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RESOURCE MATERIAL
SERIES No. 83
UNAFEI
Fuchu, Tokyo, Japan
March 2011
Masaki Sasaki
Director
United Nations
Asia and Far East Institute
for the Prevention of Crime and
the Treatment of Offenders
(UNAFEI)
1-26 Harumi-cho, Fuchu, Tokyo 183-0057, Japan
http://www.unafei.or.jp
unafei@moj.go.jp
CONTENTS
INTRODUCTORY NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
v
PART ONE
WORK PRODUCT OF THE 146TH
INTERNATIONAL TRAINING COURSE
“Attacking the Proceeds of Crime: Identification, Confiscation,
Recovery and Anti-Money Laundering Measures”
Visiting Experts’ Papers
•
Asset Recovery
by Mr. Daniel Thelesklaf (Switzerland) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
•
Forfeiture Laws and Procedures in the United States of America
by Ms. Jean B. Weld (USA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
•
International Co-Operation in the Recovery of Criminal Assets
•
Current International Money Laundering Trends and Anti-Money Laundering
Co-Operation Measures
•
International Recovery of Ill-Gotten Assets
by Mr. Wayne Patrick Walsh (Hong Kong) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Participants’ and Course Counsellors’ Papers
•
Measures to Identify, Trace, Freeze and Confiscate the Proceeds of Crime - The
Philippine Setting
by Ms. Julia Bacay-Abad (Philippines) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
•
Challenges in the Legal Regime to Deal with Money Laundering
by Mr. Chethiya Goonesekera (Sri Lanka) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
•
Attacking the Proceeds of Crime in Thailand
by Mr. Jumpon Phansumrit (Thailand) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Reports of the Course
•
Effective Measures to Deprive Criminals and Criminal Organizations of
Crime Proceeds
by Group 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
•
Effective Measures to Prevent, Detect and Punish Money Laundering
by Group 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
iii
PART TWO
THE 13TH INTERNATIONAL TRAINING COURSE ON THE CRIMINAL
JUSTICE RESPONSE TO CORRUPTION
Visiting Experts’ Papers
•
Tackling Corruption: The Hong Kong Experience
by Mr. Steven Lam (Hong Kong) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
•
Corruption Control in Singapore
by Mr. Koh Teck Hin (Singapore) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
•
Investigation and Prosecution of Corruption Offences
by Mr. Koh Teck Hin (Singapore) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
•
The United Nations Convention against Corruption: An Overview with
Special Focus on the Provisions Relevant to Criminal Justice Authorities
by Mr. Demostenes Chryssikos (UNODC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
•
UNODC Activities in Promoting and Facilitating the Ratification and
Implementation of the UNCAC
by Mr. Demostenes Chryssikos (UNODC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Participants’ Papers
•
Effective Legal and Practical Measures for Combating Corruption
by Mr. Rehman Khan (Botswana) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
•
Effective Legal and Practical Measures for Combating Corruption
by Ms. Pinthip Leelakriangsak Srisanit (Thailand) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
•
Anti-Corruption in Vietnam
by Ms. Do Thi Phuong (Vietnam) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Reports of the Course
•
Identifying and Punishing Corrupt Offenders
by Group 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
•
Strengthening the Capacity and Ability of Criminal Justice Authorities, their
Personnel and Legislation
by Group 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
iv
INTRODUCTORY NOTE
It is with pride that the United Nations Asia and Far East Institute for the Prevention of Crime
and the Treatment of Offenders (UNAFEI) offers to the international community the Resource
Material Series No. 83.
This volume contains the work produced in the 146th International Training Course, conducted
from 25 August to 1 October 2010, and the 13th International Training Course on the Criminal
Justice Response to Corruption, conducted from 18 October to 12 November 2010. The main theme
of the 146th Course was “Attacking the Proceeds of Crime: Identification, Confiscation, Recovery and
Anti-Money Laundering Measures.”
With regard to the 146th Course, confiscation of the proceeds of crime is one of the most powerful
tools to fight organized and economic crime, including corruption. It realizes justice by depriving
criminals of their ill-gotten gains, and also deters potential criminals from engaging in criminal
activity by sending out a clear message that “crime does not pay.” Stemming the flow of a criminal
organization’s lifeblood - its financial resources - can effectively hinder its activity and proliferation,
and in corruption cases, where a huge amount of public assets have been diverted and transferred to
a corrupt official’s personal accounts (often overseas), returning the confiscated assets to the Victim
Country’s national treasury can further development of that country.
For these reasons, since the late 1980s, confiscation of criminal proceeds and criminalization of
money laundering have come to be internationally recognized as important criminal justice tools, and
as a result, relevant provisions have been incorporated into various United Nations Conventions and
international standards such as the FATF recommendations.
The existence of Conventions and Recommendations, however, does not guarantee that these
measures are effectively and successfully implemented or applied. In reality, identifying, tracing,
freezing, and confiscating the proceeds of crime is an extremely complex and time-consuming
process, often exacerbated by money laundering. A sufficient understanding of various legal and nonlegal issues that arise throughout the above process is essential to effectively utilize these important
legal tools. Likewise, international sharing of knowledge and experience are necessary to effectively
request/provide assistance and co-operation to other countries. For these reasons, UNAFEI, as an
institute of the UN Crime Prevention and Criminal Justice Programme Network, decided to hold this
Course.
With regard to the 13th International Training Course on the Criminal Justice Response to
Corruption, this is UNAFEI’s annual multiple country course that focuses specifically on corruption
control and anti-corruption measures. The United Nations Convention against Corruption,
effective 2005, requires States Parties to implement a number of measures to tackle corruption
in a comprehensive way, including measures directed at prevention, criminalization, international
co-operation, and asset recovery. Paying due attention to this priority issue of the UN Crime
Prevention and Criminal Justice Programme, this course is designed to encourage countries to
become party to the Convention and fully implement it, thereby taking a closer step towards freeing
the world from the grip of corruption.
In this issue, in regard to both the 146th International Training Course and the 13th International
Training Course on the Criminal Justice Response to Corruption, papers contributed by visiting
experts, selected individual presentation papers from among the participants, and the Reports of the
Courses are published. I regret that not all the papers submitted by the participants of each Course
could be published.
I would like to pay tribute to the contributions of the Government of Japan, particularly the
Ministry of Justice, the Japan International Cooperation Agency, and the Asia Crime Prevention
v
Foundation for providing indispensable and unwavering support to UNAFEI’s international training
programmes.
Finally I would like to express my heartfelt gratitude to all who so unselfishly assisted in the
publication of this series; in particular, the editor of Resource Material Series No. 83, Ms. Grace Lord.
March 2011
Masaki Sasaki
Director of UNAFEI
vi
PART ONE
RESOURCE MATERIAL SERIES
No. 83
Work Product of the 146th International Training Course
“Attacking the Proceeds of Crime: Identification, Confiscation,
Recovery and Anti-Money Laundering Measures”
UNAFEI
VISITING EXPERTS’ PAPERS
ASSET RECOVERY
Daniel Thelesklaf *
I. INTRODUCTION
The confiscation of the proceeds of crime remains a global issue as criminals continue to move monies
through financial systems with ease and to acquire legitimate assets across the world. In the context of
corruption and fraud, which this paper is based upon, and to put the problem into perspective, the World
Bank announced that in one year alone over $1 trillion were paid in bribes. This statistic does not even
represent the cost of large scale fraud or embezzlement from public funds. At a country level the Nigerian
Economic and Financial Crimes Commission puts Nigeria’s own corruption and theft at approximately USD
420 billion since independence in 1960 – more than the total amount of development aid provided to all of
Africa by Western governments between 1960 and 1997. The knock on effect of this crime is that now an
estimated 25% of the world’s costs on government procurement is the result of corruption on a large and
systematic scale. In 2007, Transparency International suggested that of the $4 trillion spent on government
procurement annually, approximately $400 billion will be siphoned off in corruption, usually in the form
of bribes. This is monies lost to public projects such as roads, schooling and the construction of hospitals.
Even where the projects are commenced they often lead to the building of unnecessary infrastructure or
infrastructure that is of dangerously poor quality.
For this reason, efforts to prevent corruption, the wholesale plundering of state assets, systematic fraud
and the manner in which the proceeds of such criminal activity move through financial centres has recently
assumed a high international profile attracting great political interest. The answers to such problems are
complex, transcending legal and political boundaries, and require an enormous effort in both the developing
countries where the assets were stolen and the financial centres of the world where they reside, or once
resided.
Close international co-operation, whether at an informal or a formal level, on confiscation issues remains
the key and should be developed. This paper sets out to consider the current international architecture in
place to see what progress is being made and indeed what efforts are being made. The paper will adopt a
perspective based on the recovery of assets stolen through, principally, corruption and fraud.
II. THE INTERNATIONAL LEGAL FRAMEWORK
For the purposes of this paper it is worth examining the legal context in which international efforts are
anchored and the extent of the international obligations. A number of the international Conventions include
provisions on the confiscation of criminal proceeds in the identification, tracing, freezing and confiscation
of criminal assets and also seek to promote international co-operation in this context. The most relevant
are the UN Convention against Transnational Organized Crime (UNTOC), the UN Convention against
Corruption (UNCAC) and the Council of Europe Conventions on Money Laundering and Confiscation (the
Strasbourg Conventions), which have served to build upon a growing body of other relevant international
legal instruments.1
* Executive Director, International Centre for Asset Recovery (This paper is based on a paper prepared by Mr Alan Bacarese,
International Centre for Asset Recovery).
1 For example, the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988), the
Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime (1990), the Council of Europe Criminal
Law Convention on Corruption (1999), the International Convention for the Suppression of the Financing of Terrorism (1999),
and the (revised) Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime
and on the Financing of Terrorism (2005).
3
RESOURCE MATERIAL SERIES No.83
Article 13 (1) of UNTOC2 imposes an obligation upon a State Party to act in response to requests for
confiscation from other states “to the greatest extent possible within its domestic legal system.” This,
UNTOC suggests, can be done either through direct submission of the request to competent authorities
with a view to obtaining a confiscation order and then executing it; or through the submission to its
competent authorities, with a view to giving effect to a confiscation order issued on the territory of the
requesting state. However it is important to note that although corruption is a sufficient legal basis
for Article 13, as it is covered by Article 8 UNTOC, the criminal act must have been carried out by an
‘organized criminal group’ within the definition of Article 2 (a).3 In some jurisdictions the theft of public
funds through corrupt means on a grand scale is sufficient in law to meet these criteria. UNTOC also
envisages the return of the assets, rather than a reliance upon asset sharing agreements which seems to
have been the way so far, in Article 14 (2) in order to ‘‘give compensation to the victims of crime or return
such proceeds of crime to their legitimate owners.’’
But it is the United Nations Convention against Corruption (UNCAC) that has set the legal pulses racing
with its broad and purposive approach and it is upon UNCAC that this paper will primarily focus. As the first
global legally binding instrument in the fight against corruption, UNCAC came into force on 14 December
2005. The Convention deals with an impressive range of offences and preventative measures and also builds
upon the growing array of provisions designed to strengthen international co-operation in criminal matters.
However, where UNCAC differs from many of the other anti-corruption conventions already in existence is
the innovative and far-reaching provisions on asset recovery.
With the advent of UNCAC, however, has come a great deal of hype and, inevitably, false promises from
a number of countries keen to shroud themselves in the veneer of international respectability that UNCAC
provides. But does UNCAC also represent a possible new dawn of hope, a realization that some change is
slowly but inexorably taking place? Can it become the tool for change and the mechanism by which a start
is made even if only to even make a small dent in the staggering annual figures of stolen assets that are
declared by international organizations or, for example, put forward in the Nyanga Declaration of 2001 by the
representatives of Transparency International in 11 African countries? It noted that $20 billion to $40 billion
“…has over the decades been illegally and corruptly acquired from some of the world’s poorest countries,
most of them in Africa, by politicians, soldiers, businesspersons and other leaders, and kept abroad in the
form of cash, stocks and bonds, real estate and other assets.”4
The detail is in the text of UNCAC and, in particular, Chapter V which deals with fundamentally new
asset recovery provisions. It is notable that at the heart of many of the new obligations is the principle of
international co-operation in this field. For example, Article 51, and the general spirit of Chapter V, links
in with the demands already articulated in Articles 43 and 46, when requiring State Parties to afford one
another the widest measure of co-operation and assistance in this regard. UNCAC calls for both a proactive
and co-operative approach and, considering past experiences, an important step to this end might be
implementing a special system for spontaneous cooperation as envisaged by Article 56.
Furthermore, UNCAC also attempts to promote legal tools and remedies that will assist in the direct
recovery of proceeds and property from other jurisdictions. Article 53, for example, is designed to ensure
that State Parties have in place a wide range of legal remedies to recognize other State Parties as having
legal standing to initiate civil actions and other direct means to recover illegally obtained and exported
property. The suggested list includes:
• as a plaintiff in a civil action (Paragraph a);
• as a party recovering damages caused by criminal offences (Paragraph b); or
• as a third party claiming ownerships rights in a confiscation procedure, being it civil or criminal
(Paragraph c),
2 The link between organized crime and corruption is fairly well established. As far back as 1994, the UN’s Naples Declaration
recognized that the growing threat of organized crime had a “corrupting influence on fundamental social, economic and
political institutions”, leading eventually to the development of UNTOC.
3 Article 2 (a) UNTOC ‘Organized criminal group’ shall mean a structured group of three or more persons, existing for a period
of time and acting in concert with the aim of committing one or more serious crimes or offences established in accordance with
this Convention, in order to obtain, directly or indirectly, a financial or other material benefit.
4 http://ww1.transparency.org/pressreleases_archive/2001/nyanga_declaration.html
4
146TH INTERNATIONAL TRAINING COURSE
Other key asset recovery provisions of UNCAC are as follows;
(i)The mechanisms for the recovery of property through international co-operation in confiscation, as
covered by Articles 54;
(ii)International co-operation for the purposes of confiscation, as covered by Article 55; and
(iii)The Return and disposal of assets, as covered by Article 57.
Article 54 imposes three obligations and builds upon the growing international consensus that domestic
orders for confiscation can be executed in foreign jurisdictions despite the old political issues that thwarted
previous attempts. The three powers contained in Article 54 (1) represent a circle of formidable legal
provisions that will capture most factual circumstances. Article 54 obliges states; (a) to take measures
necessary to permit its authorities to give effect to a foreign confiscation order; (b) take such measures
to permit domestic authorities having jurisdiction, to order confiscation “by adjudication of an offence of
money laundering or such other offence” and finally (c) to consider taking measures to permit confiscation of
property without a criminal conviction in certain cases.
Article 54 (1) (a), which is also reflected in the provisions of UNTOC, may take one of two different
forms. The competent authorities of the requested state may either recognize or enforce the foreign
confiscation order, per se, or they may institute new proceedings under their own domestic law and enforce
the confiscation order through domestic proceedings. In both cases, the authorities of the requested State
are obliged to recognize the judicial effect of the foreign judgment. In either scenario, the requested state
will need to be satisfied that the requesting state is legally competent to make the order. Many countries
have already put in place procedures for enforcing foreign confiscation orders.
There may be a huge advantage here in the sense that the requested state may be in a better position
to undertake a thorough investigation than the authorities in the requesting state, for example, the
requested state may be in a position to better establish the full extent of the funds transferred and may
even, depending upon the jurisdiction in question, be able to use a value based approach to the confiscation
proceedings rather than a property based approach, offering much better opportunities for the requesting
state to recover significant amounts of the stolen proceeds.
Under Article 54 (1) (b) there is a clear requirement for a legal finding or an adjudication in the requested
state for an associated offence, which will generally speaking be for money laundering prosecution
although UNCAC also envisages other offence.5 Recent history has demonstrated the true value of such an
approach with the proceeds of several grand corruption cases having been recovered by prosecuting money
laundering charges in the jurisdiction where the proceeds of corruption had been secreted. The fact that
the authorities of the country where the assets have been secreted are often more independent or are not
hampered by some of the legal constraints which affect the authorities in the requesting state, for examples
questions of immunity from prosecution or statute of limitations considerations, means that this can be a
very effective weapon in the pursuit of corrupt individuals.
UNCAC already relies on anti-money laundering mechanisms to prevent, trace, seize and confiscate the
proceeds of corrupt practices.6 Article 31 (8) even contemplates the prosecuting state reversing the burden
of proof for proving the origin of the property of foreign origin.
For a number of clear examples of the value of requested states pursuing corrupt individuals for money
laundering in their jurisdictions see the efforts of the Swiss authorities in respect of the Abacha monies in
Switzerland7 and the efforts of the UK authorities in pursuing Nigerian State Governors through the UK
5 Take such measures as may be necessary to permit its competent authorities, where they have jurisdiction, to order the
confiscation of such property of foreign origin by adjudication of an offence of money-laundering or such other offence as may
be within its jurisdiction or by other procedures authorized under its domestic law .
6 Paragraph (1) (b) should be read in conjunction with articles 14, 23 and 52. Under Articles 14 and 52, State Parties shall
ensure that its financial intermediaries report suspicious transactions in addition, Article 23(2)(c) requires State Parties to be
able to prosecute money laundering offences irrespective of the place in which the predicate offence had taken place.
7 Federal Office of Justice, Press Release, 21 January 2000 http://www.ejpd.admin.ch/ejpd/en/home/dokumentation/mi/2000/ref_2000-01-21.html
5
criminal and civil courts.8
Finally, under Article 54 (1) (c) when referring to “other procedures authorized under its domestic law”
there is a clear message sent that there may be circumstances in which the States Parties may wish to use
other non traditional means to secure a successful return of stolen assets even in circumstances where
there is no criminal conviction of the suspect.
One obvious example is the use of legal provisions in countries such as in the United States, Ireland, the
United Kingdom and Colombia, among others, which permit civil or administrative confiscation procedures
that operate in rem - procedures established against the property (not the individual) and governed by a
civil standard of evidence against property suspected to be the proceeds of crime. It may even have been
derived from a foreign criminal offence and is undertaken without the need for a criminal procedure in the
jurisdiction where the proceeds were originated.
The implementation of this recommendation relies on the punitive or restorative character each
State Party assigns to the concept of confiscation, essentially therefore a non criminal remedy.9 UNCAC
recommends applying this remedial type of confiscation to situations in which the offender can not be
prosecuted by reasons of death, absence of flight or “in other appropriate cases.”10
Furthermore, in an appreciation of both the novel provision in Article 54 (1) (b), the provisions in Article
31 (8) and the spirit of UNTOC the Swiss Federal Office of Justice has in recent months declared that the
assets of former Haitian President Jean-Claude Duvalier which have been frozen in Switzerland are to be
handed over to Haiti. The lawful origin of the assets, worth some 7 million Swiss francs, could not be proven
by the account holders, in circumstances where the burden of proof was reversed and placed upon those
claiming a proprietary right in the proceeds, and so the Swiss Federal Office of Justice held that the Duvalier
clan acted in the same way as a criminal organization, as defined in Article 260 of the Swiss Penal Code. This
decision came on the back of an MLA request made in 2008 by the Haitian government.11
As we have already seen, UNCAC provides mechanisms for recovery of property through international
co-operation in confiscation, but in terms of asset recovery it is Article 55 that is the enabling provision for
the use of international co-operation. In the review of Article 54 we have established in what circumstances
the requested state should act; under Article 55 the obligation is to establish a regime for international
co-operation with the purpose of confiscation with very specific criteria laid down for the process of
engaging the requested state – it is almost a walk through guide. Article 55 seeks to place an obligation
upon the State Party to create specific procedures to be used upon receiving a request for recognizing and
enforcing foreign confiscation orders and foreign provisional measures. These measures should be extended
not just to the proceeds of crime but also property, equipment and even other instrumentalities that have
been used in the commission of the offences.
The use of such powers in the early stages of an investigation, as envisaged in Article 55 (2) is important,
as in some jurisdictions, particularly common law jurisdictions, a claimant in a civil action can require an
ex parte discovery order to compel banks, and a large number of other intermediaries or third parties,
to provide information without disclosing the fact that such information is being sought to the person in
respect of whom the information is pertinent. This, usually known as Norwick Pharmacal/Bankers Trust12
type order, will allow the competent authorities of a State Party, provided the necessary pre-requisites are
8
http://news.bbc.co.uk/2/hi/africa/4253362.stm, http://news.bbc.co.uk/2/hi/business/3626408.stm, http://news.bbc.co.uk/2/hi/
africa/7035427.stm
9 Consider the judgment in the European Court of Human Rights, in the case of Welsh v. UK (1995) for a fuller consideration
of some of the complex legal arguments that this type of provision elicits.
10 The Stolen Asset Recovery Initiative –StAR- (World Bank and UNODC) have recently published a Non Conviction Based
Guide which provides practical advice to jurisdictions contemplating NCB asset forfeiture legislation inline with Article 54 1
(c) UNCAC The Guide identifies the key concepts - legal, operational and practical - that an asset forfeiture system should
encompass. See http://www.worldbank.org/star
11 See the Federal Office of Justice press release in this matter - http://www.bj.admin.ch/bj/en/home/dokumentation/
medieninformationen/2009/2009-02-12.html
12 Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 1975
6
satisfied, to obtain access to information which will enable them to search for assets hidden by suspected
criminals. Such orders are also usually sought in conjunction with freezing injunctions, thus constituting a
powerful range of legal weapons.13
Under the provisions of Article 55 (3) (6) if a State Party elects to make the taking of the measures
conditional on the existence of a relevant treaty, that State Party shall consider this Convention as the
necessary and sufficient treaty basis. This of course is easier said than done in practice as many countries
remain wedded to fairly rigorous criteria when it comes to engaging in international co-operation. Yet
recently, again in a real signal that the order of such things may genuinely be changing, the Bangladeshi
authorities were able to plead the UNCAC provisions as a legal basis for MLA and asset recovery with
Singapore, a country with which it has no bilateral MLA relations.
In efforts to recover over $200 million alleged to have been stolen and placed into overseas jurisdictions
by former premier Khaleda Zia’s son, Arafat Rahman Koko, the Bangladeshi authorities are said to have
cited successfully the provisions of UNCAC as the legal basis for the exchange of critically important
information and evidence in relation to this ongoing investigation in the absence of any formal bilateral
treaty with Singapore. 14
However, having said this, Article 55 does still contain a number of important provisions that allow
a requested state to refuse international co-operation, such as a refusal to co-operate or the lifting of a
provisional freeze if the requested state does not receive sufficient and timely evidence or if the property
is of a de minimis value. Although Article 55 does go on to say that in the case of lifting of any provisional
measures the requesting State Party shall be given an opportunity to present its reasons in favour of
continuing the measure.
The consolidating and innovative legal tools available under Chapter V UNCAC are really a precursor
to Article 57 which contains fundamentally important provisions on the return of assets that have been
confiscated under the various mechanisms of UNCAC. The principle of returning confiscated proceeds of
corruption is a significant departure from the well established principle that reflects the fact that confiscated
assets, generally speaking, belong to the country whose courts have issued the confiscation order. As a
result, when confiscating the proceeds of corruption, the requested states may need to consider enacting
specific provisions that allow their courts to return the proceeds to the victim country, in the cases and
circumstances required by Article 57, in order to avoid conflicts with existing practices adopted in case of
proceeds of other crimes.
But as the UNODC itself testifies, reaching agreement on how to repatriate the proceeds of corrupt
activity in the early stages of negotiating the Convention was not always easy. This is a particularly
important issue for developing countries where high-level corruption has plundered the national wealth,
and where resources are badly needed for reconstruction and the rehabilitation of societies under new
governments. Reaching agreement on this chapter has involved intensive negotiations, as the needs of
countries seeking illicit assets had to be reconciled with the legal and procedural safeguards of the countries
whose assistance is sought.15
So what are the main provisions in Article 57? Article 57 paragraph 3 establishes the basis for returning
and disposing of those proceeds confiscated under Articles 46 and 55 of the Convention. In doing so, Article
57 distinguishes three different situations:
The moist straight forward case is represented in paragraph 2(a) - when the property in question is the
proceeds of embezzlement of public funds or the laundering of such proceeds the requested State shall
return the confiscated property to the requesting State. This will be generally done on the basis of a final
judgment in the requesting State. However, there remains a possibility for the requested state to waive
13
To see the power of such applications see Recovering Stolen Assets – Mark Pieth (Peter Lang publishers) Chapter entitled
‘Civil proceedings to recover corruptly acquired assets of public officials’ by Tim Daniel and James Maton.
14 http://www.thedailystar.net/newDesign/news-details.php?nid=71090
15 See website: http://www.unodc.org/unodc/en/crime_convention_corruption.html.
7
such a final determination. Yet this is exactly what took place in the Swiss efforts to repatriate the millions
of dollars of Abacha monies when in August 2004 the federal Office of Justice agreed to transmit to Nigeria
all assets in Switzerland, waiving the normal condition of a prior judicial forfeiture order. The decision
was subsequently upheld by the Swiss Supreme Court in February 2005 on the basis that the assets were
clearly the product of specific crimes (the theft of large amounts of monies form the Central Bank), that the
accounts in Switzerland were largely in false names and, critically, that the accounts structures set up by
Abacha, his cronies and family constituted a criminal enterprise under Swiss law.16 Switzerland was again
setting new standards in the realm of asset recovery.
In circumstances where the requesting state fails to reach a final judgment in certain situations, possibly
because the defendant has died or fled the jurisdiction, maybe because the statute of limitations has expired
or the person enjoys immunity for prosecution, the corrupt official remains in power, or because the
prosecution and judiciary can be corruptly manipulated, this development is significant.
Overall, Article 57 provides the default provision in paragraph 3 (c), that “In all other give priority
consideration to returning confiscated property to the requesting, State Party, returning such property to its
prior legitimate owners or compensating the victims of the crime.”
The die has now been cast and it is now up to the international community to respond.
III. CONCLUSION
The notion of recovering stolen assets is no new phenomenon, even though discrepancies in the
monies that continue to be made by criminals through corruption, fraud and other offences and the monies
recovered by law enforcement agencies remain dramatic. The legal and procedural processes that enable
investigators and prosecutors the world over to pursue such proceeds have been honed over the last 20
years or more through efforts in the US (to defeat drugs traffickers) and Italy (to combat organized crime),
to quote just two obvious examples, which are now mainstreamed in many of our own jurisdictions. But the
development of asset recovery systems has now advanced far beyond the original criminal conviction based
confiscation processes and now incorporate structures that are often outside of what is normally considered
to be the criminal process, such as non-conviction based and even taxation based systems which are proving
to be useful weapons in the armoury of law enforcement. These procedural advancements are supported by
a wealth of international policy initiatives (For example, G8 and the 2004 Justice and Home Affairs Ministers
Declaration on Recovering the Proceeds of Corruption and recent OECD and G20 declarations on tax
havens) through to the international Conventions already indentified in this paper.
And yet, the corrupt officials and organized crime groups that we have touched upon in this paper
continue to build large and complex international networks and amass substantial profits with seemingly
little prospect of being caught. There is no doubt that the ability of the victim state to strip these individuals
of those assets is critical if those networks are to be disrupted and the financial markets of the world are to
be protected from the scourge of money laundering.
On the international stage there is little doubt that UNCAC now represents the standard by which many
countries will wish to be judged, even if it does not represent a conceptual revolution, rather a consolidated
framework of ideas and practices that go some considerable way to providing an effective machinery in
which to recover the proceeds of corruption. But ultimately what is emerging is the notion that success
rests upon the will of these countries that do develop a genuine yearning to recover their stolen monies and
have the good luck to manage to trace, freeze, confiscate and try to repatriate them from a country that is
willing to employ clever legal practices to assist.
16
8
ATF 1A.215/2004 of 7 February 2005 – published on http://www.bger.ch
BIBLIOGRAPHY
UNODC Legislative Guide to UNTOC
UNODC Legislative Guide to UNCAC
Federal Office of Justice, Switzerland: Handover of Duvalier Assets to Haiti Ordered, ‘Lawful Origin of
Assets could not be Proven’: Press Release, FOJ, 12.02.09
Borgers and Moors: European Journal of Crime, Criminal Law and Criminal Justice (2007)
Pieth M: Recovering Stolen Assets: Bern, Peter Lang Publishers, 3-18, 2008
Monfrini, E: Recovering Stolen Assets: Bern, Peter Lang Publishers, 41-61, 2008
Daniel Tim and Maton J: Recovering Stolen Assets: Bern, Peter Lang Publishers, 243-266, 2008
Europol Annual Report 2007
Communication from the Commission to the European Parliament and the Council - Proceeds of
organised crime Ensuring that “crime does not pay” - Brussels, 20.11.2008 COM(2008) 766 final
9
APPENDIX A:
SANI ABACHA OF NIGERIA
Daniel Thelesklaf*
General Sani Abacha was the Nigerian head of state between 1993 and 1998, coming to power through
a coup. He had been close to the central power base of successive military governments in Nigeria, having
been Minister of Defence and the Chief of Army staff.
Upon his sudden death in 1998, General Abdulsalami Abubakar took over, becoming head of state. He put
in place a transition government, scheduled presidential elections and transitioned Nigeria into democracy
and civilian rule.
A.Asset Recovery Efforts
The transition government set up a Special Investigation Panel (SIP) that had the task of investigating
the looting and the corruption during the Abacha government. A preliminary report produced by the SIP
pointed out two main modus operandi used by the Abachas to plunder Nigeria’s coffers: (i) through false
funding requests for security operations and equipment, and (ii) through monies directly transferred from
the Central Bank of Nigeria by wire transfers to accounts abroad held by offshore companies linked to the
Abachas and their cronies (Monfrini, 2008). The preliminary report unveiled that the Abachas had siphoned
approximately USD 1,5 million and GBP 416 million from the Nigerian state (Monfrini, 2008).
The Nigerian government followed up the report and issued Decree No. 53, which ordered the return to
Nigeria of real property and movable assets, as well as cash that had been illegally acquired by the Abachas
and their entourage, in exchange of immunity from prosecution. Nigeria was able to recover more than USD
800 million through this method (Monfrini, 2008). Most of these returned assets were held in Swiss bank
accounts, and the return was made through the account held by the Central Bank of Nigeria at the Bank for
International Settlements (Daniel and Maton, 2008) in Switzerland.
1. Tracing the Assets in Switzerland
Shortly after the issuance of Decree No. 53, and based on information gathered by the SIP, the Nigerian
government stepped up its asset recovery efforts and issued a request for mutual legal assistance to
Switzerland, in December 1999.1 The request sought to “obtain documents that would assist criminal
investigations in Nigeria and the seizure of funds held in Swiss bank accounts controlled by members of
the Abacha family and their associates” (Daniel and Maton, 2008). The Nigerian authorities additionally
requested the anticipated return of the assets. Through this request, the Swiss government was able to
seize an additional USD 80 million dollars in Switzerland.
However, the Nigerian government was in need of further identifying other assets being held by the
Abachas and their associates. Information and documents provided by Switzerland through the request for
mutual legal assistance gave the Nigerian government further information on the trail of the monies and the
money laundering schemes.
Notwithstanding, Swiss legislation requires its authorities (i) not to transmit investigatory files or
requested documents while there is a challenge to the request for mutual legal assistance, and (ii) to inform
the investigated persons of the request for mutual legal assistance prior to the submission of the documents
to the requested country, so as to allow for due process. Monfrini (2008) explains “due to the existence
of appeals and the obligation of secrecy of the Swiss authorities handling the request for mutual legal
assistance, no proper interaction between the Nigerian and Swiss investigators could take place.”
* Executive Director of the Basel Institute on Governance. Former Director of the Swiss FIU.
1 The Nigerian authorities announced in September 1999 that a request for mutual legal assistance would be submitted to
Switzerland. As a result, the Swiss authorities issued a freeze order and stated that Nigeria had three months to present a
formal request for mutual legal assistance (Monfrini, 2008).
10
Due to this legal impediment, the Nigerian government supplemented its mutual legal assistance efforts
by retaining legal counsel in Switzerland so as to assist them in their asset recovery efforts. In such a way,
the Nigerian government could: (i) file a criminal complaint in Switzerland against the Abachas and their
cronies, and (ii) make an application to the Swiss courts to become a partie civile to the Swiss criminal
investigation based on the criminal complaint filed, if accepted.
Monfrini (2008) explains that the legal strategy used by the lawyers in Switzerland on the criminal
complaint was twofold, and relied heavily upon qualifying the Abachas and their cronies as a criminal
organization. By doing so, it would: (i) give Swiss authorities the jurisdiction to investigate and prosecute all
members of the Abacha criminal organization, regardless of the fact that they had never been in Switzerland,
as the activities of the criminal organization had taken place, at least in part, in Switzerland; and, more
importantly, (ii) once the Abachas and their cronies were qualified as a criminal organization, there would
be a reversal of the burden of proof, and the members of the organization would bear the burden of proving
otherwise.
Once the criminal complaint was filed and accepted by the investigating magistrate, the Nigerian
government would apply to become a partie civile to that investigation. It should be noted that Switzerland,
like most civil law jurisdictions, allows the victim to make an application as partie civile to the court,
whereby it becomes party to the criminal proceeding and assists the prosecution in the case. The civil party
also has full access to the investigatory files and related information pertaining to the investigation, among
others.
Thus, by applying to become a partie civile in the Swiss courts, the Nigerian government legally
circumvented the legal obstacles of obtaining information through the request for mutual legal assistance
and gained access to information that led to the discovery of other assets held by the Abachas in Switzerland
and other jurisdictions.
As a direct result, seizure orders were issued and resulted in the seizure of an additional USD 670 million
in various Swiss accounts. The information obtained through the Swiss investigation also allowed the Swiss
courts to request mutual legal assistance to Luxembourg and Lichtenstein, where an additional USD 830
million were seized (Daniel and Maton, 2008).
2. Tracing the Assets in the United Kingdom
In July 1999, the Nigerian Government had initiated civil proceedings before the High Court regarding
the Ajaokuta steel plant debt buy-back fraud.2 It concerned the rightful ownership of the proceeds of the sale
of debt owed by Nigeria to Russia (Daniel and Maton, 2008).
The Ajaokuta steel plan had been a Soviet project in Nigeria from the 1970s. In an effort to cut their
losses in the project, the Russians started selling off the debt due on the plant. Daniel and Maton (2008)
explain that, on the surface, it was a good deal for Nigeria as it acquired the debt for just 53% of its face
value.
However, the Abachas created a shell corporation that indirectly acquired the debt from the Russians and
then sold it to the Nigerian government for twice the sum it had paid, and retained these profits in London.
Ultimately, Nigeria won the Ajaokuta proceedings in London, and was awarded the payment of DEM 300
million plus costs (Monfrini, 2008).
In June 2000, the Nigerian authorities sent a request for mutual legal assistance to the United Kingdom
seeking evidence of both the Ajoukuta proceedings and theft of monies from the Central Bank of Nigeria.
The Abachas challenged the decision to render assistance and, later on, to transmit the documentation
to Nigeria. These legal challenges slowed the execution of the request for mutual legal assistance and its
efficiency. It was only in 2004, four years after the request had been initially send to the United Kingdom,
that the documentation was sent to Nigeria (Daniel and Maton, 2008).
2
The fraud consisted essentially in the buy-back by the Abacha government of bills of exchange relating to the building of
the Ajaokuta steel plant owed to a Russian company for DEM 986 million, resulting in the fraudulent profit of over DEM 490
million for the Abacha criminal organization (Monfrini, 2008).
11
The slow progress of the request for mutual legal assistance in the UK prompted the Nigerian
government to supplement those efforts with civil proceedings seeking to obtain bank documents related
to the Abachas and their cronies, as well as corporate vehicles in which they were the beneficial owners
(Daniel and Maton, 2008). Daniel and Maton (2008) explain that the strategy proved successful since the
Nigerian government gained access to bank documents ex parte , and only after six weeks were they served
on the civil proceedings, along with a worldwide freezing order freezing their assets. The civil proceedings
in the United Kingdom pressured the Abachas to disclose their assets worldwide.
However, the evidence produced through the civil proceedings was not as effective as it had been hoped,
as only USD 50 million had remained in the United Kingdom when the civil proceedings were initiated, from
a total of USD 1.3 billion that had been channelled through English banks (Daniel and Maton, 2008).
3. Repatriation and Monitoring
After the Swiss Supreme Court determined that the Nigerian request for mutual legal assistance could
be granted in 2003, and the Nigerian government reiterated its request that the assets be repatriated prior
to a final judgement and forfeiture (Monfrini, 2008) based on the Swiss Federal Law on International Mutual
Assistance in Criminal Matters (IMAC).
As an exception to the rule, the IMAC allows for the anticipated return of assets to the victim country
at any stage during the criminal proceedings. Monfrini (2008) reminds that the anticipated return of assets,
foreseen in article 74a of the IMAC, and which can be done at any stage of the criminal proceedings in
the victim country, is an exceptional “empowering provision (Kann-Vorschrift) which gives the authority
wide powers of discretion for the purpose of deciding, on the basis of a thorough examination of all the
circumstances, whether and under what conditions an anticipated remittance could take place.”
The Swiss authorities ultimately agreed waiving the need for a final judgement in Switzerland, in
part due to the findings on the criminal investigation that had occurred in that country, in part due to the
agreement of the Nigerian authorities to have the assets monitored (Monfrini, 2008). As such, USD 458
million – namely assets derived from specific crimes in respect of which criminal proceedings were pending
– were repatriated to Nigeria in 2004. An additional USD 50 million – attached to the Swiss prosecution that
the Abachas were a criminal organization – was subsequently also repatriated (Monfrini, 2008) in 2005. In
those decisions, the Swiss Supreme Court also conditioned the return of the assets to procedural guarantees
to the Abachas in their criminal prosecution in Nigeria.
Although initially reluctant, the Swiss government heeded to the concerns of the Swiss Parliament
of which assurances needed to be given by the Nigerian government.3 The Nigerian government issued
assurances to the Swiss government in that regard, stating that the repatriated assets would fund
development projects in the healthcare and education sector, as well as in infrastructure projects.
The discussion surrounding the monitoring of the returned assets of the Abacha case had been ongoing
since December 2000. At the time, a coalition of Swiss non-governmental organizations – later called the
Swiss Abacha Coalition – had called a press conference aiming at discussing the use of the Abachas stolen
wealth, and had proposed that it be earmarked and have specific destination on: (i) ecological disasters, and
(ii) compensation for oil field workers who had fallen victim to human rights violations.
The Swiss Abacha Coalition eventually met with Swiss officials in charge of the Abacha case and also
visited Nigeria. During the visit, a two-day conference took place, where forty Nigerian non-governmental
organizations discussed the recovery of the Abacha assets. The Nigerian Civil Society Network on Stolen
Assets (forty NGOs from the six geopolitical zones of Nigeria) was founded and later co-ordinated by the
African Network for Economic and Environmental Justice (ANEEJ). The network’s role was to assure the
equitable utilization of the stolen assets.
The World Bank was ultimately identified as a neutral party to review the utilization of the repatriated
assets, and was further expected to be part of an ongoing programme to improve public finance management
3
http://www.aktionfinanzplatz.ch/pdf/kampagnen/potentatengelder/nigeria/Gysin.Abacha05.pdf (in German)
12
in Nigeria. Jimu (2009) explains that “[t]hrough the World Bank, the Swiss government provided a grant of
about USD 280,000 to co-finance the Public Expenditure Management and Financial Accountability Review
(PEMFAR). PEMFAR was initiated as a means of executing reforms in budget spending, with regard to
Nigeria’s national economic empowerment development strategy (NEEDS) priorities in education, health,
and basic infrastructure (power, roads, and water). Out of a total sum of USD 505 million repatriated from
Switzerland, and according to the agreement reached on priority pro-poor sectors, the allocations were to
power (USD 168.5 million), works (USD 144.5 million), health (USD 84.1 million), education (USD 60.1
million), and water resources (USD 48.2 million).”
