Asset Recovery Handbook: A Guide for Practitioners, Second Edition (StAR Initiative) (Stolen Asset Recovery (Star))

Developing countries lose billions each year through bribery, misappropriation of funds, and other corrupt practices. Much of the proceeds of this corruption find 'safe haven' in the world's financial centers. These criminal flows are a drain on social services and economic development programs, contributing to the impoverishment of the world's poorest countries. Many developing countries have already sought to recover stolen assets. A number of successful high-profile cases with creative international cooperation has demonstrated that asset recovery is possible. However, it is highly complex, involving coordination and collaboration with domestic agencies and ministries in multiple jurisdictions, as well as the capacity to trace and secure assets and pursue various legal options—whether criminal confiscation, non-conviction based confiscation, civil actions, or other alternatives. This process can be overwhelming for even the most experienced practitioners. It is exceptionally difficult for those working in the context of failed states, widespread corruption, or limited resources. With this in mind, the Stolen Asset Recovery (StAR) Initiative has developed and updated this Asset Recovery Handbook: A Guide for Practitioners to assist those grappling with the strategic, organizational, investigative, and legal challenges of recovering stolen assets. A practitioner-led project, the Handbook provides common approaches to recovering stolen assets located in foreign jurisdictions, identifies the challenges that practitioners are likely to encounter, and introduces good practices. It includes examples of tools that can be used by practitioners, such as sample intelligence reports, applications for court orders, and mutual legal assistance requests. StAR—the Stolen Asset Recovery Initiative—is a partnership between the World Bank Group and the United Nations Office on Drugs and Crime that supports international efforts to end safe havens for corrupt funds. StAR works with developing countries and financial centers to prevent the laundering of the proceeds of corruption and to facilitate more systematic and timely return of stolen assets. Front Cover Contents Acknowledgments About the Authors Abbreviations Introduction Methodology How to Use the Handbook References 1. Overview of the Asset Recovery Process 1.1 Introductory Remarks 1.2 General Process for Asset Recovery 1.3 Legal Avenues for Achieving Asset Recovery 1.4 Recovering Stolen Assets in the Context of Legal Actions Initiated by Foreign Jurisdictions 1.5 Use of Asset Recovery Avenues in Practice: Three Case Examples References 2. Strategic Considerations in Developing and Managing a Case 2.1 Introductory Remarks 2.2 Gathering the Facts: Initial Sources of Information 2.3 Assessing Legislation and Considering Legal Reforms 2.4 Developing a Case Strategy 2.5 Establishing a Team, Unit, or Task Force, and Conducting Joint Investigations with Foreign Authorities 2.6 Establishing Contact with Foreign Counterparts and Assessing Ability to Obtain International Cooperation 2.7 Securing Support and Adequate Resources 2.8 Addressing Legal Issues and Obstacles 2.9 Identifying All Liable Parties 2.10 Specific Considerations in Criminal Cases 2.11 Case Management References 3. Securing Evidence and Tracing Assets (1): Investigative Measures 3.1 Introductory Remarks 3.2 Developing an Investigative Plan 3.3 Creating a Subject Profile 3.4 Obtaining Information, Financial Data, and Other Evidence References 4. Securing Evidence and Tracing Assets (2): Relevant Data and Financial Documents 4.1 Introductory Remarks 4.2 Identifying Relevant Data: Examples from Commonly Sourced Documents 4.3 Organizing Data: Creating a Financial Profile 4.4 Analyzing Data: Comparing the Flows with the Financial Profile 4.5 Garnering International Cooperation References 5. Securing the Assets 5.1 Introductory Remarks 5.2 Terminology: Seizure and Restraint 5.3 Provisional Order