Law Enforcement: Illicit Proceeds

Global Forum V:Fighting Corruption and Safeguarding

Integrity“Fulfilling our commitment: Effective action against corruption”

Sandton Convention Centre, South Africa: 2nd - 5th April 2007

Law Enforcement:

Illicit Proceeds

Ibrahim Pam

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TOR Scope of the problem Some policy and legal responses Identify constraints Recommendations

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George Bernard Shaw’s Pygmalion

Colonel Pickering to Mr Doolittle: “Have you no morals, man?”

To which Mr Doolittle replies:“Can’t afford them, Governor.”

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Definition:

UNCACArticle 2

(e) “Proceeds of crime” shall mean any property derived from or obtained, directly or indirectly, through the commission of an offence;

(same as Article 2 (e) UNTOC)

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Overview

US$1 trillion illicit money crosses borders every year globally

US$500 billion comes out of developing and transitional economies

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Overview

“Corruption” accounts for about 3% US$20 – 40 billion annually from

transition and developing countries into Western banks

China: US$50 billion Nigeria: US$100 billion

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Main policy instruments:Basel Core Principles of Effective Banking

Supervision

Issued by Basel Committee on Bank Supervision, 1997

The most important global standard for bank supervision

Benchmark for assessing quality of bank supervision

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Basel Core Principles of Effective Banking Supervision

Supervisory guidelines and general framework for effective banking supervision

CP 15 sets out rules for prevention of fraud and money laundering

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Financial Action Task Force on Money Laundering (FATF)

FATF Forty Recommendations

Original Recommendations were drawn up in 1990 as an initiative to combat the misuse of financial systems by persons laundering drug money.

Revised in 1996 to reflect evolving money laundering typologies.

The 1996 Forty Recommendations have been endorsed by more than 130 countries and are the international anti-money laundering standard.

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Financial Action Task Force on Money Laundering (FATF)

FATF 9 Special Recommendations

Essentially relate to terrorist financing Also regulate money transfers:

- (vi) Alternative Remittance- (vii) Wire Transfers- (ix) Cash Couriers

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Main legal instrumentsUN Convention Against Corruption, 2003

Asset identification, freezing, seizure, confiscation and repatriation (Art 46 & Cap V, UNCAC)

Art 52 (i) provides for basic “Know Your Customer” policies in financial institutions

Art 58 recommends establishment of Financial Intelligence Units (FIUs)

Art 53(a) provides for civil claims to establish ownership of illegally acquired property

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Main legal instrumentsUN Convention Against Transnational Organised

Crime, 2001 Article 6: criminalization of the laundering of

proceeds of crime Article 7: measures to combat money laundering Article 13: international cooperation for purposes

of confiscation Article 14: Disposal of confiscated proceeds of

crime

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Main legal instruments

Regional anti-corruption instruments:- Inter-American Convention

Against Corruption- AU Convention on Preventing and

Combating Corruption

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Some AML/CFT bodies EGMONT Group of Financial Intelligence

Units Eastern and Southern Africa Anti-Money

Laundering Group (ESAAMLG) Inter-Governmental Action Group Against

Money Laundering in West Africa (GIABA)

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Recovery of Assets Previous position: “He who confiscates,

disposes” Article 14(1), UN TOC:

“1. Proceeds of crime or property confiscated by a State Party… shall be disposed of by that State Party in accordance with its domestic law and administrative procedures.”

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Recovery of Assets Probably the most contested provisions

in UNCAC Clear division between North and South Consensus achieved on the basis of

“balance of mutual frustration” Nevertheless, provisions provide a

comprehensive regime for asset recovery

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Recovery of assets Art 51 makes return of assets a “fundamental principle”

based on three considerations:- embezzled funds returned to requesting SP- proceeds of other UNCAC offences returned to requesting SP only with prior ownership or where requested SP recognises compensation for damage as basis of return-all other cases, can also be returned to another prior legitimate owner, or used to compensate victims

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Recovery of assets:major constraints

Lack of political will Lack or inadequacy of legal framework Practical legal and technical difficulties Technical competence and capacities Costs Prevention of future victimization

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Recovery of assets:major constraints

Difficulties in tracing Money-laundering Opaque financial systems

- private banking Conviction-based recovery Competing claims and multiple

jurisdictions

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Prevention Law enforcement begins with prevention Conceptual approach that defines the

fight against corruption in terms of crime prevention properly contextualises the role of law enforcement

Prevention is low-risk, low-cost, but is potentially high-impact

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Prevention Based on concept of situational crime

prevention “Opportunity makes the thief” Applying opportunity-reduction strategies

- increase risks- increase effort- reduce rewards

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Recommendations

Prioritise prevention: institutionalize situational crime prevention strategies adapted to national systems/peculiarities

International/regional cooperation – increase cooperation and networking

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Recommendations

Strengthen national integrity systems

Apply provisions of legal instruments, domestic and international

Strengthen financial regulations/practices

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Recommendations

Use UNODC’s resources Create and strengthen FIUs Share best practices Increase technical assistance

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Thank youDiscussions