Asset Recovery Handbook

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Asset Recovery HandbookA Guide for Practitioners

Jean-Pierre Brun

Larissa Gray

Clive Scott

Kevin M. Stephenson


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Asset Recovery Handbook


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Asset Recovery HandbookA Guide for Practitioners

Jean-Pierre BrunLarissa Gray

Clive ScottKevin M. Stephenson


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2011 Te International Bank or Reconstruction and Development / Te World Bank1818 H Street NW

Washington DC 20433elephone: 202-473-1000

Internet: www.worldbank.org

E-mail: [email protected] rights reserved

1 2 3 4 13 12 11 10

Tis volume is a product o the staff o the International Bank or Reconstruction and Development / Te

World Bank. Te ndings, interpretations, and conclusions expressed in this volume do not necessarilyreect the views o the Executive Directors o Te World Bank or the governments they represent. Te

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Te material in this publication is copyrighted. Copying and/or transmitting portions or all o this workwithout permission may be a violation o applicable law. Te International Bank or Reconstruction andDevelopment / Te World Bank encourages dissemination o its work and will normally grant permission

to reproduce portions o the work promptly.

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e-mail: [email protected].

ISBN: 978-0-8213-8634-7eISBN: 978-0-8213-8635-4

DOI: 10.1596/978-0-8213-8634-7

Library of Congress Cataloging-in-Publication Data

Brun, Jean-Pierre, 1962-

Asset recovery handbook : a guide or practitioners / Jean-Pierre Brun and Larissa Gray. p. cm.

Includes bibliographical reerences and index. ISBN 978-0-8213-8634-7 ISBN 978-0-8213-8635-4 (electronic) 1. ForeitureCriminal provisions. 2. Searches and seizures. I. Gray, Larissa. II. itle.

K5107.B788 2011 345.0773dc22

2010048779


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Contents

Preface xiAcknowledgments xiiiAcronyms and Abbreviations xv

Introduction 1Methodology 2How the Handbook Can Be Used 3

1. Overview of the Asset Recovery Process andAvenues for Recovering Assets 5

1.1 General Process or Asset Recovery 51.2 Legal Avenues or Achieving Asset Recovery 91.3 Use o Asset Recovery Avenues in Practice: hree Case Examples 14

2. Strategic Considerations for Developing and Managing a Case 192.1 Gathering Facts: Initial Sources o Inormation 192.2 Assembling a eam or Unit, ask Forces, and Joint Investigations with

Foreign Authorities 222.3 Establishing Contact with Foreign Counterparts and Assessing

Ability to Obtain International Cooperation 252.4 Securing Support and Adequate Resources 272.5 Assessing Legislation and Considering Legal Reorms 282.6 Addressing Legal Issues and Obstacles 292.7 Identiying All Liable Parties 34

2.8 Speciic Considerations in Criminal Cases 342.9 Implementing a Case Management System 38

3. Securing Evidence and Tracing Assets 41

3.1 Introducing a Plan and Important Considerations 413.2 Creating a Subject Proile 433.3 Obtaining Financial Data and Other Evidence 433.4 Identiying Relevant Data: Examples rom Commonly

Sourced Documents 613.5 Organizing Data: Creating a Financial Proile 713.6 Analyzing Data: Comparing the Flows with the Financial Proile 723.7 Garnering International Cooperation 74


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vi I Contents

4. Securing the Assets 75

4.1 erminology: Seizure and Restraint 754.2 Provisional Order Requirements 764.3 Pre-restraint or Pre-seizure Planning 79

4.4 iming o Provisional Measures 854.5 Exceptions to Restraint Orders or Payment o Expenses 864.6 Ancillary Orders 874.7 hird-Party Interests 874.8 Alternatives to Provisional Measures 89

5. Managing Assets Subject to Confiscation 91

5.1 Key Players in Asset Management 925.2 Powers o the Asset Manager 935.3 Recording Inventory and Reporting 94

5.4 Common ypes o Assets and Associated Problems 955.5 Ongoing Management Issues 995.6 Consultations 1015.7 Liquidation (Sale) o Assets 1015.8 Fees Payable to Asset Managers 1015.9 Funding Asset Management 102

6. Mechanisms for Confiscation 103

6.1 Coniscation Systems 1056.2 How Coniscation Works 107

6.3 Coniscation Enhancements 1146.4 hird-Party Interests 1186.5 Coniscation o Assets Located in Foreign Jurisdictions 1196.6 Recovery through Coniscation or the Victims o Crime 1196.7 Disposal o Coniscated Assets 120

7. International Cooperation in Asset Recovery 121

7.1 Key Principles 1227.2 Comparative Overview o Inormal Assistance

and MLA Requests 127

7.3 Inormal Assistance 1317.4 MLA Requests 1387.5 Cooperation in Cases o Coniscation without a Conviction 1567.6 Cooperation in Civil Recovery (Private Law) Cases 1577.7 Asset Return 158

8. Civil Proceedings 159

8.1 Potential Claims and Remedies 1608.2 Bringing a Civil Action to Recover Assets 1698.3 Final Dispositions 1738.4 Formal Insolvency Processes 174


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Contents I vii

9. Domestic Confiscation Proceedings Undertakenin Foreign Jurisdictions 177

9.1 Jurisdiction 1779.2 Procedure or Beginning an Action 178

9.3 Role o the Jurisdiction Harmed by Corruption Oenses inForeign Investigation and Prosecution 1799.4 Ensuring Recovery o Assets rom the Foreign Jurisdiction 183

Appendix A. Offenses to Consider in Criminal Prosecution 187

Appendix B. Explanation of Selected Corporate Vehiclesand Business Terms 193

Appendix C. Sample Financial Intelligence Unit Report 199

Appendix D. Planning the Execution of a Search andSeizure Warrant 201

Appendix E. Sample Document Production Order forFinancial Institutions 203

Appendix F. Serial and Cover Payment Methods in ElectronicFunds Transfers 209

Appendix G. Sample Financial Profile Form 213Appendix H. Possible Discussion Points with

ContactsInformal Assistance Stage 235

Appendix I. Mutual Legal Assistance Template andDrafting Tips 237

Appendix J. Web Site Resources 241

Glossary 249

Index 253

Boxes

1.1 Legal Framework or Asset Recovery 101.2 Alternative Means o Recovering Assets 152.1 Role and Contribution o FIUs in Asset Recovery Cases 21

2.2 Obstacles to International Cooperation 262.3 Strategic Decisions in PeruLegislation Allowing

Plea Agreements 282.4 Prosecution o Accounting, Records, and Internal Control

Provisions in the United Kingdom and the United States 362.5 Examples o Challenges in Establishing the Elements o the Oense 373.1 Checklist or Collection o Basic Inormation 443.2 racing and Recovering AssetsEorts in the United Kingdom 463.3 Elaborating Suicient Grounds or a Search Warrant 553.4 Important Items to Seize 563.5 Documentation to Be Requested rom Financial Institutions 58


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viii I Contents

3.6 Retention Orders 593.7 Forms and Documents Related to the Wire ranser Process 653.8 Red Flags in Contracts, Payment Documentation, Payment Records,

and Payment Mechanisms 694.1 Drating Aidavits 784.2 An Example o Pre-restraint Planning Decisions in Practice 836.1 Historical Background and Recent Developments in Coniscation 1046.2 Issues Encountered in Determining the Proceeds o

CrimeA Case Example 1106.3 Using Related Activities to Capture the Full Beneit 1187.1 Connecting With PeopleA Case Example rom Peru 1247.2 Contact Points or International Cooperation 1257.3 Disclosure ObligationsA Barrier to MLA Requests 1277.4 Investigative Jurisdiction in France, Switzerland, the

United Kingdom, and the United States 1337.5 Facilitating Inormal Assistance 1347.6 Spontaneous Disclosures rom Switzerland 1377.7 Selecting a Legal Basis to Include in an MLA Request 1397.8 Overcoming Dual CriminalityIllicit Enrichment and Corruption

o Foreign Public Oicials 1427.9 Bank Secrecy and Fiscal OensesA Ground or Reusing MLA? 1467.10 Avoiding Rejections o MLA Requests hat Are Overly Broad 1497.11 Worldwide Orders in the United Kingdom 1537.12 Requirements or Direct Enorcement o MLA Requests or

Coniscation in the United Kingdom and the United States 1547.13 Asset Recovery Pursuant to an MLA Request in France 1588.1 Case Examples o Proprietary (Ownership) Claims 1608.2 he U.S. Racketeer Inluenced and Corrupt Organizations

(RICO) Statute 1638.3 Compensation or Damages Where Assets Are Misappropriated 1648.4 Fyffes v. Templeman and Others (2000) 1668.5 World Duty Free Company Limited v. The Republic of Kenya(2006) 1678.6 Disgorgement o ProitsPractice in the United States 1688.7 Circumstantial Evidence Considered in Federal Republic

of Nigeria v. Santolina Investment Corp., Solomon & Peters,and Diepreye Alamieyeseigha(2007) 170

