One of the first considerations in an asset recovery case is the development of an effective strategy for both obtaining a criminal conviction (if possible) and recovering the proceeds and instrumentalities of corruption. Practitioners must be aware of the various legal avenues available for recovering assets, as well as some of the factors or obstacles that may lead to the selection of one avenue over another.
General Process for Asset Recovery
Whether pursuing assets through criminal or non-conviction based (NCB) confiscation or through proceedings in a foreign jurisdiction or through a private civil action, the objectives and fundamental process for recovery of assets are generally the same.
1.1.1 Collection of Intelligence and Evidence and Tracing Assets
Evidence is gathered and assets are traced by law enforcement officers under the supervision of or in close cooperation with prosecutors or investigating magistrates, or by private investigators or other interested parties in private civil actions. In addition to gathering publicly available information and intelligence from law enforcement or other government agency databases, law enforcement can employ special investigative techniques. Some techniques may require authorization by a prosecutor or judge (for example, electronic surveillance, search and seizure orders, production orders, or account monitoring orders), but others may not (for example, physical surveillance, information from public sources, and witness interviews). Private investigators when licensed do have the powers granted to law enforcement; they can also be able to use publicly available sources and apply to the court for some civil orders (such as production orders, on-site review of records, profiling testimony, or expert reports).
Collecting Intelligence and Evidence and Asset Tracing
(Domestically and in foreign jurisdictions using MLA)
Securing the Assets
(Domestically and in foreign jurisdictions using MLA)
(To obtain conviction [if possible], confiscation, fines, damages, and/or compensation)
(Domestically and in foreign jurisdictions using MLA)
Return of Assets
Note: MLA = mutual legal assistance.
1.1.2 Securing the Assets
During the investigation process, proceeds and instrumentalities subject to confiscation must be secured to avoid dissipation, movement, or destruction. In certain civil law jurisdictions, the power to order the restraint or seizure of assets subject to confiscation may be granted to prosecutors, investigating magistrates, private investigators, or law enforcement agencies. In other civil law jurisdictions, judicial authorization is required. In common law jurisdictions, an order to restrain or seize assets generally requires judicial authorization, with some exceptions in seizure cases.
1.1.3 International Cooperation
International cooperation is essential for the successful recovery of assets that have been transferred to or hidden in foreign jurisdictions. It will be required for the gathering of evidence, the implementation of provisional measures, and the eventual confiscation of the proceeds and instrumentalities of corruption. And when the assets are confiscated, cooperation is critical for their return. International cooperation includes “informal assistance,” mutual legal assistance (MLA) requests, and extradition.
Informal assistance is often used among counterpart agencies to gather information and intelligence to assist in the investigation and to align strategies and forthcoming procedures for recovery of assets. An MLA request is normally a written request used to gather evidence (involving coercive measures that include investigative techniques), obtain provisional measures, and seek enforcement of domestic orders in a foreign jurisdiction.
1.1.4 Court Proceedings
Court proceedings may involve criminal or NCB confiscation or private civil actions (each described below and in subsequent chapters); and will achieve the recovery of assets through orders of confiscation, compensation, damages, or fines. Confiscation may be property based or value based. Property-based systems (also referred to as “tainted property” systems) allow the confiscation of assets found to be the proceeds or instrumentalities of crime—requiring a link between the asset and the offense (a requirement that is frequently difficult to prove when assets have been laundered, converted, or transferred to conceal or disguise their illegal origin). Value-based systems (also referred to as “benefit” systems) allow the determination of the value of the benefits derived from crime and the confiscation of an equivalent value of assets that may be untainted. Some jurisdictions use enhanced confiscation techniques, such as substitute asset provisions or legislative presumptions to assist in meeting the standard of proof.
1.1.5 Enforcement of Orders
When a court has ordered the restraint, seizure, or confiscation of assets, steps must be taken to enforce the order. If assets are located in a foreign jurisdiction, an MLA request must be submitted. The order may then be enforced by authorities in the foreign jurisdiction through either (1) directly registering and enforcing the order of the requesting jurisdiction in a domestic court (direct enforcement) or (2) obtaining a domestic order based on the facts (or order) provided by the requesting jurisdiction (indirect enforcement).
This will be accomplished through the mutual legal assistance process. Similarly, private civil judgments for damages or compensation will need to be enforced using the same procedures as for other civil judgments.