Requirements 5.4 Pre-Restraint or Pre-Seizure Planning 5.5 Timing of Provisional Measures 5.6 Exceptions to Restraint Orders for Payment of Expenses 5.7 Ancillary Orders 5.8 Third-Party Interests 5.9 Alternatives to Provisional Measures References 6. Managing Assets Subject to Confiscation 6.1 Introductory Remarks 6.2 Key Players in Asset Management 6.3 Powers of the Asset Manager 6.4 Recording Inventory and Reporting 6.5 Common Types of Assets and Associated Problems 6.6 Ongoing Management Issues 6.7 Consultations 6.8 Liquidation (Sale) of Assets 6.9 Fees Payable to Asset Managers References 7. Mechanisms for Confiscation 7.1 Introductory Remarks 7.2 Confiscation Regimes 7.3 How Confiscation Works 7.4 Confiscation Enhancements 7.5 Third-Party Interests 7.6 Legal Challenges to Consider When Enacting Confiscation Legislation 7.7 Confiscation of Assets Located in Foreign Jurisdictions 7.8 Recovery through Confiscation for the Victims of Crime References 8. Key Principles of International Cooperation in Asset Recovery and Informal Channels of Cooperation 8.1 Introductory Remarks 8.2 Comparative Overview of Informal Assistance and Mutual Legal Assistance Requests 8.3 Key Considerations for International Cooperation 8.4 Overall Process for Informal and Formal International Cooperation 8.5 Channels for Informal Assistance References 9. Conducting International Cooperation and Mutual Legal Assistance 9.1 Introductory Remarks 9.2 Mutual Legal Assistance Requests 9.3 Cooperation in Cases of Confiscation without a Conviction 9.4 Cooperation in Civil Recovery (Private Law) Cases 9.5 Cooperation in Asset Return References 10. Civil Proceedings 10.1 Introductory Remarks 10.2 Potential Claims and Remedies 10.3 Bringing a Civil Action to Recover Assets 10.4 Final Dispositions 10.5 Formal Insolvency Processes References 11. Domestic Confiscation Proceedings Undertaken in Foreign Jurisdictions 11.1 Introductory Remarks 11.2 Jurisdiction 11.3 Procedure for Beginning an Action 11.4 Role of the Jurisdiction Harmed by Corruption Offenses in Foreign Investigations and Prosecution 11.5 Ensuring Recovery of Assets from the Foreign Jurisdiction References Glossary Appendix A. Offenses to Consider in Criminal Prosecution Appendix B. Explanation of Selected Corporate Vehicles and Business Terms Appendix C. Sample Financial Intelligence Unit Report Appendix D. Planning the Execution of a Search and Seizure Warrant Appendix E. Sample Document Production Order for Financial Institutions Appendix F. Serial and Cover Payment Methods in Electronic Funds Transfers Appendix G. Sample Financial Profile Form Appendix H. Possible Discussion Points with Contacts-Informal Assistance Stage Appendix I. Mutual Legal Assistance Template and Drafting Tips Appendix J. Web Resources Appendix K. Overview of Lausanne Guidelines Appendix L. Utilizing an Electronic Case Management System to Improve Management of Complex Investigation Boxes Box 1.1 Legal Framework for Asset Recovery Box 1.2 Other Means of Recovering Assets Box 1.3 Peru: Vladimiro Montesinos and His Associates Box 1.4 Zambia: Civil Actions in Tort against Frederick Chiluba and His Associates Box 1.5 Nigeria: Diepreye Alamieyeseigha Box 2.1 Role and Contribution of Financial Intelligence Units in Asset Recovery Cases Box 2.2 Allegations of “Caviar Diplomacy” against European Politicians Box 2.3 United Kingdom: Register of “People with Significant Control” Box 2.4 Brazil: The Introduction of “colaboração premiada” Box 2.5 The Lausanne Guidelines Box 2.6 Tunisia: Establishment of Coordination and Investigative Bodies for the Case against Ben Ali and His Family Box 2.7 Malaysia: Domestic and International Coordination in the 1MDB Investigation Box 2.8 Obstacles to International Cooperation in Asset Recovery Box 2.9 Uzbekistan: US Jurisdiction over the Gulnara Karimova -Corruption Case Box 2.10 Equatorial Guinea: Immunities in the Case of Vice President Teodoro Nguema Obiang Mangue Box 2.11 Brazil: “Foro privilegiado” and the End of Impunity Box 2.12 Zambia: Liability of Lawyers in the Case