8.8 Requirements or Restraint Orders in France, Panama, and theUnited Kingdom 171

8.9 he Ao Man Long Case 1738.10 Enorcement o Judgments When the Deendant Is

Absent rom the Proceeding 1749.1 Establishing Jurisdiction Where Limited Acts Have Occurred

in the erritory 179

9.2 Establishing Jurisdiction over Nationals in the United Kingdomand the United States 180


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Contents I ix

9.3 Jurisdiction to Prosecute Money Laundering Oenses in France,the United Kingdom, and the United States 181

9.4 Coniscation Proceedings Initiated by Foreign Authorities 1829.5 Important Role o the Jurisdiction Harmed by Corruption

A Case Example rom Haiti 1839.6 Direct Recovery in Practice 1859.7 Asset Return Options Available in Switzerland 186A.1 Illicit Enrichment Provisions in France 190F.1 Hiding Originating Customer Inormation 211F.2 Monitoring Records rom Financial Institutions 211I.1 MLA Drating and Execution ips 240

Figures

1.1 Process or Recovery o Stolen Assets 6

2.1 Standards o Proo 332.2 Criminal Charges to Consider 353.1 Five Eective Questions to Use in an Investigation 483.2 Preliminary Inormation Available rom Other Government Agencies 493.3 Basic Cross-Border Wire ranser Process 633.4 Sample SWIF Message Format and Code Interpretation 683.5 Sample Flow Chart 723.6 Sample Chart o Relationships and Assets 735.1 Seized Motor Vehicles Let Outdoors 976.1 Coniscation o an Asset in a Foreign Jurisdiction 120

7.1 Phases o Asset Recovery and Integrating International Cooperation 1227.2 Flow Chart o International Cooperation 1307.3 Inormal Assistance and Formal MLA Requests

What Can Be Requested? 1317.4 Flow o an MLA Request in the Presence o a reaty or

Domestic Legislation 155A.1 Criminal Charges to Consider 187F.1 Serial/Sequential and Cover Payment Methods 210

Tables

4.1 Considerations in Partial Control or Limited Restraint 847.1 Dierences between Inormal Assistance and MLA Requests 129


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Preface

Developing countries lose between US$20 to US$40 billion each year through bribery,misappropriation o unds, and other corrupt practices. Much o the proceeds o cor-ruption nd sae haven in the worlds nancial centers. Tese criminal ows are adrain on social services and economic development programs, contributing to the ur-ther impoverishment o the worlds poorest countries. Te victims include children inneed o education, patients in need o treatment, and all members o society who con-tribute their air share and deserve assurance that public unds are being used to improvetheir lives. But corruption affects us all by undermining condence in governments,banks, and companies in both developed and developing economies.

Te international community has responded to the challenge and, in principles andthrough international agreements, is now moving orward. Te G20 has put the ghtagainst corruption at the oreront o its efforts to improve global integrity and account-

ability. Te Stolen Asset Recovery (StAR) Initiative was launched in September 2007 bythe World Bank and the United Nations Offi ce on Drugs and Crime (UNODC) to pro-mote the ratication and implementation o the United Nations Convention againstCorruption (UNCAC), and specically its chapter 5, which provides the rst compre-hensive and innovative ramework or asset recovery.

Many developing countries have already sought to recover stolen assets. A number osuccessul high-prole cases with creative international cooperation have demonstratedthat asset recovery ispossible. However, to date, only US$5 billion in stolen assets havebeen recovered. What we need now is more visible, tangible progress in orceully pros-

ecuting bribery cases, and systematic recovery o proceeds o corruption.

However, recovering proceeds o corruption is complex. Te process can be over-whelming or even the most experienced o practitioners. It is exceptionally diffi cultor those working in the context o ailed states, widespread corruption, or with lim-ited resources. We must support their efforts as they grapple with the strategic, orga-nizational, investigative, and legal challenges o recovering stolen assets, whetherthrough criminal conscation, nonconviction based conscation, civil actions, orother alternatives.

We hope that the guide will prove useul or law enorcement offi cers, prosecutors,investigating judges, lawyers, and other experts. We also expect that it will be helpul to


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xii I Preface

those making policy decisions regarding legislation and management o resourcesdevoted to ghting corruption, and we look orward to using the handbook to providetechnical assistance and promote capacity building in countries interested in the StARInitiative.

Ngozi N. Okonjo-Iweala Yury FedotovManaging Director, Te World Bank Executive Director, UNODC


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Acknowledgments

Tis handbook is the result o special collaborative efforts rom colleagues around theworld. Teir time and expertise were invaluable in developing a practical tool to assistpractitioners in recovering the proceeds and instrumentalities o corruption.

Tis publication was written by Jean-Pierre Brun (team leader, Financial Market Integ-rity Unit, World Bank), Larissa Gray (Financial Market Integrity Unit), KevinStephenson (Financial Market Integrity Unit), and Clive Scott (United Nations Offi ceon Drugs and Crime [UNODC]), with the participation o Nina Gidwaney (FinancialMarket Integrity Unit).

Te authors are especially grateul to Jean Pesme (manager, Financial Market IntegrityUnit, Financial and Private Sector Development Network) and Adrian Fozzard (StolenAsset Recovery [StAR] Initiative coordinator) or their ongoing support and guidance

on this project.

Te team beneted rom many insightul comments during the peer review process,which was co-chaired by Jean Pesme and im Steele (senior governance specialist, StARSecretariat). Te peer reviewers were Raymond Baker (director, Global Financial Integ-rity), Yara Esquivel (Integrity Vice Presidency, World Bank), Frank Fariello (LegalDepartment, World Bank), Agustin Flah (Legal Department, World Bank), JeanneHauch (Integrity Vice Presidency, World Bank), Lindy Muzila (UNODC), and MutemboNchito (prosecutor, Zambia).

As part o the drafing and consultation process, practitioners workshops were held inVienna, Austria (May 2009) and Marseille, France (May 2010). Practitioners broughtexperience conducting criminal conscation, non-conviction based conscation, civilactions, investigations, asset tracing, international cooperation and asset managementrom both civil and common law jurisdictions, and rom both developed and develop-ing countries. Te people participating (rom both public and private sectors) were YvesAeschlimann (Financial Market Integrity Unit), Jean-Marc Cathelin (France), FranceChain (Organisation or Economic Co-operation and Development [OECD]), HamzaChraiti (Switzerland), Anne Conestabile (OECD), Margaret Cotter (International Mon-etary Fund), William Cowden (United States), Maxence Delorme (France), Nick deVil-liers (South Arica), Adrian Fajardo (Mexico), Frank Filippeli (United States), ClaraGarrido (Colombia), John Gilkes (United States), Dorothee A. Gottwald (UNODC),


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xiv I Acknowledgments

Guillermo Jorge (Argentina), Vitaliy Kasko (Ukraine), William Loo (OECD), MarkoMagdic (Chile), Ola Meyer (Germany), Holly Morton (United Kingdom), ElnurMusayev (Azerbaijan), Shane Nainappan (United Kingdom), Nchima Nchito (Zambia),Jean Fils Kleber Ntamack (Cameroon), Pedro Pereira (International Centre or AssetRecovery), Stephen Platt (Jersey), Frederic Raffray (Guernsey), Linda Samuel (UnitedStates), Jean-Bernard Schmid (Switzerland), Salim Succar (Haiti), Jose Ugaz (Peru),Gary Walters (United Kingdom), Jean Weld (United States), Simon Williams (Canada),and Annika Wythes (UNODC).

Te handbook also beneted rom the contributions o Teodore S. Greenberg(Financial Market Integrity Unit), David M. Mizrachi (Panama), and Felicity oube(United Kingdom).

A special thanks also to Telma Ayamel or arranging the logistics o the workshops in

Vienna and Marseille; and to Maria Orellano and Miguel Nicolas de la Riva or theiradministrative support.

Jean-Pierre Brunask eam Leader

Financial Market Integrity UnitWorld Bank


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Acronyms and Abbreviations

BIC Bank identier codeCARIN Camden Assets Recovery Inter-Agency NetworkCHAPS Clearing House Automated Payments SystemCHIPS Clearing House Interbank Payments SystemCR Currency transaction reportECHR European Court o Human RightsEWHC (Ch.) England and Wales High Court (Chancery Division)FAF Financial Action ask ForceFCPA Foreign Corrupt Practices ActFedwire Fedwire Funds ServiceFIU Financial intelligence unitGDP Gross domestic productIBC International business corporation

ICSID International Centre or Settlement o Investment DisputesLLC Limited Liability CompanyMLA Mutual legal assistanceNCB Non-conviction basedOECD Organisation or Economic Co-operation and DevelopmentPEP Politically exposed personPC Private trust companyRICO Racketeer Inuenced and Corrupt OrganizationsStAR Stolen Asset Recovery InitiativeSR Suspicious transaction report; Suspicious activity report

SWIF Society or Worldwide Interbank Financial elecommunicationsUAE United Arab EmiratesUNCAC United Nations Convention against CorruptionUNODC United Nations Offi ce on Drugs and CrimeUNOC United Nations Convention against ransnational Organized CrimeWDF World Duty Free Company Limited


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Introduction

Te thef o public assets rom developing countries is an immense development problem.Te amount o money stolen rom developing and transition jurisdictions and hidden inoreign jurisdictions each year is approximately $20$40 billiona gure equivalent to2040 percent o ows o offi cial development assistance.1Te societal costs o corruptionar exceed the value o assets stolen by public leaders. Corruption weakens condence inpublic institutions, damages the private investment climate, and ruins delivery mechan-isms or such poverty alleviation programs as public health and education.2

Recognizing the serious problem o corruption and the need or improved mechanismsto combat its devastating impact and acilitate the recovery o corruption proceeds, theinternational community introduced a new ramework in the United Nations Conven-tion against Corruption (UNCAC). Chapter V o the convention provides this rameworkor the return o stolen assets, requiring states parties to take measures to restrain, seize,conscate, and return the proceeds o corruption. o do so, they may use various mecha-nisms, such as:

direct enorcement o reezing or conscation orders made by the court o anotherstate party;3

non-conviction based asset conscation, particularly in cases o death, ight, orabsence o the offender or in other cases;4

civil actions initiated by another state party, allowing that party to recover theproceeds as plaintiff;5

conscation o property o a oreign origin by adjudication o an offense o moneylaundering or other offenses;6

court orders o compensation or damages to another state party and recognitionby courts o another state partys claim as a legitimate owner o assets acquiredthrough corruption;7

spontaneous disclosure o inormation to another state party without prior request;8andinternational cooperation and asset return. 9

1. World Bank, Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities, and Action Plan (Washington,DC, 2007), 9.2. Ibid.