1.1.6 Asset Return
The enforcement of the confiscation order in the requested jurisdiction often results in
the confiscated assets being transferred to the general treasury or confiscation fund of assistance may be outlined in MLA legislation and may involve “formal” authorities, agencies, or administrations. As a result, another mechanism will be needed to arrange for the return of the assets. If UNCAC is applicable, the requested party will be obliged under article 57 to return the confiscated assets to the requesting party in cases of embezzlement of public funds or laundering of such funds, or when the requesting party reasonably establishes prior ownership. If UNCAC is not applicable, the return or sharing of confiscated assets will depend on domestic legislation, other international conventions, MLA treaties, or special agreements (for example, asset sharing agreements). In all cases, total recovery may be reduced to compensate the requested jurisdiction for its expenses in restraining, maintaining, and disposing of the confiscated assets and the legal and living expenses of the claimant.
Assets may also be returned directly to victims, including a foreign jurisdiction, through the order of a court (referred to as “direct recovery”).16 A court may order compensation or damages directly to a foreign jurisdiction in a private civil action. A court may also order compensation or restitution directly to a foreign jurisdiction in a criminal or NCB case. Finally, when deciding on confiscation, some courts have the authority to recognize a foreign jurisdiction’s claim as the legitimate owner of the assets.
If the perpetrator of the criminal action is bankrupt (or companies used by the perpetrator are insolvent), formal insolvency procedures may assist in the recovery process.
A number of policy issues are likely to arise during any efforts to recover assets in corruption cases. Requested jurisdictions may be concerned that the funds will be siphoned off again through continued or renewed corruption in the requesting jurisdictions, especially if the corrupt official is still in power or holds significant influence. Moreover, requesting jurisdictions may object to a requested country’s attempts to impose conditions and other views on how the confiscated assets should be used. In some cases, international organizations such as the World Bank and civil society organizations have been used to facilitate the return and monitoring of recovered funds.
1.2 Legal Avenues for Achieving Asset Recovery
The legal actions for pursuing asset recovery are diverse. They include the following mechanisms:
• domestic criminal prosecution and confiscation, followed by an MLA request to enforce orders in foreign jurisdictions;
• NCB confiscation, followed by an MLA request or other forms of international cooperation to enforce orders in foreign jurisdictions;
• private civil actions, including formal insolvency process;
• criminal prosecution and confiscation or NCB confiscation initiated by a foreign jurisdiction (requires jurisdiction over an offense and cooperation from the jurisdiction harmed by the corruption offenses); and
• administrative confiscation.
The availability of these avenues, either domestically or in a foreign jurisdiction, will depend on the laws and regulations in the jurisdictions involved in the investigation, as well as international or bilateral conventions and treaties.
1.2.1 Criminal Prosecution and Confiscation
When authorities seeking to recover stolen assets decide to pursue a criminal case, criminal confiscation is a possible means of redress. Practitioners must gather evidence, trace and secure assets, conduct a prosecution against an individual or legal entity, and obtain a conviction. After obtaining a conviction, confiscation can be ordered by the court. In some jurisdictions, particularly common law jurisdictions, the standard of proof for confiscation will be lower than the standard required for obtaining the conviction. For example, “balance of probabilities” will be needed for confiscation, whereas “beyond a reasonable doubt” will be required for a conviction. Other jurisdictions apply the same standard to both conviction and confiscation. Generally, unless enhanced confiscation provisions apply, confiscation legislation will provide for confiscation of proceeds and instrumentalities that are directly or indirectly traceable to the crime.
Enhancements include substitute asset provisions that permit confiscation of assets not connected with a crime if the original proceeds have been lost or dissipated, presumptions about the unlawful use or derivation of assets in certain circumstances, presumptions about the extent of unlawful benefits flowing from certain offenses, and the reversal of the onus and burden of proof in certain circumstances.
Legal Framework for Asset Recovery
Legislation and procedures (domestic and foreign jurisdictions):
• Confiscation provisions (criminal, NCB, administrative);
• Criminal law provisions and codes of procedures (corruption, money laundering);
• Private (civil) law provisions and codes of procedure; and
• Asset sharing laws.