However, the monitoring of the assets was presented with several challenges. One of such challenges
was the use of the recovered assets themselves. Two subsequent reports (from the World Bank,4 and a
shadow report produced by the NGO coalition5) on the monitoring of the assets suggest that USD 200
million had been misappropriated and not used for development projects, as agreed. Jimu (2009) explains
that one of the challenges in the monitoring process was following up on the allocation of the repatriated
assets was tracking the funds in the national budget. The reports indicate that there were instances in which
spending agencies used the repatriated assets to cover outstanding arrears or to make partial payments for
ongoing multi-year projects (Jimu, 2009). Another challenge concerned the quality of the implementation
of the projects – the review process reported that several projects fell behind schedule or were abandoned,
while some of the completed projects showed poor workmanship (Jimu, 2009).
B.Conclusion
The Sani Abacha case demonstrates that traditional state-to-state co-operation through mutual legal
assistance is at times insufficient to overcome the differences in legal requirements between jurisdictions,
which may end up delaying the assistance sought and hampering the expected results. This case clearly
illustrates that pro-active co-operation of prosecutors and investigators in the victim country and recipient
countries, and these amongst themselves, is paramount to ascertain greater efficiency in the asset recovery
processes.
Moreover, victim countries should consider pursuing all available avenues – including hiring legal counsel
in the recipient countries – in order to recover the stolen assets in the most efficient manner possible. In the
Sani Abacha case a complex strategy was put in place that resulted in the effective recovery of USD 2 billion
(Monfrini, 2008) of the estimated USD 5 billion which had been looted.
The Sani Abacha case clearly illustrates that the official channels do not always provide the best course
of action in the asset recovery process. It was through the joint co-operation and co-ordination of not only
several jurisdictions, but also between private and public initiatives, that a swift seizure of the Abachas’
assets was possible.
However, the Abacha case still shows that it is uncertain that the return of the assets will be put to
use appropriately by the new government. Whereas the monitoring of returned assets can spark lively
debates, it should be brought to discussion by the international community to assess its feasibility, need and
efficiency.
C.Reference
Monfrini, E. (2008), ‘The Abacha Case’, Pieth, M. (ed.) Recovering Stolen Assets, Bern: Peter Lang, pp
41-61.
Daniel, T. and Maton, J. (2008), ‘Recovering the Proceeds of Corruption: General Sani Abacha – A
Nation’s Thief’, Pieth, M. (ed.) Recovering Stolen Assets, Bern: Peter Lang, pp 64-78.
Jimu, I. Managing Proceeds of Asset Recovery: The Case of Nigeria, Peru, the Philippines and
Kazakhstan. (2009)
4
http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2007/04/10/000011823_2007041013
1028/Rendered/PDF/393900v10UNI0A11Monitoring01PUBLIC1.pdf
5 Available at http://www.evb.ch/cm_data/Report_Abacha.pdf
13
APPENDIX B:
RECOVERING FERDINAND MARCOS’ STOLEN ASSETS IN SWITZERLAND
Daniel Thelesklaf *
The case of Ferdinand Marcos illustrates how difficult it is for the successor government of a corrupt
regime to regain ownership of the assets stolen from the state.1 In the case of the Philippines, it took
seventeen years to recover approximately USD 658 million that had been deposited in Switzerland (Pieth,
2008). To put the challenge of asset recovery into perspective, it is estimated that Marcos plundered USD 5
to 10 billion, or even more, while head of state (The World Bank, 2007).
A.Background2
The corrupt activities of Ferdinand Marcos are reported to having commenced while he was a
congressperson and head of the import control board, which allowed him to gather large bribes in return for
approving import licences (Chaikin, 2000).
Marcos had been a congressperson from 1949 to 1959, where it was reported that he used political
influence for personal enrichment. He had also been a senator from 1959 to 1965, where he became the
opposition leader and the Senate President, in 1965. He was then elected in 1965 as the tenth president of
the Philippines, and later re-elected in 1969 and 1981.
Marcos faced several challenges during his second term in office – the Philippines faced an economic
crisis, and social unrest, among others. In response, Marcos suspended habeas corpus and declared martial
law using as excuse the assassination attempt against his Minister of Defence. It is later revealed that said
attempt had in fact been staged by the military.
Martial law was lifted in 1981 and general elections were called. Ferdinand Marcos was victorious,
despite the fact that the major opposition parties had boycotted the elections. The support for the Marcos
regime waned there onwards, more so after the assassination in 1983 of the opposition leader Benigno
Aquino, Jr. on the tarmac of the Manila International Airport, upon his return to the Phillipines from exile.
During his third term in office, in 1986 he called for snap presidential elections, with more than a year
left in his term, in an attempt to ease escalating public discontent. The opposition united under Benigno
Aquino’s widow, Corazon Aquino, and Marcos was declared the official winner, despite the elections having
been denounced by international observers as marred with fraud.
A peaceful civilian-military uprising called the ‘‘People Power Revolution’’ and the withdrawal of the
support to the regime by General Fidel Ramos and Defence Minister Juan Ponce Enrile – the general
administrators of the martial law and strong allies of Ferdinand Marcos – forced Marcos, his family and
cronies into exile in the United States.
The US customs inventory upon the arrival of the Marcoses and their entourage in Honolulu indicated
that they had brought with them USD 1.27 million worth of newly minted Philippine Pesos; certificates
of deposit worth USD 1 million and 24 one-kilo gold bars and certificates of gold bullion (allegedly worth
billions of dollars).
B.Tracing and Recovering the Stolen Assets
Ferdinand Marcos, members of his family and cronies accumulated wealth through six channels: (i) the
takeover of large private enterprises, (ii) the creation of state-owned monopolies in important sectors of
the economy, (iii) the awarding of government loans to private individuals acting as fronts or his cronies,
* Executive Director of the Basel Institute on Governance. Former Director of the Swiss FIU.
1 available at http://www.assetrecovery.org/kc/node/5881e61f-a33e-11dc-bf1b-335d0754ba85.4
2 A detailed timeline of events can be found at http://www.assetrecovery.org/kc/resources/org.apache.wicket.Application/
repo?nid=62506d95-a33e-11dc-bf1b-335d0754ba85
14
(iv) the raiding of the public treasury and government financial institutions, (v) the receipt of kickbacks and
commissions from firms working in the Philippines, and (vi) the diversion of foreign aid and other forms of
international assistance (Chaikin, 2000).
Moreover, Marcos had three main sources to the loot (Chaikin, 2000): (i) beneficiary of large-scale
diversion of entitlements to foreign economic assistance, including reparation funds from Japan and
economic aid from the United States; 3 (ii) the PhilCAG funds;4 and (iii) kickbacks from public works
contracts, involving the extortion of, and the soliciting of bribes and commissions in exchange for the
granting of government employment, government contracts, licenses, concessions, permits, franchises and
monopolies. Chaikin (2000) informs that there were also other forms of plunder, whereby Marcos withdrew
monies from the public treasury and the gold stocks of the Philippines.
After Corazon Aquino took office, and a few days after the exile of Ferdinand Marcos and his entourage,
she instated the Presidential Commission on Good Governance (PCGG), whose basic functions were: (i)
to recover ill-gotten wealth accumulated during the Marcos Regime; (ii) to adopt institutional safeguards
to prevent corruption in Government; and (iii) to investigate such cases of graft and corruption as may be
assigned by the President. Corazon Aquino further passed an Executive Order on March 1986 freezing all of
Marcos’ assets in the Philippines.
The newly established PCGG in turn ordered the Philippines National Bank to seize5 Marcos’ and his
cronies’ assets in the country. Letters were sent by the PCGG to banks, with a memorandum requesting
their co-operation.
As the Marcoses left the Philippines for exile, large amounts of documentation they were unable to
destroy were left behind at the Malacañang Presidential Palace (Pieth, 2008), and later become know as the
Malacañang Documents. They contained detailed (although incomplete) financial arrangements that Marcos
had with Swiss banks, which totalled approximately USD 356 million.
1. The Marcos’ Net Worth Analysis
Chaikin (2000) demonstrates that Ferdinand Marcos and his wife, Imelda Marcos, would not pass a net
worth analysis.6 Marcos’ income declaration to the Philippine authorities in 1965, prior to taking office, was
PHP 120,000, or approximately USD 7,000. In the years between 1966 and 1985, Marcos declared a total
income of PHP 16,408,442 (approximately USD 2,414,442.91). These, in turn, were divided into: (i) his
official salary; (ii) his legal practice;7 (iii) farm income; and (iv) others.
2. Tracing Marcos’ Assets in Switzerland
The Marcoses used a complex money laundering structure to launder proceeds derived from corruption.
The Philippines was thus faced with a difficult task in recovering the assets on account of the highly intricate
and secretive nature of the network of accounts in different jurisdictions – which included Switzerland,
Lichtenstein and the United States – that were used to hide the true origin and ownership of the proceeds of
the Marcoses’ corrupt activities.
The PCGG Consolidated Report on Swiss Documents, prepared in 1990, revealed that monies amassed
by the Marcoses and their cronies had been laundered into sixty accounts kept in six Swiss Banks, under
the name of seventeen foundations (incorporated mostly in Liechtenstein, so as to layer and distance the
Marcoses from the proceeds of their corrupt activities); establishments and shell corporations; as well as
codenames, aliases, pseudonyms, e.g., William Saunders, Marcos’ pseudonym during World War II; and
numbered bank accounts (Chaikin, 2000).
3
Both the Japanese and the American governments have denied this (Chaikin, 2000).
PhilCAG were the Philippine Civic Action Group. They were Phillipine soldiers that served between 1966-1970 in the
Vietnam War and were mainly involved in civilian infrastructure projects.
5 The PCGG had, for a determined period of time, the power to freeze suspect assets.
6 Net worth analysis is a method whereby financial investigators indirectly link a person and the alleged illegal activity and the
laundered monies, as no direct evidence is available or unreliable.
7 While in office, Marcos was barred by law to practice law, although in his income declaration he claimed the amount as
“receivables from prior years” (Chaikin, 2000).
4
15
In an unprecedented move, the Swiss Federal Council decided to freeze in March 1986 all of Marcoses’
assets. This political decision was legally based on Article 102. (8)8 of the Swiss Constitution of 1874 and
informed that a forthcoming request for mutual legal assistance would follow from the Philippines.
The Swiss Federal Council further mandated the Swiss Banking Commission to be informed by the
banks of the assets they were holding and in which the Marcoses had an interest (Chaikin, 2000). The direct
result from this decision was that Swiss banks were prohibited from transferring monies in any account
identifiable with the Marcoses. This allowed the Swiss – but not the Philippine government – to have a
precise overview of all of Marcos’ funds and accounts in Switzerland.
The Malacañang Documents proved invaluable to assist the Philippines in demonstrating the trail of the
monies and establishing investigatory leads (Chaikin, 2000) in Switzerland. They formed the basis of the
first mutual legal assistance request issued in April 1986 by the Philippines seeking to seize Marcos’ illegal
wealth and to obtain the respective bank documents. The request was based on the Swiss Federal Law on
International Legal Assistance in Criminal Matters (IMAC).
Swiss authorities were able to cross-reference the information received from the Swiss Banking
Commission with the information provided in the Philippine mutual legal assistance request, which allowed
for a precise seizure of Marcos’ assets. The receipt of the request for mutual legal assistance allowed for the
Swiss Federal Council to lift the freeze imposed.
Notwithstanding, the Swiss authorities rejected the request for mutual legal assistance, as it was deemed
‘indeterminate and generic’. This led to having the mutual legal assistance partially accepted: the Swiss
authorized sharing the bank documents with the Philippine authorities, but denied the request to seize the
assets. As the legal challenges to the decision began, the Swiss Federal Council re-imposed its freeze order
in July 1986.
Ultimately, the Swiss Supreme Court ruled in December 1990 that the assets were to be returned, in
principle, to the Philippines. However, the following conditions had to be met: (i) a final conviction rendered
against Imelda Marcos within one year, otherwise the assets would not be returned to the Philippines and
the freeze order would be lifted; (ii) that a Philippines court render a final judgment that the assets are
stolen and that they be returned to the Philippines government; and (iii) that Imelda Marcos be accorded
due process of law, and that the proceedings comply with the Swiss federal constitution and the European
Convention on Human Rights and Fundamental Freedoms.9
A second mutual legal assistance request was issued by the Philippine government in 1995 requesting
the anticipated repatriation of the assets 10 (Chaikin, 1995). The IMAC generally only admits that the
repatriation can take effect upon final judgment, although it exceptionally allows for the anticipated
restitution of the assets at any stage of the criminal proceedings in the requesting state.
Legal challenges again arose to this second request for mutual legal assistance, and the Swiss Supreme
Court finally determined in 1997 and 1998 the anticipated return of the assets. The Swiss Supreme Court,
however, noted that the disposal of the assets would only be determined by judicial proceedings in the
Philippines (Chaikin, 2000).
Thus, in 1998, the Swiss banks transferred an aggregate value in excess of USD 567 million to escrow
accounts in the Philippines National Bank, pending final judgment of the case in the Philippines. The Swiss
authorities further imposed strict guidelines for the use and management of the escrow account. These
funds, in February 2004 and at the time worth USD 624 million, were remitted from the escrow account to
the Philippines treasury, to the “Agrarian Reform Fund” off-budget fund, with the purpose of being spent on
agrarian reform programmes.
8 Article 102. The powers and obligations of the Federal Council, within the limits of this constitution, are in particular the
following: (…) (8) It shall watch over the external interests of the Confederation, particularly its international relations, and it
shall be in charge of external affairs generally.
9 See Philippines asset recovery statement, Conference of UNCAC States Parties, Jordan.
10 The repatriation of assets from the recipient to the victim country is, as a rule, only possible after the courts of the latter
country issue a conviction and transmits it to the recipient country via mutual legal assistance.
16
C.Conclusion
The Ferdinand Marcos case clearly illustrates the difficulties that governments face in recovering stolen
assets. Although the Malacañang Documents provided a wealth of information to the Philippine authorities
that enabled them to engage the Swiss authorities, several factors played against a more positive outcome.
The initial request for mutual legal assistance was met with partial success. On the one hand the PCGG
had to overcome several challenges while dealing with an extremely complex case. The fact that it had been
established to recover the Marcoses assets and was thus new to the task and had no previous experience to
draw from is clear from the outset of the requests.
On the other hand, the approach taken by the Swiss authorities in cross checking the information
provided in the Philippine request for mutual legal assistance with those provided by the Swiss Banking
Commission, while commendable, proved in practice that the Swiss authorities did not go beyond the
Philippine request. Only the assets mentioned in the request were frozen, and no Swiss investigations were
carried out into the other accounts (Pieth, 2008).
The fact that the repatriation took 17 years to be completed, with several legal challenges in both
countries, shows the added complexity that asset recovery brings to legal proceedings both in the recipient
and victim countries.
Furthermore, no investigation was carried out regarding the responsibility of the financial institutions
that assisting in laundering the assets into Switzerland.
Finally, attention should be drawn to the fact that the Philippine Commission of Audit noted that a
significant portion of the recovered assets in the Agrarian Reform Fund were used to finance excessive,
unnecessary expenses unlikely to benefit the agrarian reform beneficiaries. The Commission of Audit also
informed that monies were also found to have been used to procure items at inflated prices, while many
spending items were not among the approved priority projects.
D.Reference
Chaikin. Tracking the Proceeds of Organised Crime: The Marcos Case (From Australian Institute of
Criminology Conference: Transnational Crime, March 9 and 10, 2000. Available at ncjrs.gov (2000)
Salvioni, S. (2008), ‘Recovering the Proceeds of Corruption: Ferdinand Marcos of the Phillipines’, Pieth,
M. (ed.) Recovering Stolen Assets, Bern: Peter Lang, pp 79-88.
The World Bank (2007), Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities and Action
Plan, Washington, D.C.: The International Bank for Reconstruction and Development/The World Bank,
available at http://www.unodc.org/pdf/Star_Report.pdf.
17
FORFEITURE LAWS AND PROCEDURES
IN THE UNITED STATES OF AMERICA
Jean B. Weld*
I. INTRODUCTION
On the 25th Anniversary of the U.S. Department of Justice’s asset forfeiture programme in 2009, United
States Attorney General Eric Holder – who, as Deputy Attorney General in the 1980s had helped get the
programme off the ground - stressed the success and vitality of the United States’ programme. “When
we look back,” he said, on the last 25 years of the programme, we see a forfeiture regime that has been
transformed from a collection of centuries-old laws designed to fight pirates, enforce customs laws and fight
illegal contraband, into an array of modern law enforcement tools designed to combat 21st century criminals
both at home and abroad.”
Attorney General Holder noted that since 1984, the Department of Justice has deprived criminals of
over $13 billion in net federal forfeiture proceeds. This figure does not include the more recent forfeiture
actions taken by the Department of The Treasury, which maintains a separate asset forfeiture fund. He also
commented that in 2008 alone, over $500 million in assets were forfeited and returned to crime victims as
restitution. In these remarks, our Attorney General hit upon the key concepts and goals underpinning asset
forfeiture regimes anywhere in the world: (1) depriving criminals of their ill-gotten gains in order to disrupt
and dismantle criminal organizations; (2) seizing the instrumentalities of their trade in order to prevent
others from using the infrastructure in place; (3) frustrating the goal underlying most criminal conduct greed for material gain; and (4) attempting to make whole victims of crime.
A law enforcement friend of mine once told me why he liked doing asset forfeiture as part of his cases so
much. He said that the criminals were never happy about the blue lights of the police cars arriving in order
to arrest and handcuff them; but, they knew that jail time was simply a price of doing business which they
often had to pay. However, when the yellow lights of the tow truck drove up to take away their Mercedes or
Cadillac Escalade, this tough, hardened criminal would break down, weeping, because that was the whole
reason that he became a criminal to begin with, and it was more painful to be stripped of his expensive
toys than to go to jail. The moral of that story is: criminals may be lot unhappier about having their assets
taken away than they are about going to prison. We need to emphasize forfeiture in all of our criminal
investigations.
II. HISTORY OF FORFEITURE IN THE UNITED STATES
A.Early History of U.S. Forfeiture Laws
Early American forfeiture laws derived from our country’s British heritage. Forfeiture in old England was
rooted in the principle of the “deodand,” meaning a thing given to God under religious law because it was
used to cause a death. The principle was used primarily for animals causing human death, who were then
“forfeited” to the English King or Queen (who stood in for God), and the royal staff sold the animal to give
the proceeds to the poor. Often the property owner was permitted to remit the value of the property instead
of the animal. This concept of “redemption” became incorporated into the English seizure laws, and also of
the United States.
The deodand was never incorporated into American common law. However, the concept of in rem
proceedings against a “thing” for violating the law was incorporated into American customs and admiralty
laws governing the seizure of ships for crimes of piracy, treason and smuggling in the early days of
the Republic, and during the American Civil War. In 1966, these procedures were formalized in the
* Senior Trial Attorney, International Unit, Asset Forfeiture and Money Laundering Section, Criminal Division, U.S.
Department of Justice. The views expressed in this article are those of the author and do not necessarily reflect the views or
policies of the U.S. Department of Justice.
18
Supplemental Rules for Certain Admiralty and Maritime Claims which apply to our civil forfeiture cases.
This is one reason that the United States has had a non-conviction based forfeiture system from the
beginning.
The seizures of assets involved in illegal smuggling, including drug trafficking and stolen goods, as well
as acts of piracy, were processed by an administrative agency, such as the U.S. Customs Service. Owners
were often allowed to pay an amount determined based on either the violation or the value of the property in
order to redeem the property, but there was generally no right to challenge the seizure in a court of law.
B. Twentieth Century Reforms in U.S. Forfeiture Laws
In 1970, the Congress passed the Comprehensive Drug Abuse Prevention & Control Act to respond to
the “growing menace of drug abuse in the United States.”1 This law contained criminal forfeiture authority
for defendants convicted of conducting a Continuing Criminal Enterprise (“CCE”), 21 U.S.C. § 848, as
well as civil in rem forfeiture authority in 21 U.S.C. § 881. Section 881 cross-referenced the procedures for
seizure and forfeiture contained in the U.S. customs laws, which by that time did provide an opportunity
for property owners to contest the forfeiture in court by filing a claim and cost bond with the seizing
agency. In 1982, a criminal forfeiture provision was enacted as part of the Racketeering Influenced and
Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, which provided for the forfeiture of all property
over which the RICO organization exercised an influence. As criminal forfeiture laws, the CCE and RICO
provisions were not all that effective because they required a conviction for being a “kingpin” of a drug
operation or an organizer of a RICO enterprise. Therefore, in 1984, Congress enacted 21 U.S.C. § 853 as
part of the Comprehensive Forfeiture Act, and provided for forfeiture of all direct and indirect proceeds and
instrumentalities of drug trafficking upon the conviction of any felony drug offence.
Congress and the American public became well aware that forfeiture authority was not only needed in
drug trafficking crimes, but in the burgeoning field of white collar criminal activity, as well. The Money
Laundering Control Act of 1986 added new felony provisions at 18 U.S.C. § 1956 for the laundering of the
proceeds of certain defined “specified unlawful activity,” as well as prohibiting structuring transactions
under 31 U.S.C. § 5324 (with the intent to evade certain reporting requirements). The law also added civil
and criminal forfeiture provisions at 18 U.S.C. §§ 981 and 982 for confiscating the property involved in
money laundering, for foreign drug trafficking crimes, and for structuring transactions. After 1986, federal
forfeiture provisions were added piecemeal as additional federal crimes were added to the criminal code, or
to provisions already criminalized, such as corruption, child pornography, telemarketing, identity crimes,
smuggling counterfeit goods, munitions and arms export violations, bank and bankruptcy fraud, government
programme fraud, and eventually mail and wire fraud, so that there are now over 200 federal and state laws
which are predicate crimes for money laundering and forfeiture.
As the Department of Justice’s use of the forfeiture statutes became more robust, the defence bar began
to fight back in the political arena, leading to the enactment in 2000 of the Civil Asset Forfeiture Reform
Act (“CAFRA”).2 This law in some ways helped U.S. prosecutors because, for the first time, uniform
definitions for concepts like “innocent owner” were established, as well as procedures for when and how
property owners could challenge a forfeiture action. It also expanded the ability to civilly and criminally
forfeit the proceeds of many more U.S. criminal offences. However, certain other “reforms” contained in
CAFRA increased the difficulty level for obtaining forfeitures under U.S. law, including the deletion of the
reverse burden for civil forfeitures. Prior to CAFRA, as in many other countries today, once the prosecutor
demonstrated “probable cause” (i.e., a reasonable ground for belief) that the property was subject to
forfeiture, the burden shifted to the owner to establish its legitimacy. That burden-shifting provision was
taken away in CAFRA. Most seriously, however, CAFRA imposed liability on the U.S. government for an
owner’s attorney fees if the owner successfully litigated a civil forfeiture action and won release of his/her
property. The spectre of this financial liability has, in some instances, chilled the bringing of forfeiture cases.
However, for the most part, U.S. forfeiture law is alive and well, and being employed with vitality and vigour.
1
2
H.R. Rep. No. 1444, 91st Cong., 2d Sess., pt. 1, at 1, reprinted in 1970 U.S. Code Cong. & Admin. News 4566, 4567.
H.R. Rep. 1658, 106th Cong., 2d Sess., Pub. L. 106-185, reprinted in 2000 U.S. Code Cong. & Admin. News.
19
III. OVERVIEW OF CURRENT U.S. FORFEITURE PROCESSES
A.Preference for Administrative Forfeiture
Each year, the majority, generally over 60 percent, of federal forfeitures in the U.S. are obtained through
administrative forfeiture. The reason is that most seizures are not contested. This may seem strange at first,
but when one considers that most of the property seized for forfeiture in the U.S. constitutes large bundles
of cash, it is readily apparent why many seizures are not challenged, particularly if the person from whom
the cash was seized is not arrested or later indicted. No one really wants to come forward to swear that he
or she has an interest in such large amounts of generally quite unexplained U.S. currency. Administrative
forfeiture is not used for real property or businesses. Since 1990, the Customs laws (19 U.S.C. § 1607, et
seq.) have permitted administrative forfeiture of currency and monetary instruments3 without limit, and of
other personal property up to a value of $500,000.
An administrative forfeiture usually begins when a federal law enforcement agency seizes an asset
identified during the course of a criminal investigation.4 The investigation may be a purely federal one,
or may be a task force which also involves state and/or local law enforcement agencies. The asset seizure
must be based upon “probable cause” to believe that the property is subject to forfeiture. Once the asset
is seized, attorneys for the seizing agency are required by CAFRA to send notice to any persons whom the
government has reason to believe may have an interest in the property. Such notice must be sent within 60
days of the seizure if a federal agent seized the property. An administrative forfeiture can also be based upon
an “adoptive seizure,” where a state or local officer has seized the property under the authority of state or
local law, but then transfers it to federal custody for forfeiture. In that case, the federal adopting agency has
90 days after the seizure within which to send notice. Notice is usually sent by Certified Mail or Federal
Express, so that the agency has proof of delivery. The agency must also publish its intent to forfeit for three
successive weeks in a newspaper of general circulation in the area where the property was seized, or via
a government internet publication website. A person receiving notice has 30 days within which to file a
sworn claim with the seizing agency, asking for one of two types of relief: (1) the opportunity to challenge
the forfeiture in court; or (2) remission or mitigation from the forfeiture. In the second option, the property
owner is basically acknowledging the forfeiture, but claiming some mitigating circumstance. If a timely claim
is filed under the first option, the seizing agency refers the matter to the appropriate U.S. Attorney’s Office
to file a judicial forfeiture action in the case. If no one files a claim after the deadlines provided in the notice
and publication expire, the property is summarily forfeited to the United States. Remission or mitigation
may be provided if certain guidelines are met.
B.Civil (Non-Conviction Based) Judicial Forfeiture in the U.S.
In the United States, non-conviction based (“NCB”) forfeiture is known as “civil forfeiture.” This
judicial process may be brought at any time prior to or after criminal charges are filed, or even if criminal
charges are never filed. It is an action filed in court against a property, not against a person.5 Once the U.S.
Attorney’s Office receives a referral from a seizing agency of a seized asset case, that office has 90 days to
either file a civil judicial case or include the seized asset in a criminal indictment and name it for criminal
forfeiture. 18 U.S.C. § 983(a)(3)(A). If a civil case is not filed within those 90 days, the CAFRA “death
penalty” will prevent the United States from ever filing a civil forfeiture case. 18 U.S.C. § 983(a)(3)(B). If
the asset is included in an indictment and the defendant is later acquitted or has a conviction reversed on
appeal, the property cannot be forfeited. For this reason, many U.S. prosecutors choose to file a timely civil
forfeiture action and include the property for criminal forfeiture in an indictment. The law also allows the
prosecutor or the claimant to obtain a “stay” of the civil forfeiture case while a criminal investigation is
3
Monetary instruments include such items as bank checks, traveller’s checks, money orders, and bearer paper, but not bank
or other financial accounts.
4 In the U.S., as in most countries, each agency is responsible for the enforcement of a different category of criminal laws:
for example, the Drug Enforcement Administration (“DEA”) investigates drug crimes; the Federal Bureau of Investigation
(“FBI”) investigates most white collar crime and terrorism; and the Immigration and Customs Enforcement (“ICE”) and
Customs and Border Patrol (“CBP”) of the Department of Homeland Security investigate smuggling violations, intellectual
property violations, human trafficking, passport fraud, drug violations at the border and bulk cash smuggling. Note that not all
federal law enforcement agencies have administrative forfeiture authority.
5 This is why civil forfeiture actions in the U.S. have names like United States v. One Sixth Share , 326 F.3d 36 (1st Cir. 2003)
(because civil forfeiture is an in rem proceeding, the property subject to forfeiture is the defendant); United States v. All Funds
is Account Nos. 747.034/278 , 295 F.3d 23 (D.C. Cir. 2002) (civil forfeiture actions are brought against property, not people).
20
pending. Thus, if the defendant is convicted of an offence which will give rise to the forfeiture, the forfeiture
may be obtained more easily in the criminal case, although it will not be final until all appeals are exhausted.
Because civil forfeiture does not depend upon a conviction, it may be filed at any time. Often the case
will be filed under seal before criminal charges are brought, providing for Warrants of Arrest in Rem to be
issued for the assets which may be served by the law enforcement officers at any time. These warrants are
similar to seizure warrants, and are issued by the presiding judge in the civil forfeiture case. Rule G(8) of
the Supplemental Rules for Certain Admiralty and Maritime Claims (“Rule G(8)”) prescribes the procedures
which must be followed in a civil forfeiture action, which include: (1) notice to all potential claimants, even if
notice was already provided in an administrative process; and (2) full publication notice by either newspaper
or internet. Claimants have 30 days from when they are notified to submit a sworn claim indicating the basis
for asserting an interest in the property (even if a claim was already submitted in an administrative case),
and must, within 20 days after a Claim is filed, file an Answer with the court directly responding to the
allegations in the prosecutor’s judicial complaint. If those deadlines are not met, the prosecutor can seek a
“default” judgment of forfeiture, which will generally be granted, particularly if the claimant is represented
by counsel who blew the deadlines!
If a timely claim is filed, the case will follow the Federal Rules of Civil Procedure in U.S. District
Court. Civil discovery in the nature of interrogatories and depositions may take place. Prior to discovery,
either side may file for a judgment on the pleadings. Following discovery, either side may file for summary
judgment on legal issues supported by uncontested facts. If the case survives this “motions practice,”
either side may request a trial by civil jury of nine persons, of whom a majority must agree on a verdict of
forfeiture in order for the property to be civilly forfeited to the United States. The government has to prove
by a “preponderance of the evidence” that the property is linked to the underlying crime as alleged.6 In
the United States, civil forfeiture is not available for any type of “value-based” forfeiture judgment, money
judgment, or property which is equivalent to the criminally-derived or involved property. Such forfeitures
require that the defendant be bound by in personam jurisdiction. Because the jurisdiction in civil forfeiture is
in rem, U.S. law requires a “nexus” to the crime – either as proceeds or instrumentality, or – in the case of
money laundering – an “involvement in” the crime in some manner.
A Claimant in a civil forfeiture case may take one or both of two approaches to defending a forfeiture: (1)
he or she may challenge the government’s ability to sustain its burden to prove the property has a “nexus”
to the crime; and/or (2) he or she may assert an “innocent owner” status which would deny forfeiture even
if the government proves forfeitability. If the Claimant asserts “innocent owner” status, he or she has the
burden to prove that defence by a “preponderance of the evidence”. A civil forfeiture judgment may be
appealed from the U.S. District Court to the U.S. Court of Appeals of that federal circuit. The appeal is first
heard by a three judge panel; and, the losing party may seek rehearing by the panel or by the entire en banc
panel of the circuit’s appellate judges. If the case involves a novel issue or one which has created a conflict
between any of the eleven federal circuits, then certiorari may be granted by the U.S. Supreme Court.
C.Ease of Criminal Judicial Forfeiture in the U.S.
As previously noted and as in most countries providing for criminal forfeiture, criminal forfeiture in
the United States is dependent upon a conviction of a defendant for a crime which provides a basis for
the forfeiture. For example, if a defendant is charged with securities fraud and income tax evasion, and is
convicted of the tax evasion charges, but not the fraud offences, there can be no forfeiture because U.S. law
does not provide for forfeiture based upon tax evasion. Over the years, United States criminal forfeiture
laws have gradually expanded, and in 2000, CAFRA added 28 U.S.C. § 2461(c) which provides that if any law
provides for civil forfeiture, then the prosecutor may also include a criminal forfeiture for the property in a
criminal indictment. Now prosecutors often seek parallel civil and criminal proceedings against the same
property.
Criminal forfeiture is in personam , against the defendant. One drawback to this type of forfeiture
under U.S. law is that only property in which the defendant has a true interest may be forfeited criminally.
Property which is held by “nominees” or straw owners on behalf of the defendant may be forfeited
6
The “preponderance of the evidence” standard is also known in the United States as “more likely than not” and abroad is
frequently referred to as a “balancing of the probabilities.”
21
criminally, but the government must prove that the defendant is the true owner. Any property which is truly
owned by other parties who are not convicted as part of the criminal case, such as a spouse or other family
member or business partners, may not be forfeited criminally. Such property may be forfeited only in an in
rem civil action.
The greatest advantage which criminal forfeiture holds for prosecutors in the U.S. is that it affords
the possibility of a money judgment for the amount of the proceeds of the crime, and property involved
in the crime. If that property – for example, the direct proceeds obtained by a fraudulent scheme or the
mansion which was used to store narcotics – is no longer owned by or in the possession of the defendant,
the government can get a judgment against the defendant for an amount equivalent to the value of that
property. Rule 32.2 of the Federal Rules of Criminal Procedure permits the government to seek forfeiture
of “substitute assets” belonging to the defendant. The procedure for obtaining criminal forfeiture is a
bifurcated process. First, the defendant must be found guilty by proof “beyond a reasonable doubt” by either
a judge (if the defendant elects) or by a unanimous twelve person jury. Or the defendant may decide to plead
guilty to the charged crimes. Following the entry of a guilty verdict or plea which will support forfeiture, the
judge or jury will consider whether the government has shown the required “nexus” between the property
named for forfeiture and the crime of conviction. If forfeiture is ordered, a Preliminary Order of Forfeiture
is entered against the defendant, which becomes final at sentencing. This order may be appealed, along with
the defendant’s convictions. Appeal is taken to the court of appeals for the relevant circuit, and beyond that
to the U.S. Supreme Court if the issues are sufficiently important.
The Preliminary Order of Forfeiture must be served on anyone whom the prosecutor has reason to
believe may have an interest in the property, and must be published unless it is a money judgment alone.
Any interests asserted by third parties are heard in a separate part of the criminal case called an “ancillary
proceeding,” which is held after a guilty verdict or plea against the defendant. To the extent that any third
party proves by a preponderance of the evidence that he or she has an interest in the forfeited property
which is superior to the defendant’s, the court must carve out that interest from the final order of forfeiture.
D.Strategy of Using Criminal vs. Civil Forfeiture Processes
1. Pros and Cons of Civil Forfeiture
(i) Pro: Lower standard of proof of the crime and no need for conviction
The entire case in a civil forfeiture proceeding need be proven only by a “preponderance of the evidence”
to a majority of a jury of nine. Thus, if there are proof problems which may make it difficult to prove the
criminal conduct beyond a reasonable doubt to a unanimous jury of twelve, a civil proceeding may be the
best venue for the forfeiture. If there are other impediments to obtaining a criminal conviction, such as
the absence, death or incapacity of the defendant, a civil forfeiture proceeding will permit the forfeiture of
the criminally linked property. This mechanism is exceedingly important in seizures of property, such as
currency, where often the prosecutor cannot prove the exact crime which may have generated the unusual
amount of cash, but has some evidence of criminal activity – such as a canine alert or ion scan7 positive
hit for the presence of narcotic solvent or drugs on the money, and perhaps previous criminal activity by
the property owner which may explain the cash. Because of the lower burden of proof, forfeiture may be
available in these cases. Also, if a criminal conviction is reversed on appeal, a civil forfeiture proceeding
(which may have been stayed during the course of the criminal case) may rescue the forfeiture.
(ii) Pro: Property belonging to non-defendant parties may be forfeited
In a civil case, the prosecutor does not have to prove that the property owner committed or participated
in the commission of the underlying criminal activity. As long as there is proof that the property is
sufficiently linked to a crime, and the owner cannot satisfy the test for “innocent owner” by a preponderance
of the evidence, the property may be forfeited.
The “innocent owner” definition in the U.S. code depends upon when the owner acquired an interest
7 An ion scan is a portable, state-of–the-art mass spectrometry device which ionizes chemical compounds, generating charged
molecules whose mass-to-charge ratios can be measured. Ion scans are used to detect the presence of explosives, drugs and
drug residue in parts per billion. Scans can detect the particulate residue of over twelve types of narcotic drugs. In addition to
scanning currency for seizure, ion scans are used to inspect cargo containers and luggage, to identify hidden compartments,
and for passenger security at many airports.
22
in the property. For persons having an interest in the property at the time the crime was committed, the
claimant must show that he or she did not know of the criminal conduct or upon learning of it “did all
that reasonably could be expected under the circumstances to terminate such use of the property.”8 For
property which is acquired after the crime occurred (for example, proceeds of the crime), he or she must
prove by a preponderance that he or she : (1) was a bona fide purchaser for value; and (2) did not know or
was reasonably without cause to believe that the property was subject to forfeiture. 18 U.S.C. § 983(d)(A).
A hardship provision is included which guarantees that third parties will retain a minimum shelter needed
for survival as long as the property was not criminal proceeds. Only a bona fide purchaser for value without
notice or knowledge can defeat a civil forfeiture of criminal proceeds.
(iii) Cons: Deadlines, duplicated resources, and liability for attorney’s fees
The CAFRA “death penalty” mentioned earlier means that if any of the filing deadlines are missed for
a seizing agency giving notice, and the prosecutor filing an action, a civil forfeiture action is forever barred.
Criminal forfeitures are not subject to any deadlines. If a stay is not granted on the civil case, the discovery
and motions practice can create not only extra work for the prosecutor’s office, but also potentially interfere
with the criminal prosecution which is proceeding along a different time frame, under different rules of
court procedure. Finally, as noted before, if a claimant succeeds at having property released in a civil judicial
proceeding, the government may have to pay the claimant’s reasonable attorney’s fee.
2. Pros and Cons of Criminal Forfeiture
(i) Pro: Forfeiture is addressed as part of the same proceeding as the criminal offence
Successfully obtaining forfeiture of all of the property sought for forfeiture in the criminal case saves an
enormous amount of prosecutorial and judicial resources. Quite often, the court in the civil case will grant
a “stay” while the criminal case proceeds. If the defendant reaches a point in the criminal prosecution of
entering into an agreement to plead guilty to any of the criminal charges, the prosecutor will obtain – as part
of that agreement – an agreement which addresses all of the assets sought for forfeiture. If a plea agreement
is not reached and the case proceeds to trial, a criminal forfeiture judgment (including a money judgment)
may be obtained based upon the same evidence as produced in the criminal case. Thus, there is no need for
extra witnesses, or another court proceeding or another trial in order to obtain the forfeiture. In drug cases,
21 U.S.C. § 853(d) provides a presumption that any unexplained wealth accumulated during the course of a
drug crime (which can include a multiple-year conspiracy), combined with a lack of legitimate income may
be considered forfeitable drug proceeds.
(ii) Pro: A money judgment forfeiture is available and no attorney fees
Most significantly, if the property generated from the crime or used to commit the crime is no longer
available for forfeiture, the prosecutor may request that the judge or jury enter a money judgment which
may be collected against the untainted assets belonging to the defendant.
This money judgment is available for collection for years after the criminal case concludes. Finally, if
criminal forfeiture is not successful – either because the defendant is acquitted or because a third party
succeeds in obtaining release of the property – the government is not liable for anyone’s attorney’s fees.
(iii)Con: Only the defendant’s property may be forfeited
Because of this limitation, any legally recognized superior interest by a third party – even if that person
knew of the criminal nature of the property – must be forfeited in a parallel civil forfeiture case, or it cannot
be forfeited. Thus, often both proceedings are required in order to obtain the maximum forfeiture potential
under U.S. law.
IV. PROPERTY SUBJECT TO FORFEITURE UNDER U.S. LAW
A.Proceeds Forfeitures
Although the U.S. forfeiture system provides robust measures which may be used to deprive criminals
of their ill-gotten gains, and U.S. prosecutors aggressively use this system to its best advantage, the truth
is that it is overly complicated even for American prosecutors and judges. Most countries have enacted
generic asset forfeiture laws, such as the Proceeds of Crime Acts (“POCAs”) found in many Commonwealth
8
18 U.S.C. § 983(d)(2)(B) provides that such action may include giving notice to the police, or doing all that was possible to
prohibit the criminal from using the premises.
23
countries and threshold crimes forfeiture systems enacted in many civil law countries. In the United States,
property which can be forfeited either civilly or criminally varies greatly from one offense to another. For
some crimes, only the proceeds can be forfeited; for others, only instrumentalities and for others, property
“involved in” the offense. There are still many felony crimes for which forfeiture is not provided. Yet, all
property owned by individuals or organizations involved in any crime related to terrorism may be forfeited.