3. United Nations Convention against Corruption (UNCAC), art. 54(1)(a) and 54(2)(a).4. UNCAC, art. 54(1)(c).

5. UNCAC, art. 53.

6. UNCAC, art. 54(1)(b) and 54(2)(b).7. UNCAC, art. 53(b) and (c).8. UNCAC, art. 56.9. UNCAC, art. 55 and 57.


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2 I Asset Recovery Handbook

Even with this ramework, the practice o recovering stolen assets remains complex. Itinvolves coordination and collaboration with domestic agencies and ministries in mul-tiple jurisdictions with different legal systems and procedures. It requires special inves-tigative techniques and skills to ollow the money beyond national borders and theability to act quickly to avoid dissipation o the assets. o ensure effectiveness, the com-petent authority (the authority) must have the capacity to launch and conduct legalproceedings in domestic and oreign courts or to provide the authorities in anotherjurisdiction with evidence or intelligence or investigations (or both). All legal optionswhether criminal conscation, non-conviction based conscation, civil actions, orother alternativesmust be considered. Tis process may be overwhelming or eventhe most experienced practitioners. It is exceptionally diffi cult or those working in thecontext o ailed states, widespread corruption, or limited resources.

Te complexity o the process highlights the need or a practical tool to help practitio-

ners navigate the process. With this in mind, the Stolen Asset Recovery Initiative, a jointinitiative o the United Nations Offi ce o Drugs and Crime and the World Bank ocusedon encouraging and acilitating more systematic and timely return o stolen assets, hasdeveloped thisAsset RecoveryHandbook: A Guide for Practitioners. Designed as a how-to manual, the handbook guides practitioners as they grapple with the strategic, organi-zational, investigative, and legal challenges o recovering assets that have been stolen bycorrupt leaders and hidden abroad. It provides common approaches to recovering stolenassets located in oreign jurisdictions, identies the challenges that practitioners arelikely to encounter, and introduces good practices. By consolidating into a single rame-work the inormation dispersed across various proessional backgrounds, the handbook

will enhance the effectiveness o practitioners working in a team environment.

Methodology

o develop theAsset RecoveryHandbook as a practical tool to help practitioners navi-gating the issues, laws, and theory, the Stolen Asset Recovery Initiative drew on thosepeople who have practical day-to-day experience in one or more o the core areas oasset recovery. Participants included law enorcement, nancial investigators, investi-gating magistrates, prosecutors, lawyers in private practice, and asset managers. Tey

brought experiencerom developed and developing jurisdictions and rom civil andcommon law systemsin conducting criminal conscation, non-conviction basedasset conscation, civil actions, investigations, asset tracing, international cooperation,and asset management. Tey have worked with other national agencies as well as withoreign counterparts. Being amiliar with some o the challenges in this regard, theyhave developed their own methods and ideas or overcoming those challenges.

Te overall ormat o the handbook and key topics or consideration were agreed on bya group o practitioners at a workshop held in Vienna, Austria, in May 2009. 10Tese

10. Participating practitioners in the May 2009 Vienna workshop brought experience rom practice inArgentina, Azerbaijan, Canada, Colombia, Costa Rica, France, Guernsey, Jersey, Peru, South Arica,

Switzerland, Ukraine, United Kingdom, United States, and Zambia.


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Introduction I 3

were developed by the authors into a draf version, and then presented and discussed ata second practitioners workshop held one year later in Marseille, France.11Te secondworkshop was ollowed by additional contributions and consultations, and the nalversion was agreed to by the expanded group.

How the Handbook Can Be Used

Te Asset Recovery Handbook is designed as a quick-reerence, how-to manual orpractitionerslaw enorcement offi cials, investigating magistrates, and prosecutorsas well as or asset managers and those involved in making policy decisions in both civiland common law jurisdictions. Given diverse audiences and legal systems, it is impor-tant that readers keep in mind that a practice or strategy that has worked in one jurisdic-tion may not work in another. Likewise, an investigative technique that is permitted in

one jurisdiction may not be permittedor may have different procedural requirementsin another. In addition, jurisdictions may use different terminology to describe the samelegal concept (or example, some jurisdictions use conscation and others use orei-ture) or procedure (some jurisdictions assets may be seized, whereas others may berestrained, blocked, or rozen).12 Or different jurisdictions may assign differentroles and responsibilities to those people who are involved in asset recovery: in somejurisdictions, investigations are conducted by an investigating magistrate; in others, bylaw enorcement authorities or prosecutors.

Te handbook attempts to point out these differences where they exist, and it high-

lights how different concepts or practices may offer similar solutions to the same chal-lenges. However, the handbook is not designed to be a detailed compendium o law andpractices. Each practitioner thereore should read the handbook in the context o his orher specic jurisdictions legal system, law enorcement structures, resources, legisla-tion, and procedureswithout being restrained by the terminology or the conceptsused to illustrate the challenges and tools or successul recovery o assets. Te practi-tioner should also consider the context o the legal system, law enorcement structures,resources, legislation, and procedures o the specic jurisdiction where the asset recov-ery procedures will be sought.

Te primary purpose o this handbook is to acilitate asset recovery in the context o grandcorruption, particularly as outlined in chapter V o UNCAC. Nonetheless, asset consca-tion and recovery can and should be applied to a wider range o offensesparticularly,

11. Practitioners participating in the May 2010 Marseille workshop brought experience rom Argentina,Azerbaijan, Brazil, Cameroon, Chile, Colombia, France, Germany, Guernsey, Haiti, Peru, South Arica,

Switzerland, Ukraine, United Kingdom, United States, and Zambia.12. For example, in South Aricas Prevention o Organised Crime Act, 1998, conscation is dened as

value-based orders made pursuant to chapter V o the act. In other jurisdictions, these orders are describedas pecuniary penalty orders (or example, in ederal and many state conscation laws in Australia). In

Mexico, the term oreiture is preerred because this reers to the proceeds and instrumentalities o crime;conscation, on the other hand, reers to the assets o an individual. In Jersey, oreiture is used with theinstrumentalities o crime, and conscation relates to the proceeds o crime.


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the asset conscation provisions set out in the United Nations Convention againstNarcotic Drugs and Psychotropic Substances (Vienna) and the United Nations Con-vention against ransnational Organized Crime.

Te handbook is organized into nine chapters, a glossary, and 10 appendixes o addi-tional resources. Chapter 1 provides a general overview o the asset recovery processand legal avenues or recovery, along with practical case examples. Chapter 2 presents ahost o strategic considerations or developing and managing an asset recovery case,including gathering initial sources o acts and inormation, assembling a team, andestablishing a relationship with oreign counterparts or international cooperation.Chapter 3 introduces the techniques that practitioners may use to trace assets and ana-lyze nancial data, as well as to secure reliable and admissible evidence or asset cons-cation cases. Te provisional measures and planning necessary to secure the assets priorto conscation are discussed in chapter 4; and chapter 5 introduces some o the man-

agement issues that practitioners will need to consider during this phase. Conscationsystems are the ocus o chapter 6, including a review o the different systems and howthey operate and the procedural enhancements that are available in some jurisdictions.On the issue o international cooperation, chapter 7 reviews the various methods avail-able, including inormal assistance and mutual legal assistance requests; and guidespractitioners through the entire process. Finally, chapters 8 and 9 discuss two addi-tional avenues or asset recoveryrespectively, civil proceedings and domestic cons-cation proceedings undertaken in oreign jurisdictions.

Te glossary denes many o the specialized terms used within the handbook. Because

jurisdictions ofen use different terminology to describe the same legal concept or pro-cedure, the glossary provides examples o alternative terms that may be used.

