Anti corruption and Anti money laundering A critical nexus

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1 Anti corruption and Anti money laundering A critical nexus Counter Corruption Best Practices Increased Effectiveness through Interagency and Multi Sectoral Approaches Zagreb, Croatia 7 10 March 2011 Mr. Yves Aeschlimann, Financial Market Integrity Unit, World Bank

2 Ten things you should know about stolen assets, asset recovery, and the laundering of the proceeds of corruption: Corruption including the theft of state assets by people with political power is a global epidemic to which no country is immune. Developing countries lose US$20 to US$40 billion dollars every year (or US$50 million to US$100 million per day) through corrupt acts (such as bribery, embezzlement, and misappropriation of property or funds). US$100 million would pay for full immunizations for four million children or connect 250,000 houses to water. The theft of state assets undermines the rule of law and confidence in government officials, agencies, companies, and banks. It hinders social service delivery and discourages private investment. Much of the stolen money the proceeds of corruption finds safe haven in international financial centers, where it is invested and laundered. Countries still face significant challenges when seeking recovery of stolen assets to date, only US$5 billion has been recovered and individual cases can take years, even decades, to come to fruition.

3 While recovery of assets is the ultimate goal intermittent milestones are as important. When government officials generate evidence of theft and begin legal proceedings; when they request mutual legal assistance from financial centers where money is laundered they are taking significant steps to eliminate safe havens for corrupt funds. The 2003 United Nations Convention against Corruption (UNCAC), the first global anti corruption agreement, has been ratified by 144 countries and the European Union. The return of the proceeds of corruption is a fundamental principle of the Convention, and has received follow on support from the leaders of the G20 countries. Making significant progress on the prevention, detection and return of stolen assets will require leadership and cooperation from leading representatives of all stakeholders government officials in developing countries and financial centers; banks; private companies; donor organizations; civil society and the media. StAR, the Stolen Asset Recovery Initiative, a partnership between the World Bank Group and the United Nations Office on Drugs and Crimes, is the first organization of its kind to act as an honest broker and coalition builder among stakeholders, provider of knowledge and technical assistance to countries, and international political advocate on the issue of stolen assets.

4 Legal framework Financial Action Task Force (FATF) 40 R + 9 SR United Nations Convention Against Corruption Convention on combating bribery of foreign public officials in International business transactions (OECD) Council of Europe Criminal Law Convention on Corruption (173) and additional protocol (191) United Nations Convention Against Transnational Organized Crime

5 AML tools to overcome barriers Jurisdiction Immunity Legal privilege

6 Bank Switzerland Bank USA Bank Bahamas Typology Bank Jersey Bank Hong Kong PEP PEP PEP PEP PEP INTERMEDIARIES

7 Asset Recovery value chain CONDITIONS REQUIRED TO SUPPORT CASE ACTIONS CASE ACTIONS Political support Legal tools Institutional capacity Operational capacity Setting a case strategy 2 3 weeks Investigation (including asset tracing) Months to 5 years Case development (Ongoing case preferred) Prosecution trial, confiscation or other court process (e.g., NCB, civil) Sustained high level support (including ensuring proper resources and expertise, stability of teams, engagement internationally) Effective criminal and civil laws and procedures, confiscation (NCB, criminal) laws and procedures (if separate), AML, informal co operation, MLA, MLA agreements and treaties, UN conventions. Effective police, prosecutors, judicial system, central authority, MFA (possibly) Effective FIUs Freezing assets Engagement in International Cooperation (informal assistance, preparing and pursuing MLA requests) Days/months (as req d in investigation) Effective asset managers Up to 12 years, or more Months to 1 yr Court order (final) Decision: 3 4 months Appeal: up to 5 yrs Effective crim and civil laws and procedures, AML, confiscation (crim/ncb) Effective judicial system HR, financial resources, technical know how & expertise (e.g., financial investigations, auditing), infrastructure. Enforcement of orders and asset return Up to 2 years Effective crim/civil laws, MLA, MLA treaties, asset sharing agreements Effective police prosecutors, judiciary, CA, MFA Management of returned assets

8 Main publications a) Combating Money Laundering and the Financing of Terrorism: A Comprehensive Training Guide b) Stolen Asset Recovery: Guide on Non Conviction Based Asset Forfeiture c) Asset Recovery Handbook: A guide for practitioners d) Barriers to Asset Recovery Study and others on :