of Former President Frederick Chiluba Box 2.13 Brazil: Identifying Liable Parties in the Lava Jato Case Box 2.14 Prosecution of Accounting, Records, and Internal Control Provisions in the United Kingdom and United States Box 3.1 Understanding Connections and Financial Flows: The Use of Shell Companies in the Brazilian Lava Jato (Car Wash) Case Box 3.2 Uzbekistan: Beneficial Ownership of Shell Companies in the Gulnara Karimova Case Box 3.3 Checklist of Basic Information for a Subject Profile Box 3.4 United Kingdom: Investigative Techniques Applied against Joshua Dariye Box 3.5 Equatorial Guinea: Civil Society Support in the Teodorin Obiang Investigation Box 3.6 The Role of the Egmont Group in Asset Recovery Cases Box 3.7 Considerations Regarding Information Sources to Show Reasonable Grounds or Probable Cause to Obtain a Warrant Box 3.8 Important Items to Seize in an Investigation Box 3.9 Documentation to Request from Financial Institutions Box 3.10 Retention Orders Box 3.11 United Kingdom: Requirements for Issuance and Execution of Unexplained Wealth Orders Boc 4.1 Forms and Documents Related to the Wire Transfer Process Box 4.2 Brazil: Odebrecht’s “Department of Bribery” Box 4.3 Red Flags in Contracts, Payment Documentation, Payment Records, and Payment Mechanisms Box 4.4 Nigeria: Red Flags and Controversies in Awarding the OPL 245 Oil Block Box 4.5 The Moldovan Bank Fraud Scandal Box 5.1 Nigeria: Asset Freezing and Civil Forfeiture in the Case of a Former Oil Minister Box 5.2 Drafting Affidavits Box 5.3 Swiss Federal Council’s Emergency Powers to Freeze Assets Related to the Arab Spring’s Fallen Regimes Box 5.4 Nigeria: Freezing of Assets in the OPL 245 Case Box 5.5 Brazil: Freezing of Lava Jato Assets in Switzerland Box 5.6 Ukraine: Freezing Orders Imposed on Viktor Yanukovych’s Assets Box 5.7 A Hypothetical Example of Pre-Restraint Planning Decisions Box 5.8 Peru: Proactive Freezing of Vladimiro Montesinos’s Assets in Switzerland Box 6.1 France: Agency for the Management and Recovery of Seized and Confiscated Assets Box 6.2 China: Confiscation of US$14.5 Billion in Assets from Zhou Yongkang and Associates Box 6.3 Some Confiscation Issues Related to Virtual Assets Box 7.1 The EU’s 2014 Directive on the Freezing and Confiscation of Instrumentalities and Proceeds of Crime Box 7.2 Historical Background and Recent Developments in Confiscation Laws Box 7.3 Malaysia: Civil Forfeiture in the Case of 1Malaysia Development Berhad Box 7.4 United Kingdom: Guidance on Asset Recovery Powers for Prosecutors Box 7.5 1Issues in Confiscating the Commingled Proceeds of Crime: A Case Example Box 7.6 Using “Related Activities” to Capture the Full Benefit of Crime: A Case Example Box 7.7 Haiti: Presumption of Illicit Origin under the Swiss Restitution of Illicit Assets Act in the Case of Jean-Claude “Baby Doc” Duvalier Box 7.8 Preventive Confiscation in Italy Box 8.1 Operação Lava Jato (Operation Car Wash): Collaboration between US, Brazilian, and Swiss Authorities Box 8.2 The VimpelCom Case: Collaboration among Prosecutors and Regulators from 20 Countries Box 8.3 Connecting with People: A Case Example from Peru Box 8.4 Channels for International Cooperation Box 8.5 Disclosure Obligations: A Barrier to Mutual Legal Assistance? Box 8.6 Facilitating Informal Assistance Box 8.7 Law Enforcement Agencies with Investigative Mandates in France, Switzerland, the United States Box 8.8 International Cooperation for Exposing Corruption Scandals: The Panama Papers Box 8.9 France’s Central Registry of Bank Accounts: FICOBA Box 8.10 Spontaneous Disclosures from Switzerland Box 9.1 Selecting a Legal Basis to Include in the Formal Mutual Legal Assistance Request Box 9.2 Overcoming Dual Criminality: Illicit Enrichment and Corruption of Foreign Public Officials Box 9.3 Bank Secrecy and Fiscal Offenses: Prohibited Grounds for Refusing Mutual Legal Assistance Requests Box 9.4 Avoiding Rejections of Overbroad Mutual Legal Assistance Requests Box 9.5 Worldwide Provisional Orders in the United Kingdom Box 9.6 Requirements for Direct Enforcement