Te appendixes contain additional reerence tools and practical resources to assist prac-titioners. Appendix A provides an outline o offenses where criminal prosecution isconcerned. Appendix B presents a detailed list and descriptions o commonly usedcorporate vehicle terms. For those reviewing suspicious transaction reports, appendixC provides a sample nancial intelligence unit report. Appendix D offers a checklist osome additional considerations or planning the execution o a search and seizure war-rant. Appendixes E and G, respectively, provide a sample production order or nancialinstitutions and a sample nancial prole orm. Appendix F outlines the serial andcover payment methods used by correspondent banks in relation to electronic undtransers, and it discusses the new cover payment standards that became effective inNovember 2009. Appendix H offers discussion points that practitioners may use tobegin communications with their oreign counterparts. With respect to mutual legalassistance requests, Appendix I provides an outline or a letter o request, with keydrafing and execution tips. Finally, Appendix J provides a broad range o internationaland country-specic Web site resources.


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One o the rst considerations in an asset recovery case is the development o an effec-tive strategy or both obtaining a criminal conviction (i possible) and recovering theproceeds and instrumentalities o corruption. Practitioners must be aware o the vari-

ous legal avenues available or recovering assets, as well as some o the actors or obsta-cles that may lead to the selection o one avenue over another. Tis chapter introducesthe general process or asset recovery and the various recovery avenues (most o whichare discussed in greater detail in subsequent chapters).

1.1 General Process for Asset Recovery

Whether pursuing assets through criminal or non-conviction based (NCB) consca-tion or through proceedings in a oreign jurisdiction or through a private civil action,

the objectives and undamental process or recovery o assets are generally the same.Figure 1.1 illustrates this process.

1.1.1 Collection of Intelligence and Evidence and Tracing Assets

Evidence is gathered and assets are traced by law enorcement offi cers under the super-vision o or in close cooperation with prosecutors or investigating magistrates, or byprivate investigators or other interested parties in private civil actions. In addition togathering publicly available inormation and intelligence rom law enorcement orother government agency databases, law enorcement can employ special investigativetechniques. Some techniques may require authorization by a prosecutor or judge (orexample, electronic surveillance, search and seizure orders, production orders, oraccount monitoring orders), but others may not (or example, physical surveillance,inormation rom public sources, and witness interviews). Private investigators do nothave the powers granted to law enorcement; however; they will be able to use publiclyavailable sources and apply to the court or some civil orders (such as production orders,on-site review o records, preling testimony, or expert reports). Criminal investigativetechniques and tracing are discussed in detail in chapter 3, and investigative techniquesin civil actions are discussed in chapter 8.

1. Overview of the Asset Recovery

Process and Avenues for

Recovering Assets


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1.1.2 Securing the Assets

During the investigation process, proceeds and instrumentalities subject to consca-tion must be secured to avoid dissipation, movement, or destruction. In certain civillaw jurisdictions, the power to order the restraint or seizure o assets subject to cons-cation may be granted to prosecutors, investigating magistrates, or law enorcementagencies. In other civil law jurisdictions, judicial authorization is required. In commonlaw jurisdictions, an order to restrain or seize assets generally requires judicial authori-zation, with some exceptions in seizure cases. Asset restraint and seizure is discussed indetail in chapter 4; restraint in private civil actions is discussed in chapter 8. Systems tomanage assets will also need to be in place (see chapter 5).

1.1.3 International Cooperation

International cooperation is essential or the successul recovery o assets that have beentranserred to or hidden in oreign jurisdictions. It will be required or the gathering oevidence, the implementation o provisional measures, and the eventual conscation othe proceeds and instrumentalities o corruption. And when the assets are conscated,cooperation is critical or their return. International cooperation includes inormalassistance, mutual legal assistance (MLA) requests, and extradition.13Inormal assistance

13. For the purposes o this handbook, inormal assistance is used to include any type o assistance thatdoes not require aformalMLA request. Legislation permitting this inormal, practitioner-to-practitioner

FIGURE 1.1 Process for Recovery of Stolen Assets

Collecting Intelligence and Evidence and

Asset Tracing

(Domestically and in foreign jurisdictions using MLA)

Securing the Assets


Court Process

(To obtain conviction [if possible], confiscation, fines,

damages, and/or compensation)

Enforcing Orders


Return of Assets

Source: Authors illustration.

Note: MLA = mutual legal assistance.


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Overview of the Asset Recovery Process and Avenues I 7

is ofen used among counterpart agencies to gather inormation and intelligence to assistin the investigation and to align strategies and orthcoming procedures or recovery oassets. An MLA request is normally a written request used to gather evidence (involvingcoercive measures that include investigative techniques), obtain provisional measures,and seek enorcement o domestic orders in a oreign jurisdiction. International coopera-tion is addressed in chapter 7.

1.1.4 Court Proceedings

Court proceedings may involve criminal or NCB conscation or private civil actions(each described below and in subsequent chapters); and will achieve the recovery oassets through orders o conscation, compensation, damages, or nes. Conscationmay be property based or value based. Property-based systems (also reerred to astainted property systems) allow the conscation o assets ound to be the proceeds or

instrumentalities o crimerequiring a link between the asset and the offense (a require-ment that is requently diffi cult to prove when assets have been laundered, converted, ortranserred to conceal or disguise their illegal origin). Value-based systems (also reerredto as benet systems) allow the determination o the value o the benets derived romcrime and the conscation o an equivalent value o assets that may be untainted. Somejurisdictions use enhanced conscation techniques, such as substitute asset provisionsor legislative presumptions to assist in meeting the standard o proo. Chapter 6 describesthese and other conscation issues; chapter 8 describes private civil actions.

1.1.5 Enforcement of Orders

When a court has ordered the restraint, seizure, or conscation o assets, steps must betaken to enorce the order. I assets are located in a oreign jurisdiction, an MLA requestmust be submitted. Te order may then be enorced by authorities in the oreign jurisdic-tion through either (1) directly registering and enorcing the order o the requesting juris-diction in a domestic court (direct enorcement) or (2) obtaining a domestic order basedon the acts (or order) provided by the requesting jurisdiction (indirect enorcement).14Tis will be accomplished through the mutual legal assistance process (described aboveand in chapter 7). Similarly, private civil judgments or damages or compensation willneed to be enorced using the same procedures as or other civil judgments.

1.1.6 Asset Return

Te enorcement o the conscation order in the requested jurisdiction ofen results inthe conscated assets being transerred to the general treasury or conscation und o

assistance may be outlined in MLA legislation and may involve ormal authorities, agencies, or adminis-

trations. For a description o this type o assistance and comparison with the MLA request process, seesection 7.2 o chapter 7.

14. See United Nations Convention against Corruption (UNCAC), art. 54 and 55; United Nations Conven-

tion against ransnational Organized Crime (UNOC), art. 13; United Nations Convention against Nar-cotic Drugs and Psychotropic Substances, art. 5; and the errorist Financing Convention, art. 8. Forrestraint or seizure, see UNCAC, art. 54(2).


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the requested jurisdiction (not directly returned to the requesting jurisdiction).15As aresult, another mechanism will be needed to arrange or the return o the assets. IUNCAC is applicable, the requested party will be obliged under article 57 to return theconscated assets to the requesting party in cases o embezzlement o public unds orlaundering o such unds, or when the requesting party reasonably establishes priorownership. I UNCAC is not applicable, the return or sharing o conscated assets willdepend on domestic legislation, other international conventions, MLA treaties, or spe-cial agreements (or example, asset sharing agreements). In all cases, total recovery maybe reduced to compensate the requested jurisdiction or its expenses in restraining,maintaining, and disposing o the conscated assets and the legal and living expenseso the claimant.

Assets may also be returned directly to victims, including a oreign jurisdiction,through the order o a court (reerred to as direct recovery).16A court may order

compensation or damages directly to a oreign jurisdiction in a private civil action.A court may also order compensation or restitution directly to a oreign jurisdictionin a criminal or NCB case. Finally, when deciding on conscation, some courts havethe authority to recognize a oreign jurisdictions claim as the legitimate owner othe assets.

I the perpetrator o the criminal action is bankrupt (or companies used by the perpe-trator are insolvent), ormal insolvency procedures may assist in the recovery process.All o these mechanisms are explained urther in chapters 7, 8, and 9.

A number o policy issues are likely to arise during any efforts to recover assets incorruption cases. Requested jurisdictions may be concerned that the unds will besiphoned off again through continued or renewed corruption in the requestingjurisdictions, especially i the corrupt offi cial is still in power or holds signicantinuence. Moreover, requesting jurisdictions may object to a requested countrysattempts to impose conditions and other views on how the conscated assets shouldbe used. In some cases, international organizations such as the World Bank and civilsociety organizations have been used to acilitate the return and monitoring orecovered unds.17

15. Stolen Asset Recovery (StAR) Initiative Secretariat, Management o Conscated Assets (Washington,DC, 2009), http://www.worldbank.org/star.

16. UNCAC, art. 53 requires that states parties take measures to permit direct recovery o property.17. In 2007, the U.S. Department o Justice led a civil conscation action against a U.S. citizen indicted in2003 or allegedly paying bribes to Kazakh offi cials or oil and gas deals. Te action was or approximately

$84 million in proceeds. Te American citizen agreed to transer those proceeds to a World Bank trust undor use on projects in Kazakhstan. See U.S. Attorney or S.D.N.Y, Government Files Civil Foreiture Action

Against $84 Million Allegedly raceable to Illegal Payments and Agrees to Conditional Release o Funds toFoundation to Benet Poor Children in Kazakhstan, news release no. 07-108, May 30, 2007, http://www.

usdoj.gov/usao/nys/pressreleases/May07/pictetoreiturecomplaintpr.pd; World Bank, Kazakhstan BOA

Foundation Established, news release no. 2008/07/KZ, June 4, 2008, http://siteresources.worldbank.org/INKAZAKHSAN/News%20and%20Events/21790077/Bota_Establishment_June08_eng.pd.


