Law Enforcement: Illicit Proceeds

1. 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

2. TOR • Scope of the problem • Some policy and legal responses • Identify constraints • Recommendations Global Forum V

3. 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.” Global Forum V

4. 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) Global Forum V

5. Overview • US$1 trillion illicit money crosses borders every year globally • US$500 billion comes out of developing and transitional economies Global Forum V

6. 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 Global Forum V

7. 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 Global Forum V

8. 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 Global Forum V

9. 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. Global Forum V

10. 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 Global Forum V

11. Main legal instruments UN 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 Global Forum V

12. Main legal instruments UN 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 Global Forum V

13. Main legal instruments Regional anti-corruption instruments: • Inter-American Convention Against Corruption • AU Convention on Preventing and Combating Corruption Global Forum V

14. 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) Global Forum V

15. 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.” Global Forum V

16. 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 Global Forum V

17. 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 Global Forum V

18. 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 Global Forum V

19. Recovery of assets:major constraints • Difficulties in tracing • Money-laundering • Opaque financial systems - private banking • Conviction-based recovery • Competing claims and multiple jurisdictions Global Forum V

20. 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 Global Forum V

21. Prevention • Based on concept of situational crime prevention • “Opportunity makes the thief” • Applying opportunity-reduction strategies - increase risks - increase effort - reduce rewards Global Forum V

22. Recommendations • Prioritise prevention: institutionalize situational crime prevention strategies adapted to national systems/peculiarities • International/regional cooperation – increase cooperation and networking Global Forum V

23. Recommendations • Strengthen national integrity systems • Apply provisions of legal instruments, domestic and international • Strengthen financial regulations/practices Global Forum V

24. Recommendations • Use UNODC’s resources • Create and strengthen FIUs • Share best practices • Increase technical assistance Global Forum V

25. Thank you • Discussions Global Forum V