of Mutual LegalAssistance Requests for Confiscation in the United States and the United Kingdom Box 9.7 Asset Recovery Pursuant to a Mutual Legal Assistance Request in France Box 9.8 Global Forum on Asset Recovery’s Principles for Disposition and Transfer of Confiscated Stolen Assets in Corruption Cases Box 10.1 Case Examples of Actions to Claim Ownership of Assets Box 10.2 The US Racketeer Influenced and Corrupt Organizations (RICO) Statute Box 10.3 Compensation for Damages Where Assets Are Misappropriated Box 10.4 Fyffes Group Ltd. v. Templeman and Others (2000) Box 10.5 National Iranian Oil Company v. Crescent Petroleum Company International Ltd. & Gas Corporation Ltd. (2016) Box 10.6 Guinea: Rescission of Contracts for Mining Rights in Simandou Iron Mine Box 10.7 World Duty Free Company Limited v. Republic of Kenya (2006) Box 10.8 Examples of Legislative and Administrative Measures Providing Alternative Remedies to Contract Nullification Box 10.9 Disgorgement of Profits: Practice in the United States Box 10.10 The Libyan Investment Authority v. Société Générale SA and Others (2016) Box 10.11 United Kingdom: The Oxford Publishing Ltd. Case Box 10.12 Circumstantial Evidence Considered in Federal Republic of Nigeria v. Santolina Investment Corp., Solomon & Peters, and Diepreye Alamieyeseigha (2007) Box 10.13 Requirements for Restraint Orders in France, Panama, and the United Kingdom Box 10.14 Macao SAR, China: The Ao Man Long Case Box 10.15 Enforcement of Judgments When the Defendant Is Absent from the Proceeding Box 11.1 Establishing Jurisdiction Where Limited Acts Have Occurred in the Territory Box 11.2 Establishing Jurisdiction over Nationals in the United Kingdom and the United States Box 11.3 Jurisdiction to Prosecute Money-Laundering Offenses in Brazil, France, Switzerland, the United States Box 11.4 Examples of Information Sources for Confiscation Proceedings Initiated by a Foreign Jurisdiction Box 11.5 Haiti: Important Role of the Jurisdiction Harmed by Corruption Box 11.6 Direct Recovery in Practice Box 11.7 Kazakhstan: A Memorandum of Understanding as the Legal Basis for Establishing the BOTA Foundation Box 11.8 Nigeria: An Asset-Return Agreement between the United States, Nigeria, and Jersey to Repatriate Assets Stolen by Former Nigerian Dictator General Sani Abacha Box 11.9 Asset-Return Options in Switzerland: Use of a Memorandum of Understanding in the Abacha Case Box A.1 Illicit Enrichment Provisions in France Box F.1 Responses to Wire Transfers That Hide Originating Customer Information Box F.2 Monitoring Records from Financial Institutions Box I.1 Mutual Legal Assistance (MLA) Drafting and Execution Tips Figures Figure 1.1 Process for Recovering Stolen Assets Figure 2.1 Standards of Proof in Asset Recovery Actions Figure 3.1 Five Important Questions to Ask in an Asset Recovery Investigation Figure 3.2 Sources of Preliminary Information from Government Agencies Figure 4.1 Basic Cross-Border Wire Transfer Process Figure 4.2 Sample SWIFT Message Format and Code Interpretation Figure 4.3 Sample Flowchart of Investigated Networks and Flow of Funds Figure 4.4 Sample Chart of Relationships and Assets Linked to an Investigation Target Figure B4.5.1 Carousel Borrowing Scheme in a Fraud Scandal Figure 7.1 Confiscation of an Asset in a Foreign Jurisdiction Figure 8.1 Integration of Asset Recovery Phases through International Cooperation FIgure 8.2 Flowchart of International Cooperation in Asset Recovery Cases Figure 8.3 Informal Assistance and Formal Mutual Legal Assistance Requests: What Can Be Requested? Figure 9.1 Flow of an MLA Request in the Presence of a Treaty or Domestic Legislation Figure A.1 Criminal Charges to Consider for Asset Recovery Figure F.1 SWIFT Serial/Sequential and Cover Payment Processing Methods Figure L.1 Core Tabs for Investigative Case Files in Excel Figure L.2 Sample Front Sheet for a Case File Photo Photo 6.1 High-Value Vehicles, Rapidly Depreciating in a Police Yard Tables Table 2.1 Criminal Charges to Consider for Asset Recovery, by Category Table 2.2 Key Evidentiary