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1.2 Legal Avenues for Achieving Asset Recovery

Te legal actions or pursuing asset recovery are diverse. Tey include the ollowingmechanisms:

domestic criminal prosecution and conscation, ollowed by an MLA request toenorce orders in oreign jurisdictions;NCB conscation, ollowed by an MLA request or other orms o internationalcooperation to enorce orders in oreign jurisdictions;private civil actions, including ormal insolvency process;criminal prosecution and conscation or NCB conscation initiated by a oreign

jurisdiction (requires jurisdiction over an offense and cooperation rom the juris-diction harmed by the corruption offenses); andadministrative conscation.

Te availability o these avenues, either domestically or in a oreign jurisdiction, willdepend on the laws and regulations in the jurisdictions involved in the investigation,as well as international or bilateral conventions and treaties. Box 1.1 outlines the vari-ous laws relevant to practitioners pursuing these avenues. In addition, there are otherlegal, practical, or operational realities that will inuence the avenue selected. Some othese strategic considerations, obstacles, and case management issues are discussed inchapter 2.

1.2.1 Criminal Prosecution and ConfiscationWhen authorities seeking to recover stolen assets decide to pursue a criminal case,criminal conscation is a possible means o redress. Practitioners must gather evidence,trace and secure assets, conduct a prosecution against an individual or legal entity, andobtain a conviction. Afer obtaining a conviction, conscation can be ordered by thecourt. In some jurisdictions, particularly common law jurisdictions, the standard oproo or conscation will be lower than the standard required or obtaining the con-viction. For example, balance o probabilities will be needed or conscation, whereasbeyond a reasonable doubt will be required or a conviction. Other jurisdictions applythe same standard to both conviction and conscation. See gure 2.1 in section 2.6.5or an explanation o the standards o proo. Generally, unless enhanced conscationprovisions apply, conscation legislation will provide or conscation o proceeds andinstrumentalities that are directly or indirectly traceable to the crime.18

18. Te orm and operation o enhanced conscation provisions are discussed in more detail in chap-ter 6. Enhancements include substitute asset provisions that permit conscation o assets not con-nected with a crime i the original proceeds have been lost or dissipated, presumptions about the

unlawul use or derivation o assets in certain circumstances, presumptions about the extent o unlaw-

ul benets owing rom certain offenses, and the reversal o the onus and burden o proo in certaincircumstances.


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BOX 1.1 Legal Framework for Asset Recovery

Legislation and procedures (domestic and foreign jurisdictions):

Confiscation provisions (criminal, NCB, administrative);MLA;

Criminal law provisions and codes of procedures (corruption, money laun-

dering);

Private (civil) law provisions and codes of procedure; and

Asset sharing laws.

International conventions and treatiesa

UNCAC;

United Nations Convention against the Illicit Traffic in Narcotic Drugs and

Psychotropic Substances;

UNTOC;

Organisation for Economic Co-operation and Development Convention on

Combating Bribery of Foreign Public Officials in International Business

Transactions;

Southeast Asian Mutual Legal Assistance in Criminal Matters Treaty;

Inter-American Convention against Corruption;

Council of Europe Convention on Laundering, Search, Seizure and Confis-

cation of the Proceeds of Crime (1990) and the revised Council of Europe

Convention on Laundering, Search, Seizure and Confiscation of the Pro-

ceeds of Crime and on the Financing of Terrorism (2005);Council of the European Union Framework Decision 2003/577/JHA on the

Execution in the European Union of Orders Freezing Property or Evidence;

Council of the European Union Framework Decision 2006/783/JHA on the

Application of the Principle of Mutual Recognition to Confiscation Orders;

Southern African Development Community Protocol against Corruption

(2001);

African Union Convention on Preventing and Combating Corruption and

Related Offenses (2003);

Commonwealth of Independent States Conventions on Legal Assistance

and Legal Relationship in Civil, Family and Criminal Matters;

Scheme Relating to Mutual Assistance in Criminal Matters within the

Commonwealth (the Harare Scheme);

Mercosur Mutual Legal Assistance in Criminal Matters Treaty (Dec. No.

12/01); and

Bilateral MLA treaties.

a. See appendix J for available Web site resources.


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International cooperation, including inormal assistance and requests or MLA, will beused throughout the process to trace and secure assets in oreign jurisdictions, as wellas to enorce the nal order o conscation.19

A benet o criminal prosecution and conscation is the societal recognition o thecriminal nature o corruption and the accountability o the perpetrator. Further,penalties o imprisonment, nes, and conscation serve to deter uture offenders. Inaddition, criminal investigators generally have the most aggressive means o gather-ing inormation and intelligence, including access to data rom law enorcementagencies and nancial intelligence units (FIUs), use o provisional measures andcoercive investigative techniques (such as searches, electronic surveillance, exami-nation o nancial records or access to documents held by third parties), as well asgrand juries or other means o compelling testimony or evidence. And, in mostjurisdictions, MLA is provided only in the context o criminal investigations. How-

ever, signicant barriers may exist to obtaining a criminal conviction and consca-tion: insuffi cient evidence; lack o capacity or political will; or the death, ight, orimmunity o the perpetrator. Furthermore, the conduct giving rise to the requestmay not be a crime in the jurisdiction where the relie is being sought. Tese andother barriers are discussed in chapter 2.

1.2.2 Non-Conviction Based Confiscation

Another type o conscation gaining traction throughout the world is conscation with-

out a conviction, reerred to as NCB conscation.

20

NCB conscation shares at leastone common objective with criminal conscationnamely, the recovery and return othe proceeds and instrumentalities o crime. Likewise, deterrence and depriving corruptoffi cials o their ill-gotten gains are other societal equities realized by NCB conscation.

NCB conscation differs rom criminal conscation in the procedure used to conscatethe assets. A criminal conscation requires a criminal trial and conviction, ollowed bythe conscation proceedings; NCB conscation does not require a trial or conviction,but only the conscation proceedings. In many jurisdictions, NCB conscation can beestablished on a lower standard o proo (or example, the balance o probabilities or

preponderance o the evidence standard), and this helps ease the burden on theauthorities. Other (mainly civil law) jurisdictions require a higher standard o proospecically, the same standard required to obtain a criminal conviction.

19. UNCAC, art. 54(1)(a); UNOC, art. 13(1)(a); and United Nations Convention against Narcotic Drugsand Psychotropic Substances, art. 5(4)(a) require states parties to take measures to give effect to oreignorders.

20. Jurisdictions include Anguilla, Antigua and Barbuda, Australia, some o the provinces o Canada(Alberta, British Columbia, Manitoba, Ontario, Quebec, Saskatchewan), Colombia, Costa Rica, Fiji, Guernsey,

Honduras, Ireland, Isle o Man, Israel, Jersey, Liechtenstein, New Zealand, the Philippines, Slovenia, South

Arica, Switzerland, Tailand, the United Kingdom, the United States, and Zambia. International conven-tions and multilateral agreements also have introduced NCB conscation. See UNCAC, art. 53(1)(c) andrecommendation 3 o the Financial Action ask Force 40+9 Recommendations.


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However, because NCB conscation is not available in all jurisdictions, practitionersmay have diffi culty obtaining MLA to assist with investigations and to enorce NCBconscation orders. NCB conscation is discussed in greater detail in chapter 6.

1.2.3 Private Civil Action

Authorities seeking to recover stolen assets have the option o initiating proceedings indomestic or oreign civil courts to secure and recover the assets and to seek damagesbased on torts, breach o contract, or illicit enrichment.21 Te courts o the oreignjurisdiction may be competent i a deendant is a person (individual or business entity)living or incorporated in the jurisdiction (personal jurisdiction), i the assets are withinor have transited the jurisdiction (subject matter jurisdiction), or i an act o corruptionor money laundering was committed within the jurisdiction. As a private litigant, theauthorities seeking redress can hire lawyers to explore the potential claims and reme-

dies (ownership o misappropriated assets, tort, disgorgement o illicit prots, contrac-tual breaches). Te civil action will entail collecting evidence o misappropriation or oliabilities based on contractual or tort damages. Frequently, it is possible to use evi-dence gathered in the course o a criminal proceeding in a civil litigation. It is also pos-sible to seek evidence with the assistance o a court prior to ling an action.

Te plaintiff usually has the option to petition the court or a variety o orders, includ-ing the ollowing:

Freezing, embargo, sequestration, or restraining orders (potentially with world-

wide effect) secure assets suspected to be the proceeds o crime, pending theresolution o a lawsuit laying claim to those assets. In some jurisdictions, interimrestraining orders may be issued pending the outcome o a lawsuit even beorethe lawsuit has been led, without notice and with extraterritorial effect. Teseorders usually require the posting o a bond, guarantee, or other undertaking bythe petitioner.Orders against deendants oblige them to provide inormation about the sourceo their assets and transactions involving them.Orders against third parties or disclosure o relevant documents are useul inobtaining evidence rom banks, nancial advisers, or solicitors, among others.No-say (gag) orders prevent banks and other parties rom inorming the deen-dants o a restraint injunction or disclosure order.Generic protective or conservation orders preserve the status quo and preventthe deterioration o the petitioners assets, legal interests, or both. Such ordersusually require showing the likelihood o success on the merits and an imminentrisk in delaying a decision.