18 U.S.C. § 981(a)(1)(G). The Department of Justice has attempted several times to obtain passage of an allcrimes approach with the introduction of Proceeds of Crime Act legislation. However, the bill has generally
been dead-on-arrival in Congress because there is no apparent urgent need to obtain such a complete
overhaul and because of general political ambivalence toward forfeiture. So, we work with our hodgepodge of
statutes the best we can.
The closest to an “all crimes” approach to forfeiture of proceeds in the United States is 18 U.S.C.
§ 981(a)(1)(C) which authorizes the forfeiture of the proceeds of over 200 state and federal offences. Most of
these are subject to forfeiture because they are “specified unlawful activities” (“SUAs”) within the definition
of 18 U.S.C. § 1956(c)(7). All of the UN Convention required crimes are included, such as terrorist financing,
money laundering, arms smuggling, drug crimes, most varieties of fraud (except tax fraud), corruption,
human trafficking, smuggling, counterfeiting, securities violations, violent crimes, and environmental
crimes. Others are linked through cross-referencing the RICO law (18 U.S.C. § 1961) to state crimes such as
gambling, arson, kidnapping, murder, obscenity and nearly all types of theft.
U.S. courts have regarded “proceeds” as including any property, real or personal, tangible or intangible,
which would not have been obtained “but for” the commission of the crime. The civil forfeiture law defines
“proceeds” in several ways: (1) in cases involving illegal goods, illegal services, unlawful activities, and
telemarketing and health care fraud schemes, the term “proceeds” means property of any kind obtained
directly or indirectly, as the result of the commission of the offence giving rise to forfeiture, and any
property traceable thereto, and is not limited to the net gain or profit realized from the offence; (2) in cases
involving lawful goods or lawful services that are sold or provided in an illegal manner, “proceeds” includes
the amount of money acquired through the illegal transactions resulting in the forfeiture, less the direct
costs incurred in providing the goods or services; and (3) in cases involving bank or other financial fraud,
“proceeds” for forfeiture purposes excludes any amount of fraudulent obligation which was repaid.
Under U.S. law, “proceeds” will also include any increase in value which has occurred to property
generated from criminal activity. For example, if a house bought with drug proceeds increases in value 100
percent in ten years, the entire house is subject to forfeiture. “Proceeds” may also include the value of
services and benefits received from criminal activity, such as human trafficking or forced labour, even if the
defendant does not actually receive payment for those services. “Proceeds” forfeitures are strong medicine;
however, they do require that the police and prosecutors trace the property obtained from the criminal
activity, and in today’s era of transnational criminal activity, that endeavour can be difficult, if not impossible,
in many cases.
B.Facilitating Property Forfeitures
“Facilitating property” is considered to be any property which makes the criminal activity more likely
to occur. This term is the United States’ version of an “instrumentalities” of crime confiscation. Criminal
and civil forfeiture of facilitating property has long been permitted in drug cases. Most of the forfeitures
permitted under the more generic criminal forfeiture law, 18 U.S.C. § 982, and civil forfeiture law, 18 U.S.C.
§ 981, apply only to criminal proceeds. Immigration, telemarketing, identity theft, child pornography and
alien smuggling are exceptions.
CAFRA added the requirement that in “facilitating property forfeitures”, the prosecutor must prove, by
a preponderance of the evidence, that the property had a “substantial connection” to the underlying offence.
This test has been held to prohibit forfeiture of an entire residence based upon one telephone call from
the property, or a vehicle which is used to transport someone to a meeting to discuss the crime. Such uses
would be considered “incidental” and not “substantially connected” to the criminal activity.
C.Property “Involved In” Money Laundering
U.S. forfeiture law allows the criminal or civil forfeiture of any property which is “involved in” a money
24
laundering offence. 18 U.S.C. §§ 981(a)(1)(A) and 982(a)(1). This concept reaches further than “facilitating”
or instrumentality property primarily because it allows the prosecutor to forfeit also untainted property
which has been commingled with the criminally-related property. For example, if someone uses criminal
proceeds to purchase real property in the name of a nominee family member, but half of the purchase price is
paid for with legitimate funds, the entire property becomes subject to forfeiture. If tainted funds are used to
purchase a business by one partner, but another partner uses untainted funds, the entire business becomes
subject to forfeiture if the business partner cannot establish that he was a bona fide purchaser for value. The
money laundering forfeiture provision is a popular one among U.S. prosecutors.
The primary limitation to its use is the assertion of the 8th Amendment defence of “excessive fines
and penalties.” The 8th Amendment to the U.S. Constitution prohibits the government from imposing an
excessive fine or penalty. In Austin v. United States , 509 U.S. 602, 622 (1993), the Supreme Court applied
the 8th Amendment to civil forfeiture cases, determining that such forfeitures must be limited to property
which is, in some way, “proportional” to the underlying crime committed. Such a measure is often difficult.
Many courts have applied the test of comparing the value of the property sought to be forfeited to the
maximum fine which Congress authorized for the underlying crime; however, this has not been adopted as
a conclusive measure, and courts generally look to the entire circumstances of a case to determine what is
grossly disproportional to the crime, and what is not, for forfeiture purposes.
V. PROVISIONAL RESTRAINT OF PROPERTY UNDER U.S. LAW
Prosecutors in the U.S. must generally determine whether they will seek to seize or restrain assets
prior to the initiation of either a criminal or civil forfeiture proceeding. A seizure always precedes an
administrative forfeiture proceeding. The law recognizes the obvious principle that if property can
effectively be restrained during the pendency of a forfeiture case, restraint is generally preferable to an
actual seizure, which often requires significant expenditure of maintenance and storage fees.
A.Restraining Orders
U.S. laws provide a three-stage procedure for obtaining restraining orders against assets sought for
either civil or criminal forfeiture. Prior to the initiation of criminal charges, a temporary restraining order
(“TRO”) may be obtained for 14 days upon an ex parte application and without prior notice to anyone with
an interest in the property. The prosecutor must establish, in the application that there is probable cause to
believe that the property is subject to forfeiture and that providing notice would jeopardize the availability of
the property. The 14 day period may be extended upon good cause shown, permitting serial TRO’s until law
enforcement agents have completed their “take down” of a criminal operation. Prior to the expiration of the
initial TRO, the prosecutor must serve the order upon any potential parties in interest.
After affected parties have received notice and been given an opportunity to request a hearing, the
prosecutor must demonstrate that: (1) there is a substantial probability that the U.S. will prevail on
forfeiture and that failure to enter the order could result in the property’s becoming unavailable; and (2) the
need to preserve the property outweighs hardship to the affected parties. The court may then grant a 90-day
restraining order, which can be extended upon good cause.
Once a criminal indictment or a civil forfeiture complaint is filed, the prosecutor may obtain a permanent
pre-trial restraining order. The reason for this provision is that in either case, an independent entity has
found probable cause to believe that the property will be forfeited, thus satisfying possible judicial concerns
about violations of the U.S. Constitution’s 4th Amendment protections against unreasonable searches and
seizures. In a civil forfeiture, the judge makes that determination based on the civil complaint; in a criminal
forfeiture, the grand jury makes the determination based upon allegations in the indictment. Except for a
request to pay attorney’s fees (which is not permitted in the U.S. from tainted property), no one is entitled
to a hearing on a restraining order issued after an indictment or civil forfeiture complaint has been filed.
B.Seizure Warrants
Civil and criminal seizure warrants are both available, with slightly different standards. A civil seizure
warrant may be issued by the court upon of probable cause to believe the property is subject to forfeiture
(18 U.S.C. § 981(b)), which is usually accomplished by an affidavit sworn to by a law enforcement officer.
This seizure warrant is used for most administrative seizures.
25
A criminal seizure warrant requires not only a showing of probable cause for forfeiture, but also that a
restraining order is insufficient to maintain the property (or its value) for forfeiture. This provision confirms
that restraint during the course of a forfeiture proceeding is preferable; but if the government learns that
property is being transferred, damaged, or destroyed, a criminal seizure warrant would be available.
C.Management of Restrained or Seized Assets
Though somewhat beyond the scope of this paper, issues of asset management should be considered
when deciding whether and when to restrain or seize property subject to forfeiture. For example, most
vehicles and other modes of transportation, such as boats, motorcycles, and recreational vehicles, are
generally seized because of the depreciation in their value through continued use. Prior to seizure, a
computation should be undertaken as to whether the overall costs of seizing, storing and maintaining the
asset will be less than the anticipated sales price.
Real property and businesses present special challenges. A net equity computation of real property is
essential, taking into account any liens or mortgages upon the property. As for business forfeitures, the U.S.
Marshal’s Service has a team of professionals who advise prosecutors on whether – and how best to – seek
forfeiture of a business. U.S. law prohibits the seizure of real property before a final forfeiture judgment
unless the prosecutor shows the attempted sale, destruction or unlawful use of the property; however, the
filing of a lis pendens in the public land records office is permitted, as is a restraining order setting forth
certain conditions for continued occupancy of the property by its owners. Likewise, restraining orders are
most useful in connection with preserving the value of most businesses until a final judgment is entered. If
seizure is required, a business manager or receiver can be appointed by the court.
Most financial accounts should generally be simply restrained pending the outcome of the proceeding.
Some investment accounts may need to be liquidated or converted with court approval to maintain their
value.
D.Provisional Restraint of Assets Overseas
U.S. courts have extraterritorial jurisdiction over assets which are named in either a civil forfeiture
action or a criminal indictment. The court may order a criminal defendant to “repatriate” any property
named for criminal forfeiture. 18 U.S.C. §853(e)(4). Penalties for a failure to comply with a repatriation
order can include a finding of contempt and/or a sentencing enhancement to the defendant for obstruction
of justice. Civil forfeiture provisions do not have a repatriation option, but the court can take “any action to
seize, secure . . .” the availability of property subject to civil forfeiture, which would include ordering any
claimants to the case to take action with respect to foreign assets.9
VI. USING FORFEITURE FOR VICTIM RESTITUTION
Restitution to crime victims is mandatory under United States sentencing laws. Because victims have a
statutory right to restitution, prosecutors must use all tools available to obtain assets from the defendant to
attempt to make victims whole. Experience has shown that unless assets are restrained prior to a conviction
at the conclusion of a criminal case, nothing will be left to satisfy an order of restitution to victims.
Restitution has become a prominent objective in the Department of Justice’s Asset Forfeiture Strategic
Plan for the past several years. Although U.S. law permits a double recovery for forfeiture and restitution,
most defendants lack the assets to satisfy both. Thus, the law permits restitution to be applied to net
forfeited assets. If a restitution order has been entered in a criminal case, the prosecutor will simply refer
the matter to DOJ’s Asset Forfeiture and Money Laundering Section (“AFMLS”), along with a report
indicating that the listed victims have been identified and validated, and are the only ones known. This
process is called “restoration” of the forfeited property, and is the simplest procedure, whether property has
been forfeited criminally or civilly. An older process, called “remission or mitigation” of the forfeiture, is a
more involved process, also conducted by AFMLS, and is frequently used in conjunction with civil forfeiture
where there is no restitution order.
9
One caveat our prosecutors must keep in mind is that if they have made an MLAT request to a foreign country asking the
government to restrain assets, that restraint must be lifted before a repatriation order can be complied with.
26
VII. ASSET LIQUIDATION IN THE UNITED STATES
Because the United States has two dedicated Asset Forfeiture Funds, we also have two agencies which
manage and liquidate the assets designated for each Fund. The U.S. Marshal’s Service (“USMS”) is the
“custodian” for the Department of Justice Assets Forfeiture Fund (“DOJ AFF”), and the Treasury Executive
Office for Asset Forfeiture (“TEOAF”) contracts with the custodians of the assets to be deposited to the
Treasury Forfeiture Fund. Since 1999, the USMS has used an internet service for auctioning most of the
assets for which it is responsible to liquidate. This site, www.Bid4Assets.com, has been successful in netting
higher net proceeds for the USMS than in pre-internet years. Assets as diverse as high-end vehicles,
homes, commercial and agricultural real properties, timeshare condominium units, recreational watercraft,
aircraft, jewellery, artwork, and financial instruments are all sold on the internet site.
For the past several years, deposits to the DOJ AFF have exceeded $1,000,000,000 ($1 billion) each year.
For 2009, total deposits exceeded $1.4 billion. The Treasury Fund, which was established in 1993, received
$527,000,000 ($527 million) deposits in 2009. All forfeited proceeds and the proceeds of the sales of forfeited
property are deposited to one of these Funds. The Funds are managed to provide for satisfying expenditures
of the forfeiture proceedings – such as appraisals, title searches – and also to pay outstanding liens, and
other expenses in need of resolution before liquidation can occur. International sharing, where assistance
from our foreign partners is recognized, and “equitable sharing,” for our domestic law enforcement partners,
are also paid out of the Funds. Both types of sharing are based on the level and type of assistance provided to
an investigation.
VIII. CONCLUSION
The United States has a robust and effective asset forfeiture legal regime. In the over 25 years of the
Department of Justice’s forfeiture programme, much has been accomplished but much remains to be
done, including legislative changes to simplify the process and the descriptions of property which may be
forfeited. Because of the nature of the United States’ democratic political system, these changes take time.
Meanwhile, our law enforcement community will continue to assist our international partners in the most
effective ways we can under our far from perfect, but quite powerful, forfeiture system.
27
INTERNATIONAL CO-OPERATION IN THE RECOVERY
OF CRIMINAL ASSETS
Jean B. Weld
I. INTRODUCTION
On 25 July of this year, U.S. Attorney General Eric Holder, in remarks to the African Union in
Kampala, Uganda, announced a new Department of Justice initiative “to combat and prevent the costs and
consequences of public corruption.” In so doing, he noted the World Bank’s estimate that out of a world
economy of 30 trillion dollars per year, at least one trillion dollars is spent on bribes. The project, known as
the Kleptocracy Asset Recovery Initiative, will dedicate a team of prosecutors to combat “large-scale foreign
official corruption and recovering public funds for their intended – and proper – use: for the people of our
nations.” Attorney General Holder promised that the U.S. will continue to work with all governments to
strengthen the judicial sectors throughout the global community in order to help stem the scourge of grand
corruption. President Obama approved the Kleptocracy Initiative as part of a “new standard of transparency”
highlighted by the recent enactment of financial reform legislation in the U.S.
Recognizing that this conference is dedicated to general issues of asset recovery, with an emphasis on
corruption and organized crime, this paper will explore tools which investigators and prosecutors currently
have available to seek assistance from other countries in criminal matters. It will also address more
specific issues involved in tracing, identifying, restraining, and eventually confiscating the proceeds and
instrumentalities of transnational crime and corruption.
II. OVERVIEW OF GLOBAL TOOLS FOR MUTUAL LEGAL CO-OPERATION
A.Formal and Informal Mechanisms for Assistance
Historically, governments have relied primarily on formal requests from other governments for legal
assistance in criminal matters. For the most part, governments must seek such assistance through one of
four possible modes: (1) an international convention or agreement providing for mutual legal assistance
(“MLA”); (2) a bilateral mutual legal assistance treaty (“MLAT”); (3) domestic legislation permitting
international co-operation; or (4) a promise of reciprocity through diplomatic channels (often called a “letter
rogatory”).
A letter rogatory was the traditional means for obtaining such assistance, and consists of a formal request
from a court in one country to a court in another country, generally for evidence or service of process. These
requests are transmitted through diplomatic channels of each country in order to be received by the foreign
court, and a certificate of service or evidence must be returned in the same manner, creating a slow process
for obtaining assistance.1 Countries using letters rogatory to obtain evidence in criminal investigations,
for example the identification of assets, may use the same vehicle for requesting restraint of those assets.
However, use of a bilateral or multilateral agreement will generally result in a more expeditious process
because such requests are generally handled directly between the central authorities of each country.
* Senior Trial Attorney, International Unit, Asset Forfeiture and Money Laundering Section, Criminal Division, U.S.
1 Several Conventions signed in the Hague have supplanted the need for letters rogatory, but only in civil and commercial
matters: the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters
(“Hague Service Convention”) signed on 15 November 1965; and (2) the Convention on the Taking of Evidence Abroad
in Civil or Commercial Matters (“Hague Evidence Convention”) signed on 18 March 1970. Neither Convention permits
assistance in criminal matters, however.
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1. Bilateral Mutual Legal Assistance Treaties (MLATs)
The most common formal procedure used by the United States to request or provide legal assistance in
criminal matters is through a formal bilateral MLAT. An MLAT is a formal agreement, generally negotiated
and approved by the ministries of justice and foreign ministries of both countries, which provides for the
gathering of information in connection with the enforcement of the criminal laws of both countries. The
United States currently has bilateral mutual legal assistance treaties with over 70 other countries and
one with the European Union. Most of these MLAT agreements have provisions governing mutual legal
assistance in confiscation or forfeiture matters as included in the enforcement of criminal laws. These
provisions obligate parties to provide to each other formal assistance in the nature of restraint of property
which is subject to confiscation, and to assist in the eventual confiscation of the property. Generally, an
MLAT agreement will require a form of dual criminality, sometimes called dual forfeitability, for assistance
to be available – in other words, that the conduct underlying the confiscation in Country A also subject the
property located in Country B to forfeiture had the conduct occurred in Country B.2 MLAT’s are often used
to obtain financial records and to obtain search and seizure warrants or orders in a foreign country.
2. United Nations Conventions and Other Multilateral Treaties
For foreign partners with whom we do not have an MLAT, the U.S. will use the appropriate United
Nations Convention, or, if preferred by the other country, a multilateral treaty such as the Inter-American
Convention on Mutual Assistance in Criminal Matters, which has been in effect since 1992. Depending
upon the relationship and the willingness of the other country, these Conventions may provide results as
satisfactory as an MLAT.3
3. Informal Channels of Assistance
Often, near the beginning of an investigation, coercive powers are not yet needed, and some form
of “informal assistance” may suffice to provide information helpful to the investigation. This term is
generally used for assistance through channels outside of the formal MLA channels, often through direct
communications between counterparts such as financial intelligence units (“FIU’s”), police, prosecutors
or investigating magistrates sharing intelligence or data which is legally available to that agency through
domestic databases.
The Camden Assets Recovery Inter-Agency Network (“CARIN”) is one such example of “an informal
network of contacts and a co-operative group in all aspects of tackling the proceeds of crime.” See http://
www.europol.europa.eu/publications/Camden_Assets_Recovery_Inter-Agency_Network/CARIN_Europol.
pdf. CARIN’s membership consists of law enforcement and judicial authorities from the European Union
and invited jurisdictions, and observer status is granted to several others. This organization began in
October 2002 with a conference of the Criminal Assets Bureau of Ireland and Europol held at the Camden
Court Hotel in Dublin, Ireland. CARIN has become an effective law enforcement tool used among member
countries for the expedient sharing of information and use of multiple tools available for each jurisdiction to
trace, freeze or seize, and confiscate the assets of international criminal organizations.
Such informal assistance can be exceedingly helpful to the process of asset recovery, particularly in the
initial identification of other names used by the criminal targets, associates, and properties in the names of
these individuals. Less formal contacts can often be the starting point for later formal requests. Informal
assistance creates a dialogue which can produce invaluable information, but formal MLA will likely be
needed to obtain documents and witness statement to be used in court as evidence. Following the informal
assistance, if permitted, a draft of the formal MLA request can be sent to the other country to insure that
the prerequisites are met. This practice can hopefully avoid time-consuming delays resulting from rejections
of the request for failure to comply with treaty requirements.
2
Such a provision often eliminates the ability to provide formal legal assistance in criminal tax matters because many
countries, including the United States, do not provide for forfeiture or confiscation for tax crimes.
3 For example, because of the absence of a bilateral MLAT with Colombia and the Dominican Republic, the U.S. routinely uses
the Vienna and Palermo Conventions, with excellent results.
29
B. Egmont Group of Financial Intelligence Units
What is now known globally as the Egmont Group began in 1995, at a meeting of heads of FIUs at the
Egmont Arenberg Palace in Brussels.4 The Group now includes 121 member countries, and meets on a
regular basis throughout the world to improve methods of international co-operation, especially in the area
of information exchange through its Egmont Secure Web (“ESW”), which only member FIUs are permitted
to access. The assistance which member FIUs can render to each other through Egmont varies, and is
dependent upon domestic law. The primary function of many FIUs is the collection and storage in a database
of all suspicious activity reports (“SARs”)5 generated by entities within country which are required to file
them; others actually perform analysis of the SARs and prepare reports; and, still other FIUs have their
own investigators and prosecutors. Generally, an Egmont member receiving a request for information from
another member will share, often under the terms of a Memorandum of Understanding (“MOU”) which
provides for confidentiality and assurances of reciprocity, whatever information that the requesting FIU
would be permitted to share.
The United States’ FIU, known as FinCEN (the Financial Crimes Enforcement Network) is celebrating
its 20th year in operation. FinCen has an International Programs Division dedicated to strengthening support
among its international partners. This Division receives, processes, and responds to requests from foreign
FIUs and acts as a conduit for requests from U.S. law enforcement to foreign FIUs. Historically, FinCEN has
been legally empowered to respond to foreign requests by providing only the information contained in its
domestic database – i.e., SARs, Currency and Monetary Instrument Reports, Currency Transaction Reports
and other documents required by the United States Bank Secrecy Act (“BSA”).
Just this year, in response to our obligations under the US/EU MLAT, FinCEN amended its regulations
to permit foreign law enforcement to request, through U.S. law enforcement attachés, account information
from U.S. banks in certain defined cases. Initially, this power was granted to FinCEN under Section 314(a)
of the USA PATRIOT Act of 2001. Currently, U.S. investigators may submit a Section 314(a) request in
connection with an investigation of terrorism or significant money laundering, and FinCEN will contact the
more than 25,000 U.S. financial institutions to identify accounts and transactions of the suspected targets.
Every two weeks, FinCEN sends the 314(a) requests via a secure Internet website. The institutions must
query their records for data matches during the preceding 12 months and transactions during the preceding
six months, and have two weeks to respond if a match is identified. FinCEN bundles the responses and
sends them to the requesting agency. As noted, FinCEN is rolling out this ability on a global level, region by
region. By running this scan of U.S. financial institutions for a foreign law enforcement agency, FinCEN will
be able to provide even more helpful information to foreign investigations than it does at the present.
C.United Nations Conventions
1. General Principles
Since its establishment in 1945, the United Nations has provided a global venue for its Member
States to convene and address matters of critical importance to the world’s humanitarian and economic
conditions. With 192 current Member States, the UN has generated many multilateral treaties and protocols
(agreements ancillary to treaties) which address issues from nuclear destruction to drug trafficking, money
laundering, terrorist financing, and corruption.
Depending on constitutional requirements, countries generally have one of two options for implementing
their obligations once they have signed and ratified a multilateral agreement such as a UN treaty.6 Some
countries must transpose the treaty provisions into domestic law before the treaty has legal force in that
country. For others, the mere act of ratification makes the treaty provisions self-executing. In these latter
jurisdictions, assistance may be granted directly based on the convention provisions.
4
An FIU, for Egmont purposes, is a central, national agency responsible for receiving (and, as permitted, requesting),
analysing and disseminating to competent authorities, disclosures of financial information: (i) concerning suspected proceeds
of crime and potential financing of terrorism; or (ii) required by national legislation or regulation, in order to counter money
laundering and terrorism financing. http://www.egmontgroup.org/about
5 For purposes of this paper, the term “SAR” will be used to cover all categories of suspicious financial transaction reporting.
6 Hans Kelsen, Principles of International Law (New Jersey: the Lawbook Exchange, 2003), p. 195 (f).
30
2. Vienna Convention (1988)
The UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (“Vienna
Convention”) was adopted in 1988, and provides the basis for mutual assistance in drug trafficking
cases. The Convention has been ratified by at least 175 countries, and most countries which provide
mutual legal assistance have little difficulty providing assistance in drug cases. Article 5 of the Vienna
Convention requires each State Party to enact domestic confiscation and freezing provisions for proceeds,
instrumentalities and intended instrumentalities of drug offences, and to provide international assistance
in these areas. The same article requires that financial records pertaining to such offenses be available to
domestic and foreign investigators despite bank secrecy provisions.
Finally, Article 5(a) provides that “proceeds or property confiscated by a Party . . . shall be disposed of by
that Party according to its domestic law and administrative procedures,” and Article 5(b)(ii) encourages the
sharing of such confiscated assets with other Parties “on a regular or case-by-case basis” in accordance with
domestic law or any applicable bilateral or multilateral agreements. Thus, although the Vienna Convention
requires the provision of legal assistance such as evidence to other countries, and requires each State Party
to provide for the confiscation of drug-related assets, it does not require that those assets be shared with
other countries. 7
3. UN Convention against Transnational Organized Crime (1999)
The UN Convention against Transnational Organized Crime (“UNTOC”) was signed in Palermo, Italy, in
December 2000, and provides for a global response to combat serious international criminal activity, such as
the trafficking in persons, arms and ammunition, and money laundering. This Convention, which has been
ratified by at least 147 countries, also obligates States Parties to adopt domestic regimes to confiscate the
proceeds, instrumentalities, and intended instrumentalities of offences covered by the Convention. These
offences include certain specified crimes such as an organized criminal group, money laundering, corruption,
obstruction of justice, and “serious crimes” which are transnational and punishable by imprisonment of over
four years. The Convention also requires States Parties to criminalize the laundering of the proceeds of
certain listed predicate crimes.
Article 13 of UNTOC governs the obligations of States Parties to each other in confiscation matters. It
requires that the requested country “take measures to identify, trace and freeze or seize proceeds of crime”
as well as instrumentalities “for the purpose of eventual confiscation to be ordered either by the requesting
State Party or . . . by the requested State Party.” Such procedures must not prejudice the rights of “bona fide
third parties.” Like the Vienna Convention, Article 14 provides that confiscated assets be disposed of under
domestic law, but that “if so requested” a State Party should “give priority consideration to returning the
confiscated proceeds of crime or property to the requesting State Party so that it can give compensation to
the victims of the crime or return such proceeds of crime or property to their legitimate owners.” Sharing is
encouraged, as well as contributions to intergovernmental bodies specializing in the fight against organized
crime. Thus, under UNTOC, use of confiscated assets as restitution to victims of crime is a priority.
4. UN Convention against Corruption (2005)
The UN Convention against Corruption (“UNCAC”), signed in Merida, Mexico, in December 2003,
provides an entirely different, and mandatory, scheme for the recovery and return of corruption proceeds.
In further discussing the G8 and global initiative against grand corruption, this paper will cover these
provisions in greater detail in a subsequent section. The UNCAC took effect in 2005, and has been ratified
by over 137 States Parties.
7
Like the Vienna Convention, Article 8 of the UN Convention for the Suppression of Financing of International Terrorism
(“Terrorist Financing Convention”), signed in 1999 and ratified by 167 States Parties, requires each State Party to enact
provisions for the identification, detection, freezing or seizure, and forfeiture of “any funds used or allocated for the purpose
of committing” any of the offenses covered by the Convention. Sharing of forfeited proceeds is again recommended, but not
mandated.
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III. INTERNATIONAL CO-OPERATION LAWS IN THE U.S.
A.Assistance Available Under U.S. Law for the United States to Assist Foreign Countries to Restrain
and Forfeit Property Located in the United States
Like most countries, the United States may respond to an MLA request to provide confiscation
assistance by either filing its own domestic forfeiture action or by enforcing orders undertaken by the
requesting country. The domestic action could be either a civil in rem forfeiture action, or a criminal
forfeiture. Generally, the U.S. case would be a civil forfeiture, particularly if the criminal case is being
prosecuted in the foreign country or not being prosecuted at all.
The United States’ Central Authority for receiving MLA requests is the Department of Justice, Criminal
Division, Office of International Affairs (“OIA”). OIA will receive the MLA request, and submit it for
execution by one or more of the 93 United States Attorney’s Offices (“USAOs”) or another section of the
Criminal Division. If the request is for records or other evidence, it will normally go to a USAO to obtain
a Commissioner’s Subpoena from a U.S. district court, which will be served on the party from whom the
information is sought. If the request is to freeze assets, it will normally go to the Asset Forfeiture Money
Laundering Section (“AFMLS”) of the Criminal Division. AFMLS has the lead responsibility for obtaining
restraints, seizures, or confiscations at a foreign government’s request.
Until a recent adverse decision in the Court of Appeals for the District of Columbia, the Department of
Justice believed it had authority under a provision of 28 U.S.C. § 2467 enacted as part of the USA PATRIOT
Act of 2001, to provisionally restrain assets at the request of our treaty partners, either based upon an
affidavit by a law enforcement officer or based upon the enforcement a restraining order issued by a foreign
court. 28 U.S.C. § 2467(d)(3). The foreign order had to be certified by the U.S. Attorney General, and the
conduct underlying the foreign violation had to constitute an offence for which forfeiture would be permitted
under U.S. law.
However, on July 16, 2010, the appellate court in the District of Columbia in the case of In Re: Any and
All Funds or Other Assets in Brown Brothers Harriman & Co. Account # 8870792, et al., -- F.3d --, 2010 WL
2794281 (D.C. Cir. July 16, 2010), No. 09-5065 (“Dantas case”), held that, because of problems with certain
aspects of the statutory language, the provision allowing restraining orders applies only after a foreign
judgment of forfeiture was entered.
This ruling has affected ten restraint cases currently filed in the District of Columbia, involving nearly
$500 million. The United States will have to either request a domestic forfeiture restraint based on the filing
of an entirely separate U.S. forfeiture action or release the funds. In many of the cases, the U.S. statute of
limitations has run, and therefore filing a domestic case is not possible. In others, because a criminal act did
not occur in the United States, we have no venue to file a U.S. case. Under 18 U.S.C. § 981(b)(4), if there
has been a foreign arrest for certain “foreign predicate offenses” under U.S. law, we can request a 30-day
freeze on assets to give us time to obtain from the foreign government the evidence necessary to file a
domestic case, and that period may be extended as necessary. The “foreign predicate offenses” include:
arson, fraud by or against a foreign bank, public corruption, arms smuggling, trafficking in persons, narcotics,
and weapons (including nuclear, biological) plus crimes under 18 U.S.C. § 1956(c)(7)(B) (which include
drug trafficking, murder, arson, extortion, explosives, public corruption, fraud by or against a foreign bank,
munitions smuggling, human trafficking, child sexual exploitation, child trafficking, and any offence for which
extradition is required by multilateral agreement.
The potential pitfalls with filing a domestic forfeiture action to obtain a freeze or restraint based upon a
foreign request are legion. The case would generally be a duplicated trial of the confiscation trial which is
ongoing in the foreign country. Sufficient evidence would have to be produced in English from the foreign
country for the U.S. court. Under U.S. law, a civil forfeiture case (which these would normally be) generally
requires tracing of the direct criminal proceeds to the property to be forfeited; the U.S. could not restrain
based upon “value-based” foreign forfeiture systems, although it can enforce final judgments entered in such
systems. The expenditures and unreliability of foreign witness travel could result in a dismissal of the U.S.
case, in which case the U.S. government would be liable to pay attorney’s fees to the claimant.
The Dantas court opinion does not affect the United States’ ability to register and enforce a final
32
forfeiture or confiscation judgment entered in a foreign country which has an agreement for forfeiture
assistance with the U.S. However, the practical effect of the ruling is that there will seldom be such assets
remaining for execution of a final judgment unless the U.S. has filed its own forfeiture action and obtained
restraint.8
B. United States’ Laws Governing U.S. Efforts to Confiscate and Recover Foreign Assets
United States prosecutors have authority to file either domestic civil or criminal forfeiture actions
against property abroad. Under 28 U.S.C. § 1355(b), a civil forfeiture action may be filed against any foreign
property which is subject to civil forfeiture under U.S. law. Case law has established that, in order to provide
the U.S. district court with jurisdiction, the U.S. government must be able to demonstrate that the foreign
government will cooperate in recognizing the forfeiture or in allowing the asset to be transferred to the
United States.
Under 21 U.S.C. § 853(l) and 18 U.S.C. § 982(b)(1), a U.S. district court can enter any criminal forfeiture
order “without regard to the location of any property” which may be subject to forfeiture. Also, in a
criminal forfeiture proceeding, a U.S. court may order a defendant, under 21 U.S.C. § 853(e)(4) to repatriate
any foreign assets to the United States. Such repatriation should occur only if permitted by the foreign
government and if not in violation of any restraining order which the foreign government has enforced on
behalf of the U.S.
Further, if a criminal defendant agrees to plead guilty pursuant to an agreement, the agreement will
contain a provision by which the defendant agrees to repatriate the foreign-based property back to the
U.S. for forfeiture. The plea agreement may also contain a provision by which the defendant agrees to the
appointment of a representative in the foreign country to assist in the confiscation and liquidation of the
property. Also, the United States will often add to an Extradition Treaty request a request that any valuable
property which is found on or near the defendant when he or she is arrested be returned to the United
States with the person.
IV. INTERNATIONAL ASSET SHARING
A. FATF Recommendation 38 and UN Model Sharing Agreement9
Recommendation 38 of the Financial Action Task Force (“FATF”) 40 Recommendations covers
international co-operation: ‘‘There should be authority to take expeditious action in response to requests
by foreign countries to identify, freeze, seize and confiscate property laundered, proceeds from money
laundering or predicate offences, instrumentalities used in or intended for use in the commission of these
offences, or property of corresponding value. There should also be arrangements for coordinating seizure
and confiscation proceedings, which may include the sharing of confiscated assets.’’
te
This Recommendation basically restates most of the UNTOC requirements, mandating the provision of
legal assistance in the identification, freezing, seizing, and confiscation of the proceeds, instrumentalities and
intended instrumentalities of money laundering and predicate offences, and encouraging sharing.10 It also
imposes an obligation to identify, restrain, and confiscate “property of corresponding value.” Unfortunately,
in the U.S., without our amended Section 2467(d)(3), we are unable to restrain assets of corresponding
value, which poses an extra burden on our “value-based forfeiture system” partners to trace the proceeds
and instrumentalities of crime to identified U.S.-based assets. The UN Office on Drugs and Crime
(“UNODC”) developed a model sharing agreement which was endorsed by the UN General Assembly in
8
The Department of Justice is seeking to obtain an amendment to Section 2467(d)(3) which would address the language
problem relied on by the Dantas court. It is unknown whether, or when, such an amendment will be enacted by the U.S.
Congress.
9 The 40 Recommendations of the FATF provide a set of counter-measures against money laundering covering the criminal
justice system, law enforcement, the financial system, and international co-operation. They are recognized, endorsed, or
adopted by many international bodies, and set out principles for action, while allowing countries flexibility in implementing
those principles. Though not a binding international convention, those countries who have joined the FATF or any regional
styled FATF body have made a political commitment to combat money laundering by implementing the 40 Recommendations.
http://www.fatf-gafi.org
10 Thus, Country A could conceivably freeze and forfeit property at the request of Country B, but keep the proceeds from the
sale of the property for its own treasury. This has happened to the United States in several cases.
33
December 2005. Some of the suggested language in this model agreement has been adopted by the U.S. in
its most recent bilateral sharing agreements with other countries.
B. U.S. Statutory Conditions for Sharing
Authority for the United States to share civilly or criminally forfeited assets with other jurisdictions is
found at 18 U.S.C. § 981(i).11 Three conditions must be met in order for sharing to occur: (1) the amount
and conditions of sharing must be authorized by the Attorney General or Secretary of the Treasury with
concurrence of the Secretary of State; (2) there must be a treaty or an agreement (either case-specific or
long term) between the U.S. and the foreign jurisdiction which authorizes the sharing; and (3) if applicable,
the foreign jurisdiction must be certified by the Secretary of State as having met certain criteria permitting
foreign assistance. Since 1989, well over $250 million has been shared with over 40 jurisdictions from assets
forfeited to the Department of Justice Assets Forfeiture Fund. The jurisdiction requesting sharing must
have facilitated the initial forfeiture by rendering some form of assistance. DOJ and Treasury have the same
internal guidelines for how the percentage of sharing is determined.12
The United States does not generally share where there are identified innocent owners or victims of
the crimes underlying the forfeiture. Instead, we will endeavour to return the forfeited assets to innocent
owners and victims either though our remission process or by taking advantage of a similar process in a
foreign country.
V. GLOBAL IMPERATIVE FOR RECOVERY OF CORRUPTION PROCEEDS:
INTERNATIONAL “KLEPTOCRACY” INITIATIVE
A.International Agreements to Combat Corruption, the G8 Initiative, and StAR
The term “kleptocracy” is derived from the Greek “kleptes” and “kratos”, meaning rule by thieves.
Thus, it is applied to a government which uses corruption to extend the personal wealth and power of the
government officials and the ruling class. As noted by Attorney General Holder in Uganda, corruption
accounts for at least $1 trillion, or over 3% of the world’s Gross Domestic Product (“GDP”), each year.
This number is even higher for members of the African Union, where up to 25% of the GDP is estimated
to be lost to corruption.13 A number of multilateral agreements have been enacted over the years to enable
jurisdictions to assist each other in fighting and recovering the proceeds of corruption, such as the InterAmerican Convention Against Corruption and the OECD Convention on Combating Bribery of Foreign
Public Officials (both signed in 1997), the European Union Convention on the Fight Against Corruption of
1995, and the African Union Convention on Preventing and Combating Corruption of 2004. Despite these
agreements, the obstacles to investigating and prosecuting kleptocracy cases have persisted. In May 2004, in conjunction with the anticipated effective date of UNCAC, the G8 issued a Justice and
Home Affairs Ministerial Declaration calling on all governments to prioritize the recovery of corruption
assets for victim states. As part of an effort to combat corruption, or at least to deprive the kleptocrat and
his family of the enjoyment of the stolen assets, the G8 committed to developing joint teams of forfeiturerelated MLA experts to send to victim states, co-ordination task forces to work with victim states on MLA
requests, and workshops to exchange information and best practices. The projects and publications of the
World Bank StAR initiative are designed to help accomplish these stated goals.
11
Duplicate provisions are found at 21 U.S.C. § 881(e)(1)(E) (for criminal and drug forfeitures) and 31 U.S.C. § 9703(h) (for
Department of Treasury forfeitures).
12 For “essential assistance,” 50% or more of the amount forfeited can be shared. For “major assistance” between 40 and 50%
can be shared and for “facilitating assistance,” the amount would be up to 40%.. Essential assistance can involve a country’s
waiving its own forfeiture action, repatriating the assets without needing a signed letter from the defendant, providing virtually
all of the evidence for forfeiture, or defending litigation in that country connected with the forfeiture. Major assistance may
consist of enforcing a U.S. forfeiture order in order, freezing assets at the request of the U.S., repatriating assets with an
extradited defendant, or expending substantial law enforcement resources to obtain the forfeiture. Facilitating assistance may
involve the provision of bank or financial records, giving of intelligence information, providing service of process for witnesses
or facilitating witness interviews.
13 “Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities, and Action Plan”, UNODC/World Bank Group,
published June 2007, at p. 9.
34
B. Implementation of UNCAC
UNCAC’s mandatory asset recovery provisions entered into force in December 2005 as the first legally
binding global anti-corruption agreement. UNCAC makes it clear that Asset Recovery is a major mission of
the agreement – all of Chapter V is dedicated to this “fundamental principle of” the Convention, for which
States Parties must “afford one another the widest measure of cooperation and assistance” (UNCAC, Art.
51).
Articles 14, 23 and 31 provide requirements for the domestic regimes of States Parties to detect
identify, freeze, seize and confiscate the proceeds, commingled proceeds, instrumentalities, and intended
instrumentalities of corruption. Article 53 mandates provisions for the direct recovery of corruption assets,
including laws permitting private civil causes of action to recover damages owed to victim states and
the recognition of a victim state’s claim as a legitimate owner of stolen assets. Article 54 requires States
Parties to give effect to any confiscation order for corruption proceeds issued by another State Party, and
to “consider taking such measures as may be necessary to allow confiscation [. . .] without a criminal
conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in
other appropriate cases.” Although stopping short of requiring non-conviction based forfeiture, UNCAC
recognizes that in cases of corruption, the criminal kleptocrat may not always be available for criminal
prosecution. States Parties must be able to freeze or seize corruption assets based upon an order issued
by another State Party and upon an MLA request which provides “a reasonable basis for the requested
State Party to believe that there are sufficient grounds for taking such actions and that the property
would eventually be subject to an order of confiscation”. Similar assistance must be given to a final order
of confiscation under Article 55. Article 55 ¶ 7 provides that co-operation may be refused if necessary,
sufficient and timely evidence is not received, or if the property is of minimal value. Finally, Article 57
mandates a return of confiscated embezzled or laundered public property to the requesting State Party.