Challenges in Establishing the Elements of Selected Criminal Offenses Pertaining to Asset Recovery Table 5.1 Considerations in Partial Control or Limited Restraint of an Asset—For Example, a Hotel Table 8.1 Differences between Informal Assistance and MLA Requests Table L.1 Sample Investigation Log Table L.2 Sample Standard Format for a Subject Profile Table L.3 Sample Subject Profile Data from Social Media and Other OSINT Sources Table L.4 Initial Financial Data to Include in Subject Profile Table L.5 Sample Standard Format for a Financial Profile Table L.6 Sample Format for Calculating Value of Assets in Subject’s Financial Profile Table L.7 Sample Format for Liability Calculation in Subject’s Financial Profile Table L.8 Sample Income Data in Financial Profile Table L.9 Sample Expenditure Data in Financial Profile Table L.10 Sample Format for Calculating Change in a Subject’s Net Worth Table L.11 Sample Preliminary Evidence Matrix Table L.12 Sample Extension of Evidence Matrix, Listing Key Evidence by Element Table L.13 Sample Standard Format of Exhibit Register Table L.14 Sample Event Timeline Format Table L.15 Sample Format of Persons and Companies of Interest Lists Table L.16 Sample Items to Include in a Case Closure Check Sheet Table L.17 Information for Inclusion in “Lookup” Tab The Asset Recovery Handbook: A Guide for Practitioners has been updated in 2020 by the Stolen Asset Recovery (StAR) initiative, a joint initiative of the United Nations Office of Drugs and Crime and the World Bank focused on encouraging and facilitating a more systematic and timely return of stolen assets. Designed as a how-to manual, the handbook guides practitioners as they grapple with the strategic, organizational, investigative, and legal challenges of recovering assets that have been stolen by corrupt leaders and hidden abroad. It provides common approaches to recovering stolen assets located in foreign jurisdictions, identifies the challenges that practitioners are likely to encounter, and introduces good practices. By consolidating into a single framework, information that is dispersed across various professional backgrounds, the handbook has enhanced the effectiveness of practitioners working in a team environment. After 10 years of serving as a recognized reference for practitioners and trainers since it was first published in 2011, the StAR initiative decided to develop this updated version by incorporating developments based on the experience collected during this decade, including new legislation and case examples. This 2020 second edition emphasizes the need to utilize innovative strategies and technical tools, including in the context of international cooperation The Asset Recovery Handbook: A Guide for Practitioners was first published in 2011 by the Stolen Asset Recovery Initiative, a joint initiative of the United Nations Office of Drugs and Crime and the World Bank focused on encouraging and facilitating a more systematic and timely return of stolen assets. Designed as a how-to manual, the handbook guides practitioners as they grapple with the strategic, organizational, investigative, and legal challenges of recovering assets that have been stolen by corrupt leaders and hidden abroad. It provides common approaches to recovering stolen assets located in foreign jurisdictions, identifies the challenges that practitioners are likely to encounter, and introduces good practices. By consolidating into a single framework, the information dispersed across various professional backgrounds, the handbook has enhanced the effectiveness of practitioners working in a team environment. After 10 years of serving as a recognized reference for practitioners and trainers, the StAR initiative has decided to develop an updated version by incorporating updates based on the experience collected during this decade, including new legislation, good practices, and case examples. This updated version emphasizes the need to utilize innovative strategies and technical tools, including in the context of international cooperation