Te principal disadvantages o litigating in a oreign jurisdiction are the cost o tracingassets and the legal ees entailed in obtaining relevant court orders. However, the litigant

21. UNCAC art. 53(a) calls on states parties to permit another state party to initiate a civil action in domes-tic courts.


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has more control in pursuing civil proceedings and assets in the hands o third partiesand may have the advantage o a lower standard o proo. For example, civil cases incommon law jurisdictions usually are decided on a balance o probabilities or pre-ponderance o the evidence standard.

Similarly, arbitration proceedings related to international contracts obtained throughbribes or illicit advantages awarded to corrupt offi cials may open promising avenues,including the cancellation o contracts, and potential claims or torts or damages. Teseavenues are discussed in greater detail in chapter 8.

1.2.4 Actions Initiated by Foreign Jurisdictions

Authorities seeking to recover stolen assets may choose to support a criminal or NCBconscation proceeding that has been initiated in another jurisdiction against the cor-

rupt offi cial, associates, or identied assets. At the conclusion o the proceedings, thestate or government may be able to obtain a portion o the recovered assets throughorders o the oreign courts or pursuant to legislation or agreements.22Tis will requirethat the oreign authority has jurisdiction; the capacity to prosecute and conscate;and, most important, the willingness to share the proceeds. Te initiation o an actionby a oreign authority may take place in one o two ways:

Authorities in the jurisdiction harmed by corruption may ask the oreign author-1.ities to open their own case. Tis may be accomplished by ling a complaint or,even more simply, by sharing incriminating evidence and a case le with author-

ities o the oreign jurisdiction. In all cases, the oreign authorities ultimately havethe discretion to pursue or ignore the case. I authorities pursue it, the jurisdic-tion harmed by the offenses will need to cooperate with the oreign authorities toensure they have the necessary evidence.Foreign authorities may open a case independent o request rom the jurisdiction2.harmed by corruption. Foreign authorities may receive inormation linking acorrupt offi cial to their jurisdictionwhether through a newspaper article, a sus-picious transaction report (SR), or a request or inormal assistance or MLAand decide to investigate money laundering or oreign bribery activities under-taken within their national territory.

Te involvement o the victimincluding a state or government that has been harmedby corruption offensesin the proceedings is generally encouraged in most jurisdic-tions; however, it generally is limited to discussions with practitioners and does notextend to actual standing in the proceedings. In some civil law jurisdictions, however, itmay also be possible or the victim to participate in oreign proceedings as a privateprosecutor or as a civil party to the proceedings. In both civil and common law jurisdic-tions, it may be possible to recover assets rom these proceedings through court-orderedcompensation, restitution, or damages as a party harmed by corruption offenses or as a

legitimate owner in conscation proceedings.

22. UNCAC art. 53(b) and 53(c) require states parties to take measures to permit direct recovery.


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Tis avenue is an interesting option i the jurisdiction seeking redress does not havethe legal basis, capacity, or evidence to pursue an international investigation on itsown. Moreover, i the limitation period rules out the prosecution o the initial corrup-tion charges, it may be possible to investigate offenses o money laundering or posses-sion o stolen assets in other jurisdictions. On the other hand, the jurisdiction that hasbeen harmed by corruption offenses has no control over the proceedings, and successlargely depends on the oreign authorities priorities. In addition, unless the return othe assets is ordered by the court, it will be dependent on asset sharing agreements orthe authorities ability to return the assets on a discretionary basis (see section 9.4 inchapter 9).

1.2.5 Administrative Confiscation

Unlike criminal or NCB conscation, which requires court action, administrative con-

scation generally involves a non-judicial mechanism or conscating assets used orinvolved in the commission o the offense. It may occur by operation o statute, pursu-ant to procedures set out in regulations, and is typically used to address uncontestedconscation cases. Te conscation is carried out by an authorized agency (such as apolice unit or a designated law enorcement agency), and ofen ollows a process similarto that traditionally used in customs smuggling cases. Te procedures usually requirenotice to persons with a legal interest in the asset and publication to the public at large.Generally, administrative conscation is restricted to low-value assets or certain classeso assets. For example, legislation may permit the conscation o any amount ocash, but prohibit the conscation o real property. Another variation on this type o

conscation, called abandonment by some jurisdictions, employs a similar proce-dure. Another non-judicial means to recover assets is through taxation o the illicitprots (see box 1.2).

1.3 Use of Asset Recovery Avenues in Practice: Three Case Examples

Outlined below are three short case examples that demonstrate how the various avenuesdiscussed throughout this chapter have been used to recover assets in practice. Eachcase involved several jurisdictions and incorporated a number o different strategicapproaches, depending on

the circumstances o the case, the avenues available in thedomestic and oreign jurisdictions, or repatriation arrangements.

1.3.1 Case of Vladimiro Montesinos and His Associates

Following televised videos that showed Vladimiro Montesinos (personal adviser toPerus president Alberto Fujimori and de acto chie o Perus intelligence service) brib-ing an elected opposition congressman in September 2000, unds were traced to severaljurisdictions, includingthe Cayman Islands, Luxembourg, Switzerland, and the United

States. Ultimately, more than $250 million was recovered rom Switzerland and theUnited States and rom local banks in Peru.


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For the $48 million o assets in Switzerland, two options were discussed with the Swissinvestigating magistrate: Te Peruvian authorities could prosecute the offenders domes-tically or corruption and then seek recovery o the assets through MLA requests andsigned waivers. Or Switzerland could pursue drug traffi cking and related money laun-dering offenses that were involved in the case. With the second option, recovery wouldbe reduced because Peru would have to share a percentage o the assets with Switzerland.Peru decided to pursue the rst option. o lay the groundwork, Peruvian authoritiesintroduced legislation permitting guilty pleas (plea agreements) and other orms ocooperation.23 In return or a reduced criminal sentence or dismissal o proceedings,deendants provided useul inormation regarding known or unidentied crimes andunknown evidence, access to the proceeds o crime, or testimony against key gures. Inaddition, deendants signed waivers authorizing the oreign banks that held their moneyto transer it to the Peruvian government accounts. Several million dollars were recov-ered through the use o these waivers.

23. Reerred to as the Effi cient Collaboration Act (Law 27.378).

BOX 1.2 Alternative Means of Recovering Assets

Taxation of Illicit Profits

A public official or an executive from a state-owned company who receives

bribes, misappropriated funds, or stolen assets may be liable for income taxes onthis illicit income. In such a case, authorities do not have to prove the illicit origin

of assets. It is sufficient to prove that they represent undisclosed revenue. The

authorities simply prove that the taxpayer has made a taxable gain or received

taxable income and that he or she is liable for the appropriate amount of taxes,

including interest and penalties if the tax was not paid on time. Therefore, the

evidentiary burden is less than in a civil recovery case. Given the fact that this

approach generally does not involve court proceedings, this mechanism is poten-

tially cheaper and faster than civil recovery or criminal proceedings.

Fines and Compensation Orders in Criminal TrialsIn criminal cases, the court may order the defendant to pay fines, compensation

to the victim, or both. Such orders may accompany confiscation orders, or may

be ordered in lieu of confiscation orders. Although fines or compensation orders

may be easier to achieve than a separate proceeding for confiscation, the enforce-

ment of such orders is likely to be more difficult. Enforcement of fines and com-

pensation orders may proceed through civil courts, whereas confiscation orders

will be enforced against assets that have been previously restrained. In addition,

the amount of the fine may be limited by statute and therefore insufficient on its

own to meet the recovery being sought.


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For the assets allegedly in the Cayman Islands, Peru hired local lawyers to assist withpursuit o $33 million transerred through a Peruvian bank. Peruvian authorities alsomet with the FIU to seek its assistance. Afer several months o nancial analysis, Perudiscovered that the money had never been sent to the Cayman Islands, but had remainedin the Peruvian bank. A back-to-back loan scheme had been used to simulate thetranser to the Cayman bank and the return to the Peruvian bank. When this wasdiscovered, the unds in the Peruvian bank were seized.

In the United States, Victor Venero Garrido, an associate o Montesinos, was arrested incoordination with the Peruvian authorities; his apartment was seized; and $20 millionwas rozen. Another $30 million o Montesinos unds held in the name o a ront manwere also rozen. NCB conscation proceedings in Caliornia and Florida were used torecover the unds, and the entire amount was repatriated to Peru. Te repatriation agree-ment with the United States was conditioned on the investment o the money in human

rights and anticorruption efforts.

In Peru, more than $60 million was recovered by Peruvian authorities seizing and con-scating properties, vehicles, boats, and other assets through approximately 180 crimi-nal proceedings involving more than 1,200 deendants.

