally necessary to first come into possession or control of those assets. Please describe in detail the process by which your government can sufficiently attain possession or control of assets so they can be repatriated. 14. Please explain in detail the authority of your government to repatriate stolen assets, once those assets are in your custody or control. 15. Does your country have the authority to enforce foreign forfeiture judgments? 16. Please indicate whether your country can extradite persons who participated in foreign corruption offenses. Challenges, Opportunities, and Action Plan 47 References Baker, Raymond. 2005. Capitalism's Achilles Heel: Dirty Money and How to Renew the Free-Market System. John Wiley and Sons, Inc. Baker, Raymond, Brionne Dawson, Ilya Shulman, and Clint Brewer. 2003. "Dirty Money and Its Global Effects." International Policy Report (January). http://www.ciponline.org/dirtymoney.pdf Camdessus, Michel. 1998. "Money Laundering: The Importance of International Countermeasures." 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Global Achievement or Missed Opportunity?" Journal of International Economic Law 8(1): 191­229. World Bank. 2007. "Strengthening World Bank Group Engagement on Governance and Anticorruption." Washington, DC (March 21). http://www.worldbank.org/html/extdr/comments/ governancefeedback/gacpaper-03212007.pdf Photo Credits: Front cover: (clockwise from top left); Ami Vitale, Dominic Sansoni, Dominic Sansoni, Joel Blit Back cover: Curt Carnemark Design: Studio Grafik UNITED NATIONS OFFICE ON DRUGS AND CRIME Vienna International Centre PO Box 500 A-1400 Vienna Austria Tel: +43 1 26060 0 Fax: +43 1 26060 5866 www.unodc.org THE WORLD BANK 1818 H Street, NW Washington, DC 20433 USA Tel: (202) 473-1000 Fax: (202) 477-6391 www.worldbank.org