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24.03.2009 Business & Finance

No Safe Haven for Corruption

By World Bank Ghaan Office

March 11, 2009––On February 12 the Swiss Federal Office of Justice rejected the claims of the Duvalier family to $6 million dollars held in Switzerland, and ordered the return of the assets to Haiti.

The ruling is an important step for the Government of Haiti in its quest to secure the return of stolen assets and an important development for the World Bank and United Nations Office on Drugs and Crime (UNODC) Stolen Asset Recovery Initiative.

“The joint efforts by the Governments of Haiti and Switzerland, supported by StAR, demonstrate that developing and developed countries can work together to fight corruption and end impunity for those that steal from the poor,” said Ngozi Okonjo-Iweala, managing director. “StAR emphasizes that developed and developing countries share a joint responsibility for tackling corruption, and that international collaboration and collective action are needed to facilitate asset recovery and prevent asset theft.”

Money Goes Back to Countries

StAR Initiative was launched in September 2007 by the Ban Ki-Moon, UN secretary general, Robert Zoellick, and Antonio Maria Costa, executive director of UNODC, to help facilitate the return of the proceeds of corruption to developing countries.

StAR brings together staff from the United Nations Office on Drugs and Crime, the World Bank's FPD Financial Market Integrity Unit, PREM Public Sector and Governance, and World Bank Institute.

“Asset recovery is usually a tortuous, time-consuming and uncertain process,” explains Adrian Fozzard, StAR's coordinator. “StAR's task is to reduce these barriers by developing new tools, building capacity, and supporting asset recovery initiatives in both victim countries and financial centers.”

StAR encourages partner countries to innovate by putting in place and implementing the various legal instruments for asset recovery that are provided for under the United Nations Convention against Corruption.

Enforcement without Conviction

One of these innovations is non-conviction based forfeiture: a procedure that allows law enforcement to pursue the recovery of assets in those cases where a conviction cannot be secured but is enough to demonstrate the tainted nature of the assets.

Later this month, StAR will publish a guide, prepared by experts from seventeen countries under StAR leadership, that explains how to design and implement an effective non-conviction based forfeiture regime.

International networks are crucial to the asset recovery process. Investigators trying to trace and freeze assets in foreign jurisdictions have to be able to make contact with their counterparts and share sensitive information. StAR has bridged this gap by setting up a secure Focal Point database with INTERPOL. The database allows law enforcement to identify contact points and share information on asset recovery around the clock. There is considerable demand: launched in January this year, the database already has contact points in seventy countries.

Honest Broker

At the country level, StAR's assistance is geared to helping the national authorities make informed decisions about their asset recovery programs. In this role, StAR helps countries put together multi-disciplinary teams to work on asset recovery cases and provides technical assistance and training. Acting as an honest broker, StAR also helps forge contacts and facilitate collaboration with financial centers.

“While attention inevitably focuses on the recovery of assets,” says Stuart Gilman, a UNODC expert and StAR's deputy coordinator, “the launching of an investigation, and successful collaboration with foreign jurisdictions in tracing and then freezing assets are important victories in the fight against corruption, and should be recognized as successes. This is particularly true in countries that are trying to hold prominent public servants to account for the first time.”

Collaborative Effort

Collaboration with the world's financial centers is essential to achieving StAR's objectives, not just in terms of follow-up on individual cases, but also in terms of building systems that help trace the proceeds of corruption and deter asset theft.

Stolen assets can only be identified where the real owners of bank accounts, trusts, partnerships and other corporate instruments can be identified. Similarly, incentives have to be in place if financial service providers are to invest resources in monitoring and reporting on activities that may be financed from the proceeds of corruption.

“The financial crisis and reform of the international financial sector provide a unique opportunity to tackle the criminal flows that are generated from the proceeds of corruption,” explains Jean Pesme, manager of the Financial Market Integrity Unit and member of the StAR team. “The integrity of the world's financial system is a global public good that is crucial to good governance and the success of development efforts in the Bank's partner countries.”