1.3.2 Case of Frederick Chiluba and His Associates

In 2002, a task orce was established in Zambia to investigate corruption allegationsagainst the ormer president Frederick Chiluba and his associates during the period

19912001, to assess whether criminal proceedings could be brought, and to determinethe best options or recovering assets. In 2004, the attorney general o Zambia initiateda civil suit in the United Kingdom to recover unds transerred to London and acrossEurope between 1995 and 2001 to und the ormer presidents expensive liestyleincluding a residence valued at more than 40 times his annual salary.24Tese proceed-ings were launched in addition to ongoing criminal proceedings in Zambia.

Tree actors inormed the decision to launch the civil action in addition to the criminalproceedings: First, most o the deendants were located in Europe, making domesticcriminal prosecution and conscation impossible in a number o cases.25Second, mosto the evidence and assets were located in Europe, which made a European venue a moreavorable option. And, third, specically with respect to the cases whereas domesticcriminal prosecution and conscation was possible, successul international coopera-tion through an MLA request was unlikely. Zambia lacked the bilateral or multilateralagreements, procedural saeguards, capacity, and experience necessary to collect evi-dence and enorce conscation orders across Europe. Instead, court orders obtained ina European jurisdiction would be easier to enorce in jurisdictions that were parties tothe Brussels Convention on recognition o oreign court decisions in Europe.

24.Attorney General of Zambia v. Meer Care & Desai & Others,[2007] EWHC 952 (Ch.) (U.K.).25. Zambia did not have NCB conscation legislation at that time; however, it was adopted subsequently.


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London was chosen as the European venue because most o the unds diverted romZambia had passed through two law rms and bank accounts in the United Kingdom,and the attorney general o Zambia was able to establish jurisdiction over deendants injurisdictions that were parties to the Brussels Convention. Finally, it was anticipatedthat decisions obtained rom courts in the United Kingdom would also be enorceablein Zambia when they were registered beore the courts.

Te High Court o London ound suffi cient evidence o a conspiracy to transer approx-imately $52 million rom Zambia to a bank account operated outside ordinary govern-ment businessthe Zamtrop accountand held at the Zambia National CommercialBank in London. Forensic experts traced the monies received in the Zamtrop accountback to the ministry o nance. Tey also substantially traced the unds leaving theZamtrop account, and they revealed that $25 million was misappropriated or misused.In addition, the High Court ound no legitimate basis or payments o about $21 million

made by Zambia pursuant to an alleged arms deal with Bulgaria and paid into accountsin Belgium and Switzerland.

Te Court held that the deendants conspired to misappropriate $25 million rom theZamtrop account and $21 million rom the arms deal payments. Te Court also heldthat the deendants had broken the duciary duties they owed to the Zambian Republicor dishonestly assisted in such breaches. As a result, the deendants were held liable orthe amounts and assets corresponding to misappropriated unds.

1.3.3 Case of Diepreye AlamieyeseighaIn the case involving Diepreye Peter Solomon Alamieyeseigha, ormer governor oBayelsa State, Nigeria, this jurisdiction was able to recover $17.7 million through domes-tic proceedings and through cooperation with authorities in South Arica and theUnited Kingdom.

In September 2005, Alamieyeseigha was rst arrested at Heathrow Airport by theLondon Metropolitan Police on suspicion o money laundering. An investigationrevealed that Alamieyeseigha had $2.7 million stashed in bank accounts and in hishome in London, as well as London real estate worth an estimated $15 million.Alamieyeseigha was released on bail and subsequently lef the jurisdiction in November2005, returning to Nigeria.

In Nigeria, he claimed immunity rom prosecution. He was subsequently removedrom offi ce by Bayelsa States lawmakers, and thereby lost his immunity. Later inNovember 2005, Nigerias Economic and Financial Crimes Commission charged himwith 40 counts o money laundering and corruption, and it secured a court orderrestraining assets held in Nigeria.

For assets in the United Kingdom, close cooperation between the Commission and theLondon Metropolitan Polices Proceeds o Corruption Unit was crucial. Te $1.5 millionin cash seized rom Alamieyeseighas London home was conscated under the Proceeds


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o Crime Act on the basis o a court order that the assets represented proceeds o crime.In May 2006, the court ordered the unds repaid to Nigeria, and the transer was made aew weeks later. For the bank accounts, the process was more challenging because assetsand evidence were located in the Bahamas, the British Virgin Islands, the Seychelles,South Arica, and the United Kingdom. Nigerian authorities recognized that requestingassistance rom these jurisdictions could take considerable time and that orders romNigerian courts would not necessarily be executed. In addition, the pursuit o legal pro-ceedings in each o these jurisdictions was a daunting prospect because the Nigerianauthorities had little evidence linking Alamieyeseigha to these assets and linking theassets to acts o corruption.

As a result, Nigerian authorities decided to bring civil proceedings in the United Kingdomand simultaneously pursue criminal proceedings in Nigeria. o secure evidence, the Nige-rian authorities obtained a disclosure order or the evidence compiled by the Metropoli-

tan Police in the course o its investigation.26

Nigeria was able to use this evidence togetherwith Alamieyeseighas income and asset declaration27 to obtain a worldwide restraintorder covering all assets owned directly or indirectly by Alamieyeseigha and a disclosureorder or documents held at banks and by Alamieyeseighas associates.

In parallel with those proceedings, the South Arican Asset Foreiture Unit initiatedNCB conscation proceedings against Alamieyeseighas luxury penthouse. Funds werereturned to Nigeria ollowing the sale o the property in January 2007.

Beore a Nigerian high court in July 2007, Alamieyeseigha pleaded guilty to six charges

o making alse declaration o assets and caused his companies to plead guilty to 23charges o money laundering. He was sentenced to two years in prison, and the courtordered the conscation o assets in Nigeria. Alamieyeseighas guilty pleas effectivelyvoided his deense in the civil proceedings in the London High Court; and, in December2007, the Court issued a summary judgment conscating property and a bank accountin the United Kingdom. A judgment in July 2008 led to the conscation o the remain-ing assets in Cyprus, Denmark, and the United Kingdom.

26. Te Nigerian application or disclosure was not contested by the Metropolitan Police. Tis departedrom the usual practice: the police usually do not concede to providing evidence gathered through criminal

investigations to assist private parties pursuing civil claims.27. Te declaration was led in 1999 when Alamieyeseigha was rst elected state governor. It indicated thathe had assets amounting to just over hal a million dollars and an annual income o $12,000.


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2. Strategic Considerations for

Developing and Managing a Case

Successul asset recovery requires a comprehensive plan o action that incorporates anumber o important steps and considerations. Practitioners will need to gather andassess the acts to understand the case; assemble a team; identiy key allies; communicatewith oreign practitioners; grapple with the legal, practical, and operational challenges28;and ensure effective case management. Each acet will help practitioners select the mostappropriate legal avenue or recovering assetswhether criminal or non-convictionbased (NCB) conscation ollowed by a mutual legal assistance (MLA) request orenorcement, private civil action, or a request that authorities in another jurisdiction pur-sue criminal or NCB conscation. Experience has demonstrated that whereas a criminalconvictionis always important to combat and deter corruption, criminal conscationmaynot be the best option or asset recovery. Some authorities will use a combination o theavenues to pursue conscation.29Alternatively, the presence o obstacles may warrantconsideration o another legal avenue. In cases involving multiple jurisdictions, a numbero different avenues may be pursuedor example, domestic conscation ollowed by anMLA request or enorcement in one jurisdiction and private civil recovery in another.

Tis chapter reviews some o the initial actions and some o the issues that practitionerswill have to consider in selecting an avenue or asset recovery. It is important or practi-tioners to persevere and to think creatively in developing and implementing a strategy:perhaps there is an innovative way to resolve an issue, such as introducing new legislationor a different approach. Practitioners should also be conscious that decision making is anongoing and iterative process: because pragmatism is essential, the rst choices should bereviewed regularly to check that they are still appropriate in light o case developments.

2.1 Gathering Facts: Initial Sources of Information

o launch an asset recovery investigation, authorities analyze leads rom diverse sourceso inormation discussed below. Tey may also choose to undertake some preliminary

28. Te Stolen Asset Recovery (StAR) Initiative is currently undertaking a study o the barriers to asset

recovery. Te expected publication date is early-2011. Te study will be available at www.worldbank.org/star. See also Best Practices: Conscation (Recommendations 3 and 38), adopted by the plenary o the

Financial Action ask Force (FAF) in February 2010. Te document is available at http://www.at-ga

.org/dataoecd/39/57/44655136.pd.29. In the United States, or example, prosecutors ofen use NCB conscation procedures to reeze or seizeproperty and have the NCB case stayed during criminal proceedings. I the deendant is convicted, crim-inal conscation will be used to conscate the deendants interest in the property.


