Global corruption is its own economy: so-called illicit financial flows run into billions if not trillions of dollars annually, in bribes, stolen public funds and diverted foreign aid and foreign direct investment, among other common forms of corruption. People living in developing and transition countries suffer corruption's worst effects, with the loss of investment in public health killing an estimated 140,000 children every year.
Illicit financial flows usually end up hidden overseas, away from their country of origin. The UN Convention against Corruption ("UNCAC") Coalition calls the UK "a safe haven for corrupt assets stolen around the world". What is the UK doing to identify and confiscate such assets, and what does it do with such assets that it does confiscate? What conditions must be met before confiscated assets can be repatriated to their country of origin? This article briefly outlines the international legal framework for repatriation, and discusses the steps taken by the UK to facilitate the repatriation of confiscated assets to their countries of origin, the existing barriers to repatriation, and what improvements the UK may make to restore more confiscated assets to their countries of origin.
The international legal framework
The UNCAC is the principal legally-binding instrument on the repatriation of confiscated property, enshrining the return of stolen assets to their countries of origin as a "fundamental principle". However, repatriation is not obligatory unless three conditions are met: (i) the courts of the country of origin must have made a final order confiscating the assets, (ii) which is recognised by the courts of the confiscating country, and (iii) the assets must derive from embezzled public funds or the country of origin must have established its ownership of the assets or the confiscating country recognises damage suffered by the country of origin as a basis for returning the assets.
Despite the supranational nature of the UNCAC, in reality successful repatriation of assets has tended to be based in longer terms commitments between individual states and/or case-by-case agreements; that is to say, the UNCAC provides a framework, but states still have much to do to reach the point where assets are transferred back to their countries of origin.
The UK's record on repatriation
The Proceeds of Crime Act 2002 is the UK's principal asset recovery legislation. Confiscation orders can be made after a conviction in the domestic courts, and civil forfeiture orders may be pursued by prosecutors even where there is no conviction. In 2017, the UK introduced unexplained wealth orders ("UWO/s"), a main target of which are politically exposed people outside of the EU and their associates, who have assets in the UK which on paper they seem unable to afford. UWOs require the respondent to demonstrate the source of their wealth, failing which the respondent's assets may be confiscated. A strength of UWOs is that they do not require a criminal conviction. The UN General Assembly Special Session against Corruption 2021 called for the wider introduction and better application of non-conviction based forfeiture to improve rates of asset recovery and return.
Through its asset recovery legislation; the introduction of a beneficial ownership register (albeit one that could go further by requiring overseas companies purchasing UK property to declare who their ultimate beneficial owners are); published guidance on the recovery and repatriation of assets stolen from foreign jurisdictions, "Obtaining Assistance from the UK in Asset Recovery: A Guide for International Partners"; coupled with asset recovery policy initiatives at government and prosecutorial/law enforcement level, the UK has demonstrated political will to identify and return misappropriated assets to their countries of origin.
However, there is no UK domestic legislation which specifically provides for the repatriation of assets to their countries of origin. This can be contrasted with Switzerland, which enacted the Foreign Illicit Assets Act in 2016 to formalise a framework for the repatriation of assets, building on the leadership it has demonstrated in this area for several decades.
It is perhaps the lack of specific legislation in the UK that has resulted in a piecemeal repatriation of assets:
- 1. £4.4 million was returned to Chad for investment in humanitarian aid projects, which the UK's Serious Fraud Office (the "SFO") had successfully argued in civil proceedings were the proceeds of corrupt transactions involving Chadian officials based in Washington DC. None of the officials involved were criminally convicted of offences related to the corrupt transactions either in the UK or abroad.
- 2. £4.2 million was repatriated to Nigeria for infrastructure and building projects, following the conviction of James Ibori, the former Governor of Nigeria's oil-rich Delta State, for fraud and money laundering offences. This was the first repatriation to Nigeria following the signing of a 2016 memorandum of understanding by which the UK agreed to repatriate confiscated criminal assets identified as belonging to Nigeria.
- 3. The first publicised UWO case was brought against Zamira Hajiyeva, whose husband, the former head of a state-owned bank in Azerbaijan, was convicted and jailed for corruption offences by a Baku court in 2016. After several failed attempts to have the UWO discharged, seen as a test case for whether UWOs could have "bite", Ms Hajiyeva continues to contest claims brought by the UK's National Crime Agency over millions of pounds of assets, some of which could be returned to the Azerbaijani government if successfully confiscated.
- 4. The SFO paid £349,000 to the Kenyan Government following a criminal case in the UK in which officers of a printing company were convicted of bribing officials in Kenya and Mauritania, resulting in financial penalties totalling £2.2 million.
- 5. Again the SFO was involved with securing a payment of £29.5 million in reparations to Tanzania by BAE Systems, in respect of accountancy failures, after the company was accused of making unlawful commission payments to obtain a contract to supply a radar system. This was part of a settlement agreement that was reached in the absence of any criminal conviction, to bring "a pragmatic end" to a much-publicised investigation that had run for several years.
- How can international repatriation of funds be improved?
A better process for identifying victims and the appropriate entity to receive repatriated assets would arguably have assisted in the above SFO case concerning bribery in Kenya and Mauritania, where the court refused an SFO application for a compensation order to be made in Kenya's favour, stating, among other reasons, that it was not clear who the recipient ought to be nor that any compensation awarded would reach that recipient. As a result, it was at the SFO's discretion that £349,000 was eventually paid to the Kenyan Government.
Of course, the difficulties in delivering effective asset recovery and repatriation are not unique to the UK. A 2020 survey of States Parties to the UNCAC, conducted by the Stolen Asset Recovery Initiative of the UN Office on Drugs and Crime and the World Bank, revealed that just US$2.4 billion of confiscated assets were returned to their countries of origin between 2010 and 2020, US$740 million of which were funds returned to Malaysia in 2019 and 2020 linked to the 1MDB investment fraud. Given the far greater sums that would have been misappropriated during this ten-year period, it is unsurprising that Transparency International describes this global rate of return as "disturbingly low".
Greater international co-ordination is required among confiscating or would-be confiscating states to give proper and practical effect to the UNCAC's asset recovery and repatriation measures, by creating a template for the implementation of repatriation provisions in domestic legislation that also details a procedure for dealing with confiscated assets.
Such co-ordination must be extended so that countries of origin have in place appropriate procedures and agencies for receiving repatriated assets, with transparency and accountability in the return and disposition of recovered property essential to assuring confiscating countries as well as the people of receiving countries that repatriated assets will not be misappropriated again.
- What next?
Almost two decades since the adoption of the UNCAC, the process for returning stolen assets is fraught with practical and logistical difficulties, each case demanding the investment of significant resource in both confiscating and receiving countries to ensure that returned assets reach the right people without being vulnerable to misappropriation. Yet given the enormous scale of losses from corruption in developing and transition countries, and the destruction this wreaks on their citizens and civic society, it is vital that the UK takes the necessary domestic steps and a leading role internationally to vastly improve the rate at which illicit financial flows are recovered and returned to their countries of origin.