International conventions and treaties
• United Nations Convention against the Illicit Traffic in Narcotic Drugs and
• 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 Confiscation of the Proceeds of Crime (1990) and the revised Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds 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.
• Bilateral MLA treaties.
International cooperation, including informal assistance and requests for MLA, will be used throughout the process to trace and secure assets in foreign jurisdictions, as well as to enforce the final order of confiscation.
A benefit of criminal prosecution and confiscation is the societal recognition of the criminal nature of corruption and the accountability of the perpetrator. Further, penalties of imprisonment, fines, and confiscation serve to deter future offenders. In addition, criminal investigators generally have the most aggressive means of gathering information and intelligence, including access to data from law enforcement agencies and financial intelligence units (FIUs), use of provisional measures and
oercive investigative techniques (such as searches, electronic surveillance, examination of financial records or access to documents held by third parties), as well as grand juries or other means of compelling testimony or evidence. And, in most
jurisdictions, MLA is provided only in the context of criminal investigations. However, significant barriers may exist to obtaining a criminal conviction and confiscation: insufficient evidence; lack of capacity or political will; or the death, flight, or immunity of the perpetrator.
1.2.2 Non-Conviction Based Confiscation
Another type of confiscation gaining traction throughout the world is confiscation with-
out a conviction, referred to as “NCB confiscation.”20 NCB confiscation shares at least one common objective with criminal confiscation—namely, the recovery and return of the proceeds and instrumentalities of crime. Likewise, deterrence and depriving corrupt officials of their ill-gotten gains are other societal equities realized by NCB confiscation.
NCB confiscation differs from criminal confiscation in the procedure used to confiscate
the assets. A criminal confiscation requires a criminal trial and conviction, followed by the confiscation proceedings; NCB confiscation does not require a trial or conviction, but only the confiscation proceedings. In many jurisdictions, NCB confiscation can be established on a lower standard of proof (for example, the “balance of probabilities” or “preponderance of the evidence” standard), and this helps ease the burden on the authorities. Other (mainly civil law) jurisdictions require a higher standard of proof—specifically, the same standard required to obtain a criminal conviction.
1.2.3 Private Civil Action
Authorities seeking to recover stolen assets have the option of initiating proceedings in domestic or foreign civil courts to secure and recover the assets and to seek damages based on torts, breach of contract, or illicit enrichment. The courts of the foreign jurisdiction may be competent if a defendant is a person (individual or business entity) living or incorporated in the jurisdiction (personal jurisdiction), if the assets are within or have transited the jurisdiction (subject matter jurisdiction), or if an act of corruption or money laundering was committed within the jurisdiction. As a private litigant, the authorities seeking redress can hire lawyers to explore the potential claims and remedies (ownership of misappropriated assets, tort, disgorgement of illicit profits, contractual breaches). The civil action will entail collecting evidence of misappropriation or of liabilities based on contractual or tort damages. Frequently, it is possible to use evidence gathered in the course of a criminal proceeding in a civil litigation. It is also possible to seek evidence with the assistance of a court prior to filing an action. The plaintiff usually has the option to petition the court for a variety of orders, including the following:
• Freezing, embargo, sequestration, or restraining orders (potentially with worldwide effect) secure assets suspected to be the proceeds of crime, pending the resolution of a lawsuit laying claim to those assets. In some jurisdictions, interim restraining orders may be issued pending the outcome of a lawsuit even before the lawsuit has been filed, without notice and with extraterritorial effect. These orders usually require the posting of a bond, guarantee, or other undertaking by the petitioner.
• Orders against defendants oblige them to provide information about the source of their assets and transactions involving them.
• Orders against third parties for disclosure of relevant documents are useful in obtaining evidence from banks, financial advisers, or solicitors, among others.
• “No-say” (gag) orders prevent banks and other parties from informing the defendants of a restraint injunction or disclosure order.
• Generic protective or conservation orders preserve the status quo and prevent the deterioration of the petitioner’s assets, legal interests, or both. Such orders usually require showing the likelihood of success on the merits and an imminent risk in delaying a decision.
Credit: Dr Ngozi Nkoji-Iweala
Dr. Ohio O. Ojeagbase (MBA, ERMAP, PhD)
Certified Private Investigator, Asset Recovery Strategist & Counter Fraud Expert
Email: email@example.com or firstname.lastname@example.org
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