UNCAC also requires that financial institutions of the States Parties strengthen their ability to detect and
freeze corruption-related assets. Most of these mandates require methods to determine the true beneficial
ownership of accounts being used to conceal corruption proceeds.
C.Case Studies: Abacha and Fujimori/Montesinos
Two pre-UNCAC cases of grand corruption resulted in significant recoveries of assets for two victim
states – Nigeria and Peru. Both cases provide examples of successful collaboration between financial sector
jurisdictions and the states which were victimized by their kleptocrat leaders which led to the recovery and
return of hundreds of millions of dollars of stolen assets.
1. General Sani Abacha (Nigeria)
General Abacha governed Nigeria from 1993 to 1998, dying in June 1998 of an ostensible heart attack.
He is reported to have looted from $3 billion to $5 billion from the Nigerian national treasury during his
five years in office. Subsequent to Abacha’s death, Nigerian investigators determined that he had obtained
property through outright theft from the Nigerian treasury through the central bank, inflation of the value of
public contracts, extortion of bribes from contractors, and fraudulent transactions. The funds were laundered
through “a complex web of banks and front companies in several countries, but principally Nigeria, the UK,
Switzerland, Luxembourg, Liechtenstein, Jersey, and the Bahamas.”14
In excess of $800 million was recovered in Nigeria from Abacha’s family and associates. Abacha’s
successor, President Olusegun Obasanjo, hired a Swiss legal firm to help trace and recover funds held
abroad. Nigeria sent an MLA request to Switzerland, which then immobilized over $500 million in
Swiss bank accounts. After several years, Switzerland was able to waive the usual requirement of a final
confiscation order from the foreign jurisdiction, as Nigeria was simply not able to produce one under its legal
regime at the time. The Abacha family delayed Nigeria’s recovery for over five years with various motions
and appeals. However, finally the World Bank was selected as a monitor for the recovered assets, and in late
2005 and early 2006, $505 million was repatriated. An additional $106 million was repatriated from Jersey.
The World Bank monitored Nigeria’s use of the funds, insuring that they were used for the welfare of the
public in areas such as rural infrastructure, health and education.
14
“Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities, and Action Plan”, UNODC/World Bank Group,
published June 2007), at p. 18.
35
2. President Alberto Fujimori and Intelligence Police Chief Vladimiro Montesinos (Peru)
During his ten years as president of Peru, Alberto Fujimori and his intelligence police chief, Vladimiro
Montesinos, methodically bribed judges, politicians, and the media. However, on September 14, 2000,
Fujimori lost control of the media when a television station broadcast a video showing Montesinos giving a
Peruvian Congressman a $15,000 bribe. Investigations followed, leading to Fujimori’s resignation, flight to
Japan, and his later 2007 arrest in Chile and extradition to Peru. Fujimori was convicted in Peru on charges
of human rights violations, embezzlement, and bribery, and he is serving a combined term of 25 years
imprisonment.
Montesinos had known connections to Colombian drug traffickers, and was involved with arms trafficking
for the benefit of the Colombian terrorist group, the FARC. In 2001, he was arrested in Venezuela, and
extradited to Peru, where he was convicted on charges of embezzlement and official corruption, receiving
a combined sentence of 20 years’ imprisonment. The first repatriation of Montesinos’ corruption proceeds
came sui generis from Switzerland in 2002 in the amount of $77.5 million, based upon clear and convincing
evidence that the funds represented bribes paid on Russian arms deals. Also, the Swiss made spontaneous
disclosures to Peru of other suspicious transactions, invited the Peruvian government to submit an MLA
request to freeze additional funds, and later repatriated over $50 million in additional funds. In the United States, suspicious transaction reports filed with FinCEN indicated additional funds at
the Miami branch of the Pacific Industrial Bank. Approximately $20 million connected with Montesinos’
associate, Venero Garrido, were frozen in Florida and California in two civil forfeiture actions. Venero was
arrested in Miami and extradited to Peru, and Peruvian authorities were able to document the funds frozen
in the U.S. as bribes received by Venero from fraudulent schemes connected with the Peruvian Military
Pension Fund. These funds were forfeited in the U.S. and returned to the government of Peru. Additional
funds of $33 million appeared to be held at the Pacific Industrial Bank in Cayman Islands; however, the
Caymans provided sufficient documentation and co-operation for Peruvian authorities to eventually
determine that although the tangled web of financial transactions made it seem that the funds had been
transferred there, they were physically still located in a Peruvian bank.15 Thus, within a five year period, as
a result of commendable co-operation by several countries, Peru recovered over $180 million in corruption
proceeds.16
VI. CONCLUSION
Despite the major gains achieved in recent years in the global recovery of criminally-derived assets,
much remains to be done. Jurisdictions must conform their domestic legislation to their international
treaty obligations. Through institutions such as the UNODC, the StAR Initiative, and the Basel Institute on
Governance, efforts are being made to provide training and other resources to nations with developing AML
and anti-corruption regimes.
Recovery of corruption proceeds is fraught with barriers not necessarily present in other types of
criminal cases. Differences in legal systems and the resources needed for endless court challenges by the
kleptocrat’s family and associates increase the difficulty. However, armed with ever evolving legal and
technological tools, investigators, prosecutors, and judges will hopefully be increasingly more effective in
combating international organized crime and political corruption. At a minimum, if at least some of that 3.5%
of the world’s GDP can be redirected to the vast needs of world’s poor and underfed, then our efforts will
not have been in vain.
15
“Peruvian Efforts to Recover Proceeds from Montesinos’ criminal network of corruption,” Guillermo Jorge, (September
2007), ¶¶ 14, 26, 50-76 http://www.baselgovernance.org.
16 “Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities, and Action Plan”, UNODC/World Bank Group,
published June 2007), at p. 20, 25 (also noting that the repatriated funds were deposited to a special fund called FEDADOI,
which was established to ensure the transparent use of the recovered assets; however, the resources ended up supplementing
the budgets of institutions with members on the FEDADOI board).
36
CURRENT INTERNATIONAL MONEY LAUNDERING TRENDS
AND ANTI-MONEY LAUNDERING CO-OPERATION MEASURES
Jean B. Weld*
I. INTRODUCTION
“Profit is fundamental to the goals of most crime, and therefore criminals make great efforts to move
illegally obtained money and other assets in order to convert, conceal or disguise the true nature and
source of these funds.”1 Money launderers and supporters of terrorism have demonstrated great creativity
in building upon traditional money laundering techniques to develop further complex money laundering
schemes designed to thwart the ability of authorities to prevent, detect and prosecute the laundering.
Keeping up with the creativity of criminals flush with cash is a full time job requiring the consistent and
combined talents of investigators, prosecutors and judges worldwide. Money laundering continues to be a
serious global threat as jurisdictions flooded with illicit funds are vulnerable to the breakdown of the rule
of law, the corruption of public officials and destabilization of their economies. Thus, the immense social
costs of crime require that the global law enforcement community make every effort to stay abreast of the
evolving methods and techniques employed by the criminals.
The development of new technologies and linkages between criminal organizations and gatekeepers
– such as accountants, attorneys, and bankers – who are willing to assist in the laundering has also
exacerbated the challenges faced by the law enforcement community. This paper will explore current global
trends of money laundering, with a short note on terrorist financing, and address certain elements of AML/
CFT2 regimes which are, at least in part, effective in stemming the flow and enjoyment by the criminals of
their ill-gotten gains.
II. CURRENT MONEY LAUNDERING THREATS AND TRENDS
As a basic concept, money laundering consists of any act which converts money or other property which
is acquired through illegal activity into money or property that appears legitimate, thereby concealing
its illegitimate source. The financing of much criminal activity, including terrorist acts, originates with
laundered proceeds, generally in the form of cash.
In addition to the obvious profit motive of nearly every crime which generates money, “the availability
of working capital is also fundamental for both criminals and terrorists to sustain their networks.”3 The
distribution of narcotics, arms, and munitions requires a global network of growers and/or manufacturers,
processors, couriers, transporters, marketers, maintenance and storage workers, and other personnel
essential to the criminal enterprises. These individuals will nearly always be paid in cash because criminal
organizations risk discovery and prosecution if records of these transactions are generated and retained.
Criminal enterprises generate funds in a myriad of different ways. But, the primary stages of money
laundering remain the same for all crimes: (1) placement of the criminal proceeds into the financial or
other transfer system; (2) layering the funds so as to conceal their original source; and (3) integration into
* Senior Trial Attorney, International Unit, Asset Forfeiture and Money Laundering Section, Criminal Division of the U.S.
1 Global Money L aundering & Terrorist Financing Threat Assessment (July 2010) http://www.fatf-gafi.org/
dataoecd/48/10/45724350.pdf at p. 12.
2 The term AML/CFT is used in this paper, as adopted by the Financial Action Task Force (“FATF”), to refer to anti-money
laundering and combating of terrorist financing efforts.
3 http://www.fatf-gafi.org/dataoecd/48/10/45724350.pdf at p. 12.
37
the legitimate financial markets, such as banks, credit companies, broker dealers, real estate, and many
others. The FATF recently noted that “the ML/TF (money laundering and terrorist financing) methods and
techniques that most jurisdictions are currently seeing are broadly the same as the ones that have been
observed and described in previous FATF exercises,” and include cash couriers and cash smugglers.4 Newly
emerging threats detected included a demonstrably increased use of internet-based payment systems and
more complex commercial structures and trusts set up and maintained by gatekeepers.5
A.Traditional Money Laundering Typologies
1. Structured Transactions Deposited to Financial Institutions
Most major criminal enterprises generate large amounts of cash. This is particularly true of narcotics
trafficking organizations, which constituted one of the first areas which law enforcement sought to combat
with money laundering prosecutions and confiscations. However, identity fraud, access device fraud, bank
fraud, gambling, and smuggling also result in vast quantities of cash which must be integrated into the
economy in order to be used.
The most efficient and effective method of transferring cash is the banking system. Bank transfers allow
value to be moved electronically and quickly in a secure environment. Banks are generally the criminal’s
fast track to his or her recently opened account in Switzerland. Wire transfers are an effective way to pay
expenses of the criminal enterprise. However, in an effort to thwart the criminal’s easy use of the banking
system, jurisdictions have adopted statutory and regulatory requirements requiring financial institutions
to report cash transactions above a certain amount. To avoid generating these reports, criminals often
structure their transactions. For example, the criminal would open accounts at several banks, and make
deposits to separate teller windows or ATM machines in amounts less than $10,000, thereby avoiding the
filing of any Currency Transaction Reports (“CTRs”) by the financial institution.
As these financial reporting requirements have become more stringently enforced, and with the
development of required Suspicious Transaction Reporting (“STR”), criminals have begun to look for
other methods to launder their illicit funds. STR reporting (called “SAR” reports in the U.S. for Suspicious
Activity Report) is required in the U.S. whenever the bank employee has reason to “suspect” that funds
come from illegal activity or are disguised, that is, whenever the bank has information that the transaction
is structured to evade reporting requirements, appears to serve no known business or apparent lawful
purpose, or is being used to facilitate criminal activity even if it has no knowledge of the underlying criminal
conduct, it must file a SAR. Moreover, most large banks now have sophisticated AML compliance software
installed which will automatically detect many of these type of transactions, keeping the compliance officers
quite busy determining whether and when they are obligated to file SARs.
2. Cash Couriers and Bulk Cash Smugglers
As banks in jurisdictions with stronger AML/CFT (‘‘Anti-money Laundering/Countering the Financing
of Terrorism’’) regimes have become less friendly to the criminal’s cash business, he or she turned to
other methods of placement, layering and integrating that currency. The most obvious technique involved
employees of the criminal organization smuggling cash from the consumer country of the illegal product to
the distributor, or from the criminal to the foreign bank secrecy destination where he or she had arranged
for the currency to be invested. Cash smuggling can be subdivided into two categories: (1) cash courier,
and (2) bulk cash smuggling (“BCS”). BCS involves large volumes of cash, and smuggling methods usually
involve land or sea border crossings through concealed cash in vehicles or cargo containers. Cash couriers
are natural persons physically transporting cash on their person or accompanying luggage. The preferred
method of transport for cash couriers is by commercial airline.6 For either type of cash smuggling, larger
denomination bank notes are used whenever possible to reduce the weight and size of the cargo. For
this reason, many couriers and smugglers will first deposit or exchange smaller bills, through structured
transactions, which also eliminate the chance of exposing bills with forensic value to trained drug dogs and
to ion-scanning machines.
4 Id
at p. 9.
“Gatekeeper” is a term used by the FATF to characterize those who “protect the gates to the financial system,” through
which potential users must pass in order to succeed, and include professional experts who provide financial expertise
to launderers, such as lawyers, accountants, tax advisers, trust and service company providers, as well as bankers and
investment brokers. Id. at p. 44.
5
38
FATF Special Recommendation IX was designed to require jurisdictions to address the issue of cash
couriers at their borders. It requires countries to implement either a declaration or disclosure system for
detecting the cross-border transportation of currency and bearer negotiable instruments. In addition, border
officials must have the authority to seize such currency or bearer instruments if it is suspected to be tied to
terrorist financing or money laundering, or falsely declared or disclosed. Finally, jurisdictions must be able
to penalize offenders who provide false disclosures or declarations, and to confiscate the seized currency or
instruments if demonstrated to be related to TF or ML.7 The FATF has issued a Best Practices guidance
paper8 to assist jurisdictions in recognizing “red flags” of suspicious border activity and to adopt procedures
which will implement SR IX.
3. Money Service Businesses and Informal Value Transfer Systems
Criminals, and in particular terrorists, will often use non-banking financial institutions or money service
businesses because, even in jurisdictions which regulate them, many of these entities are little concerned
about AML/CFT compliance. Large global franchise MSBs, such as Western Union or MoneyGram,
comply with reporting requirements and co-operate well with law enforcement. However, smaller ethnicbased money services businesses, such as may be operated from a grocery store or travel agency, are less
aware of their AML/CFT responsibilities, and are more easily used by the criminal to launder his funds. In
addition, many MSBs carry on a multitude of different financial activities, such as wire transmission, foreign
exchange, check cashing or selling of money orders, travelers’ checks and stored value, within the U.S. and
other countries. Many smaller “informal value transfer systems” (“IVTS”) function on a “trust” basis among customers.
One such IVTS is the “hawala ” (also known as “hundi ”). This large network of money brokers operates
chiefly in the Middle East, North Africa, the Horn of Africa, and South Asia. This system allows hawaladars
from all parts of the world to transfer funds to and from their clients by settling debts between themselves.
Little in the way of record keeping is involved, and the commissions charged by the hawaladars are generally
less than clients would pay to transfer funds abroad through a financial institution. Hawala can operate
legally within the United States so long as the hawaladar obtains the necessary license from the state(s)
in which it operates and is registered with the Financial Crimes Enforcement Network (FinCEN). A large
portion of hawala activity is legitimate, for example remittances from family members in the U.S. to family
in Pakistan, and international aid agencies in Afghanistan use hawala for humanitarian and emergency relief
work.9
The key to deciphering legitimate from illegitimate MSB operations lies in the implementation by
countries of FATF Special Recommendation VI, which requires that such entities be licensed and registered,
and closely regulated to determine compliance with AML/CFT standards. The U.S. takes this approach, and
attempts to close down, prosecute, and obtain confiscations from unlicensed money transmitting businesses,
and to issue guidance and training to improve transparency and compliance in those which have registered.
4. Trade-based Money Laundering
Trade-based money laundering (“TBML”) is another alternative remittance system providing a method
by which criminal organizations obtain, transfer and store criminal proceeds, disguised as legitimate trade. In
TBML, value is moved by falsifying invoices, or over-invoicing and under-invoicing commodities which are
imported or exported. Trade is used by criminal organizations in this process to disguise the movement of
money through complex and confusing documentation sometimes associated with legitimate trade activity.
TBML is used extensively by Colombian drug cartels to repatriate drug proceeds through a method
commonly known as the Black Market Peso Exchange (“BMPE”). In addition, alternative remittance
services, unlicensed MSBs, and hawaladars all use a form of TBML to settle their debts arising from foreign
remittances. These groups will accomplish settlement by purchasing commodities in one country and
then transferring them to another country where the commodity is sold and the proceeds remitted to the
intended recipient. Red flag indicators of trade-based money laundering include: (1) vendor payments made
7
http://www.fatf-gafi.org/document/19/0,3343,en_32250379_32236920_43775315_1_1_1_1,00.html
http://www.fatf-gafi.org/dataoecd/50/63/34424128.pdf
9 Passas, Nikos, “Demystifying Hawala: A Look into its Social Organization and Mechanics.” Journal of Scandinavian Studies in
Criminology and Crime Prevention (2006), Vol. 7, pp. 46-62.
8
39
in cash by unrelated third parties; (2) vendor payments made via wire transfers from unrelated third parties;
(3) vendor payments via checks, bank drafts, or postal money orders from unrelated third parties; (4) false
invoicing and customs documents: such as commodity misclassification or commodity over-valuation or
under-valuation; (5) carousel transactions (the repeated importation and exportation of the same highvalue commodity); (6) commodities traded do not match the business involved; (7) unusual shipping routes
or transshipment points; (8) packaging inconsistent with commodity or shipping method; and (9) doubleinvoicing.10
The U.S. Department of Homeland Security, Immigrations and Customs Enforcement (“ICE”) has
established several Trade Transparency Units (“TTUs”) which are dedicated to the ongoing analysis of
trade data provided through partnership with other countries. Five are positioned in Latin America – three
in the tri-border area of Brazil, Argentina and Paraguay, one in Mexico, and one in Colombia. There is a
growing international effort to establish TTUs throughout the world which, like the Egmont Group of FIUs,
can exchange real time data and information, mentor each other, and assist on an informal basis in criminal
investigations.
B. Emerging Technologies
1. Prepaid Value Cards
In October 2006, FATF published a typologies report on new payment methods used for legitimate
economic transactions which could be exploited by money launderers. Featured were the increasing role of
non-banks in offering prepaid value cards, electronic purses, mobile payments, internet payment services
and digital precious metals. Certainly, criminal launderers are motivated to use the anonymity that these
services afford. Better than the ATM network (which generally uses surveillance video), these methods
provide criminals new methods of avoiding face-to-face contact with financial service providers who could
identify them to police. Moreover, they provide prompt and easy access from nearly anywhere in the
world.11
2. Online Payment Systems
“Crime courses through the internet in ever-expanding variety. Hackers brazenly hawk stolen bank and
credit-card information [. . .]. Money launderers make illicit cash disappear in a maze of online accounts.
Diverse as they are, many of these cybercriminals have something important in common: e-gold, Ltd.”12
E-Gold Ltd. (“E-Gold”) was one of the oldest and best known digital currency dealers before it, along with
its operating company Gold and Silver Reserve, Inc. (“G&SR”), its digital exchanger OmniPay, the principal
director and CEO, and other officers were indicted in the District of Columbia on charges of conspiracy to
operate an unlicensed money transmitting business, conspiracy to commit money laundering, and several
other violations. After numerous pre-trial motions, E-Gold and G&SR pled guilty to the conspiracy charges,
and three senior officers entered guilty pleas. The court ordered E-Gold to pay a $300,000 fine, to obtain
licenses as a money transmission business in all relevant states in which it operated, and to forfeit $1.75
million, which was in addition to $14 million forfeited in related civil forfeiture proceedings.
The dangers of online payment systems, whether as digital currency, virtual banking systems, or other
methods are difficult to address. The locations of the operators and websites are often unknown or they are
located in jurisdictions which will not render assistance to a criminal investigation. It is ‘virtually’ impossible
to trace the physical location of any value because there really is no such location. “Digital currency is
popular as a payment and money laundering method in child pornography, financial fraud, and online
extortion schemes. Digital currency dealers and exchangers commonly allow anonymous accounts with
no limit on account or transaction value. As with other online payment services, digital currency dealers
and exchangers often keep personnel, web hosts, and assets offshore and not always in the same country,
complicating regulatory jurisdiction.”13 Since the successful conclusion to the U.S. criminal case, E-Gold is
a mere shadow of its former self, but its CEO is working with U.S. financial regulators to try and restructure
the company to comply with all applicable regulatory standards. 10
http://www.ice.gov/partners/financial/topics.htm.
Money Laundering & Terrorist Financing Threat Assessment (July 2010) http://www.fatf-gafi.org at pp. 34-35.
12 Grow, Brian, “Gold Rush: Online payment systems like E-gold Ltd. are becoming the currency of choice for cybercrooks.”
Bloomberg Business Week (Jan. 9, 2006).
13 Smith, Susan L. and Ericson, Daniel W., “E-Gold, Ltd.” Money Laundering Monitor, U.S. Department of Justice, Criminal
Division, Asset Forfeiture & Money Laundering Section, Vol. 13, No. 3 (2008) at pp. 1-2.
11 Global
40
Another online phenomenon which creates the potential for laundering criminal proceeds is “Second
Life,” operated by a U.S. corporation located in California. Over 18,000,000 users, called “Residents,”
move about and intermingle with other residents via a cartoon/human-like character called an “Avatar.”
The Avatars move about in the Metaverse (3D virtual reality world), which includes an island beach resort
or shopping mall, just to name a few. Avatars may buy or sell virtual items and/or services, and virtual real
estate. Second Life has created its own currency called Linden dollars (named after the game developer,
Linden Lab) which can be exchanged for US dollars. Once a value is placed on an object (no matter what
that object is, real or virtual) criminals may find a way to abuse it by fraud and/or money laundering
because anything of value can be laundered. A player/resident may use any credit or debit card or prepaid
card (including those stolen or obtained by fraud or identity theft) to purchase online money which may
be redeemed for virtual items or actual money with another player in another country in that country’s
unit of currency. This creates new opportunities for transferring funds anonymously, in order to evade
detection by law enforcement and taxing authorities. As with E-Gold, all that is required to open an account
is an unverified name and verified email address. If stolen or fraudulent credit cards are used, “Second
Life” absorbs the value into cyberspace, and ends the paper trail. “Second Life” has tried to address these
concerns by banning gambling after internet gaming became illegal in the U.S. As a U.S. law enforcement
officer has noted, “While Second Life and other virtual MMOGs (massively multiplayer online games) have
built a virtual global village complete with entertainment, business commerce and education, they have
neglected to incorporate a virtual global police department.”14
3. Increased Use of Gatekeepers to Establish Sophisticated Trusts
Gatekeepers have become a greater money laundering threat than in previous years. These professional
accountants, lawyers, and company service providers engage in both self-laundering and third-party
laundering. FATF considers Politically Exposed Persons (“PEPs”) as gatekeepers because they have access
to funds and systems in their country which they can manipulate to personal advantage, and because they
have the power to change financial legislation or rules for their own benefit. These individuals often engage
in self-laundering of state funds which they have extracted for themselves.15
Trust company service providers are responsible for much of the tangled web of complex trusts
registered in offshore jurisdictions such as the Cayman Islands, the British Virgin Islands, the Cook Islands,
Guernsey, and Jersey, where deciphering the true beneficial ownership of the trust vehicles is difficult, if
not impossible. Many trusts and private investment companies (“PICs”) formed in multiple jurisdictions
function as successful tax evasion or avoidance vehicles. The trust company functions as the actual owner
of the assets, and the trustee controls their investment, thus creating a separation between the criminal
and his or her accumulated illicit funds which is difficult for law enforcement to pierce. The professional
“gatekeepers” shield their clients’ interest in the assets and conceal their own involvement behind their
professional confidentiality protections.
III. TOOLS TO COMBAT INTERNATIONAL MONEY LAUNDERING
A.United States’ Anti-Money Laundering Laws
1. Basic Money Laundering Statute – 18 U.S.C. § 1956
First enacted in 1986, this statute provides U.S. prosecutors with their most effective weapon against
money launderers. It criminalizes any financial transaction involving the actual proceeds of any of over
200 federal, state or foreign “specified unlawful activities” (SUAs) by someone who knows that the funds
constitute criminal proceeds and conducts the financial transaction in order to accomplish any one of four
objectives: (1) to promote the carrying on of SUA; (2) to evade taxes; (3) to conceal or disguise the nature,
source, location, ownership or control of the proceeds; or (4) to avoid any Federal or State transaction
reporting requirement. The statute also reaches the international movement of funds or monetary
instruments, where the funds have passed out of, into, or through the United States for the purpose
of promoting an SUA; concealing or disguising the proceeds of an SUA; or to avoid a Federal or State
transaction reporting requirement. In addition, the statute expressly permits prosecution of anyone who
14
Sullivan, Kevin (New York State Police Investigator), “Virtual Money Laundering and Fraud – Second Life and Other Online
Sites Targeted by Criminals.” http://www.bankinfosecurity.com/articles.php?art_id=809&search_keyword=virtual+money+l
aundering&search_method=exact (April 3, 2008).
41
launders funds “represented to be the proceeds of specified unlawful activity” which permits undercover
money laundering operations by law enforcement.
The key to a Section 1956 prosecution is that the funds must be the proceeds of one of the recognized
SUAs. Section 1956(c)(7)(B) covers certain foreign predicate crimes for money laundering; thus, if funds
are laundered to or through the U.S. which were generated by any of the listed foreign predicates, a money
laundering offence can be charged in the United States. “Financial Transaction” is defined in the statute as a
transaction affecting foreign or interstate commerce which involves the movement of funds by wire or other
means, any transaction involving monetary instruments, any transaction involving the use of a financial
institution, and also any transaction involving the transfer of title to real property, a vehicle, a vessel,
or aircraft. Thus, all transactions involving the purchase or sale of conveyances, as well as transactions
occurring in cash, are covered by the statute. “Proceeds” is defined as “any property derived . . . through
some sort of unlawful activity, including the gross receipts of such activity.” This definition was added by
Congress in 2009 to address the U.S. Supreme Court’s decision in United States v. Santos , 553 U.S. 507
(2008), which determined that the term “proceeds,” as applied to laundering the proceeds of gambling,
meant “net profits.”
Section 1956 applies to the myriad of reporting requirements under the U.S. Bank Secrecy Act (31 U.
S.C. § 5311, et seq.), including SARs, CTRs, Currency or Monetary Instruments Reports (CMIR), and
Foreign Bank account Registrations. It also covers I.R.S. Form 8300, which requires that anyone engaging
in a commercial transaction involving more than $10,000 in cash must report the transaction to the Internal
Revenue Service.
Because this conference is focused on targeting transnational organized crime and corruption, it
should be noted that Section 1956 was used recently to prosecute numerous defendants in a corruption
investigation arising out of Haiti’s state-owned national telecommunications company, Teleco. On June
1, 2010, Robert Antoine, of Miami and Haiti, formerly the director of international affairs for Teleco, was
sentenced to four years imprisonment for conspiracy to launder bribes which he accepted from three U.S.
telecommunications companies. To disguise the bribery proceeds, he laundered them through intermediary
companies. Several of the U.S. companies involved, and their officers, have been charged with or convicted
of violations of the Foreign Corrupt Practices Act (“FCPA”) (15 U.S.C. § 78d-2) and money laundering. The
FCPA (enacted in the post-Watergate period of 1977) does not provide for forfeiture. However, forfeitures
were ordered based upon the money laundering convictions, including a $1,852,209 forfeiture judgment
against Antoine.16
2. Spending Statute – 18 U.S.C. § 1957
U.S. prosecutors use 18 U.S.C. § 1957 to prosecute “monetary transactions” involving “criminally
derived property” of a value in excess of $10,000. We call this the “Spending Statute” because the term
“monetary transactions is broadly defined to include any “exchange, in or affecting interstate or foreign
commerce” which is by, through or to a financial institution. The definition of a financial institution is not
limited to a banking institution but includes a number of other entities such as an automobile dealership,
pawn broker, all types of money service businesses, casinos, dealers in real estate, and dealers in precious
metals. Because Section 1957 is a “general intent” crime, as opposed to “specific intent” crime such
as Section 1956, U.S. prosecutors use it in cases where the evidence may not support an inference that
the defendant acted with any of the specific intent requirements of Section 1956, such as to promote the
unlawful activity, or to conceal or disguise the source of the funds. As in Section 1956 prosecutions, the
property must be the proceeds of a “specified unlawful activity.”
Examples of uses of Section 1957 include prosecutions for purchases of property with over $10,000
in cash, or traveller’s checks, or transfer of a conveyance for over $10,000. Section 1957 has no “sting”
16
Section 1956 is also used to prosecute the laundering of funds to suspected terrorist organizations where the terrorist
financing charge cannot be proven beyond a reasonable doubt. For example, in 2008 Saifullah Anjum Ranjha, of Washington,
D.C., received a sentence of nine years’ imprisonment and was ordered to forfeit $2,208,000 in funds which he laundered
through his money remitter business - Hamza, Inc. During an undercover “sting” operation in which the defendant was
provided with ostensibly drug money, he claimed that he handled money from drug trafficking, cigarette smuggling and
weapons trafficking, and that he channelled funds to al Qaeda; however, the al Qaeda connection was not conclusively
established. The defendant had bank accounts in Canada, Spain, England, Pakistan, Japan, and Australia using “hawala ”.
42
provision, so the property involved in the charged transaction must, in fact, be the proceeds of an identified
SUA. Section 1957 carries a lesser sentence, 10 years as opposed to the 20 year sentence under Section
1956.
3. Money Laundering Prosecutions Under IEEPA – 50 U.S.C. § 1705
In recent years, the U.S. Department of Justice has vigorously employed the criminal, civil and forfeiture
provisions of the International Economic Emergency Powers Act (“IEEPA”), the Trading With the Enemy
Act, and the Bank Secrecy Act (“BSA”) to prosecute large international financial institutions that have
continued to do business with clients in jurisdictions which are listed on the U.S. Office of Foreign Assets
Control (“OFAC”) list. Some of these cases were investigated by the Federal Bureau of Investigation
(“FBI”), some by the IRS, some with assistance from the New York County District Attorney’s Office, and a
recent case against ABN AMRO with assistance from the U.S. Attorney’s Office for the District of Columbia.
IEEPA (50 U.S.C. § 1705) criminalizes any violation of regulations issued under the Act which require
the blocking of transactions from sanctioned countries such as Iran, Sudan, Libya, and Burma. The Act
also requires banks to maintain adequate programmes to detect and report suspicious activity indicative of
money laundering, terrorist financing, and other crimes. Instead of applying the statutorily required AML/
CFT protections, these banks actively engaged in conduct to defeat their application, such as: (1) altering
references from outgoing transactions that identified sanctioned countries, banks, or persons; and (2)
stripping data from certain fields for incoming transactions to conceal the origin as any sanctioned entity.
Through the stripping and alterations, the banks ensured that the payments were fully processed undetected
through filters at any U.S. financial institutions.
In 2009 and 2010, four international banks were charged and entered into deferred prosecution
agreements with the Department of Justice. The agreements provided for stiff fines and forfeitures, and
mandated remedial AML/CFT procedures immediately with oversight from the government and the court.
In 2009, Lloyds TSB admitted in a DPA that its London, Tokyo, and Dubai offices had been stripping wire
transfer information to conceal references to Iran, Sudan, and other sanctioned entities, bypassing AML
filters at U.S. banks. Lloyds forfeited $350,000,000 for the violations. Credit Suisse Bank also entered into a
DPA in 2009 for similar violations, and forfeited $536,000,000. In 2010, ABN AMRO and Barclays Bank PLC
entered into similar DPAs, forfeiting $500,000,000 and $298,000,000 respectively.
4. Money Laundering in Support of Terrorist Financing
Terrorist financing is, in some respects, the reverse of typical money laundering.17 In most money
laundering cases, the perpetrators have “dirty” money which they are seeking to “clean” or “wash”
sufficiently to reintegrate it into the global economy so that they can enjoy its use. In terrorist financing,
often the sources of the funds are “clean” or legitimate, but the final uses to which the funds are put
constitute heinous violent and destabilizing crimes against humanity. Supporters and members of terrorist
organizations are not selective in the types of criminal activity from which they will accept proceeds. The
proceeds of drug trafficking, extortion, fraud, currency counterfeiting, cigarette smuggling, and human
trafficking conducted in and laundered to all parts of the world have found their way into the coffers of
terrorist organizations. Sympathizers and supporters also contribute clean money to terrorist financing.
The tools for combating terrorist financing are essentially the same as those used to combat money
laundering. Co-operation between law enforcement and intelligence agencies, including the FIUs,
aggressively prosecuting cases when appropriate, penalizing financial institutions which attempt to bypass
the UN sanctions lists, bilateral and multilateral diplomacy, and capacity building in jurisdictions which
are most vulnerable to this activity. Terrorist organizations have transitioned to smaller, decentralized
groups (cells) which do not require large expenditures of funding to prepare and carry out their missions.
17
The UN Convention Against Terrorist Financing (1999) (Terrorist Financing Convention) defines terrorist financing as
“the providing or collecting of funds by any means, directly or indirectly, . . . with the intention that they should be used or
in the knowledge that they are to be used, . . . (a) to carry out an act which constitutes the offense of terrorism; (b) to carry
out any other act intended to cause death or serious bodily injury to a civilian or to any other person not taking an active
part in the hostilities in a situation of armed conflict, when the purpose of such act, . . . is to intimidate a population, or to
compel a government or an international organization to do or to abstain from doing any act; or (3) by any terrorist or terrorist
organization (for any purpose).”
43
The perpetrators of the London 7/7 (7 July 2005) bombings of three underground trains and a bus killing
52 people were self-funded through street-level drug dealing. The 9/11 terrorist acts only required a few
hundred thousand dollars. Such low level cash financing is nearly impossible to detect as it is normally
outside the regulated financial system, often involves stolen or fictitious identities, and does not generally
arouse suspicion in any entity that would generate a suspicious activity report.
U.S. laws against terrorist financing are comprehensive, and they criminalize: (1) providing, or concealing
or disguising the nature, location, source or ownership of “material support or resources,”18 knowing that
they may be used to carry out a terrorist act, 18 U.S.C.
§ 2339A (enacted in 1994); (2) the provision or attempted provision of “material support” (as defined in
Section 2339A) to a foreign terrorist organization,19 18 U.S.C. § 2339B (enacted in 1996); and (3) providing
or collecting, directly or indirectly, “funds”20 knowing or intending that they be used to carry out any act
listed in the various conventions, protocols and treaties covered by the Terrorist Financing Convention,
or any act intended to cause death or serious bodily injury to a civilian, or any person not taking an active
part in the hostilities of a situation of armed conflict to intimidate a populations, to compel a government or
international organization to do or abstain from doing any act, 18 U.S.C. § 2339C (enacted in 2002).
Traditionally, the most common terrorist financing prosecution in the United States was a “clean money”
prosecution, in which funds were raised for organizations constituting “fronts” for FTOs. “Clean money”
prosecutions generally involve groups which raise money ostensibly for charitable overseas work, but
actually channel the funds to FTOs. In these cases, the prosecution must show that contributors had reason
to know that the so-called “charity” was a front for an FTO.21
In “dirty money” prosecutions, U.S. prosecutors target FTO agents who engage in criminal behaviour
to support their presence in the United States and generate funds which are sent back to family members
and trusted friends to jurisdictions which are weak on AML/CFT compliance, and are often state sponsors
of terrorist organizations. Often because of lack of available legal assistance from these jurisdictions, U.S.
prosecutors cannot establish the precise use of the funds in the foreign country; however, the criminal
nature of their origin, and the lack of any apparent legitimate endeavour may give rise to sufficient inference
of terrorist activity.22
18 “Material support or resources” is defined as “any property, tangible or intangible, or service, including currency or
monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false
documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel [. . .],
and transportation, except medicine or religious materials.” 18 U.S.C.U.S.C. § § 2339A(b)(1).
19 “Terrorist organization” is defined as an entity designated as a Foreign Terrorist Organization (“FTO”) by the Secretary of
State. An FTO must threaten the security of U.S. nationals or the security (national defence, foreign relations, or economic
interests) of the United States. There are currently 46 entities so listed. 18 U.S.C.U.S.C. § § 2339B(g)(6).
20 “Funds” is defined as assets of every kind, tangible or intangible, movable or immovable, legal documents or instruments
in any form, including electronic or digital, evidencing title to, or interest in, such assets, including coin, currency, bank
credits, travellers checks, bank checks, money orders, shares, securities, bonds, drafts, and letters of credit. 18 U.S.C.U.S.C.
§ § 2339C(e)(1).
21 Examples of “clean money” cases include: United States v. Enaam Arnaout, 431 F.3d 994 (7th Cir. 2005) (defendant, CEO of
the Benevolence International Foundation (“BIF”) was convicted of RICO charges for duping donors who sent $400,000 which
actually went to Chechnyan rebels and the Bosnia military); United States v. Oussama Kassir , 2009 WL 2913651 (SDNY 2009)
(defendant convicted of violating 18 U.S.C.U.S.C. §§ 2339A and 2339B for providing training and other resources to young
men for jihad in the Pacific Northwest at both a Seattle mosque and a camp site in Bly, Oregon); United States v. Rafil Dhafer,
Help the Needy Endowment, et al. , 577 F.3d 411 (2d Cir. 2009) (Dhafer, an Iraqi-born New York oncologist, was convicted of
IEEPA violations, promotional ML, fraudulent Medicare billings, and tax fraud as a result of using contributions received by
his unregistered charitable organization - Help the Needy - to violate the Iraqi Sanctions Regulations; he was sentenced to 22
years’ imprisonment).
22 Examples of “dirty money” cases include: U.S. v. Mohamed Hammoud, et als, 381 F.3d 316 (4th Cir. 2004) (pre-9/11
prosecution against Lebanese men discovered by a local sheriff conducting a massive interstate cigarette smuggling enterprise
in Charlotte, North Carolina – Hammoud and associates had ties to Hezbollah before coming to the U.S. on false visas in 1992;
Hammoud was convicted of providing “material support” under 18 U.S.C. § 2339B, RICO conspiracy, money laundering,
cigarette smuggling, immigration violations, and was sentenced to 155 years imprisonment); U.S. v. Syed Mustajab Shah, et al ,
02CR 2912 (S.D.Cal. 2002) (charged with conspiracy to distribute 600 kilos of heroin and five metric tons of hashish, and with
44
IV. CO-OPERATION IN AML INVESTIGATIONS,
CO-OPERATION BETWEEN FIUs, AND “OPERATION MANTIS”
Co-operation in anti-money laundering investigations must begin domestically, even in transnational
crime and corruption cases. Law enforcement, intelligence, and prosecution agencies should collaborate
and co-operate on the home front before an outreach to international partners for assistance. Some of the
cases mentioned in this paper involved several levels of international assistance, such as police-to-police and
prosecutor-to-prosecutor. For example, the Haitian Teleco corruption case required dedicated co-operation
between ICE-Miami and Haiti’s FIU, the Unité Centrale de Renseignements Financiers (“UCREP”), also
the Bureau des Affaires Financières et Economiques (a division of the Haitian National Police), and the
Ministry of Justice and Public Security. FIUs are an essential component of any team to combat money
laundering. Egmont membership brings access to the Egmont Secure Web, which opens up the possibility of
obtaining financial intelligence from 121 member countries.
A.United States’ Suspicious Activity Report (SAR) Review Teams
A model of law enforcement co-operation for transnational crime and money laundering cases in the
United States has become the SAR Review Team. Each federal district has been requested to establish such
a team comprising a designated Assistant U.S. Attorney, agents from all federal law enforcement agencies
within the district, and state and local investigators who have jurisdiction over money laundering or other
crimes (such as gambling and narcotics) which often give rise to money laundering. The objective is to
meet on a regular basis, but no less than once a month, and analyse certain pre-selected Suspicious Activity
Reports (SARs). The SAR information is sent to the SAR team leader once a month by FinCEN, and the
team leader may divide up the review of the SARs to various members of the team. The team’s mission is to
evaluate and prioritize the SARs for investigative purposes. Like many FIUs, FinCEN became overwhelmed
with the sheer number of SARs being filed, and this proactive approach was necessary in order to maximize
the intelligent use of these mandatory reports.