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investigations, as outlined in chapter 3. Potential sources o inormation include theollowing:

Criminal complaints (communications) and proceedings. Reports o raud,corruption, thef, or other offenses led by victims (including individuals, com-panies, and jurisdictions harmed by corruption offenses) or government agencies(such as regulatory authorities, anticorruption agencies, tax authorities, andnancial intelligence units [FIUs]) are vital sources o inormation. In addition,investigations into other criminal activities may reveal corruption. For example,a search or communication intercept in a drug case could yield evidence obribery activities.FIU reports. Money laundering legislation obliges nancial institutions, regula-tory authorities, and some nonnancial businesses and proessions (such as law-yers, accountants, dealers in precious metals and stones, and trust and company

service providers) to le suspicious transaction or activity reports (SRs) withFIUs and to be particularly vigilant concerning politically exposed personsnamely, senior government offi cials, their amily members, and close associates.30Some jurisdictions also require the lling o currency transactions reports (CRs)or certain transactions. On receipt o an SR or a CR rom a reporting entity,an FIU may launch an investigation and relay the completed report to local lawenorcement or prosecutors. Te FIU may also transmit the inormation to a or-eign FIU through the Egmont Group, a network o FIUs. For more inormationon using FIUs in initiating and investigating asset recovery cases, see box 2.1, andsection 3.3.2 o chapter 3.

Civil or administrative proceedings. Civil or administrative proceedings, suchas a brokerage report, regulator sanctions against a nancial institution, or sanc-tions against a company by an international or regional development bank, mayreveal corrupt activities. Many complaints, although not specically citing cor-ruption, lead to the discovery o such misconduct on investigation. A complaintabout missing or deective materials, or instance, could indicate that deectivegoods were accepted by a procurement offi cial in exchange or bribes. Similarly,complaints led by contractors alleging unair treatment in a bidding process alsomerit attention.MLA requests. Requesting jurisdictions may include in their requests a lot odetailed inormation on individuals and bank accounts that may lead the requestedjurisdiction to open a domestic case or money laundering. Inormation sharedthrough tax exchange agreements also may be useul.Spontaneous disclosures. Foreign competent authorities and FIUs may sponta-neously provide the authorities in another jurisdiction with inormation on cor-ruption activities that have taken place in the other jurisdiction or have involvedone o its nationals. Such inormation may also be passed through ormal orinormal practitioner networks (see section 7.3.5 o chapter 7).

30. See United Nations Convention against Corruption (UNCAC), art. 52(1) and (2); and recommenda-tions 6, 13, and 16 o the FAF 40+9 Recommendations.


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Strategic Considerations for Developing and Managing a Case I 21

BOX 2.1 Role and Contribution of FIUs in Asset Recovery Cases

FIUs are agencies responsible for collecting STRs from financial institutions andother reporting entities, conducting analysis, and disseminating the resulting

intelligence to local competent authorities (typically, law enforcement agenciesand prosecutors and foreign FIUs) to combat money laundering and terrorist

financing. They may be helpful partners for asset recovery practitioners in initiat-ing a case and conduct an investigation in a number of ways:

Proactive sharing of intelligence with law enforcement and prosecu-

tors. Where an FIU analysis reveals money laundering or other criminalactivity, FIUs will proactively provide intelligence reports to local law

enforcement or prosecutors. Where appropriate, FIUs will also provideintelligence reports to foreign FIUs bilaterally, often through the Egmont

Groups secure Web site. That information is analyzed further and may be

passed to foreign law enforcement and prosecutors.Provision of ancillary intelligence. Most FIUs maintain a central database of

all STRs, CTRs, cross-border currency reports, intelligence reports, and anyqueries received from law enforcement agencies or foreign FIUs. The intelli-gence received and stored may not have been sufficient on its own to warrant

a report to law enforcement; however, it may be useful to law enforcementofficials in understanding the activity of an investigations targets, identifying

associates, and forming links with the investigations of other agencies.Expertise in financial matters. Financial intelligence analysts are familiarwith financial services and products and with money laundering typologies,

and they are experienced in analyzing financial records and flows. Suchexpertise is critical throughout an investigation and prosecution, and FIUs

may be a helpful resource in this regard.Personal contacts and networks. FIUs will have contacts in financial insti-tutions, other domestic agencies, and foreign FIUs (through the Egmont

Group) that may be helpful resources for practitioners.Ability to institute an administrative freeze. Some FIUs are able to restrainfunds for a brief period of time (see section 7.3.4), thereby helping practitio-

ners quickly preserve assets prior to the obtaining of a formal court order.

Practitioners have found FIUs to be most effective as partners. Such a relation-ship requires a two-way sharing of relevant intelligence between the FIU and thepractitioner: both upstream and downstream rather than a one-way flow of intel-

ligence from the FIU to the practitioner. Practitioners have found that such apractice increases the intelligence available to FIUs and ultimately improves thefinancial analysis that the FIUs produce.

Auditors. Companies are commonly subject to annual audits o their nancialstatements, and individuals are audited by tax agencies. Similarly, governments

usually establish auditing or regulatory agencies (or example, offi ces o inspectorsgeneral, courts, inspection agencies, and specialized accounting offi ces) to overseegovernment departments or state-owned companies. Tese audits requently


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uncover discrepancies between movements o unds and actual business transac-tions, thereby signaling possible corrupt activities. In particular, examination onancial documents relating to revenues or expenses may reveal patterns o cti-tious billing typical o corruption and bribery cases.Whistle-blowers. Initial reerrals or investigation may come rom employees orindividuals who suspect maleasance within their institutions or who are hopingor lenient treatment or their own crimes.31Media and civil society reports. Suspicious activity or arrests o oreign offi -cials on corruption charges are ofen relayed by the news media or throughreports o civil society and nongovernmental organizations. Such reports maytrigger an investigation directly or may prompt the ling o an SR that leads toan investigation.Asset and income declarations by public offi cials. Many jurisdictions obligepublic offi cials to disclose inormation regarding their assets and income.32Tese

declarations may highlight signicant increases in assets that are inconsistentwith an individuals declared income or even alsication o declared income.Comparing declared assets against those assets used by public offi cials may pointtoward illicit enrichment.Intelligence services. Inormation may be received rom an intelligence agencyor through intelligence services located in another government agency (or exam-ple, law enorcement or a regulatory authority).Proactive investigations. Practitioners may also actively seek inormation rompotential sources. Tey may monitor the activities o sensitive industries or thosesusceptible to money laundering and corruption, such as natural resource extrac-

tion or arms dealing.

2.2 Assembling a Team or Unit, Task Forces, and Joint Investigations

with Foreign Authorities

Particularly in large, complex cases, it will be important to assemble a multidisciplinaryteam or unit to ensure the effective handling o the case and eventual conscation. Tisteam likely will comprise a range o individuals, including nancial investigators andexperts in nancial analysis, orensic accountants, law enorcement offi cers, prosecu-tors, and asset managers. Experts may be appointed rom the private sector or seconded

31. Many jurisdictions have incorporated whistle-blower protections and procedures into legislation. Haiti,or example, enshrined the conceptreerred to as public outcryin its 1987 constitution. See also

UNCAC, art. 33.32. UNCAC art. 8(5), 52(5), and 52(6) require states parties to consider establishing such systems; andthere are approximately 114 jurisdictions with systems in place or disclosure to an ethics offi ce, anticor-

ruption body, or other government department. See Teodore S. Greenberg, Larissa Gray, DelphineSchantz, Carolin Gardner, and Michael Lathem, Politically Exposed Persons: Preventive Measures for the

Banking Sector(Washington, DC: World Bank, 2010), 42; Ruxandra Burdescu, Gary J. Reid, Stuart Gilman,

and Stephanie rapnell, Stolen Asset RecoveryIncome and Asset Declarations: Tools and Trade-offs(Washington, DC: StAR Initiative, conerence edition released November 2009). Documents are availableat www.worldbank.org/star.


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Strategic Considerations for Developing and Managing a Case I 23

rom other agencies, such as a regulatory authority, the FIU, a tax authority, an audit-ing agency, or the offi ce o an inspector general. Depending on its jurisdiction andcircumstances, the case will likely involve investigative and prosecutorial teams andmay expand to a joint task orce o the relevant agencies or a joint investigation withanother jurisdiction.33

2.2.1 Investigative and Prosecutorial Teams

Investigative teams should include individuals with the expertise necessary to analyzesignicant volumes o nancial, banking, and accounting documents, including wiretransers, nancial statements, and tax or customs records. Tey should also includeinvestigators with experience in gathering business and nancial intelligence; identiyingcomplex illegal schemes; ollowing the money trail; and using such investigative tech-niques as electronic surveillance, wiretapping, search warrants, and witness interviews.

In some cases, it may be useul or necessary to appoint experts or consultants who bringtechnical expertise in nancial analysis, orensic accounting, and computer orensics.

Prosecutors also require similar expertise and experience to effectively present the casein court. Special prosecutors may be appointed in cases involving high-ranking offi cialsto prevent conicts o interest, to guarantee independent investigations, and to ensurethat the process is credible.

Normally, a high-ranking prosecutor should lead the investigation or ollow investi-gations conducted by the investigating magistrate or law enorcement because the

prosecutor ultimately is responsible or presenting the case to the court. He or shemust ensure that law enorcement agencies collect the necessary evidence to estab-lish the offenses, provisional measures, and conscation.34In addition, the prosecu-tor acts as an interace with judges when law enorcement offi cers need judicialauthorization to use special investigative tools, such as wiretapping, searches, arrests,and plea agreements.

Te law enorcement or prosecution agencies having primary responsibility or thespecic offenses involved in a case ofen have the capacity to gather and present theevidence required or the purpose o conscation. Where possible, there is also meritin creating specialized conscation investigation and prosecution units to support pri-mary criminal investigation teams. Experience suggests that