The ChrisTian sCienCe MoniTor | February 28, 2011 15

By Stephen kurczy / staff writer

how does a nation track down a deposed leader’s stolen assets or laundered funds?

The first step is identifying where assets are held. Former Egyptian President Hosni Mubarak is believed to have money in Swiss and offshore bank accounts, as well as invested in real estate in Egypt’s Red Sea resort town of Sharm el-Sheikh, London, New York, and Los Angeles.

Indeed, Switzerland, Britain, and the United States are historically financial beehives for kleptocrats looking to stash money, in large part because their cities offer the best bankers, lawyers, and financial re-sources. About 27 percent ($2 trillion) of the world’s privately held offshore wealth is managed in Switzerland, ac-cording to Boston Consulting Group.

In the case of Nigeria’s efforts to reclaim stolen assets of late President Sani Abacha, who died while in office, the government sought assistance from Liechtenstein, Luxembourg, Switzerland, Britain, and the US in identifying, tracing, and freezing $1.1 billion in embezzled public funds and profits from corruption. After five years of legal battles, with the Swiss particularly providing legal assistance to Nigeria, the Abacha family agreed in 2002 to return $1 billion. Further legal battles returned another $300 million to Nigeria.

“These people have good lawyers and have well protected themselves with various layers,” says Daniel Thelesklaf, who heads the Swiss-based International Center for Asset Recovery, adding that his agency is willing to assist Egypt. “To break through all these layers is a complex procedure, and experience shows that this will take some years.”

Swiss banks often seem to make news for holding suspect assets. Is the government doing anything?

Despite its reputation for bank-ing secrecy – and precisely because the government has tried to chal-

lenge its stereotype as a financial refuge for ex-dictators and war criminals – Switzerland has among the most progressive anti-money-laundering laws. Its 1983 Federal Act on International Mutual Assistance in Criminal Matters was first used 25 years ago to freeze the assets of the Philippines’ Ferdinand Marcos, ousted in a 1986 coup. Another 1998

law required banks to ascertain the “beneficial owner” of accounts – that is, the man behind the lawyers. On the basis of those laws, the Swiss govern-ment froze accounts belonging to Mr. Mubarak, Tunisia’s Zine El Abidine Ben Ali, and Ivory Coast’s Laurent Gbagbo.

And thanks to Switzerland’s new Return of Illicit Assets Act, which took effect Feb. 1 and allows the Swiss gov-ernment to determine the legality of funds of any person hailing from a “failing state,” the account of Haiti’s Jean-Claude “Baby Doc” Duvalier is now under investigation.

“This burden-shifting law is unique in the world of anticorruption legis-lation,” says Mark Vlasic, who was on the Duvalier/Haiti asset recovery team at the World Bank and now serves as international legal adviser

to the Charles Taylor/Liberia asset re-covery team.

Swiss law is today a model for other nations.

What’s being done to prevent international money laundering?

While progress is being made, with Switzerland saying it has returned more than $1.5 billion over the past 20 years, the problem continues. The World Bank estimates $20-40 billion is stolen from developing countries each year, while a January report from Global Financial Integrity put that figure over $1 trillion annually. From 2000 to 2008, according to the report, China lost $2.18 trillion, Russia lost $427 billion, and Mexico lost $416 bil-lion in illicit outflows. China lost most of that money from trade mispricing, which is when companies exagger-ate the price of imports, understate exports, and pocket and launder the remainder to offshore accounts.

But world bodies are stepping up efforts to address the issue, says Mr. Vlasic, a Georgetown University law professor who served as head of operations of the World Bank’s Stolen Asset Recovery Initiative (StAR), which helps nations develop anti-money-laundering capacities. Since StAR’s 2008 launch, corrup-tion and kleptocracy have been the topics of discussion in the inter- national community, he says, high-lighting their mention in recent G20 statements.

In June, the US Justice Department launched a new Kleptocracy Asset Recovery Initiative, the intergovern-mental Financial Action Task Force has since 2000 removed all 15 nations from its blacklist.

Today, “banks must take reason-able measures to establish the source of wealth and source of funds related to their customers and the beneficial owners of the funds,” says Theodore Greenberg, former chief of the anti-money-laundering section of the Department of Justice. Yet that money is often laundered through a web of legal entities and structures. “It’s like untying the Gordian knot,” he says.

And the more you attempt to un-tangle one end, someone else is knot-ting up the other.

“When was the last time that you saw a banker or lawyer thrown in jail?” says Jeffrey Robinson, author of the 1995 crime exposé “The Laun-drymen.” “If you start throwing bank-ers, lawyers, accountants in jail, you’ll put a real dent in the problem.” r

How dictators stasH tHeir casH

Laurent GbagboPresident of Ivory Coast: 2000-present*Est. assets: $200 million Frozen:Swiss, US, and EU accounts

Zine El Abidine Ben Ali President of Tunisia: 1987-2011Est. assets: $5 billionFrozen: Swiss, EU accounts

Hosni Mubarak President of Egypt: 1981-2011Est. assets: $40-70 billionFrozen: Swiss accounts

Big men, big moneyRECOVERED FUNDS FROZEN FUNDS

Sani Abacha President of Nigeria: 1993-98Est. assets: $2-5 billionRecovered: $1.3 billion

Ferdinand MarcosPresident of the Philippines: 1965-86Est. assets: $5-10 billionRecovered: $658 million

Jean-Claude “Baby Doc” DuvalierPresident of Haiti: 1971-86Est. assets: $600 millionRecovered: $5.8 millionin Swiss accounts under disputeSOURCES: Basel Institute

on Governance, Reuters

AFP/NEWSCOM REUTERS

REUTERSAP

APAFP/GETTY IMAGES/NEWSCOM

* Mr. Gbagbo refused to step down after losing a Nov. 28 presidential vote.

Pub Date: *WEEKLY* 02/28/11 Slug: OMONEY_g1_281501.eps © 2011 The Christian Science Monitor (www.csmonitor.com). All rights reserved.

Distributed by The Christian Science Monitor News Service (email: syndication@csmonitor.com)

RICH CLABAUGH/STAFF ILLUSTRATOR.epsFROZEN ASSETS

RICH CLABAUGH/STAFF

It’S a multIbIllIon-dollar queStIon: When does an autocrat’s wealth become illicit? Often only after his ouster, as seen in efforts to freeze accounts of Egypt and Tunisia’s deposed leaders. But how will the new governments in those countries retrieve ill-gotten gains? An increased global focus on tracking down illicit funds may help.

BRIEFING