Prior to each team meeting, all members will have cross-referenced the current list of SARs against
any databases maintained by that agency. The team should prioritize the illegal activities it most wishes
to have investigated. Developing criminal cases beyond the SARs themselves is difficult because it can be
nearly impossible at first to identify an SUA underlying a reported financial transaction. Investigating every
SAR consumes significant investigatory time in an inefficient manner, resulting in few cases. Based on the
experience of the U.S. teams, prioritizing the crimes of structuring transactions and unlicensed money
transmitting businesses have proven to be the best use of the team. Some of these cases have spun into
larger, more complex and serious investigations, and have led to deportations and possible disruption of
some terrorist financing operations. The teams generally focus on transactions occurring within the last
twelve months. Numerous cases of substantial merit have evolved from SAR Review Teams, involving
structured transactions, tax evasion, check kiting on real estate investment accounts, drug trafficking,
mortgage fraud, pyramid real estate schemes, fraudulently obtained health care and insurance fraud
payments, and laundering of gambling proceeds.
B. “Operation Mantis” – G8 Roma/Lyon Initiative for Bulk Cash Smuggling
The G8 Roma/Lyon Group was formed in 1997 by the Group of Seven Industrialized Countries (“G7”) –
which included Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. Russia
was invited later and the group became the “G8.” The Roma/Lyon Group is an Anti-Crime and Counterterrorism experts group. It has evolved into several working groups that meet three times a year to discuss,
debate, and develop strategies to address public security issues surrounding terrorism and transnational
crime. The Group primarily concentrates on combating criminal organizations’ use of the global transport
system to further illegal activity.
negotiating to purchase four Stinger anti-aircraft missiles to sell to al Qaeda in Afghanistan; defendants were arrested in, and
extradited from, Hong Kong); U.S. v. Uwe Jenson, Carlos Ali Romero Varela, et al H-02-1008M (S.D.Tex. 2002) (high ranking
members of the AUC (Armadas Unidades de Colombia) charged with drug conspiracy and conspiracy to provide material
support to the AUC, a designated FTO; Costa Rican officials arrested defendants following an undercover weapons-for-drugs
“sting” contemplating $25 Million in weapons to be provided to the AUC in exchange for cash and cocaine).
45
During a three day period in 2009, the Roma/Lyon Group conducted a multinational enforcement action
known as “Operation Mantis.” This was a multilateral initiative conducted by officials from seven of the
eight members to specifically address bulk cash smuggling. Focusing on commercial airline travellers,
the objectives were interdiction, investigation, and intelligence-gathering and sharing in order to identify,
disrupt and dismantle trans-border criminal networks using cash couriers to smuggle illicit cash. Because
similar operations are likely to be repeated in the future, at least on a regional basis, the specific dates were
not announced. Over 500 flights were examined, tens of thousands of passengers were interviewed, and
tens of thousands of bags were inspected. The operation netted over $3.5 million from 81 cash seizures
and discovered another $4.2 million in undeclared currency at various ports of entry. Cash couriers are a
transport of choice for many criminal syndicates and terrorist cells, and commercial airlines are a preferred
means of transport because foreign destinations can be reached quickly with little or no pre-planning.
Operation Mantis resulted from two years of planning within the G8 with the stated objective of
supporting FATF Special Recommendation IX, which addresses issues of cash couriers and border security.
Participating officials collected and shared real time information and intelligence, which should prove helpful
in future targeting and interdiction of cash couriers. Airports throughout the world have employed different
methods to detect cash carried in baggage, on travellers, or in shipments, such as currency detection dogs,
X-ray and gamma ray equipment, body searches, and ion mobility scanners. At least one arrest was publicly
acknowledged as a result of Operation Mantis, that of a 17-year old female flying from London to Vietnam.
She was arrested carrying £380,000 (US $550,000) in her checked luggage. Subsequent searches at her UK
residence revealed additional £12,000 (US $17,000).
C.United States’ Laws on Cash Couriers and Bulk Cash Smuggling
Title 31 of the United States Code, Section 5316 and its implementing regulation, 31 C.F.R. § 103.23,
enacted in 1982, imposes an obligation on all persons to file a Currency Monetary Instrument Report
(CMIR) with the U.S. Customs Service23 upon transporting, mailing, or shipping into or out of the United
States domestic or foreign currency, or monetary instruments (such as traveller’s checks, money orders,
bearer instruments) in an amount exceeding $10,000 at one time. This was the traditional provision used by
Customs officials to arrest or seize undeclared currency at the U.S. border. Civil and criminal forfeiture is
available for “all property, real or personal, involved in” the CMIR violation and all property traceable to that
property. This is the language prominently displayed on U.S. Customs signs at airports and other ports of
entry.
In 2001, as part of the USA PATRIOT Act, Congress enacted the Bulk Cash Smuggling (“BCS”)
Statute, 31 U.S.C. § 5332. A violation of the BCS law requires proof of: (1) an intent to evade the reporting
requirement; (2) knowing concealment of over $10,000 in monetary instruments on one’s person, in
a container such as luggage, or in a conveyance; and (3) the transportation or transfer of the currency
or monetary instruments to or from the United States. This statute is now used to prosecute couriers
transporting large amounts of cash at or near any of the U.S. borders, and it used to criminally and civilly
forfeit the seized currency.24
V. CONCLUSION
The volume and variety of global money laundering challenges faced by investigators and prosecutors
seems infinite. As FATF and other international bodies have succeeded in raising awareness and
competency throughout the world to combat money laundering and terrorist financing, the criminals seem to
always stay one step ahead. They will continue to exploit new technologies, weak AML/CFT jurisdictions,
financial secrecy jurisdictions (from which it remains difficult to obtain mutual legal assistance), greedy and
gullible victims, and underground value transfer systems.
23
After 9/11, the Customs Service was transformed into the Customs and Border Patrol (CBP) and Immigration and Customs
Enforcement (ICE). CMIRs are filed with CBP.
24 In the case of United States v. Jose , $114,948 in U.S. currency was seized from the defendant’s luggage on a flight departing
Puerto Rico to St. Maarten, Netherlands Antilles. The cash was in tissue paper-wrapped bundles, hidden in a pair of sneakers
and other bundles were wrapped in carbon paper and hidden inside a set of bed sheets. Customs officials advised Jose about
the currency reporting requirements for transported amounts in excess of $10,000; he reported that he had $1,400 in cash
with him. The final forfeiture judgment was for the full amount seized less the $1,400 which he declared.
46
Co-operation among nations, and among domestic law enforcement officials within each nation, is,
therefore, imperative to stem the immense and rising tide of laundered organized crime and corruption
proceeds. International organizations such as the UNODC, the FATF, the Asian Pacific Group, Moneyval, the
IMF, and the OAS must continue to press for member compliance with international AML/CFT standards
and take a strong stance against continued noncompliance resulting from lack of political will. The powerful
tool of asset forfeiture should be used, also, to help fund the fight against transnational crime. As an old
police friend of mine, who was also a hunter, used to say, “Sometimes you get the bear, sometimes the bear
gets you.” We will never fully eradicate transnational crime, but without the continued effort, personal
accountability and the rule of law will be seriously undermined. We must not give up the fight.
47
INTERNATIONAL RECOVERY OF ILL-GOTTEN ASSETS
Wayne Patrick Walsh*
I. PROCESSING REQUESTS FOR INTERNATIONAL RECOVERY
OF ILL-GOTTEN ASSETS IN HONG KONG, CHINA
(INCLUDING RESTRAINT ORDERS, CONFISCATION AND RECOVERY OF ASSETS)
A.The Legal Framework
On 1 July 1997 the People’s Republic of China resumed the exercise of sovereignty over Hong Kong
and many of the international arrangements prevously applicable to Hong Kong under British rule fell
away. At the same time, the Basic Law of the Hong Kong Special Administrative Region (“HKSAR”) of the
People’s Republic of China (“PRC”) became part of Hong Kong law. Under the principle of “one country, two
systems”, the Basic Law prescribes the system to be practised in the HKSAR under which the Government
of the HKSAR is given a high degree of autonomy.
In the area of international co-operation in criminal matters, Article 96 of the Basic Law provides that
with the assistance or authorization of the Central People’s Government, the Government of the HKSAR
may make appropriate arrangements with foreign states for reciprocal juridical assistance. Under Article 153
of the Basic Law, international agreements to which the PRC is or becomes a party may be applied to the
HKSAR and international agreements to which the PRC is not a party but are implemented in HKSAR may
continue to be implemented in HKSAR.
According to Article 152 of the Basic Law, representatives of Government of the HKSAR may, using the
name “Hong Kong, China”, participate in international organizations and conferences not limited to states.
Under these principles, HKSAR negotiates with foreign states for bilateral agreements for co-operation
in criminal matters, such as mutual legal assistance, and is made subject to relevant international
agreements such as the United Nations Convention against Transnational Organized Crime and the United
Nations Convention against Corruption. Hong Kong, China also participates as a member of certain
international organizations and conferences using its own name, such as the Financial Action Task Force
Against Money Laundering.
On the domestic front, HKSAR enacted legislation in 1997 to implement the new international
arrangements for co-operation in criminal matters, including the Mutual Legal Assistance in Criminal
Matters Ordinance, Cap. 525. This is an Ordinance to regulate the provision and obtaining of assistance in
criminal matters between Hong Kong and places outside Hong Kong. It includes measures for the taking
of evidence from witnesses (including by live TV link), search and seizure of things, production of material
(such as bank records), service of documents, transfer of persons to give assistance in relation to criminal
matters, and restraint and confiscation of proceeds of crime.
1. Mechanism for Restraint and Confiscation of Proceeds of Crime
Mechanisms provided under domestic legislation, such as the Organised and Serious Crimes Ordinance,
Cap. 455, enable Hong Kong authorities to apply for restraint and confiscation measures during the course
of their own criminal investigations or prosecutions in Hong Kong. This includes cases of money laundering
against defendants in Hong Kong when the predicate offence may have occurred abroad. Local confiscation
* Deputy Law Officer, Department of Justice, Hong Kong, China.
48
is generally conviction based, although some powers of forfeiture exist absent a conviction. For example,
should an offender abscond, the court may confiscate his or her criminal assets. Confiscation is value-based,
that is, an assessment of the value of the defendant’s criminal gains, and may attach to any identified assets
belonging to him or her or under his or her control.
However, international requests for restraint and confiscation of proceeds of crime based upon foreign
investigations and prosecutions are processed under the Mutual Legal Assistance in Criminal Matters
Ordinance. This Ordinance provides for a system of registration of external confiscation orders by the Hong
Kong court provided certain threshold criteria are met. These are:
 At the time of registration the foreign order is in force and not subject to appeal;
 The person against whom or in relation to whose property the foreign order

was made received
notice of the proceedings in the foreign place in sufficient time to enable him or her to defend them;
The Hong Kong court is of the opinion that enforcing the order in Hong Kong would not be contrary
to the interests of justice.
This mechanism recognizes the principle that the proper forum for determination of the confiscation
order on its merits is the court of the foreign place seeking enforcement and that Hong Kong courts should
not relitigate the foreign order on its merits.
The mechanism is available whether the proceedings in the foreign jurisdiction giving rise to the
confiscation or forfeiture order are criminal or civil in nature, so long as they are connected to a criminal
matter. This means Hong Kong courts can give effect both to “in personam” and “in rem” confiscation or
forfeiture orders, including orders made in the absence of a criminal conviction.
The Hong Kong court can also make a restraint order where an external confiscation order may be made
in a proceeding which has been or is to be instituted in the foreign place, to restrain dealing in property
against which the order may be eventually enforced. The restraint order, if made, normally remains in force
until conclusion of the foreign proceedings and the registration of any external confiscation order.
In cases involving property which must be managed or sold to realize funds for payment into court,
a receiver is to be appointed. All funds paid into court are held for five years pending a request from the
government of the foreign place that any or all of the proceeds be repatriated. After that, the funds are paid
into general revenue.
It is not a legal prerequisite that a bilateral mutual legal assistance agreement exist before assistance can
be given under the Ordinance, provided the requesting party gives a reciprocity undertaking that it would in
future provide similar assistance if requested by HKSAR. However, there must be a bilateral or multilateral
arrangement in place under the Ordinance before any sharing of confiscated assets can take place.
2. Mechanism for Sharing
Under the Mutual Legal Assistance in Criminal Matters Ordinance, the Secretary for Justice may direct
the court to pay to a foreign government such proportion of the realized funds held as specified in the
direction. Payments may only be made to foreign governments that have bilateral agreements with the
HKSAR for mutual legal assistance in criminal matters or are party to other multilateral agreements such as
the United Nations Convention against Corruption which specifically provide for repatriation of assets.
HKSAR has adopted a policy on asset sharing and repatriation in such cases to take account of recent
international initiatives in this area. Sharing of realized assets is considered in all cases net of actual
expenses incurred, and the usual starting point is fifty-fifty sharing. However, each case will be considered
on its own merits. For example, where there are identified victims of fraud in the foreign jurisdiction
restitution will be addressed. In cases coming within Article 57 of the United Nations Convention against
Corruption, the full amount may be repatriated.
B. The Operational Framework
The Mutual Legal Assistance Unit of the Department of Justice works with Hong Kong law enforcement
to assist foreign jurisdictions in the tracing and restraint of proceeds of crime, as well as the registration of
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external confiscation orders.
The Mutual Legal Assistance Unit acts as Hong Kong’s Central Authority under international
arrangements for co-operation in criminal matters and is staffed by qualified lawyers. The Unit acts not only
as the Central Authority: it also executes the request by way of obtaining court orders and supervising law
enforcement.
Hong Kong law enforcement agencies are Hong Kong Police, Hong Kong Customs and Excise
Department, and the Independent Commission Against Corruption. Depending on the nature of the
offending in any particular case, officers from one of these agencies will work with the Mutual Legal
Assistance Unit to execute the foreign request for assistance.
In cases where not all assets may have been identified by the foreign jurisdiction, Hong Kong law
enforcement may work with their foreign counterparts initially at the law enforcement level to trace and
identify assets. The Joint Financial Intelligence Unit in Hong Kong is staffed by officers from Police and
Customs and Excise Department, and this Unit may also provide assistance.
Once the formal request for assistance is finalized, it should be sent by the Central Authority of the
requesting jurisdiction direct to the Mutual Legal Assistance Unit, Department of Justice HKSAR. There is
no need to route the request through embassies in Beijing or consular representatives in Hong Kong. This
only wastes time.
The request for restraint will be assigned to a lawyer in the Mutual Legal Assistance Unit who will
consider its contents and reply to the requesting authority. If the request does not comply with minimum
legal requirements, advice will be given. Once the request meets minimum legal requirements, it will
be processed. In cases of restraint and registration of external confiscation orders, this will necessitate
Secretary for Justice acting for the government of the requesting place to apply to Hong Kong courts for
orders.
Restraint orders are usually applied for on an ex parte basis i.e. without notice to the defendants or other
affected parties. The application will be supported by a detailed affidavit setting out all factual and legal
circumstances of the cases. If the application is granted, the court will appoint a return date several months
later by which time the defendants and other parties must be served notice of the proceedings and be given
the opportunity to oppose the continuation of the restraint order in Hong Kong. At the return date, if there
is no opposition, the court will usually order the restraint until further order i.e. until completion of the
proceedings in the foreign jurisdiction and the making of any final confiscation order there. If the application
is opposed, a full hearing will be held and the court will make its decision depending upon the arguments
raised.
In cases where funds are held in bank accounts, the accounts will be frozen with interest continuing to
accrue. In cases of other property such as apartments or shares, receivers may be appointed to manage the
property. The costs of receivers will be paid from the property under management. The defendants may
also apply to the court for release of funds for legal and living expenses, but only if the court is satisfied they
have no other available funds or means worldwide.
If no final confiscation order is obtained in the requesting jurisdiction, the restraint order in Hong Kong
will be discharged. On the other hand, if the requesting jurisdiction does obtain a final confiscation order in
its own courts over proceeds of crime in Hong Kong, the foreign jurisdiction should make a request to the
Mutual Legal Assistance Unit for registration of the order in the Hong Kong court. Again, counsel will act on
the request if the minimum legal requirements are met and will apply to the court to register the order. The
defendant and affected parties must be given notice of the registration and will have the opportunity to apply
to have it set aside. If the registration is not set aside, it will be enforced. In case of funds held in banks, the
funds will be paid into court. In case of other property, receivers may be appointed to realise the property
and pay the realized funds, net of expenses, into court.
The Mutual Legal Assistance Unit will keep the foreign jurisdiction informed of progress at all times.
Once all funds are paid into court, the requesting jurisdiction will be given an opportunity to apply for a
50
share of the realized funds. This process will be determined by Secretary for Justice in consultation with
Hong Kong law enforcement and the authorities of the requesting jurisdiction on a case by case basis.
C.Minimum Legal Thresholds for Assistance
The Mutual Legal Assistance in Criminal Matters Ordinance contains minimum legal thresholds that
must be met by the requesting place before assistance can be rendered.
The general thresholds common to all requests for mutual legal assistance, including restraint and
confiscation procedures, comprise the following grounds of refusal:
 The






granting of the request would impair the sovereignty, security or public order of the PRC or any
part thereof;
The request relates to an offence of a political character;
The request relates to a purely military offence;
The request was made for the purpose of punishing a person on account of race, religion, nationality
or political opinions;
The request gives rise to double jeopardy;
The granting of the request would seriously impair the essential interests of Hong Kong;
Dual criminality is not met.
In addition, specific conditions apply for registration of an external confiscation order. The offence to
which the order relates must be punishable by imprisonment for not less than two years. The purpose of the
order must be for recovering payments or others rewards received in connection with the offence, property
derived or realized from such payments or rewards, or property used or intended to be used in connection
with the offence. The order may also be for the purpose of depriving a person of a pecuniary advantage
obtained in connection with the offence.
These conditions are broad and are easily met in most cases.
II. EFFECTIVE INTERNATIONAL CO-OPERATION (IN PARTICULAR, MUTUAL LEGAL
ASSISTANCE) IN CASES OF RECOVERY OF ILL-GOTTEN ASSETS
A.Some of the Problems
Those practitioners who have worked in the area of mutual legal assistance know that serious obstacles
can arise in achieving effective recovery of proceeds of crime located abroad. Despite public adherence by
governments to full co-operation between States in the recovery of ill-gotten assets, many practitioners
know there are considerable hurdles to overcome and there is general room for improvement by most
jurisdictions – both as victim States and as receiving States holding proceeds of crime.
The subject has taken on international significance in the wider political arena, and recent multilateral
instruments such as the United Nations Convention against Corruption now contain detailed provisions
on asset recovery (Chapter V) to facilitate effective co-operation between States. The United Nations
Office on Drugs and Crime, together with the World Bank, has established the Stolen Asset Recovery
(StAR) Initiative as a platform to improve capabilities of countries in effective international asset recovery.
International bodies such as the Financial Action Task Force Against Money Laundering (FATF) are
currently working on reviews to strengthen their standards on international co-operation for asset recovery
to encourage more effective implementation and outcomes in practice.
But serious problems persist.
1. The Absence of an Adequate Legal Framework
An adequate domestic framework to execute international requests for recovery of proceeds of crime is
fundamental to any successful system. Foreign requests for recovery of assets invariably involve the use
of coercive measures, such as restraint and confiscation of property, and countries receiving such requests
must have adequate legal powers to give effect to these requests.
51
Traditionally, jurisdictions have relied upon their own powers of investigation to commence a local
investigation or prosecution with a view to restraining or confiscating the assets based on offences
committed abroad. However, this local procedure is sometimes ill-suited to foreign requests where most
of the criminal activity has taken place abroad, where the evidence is also mostly located abroad and where
jurisdictional issues concerning the right to prosecute can arise.
More recently, jurisdictions have begun enacting legislation which enables their own courts to recognize
and enforce confiscation or forfeiture orders obtained abroad but covering proceeds of crime located in their
own jurisdiction. This procedure has the great benefit of ensuring that the merits of the confiscation order
are more or less determined in the State where the crime or predicate offence occurred. The courts in the
requested State where the assets are located then simply ensure certain fundamental thresholds are met
for registration and enforcement of the order without re-litigating the merits of the order obtained in the
requesting State.
Claims for recovery of assets may also be pursued through the civil courts of the State in possession of
the ill-gotten gains. These are essentially private actions between plaintiffs and defendants based on civil
law claims and remedies.
But whatever the case, it is essential that States have some legal framework in place to execute
international requests for recovery of proceeds of crime effectively and efficiently. It is even better if the
framework is supported by bilateral treaties between States for mutual legal assistance in criminal matters,
specifically covering asset recovery. Without a suitable legal framework, nothing much is really possible
when a request is received.
2. Inadequate Implementation of the Law
However, even if an appropriate legal framework is in place to make and process requests, serious
problems remain in the effective implementation of these procedures in actual casework. Many jurisdictions
now have laws including purpose-built laws for mutual legal assistance, but what good is the law if it is not
effectively implemented?
Effective implementation depends upon sufficient provision of personnel and resources to deal with
requests for international co-operation. Most resources in any criminal justice system are allocated to
domestic cases, and foreign requests for assistance have sometimes been treated with less priority. This
mindset is changing and it is increasingly common for countries to have dedicated units within justice and
law enforcement agencies to deal with foreign requests for legal assistance. This trend is to be encouraged
and should continue.
However, it is equally important to ensure that personnel are adequately trained and sufficiently expert
in the work they must undertake. Success in this area depends very much upon motivated personnel
who seek results and who do not simply act as link in a chain of bureaucratic paper-shuffling with no true
engagement in the substantive outcomes. There must be a system, but the system must be operated by
the right people and be as simple as possible, notwithstanding the sensitivities sometimes involved e.g. in
requests concerning current or past political figures in the victim State.
The overall legal and court system in the requested State must also have integrity and be functioning
effectively and efficiently. If the request is fed into a dysfunctional court system with systemic delays or
lacking integrity of process then effective implementation will not be achieved at all.
3. North versus South
The old north/south divide between rich nations and under-developed nations can be very much an issue
in asset recovery work. However, it’s more a divide between developed financial centres (e.g. London, New
York, Hong Kong, Zurich) which tend to receive or have proceeds of crime routed through their systems and
developing nations who may be the victim of large scale larceny by persons in positions of power or privilege
who have deposited their ill-gotten gains abroad.
Serious issues arise between what the financial centre may require from the requesting jurisdiction in
order to effectively restrain or confiscate property in its jurisdiction and what the requesting jurisdiction is
52
able to give. Financial centres usually have sophisticated and well-developed legal systems which require
minimum legal thresholds and evidential requirements to be met before requests can be processed. Some
less developed jurisdictions do not operate at such a sophisticated level and cannot provide the necessary
levels of information or detail required. Some may even have difficulty in formulating a request for
assistance in the first place.
The StAR Initiative is working on issues such this in an attempt to bridge the divide and remove
barriers to effective asset recovery. Is the problem with financial centres which set their thresholds too
high in processing requests, or is the problem with requesting jurisdictions that do not adequately and
sufficiently pursue requests and provide the necessary information requested by the financial centres? Is it
a combination of both?
4. Common Law versus Civil Law
This is another divide than can cause problems – the different procedural requirements between
common law and civil law legal systems. Common law jurisdictions find it relatively easily to communicate
between themselves to understand the requirements of the other jurisdiction in processing requests.
The requirements are often very similar. Civil law jurisdictions likewise may operate smoothly between
themselves. But when a civil law jurisdiction seeks assistance from a common law jurisdiction, or vice versa,
immediate procedural barriers to communication can arise. Procedures which a civil law jurisdiction seeks in
a common law jurisdiction may simply just not be available, and procedures that a common law jurisdiction
asks a civil law jurisdiction to follow in making a request for assistance may be simply impossible to comply
with.
This can sometime cause misunderstandings or even resentment by both parties that the request is
either not being acted upon or pursued in good faith. For example, requests for additional information by the
requested jurisdiction in an attempt to ‘fit’ the request to its own procedural system may be regarded by the
other as a way of somehow refusing or delaying the request.
But simply put, powers and procedures between the two systems are different. In civil law jurisdiction
investigating magistrates or prosecutors may be able to freeze bank accounts by administrative action,
whereas in common law jurisdictions a more cumbersome procedure of formal court orders is usually
involved. Common law jurisdictions may ask for evidence “on oath or affirmation”, which may be a concept
unknown to some civil law jurisdictions. Investigating magistrates from civil law jurisdictions may ask
common law jurisdiction to “take over the inquiry and take all steps as necessary to locate and confiscate
proceeds of the crime”, whereas common law jurisdiction usually act upon specific instructions such as
“restrain all funds in bank account xxx”.
5. Delay
The most common complaint and problem associated with requests to recover proceeds of crime is delay.
The procedures to make formal requests are often regarded by law enforcement as cumbersome and timeconsuming, involving formalities in their own jurisdiction before the request is issued, further formalities in
transmission of the request, and yet further formalities in execution once received by the other jurisdiction.
Lack of adequate legal frameworks, ineffective processing, communication and resource gaps (see 1 - 4
above) all add sometimes to a sense of frustration that the system is not working, or if it is it is working then
only very slowly. In some cases, countries eventually give up pursuit of the request due to lack of progress
in the requested State.
But this is something of a two-way street. The requested States may equally say the delay is caused
by the requesting State not providing the additional information required so to execute the request. The
requested jurisdiction may have obtained an initial restraint order at the request of the other jurisdiction but
may not be able to enforce confiscation and realize the assets in its own jurisdiction because the requesting
jurisdiction has not obtained a final confiscation order that can be enforced abroad.
The fact remains that requests for international legal co-operation between different countries involving
the exercise of compulsory powers over persons and property will of necessity involve a certain degree
of formality, time and effort to achieve. Countries and practitioners should work together to improve
53
co-operation, overcome identified problems and reduce delay in individual cases.
The question remains: how?
B. Some Suggested Solutions
There are no easy or instant solutions. From a practical perspective, there are a variety of forces at play
which may inhibit effective co-operation, ranging from over-arching political considerations to systemic
failures in criminal justice systems to individual lack of action in particular cases.
However, experience suggests that some immediate progress can be made by focusing in particular on
operational imperatives regardless of the wider political or legal context.
1. Partnerships
Identify your major partners for asset recovery. At the domestic level these are likely to be law
enforcement agencies, justice ministries, financial sector players such as banks where assets may be
held, and private sector entities such as accounting firms which may provide experts to assist in tracing
or managing assets. Work with each other to establish procedures and protocols that each is familiar when
making or receiving international requests for asset recovery.
At the international level, identify which jurisdictions are key jurisdictions for asset recovery work. If
bilateral treaties or agreements have not been established, work to establish them. Identify counterpart
players and agencies within those jurisdictions, so that when an actual case arises the channels of
communication are already established and known.
Develop and maintain your network of contacts. This may be achieved by regular case consultations with
your more important partners on an annual or biennial basis. Attend international conferences and seminars
when asset recovery issues are being discussed in multilateral forums. Sign up to relevant networking
groups, such as the Asset Recovery Experts Network (www.aren.assetrecovery.org).
2. Case Communication
Keep talking, talking, and talking. Set up an easy line of communication, including by email if possible. Be
responsive. Requests received should be acknowledged and a way forward offered. If further information is
required, it should be supplied expeditiously. Avoid a stalemate situation – the requesting party complains
the request is not being processed. The requested party complains it needs more information before it can
do so.
Don’t stop talking to each other. This can be difficult, particularly if foreign language issues are involved.
But keep working at it. If necessary, convene face-to-face meetings in important cases by travelling to the
other jurisdiction to discuss.
Have information available upon request in booklets or on your website about how to make requests for
asset recovery, including contact details. Offer to review foreign requests in draft before they are formally
sent to ensure that they are compliant and may be executed.
Build trust.
3. Resources
Political commitments by governments to ensure effective recovery of proceeds of crime must be backed
by adequate provision of funding to establish and maintain the agencies which are engaged at the operational
level.
In some jurisdictions specialized agencies have been established to recover proceeds of crime, both
domestically and at the international level. But for most jurisdictions the work is assumed by existing
law enforcement and criminal justice system agencies within a broader platform of other work. Whatever
approach is used, trained personnel, including financial investigators and lawyers, must be made available
and given opportunity to focus on international asset recovery work.
54
Personnel should not be too junior or rotated too quickly. Experienced operators are required to ensure
effective outcomes. Specialization is needed.
4. Central Authorities
Central authorities can perform an important role in achieving effective outcomes. They are usually
the first point of contact with the foreign requesting party and are the gateway for execution of the request
domestically. However, central authorities should not simply act as a post-box. They should add value
wherever possible.
Central authorities may advise on the adequacy of the request. They can provide direct contact details
of the responsible officer within the central authority, as well as contact details of other officers or agencies
responsible for executing the request. They should oversee execution of the request on a pro-active basis, if
not by directly executing themselves then by at least overseeing its timely execution.
Some central authorities receive large numbers of requests for international assistance, not just limited
to asset recovery work. They should give priority to cases as necessary and have in a place an effective
electronic case management system to track cases and their progress towards effective execution.
5. Anti-Corruption Efforts
However, the best work at the operational level is not going to be good enough if systemic corruption or
criminal justice failures pervade either the State making the request or the State receiving the request.
Some of the more high-profile international asset recovery cases have involved political leaders who have
stolen from the coffers of the State they have been elected to lead, sometimes aided or at least unchecked by
a corrupt political system. After regime change, their ill-gotten gains have become the target of recovery by
the new regime. But the existing systems in the country may have become corrupted to such an extent that
they cannot effectively manage pursuit of these assets abroad. And when they can, questions may still arise
concerning the return and disposal of these assets to a system which remains fundamentally corrupted. Will
ill-gotten assets only be returned to end up in some-one else’s own pocket?
It is only when both requested and requesting States have in place fundamentally fair institutional
systems that operate relatively free of corrupt interference that this problem will be alleviated. Of course
the scope of such reform goes far beyond measures for effective asset recovery.
However, recent instruments such as the United Nations Convention against Corruption are leading the
way for systemic reform. The provisions of the Convention rightly go beyond the standard criminalization
and asset recovery measures to include detailed provisions on corruption prevention measures in both the
public and the private sector, aimed at ensuring the integrity of institutions operating within each State.
C.Asset Management and Retention - Who Gets the Money?
Finally, to deal with the question of what happens to the ill-gotten gains if and when recovered.
Many jurisdictions have in place a scheme to protect and manage proceeds of crime pending enforcement
of a final confiscation order. The funds remain under restraint in the jurisdiction where they are located, and
depending upon the nature of the asset under restraint, receivers are sometimes appointed to manage the
property. If these are private sector receivers they may be paid from the assets under management.
Once the final confiscation order is enforced and all property realized, where do the funds go – to the
jurisdiction in which they were seized, the jurisdiction requesting seizure, or are they shared? Bilateral
or multilateral agreements may regulate such issues. Under the United Nations Convention against
Corruption, in certain types of cases all funds must be repatriated to the victim State. Under the United
Nations Convention against Transnational Organized Crime, restitution of victims of fraud is strongly
encouraged.
If the funds or a portion of the funds are retained by the jurisdiction in which they were seized, they
may be paid into general revenue. Some jurisdictions operate asset forfeiture funds into which recovered
proceeds are paid. The funds are then used for to pay for domestic law enforcement initiatives and other
55
related purposes.
Whatever the case, proper asset sharing and repatriation of ill-gotten gains must be the cornerstone
of a successful system. Law enforcement and criminal justice agencies will not usually be willing to
expend considerable time and effort to pursue ill-gotten gains abroad if they know, even when successfully
recovered, the ill-gotten gains will not be repatriated or at least shared.
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PARTICIPANTS’
ANDAND
COURSE
COUNSELLORS’
PARTICIPANTS’
COURSE COUNSELLORS’
PAPERS PAPERS
MEASURES TO IDENTIFY, TRACE, FREEZE AND CONFISCATE
THE PROCEEDS OF CRIME - THE PHILIPPINE SETTING
Julia C. Bacay-Abad*
I. INTRODUCTION
Confiscating the proceeds of crime is an effective way to curtail economic crime. Indeed, precluding
criminals from enjoying the proceeds of their criminal activities serves as a strong deterrence to would-be
offenders since the incentive to engage in economic crime is diminished if the likelihood of gaining profit is
reduced.
In the same way, forfeiture is a form of incapacitation, in that the tools or instruments of the crime are
removed from circulation so that they may no longer be used, either by the criminal once he or she regains
freedom, or by the members of his or her criminal organization.
Moreover, in cases where the crime involves innocent victims, such as swindling and other types of
fraud, asset forfeiture is an effective means of recovering property that may be used to compensate the
victims.
In the Philippines, penal laws - the Revised Penal Code and some special criminal laws - include the
forfeiture of instruments and proceeds of crime as a form of accessory penalty. But while criminal forfeiture
aims to dissuade people from committing crimes, it does not prove as effective as it should since it is
dependent on the conviction of the accused in a criminal prosecution. And more often than not, unless the
authority is able to place the proceeds of the crime in the custody of the authorites at the initial stage of
criminal prosecution, by the time a conviction is obtained, the said proceeds are gone.
In contrast, civil forfeiture requires neither conviction nor prior initiation of a criminal prosecution.
While criminal forfeiture is as old as the Revised Penal Code1 in the Philippines, civil forfeiture is
relatively new.
This paper focuses on the civil forfeiture regime in the Philippines, its legal framework, the progress the
government has made since its adoption, and the direction it takes towards a more successful confiscation of
proceeds of crime.
II. GENERAL SITUATION IN TERMS OF IDENTIFYING, TRACING, FREEZING AND
CONFISCATING PROCEEDS OF CRIME IN THE PHILIPPINES
A. Identifying and Tracing Assets
1.Submission of Covered Transaction Reports (CTRs) and Suspicious Transaction Reports (STRs) by
Covered Institutions
Under Republic Act (R.A.) No. 9160, otherwise known as the Anti-Money Laundering Act of 2001
(AMLA), as amended, covered institutions2 are required to submit to the Anti-Money Laundering Council
* Deputy Director and Head, Legal Services Group, Anti-Money Laundering Council Secretariat, Philippines.
1 The Revised Penal Code took effect on 1 January 1932.
2 Under Section 3(a) of the AMLA, as amended, “covered institutions” refer to: (1) banks, non-banks, quasi-banks, trust
entities, and all other institutions and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng
Pilipinas (BSP); (2) insurance companies and all other institutions supervised or regulated by the Insurance Commission (IC);
57
(AMLC)3 covered transaction4 reports (CTRs) and suspicious transaction5 reports (STRs) within five
working days from the occurrence of the transactions.
The primary purpose of requiring covered institutions to submit CTRs and STRs is to provide the AMLC
with “leads” in the investigation of possible money laundering, as well as to enable it to profile transactions
to trigger alerts and track assets of persons or entities suspected of committing money laundering.
CTRs and STRs submitted to the AMLC are, under the law, strictly confidential and may not be disclosed
to any person; neither may they be used as evidence in any proceedings. The AMLC, being the government
agency empowered to investigate money laundering offences, makes use of the information contained in the
STRs as a jump-off point for the investigation of possible money laundering offences. CTRs, on the other
hand, are used to track other assets of a person being investigated.
However, to be able to share the information with other law enforcement agencies that are tasked to
investigate unlawful activities (predicate crimes), the AMLC has entered into a Memorandum of Agreement
(MOA) with relevant law enforcement agencies (LEAs) and other investigative bodies. Under the MOA,
the parties may, on their own initiative or upon request, share with each other any information that may aid
in their respective investigations subject to the provision of confidentiality. To date, the AMLC has entered
into MOAs with 13 LEAs and investigative bodies in the Philippines. The AMLC has likewise an existing
Memorandum of Understanding (MOU) with 27 foreign FIUs by virtue of which exchange of information is
facilitated.
The submission of CTRs and STRs being mandatory, the law authorizes the AMLC to impose an
administrative penalty (in the form of fines) upon any covered institution which fails to comply with the
reporting requirement.
2. Bank Inquiry as an Investigative Tool
In the past, the difficulty of identifying and tracing proceeds of crime was aggravated by the fact that
law enforcement agents could not look into the bank deposits of individuals, particularly those who were
suspected of committing crimes, due to the bank deposit secrecy law in the country. Indeed, the strict bank
deposit secrecy law used to be an obstacle in tracing assets, particularly assets in the form of bank deposits.
However, with the enactment of R.A. No. 9160, the bank deposit secrecy law has been relaxed. Under
the AMLA, if there is probable cause that a particular bank deposit or investment is related to an unlawful
activity or a money laundering offence, the AMLC may inquire into or examine such bank deposit or
investment. As a general rule, the AMLC needs to get an order from the proper court to enable it to
examine a bank deposit. However, if the investigation being conducted is in relation to the unlawful activities
of kidnapping for ransom, illegal drug activities or terrorism, the AMLC may exercise its authority to
examine a particular bank deposit without the necessity of a court order.
and (3)(i) securities dealers, brokers, salesmen, investment houses and other similar entities managing securities or rendering
services as investment agent, adviser, or consultant; (ii) mutual funds, close-end investment companies, common trust
funds, pre-need companies and other similar entities; (iii) foreign exchange corporations, money changers, money payment,
remittance, and transfer companies and other similar companies; and (iv) other entities administering or otherwise dealing in
currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary
instruments or property supervised or regulated by the Securities and Exchange Commission (SEC).
3 The AMLC is the financial intelligence unit (FIU) of the Philippines.
4 A covered transaction is any transaction in cash or other equivalent monetary instrument involving a total amount in excess
of five hundred thousand Pesos (PhP500,000.00, or approximately US$10,000.00) within one banking day (Section 3[b]) of the
AMLA).
5 A suspicious transaction is a transaction, regardless of the amount involved, where any of the following circumstances exist:
(i) there is no underlying legal or trade obligation, purpose or economic justification; (ii) the client is not properly identified;
(iii) the amount involved is not commensurate with the business or financial capacity of the client; (iv) taking into account
all known circumstances, it may be perceived that the client’s transaction is structured in order to avoid being the subject of
reporting requirements under the AMLA; (v) any circumstance relating to the transaction which is observed to deviate from
the profile of the client and/or the client’s past transactions with the covered institutions; (vi) the transaction is in any way
related to an unlawful activity or offence under the AMLA that is about to be, is being or has been committed; or (vii) any
transaction that is similar to any of the foregoing (Section 3[b-1] of the AMLA).
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PARTICIPANTS’ AND COURSE COUNSELLORS’ PAPERS
Through a bank inquiry, the AMLC is able to obtain relevant documents and information pertaining to
the financial transactions of a person suspected of committing money laundering. Such transactions may
include purchases of properties, which may lead to the discovery of other assets acquired by the subject to
investigation. Unlike an STR, any bank document or records obtained pursuant to an order of the court may
be used in evidence once a criminal case for money laundering or a civil forfeiture case has been filed in
court.
3. Investigation of Ill-gotten Wealth of Government Officials and Employees
The authority to investigate ill-gotten wealth of government officials and employees pertains to
the Office of the Ombudsman. The investigation is usually initiated upon complaint of either a known
complainant or an anonymous complainant. A complaint filed by a known complainant is validated in a
preliminary conference and by gathering supporting documents, getting sworn statements of the witnesses
and conducting ocular inspection. Thereafter, the Field Investigation Office (FIO) of the Office of the
Ombudsman conducts an independent investigation.
On the other hand, if the complaint has been filed by an anonymous complainant, the FIO acts as the
nominal complainant, and at the same time, conducts investigation. The investigation includes establishing
the personal circumstances of the respondent, particularly his or her being a public officer, and verification of
the allegations in the anonymous complaint.
