Political will is vital to curb terrorism financing, money laundering and recovery of Africa’s looted assets

Abiyamo

Hawa Noor M.

Oct 13, 2016

Africa has lost $1 trillion over the past five decades through illicit financial flows. International mechanisms for getting this looted wealth back exist. While some African countries have often claimed that the existence of tax havens hinders assets recovery efforts, lack of political will has been cited as the key problem.

The use of Unexplained Wealth Orders (UWOs) to curb illegally acquired wealth looks like an answer to Africa’s long-term problem of recovering its looted assets. This is because UWOs can lead to suspects being stripped of such wealth by a court of law if they fail to prove that it was legally accumulated by transferring the burden of proof to the beneficiary. Its success will, however, depend on the cooperation and political will especially from respective African countries that have the capacity to block access to crucial information on suspicious transactions.

During an anti-corruption summit of about twenty global leaders in London in May 2016, former British Prime Minister David Cameron announced the formation of a global forum for assets recovery, bringing together the cooperation of governments, law enforcement agencies and the private sector in combined efforts to recover stolen assets. [1] The climax of the summit was the signing of a global declaration against corruption and a consensus to hold the first gathering in the US next year, dedicated to the recovery of assets from Nigeria, Ukraine, Sri Lanka and Tunisia. UWOs was one of the outputs of the summit.

This new development is particularly significant to Africa because it is estimated that the continent has lost about $1 trillion in illicit financial flows in the last 50 years. [2] Annually, up to $50 billion is lost from the continent through theft and evasion of tax and tariffs, which is about double the amount it receives in official development assistance. [3] The impact of this is the deepening of income inequality by benefiting mainly the political class, long-term consequence for social capital and loss of accountability especially in public institutions. [4] This is also reiterated in the 2015 report of the High Level Panel (HLP) on illicit financial flows from Africa established by the Economic Commission for Africa (ECA) and the African Union (AU).

Efforts to recover stolen assets are governed by a transnational legal regime based on criminal law. The United Nations Convention against Corruption (2005), also known as the anti-corruption treaty, is the main legal framework under which recovery of stolen assets is managed and establishes provisions on international cooperation for proceeds and asset recovery acquired through corruption and other illicit means. The law obliges member states to ensure confiscated assets are managed by a competent authority, and that assets should be retuned to legitimate owners and victims of offenses compensated and if it involves another state, returning them to that state. In such a situation, the requested state may deduct reasonable expenses incurred in the investigation, prosecution, or judicial proceedings leading to the return or disposition of confiscated assets. Cooperation and agreements between states should be done on a on a case by case basis. [5]

Despite this, legal challenges exist in relation to assets recovery such as the demand for proof that the assets in question were acquired illegally and so two practical examples illustrate this legal gap: Nigeria and the DR Congo.

Attempts to recover looted assets of the former Nigerian ruler Sani Abacha (an estimated $2.3 billion, $1 billion worth of contracts to front companies and bribes worth of $1 billion from foreign companies) led to discoveries of accounts in Luxemburg, Liechtenstein, Jersey Channel Islands, USA, Switzerland and Britain. Investigations outside Nigeria proved more productive than at home partly due to the support of the US and various European governments. [6] In the end, the legal threat for proof that was missing led to an out of court settlement that allowed the family to keep $100 million and leaving a sum of $300 million. The family returned $1 billion while $535 million was released from Swiss banks, $200 million from banks in Britain and $300 million from Luxembourg and Liechtenstein. [7] The amount retained by the family was undeserved.

In the case of the DRC, Mobutu Seseseko’s son, Francois-Joseph Mobutu Nzanga Ngbangawe, had become prime minister when attempts to recover stolen assets by his father were launched. Nzanga shattered the process of releasing recovered funds back to DRC leading to Switzerland being legally bound to unfreeze the funds to him. [8]

These two cases and others such as Switzerland’s ‘Lex Duvalier’ of 2011 and UK’s Proceeds of Crime Act (POCA) 2002 demonstrate the double-aged nature of the law: providing opportunities for assets recovery while at the same time taking it away by demanding proof of illegality for the authorization of return of assets to be effected. [9] With UWOs, however, it is expected that the burden of proof will shift to the suspect and so if the two cases were to be subjected to UWOs, the families of Abacha and and Seseseko could have been compelled to show proof of how they acquired the wealth in question. [10]

While some African countries have often claimed that the existence of tax havens was a hindrance to their assets recovery efforts, their lack of political will has been cited as the problem. [11] In the case of the US and Switzerland pressure was largely applied from the former, forcing Switzreland to change some of its banking secrecy laws (such as the Swiss Banking Law of 1934). Although it was largely in relation to cases involving American defendants, it is a good case to emulate as it indicates that where there is political will there is a way.

The summit’s proposition to use UWOs and other methods such as intelligence sharing, provision of mutual legal assistance between states and creation of public registers to reveal real company beneficiaries, although driven by the UK, and motivated by the fact that foreign companies owned about 100,000 properties in England and Wales and that more than 44,000 of these were in London, it is indeed a welcome breakthrough that can succeed if accorded the necessary political will. However it is also important to consider that emphasis on cooperation must take into account the tendency of corrupt elites to hide looted assets in locations where laws are weak, something that can frustrate cooperation between states. Other initiatives such as public registers can therefore only follow when the problem of proof has been tackled.

In the context of increased global terrorism that has shone light on money laundering, some of which is suspected to be used to fund terrorist activities and amidst leaked information of the Panama Papers, some 11.5 million records of offshore secret bank accounts and transactions of the clients of the Panamian law firm, Mossack Fonseca, [12] there is no better time to finally explore opportunities of curbing illicit financial flows.

* Hawa Noor M. is an independent research consultant based in Nairobi, Kenya.

End notes

[1] https://www.gov.uk/government/news/pm-announces-new-plan-at-anti-corruption-summit-to-recover-stolen-assets

[2] http://www.uneca.org/sites/default/files/PublicationFiles/iff_main_repor...

[3] http://www.uneca.org/pages/iff-background

[4] http://concernedafricascholars.org/wp-content/uploads/2012/11/caploss05-...

[5] https://www.baselgovernance.org/theme/icar

[6] file:///Users/Noor/Downloads/ASR14NO4F2[1].pdf (page 20)

[7] file:///Users/Noor/Downloads/ASR14NO4F2[1].pdf (page 21)

[8] https://www.issafrica.org/iss-today/swiss-battle-to-return-africas-stolen-loot

[9] The EastAfrican (2016). Recovering the Millions Stolen by Crooked Elites. February 20^th -26^th, pp 26.

[10] http://www.telegraph.co.uk/news/politics/11814901/Suspiciously-rich-coul...