In the investigation of ill-gotten wealth, the Office of the Ombudsman resorts to two important
documents which are required to be filed by all public officials and employees: these are the Statement
of Assets Liabilities and Net Worth (SALN) and the Disclosure of Business Interests and Financial
Connections. Under R.A. 6713 or the Code of Conduct and Ethical Standards for Public Officials, all public
officials and employees shall file under oath their Statement of Assets, Liabilities and Net Worth and a
Disclosure of Business Interests and Financial Connections and those of their spouses and unmarried
children under 18 years of age living in their households. The two documents shall contain information on
the following:
(a)
(b)
(c)
(d)
(e)
real property, its improvements, acquisition costs, assessed value and current fair market value;
personal property and acquisition costs;
all other assets such as investments, cash on hand or in banks, stocks, bonds, and the like;
liabilities, and;
all business interests and financial connections.
The documents must be filed:
(a) within 30 days after assumption of office;
(b) on or before 30 April of every year thereafter; and
(c) within 30 days after separation from the service.
All public officials and employees required to file the aforestated documents shall also execute, within
30 days from the date of their assumption of office, the necessary authority in favour of the Ombudsman to
obtain from all appropriate government agencies, including the Bureau of Internal Revenue, such documents
as may show their assets, liabilities, net worth, and also their business interests and financial connections in
previous years, including, if possible, the year when they first assumed any office in the Government.6
The FIO verifies the contents of the SALN from the records of relevant government agencies such as
the Land Transportation Office (LTO), the Registry of Deeds, Assessor’s Office, Securities and Exchange
Commission, Department of Trade and Industry, Bureau of Licenses and Permits, Bureau of Internal
Revenue (to determine other sources of income), and the Bureau of Immigration (for travel records).
The FIO then analyses the respondent’s income, compensation and other benefits received from the
government vis-à-vis all his or her declared and undeclared assets. The FIO also conducts ocular inspection
and surveillance whenever applicable and/or if necessary.
6
Section 8, R.A. 6713.
59
In case of discrepancy between the totality of all known sources of income and acquired assets, the
Office of the Ombudsman files either a criminal complaint for violation of R.A. 3019 (Anti-Graft and Corrupt
Practices Act) and/or a civil case for forfeiture of ill-gotten wealth under R.A. 1379.
B. Freezing of Assets
Prior to the enactment of the AMLA in 2001, the Government had no mechanism to freeze a property or
asset that was deemed related to criminal activities. With the passage of R.A. No. 9160, however, freezing
of assets that are deemed related to unlawful activities or money laundering offence became an available
remedy to the Government.
1.Petition for Freeze Order is filed with the Court of Appeals
In the Philippines, freezing of property or assets is a judicial function. This is the express provision under
Section 10 of R.A. 9160, as amended.
A verified petition to freeze is filed ex parte with the Court of Appeals. It is filed in the name of the
Republic of the Philippines, as represented by the AMLC.
To ensure the confidentiality of a petition for freeze order, the petition is filed directly with the Presiding
Justice7 of the Court of Appeals who shall enter the same in a logbook specifically designed for the purpose,
and assigned a docket number. The logbook and the entries therein are kept strictly confidential and
maintained under the responsibility of the Presiding Justice.
2. Action by the Court of Appeals; Effectivity of the Freeze Order
Within twenty-four hours after the filing of a petition for freeze order, the Court of Appeals shall
immediately act thereon. If the Court is satisfied that, based on the allegations of the petition, there exists
probable cause that the monetary instrument, property, or proceeds subject of the petition are in any way
related to an unlawful activity, it shall issue ex parte a freeze order directing the respondent, or any person
acting on his or her behalf, to desist from transacting, withdrawing, depositing, transferring, removing,
converting, concealing, or otherwise disposing of the property subject to the freeze order.
The freeze order shall be effective immediately for a period of 20 days. Within the twenty-day period, the
Court shall conduct a summary hearing, with notices to the parties, to determine whether or not the freeze
order should be modified or lifted, or its effectivity extended. On motion filed by the petitioner (AMLC), the
freeze order may, on good cause, be extended for a period not exceeding six months.
The proceedings relating to petitions for a freeze order are governed by the Rule of Procedure on Civil
Forfeiture which was adopted by the Supreme Court in 2005.
C. Forfeiture of Assets
1.Criminal Forfeiture
Under Article 25 of the Revised Penal Code, forfeiture or confiscation of the instruments and proceeds
of an offence is classified as an accessory penalty which may be imposed upon conviction of the accused,
in addition to the penalty of imprisonment. Article 45 thereof provides that every penalty imposed for the
commission of a felony shall carry with it the forfeiture of the proceeds of the crime and the instruments or
tools with which it was committed. Such proceeds and instruments or tools shall be confiscated and forfeited
in favour of the Government, but those articles which are not subject of lawful commerce shall be destroyed.
Section 9 of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019) 8 imposes, in addition to
imprisonment and perpetual disqualification from public office, the penalty of confiscation or forfeiture in
favor of the Government of any prohibited interest and unexplained wealth manifestly out of proportion to
the salary and other lawful income of the public officer or employee.
The law penalizing the crime of plunder (R.A. No. 7080) likewise provides that in the imposition of
penalty, the court shall declare any and all ill-gotten wealth and their interests and other incomes and assets
7 The Presiding Justice is the administrative head or chief executive officer of the Court of Appeals.
8 R.A. No. 3019 took effect on August 17, 1960.
60
including the properties and shares of stock derived from the deposits or investment thereof forfeited in
favour of the State.9
A similar provision on forfeiture of instruments and proceeds of crime is provided in R.A. No. 9165,
otherwise known as the Comprehensive Dangerous Drugs Act of 2002.10 Section 20 thereof provides that
every penalty imposed for the unlawful importation, sale, trading, administration, dispensation, delivery,
distribution, transportation or manufacture of any dangerous drug and/or controlled precursor and essential
chemical shall carry with it the confiscation and forfeiture, in favour of the government, of all the proceeds
and properties derived from the unlawful act, including, but not limited to, money and other assets obtained
thereby, and the instruments or tools with which the particular unlawful act was committed, unless they are
the property of a third person not liable for the unlawful act, but those which are not of lawful commerce
shall be ordered destroyed without delay pursuant to the provisions of Section 21 of the Act.
2.Civil Forfeiture
The Philippines has, at present, two civil forfeiture statutes that allow recovery of proceeds of crime
without a criminal conviction. First is R.A. No. 1379 which was signed into law on 18 June 1955, and second
is R.A. No. 9160, otherwise known as the Anti-Money Laundering Act (AMLA) of 2001, as amended.
(i) Republic Act (R.A.) No. 1379
R.A. No. 1379 was the first civil forfeiture statute in the Philippines. It provides for the proceedings for
the forfeiture of property found to have been unlawfully acquired by government officers and employees.
It covers property that a public officer or employee has acquired during his or her incumbency which is
manifestly out of proportion to his or her salary as such public officer or employee and to his or her other
lawful income and the income from legitimately acquired property.11
The proceedings for forfeiture under R.A. No. 1379 is initiated by the Office of the Ombudsman.12 The
petition for forfeiture shall describe the approximate amount of property that the public officer or employee
has acquired during his or her incumbency in his or her past and present offices and employments, a
description of said property, the total amount of his or her government salary and other proper earnings
and incomes from legitimately acquired property, and such other information as may enable the court to
determine whether or not the respondent has unlawfully acquired property during his or her incumbency.
The respondent shall have a period of fifteen days within which to present his or her answer. Thereafter,
the Court shall set a date for a hearing, which may be open to the public, and during which the respondent
shall be given ample opportunity to explain, to the satisfaction of the court, how he or she has acquired the
property in question.
If the respondent is unable to show to the satisfaction of the court that he or she has lawfully acquired the
property in question, then the court shall declare such property forfeited in favour of the State, and by virtue
of such judgment, the property aforesaid shall become property of the State.
As earlier stated, R.A. No. 1379 covers only unexplained wealth of those working in the government.
Proceeds of crime acquired by a private individual may not be forfeited under this law.
While the law on forfeiture of unexplained wealth has been in existence since 1955, much is to be desired
in terms of the number of cases filed and successfully prosecuted pursuant to R.A. 1379. To date, there have
been two cases won, 13 dismissed or lost, and nine still pending before the Sandiganbayan .13
9 Section
2, R.A. No. 7080, as amended by R.A. No. 7659.
R.A. No. 9165 took effect on 4 July 2002.
11 Section 2, R.A. No. 1379.
12 Under the original provision of R.A. No. 1379, the authority to file a petition for forfeiture against unexplained wealth is
vested in the Solicitor General. However, subsequent legislation vested such authority in the Office of the Ombudsman.
13 A petition for Forfeiture pursuant to R.A. 1379 is filed either with the Sandiganbayan (special anti-graft court) if the
respondent occupies a position in government with at least salary grade 27, or with the ordinary court (Regional Trial Court), if
the respondent occupies a position below salary grade 27. As of this writing, only statistics on forfeiture of assets filed with the
Sandiganbayan had been obtained.
10
61
(ii) Republic Act No. 9160
The FATF14 40 Recommendations provide that countries may consider adopting measures that allow
proceeds and instrumentalities of crime to be confiscated without requiring a criminal conviction, or which
require an offender to demonstrate the lawful origin of the property alleged to be liable to confiscation, to the
extent that such a requirement is consistent with the principles of their domestic law.15
In compliance with the FATF 40 Recommendations, on 28 September 2001, the Philippine Congress
enacted R.A. No. 9160, otherwise known as the Anti-Money Laundering Act (AMLA) of 2001. The law took
effect on 17 October 2001. On 5 March 2003, R.A. No. 9160 was amended by virtue of R.A. No. 9194 which
took effect on 23 March 2003.
R.A. No. 9160 created the Anti-Money Laundering Council (AMLC), the financial intelligence unit (FIU)
of the Philippines. The AMLC is the government agency that is primarily responsible in the implementation
of the AMLA, as amended.
R.A. No. 9160 criminalized money laundering in the Philippines and, at the same time, introduced
civil forfeiture as an appropriate remedy for the seizure and forfeiture in favour of the State of monetary
instrument, property or proceeds involved in or related to an unlawful activity or money laundering offence
as defined in the law, without the necessity of conviction or prosecution in a criminal case.
Under Section 7 of the AMLA, the AMLC is vested with the authority to institute civil forfeiture
proceedings and all other remedial proceedings against assets or properties that are deemed related to
unlawful activities and/or money laundering offences. Relative thereto, Section 12 of the AMLA provides
that:
“SEC. 12. Forfeiture Provisions.—
(a) Civil Forfeiture. – When there is covered transaction report made, and the court has, in a petition
filed for the purpose ordered seizure of any monetary instrument or property, in whole or in part, directly or
indirectly, related to said report, the Revised Rules of Court on civil forfeiture shall apply.”
III. RULE OF PROCEDURE ON CIVIL FORFEITURE
While Section 12 of R.A. No. 9160 speaks of the Revised Rules of Court on civil forfeiture. At the time
R.A. No. 9160 was enacted, in 2001, there was no Rule on Civil Forfeiture in the Philippines. Thus, in
January 2005, upon the request of the AMLC, the Supreme Court directed the Committee on the Revision of
the Rules of Court to draft the Rule on Civil Forfeiture.
On 15 November 2005, the Supreme Court adopted the Rule prescribing the procedure in cases of civil
forfeiture including applications for asset preservation orders and petitions for freeze orders against assets
or properties involved in or related to an unlawful activity or money laundering offences. The Rule of
Procedure on Civil Forfeiture took effect on 15 December 2005.
A. Salient Provisions of the Rule of Procedure on Civil Forfeiture
1.Applicability of the Rule
The Rule of Procedure on Civil Forfeiture shall govern all proceedings for civil forfeiture, asset
preservation and freezing of monetary instrument, property, or proceeds representing, involving, or relating
to an unlawful activity or a money laundering offence defined under R.A. No. 9160, as amended.
Under R.A. No. 9160, the term “unlawful activity” is defined as any act or omission or series or
combination thereof involving or having direct relation to the following:
1.Kidnapping for ransom;
2.Drug Trafficking and other violations of the Comprehensive Dangerous Drugs Act of 2002;
3.Graft and Corruption under R.A. No. 3019, as amended;
14
15
Financial Action Task Force.
FATF Recommendation No. 3
62
4.Plunder (R.A. No. 7080 as amended);
5.Robbery and extortion;
6.Jueteng and Masiao (illegal gambling under Presidential Decree [PD]1602);
7.Piracy on the high seas (Revised Penal Code [RPC] & PD 532);
8.Qualified Theft under Art. 310, RPC;
9.Swindling under Art. 315, RPC;
10.Smuggling under R.A. 455 & 1937;
11.Violations of Electronic Commerce Act of 2000;
12.Hijacking, destructive arson and murder, including those perpetrated by terrorists against noncombatant persons and similar targets;
13.Fraudulent practices and other violations under the Securities Regulation Code of 2000 (RA 8799);
14. Felonies or offences of a similar nature that are punishable under the penal laws of other countries.
The foregoing offences are among the many crimes that are motivated by economic gain and generally
generate huge criminal proceeds.
2.Petition for Civil Forfeiture is filed in the Name of the Republic of the Philippines
Under Section 2 of the Rule of Procedure on Civil Forfeiture, a petition for civil forfeiture should be
filed in the name of the Republic of the Philippines, through the AMLC, as represented by the Office of the
Solicitor General.
The AMLC is the sole authority that may institute actions for civil forfeiture and all other remedial
proceedings in favour of the State. Considering, however, that the AMLC was not vested with legal capacity
to sue and be sued, the Rule requires that the action be instituted in the name of the Republic of the
Philippines.
The Solicitor General is the statutory counsel of the Republic of the Philippines and all its agencies and
instrumentalities, and any action filed in the name of the Republic, if not initiated by the Solicitor General,
shall be summarily dismissed.16
3.Where to File Petition for Civil Forfeiture
Section 3 of the Rule on Civil Forfeiture provides that a petition for civil forfeiture shall be filed in any
Regional Trial Court of the judicial region 17 where the property is located. Where all or any portion of the
property is located outside the Philippines, the petition may be filed in the Regional Trial Court in Manila or
of the judicial region where any portion of the property is located.
4.Direct Filing with the Executive Judge; Confidentiality of the Action
A petition for civil forfeiture shall be filed directly with the Executive Judge of the regional trial court.18
The Executive Judge is designated by the Supreme Court to exercise administrative supervision over lower
courts. Normally, the function of an Executive Judge relates only to the management of the first and second
level courts within his or her administrative area with a view to attaining prompt and convenient dispatch of
its business. However, in the case of actions for civil forfeiture, the Rule has vested solely in the Executive
Judges the judicial function and authority to act on, hear and decide petitions for civil forfeiture.
To ensure confidentiality in actions for civil forfeiture, the Rule requires the Executive Judge with whom
the petition is filed to enter the petition in a separate logbook which shall be kept strictly confidential and
maintained under the responsibility of the Executive Judge.19 This is to prevent leakages or disclosures of
information to unauthorized persons that may jeopardize the case and render it ineffectual.20
16 Republic
vs. The Register of Deeds of Quezon, Volume 314, Philippine Reports, page 473.
A judicial region consists of several cities or municipalities.
18 Section 5, Rule of Procedure on Civil Forfeiture.
19 Sections 6 and 7, ibid.
20 Justice Jose Vitug, Justice Oscar M. Herrera and Justice Bernardo P. Pardo, A Summary of Notes and Views on the Rule of
Procedures in Cases of Civil Forfeiture , 2006 Edition, page 19.
17
63
5. Service of Notice to the Respondent
Under the Rule on Civil Forfeiture, the respondent shall be given notice of the petition in the same
manner as service of summons in ordinary civil actions, i.e., personally, or by any other means prescribed
in the Rules of Court. Where the respondent is designated as an unknown owner or whenever his or her
whereabouts are unknown and cannot be ascertained with diligent inquiry, service may, by leave of court,
be effected by publication in a newspaper of general circulation in such places and for such time as the court
may order.
The notice shall inform the respondent that if no comment or opposition to the petition is filed within the
required period (i.e., 15 days from service of notice or 30 days from the publication of notice), the court shall
hear the case ex parte and render such judgment as may be warranted by the facts alleged in the petition and
its supporting evidence.21
A civil forfeiture is an action in rem , that is, action against the property subject thereof, and not against
the person known to be the owner or possessor of the property. That being the case, notice of the petition
is required to be served to the respondent, not for purposes of acquiring jurisdiction over the person of the
respondent, but for purposes of satisfying the requirements of due process.22 In fact, the Rule allows the
institution of civil action even if the owner of the property is unknown, or his or her whereabouts could not
be ascertained. In such cases, notice of the petition may be served by publication. Indeed, the institution and
prosecution of a civil forfeiture are not dependent on the prosecution or conviction of the respondent in a
criminal proceeding.
6. Provisional Remedies available in a Petition for Civil Forfeiture
(i) Ex-parte issuance of Provisional Asset Preservation Order (PAPO)
Within 24 hours upon the filing of a petition for civil forfeiture, the Executive Judge shall, ex-parte, act
thereon. Based on the allegations of the petition and the supporting documents, the Executive Judge shall
determine whether probable cause23 exists that the property subject to the petition is in any way involved
in or related to an unlawful activity or a money laundering offence as defined in R.A. No. 9160, as amended.
If the Executive Judge finds probable cause, he or she shall issue a Provisional Asset Preservation Order
(PAPO) effective immediately for a period of 20 days from the date of service thereof to the respondent
forbidding any transaction, withdrawal, deposit, transfer, removal, conversion, concealment or other
disposition of the subject monetary instrument, property or proceeds.24 The term “provisional” means
temporary, preliminary or tentative.
(a) Summary hearing for the issuance of an Asset Preservation Order (APO)
During the twenty-day effectivity of the PAPO, the court shall conduct a summary hearing at which the
respondent may, for good cause, show why the PAPO should be lifted. The court shall determine during
that hearing whether the PAPO should be modified or lifted, or whether an asset preservation order (APO)
should be issued.25
During the summary hearing, the burden of evidence is shifted to the respondent to show why the PAPO
should be modified or lifted. He or she must adduce preponderance of evidence to overcome the court’s
earlier finding of probable cause.
Should the respondent fail to present preponderance of evidence, the court shall issue an asset
preservation order (APO) which shall be effective until the case is finally decided.
The provision on the hearing for the issuance of an APO is intended to satisfy the requirements of due
21
Section 8, ibid.
vs. Court of Appeals , Vol. 425, Supreme Court Reports Annotated, page 98.
23 The term probable cause is defined in the Revised Implementing Rules and Regulations (RIRRs) of R.A. No. 9160, as
amended, as “such facts and circumstances which would lead a reasonably discreet, prudent or cautious man to believe that
an unlawful activity and/or money laundering offense is about to be, is being or has been committed and that the account or
monetary instrument or property sought to be frozen is in any way related to said unlawful activity and/or money laundering
offense” (Rule 10.2 of the RIRRs).
24 Section 11, ibid.
22 Gomez
64
process of law.
An asset preservation order is akin to a writ of preliminary injunction as an ancillary or preventive
remedy that is resorted to by a litigant to protect or preserve his or her rights or interests and for no other
purpose during the pendency of the principal action.26
(b) Pre-trial, Trial and Judgment
Pre-trial is mandatory in an action for civil forfeiture. If a comment or an opposition is filed, the court
shall forthwith send notice of pre-trial conference to the parties.27 Pre-trial is intended to clarify and limit
the basic issues between the parties. Thereafter, trial shall proceed. Within 30 days from submission of
the case for decision, the court shall render judgment, based on preponderance of evidence, declaring
the property forfeited in favour of the State, or in appropriate cases, ordering the respondent to pay an
amount equal to the value of the monetary instrument or property and adjudge such other reliefs as may be
warranted.28
(c) Factors to determine where lies preponderance of evidence
In rendering judgment, the court may consider the following factors to determine where lies the
preponderance of evidence:
(a)That the monetary instrument, property, or proceeds are represented, involved, or related to an
unlawful activity or a money laundering offence:
(1)If the value or amount involved is not commensurate with the business, financial or earning capacity
of the person;
(2)If any transaction indicates a clear deviation from the profile or previous transactions of the person;
(3)If a person opens, maintains or controls an account with a covered institution not in his or her own
name or registered business name unless authorized under existing law;
(4)If a person has structured transactions in order to avoid being the subject of reporting requirements
under Republic Act No. 9160, as amended; or
(5)If any transaction exists that has no apparent underlying legal or trade obligation, purpose or
economic justification;
or
(b)That the monetary instrument, property, or proceeds, the sources of which originated from or are
materially linked to monetary instruments, properties, or proceeds used in the commission of an
unlawful activity or money laundering offence, are related to the said unlawful activity or money
laundering offence.29
(d) Claims against Forfeited Asset (Third Party Claim)
In order to protect the rights of innocent parties who may have legitimate claim on the property that has
been ordered forfeited in favour of the State, the Rule provides for third party claims. Thus, where the court
has issued an order of forfeiture, any person who has not been impleaded or has not intervened claiming an
interest in the property may file a verified petition for the declaration that the same legitimately belongs to
him or her and for segregation or exclusion of the property. The verified petition shall be filed with the same
court which rendered the order of forfeiture within 15 days from the date of finality of the order of forfeiture.
If nobody files such third party claim within the prescribed period, the order of forfeiture shall be executory
and bar all other claims.30
The court may dismiss the (third party) claim outright if it is not sufficient in form and substance and is
manifestly filed for delay.
Within 15 days after notice, the petitioner (AMLC) shall file a comment admitting or denying the claim
26 Republic
vs. Evangelista , 466 Supreme Court Reports Annotated, page 544.
Section 22, ibid.
28 Sections 29, 32, ibid.
27
65
specifically. The petitioner in its comment shall allege in offset any fees, charges, taxes and expenses due it.
Upon the filing of a comment contesting the claim, the court shall set the claim for hearing within 30 days
with notice to all parties. The court shall, thereafter, issue a final order on the contested claim within thirty
days from submission.
B. Cases Filed under the Present Rule of Procedure on Civil Forfeiture
As of 30 June 2010, the AMLC has filed a total of 41 cases for civil forfeiture, 12 of which have been
decided in favour of the Government. The AMLC has forfeited bank deposits in the amount of Php
43,301,412.53, a big portion of which had been turned over to the National Treasury. The pending cases
involve approximately Php 607,784,714.98 in cash, as well as four parcels of land with improvements; three
parcels of land without improvements; one condominium unit; one vessel; 58 vehicles; and various pieces of
jewellery of undetermined value.
One of these decided cases involved kidnapping for ransom committed against a Japanese national.
Sometime in 2003, a Japanese national was kidnapped in the southern part of the Philippines. The
kidnappers demanded from the family of the victim ransom money in the amount of six million yen. Wanting
the safe release of her father, the victim’s daughter wire-transferred the amount of six million yen to a bank
account in the Philippines as ordered by the kidnappers. Because of the sudden deviation from the usual
transactions in the bank account to which the wire transfer was made, the bank submitted a suspicious
transaction report to the AMLC which triggered an investigation. After its investigation, the AMLC
immediately instituted a civil forfeiture proceeding against the bank account. A judgment was rendered
in favour of the AMLC and the deposits in the bank account were ordered forfeited in favour of the State.
Thereafter, the family of the victim was able to seasonably file a claim against the forfeited amount, which
the court favourably granted. The entire amount forfeited was returned to the family.
While the civil forfeiture has long been decided, and the proceeds have been returned to the family of the
victim, the criminal cases for kidnapping for ransom and money laundering offence are still ongoing.
Another terminated civil forfeiture case involved the predicate offence of swindling or fraud (the “ponzi
scheme”) wherein a number of victims were inveigled to invest their money in a purported investment
company with a promise of high yields. It turned out that the company did not have a secondary license
to sell securities to the public. The company was shut down by the Securities and Exchange Commission.
The AMLC was able to freeze and forfeit the remaining money in the bank accounts of the respondents
amounting to more than twenty-one million pesos (Php21,000,000.00). At present, there is a pending claim
against the forfeited amount filed by a victim-investor which is still being heard by the forfeiture court.
IV. CHALLENGES OF THE PRESENT MEASURES TO IDENTIFY,
TRACE AND CONFISCATE PROCEEDS OF CRIME
Under R.A. No. 9160, in cases where the unlawful activity involved is not kidnapping for ransom, illegal
drug activities, or acts of terrorism, the AMLC needs to file an application in court before it can exercise its
authority to inquire into or examine bank deposits. In one case,31 however, the Supreme Court ruled that the
filing of an application for bank inquiry by the AMLC in such cases cannot be made ex parte. In other words,
there should be a notice to the respondent and hearing before an order allowing bank inquiry can be granted.
This procedure has hampered the expeditious conduct of bank inquiries on the part of the AMLC.
Moreover, under the present law, the unlawful activities (or predicate crimes to money laundering) are
limited to just 14 types of offences. Thus, the authority of the AMLC to institute civil forfeiture proceedings
is likewise limited to cases that are related to the aforementioned unlawful activities and money laundering
offences. For other crimes that are not considered “unlawful activities” or predicate crimes, forfeiture of
criminal proceeds may be obtained only in criminal proceedings, that is, subject to the conviction of the
accused.
31 Republic
66
of the Philippines vs. Eugenio , G.R. No. 174629, 14 February 2008.
Another challenge that the AMLC faces in the asset recovery regime is the lack of provision in the law
for asset management. There is no special fund for that purpose. Neither is there a provision in the law
allowing the AMLC to retain a portion of the forfeited funds to defray the necessary expenses incurred in
forfeiting assets. Thus, while the AMLC spends its own budget for the litigation expenses, everything that
is forfeited goes to the National Treasury.
V. FUTURE DIRECTION
In order to make identifying, tracing and confiscating proceeds of crime more efficient, the AMLC has
proposed to the Legislature further amendment of R.A. No. 9160. Among the proposed amendments are:
(i) inclusion of additional offences in the list of unlawful activities or predicate crimes to money laundering,
against which the AMLC may invoke the authority to file petition to freeze, conduct bank inquiry, and
institute civil forfeiture proceedings; (ii) giving the AMLC administrative power to freeze assets; (iii)
making the application for bank inquiry ex parte; and (v) establishment of a special fund out of the forfeited
assets that would defray the AMLC’s expenses in litigating civil forfeiture cases. The amendatory bill is still
pending with the Legislature.
VI. CONCLUSION
The generally lower standard of evidence in civil forfeiture actions, which are available in the absence
of criminal conviction, makes civil forfeiture an attractive option. Indeed, while the criminal cases for the
unlawful activities and money laundering offences have been dragging in both the preliminary investigation
and prosecution stages, the AMLC has been successful in all the civil forfeiture cases that had been decided
by the courts.
The present asset recovery regime in the Philippines has its own share of weaknesses and strengths.
But with a strong determination on the part of the AMLC, a sustained co-operation among all concerned
law enforcement agencies, both domestic and international, and a constant vigilance on the part of the civil
society, it is believed that civil confiscation could become the most effective mechanism to prevent the
laundering and proliferation of the proceeds of crime.
67
CHALLENGES IN THE LEGAL REGIME TO DEAL
WITH MONEY LAUNDERING
Chethiya Goonesekera*
I. INTRODUCTION
The general aim of this paper is to explore the contribution of anti-money laundering regimes to the fight
against corruption. Corruption is a crime which has as its ultimate aim the enjoyment of ill-gotten proceeds.
In instances of grand corruption some form of laundering activity is likely to take place in an attempt to
disguise the illegitimate source of wealth. An effective anti-money laundering regime will have in place
measures aimed at identifying and investigating such laundering activity and using the evidence obtained in
bringing the person or persons concerned to justice. It will also have in place measures aimed at preventing
the dissipation or loss of the proceeds of crime and recovering and/or confiscating them. An effective antimoney laundering regime can therefore make a significant contribution to the fight against corruption in at
least two main ways:
(i) it can help to uncover evidence of criminal activity through identification of suspicious movements of
financial assets, thus increasing the chances of a successful prosecution of the perpetrator of the crime;
(ii) it also enables the tracing of criminal proceeds to facilitate their preservation, recovery and ultimate
return to their rightful owner. In the case of State assets which have been pilfered by corrupt officials, these
may be returned to their rightful use.
II. EFFECTS OF TERRORISM
Sri Lanka is a country that recently emerged from 30 years of terrorism unleashed by the Liberation
Tigers of Tamil Ealam (LTTE). LTTE, albeit as a terrorist organization, has amassed a substantial amount
of wealth through illegal activities, including drugs and arms smuggling, human smuggling, credit card fraud
and extortion from diaspora communities. In the circumstances, the government of Sri Lanka, together
with relevant international law enforcement agencies, is concentrating very much on investigating and
prosecuting offenders whilst identifying and recovering all such ill-gotten wealth.
III. SRI LANKA’S INTERNATIONAL STATUS
In addition to the above, during the last decade or so, the state has been confronted with the challenge of
dealing with organized crime and proceeds of crime, most of which tend to take a transnational character. Sri
Lanka has been ranked 97th in the Corruption Perception Index 2009 of Transparency International which
reveals that bribery and corruption has to be dealt with comprehensively if the government is to ensure
sustainable development and to attract legitimate and long term foreign direct investment. The above can
be identified as the principal areas in which the government needs to engage to deal with ill-gotten wealth
and money laundering. It is in this context that Sri Lanka, during the last five years or so, initiated many
legislative and institutional reforms. At international level Sri Lanka is a signatory to many international and
regional conventions and initiatives on anti-corruption and money laundering, including the United Nations
Convention against Corruption (UNCAC).
IV. LEGAL FRAMEWORK TO ERADICATE BRIBERY AND CORRUPTION
Sri Lanka opened its economy in 1978, heralding an era of open economy bringing with it both positive
and negative dynamics. A free market economy necessitated deregulation and removing of controls which
* Senior State Counsel, Attorney General’s Department, Sri Lanka.
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were interpreted as impeding economic activity, particularly those of a transnational nature. This sudden
and at times ad hoc deregulation also resulted in the inability of the government to effectively monitor and
deal with sophisticated crimes, particularly economic crimes - hallmarks of bribery, corruption and money
laundering.
The Sri Lankan legal framework can be approached and analysed in two phases. The first phase is
comprised of the legislation enacted in the post-independence period, from 1948 until the end of the last
century. This legislation primarily relates to bribery and corruption (Bribery Act of 1950), the emphasis
being more on punishing the offender and to some extent utilizing that as a deterrence to would-be
offenders . The Act was enforced by a dedicated department and the prosecutions were on indictment by
the Attorney General. In the mid 1970s, supporting legislation was enacted emphasizing the importance
of transparency by requiring public officials to make an annual declaration of their personal assets and
those of their immediate family members. An officer was required to explain if this declaration disclosed
a disproportionate increase in the assets of the official concerned when compared to his or her legitimate
sources of income. However, this legislation was not complied with at an optimal level.
The second phase can be analysed as the period from early 1990s to date. The legal framework was
changed with the introduction of an independent institution (Permanent Commission to Investigate
Allegations of Bribery and Corruption) which was vested with the power of direct indictment and
answerable only to the Parliament.
A. Prevention of Money Laundering Act
A significant milestone is the changes that were taking place in the international arena as a response
to the 9/11 terrorist attack: the investigation into aspects of terrorist financing. In keeping with the
international trends and in view of the increase in the level of terrorist activity in Sri Lanka, the government
enacted the Prevention of Money Laundering Act (No. 05 of 2006). This Act basically related the crime
and the resultant liability to activities such as transacting, receiving, possessing, concealing or investing
property derived directly or otherwise from an unlawful activity with the knowledge that such property
had been derived from such unlawful activity. The law went on to provide an inclusive reference to the
types of activities that could attract liability under this Act. These included dangerous drugs, terrorism,
bribery, corruption, firearms and explosives, foreign currency transactions, transnational organized crimes,
cybercrimes, child pornography and trafficking of persons.
Section 2 of the Prevention of Money Laundering Act makes the Act applicable in relation to:
(a) A person who commits an offence under the provisions of this Act whilst being resident in Sri Lanka;
(b) An Institution which is used for the commission of an offence under the provisions of this Act, which
Institution is carrying on business in Sri Lanka and is either incorporated or registered in Sri Lanka or is
either incorporated or registered as a branch of a bank incorporated or registered outside Sri Lanka.
The new law provides for the imposition of penal sanctions in respect of persons found guilty by the high
court of the commission of the offence of money laundering. They are sentenced (i) to a fine not less than
the value of the property in respect of which the offence was committed and not more than three times that
value; or (ii) to rigorous imprisonment for a period of not less than five years and not more than twenty
years; or (iii) to both such fine and imprisonment. Further, the assets of the person convicted, including
the assets derived directly or indirectly from the commission of the offence of money laundering, shall be
forfeited.
B. Financial Transactions Reporting Act
To assist in investigations and to ensure continuous monitoring the parliament enacted the Financial
Transactions Reporting Act (No. 06 of 2006) which set up a Financial Intelligence Unit to independently
monitor suspected financial transactions and to conduct further investigations as may be warranted if there
is reasonable suspicion that money laundering is taking place. The Financial Transactions Reporting Act
was enacted with the objective of collecting of data relating to suspicious financial transactions to facilitate
the prevention, detection, investigation and prosecution of the offenders of money laundering and the
financing of terrorism respectively. The Act also operates to require certain institutions to undertake due
diligence measures to combat money laundering and the financing of terrorism, and this act seeks to provide
extensive supervisory powers to monitor the activities of all financial institutions.
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The law sets out entities that would monitor criminal activities of financial industry institutions, dealers
in various goods and services, casinos, gambling houses or lottery owners and extends to even service
providers such as lawyers, accountants, and estate agents. The law provides to issue freezing orders to
prevent money being siphoned off during the investigation period. It also provides for the forfeiture of
wealth derived from a predicate offence.
C. Financial Intelligence Unit
The Report of the Sri Lanka Financial Intelligence Unit issued by the Central Bank in November 2006
details the nature, composition and the functions of the Financial Intelligence Unit in Sri Lanka as well as in
the other countries, as follows:
“FIUs vary from country to country, but all of them share three core functions which are, to receive,
analyse and disseminate information, to combat Money Laundering and Terrorist Financing, which is
required to be undertaken both domestically and internationally. Since Money Laundering is often a crossborder activity, there is the need for FIUs to join forces with other intelligence units. Despite the best
domestic laws and regulations against money laundering, including those for a FIU, the need for an effective
information sharing mechanism is crucial. Financial Institutions are mandated to generate suspicious
activity reports and other mandated disclosures, such as cash transaction reports, and forward them to the
FIU. The centralization of this function and designating the FIU as the receiver of financial information is
fundamental for effective prevention, both in a national and international framework for Money Laundering.
Centralization also ensures greater efficiency in information gathering. There are various types of models
of operational FIUs. For Sri Lanka, the authorities have chosen the Administrative Model. This model is
usually part of the structure, or under the supervision of, an administration or an agency other than Law
Enforcement or Judicial Authorities. Accordingly, in Sri Lanka the FIU has been established by Gazette
Order, No.1437/24 of 23rd March, 2006 as a special unit in the Central Bank of Sri Lanka, reporting directly
to the Governor and the Monetary Board.’’
“Financial Transactions Reporting Regulation No.1 was issued whereby, the reporting threshold for
the purposes of Section 6(a ) of the FTRA was determined to be, any transaction exceeding Rs.1, 000,000
in cash, or its equivalent in foreign currency. In terms of Section 6(b ) the threshold for the reporting of
electronic fund transfers (EFTs) was determined to be, transfers in excess of Rs.1, 000, 000 or its equivalent
in foreign currency. The banks, in the first instance, were required to set up AML & CFT regimes and were
also advised to report all mandated Cash Transactions, Electronic Fund Transfers meeting the stipulated
threshold and any Suspected Transactions relating to money laundering and terrorist funding activities.”
D. Requirement to Maintain Records
In order to monitor the functions of the financial institutions, Section 4(1) of the Financial Transactions
Reporting Act requires the financial institutions to maintain records of transactions and of correspondence
relating to transactions and records of all reports furnished to the Financial Intelligence Unit for a period of
six years from the date of the transaction, correspondence or the furnishing of the report.
E. Obligation to Report to Financial Intelligence Unit
Section 6 of the Financial Transactions Act requires the Financial Institutions to report on Financial
Transactions. Accordingly, an Institution shall report to the Financial Intelligence Unit any transaction of
an amount in cash exceeding such sum as shall be prescribed by the Minister by Order published in the
Gazette, or its equivalent in any foreign currency (unless the recipient and the sender is a bank licensed by
the Central Bank); and any electronic funds transfer at the request of a customer exceeding such sum as
shall be prescribed by regulation.
F. Power of Courts to make Seizure and Forfeiture Orders
Upon an application made to High Court of Colombo under Section 26 of the Financial Transaction
Reporting Act, the courts can grant an order of continued detention of the cash and bearer instruments
seized under Subsection 4 of Section 24 or 25 for a period not exceeding three months. Furthermore,
under Section 26(2) of the Act, the Court may subsequently Order, after hearing, with notice to parties, the
continued detention of the cash and negotiable bearer instruments if satisfied of the matters mentioned in
section 26(1) but the total period of detention shall not exceed two years from the date of the Order.
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However, according to Section 26(4), no cash or negotiable bearer instruments detained under Section
26 shall be released where it is relevant to an investigation, prosecution or proceeding under the Prevention
of Money Laundering Act, No. 5 of 2006 or the Convention on the Suppression of Terrorist Financing Act,
No. 25 of 2005. Under Section 13(1) of the Prevention of Money Laundering Act, No. 5 of 2006: ‘‘Where a
person is convicted of the offence of money laundering, the Court convicting such person shall, make Order
that any movable or immovable property of such person derived or realised, directly or indirectly from any
unlawful activity, be forfeited to the State free from all encumbrances.’’ Further, under Section 13(4) the
Court making the Order of Forfeiture may presume that any movable or immovable property belonging
to the person convicted of the offence of money laundering is derived or realised, directly or indirectly,
from any unlawful activity if such property is not commensurate with the known sources of income of such
person, and the holding of which cannot be explained on a balance of probabilities, to the satisfaction of the
Court. The burden of proof for the convicted person to prove the sources of income is a civil burden of proof,
which in fact favours the convicted person.
Under Section 5 of the Convention on the Suppression of Terrorist Financing Act the court is empowered
to make forfeiture orders against the offences specified in Section 3 of the said Act. Accordingly, forfeiture
orders could be made against any person who, by any means, directly or indirectly, unlawfully and wilfully
provides or collects funds, with the intention that such funds should be used, or in the knowledge that they
are to be used or having reason to believe that they are likely to be used, in full or in part, in order to commit
any act intended to cause death or serious bodily injury to civilians or to any other person not taking an
active part in the hostilities, in a situation of armed conflict, and the purpose of such act, by its nature or
context, is to intimidate a population or to compel a government or an international organization, to do or
to abstain from doing any act, and who is therefore guilty of the offence of financing of terrorists or terrorist
organizations.
Moreover, freezing and seizure orders also could be made under Section 4 of the Convention on the
Suppression of Terrorist Financing Act against any person indicted by the Attorney General in the High
Court for offences specified in Section 3 of the Act. If such funds are lying in an account with any Bank, they
shall be subject to an order of freezing, or if such funds are in the possession or control of any person, they
shall be liable to seizure. On the filing of indictment, the Attorney-General shall notify the Central Bank of
the freezing or seizure as the case may be.
Further, at the conclusion of the case where the cash or negotiable bearer instruments have not been
claimed by any person within one year of it being seized or detained, an authorized officer may make an
application to the Court that such cash or negotiable instrument, or its equivalent in Sri Lankan rupees,
upon sale to the Central Bank, as the case may be, be forfeited to the Consolidated Fund under Section 26(5)
of the Financial Transactions Reporting Act.
In order to facilitate an investigation into offences of money laundering, the law seeks to authorize an
investigator to, upon application to a magistrate obtain an order, receive any document relevant to such
investigation from any person, including information relating to any identified transaction from any covered
entity.
In addition to the aforementioned orders of the courts, the Financial Transactions Reporting Act has also
empowered authorized officers to make orders of seizure and detention. Accordingly, under Section 25 of
the Act, an authorized officer may seize and, in accordance with the provisions of this part, detain any cash
or negotiable bearer instruments which are being imported into, or exported from, Sri Lanka in any form
or manner, if he or she has reasonable grounds for suspecting that it is derived from the commission of any
unlawful activity or intended by any person for use in the commission of an unlawful activity or intended
to be used for or in connection with an offence connected with the financing of terrorism in terms of the
Convention on the Suppression of Terrorist Financing Act, No. 25 of 2005.
G. Financial Institutions must exercise Due Diligence
The liability of financial institutions to monitor financial transactions of their customers also has been
broadened in the Financial Transactions Reporting Act under Section 5. This requires the institutions to
exercise due diligence and scrutiny of customers on transactions. Accordingly, an Institution shall conduct
ongoing due diligence on the business relationship with its customer, and conduct ongoing scrutiny of any
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transaction undertaken throughout the course of the business relationship with a customer to ensure that
any transaction that is being conducted is consistent with the Institution's knowledge of the customer,
the customer's business and risk profile, including, where necessary, the source of funds. However, the
effectiveness of this section is weakened due to the lack of technical capacity of certain financial institutions
to monitor complex and sophisticated transactions that occur through their institutions.
Furthermore, until very recently in Sri Lanka, the existence of unregistered financial institutions
was a common phenomenon. These institutions even had the capacity to engage in foreign transactions.
The deposits and transactions through such unregistered institutions were not on record. Therefore no
documentary evidence was available and this hindered investigations into corrupt financial transactions.
Therefore, statutorily requiring the financial institutions to exercise due diligence on transactions is an
improvement, but such improvement may be meaningful only if the institutions are provided with the
necessary technical capacity to monitor the financial transactions. The existence of such unregistered
financial institutions created a gap between the international and local laws but currently every such
unregistered financial institution must register with the Central Bank of Sri Lanka which is also the
Financial Intelligence Unit and the regulator of all financial institutions. According to the “Know Your
Customer” guidelines, all licensed banks are to conduct due diligence on all customers involved in crossborder financial transactions and ensure that all requirements under the relevant statutes are met.
Therefore, domestic laws have to a certain extent reduced the gap between international and local laws.
H. FIU may refer Matters for Investigations
The Financial Intelligence Unit has the power to refer any matter to the relevant authorities responsible
for carrying out investigations (Financial Investigating Unit in the Criminal Investigating Department) on
reasonable grounds. Accordingly, Section 15(1)(f) of the Financial Transactions Reporting Act No. 06 of 2006
states that the Financial Intelligence Unit shall refer any matter or any information derived from any report
or information it receives to the appropriate law enforcement agency if, on the basis of its analysis and
assessment, the Financial Intelligence Unit has reasonable grounds to suspect that the transaction would be
relevant to the investigation or prosecution under this Act or of an act constituting an unlawful activity, and
in connection therewith, the Financial Intelligence Unit may send a copy of such referral or information to
the relevant supervisory authority.
I. Exchange of Information with Foreign Law-Enforcing Agencies
Furthermore, the Financial Intelligence Unit can disclose to any foreign institution or agency any report
or information. This is set out in Section 16 of the Financial Transactions Reporting Act which allows the
Financial Intelligence Unit to share any information received on proceeds of crime and evidence gathered
in investigations with any other foreign agencies. Section 16 sets out that the Financial Intelligence Unit
may disclose any report or information to an institution or agency of a foreign state or of an international
organization or body or other institution or agency established by the Government of a foreign State that has
powers and duties similar to those of the Financial Intelligence Unit on such terms and conditions as are set
out in the agreement or arrangement between the Financial Intelligence Unit and an institution, agency or
organization or authority regarding the exchange of such information under Section 17.
Section 17 of the Financial Transactions Reporting Act provides for, subject to the approval of the
Minister in charge, working in co-operation with other international organizations which possess powers
and duties similar to those of the Financial Intelligence Unit. Accordingly this section allows the Financial
Intelligence Unit to enter into agreement with other foreign law enforcement agencies and foreign
supervisory authorities in order to exchange information and evidence. The information exchanged in such
agreements may not only benefit the Financial Intelligence Unit in Sri Lanka in investigations, but also the
foreign law enforcement agencies. Science and technology in South Asia is not as developed as in western
countries. Therefore, the Asian region is a shelter for fugitives from western countries. This problem could
be arrested in Sri Lanka with the aid of agreements entered into with other international organizations, as
the purpose of such agreements is exchange of information. Therefore, information thus exchanged will
assist to capture fugitives from foreign countries who take shelter in Sri Lanka. These agreements advance
mutual assistance between Sri Lanka and foreign countries to eradicate the crime of money laundering and
capture fugitives.
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J. Extradition Arrangements
Section 31 of the Prevention of Money Laundering Act, No. 05 2006 provides for extradition
arrangements. Accordingly, where there is an extradition arrangement in force between the Government
of Sri Lanka and the Government of any other State, such arrangement shall be deemed, for the purposes
of the Extradition Law, No. 8 of 1977, to include provision for extradition in respect of the offence of
money laundering as defined in this Act, and of attempting or conspiring to commit, aiding and abetting
the commission of, or conspiring to commit, such offence. Moreover, under Section 32 of the same Act the
Government shall afford such assistance (including the supply of any relevant evidence at its disposal) to
the relevant authorities of any foreign State as may be necessary in connection with criminal proceedings
instituted in the State against any person, in respect of an offence under the law of that State corresponding
to the offence of money laundering. This promotes international co-operation between Sri Lanka and other
foreign jurisdictions to tackle the problem of money laundering.
K. Assistance to Foreign Jurisdictions for Anti-Money Laundering Efforts
Under Section 31 of the Mutual Assistance in Criminal Matters Act No. 25 of 2002, Sri Lanka will make
arrangements for persons to give evidence or assist investigations if it receives a request by a specified
country for a prisoner in Sri Lanka to give evidence or assist in investigations. Accordingly, where a
proceeding or an investigation relating to a criminal matter has commenced in a specified country, and the
appropriate authority of that specified country requests the removal of a prisoner who is in Sri Lanka, for
the purposes of giving evidence at a hearing in connection with such proceeding or of giving assistance
in relation to such investigation, as the case may be, being of the opinion that such prisoner is capable of
giving evidence relevant to such proceeding, or of giving assistance in relation to such investigation, direct
in writing the release of such prisoner from prison for the purposes of removal to the specified country and
make arrangements for the travel of such prisoner to the specified country.
Additionally, under Section 27 of the Prevention of Money Laundering Act, Sri Lanka may give assistance
to commonwealth countries in investigations and prosecution of offences. Sri Lanka will give the same
assistance to countries other than Commonwealth countries upon entering in to agreement with such
countries.
Accordingly, the provisions of the Mutual Assistance in Criminal Matters Act, No. 25 of 2002 shall,
wherever it is necessary for the investigation and prosecution of an offence under Section 2 of this Act,
be applicable in respect of the providing of assistance as between the Government of Sri Lanka and other
States who are either (a) Commonwealth countries specified by the Minister by Order under Section 2 of the
aforesaid Act; or (b) Non-Commonwealth countries with which the Government of Sri Lanka entered into
an agreement in terms of the aforesaid Act. In the case of a country which is neither (a) nor (b) above, then
it shall be the duty of the Government to afford all such assistance to such a country, and the Government
may, through the Minister, request all such assistance from such country as may be necessary for the
investigation and prosecution of an offence.
L. Monitoring Powers of the FIU
Tamil Rehabilitation Organization (TRO) which claims to be engaged in humanitarian operations in Sri
Lanka for the welfare of the victims of war, for several years had been suspected by the Government of Sri
Lanka and the Central Bank to have been engaged in Terrorist Financing activities. The TRO network in
Sri Lanka has for several years received large sums of money to their bank accounts in Sri Lanka from their
foreign network. Investigations were carried out based on this suspicion which resulted in the arresting of
various persons nationally and internationally, connected to TRO. Following the investigations, the Financial
Intelligence Unit made an application under the Financial Transactions reporting Act, in the High Court of
Colombo, to freeze the funds of the TRO in local bank accounts, which amounted to over 20 million rupees.
The wide powers given by the Financial Transactions Reporting Act to the Financial Intelligence Unit
facilitated the making of such an application in the High Court in order to combat terrorism.
The Financial Transactions Reporting Act has granted dominant monitoring powers to the Financial
Intelligence Unit under Section 18 to examine books and records of the financial institutions. Accordingly,
the Financial Intelligence Unit, or any person authorized by it, may examine the records and inquire into the
business and affairs of an Institution for the purpose of ensuring compliance with the Act or any directions,
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orders, rules or regulations issued under the Act, and for that purpose may, at any reasonable time, enter
any premises in which the Financial Intelligence Unit or authorized person believes, on reasonable grounds,
that there are records relevant to ensuring compliance with the provisions, or use or cause to be used any
computer system or data processing system found in the premises, to examine any data contained in or
available to the system.
M. National Procurement Agency
Sri Lanka has provided for a National Procurement Agency in order to facilitate the fight against
corruption and money laundering. The National Procurement Agency operates with the vision to be
recognized as an esteemed and dynamic public entity, promoting an efficient and effective, transparent and
accountable public procurement system. The objective of the National Procurement Agency is to streamline
the government procurement system and standardize the same to be of equal application to all government
institutions, to ensure better transparency and good governance in relation to government procurement
awards and to put in place a monitoring system in relation to selection of successful bidders and awards of
government procurements. The National Procurement Agency must work in co-operation with the Financial
Intelligence Unit to provide information regarding the bidders of contracts involving large amounts of money,
to prevent any possibility of money laundering activities.
V. AREAS THAT REQUIRE FURTHER ATTENTION
Recent geographical surveys indicate that the formation of the sea bed provides evidence of possible oil
deposits. If true, Sri Lanka will be the recipient of huge financial resources. To ensure that these financial
resources are legitimate and to prevent Sri Lanka from being used as a place to launder money, it is essential
that the legal framework relating to money laundering and terrorist financing is well understood, efficiently
enforced and constantly updated.
Furthermore, Sri Lanka is an economy which is endeavouring to emerge from a 30 year fight against
terrorism. As a result, the infrastructure of Sri Lanka is destroyed and under-developed. With the end of
the war, the Government is intensely engaged in ‘Mega Development Projects’ to boost the economy and
develop infrastructure. Large foreign direct investments are made in Sri Lanka by foreign governments and
private companies. Consequently, a large sum of money is flowing into the country. Therefore, the Central
Bank, through the Financial Intelligence Unit, must exercise proper and substantial supervision over that
money to prevent money laundering activities that may occur in the guise of foreign direct investments.
VI. CONCLUSION
Corruption is a multi-faceted problem that requires a multi-faceted solution. A number of different tools,
both legal and non-legal, need to be used to deter the commission of the offence in the first place and, where
the offence is committed, to prevent those who have committed it from enjoying the proceeds of their
crime. Though anti-money laundering efforts cannot put a stop to corruption, it can be very effective in
achieving the latter aim, especially in cases of grand corruption. Anti-money laundering efforts can also play
a significant role in tracing and recovering the proceeds of corruption. Whenever this occurs the far-reaching
negative effects and implications of corrupt behaviour, especially grand corruption, may be assuaged.
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ATTACKING THE PROCEEDS OF CRIME IN THAILAND
Jumpon Phansumrit*
I. INTRODUCTION
The proceeds of crime in Thailand are derived from several criminal activities, namely, illicit drug
trafficking, human trafficking, illegal smuggling of workers, smuggling of contraband, illegal oil trafficking,
illegal logging, arms trade, contract killings, kidnapping, money laundering, bribing of government
authorities and corruption. These activities have not only intimidated and disgusted people but also
threatened the safety of lives and property, causing serious damage to national security, both economically
and socially. Money and assets gained from illicit acts are frequently laundered and used to fund further
illegal activities. The proceeds of crime can make criminals wealthy and healthy, particularly the organized
ones. With their wealth, the criminal groups can have strong influence over government authorities by
bribing them to keep officials out of their way or prevent them from obstructing the organization’s activities.
Corruption is one of the most serious crimes which can generate huge proceeds. In a 2009 survey by
Transparency International, Thailand ranked 84, with a Corruption Perceptions Index (CPI) score of 3.4,
much behind some countries in the region.1 The proceeds of corruption are increasing. Kickback proceeds
are currently estimated at around 30% of the government’s project budget.2
Money laundering is directly related to the proceeds of crime. Once the ill-gotten gains have been
amassed, they are frequently transferred to others, who are proxies. The criminally earned money can
then go through a money laundering process for safe keeping. There is an urgent need to explore effective
countermeasures to handle money laundering and attack the proceeds of crime. If it succeeds, we can
eradicate or reduce the criminals’ strength and wipe out crime from our society.
II. CURRENT SITUATION OF ACCUMULATION OF PROCEEDS OF CRIME AND MONEY
LAUNDERING
A. Accumulation of Proceeds of Crime
The accumulation of proceeds of crime in Thailand comes from several criminal activities. The drugs
situation in Thailand has caused most grave concern, with an increasing trend in the extent of trade, the
numbers of arrests of drug-related offenders and the number of drug users/abusers. The greatest percentage
of crime proceeds, are thus derived from the drugs trade. The trafficking of Amphetamine-Type Stimulants
(or ATS) generates the most income and proceeds for the criminals and their syndicates.3 On 24 February
* Expert Public Prosecutor, Office of Policy and Strategy, Office of the Attorney General, Bangkok, Thailand.
1 Corruption Perceptions Index 2009, Transparency International, (visited 2 August 2010) < http://www.transparency.org/
policy_research/surveys_indices/cpi/2009/cpi_2009_table, describing how Singapore ranked 3, with a CPI score of 9.2, Brunei
Darussalam ranked 39, with a CPI score of 5.5, Malaysia ranked 56 with CPI score 4.5. The rank shows how one country
compares to others included in the index. The CPI score indicates the perceived level of public-sector corruption in a country/
territory.
2 ‘Corruption’ now up to 30% of project costs , Thailand Times, 17 July 2010 (visited 20 July 2010) <http://news.forum.
co.th/070-money/business/corruption-now-30-of-project-costs/>, explaining that in a seminar on “Thailand’s Investment
Environment Looking Forward” the President of the Thai Chamber of Commerce and Board of Trade, Dusit Nontanakorn,
revealed that corruption practices have increased to intolerable levels. The last decade saw bribes and corruption eat up, on
average, 3% of a project’s total value, however, that figure has since jumped to a whopping 30%. Mr. Dusit said that if no action
is taken, bribery and corruption could well end-up costing up to between 50-80% of a project’s cost.
3 See also Thailand Country Report (2009), (unpublished document, Office of the Narcotics Control Broad, Thailand) (on file
with the author), at 1.
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2010, the Ministry of Justice released news of the arrest of a drugs trafficking Usaman Samaelaeng
syndicate which operates its trafficking business in the southern parts of Thailand, including illicit crossborder trade with Malaysia.4 The authorities arrested four suspects and seized 134,000 amphetamine
tablets, three cars, jewellery, luxurious electrical appliances and 6,000,000 Baht in cash. They also froze
assets including one house and three condominiums.5
The proceeds of crime from the drugs trade also has a transnational organized nature. In 2009, Thai and
Myanmar authorities jointly blockaded and searched an area where the gang of Nor Kham, a Myanmar drugs
trafficker, who was the subject of both Thai and Myanmar arrest warrants, was hiding. During February
2009, the Myanmar army searched the area and found 414,098 tablets of methamphetamine, 4.5 kilograms of
methamphetamine powder, one kilogram of heroin, one kilogram of ephedrine, 12.5 kilograms of caffeine and
162,000 tablets of pseudoephedrine, as well as 22,124,000 Thai Baht, 500,000 U.S. Dollars, a safe containing
1,000,000 Thai Baht and lots of weapons. Subsequently, Thai authorities searched an area near the border in
Chiang Rai province and arrested four suspects of Nor Kham’s gang.6
A large percentage of the proceeds of crime is also derived from misuse of power and the corrupt
behaviour of politicians and civil officials. In 1998, Rural Doctor Solidarity, a watchdog group of doctors who
work in remote rural hospitals, first exposed medicines and medical supplies scam. This is known as the
Medicines and Medical Supplies Case . They alleged that the purchasing prices of medicines and medical
supplies in 34 provinces were so unusually high that there must be some corruption in the purchasing
process. Rakkiat Suksthana, the public health minister at the time, was suspected of involvement. The
police and the National Anti-Corruption Commission investigated the case. The Minister was alleged to
order his health authority subordinates to purchase medicines and medical supplies from two colluding
firms with unusually high prices. A large sum of money appeared in the bank accounts of his wife and
associates. In 2002, the NACC ruled that the Minister was “unusually wealthy” and the public prosecutor
prosecuted both him and an adviser on corruption charges and filed a motion to confiscate his property,
including 233 million Baht in bank deposits. They were both eventually sentenced to 15 years and 6 years of
imprisonment respectively, and the property confiscated.7
Another well-known case of corruption is the Klong Daan Sewage Treament case. The Klong Daan
case incorporates a number of corrupt practices, including illegal land registrations, illegal bidding and
construction of a waste treatment factory, and non-performing officials. The Klong Daan sewage treatment
project was adopted in 1995 and expected to be the largest sewage treatment utility in Southeast Asia, with
a total budget of 23,700 million baht. The project was located in Klong Daan Sub-district, Samudprakarn
Province, in the vicinity of Bangkok. Corruption took place even before the project started up. Wattana
Assawahaem, the most influential politician in Samudprakan and deputy interior minister at the time,
used inside information to buy 17 parcels of land, totalling 1900 rai (760 acres), from local people in areas
where the project would be located. A number of plots of public land were illegally registered as private
property and subsequently sold for the project. He paid 563 million baht for the land and sold it to the
project owner, the Department of Pollution Control, for 1,900 million baht. The Klong Daan community and
some authorities filed a complaint to the NACC for investigation. The case was submitted to the Office of
the Attorney General, in 2007, for prosecution. In 2009, the Supreme Court sentenced the former Deputy
Minister to 10 years’ imprisonment, but he is alleged to have escaped to a neighbouring country prior to the
date of the sentence. He is currently still at large.8
The amount of ill-gotten gains from illegal gambling is enormous as well in Thailand and South East Asia.
The recent news released by INTERPOL relating to football gambling was that more than 5,000 people have
4
Press Release, Ministry of Justice, 24 Feb 2010, (visited 15 July 2010) <http://www.moj.go.th/th/cms/detail.php?id=12738>.
The exchange rate on 1 August 2010, 1 US. Dollar approximately equals to 32.50 Thai Baht.
6 Thailand Country Report (2009), supra note 4, at 8.
7 Supreme Court Judgment of the Supreme Court’s Criminal Division for Persons Holding Political Positions, Ref. No. Or.
Moh. 1/ 2545 and Or. Moh. 2/ 2546 respectively.
8 Supreme Court Judgment of the Supreme Court’s Criminal Division for Persons Holding Political Positions, Black Or. Moh.
No. 2/ 2550 and Red Or. Moh. No. 2/ 2551, see also, Charas Suwanmala, Fighting corruption from the bottom: The case of
Thailand, Article 2.org, Asian Legal Resource Centre (ALRC), (visited 24 July 2010), < http://www.article2.org/mainfile.
php/0901/370/ >.
5
76
been arrested and nearly 10 million US dollars seized in an INTERPOL co-ordinated operation in Asia run
throughout the 2010 FIFA World Cup targeting illegal soccer gambling linked to organized crime gangs. In
the month-long operation code named SOGA III, police across China (including Hong Kong and Macao),
Malaysia, Singapore and Thailand identified and raided nearly 800 illegal gambling dens which handled
more than 155 million US dollars’ worth of bets. Jean-Michel Louboutin, INTERPOL’s Executive Director
of Police Services said that as well as having clear connections to organized crime gangs, illegal soccer
gambling is also linked with corruption, money laundering and prostitution. During the operation, which ran
from 11 June to 11 July, officers also seized assets including cars, bank cards, computers and mobile phones.
The information gathered will now be reviewed and analysed to determine the potential involvement of
other individuals or gangs across the region and beyond.9
B. Money Laundering10
1. Where Thai Criminals Launder their Money
The criminals launder their ill-gotten gains through various channels. The general practices are
depositing the proceeds in family members or associates’ bank accounts, buying real property, and investing
in bogus businesses. In the Medicines and Medical Supplies case, authorities found 33 million baht given in
bribes in bank accounts of the Minister’s wife.11
Another renowned case was exposed by procedures in the United States. On 19 January 2010, the U.S.
District Court for the Central District of California unsealed an indictment charging S., the former governor
of the Tourism Authority of Thailand, and her daughter, J.S., with one count of conspiracy to launder money,
seven counts of money laundering, and one count of aiding and abetting.12 Between 2002 and 2007, Mr. and
Mrs. Green, executives of a Los Angeles-based film festival management company, who were convicted
at trial of nine substantive Foreign Corrupt Practices Act violations, six counts of money laundering, and
conspiracy,13 paid then-governor S. approximately US$1.8 million in exchange for more than US$14 million
worth of contracts. The Greens routed the payments through numerous businesses and U.S. bank accounts
to bank accounts in the United Kingdom, the Isle of Jersey, and Singapore held in the name of J.S. and an
unnamed friend. These payments were disguised as “commission” payments in the Greens’ books and
records.
In the Usaman Samaelaeng case, the authorities found out that the gang had opened a luxury car dealer
enterprise in Bangkok as place to launder their drugs proceeds. The authorities seized their 17 sport cars,
9
Thousands arrested in INTERPOL-led operation against illegal soccer gambling networks across Asia , Interpol Media
Release, INTERPOL, 16 July 2010 (visited 20 July 2010) <http://www.interpol.int/Public/ICPO/PressReleases/PR2010/PR059.
asp>.
10 Introduction to money-laundering, UNODC, (visited 10 July 2010) <http://www.unodc.org/unodc/en/money-laundering/
introduction.html> describing how money laundering is the method by which criminals disguise the illegal origins of their
wealth and protect their asset bases, so as to avoid the suspicion of law enforcement agencies and prevent leaving a trail of
incriminating evidence. See also Money Laundering, Global Politician, 21 February 2008 (visited 10 July 2010), <http://www.
globalpolitician.com/24153-finance-crime>, describing the three common factors identified in laundering operations: firstly,
moving the funds from direct association with the crime; secondly, disguising the trail to foil pursuit; and thirdly, making the
funds again available to the instigator, with their occupational origin hidden from view. See also Law Encyclopedia: Money
Laundering, Answers.com, visited 10 July 2010, <http://www.answers.com/topic/money-laundering>, describing how money
laundering usually consists of three steps: placement, layering, and integration. Placement is depositing funds in financial
institutions or converting cash into negotiable instruments. Layering involves the wire transfer of funds through a series of
accounts in an attempt to hide the funds’ true origins. Integration involves the movement of layered funds, which are no longer
traceable to their criminal origin, into the financial world, where they are mixed with funds of legitimate origin.
11 See Supra text accompanying note 8.
12 United States v. J. Siriwan, Case No. CR 09-00081 (C.D. Cal); See Thailand: Money Laundering Indictment Of Thai
Government Official Underscores DOJ Efforts To Punish Recipients Of Foreign Bribes And The Increasing Intersection
Between Money Laundering And FCPA Charges, O’Melveny & Myers LLP, 19 February 2010 (visited 25 July 2010).
< http://www.mondaq.com/article.asp?articleid=94160>.
13 United States V. Gerald and Patricia Green, Case No. CR 08-00059 (C.D. Cal.); See Greens Get Six Months in Jail,
The FCPA Blog, 13 August 2010 (visited on 18 August 2010) <http://www.fcpablog.com/blog/tag/gerald-green> (describing
how, on 12 August 2010, the court sentenced Mr. and Mrs. Green each to six months in jail and six months home confinement.
They were also ordered to each pay US $250,000 in restitution.
77
valued at 120 million baht, for examination.14 It is quite common for intellectual property infringers to
launder the proceeds through their normal trade practices. For example, when an infringer deposits the
money received from the sale of counterfeit products into a bank account and later withdraws the money to
buy more counterfeit products for further trafficking, it constitutes money laundering.15
A pattern of money laundering used by Thai criminals to launder their ill-gotten gains overseas is
through underground banking enterprises (in Chinese Thai “poi-guwan” ) which are set up as travel agencies
or trading firms doing both normal business and underground services. In particular, organized crime groups
have a tendency to use money extravagantly, including illegal foreign currency, which is illegally sent out
of the country to launder it. The gangs transfer money out of country through poi-guwan . In the poi-guwan
system, there are no official records of the transactions, so they are impossible to trace.16
Casinos are alleged to be good places to launder the proceeds of crime. While casino businesses are
illegal in Thailand, there are 37 casinos operating in neighbouring countries within very close proximity
of the Thai border servicing Thai gamblers.17 These cross-border casinos have the involvement of Thai
political figures and businessmen. According to press reports, four big Thai loggers and border traders are
investors in the Cambodian ventures; the “son-in-law of a big politician” and an elder brother of a former
deputy minister have stakes casinos in Myanmar.18 They are allegedly suitable for politicians and drug
dealers to launder their kickbacks and drugs money respectively.19
2. Thailand - A Laundering Place
With nice beaches, resorts and weather, Thailand is known to be a popular destination for foreigners
to visit and settle down. Unfortunately, some criminals also like to mingle with tourists and hide their
ill-gotten gains in several resorts. The Acting Secretary-General of the Anti-Money Laundering Office
(AMLO), Police Col. Sihanart Prayoonrat said there was a high risk Thailand would be named as a country
prone to money laundering problems. There was a flow of suspicious funds into the country, and AMLO
had been tracing the flows together with the Department of Special Investigation and the Customs
Department to identify those behind the transactions. Thailand needs to step up its anti-money laundering
measures to prevent the country from facing trade barriers imposed by G20 countries.20 Police Lt. Gen.
Wuthi Liptapallop, Commander of the Immigration Bureau, revealed that Thailand has been regarded as a
heaven for foreign fugitives. They are involved with child sex abuse, murder, robbery, money laundering
and drugs. Many criminals, after committing crimes in their home countries, come to Thailand with a lot of
money. They will often find Thai women to be their temporary wives, and use the wives’ documents to run
businesses on their behalf.21
In 2007, the Office of the Attorney General successfully extradited Paulus Meyer and his three associates
to Belgium. In the extradition trial and the Belgian request revealed that the Meyer gang trafficked
large amount of narcotics to the European market. In two incidents, they found that the gang imported
45 tons of marijuana from Morocco and 118 kilograms of heroin from Turkey in containers containing
14
Press release, Supra note 5.
See Santanee Ditsayabut, International Harmonization of National Laws and Policies for Effective Prevention and
Suppression of Intellectual Property Violation, Institute of Intellectual Property, Tokyo, March 2010, at 45.
16 See Wanchai Roujanavong, Organized Crime in Thailand, at 27 and 45 (First Edition, 2006). The author describes how,
in 1999, the author received information from a Hong Kong narcotics control officer that his office often found several
hundred million baht being transferred to Hong Kong from Thailand. Later, each sum was transferred back to Thailand. An
investigation found that the money was not involved with narcotics activities; therefore, the officer did not take any action.
However, these cases could in fact be money laundering, involving the transfer of money from one account to an overseas
country, then back to the same country but a different account to create a semblance of overseas business, in order to launder
money derived from illegal activities.
17 Thailand: Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism, International
Monetary Fund, December 2007, at 21.
18 Pasuk Phongpaichit, Gambling with Thailand (Draft extract from Utsahakam kan phanan ), February 1999, at 6.
19 Cambodia - Drugs and Casinos (map), Geopolitical Drug Newsletter, Centre for Geopolitical Drug Studies, No.6 March
2002, at 3.
20 Crack down on money laundering vital – AMLO , Bangkok Post, 5 March 2010, <http://www.bangkokpost.com/news/
crimes/33893/crackdown-on-money-laundering-vital-amlo.>.
21 The hunt for foreign fugitives , Spectrum, Bangkok Post, Vol. 3 No. 31, August 1-7, 2010, at 12-13.
15
78
scrap metal and materials to the port of Antwerp, Belgium. They spent their drugs proceeds by buying
luxury cars and goods, including investments in businesses such as a fitness club and a beauty parlour. At
a certain period, they planned to move their capital to Thailand. They moved the money to Thailand by
letting a gang member who was married to a Thai woman arrange the transfer through an underground
bank. Subsequently, the gang fled Belgium and settled down in Samui Island, in the Gulf of Thailand.
The investigation found that they purchased several plots of land and houses on the island through Thai
nominees and deposited money in several bank accounts. They planned to possibly build martial arts school
or fitness centres on the island. The request for confiscation of property is under consideration and further
investigation by Thai authorities.22
The media has recently reported the arrest of Ronald Paul Shade, a California man who was extradited
to the United States to face charges relating to defrauding senior citizens in a real-estate Ponzi scheme.
Shade has stolen about US$14 million and been charged by the San Bernardino District Attorney’s Office
with nine counts of grand theft, three counts of theft from an elder adult, 12 counts of filing a forged
document, and five counts of money laundering. Shade was living in Samui Island for about two years when
authorities caught up with him. He was an entrepreneur-type of person, who had no prior contacts with law
enforcement.23
III. LAWS AND PROCEDURES TO ATTACK PROCEEDS OF CRIME
A. Identification and Tracing of Proceeds of Crime
1. Criminal Procedure Code
The Criminal Procedure Code, Part 2 Investigation , provides the investigator with the power to gather
evidence to prove the facts of the offence and the guilt of the offender. Pursuant to Section 132, for the
purpose of gathering evidence, the investigator can search the property for articles obtained through an
offence or used or suspected of having been used for the commission of an offence. By conducting the search
of property and articles found, the investigator can identify and trace the proceeds of crime. The investigator
can order a person who possesses the articles related to the commission of the to hand over such articles as
evidence. The power to gather evidence under the Criminal Procedure Code covers all crimes.
2. Act on Measures for the Suppression of Offenders in an Offence Relating to Narcotics, B.E. 2534 (1991)
The Act on Measures for the Suppression of Offenders in an Offence Relating to Narcotics, B.E. 2534
(1991) , which applies only to narcotics offences, established the Properties Examination Committee to
identify and trace the proceeds of crime. The Permanent Secretary of the Ministry of Justice chairs the
Committee and is assisted by the Secretary General of the Office of Narcotics Control Board. The Secretary
General acts as secretary of the Committee and supervises all regular work.24 Section 16 provides the
Committee with the power to examine property connected with the commission of an offence relating to
narcotics25 and make determinations whether property is connected with the commission of an offence
relating to narcotics. In case of urgent necessity, the Secretary General may issue a provisional order for the
22
Criminal Court Decision, Black Case No. Kor. 6/2550 Red Case No. Kor. 6/2550, Case dossier is filed with the Division 1,
International Affairs Department, Office of the Attorney General.
23 An American wanted by US authorities for alleged money laundering was charged on Samui Island yesterday , Nation, 18
July 2010 (visited 18 July 2010) <http://www.nationmultimedia.com/home/2010/07/18/national/American-arrested-30134033.
html>. See also Here, now, the story of Ronald Paul Shade’s extradition, The Sun, 23 July 2010 (visited 24 July 2010) <http://
www.sbsun.com/news/ci_15561630>. See also Court agrees to extradite Briton , Bangkok Post, 7 August 2010, at 3, describing
how the Criminal Court has endorsed a request submitted by the public prosecutor to extradite Paul John Stone, a Briton who
has been charged in Thailand with theft and is wanted by the UK authorities in money laundering and doucument forgery
cases. Mr. Stone was arrested in Surat Thani, Southern part of Thailand on 31 May 2010, after escaping the UK authorities to
Thailand.
24 Act on Measures for the Suppression of Offenders in an Offence Relating to Narcotics B.E. 2534 (1991) [hereinafter
“Narcotics Suppression Act”], Section 15.
25 “properties connected with the commission of an offence” is defined in Section 3 to mean money or properties obtained
through the commission of an offence relating to narcotics, and shall include money or properties which are obtained by means
of using such money or properties to purchase or by causing in any manner whatsoever to transform such money or properties
irrespective of the number of such transformation and whether or not such money or properties will be in the possession of, or
transferred to or apparently evidenced on the register as belonging to other persons.
79
examination of the properties of the alleged offender, and then report to the Committee.26
To examine the property, the Committee and the Secretary General can issue a letter of inquiry
requesting, or issue an order requiring, any person concerned to give statements or give explanations or to
submit any account, document or evidence for examination, which also includes examination through the
banks, the Securities Exchange and the financial institutions.27 The Committee or the Secretary-General
may assign a competent officer to conduct the examination of the property on its or his or her behalf.28 The
competent officer can enter dwelling place, premises or conveyance where there is a reasonable ground to
suspect that the property believed to be connected with the offence is hidden therein, for the purposes of
searching or examining, seizing or attaching the properties.29
3. The Anti-Money Laundering Act, B.E. 2542 (1999)
In the context of identification and tracing of proceeds of crime, the Anti-Money Laundering Act ,
which covers certain predicate offences,30 is drafted similarly to the Narcotics Suppression Act . The AntiMoney Laundering Act establishes the Transaction Committee consisting of five members nominated by
the Judicial Commission, the State Audit Commission, the National Human Rights Commission and the
Public Prosecutor Commission, including the Secretary General of the Anti-Money Laundering Office,
who acts as secretary to the Committee.31 The Committee has the power32 to examine transaction or
property connected with the commission of an offence.33 The Committee, the Secretary General and the
competent officer entrusted by the Secretary General have the powers to issue a written inquiry towards
or summon a financial institution, Government agency, State enterprise and any person, as the case may be,
to give a statement or furnish written explanations or any account, document or evidence for examination
or consideration.34 To search and examine the property or evidence, the competent officer can enter any
dwelling place, place or vehicle reasonably suspected to have the property connected with the commission
of an offence or evidence connected with the commission of an offence of money laundering hidden or kept
therein.35
The Anti-Money Laundering Act requires the financial institutions, Land Offices and certain Business
Professions to report specific transactions and suspicious transactions to the Anti-Money Laundering Office
for examination.36 The Anti-Money Laundering Office has the power and duty to receive, examine and
26
The Narcotics Suppression Act, Section 19 paragraph 2.
Id, Section 25(1) (2).
28 Id, Section 21.
29 Id, Section 25(3).
30 There are 11 predicate offences covered by the Anti-Money Laundering Act, B.E. 2542 (1999) [hereinafter “Anti-Money
Laundering Act”]. Nine offences provided in the Anti-Money Laundering Act, Article. 3, are Narcotics, Sexual Abuse of
women and children, Public Fraud, Embezzlement, Corruption, Extortion, Customs Evasion, Terrorism, and Illegal Gambling.
In addition, 2 offences of Election Fraud and Trafficking in Persons under the Organic Act on the Election of the Member of the
House of Representatives and Senator B.E. 2541 (1998) and the Anti- Trafficking in Persons Act B.E. 2551 (2007) respectively
are provided as predicate offences under the Anti-Money Laundering Act.
31 The Anti-Money Laundering Act, Section 32.
32 Id., Section 34 (1).
33 Id., Section 3 defines “Property connected with the commission of an offense” as:
(1) money or property obtained from the commission of an act constituting a predicate offense or money laundering offense
or from aiding and abetting or rendering assistance in the commission of an act constituting a predicate offense or money
laundering offense and shall include money or asset that was used or possessed to be used in, or for aiding and abetting the
commission of an act constituting a predicate offense under (8) of the definition of “predicate offense”;
(2) money or property obtained from the distribution, disposal or transfer in any manner of the money or property under (1);
or
(3) fruits of the money or property under (1) or (2).
34 Id., Section 38 (1) (2).
35 Id., Section 38 (3).
36 Id., Section 3 provides that ‘Suspicious Transaction’ means a transaction of a differently complicated nature from similar
transactions ordinarily made, transaction lacking economic feasibility, transaction reasonably believed to have been made in
order to avoid the applicability of this Act, or transaction connected or possibly connected with the commission of a predicate
offense, notwithstanding the transaction being single or multiple. Section 13 and 15 and Ministerial Regulation No. 2 and 3
of B.E. 2543 provide that the financial institutions and Land Offices handling cash transactions exceeding 2,000,000 baht or
27
80
analyse the transactions reported.37 The authorities can identify and trace the ill-gotten proceeds through
the function of reporting and examination of suspicious transactions.
4. Organic Act on Counter Corruption B.E. 2542 (1999)
The Organic Act on Counter Corruption B.E. 2542 (1999) establishes the National Anti-Corruption
Commission (NACC).38 The NACC is an independent authority for conducting corruption investigations of
political persons, persons holding high-ranking positions and other government officials. Specific members
of the national and local governments, as well as their families, are required to file a declaration of assets and
liabilities within 30 days of taking office and again after leaving office. 39 The NACC has power to examine
the declaration of assets and liabilities submitted.40 In the case where the examination reveals an unusual
change of the property, the NACC can request the person to explain the acquisition of such property before
the NACC passes a resolution that such person has had an unusual increase of property.41
B. Freezing and Seizure of Assets
1. Criminal Procedure Code
The Criminal Procedure Code provides authorities the power to investigate crime by gathering the
evidence to prove the facts and guilt of the offenders. The investigator can freeze and seize property during
search. The properties which are illegal to possessed or obtained through the commission of offence or have
been used or suspected of having been used for the commission of an offence can be frozen and seized. The
main purpose of freezing and seizure under the Criminal Procedure Code is to use those properties to prove
the facts or guilt of the offenders, not for confiscation of the proceeds of crime.42
2.Act on Measures for the Suppression of Offenders in an Offence Relating to Narcotics, B.E. 2534 (1991)
The power to freeze and seize property belongs to the Property Examination Committee chaired by
the Permanent Secretary of the Ministry of Justice. During the examination of property by competent
officials, if the owner of the property cannot produce evidence to prove that (1) the property examined is
not connected with the commission of an offence relating to narcotics, or (2) he or she has received the
transfer of such property in good faith and for value, or (3) has reasonably acquired property on account of
good moral or public charity, the Committee can order the freezing or seizure of such property and proceed
for confiscation.43 The provisional freezing and seizing of property can be done where there is a reasonable
ground to believe that the property may be transferred, removed, or concealed to avoid examination and
confiscation. After temporary freezing and seizing, the Committee has to consider whether the property
is connected with a commission of an offence relating to narcotics and will consequently be subject to
confiscation.
property transaction exceeding 5,000,000 baht have to report such transactions to the Anti-Money Laundering Office (AMLO).
Section 16 was amended in 2009 to provide certain business professions which have duty to report transactions: 1) professions
relating to the investment or movement of funds, securities and stock exchange; 2) professions relating to trading of precious
stones; 3) professions relating to trading or hire-purchase of cars; 4) professions acting as a broker or an agent in buying
or selling immovable property; 5) professions relating to trading of antiques; 6) professions relating to personal loans; 7)
professions relating to electronic money cards; 8) professions relating to credit cards that are not a financial institution; and
9) professions relating to electronic payments. At the time of writing this paper, the draft ministerial regulation covered the
reporting procedures of business professions is under consideration of the Juridical Council; Telephone interview with Apichat
Tanomsup, Director of Litigation Bureau, The Anti-Money Laundering Office, (27 August 2010). The interview describes
how pursuant to Section 38 paragraph 4, the AMLO can share or provide the information of transactions obtained from the
reporting procedures with other competent authorities. Currently, the AMLO regularly shares the information with the Office
of Narcotics Control Board, the Revenue Department and the Office of the Election Commission.
36 Id., Section 40 (3) (4).
i.e.,
38 The name of the agency, National Anti-Corruption Commission (NACC), has been changed from National Counter
Corruption Commission (NCCC) by its resolution 40/2551 of 15 July 2008.
39 The Organic Act on Counter Corruption, B.E. 2542 (1999) (hereinafter “Counter Corruption Act”), Section 32, 39 and 42.
40 Id., section 19 (4), 36 and 42 paragraph 3.
41 Id., Section 38.
42 Criminal Procedure Code, Section 85, 132 (4).
43 The Narcotics Suppression Act, Section 22.
81
3. The Anti-Money Laundering Act, B.E. 2542 (1999)
The power to freeze and seize property belongs to the Transaction Committee. In conducting an
examination of the report and information on transaction-making, if there is a reasonable ground to believe
that any property connected with the commission of an offence may be transferred, moved, concealed
or hidden, the Transaction Committee has the power to order freezing or seizure of such property for a
duration of not more than 90 days.44 In case of necessity or urgency, the Secretary General can make that
order but he or she must report it to the Transaction Committee afterwards.45
A person whose property has been frozen or seized, or any interested person, may produce evidence
that the money or property is not connected with the commission of the offence in order that the freezing or
seizure will be revoked by the Transaction Committee.
Before the confiscation process starts, the NACC has the power to temporarily freeze and seize property,
when it finds that (1) the property is connected with the unusual wealth of corrupt officials, and (2) the
property may be transferred, relocated, transformed or concealed. After the temporary freezing and seizing
of property, the owner of the property can present evidence that it is not connected with the unusual wealth.
If his or her evidence is not sufficient, the NACC will continue to freeze and seize the property and further
proceed for confiscation.46
C. Confiscation
1. Penal Code
The Penal Code authorizes the court to confiscate: (1) property of which possession is illegal;47 (2)
property used or intended for use in the commission of an offence; and (3) property acquired by a person
through the commission of an offence.48 The confiscation of property of which possession is illegal does
not require the conviction of an offender. For property used or intended for use in the commission of an
offence; and property acquired by a person through the commission of an offence, the court has discretion to
confiscate or return to the owner. The confiscated property is vested in the State unless the court orders the
property to be destroyed.49
2. Act on Measures for the Suppression of Offenders in an Offence Relating to Narcotics B.E. 2534 (1991)
The Narcotics Suppression Act provides criminal forfeiture of the proceeds of crime. When the public
prosecutor has indicted the offender on narcotics offences, the public prosecutor can file a motion with the
court to request the confiscation of the property connected with the commission of an offence relating to
narcotics which has been frozen or seized by the Property Examination Committee. The motion may be
filed together with the indictment or at any time before the Court of First Instance passes judgment. In case
where there is a reasonable ground to be identified that the public prosecutor cannot file the motion before
the Court of First Instance passes judgment, the motion can be filed within one year from the date that the
Court of First Instance passed judgment, unless there is a final judgment of acquittal.50
The court has to conduct a trial in respect of all the properties that are the subject of the prosecutor’s
application for confiscation and has to be satisfied that there is a prima facie case that the properties are
connected with the commission of a narcotics offence before ordering forfeiture.51 In the case where there
is a final judgment dismissing the charge against the accused, the freezing or seizure of his or her property,
including the property of other persons which has been frozen or seized, shall be terminated. 52 The
confiscation under the Narcotics Suppression Act is, therefore, a conviction-based scheme.53
44
The Anti-Money Laundering Act, Section 48 paragraph 1.
Id., Section 48 paragraph 2.
46 Id., Section 78.
47 The Penal Code, Section 32.
48 Id., Section 33.
49 Id., Section 35.
50 The Narcotics Suppression Act, Section 27.
51 Id., Section 29.
52 Id., Section 32.
53 Interview with Surasak Trirattakul, Deputy Director-General of the Department of Special Litigation, Office of the Attorney
General (15 July 2010), which also confirmed that the confiscation under the Narcotics Suppression Act is criminal forfeiture,
45
82
3. Anti-Money Laundering Act, B.E.2542 (1999)
The confiscation under the Anti-Money Laundering Act is a civil non-conviction based system. The
proceeding begins following the freezing and seizure process. When there is sufficient evidence that any
property is connected with the commission of an offence, the Secretary General shall submit the file to the
public prosecutor to consider making an application to the court for confiscation.54 The public prosecutor can
consider the case and evidence involved. If the public prosecutor finds that there is no sufficient evidence,
the public prosecutor has to immediately inform the Secretary General for further action. The Secretary
General can conduct further investigation and gather more evidence relating to property. After additional
actions have been completed, the Secretary General will refer the case back to the public prosecutor.
And if the public prosecutor still finds that there is no sufficient prima facie case to make the application
to the court, the public prosecutor will notify the Secretary General to refer the case to the Anti-Money
Laundering Board (AMLB)55 which will have to make a decision within 30 days whether to file the case to
the court for confiscation or not. The decision of the AMLB is final and the Secretary General and the public
prosecutor have to act in compliance with such decision.
The public prosecutor has to file the case to the Civil Court and the court proceedings will be conducted
in accordance with the Civil Procedure Code.56 The court will apply the balance of probabilities 57 standard
of proof to decide whether the property is connected with the commission of an offence or not. If the court
is satisfied that the property is connected with the commission of an offence, the court will confiscate the
property by giving the order that the property be vested in the state.58 However, if the real owner of the
property enters into the proceedings and is able to prove to the court that (1) he or she is the real owner and
the property is not connected to the offence; or (2) the property has been transferred to him or her in good
faith with value consideration or has secured its acquisition in good faith and appropriately in the course of
good morals or public charity,59 the court will return the property to the real owner.
There is a presumption clause that where the owner or the transferee of the property was or has been
associated with the offender of the predicate offence or the offence of money laundering, the property is
presumed to be connected with the commission of an offence.60 Consequently, the owner of the property
has the burden of proving that the property is not involved in the offence or he or she has acquired it in good
faith with value consideration.
(i) The “Michael” Case
Michael, a British citizen, was a member of an organized crime gang selling drugs in Europe. In 1979, He
was arrested and charged with an offence of heroin possession in Germany. The German court sentenced
him to five years’ imprisonment and extradited him to the UK. In 1982, he moved to reside in Thailand. He
was living with two Thai wives (one deceased) and had three children. Michael set up two bogus trading
companies and travelled several times to Europe. In 2000, Michael was arrested by Belgian authorities
with an Italian arrest warrant and was extradited afterwards to stand trial in Italy. The Florence prosecutor
prosecuted him for the importation of 780 kilograms of cocaine from Africa to Italy. The Court of Florence
sentenced him to 16 years’ imprisonment and this was later reduced by the Italian Court of Appeal to 10
years. While standing trial in Europe, the UK authorities informed the Thai authorities of Michael’s drugs
business. The AMLO examined properties in the names of eight persons, i.e., Michael, his two wives, three
children and two relatives of a wife. The AMLO found those persons owned several bank accounts, foreign
bank notes and jewellery in bank’s safety box, four vehicles and 11 plots of land valued at 21.3 million Baht.
based on two grounds: (1) a confiscation motion has to be filed with the prosecution indictment; and (2) assets cannot be
confiscated if the defendant is acquitted of criminal charges.
54 The Anti-Money Laundering Act, Section 49 paragraph 1.
55 Id., Section 24, 49 paragraph 1. The Anti-Money Laundering Board chaired by the Prime Minister consists of 24 members
who are Minister of Justice, Minister of Finance, high level government officials, representatives of financial institutions and
other qualified experts.
56 Id., Section 59.
57 In the criminal forfeiture process under the Narcotics Suppression Act, the public prosecutor has more burden to prove
beyond reasonable doubt in order to obtain confiscation order.
59 Id., Section 50.
60 Id., Section 51 paragraph 3.
83
The Transaction Committee of the AMLO had reasonable ground to believe that all properties derived or
connected with the narcotics offences Michael committed overseas. The Transaction Committee ordered the
freezing and seizure of those properties. The AMLO passed the case to the public prosecutor to proceed for
confiscation.
The motion for confiscation was filed to the Civil Court. The public prosecutor could prove that Michael
committed narcotics offences and that seven other persons were associated with him. The burden of proof
shifted to Michael and others to rebut the presumption that the properties were not connected or derived
from the drugs trade. Michael and others failed to rebut the presumption. The Civil Court confiscated all
properties except one plot of land which a relative could prove that he obtained before Michael committed
the offence. The Court of Appeal upheld the Civil Court’s confiscation order. In addition, both courts
confirmed the extra-territorial jurisdiction of predicate offence that the properties could be confiscated, even
though the predicate offence occurred outside Thailand.61
The confiscation process under the Counter Corruption Act is provided in Chapter VII, The Request for
the Property to devolve on the State. In case where an allegation is made that any politician or any State
official has become unusually wealthy, the NACC shall make a preliminary determination whether to accept
the case for consideration. If the alleged culprit is a person who has already submitted a declaration of assets
and liabilities, the NACC shall take such declaration into consideration.62 In case the NACC finds that any
particular property owned by the accused may be transferred, relocated, transformed or hidden, the NACC
is fully mandated to issue an order to freeze or to seize the property temporarily, pending further inquiry.63 If
the NACC concludes that the accused is in fact unusually wealthy,64 it shall submit the case to the Attorney
General to proceed with confiscation in the court.
The Criminal Division for Persons Holding Political Positions of the Supreme Court has jurisdiction
over the proceeding against the politicians. For other government officials, the normal courts of civil
jurisdiction have authority over the case. 65 The courts shall apply the Civil Procedure Code over
confiscation proceedings.66 The accused has the burden of proof to prove that the property does not result
from the unusual wealth.67 If the accused cannot prove his or her burden, the court will order confiscation of
property. Further, in case the court passes the order of confiscation over the property unusually increased,
but the execution of confiscation cannot be conducted in whole or in part over the property, the authority
can execute confiscation over other property of the accused within 10 years.68 The confiscation under the
Counter Corruption Act is a non-conviction based scheme.
5. Administrative Forfeiture
Administrative forfeiture is the process by which seizing agencies may declare property forfeited to the
state without judicial involvement. In Thailand, the authorities can freeze, seize and confiscate property
without a court order in some legislation, namely the Taxation Code and the Act on House and Land Tax,
B.E. 2475 (1932) .69 Pursuant to the Taxation Code, the Director-General of the Revenue Department has
the power to freeze or seize, and order the sale by auction of, the property of person who evades tax. The
property is not limited to only proceeds of crime. All property can be seized and sold by auction. Money
derived from the auction will be used to pay the unpaid tax first, and, if there is still some remaining, can
be returned to the owner afterwards. The Act on House and Land Tax provides a similar format for the
Governor and the Mayor of local authorities to exercise the administrative forfeiture scheme over the
property of a person who evades house and land tax.
61
The Court of Appeal, Black Case No. 3860/2549, Red Case No. 7402/2551.
The Counter Corruption Act, Section 75.
63 Id., Section 78.
64 Id., Section 4 defines “unusually wealthy” as having acquired or accumulated an unusual amount of wealth or a marked
increase of assets or an unusual decrease of wealth or assets or having acquired an unjustifiable amount of assets as a result of
performing or carrying out official duties and functions or of exercising power or authority, constitute a case of unusual wealth.
65 Id., Section 80.
66 Id., Section 80 paragraph 3.
67 Id., Section 81.
68 Id., 83.
69 Taxation Code, Article 12; the Act on House and Land Tax, B.E. 2475 (1932), Article 44.
62
84
D. Asset Recovery
The return of assets to the country of origin is a fundamental principle of the United Nations Convention
against Corruption. The Convention emphasizes that State Parties shall co-operate and assist one another
to the greatest extent for the return of the assets.70 Currently, in Thailand, the asset recovery principle
cannot be implemented. According to the legal system, assets confiscated by virtue of the Penal Code , the
Anti-Money Laundering Act , and the Organic Act on Counter Corruption belong to the public treasury. The
only exception is in the Act on Measures for Suppression of Offenders in an Offense relating to Narcotics ,
which stipulates that the properties forfeited shall devolve on the Narcotics Control Fund for the purpose
of prevention and suppression of narcotics. The confiscated assets thus cannot be return to the country of
origin.
The Act on Mutual Assistance in Criminal Matters B.E. 2535 (1992) (hereinafter “MLA Act”) which
covers all assistance requested or rendered by Thailand, also does not provide for asset recovery or asset
sharing of the confiscated proceeds. The MLA Act provides that the forfeited property shall become the
property of State.71 When there is a request to confiscate property in Thailand, and the public prosecutor
successfully gets court order to confiscate the property, the property will be executed and sent to state
treasury. Thailand cannot return the confiscated assets to the requesting country. The Thai authorities
support the concept of asset recovery and the fundamental principle laid down in international Conventions,
though there are some critics opposed to that principle. In 2008, the Office of the Attorney General proposed
a Bill to amend the MLA Act, particularly the asset recovery clause. The amendment will provide an
exception that confiscated assets will not fall into state treasury if there is a treaty providing otherwise.
It means that Thailand can return the assets to the requesting state when there is a treaty permitted for
sharing the assets.72 The Bill is under the consideration of the Parliament and is expected to be passed in
2011.73
IV. CRIMINALIZATION OF MONEY LAUNDERING
The United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
1988 (Vienna Convention) requires State Parties to adopt the criminal offences of money laundering under
their domestic law.74 In 1999, The Anti-Money Laundering Act was promulgated to criminalize money
laundering actions. The Anti-Money Laundering Act came into force as a result of the Thai Government’s
intent to accede to the Vienna Convention.75 The criminal aspects of money laundering are provided in
Chapter I, General Provision, from Section 5 to 12 with Penalty Clauses in Chapter VII, from Section 60 to
Section 66.
70
United Nations Convention against Corruption (2003), Chapter V. Asset recovery, Article 51.
The MLA Act, Section 35 states “The properties forfeited by the judgment of the Court under this part shall become the
properties of the State, but the Court may pass judgment for such properties to be rendered useless, or to be destroyed.”
72 Currently, Thailand has entered into MLA Treaty with 13 countries, namely; USA, Canada, UK, France, Norway, India,
China, Republic of Korea, Poland, Sri Lanka, Peru, Belgium and Australia. Apart from 13 bi-lateral treaties, Thailand signed
the Treaty on Mutual Legal Assistance in Criminal Matters among like-minded ASEAN Member Countries (ASEAN MLAT),
which is pending in Thai Parliament for ratification. The ASEAN MLAT, Article 1 paragraph 2 provides that assistance which
shall be rendered under the treaty included; the recovery, forfeiture or confiscation of property derived from the commission
of an offence; Article 22 paragraph 5 provides that the Requested Party shall, subject to its domestic laws, transfer to the
Requesting Party the agreed share of the property recovered under this Article subject to the payment of costs and expenses
incurred by the Requested Party in enforcing the forfeiture order. If the Parliament ratifies the ASEAN MLAT, Thailand can
return the confiscated assets to other 9 ASEAN countries, i.e., Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, Philippines, Singapore and Vietnam.; ASEAN is an Association of Southeast Asian Nations established on 8 August
1967, <http://www.aseansec.org/about_ASEAN.html.>.
73 Interview with Torsak Buranaruangroj and Denduan Klanson, Public Prosecutor, Office of Law Development, Office of the
Attorney General, on 4 August 2010.
74 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988, Article 3 paragraph 1
(b) (c).
75 See Police Maj. Gen. Peeraphan Prempooti, Effective Countermeasures against Money Laundering in Thailand, Resource
Materials No. 67, UNAFEI, Tokyo, December 2005, p. 158.
71
85
A. The Money Laundering Offences
Section 576 criminalizes money laundering actions into two offences, as outlined below.
1. Money Laundering Offence of Receiving a Transfer
Section 5 (1) provides that any person who transfers, receives a transfer of, or converts property
connected with the commission of an offence for the purpose of covering or concealing the origin of such
property or for the purpose of assisting other persons to avoid the penalty or receive a lesser penalty
commits an offence of money laundering. The law states three actions of: transfer, receiving a transfer and
conversion of proceeds of crime as actus reus or external elements of the offence. It requires a specific
intent for the purpose of covering or concealing the origin of such property or for the purpose of assisting
other persons to avoid the penalty or receive a lesser penalty in respect of the predicate offence. Examples
of this offence are the general practices of money laundering; for instance, a mistress of drug dealer receives
money which drug dealer obtained from selling drugs and deposits into her bank account as her savings.
2. Money Laundering Offence of General Actions
Section 5 (2) provides that any person who acts in any manner whatsoever for the purpose of concealing
or disguising the true nature, acquisition, location, distribution or transfer of property connected with
the commission of an offence commits an offence of money laundering. The actus reus for this offence is
broader than the one provided in Section 5(1) and can apply to any act of offender which is not limited to
only transfer, receiving a transfer and conversion of property. Though, specific intent for the purpose of
concealing or disguising the true nature of property is similarly required. For example, a corrupt official
receives a bribe and deposits the money into his or her own account as savings.
Both offences of money laundering require the knowledge that the property being laundered is the
proceeds of a predicate offence. It applies the general principle of intent element of the offences provided
in the Penal Code.77 Accordingly, the offence of money laundering takes place only if it is committed
intentionally.
The penalty for a money laundering offence is imprisonment from one to ten years, and/or a fine from
20,000 to 200,000 baht.
(i) The “School Milk” Case
Nimit, a former Deputy Governor of Nong Khai Province in the Northeastern part of Thailand, was
assigned by the Governor to chair a provincial committee to procure milk for students in the province. Nimit
and a subordinate conspired to ask for kickback money from the milk contractors. A contractor reported
the incident to the Anti-Money Laundering Office (AMLO). The AMLO assigned an undercover officer
as a milk contractor and joined a group of contractors giving 140,000 baht to Nimit and the subordinate.
Later, the police and AMLO officers searched Nimit’s house and found 140,000 baht in a desk in living
room. Nimit alleged that the money was his savings which had just withdrawn from the bank. The public
prosecutor separately prosecuted Nimit for corruption and money laundering offences. The court sentenced
Nimit to five years’ imprisonment for corruption.78 For the money laundering charge, the public prosecutor
could prove beyond a reasonable doubt that Nimit acted for the purpose of concealing the true nature and
76 Anti-Money Laundering Act, Section 5 provides “Whoever
(1) transfers, receives the transfer, or changes the form of a property connected with the commission of an offense, for the
purpose of concealing or disguising the origin or source of that property, or for the purpose of assisting another person either
before, during, or after the commission of an offense to enable the offender to avoid the penalty or receive a lesser penalty for
the predicate offense; or
(2) acts by any manner which is designed to conceal or disguise the true nature, location, sale, transfer, or rights of ownership,
of a property connected with the commission of an offense shall be deemed to have committed a money laundering offence.”
77 Penal Code, Section 59 states “A person shall be criminally liable only when such person commits an act intentionally,
except in the case where the law provides that such person must be liable when such person commits an act by negligence,
or except in the case where the law clearly provides that such person must be liable even though such person commits an act
unintentionally. To commit an act intentionally is to do it consciously and desiring its effect or with the capacity to foresee its
effect. If the person committing the act does not know the facts constituting the element of the offence, it cannot be deemed
that such person desired or could have foreseen the effects of such doing.”
78 Nong Khai Provincial Court, Criminal Case, Black No. 1868/2547, Red No. 598/2550.
86
acquisition of the bribe which connected with the predicate offence of corruption. The court sentenced Nimit
to two years’ imprisonment for money laundering.79
B. Self-Laundering
Section 5 does not make it clear whether the one who commits the predicate offence is capable of
committing the offence of money laundering. However, several commentators commented that the
perpetrator of the predicate offence can be found guilty of the laundering offence. In other words, a person
convicted of a predicate offence may also be convicted of money laundering in connection with dealing with
the proceeds arising from that offence. The Criminal Court confirmed this principle in the “School Milk”
Case.80
C. Ancillary Offences
1. Aiding and Abetting
Aiding and abetting an offender, either before or during the commission of the offence is penalized
with same penalty as the principal offender. The acts of procuring or supporting with money, means of
transportation, shelter, or any other object in order to assist the offender to escape punishment, or to gain
a benefit from the commission of an offence are subject to same penalty. The Court has discretion to render
a lesser penalty or not impose any punishment for such offence where the person assists his or her spouse,
parents or children.
2. Attempt to Commit Crime
An attempt to commit a money laundering offence will be subject to the same penalty as the offence
committed. It shows that the legislators consider money laundering to be a serious crime. Generally,
an attempt to commit other ordinary crimes is punished with two thirds of the punishment provided for
complete commission of the offence.81
3. Conspiracy
The Anti-Money Laundering Act criminalizes conspiracy to commit an offence of money laundering
when there are at least two persons in the conspiracy.82 The construction of this offence has been drafted in
terms similar to the Narcotics Suppression Act . The conspirator receives half of the punishment for such an
offence. However, if a money laundering offence is committed as a result of the conspiracy, the conspirator
shall receive the full punishment for such offence, even he or she does not participate in commission of the
offence.
D. Extra-territorial Jurisdiction
The Anti-Money Laundering Act extends jurisdiction over money laundering offences committed abroad,
provided that (1) the offender or any accomplice is a Thai person or has a place of residence in Thailand; or
(2) the offender is a foreigner and intends its consequence to occur within Thailand or the Thai government
is the victim; or (3) the offender is a foreigner and such act is an offence under the law of the country where
the offence is committed, if such offender has appeared in Thailand and has not been extradited under the
law on extradition.83 The extra-territorial jurisdiction provision of the Anti-Money Laundering Act has
drafted in similar to the same provision of the Narcotics Suppression Act .
E. Liability of Juristic Persons
There are several incidences of offenders laundering money through corporations or enterprises. Such
corporations or enterprises, which are juristic persons, or legal persons, can also be liable for money
laundering offences, if it or its representative has knowledge of such laundering activities. The juristic
person is punished with a fine in the amount of 200,000 to 1,000,000 Baht. A director, manager, or any
person responsible for the operation of the juristic person who is involved with the laundering is also
punishable with imprisonment for one to ten years, and/or a fine of 20,000 to 200,000 Baht.84
79
Bangkok Criminal Court, Black Case No. Phor.Yor. 9/2546, Red Case No. Phor. Yor. 1/2548.
Id.
81 Penal Code, Section 80.
82 Anti-Money Laundering Act, Section 7.
83 The Anti-Money Laundering Act, Section 6. See also the Measures Suppression Act, Section 5.
80
87
V. CHALLENGES AND EFFECTIVE COUNTERMEASURES
A. Joint Investigation
In general, the nature of money laundering crime and assets forfeiture relates to sophisticated and
complicated matters involving organization, influential figures, business and financial activities. A single law
enforcement agency with specific expertise or limited power might not be able to effectively deal with them.
Some special investigative techniques, for instance, surveillance, wire tapping, internet access or controlled
delivery, might not be permitted to by all agencies. A joint investigation conducted by a combined team of
experts or a joint task force consisting of law enforcement officers, forensics scientists, lawyers, tax officers,
and customs authorities, will be more effective to handle this complicated type of crime. The officers who
have authority to apprehend culprits and officers who have authority to identify and seize the proceeds of
crime have to closely co-ordinate and work together. The agencies concerned have to build channels for
communication and information sharing. In addition, the involvement of the prosecuting authority at the
early stage of investigation can bring high success in court proceedings.
B. Special Investigative Measures
Since the crime of money laundering and manner of concealing proceeds of crime generally involve
sophisticated and complicated activities, it is thus rather difficult for investigators and officers involved to
seek and compile enough evidence to effectively prosecute the culprits and get their money. The law should
equip law enforcement authorities to apply special investigative measures in seeking vital evidence and
tracing ill-gotten proceeds.
1. Access to Information through Communication and Electronic Technology
The officials should be able to adopt special measures to access information by employing electronic
devices or tools to access information with regard to accounts of clients in financial institutions, data
regarding communication or computers, which might have been used to commit activities of money
laundering for the purpose of obtaining necessary and vital evidence in order to use against the offender and
its proceeds. This special measure might interrupt normal business practices and life of innocent people, so
an appropriate period and court permission should be required.
2. Controlled Delivery of Evidence
Controlled Delivery of Evidence is a means of making an arrest by allowing illegal objects or materials
to be delivered under controlled methods and conditions to reach the wrongdoer or suspect. Once evidence
of crime is delivered to a person or destination, the law enforcement officers arrest the person, who accepts
the object or material as evidence of the crime, including others involved in the criminal network. The
controlled delivery method has been frequently used in narcotics cases. Apart from drugs in narcotics case,
other illegal objects, i.e., firearms, contraband goods, including money used to buy them and proceeds,
should be permitted by law to be used as evidence in money laundering and proceeds of crime confiscation
cases.
C. Reporting System
1. Transactions Report
The reporting system of specific transactions and suspicious transactions by financial institutions
and related business entities to the anti-money laundering agency is an effective tool for monitoring and
gathering information on the proceeds of crime. The authority can examine suspicious transactions and
identify the illicit proceeds and suspected launderers. From tracing the trail of money, the investigator
might be able to understand and map out the whole syndicate, including pinning down the group leader.
To effectively fight money launderers and take their proceeds, the transaction reporting system has to be
established.
The compliance of prospective laundering places, such as financial institutions, stock exchanges, casinos
and real property authorities, with the rules and regulations of reporting, is required. The anti-money
laundering authority has to meet regularly and ensure the co-operation and assistance of the institutions.
2. Declaration of Assets and Liabilities
An assets declaration or disclosure required by persons who are likely to be involved with ill-gotten
88
proceeds and money laundering is an effective reporting system. It should be required by law for officials
who are at managerial or executive level, including political and high-ranking position holders to disclose
assets and liabilities. Upon accepting their positions, they are strictly required to submit lists of assets
and liabilities held by them, their spouses and their minor children. This disclosure of assets and liabilities
should be strictly required at the time of assuming office and upon leaving office.
The anti-corruption authorities can examine their report of assets when there is suspicion or an
allegation of corruption. If proved to have an unusual increase of accumulated assets, they are likely to be
prosecuted and their assets forfeited.85
D. Civil Forfeiture
Civil forfeiture is a proactive measure, which is not bound by criminal charges against the accused.
Although no criminal action may yet have been taken against the suspect or even if the suspect had been
charged with a predicate offence and was later acquitted, the government may file a case in civil court
seeking a court order to have the assets confiscated. The standard of proof in civil forfeiture is only balance
of probabilities which is much less burdensome than the beyond reasonable doubt standard in criminal
trials. Civil forfeiture should be introduced in jurisdictions which have only conviction-based systems as
a tool, to overcome the limitation in conducting confiscation under the traditional criminal law standard.
This particular measure is an innovative legal concept to effectively take out financial resources from the
sophisticated syndicates and prevent them from smoothly carrying out their criminal activities.
E. International Co-operation
1. Legal Framework
When money laundering and proceeds of crime cross borders and involve organized crime, it will be
more difficult for authorities to handle. International co-operation among authorities in the jurisdictions
concerned is necessary. The co-operation can be arranged under bi-lateral or multi-lateral schemes.
The effective tool to tackle cross-bordered money laundering and proceeds of crime is an instrument for
Mutual Legal Assistance in Criminal Matters, setting a formal comprehensive framework for co-operation
covering various aspects of the criminal process, namely: investigation, compiling and providing documents
or information, delivery of documentary evidence, tracing of subjects or individuals, search and seizure,
initiating criminal proceeding upon request, and confiscation of assets.
Regional cooperation can also be a forum or means to implement a common policy against cross-border
crime.86 It can assist or establish effective mutual assistance in legal matters and law enforcement systems,
including intelligence gathering and sharing as a key mechanism to overcome some pending obstacles in
dealing with transnational organized crime.
2. Informal Consultation
Assistance dealing with freezing, seizure and confiscation of property should be expeditious. Properties
or assets can be transferred very swiftly in the banking system with the help of current technology, for
instance, by electronically enhanced account transfer. Thus, at international level if competent authorities
have to wait for normal proceedings before rendering assistance, the properties and assets held by suspects
or their associates may be hidden and transferred to the point that authorities would not be able to trace and
confiscate them at all.
Informal consultation among authorities concerned is recommended before sending the formal request.87
Once the request passes through formal functions or diplomatic channels, it is difficult or too much timeconsuming to correct the inaccurate procedures. The establishment of a network or forum of authorities
85 Constitution of the Kingdom of Thailand B.E. 2550 (2007), Articles 259-264; The Counter Corruption Act, Chapter 3 on
Inspection of Assets and Liabilities, Articles 80 and 119.
86 ASEAN sets up the Senior Officials Meeting on Transnational Crime (SOMTC) as a forum to implement the Plan of Actions
to Combat Transnational Crime by targeting eight categories of crime, i.e.; trafficking in persons, illicit drugs trafficking, sea
piracy, money laundering, arms smuggling, terrorism, international economic crime, and cybercrime.
87 The author had an experience of informal consultation when handling a request from Japan to gather evidence and examine
suspicious transactions in Thailand of a Japanese construction contractor allegedly colluded with a Thai contractor to bribe
a former Bangkok Governor and his subordinates to win a drainage tunnel project in Bangkok. The Japanese authorities
89
concerned can facilitate such consultation.
F. Asset Sharing
The concept of asset sharing is to show appreciation for the hard work of all concerned agencies in the
requesting state. The requesting state must spend a great amount of resources in tracing and freezing assets
in foreign countries. It is thus appropriate to share the confiscated assets based on proportions agreed upon.
In addition, the return of assets can be justified to compensate to the victims or legitimate owners of assets
in the state of origin. In some countries this concept is applied as a reward for authorities who make serious
efforts to trace and confiscate such assets. It, therefore, can be an incentive for authorities to effectively
fight against money laundering crime.
VI. CONCLUSION
It is clear from the nature of crime, particularly the organized ones, that the proceeds of crime are an
ultimate goal and motivation for criminals to commit wrong-doings. The process to obtain high ill profits
is complicated and sophisticated. Once acquired, the process to safely hide and keep them is even more
difficult. More people are needed to work and assist in laundering the ill-gotten gains. In order to cut
criminals’ resources and stop their activities, several measures and innovative practices have to be adopted.
Special investigative techniques of IT access and controlled delivery of evidence can produce successful
tracing of crime proceeds. The reporting system by financial institutions and self-declaration of property
by politicians and government officials is necessary for examination of assets. The civil forfeiture principle
is very valuable and effective for confiscation. In cases of cross-border proceeds and money laundering,
the co-operation of countries concerned is a must. International legal frameworks and instruments have
to be fully implemented to assist other countries in attacking transnational proceeds of crime. In the
absence of such instruments, the assistance should be rendered to the fullest extent possible. If all effective
countermeasures are utilized, there will be no safe place for criminals to hide their ill-gotten gains. Without
earning anything from their risky businesses, criminals are supposed to stop their activities. Then, the
public will have a safe place and better society to live in.
contacted the author through UNAFEI alumni link and asked for recommendation before drafting the request. The author
gave some recommendations on the Thai mutual legal assistance laws and asked to see the draft of request, including the
Thai translation of request before sending through the formal channel. The author found some inaccurate information in the
draft of request, i.e., names and gender of the suspects, addresses of some companies involved, including several incorrect
translations and informed the Japanese counterparts to correct them. The Japanese counterparts verified and corrected all
information and formally submitted the request afterwards. In the meantime, the author started to prepare all procedures
and documents for assistance based on the draft of request. When the author received the formal request through diplomatic
channel, the author could finish all procedures needed to render assistance within few days. The author believes that without
such consultation, it will take months to start the assistance procedures after sending back and forth of formal notes asking for
new correct information and translation.; See also, Nishimatsu ‘planned Thai contract bribes’ , the Yomiuri Shimbun, 16 January
2009. (The article describes how Nishimatsu Construction Co. planned to offer about 350 million yen in bribes with its joint
venture partner in Thailand to then Thai government senior officials to win a 2003 tunnel construction project. Nishimatsu,
a Tokyo-based second-tier general contractor, and its Thai partner, reportedly prepared a total of 480 million yen for bribery
maneuvering, with Nishimatsu contributing about half the amount. The Tokyo District Public Prosecutors Office arrested a
former vice president of Nishimatsu Construction on suspicion of smuggling 70 million yen into Japan from abroad. The public
prosecutors special investigation squad asked Thai prosecutors to co-operate in investigating the case as a violation of the
Unfair Competition Prevention Law, as Nishimatsu and its Thai partner are suspected to have committed bribery.)
90
APPENDIX
Table 1
Frozen/Seized Property executed under the Act on Measures for the Suppression of Offences
in an Offence Relating to Narcotics B.E. 2534 (1991)
Types of Property (Million Baht)
Number of
Examinations
(Persons)
Frozen/Seized
Property
(Million Baht)
Cash
Bank
Deposit
Movable
Property
Real
Property
2005
1,238
869.8
102.6
151.7
355.1
260.4
2006
1,639
1,036.9
98.4
244.0
331.3
363.2
2007
1,453
595.0
112.2
156.8
255.4
70.6
2008
1,834
768.6
97.1
257.0
338.2
76.3
2009
2,009
929.5
159.5
291.0
348.9
130.1
Total
8,173
4,199.8
569.8
1,100.5
1,628.9
900.6
Year
Source: Assets Seizure Bureau, Office of the Narcotics Control Board.
Table 2
Types and Number of cases handled by the Anti-Money Laundering Office
from 27 October 2000 (the inception) to 31 December 2009
Cases
reported for
examination
Frozen and
Seized
Property
3,801
928
Human Trafficking
176
31
Public Fraud
393
24
Embezzlement
109
15
Corruption
619
24
Extorsion
54
2
Customs
278
20
Terrorism
24
0
Gambling
5
0
Election Fraud
1
0
Money Laundering
6
0
588
0
6,054
1,044
Predicate Offence
Narcotics
Others
Total
Source: The Anti-Money Laundering Office.
91
Table 3
Types of Property kept and managed by the Anti-Money Laundering Office
from 13 December 2000 - 31 December 2009
Types of property
Amount (Baht)
Cash
496,284,471.28
Bank Deposit
512,097,271.67
Vehicle
37,227,325.00
Jewelry
160,546,996.95
RealProperty
1,311,766,629.54
AuctionList
153,631,897.59
Others
517,309,873.87
Total
3,188,864,465.90
Source: The Anti-Money Laundering Office.
Table 4
Amount of Frozen/Seized and Confiscated Assets under the Anti-Money Laundering Act
B.E. 2542 (1999)
Year
Assets filing to court
for confistisication
(Baht)
Confisticated
Assets (Baht)
2005
518,626,133.38
495,262,316.41
2006
624,998,810.39
195,736,807.41
2007
504,017,495.22
495,459,532.22
2008
159,947,247.78
137,986,968.22
2009
86,446,268.09
57,608,319.90
Total
1,894,035,954.86
1,382,053,944.16
Source: The Department of Special Litigation, Office of the Attorney General88 and the
Anti-Money Laundering Office.89
88
Telephone interview with Surasak Trirattakul, Deputy Director-General of the Department of Special Litigation, Office of
the Attorney General, (6 August 2010) (informing that the amount of confiscated assets in 2006 was proportionately less than
other years, because several cases for confiscation of large amount of properties relating to an alleged narcotics defendant
who operated truck transportation business in the north of Thailand were dismissed by the Civil Court. The public prosecutor
appealed the Civil Court orders to the Court of Appeal. The case is under the consideration of the Court of Appeal.).
89 Telephone interview with Apichat Tanomsup, Director of Litigation Bureau, The Anti-Money Laundering Office, 6 August
2010. The interviewee stated that the amount of frozen/seized assets filing to court for confiscation in 2008 and 2009 were
less than other years, because in 2008 the Anti-Money Laundering Act was amended and changing the qualification of the
Transaction Committee. Due to political uncertainties from 2008 till now, the governments have been changing and not be
able to appoint the Transaction Committee to be in charge of examination, freezing and seizure of property yet. The amount of
frozen/seized assets filed to court in 2008 and 2009 were the work of the last Transaction Committee before March 2008.
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REPORTS OF THE COURSE
GROUP 1
EFFECTIVE MEASURES TO DEPRIVE CRIMINALS AND
CRIMINAL ORGANIZATIONS OF CRIME PROCEEDS
Chairperson Co-Chairperson Co-Chairperson
Rapporteur
Co- Rapporteur
Co- Rapporteur
Members
Visiting Experts Advisers Mr. Jumpon Phansumrit Mr. Chethiya Goonesekera
Mr. Koji Morishita
Mr. Ramadhan Ali Nassib
Mr. Anthony Adverse Vanderhyden
Mr. Kazuyoshi Tsuji
Ms. Tuyet Mien Duong
Mr. Naoki Fukuda
Mr. Toshiyuki Igusa Mr. Katsuhiko Manabe
Ms. Jean B. Weld
Mr. Wayne Walsh
Prof. Naoyuki Harada
Prof. Kumiko Izumi
Prof. Haruhiko Higuchi
Prof. Yuichiro Wakimoto
(Thailand)
(Sri Lanka)
(Japan)
(Tanzania)
(Guyana)
(Japan)
(Viet Nam)
(Japan)
(Japan)
(Japan)
(U.S.A.)
(Hong Kong)
(UNAFEI)
(UNAFEI)
(UNAFEI)
(UNAFEI)
I. INTRODUCTION
This group discussed “Effective Measures to Deprive Criminals and Criminal Organizations of Crime
Proceeds” under the following sub headings:
a.
b.
c.
d.
e.
Measures to identify and trace the proceeds of crime;
Measures to freeze/seize the proceeds of crime;
Confiscation/deprivation of the proceeds of crime;
Recovery of the confiscated proceeds of crime;
Capacity building.
II. MEASURES TO IDENTIFY AND TRACE THE PROCEEDS OF CRIME
A.Current Situation
1. Establishing an FIU
All participants stated that in their countries there are measures to identify and trace the proceeds
of crime. During the discussion it was discovered that in each country there is an FIU or legislation to
establish an FIU. However, the status of FIUs varied from one country to another. Some FIUs belong to the
Ministry of Finance, some to the National Police Agency, some to the central/State bank, etc.
It was also found that most FIUs do not have duties and powers to conduct investigation, but the Thai
FIU has investigative power for civil forfeiture. In Sri Lanka, the Financial Intelligence Unit does not have
investigative powers but there is another Financial Investigating Unit, which belongs to the police, with
investigative power.
2. Suspicious Transactions Reporting (STR) System
All participants’ countries have Suspicious Transaction Reporting systems in accordance with the FATF
40+9 Recommendations, and they have also sanctions against designated institutions which do not report
suspicious transactions. However, there are some countries that are not in compliance with the FATF
40+9 Recommendations where attorneys, judicial scriveners, administrative scriveners and licensed tax
accountants, etc. do not have to report suspicious transactions.
Most participants’ countries require that the transactions exceeding certain amounts, such as US$10,000,
have to be reported to the FIU for analysis. However, Japan does not have such a threshold requirement.
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Also, all participants’ countries have laws or guidelines regarding Customer Due Diligence (CDD), but
requirements vary. In some countries, CDD requirements are lenient and people have to present identification
but no photograph when opening an account; similarly, companies do not have to present a list of shareholders
when opening an account.
However, co-operation of banks and non-bank financial institutions and FIUs in all participants’ countries
is well secured. Banks and non-banks have to report suspicious transactions to their country’s FIUs and other
competent investigative organs can get information from the FIU.
In all countries, an investigative agency can receive information on customers of banks or non-banks if
necessary. (In some countries, the investigative agency needs a warrant from a judge or court.) So there are no
obstacles caused by bank secrecy laws.
3. Asset Disclosure
All participants’ countries, except Tanzania-Zanzibar, have an Asset Disclosure System for politicians in
the legislature. In some countries, civil servants of high rank also have to declare their assets. However,
access to information of disclosed assets is different. In some countries, such as Thailand and Japan, ordinary
citizens can access information on politicians’ assets; but in Sri Lanka, Guyana, mainland Tanzania and
Vietnam ordinary citizens cannot access the information, only competent investigative authorities.
4. Co-operation and Information-sharing
Co-operation and information-sharing among relevant authorities domestically and internationally was
also considered in the group discussion. Domestically it was found that in all countries, except Japan and
Vietnam, FIUs send information of STRs, after analysis, if an investigative agency requests the FIU to
send it. But in Japan, Guyana and Vietnam, FIUs disseminate STR information, after analysis, to competent
authorities without request. However, in none of the participants’ countries can investigation agencies
access STR information (before analysis) directly.
5. International Co-operation
All participants’ countries, except Tanzania, are members of the Egmont Group. The members of the
Egmont Group can exchange STR information between FIUs. However, Non-Egmont Group countries can
exchange STR information between FIUs upon a Memorandum of Understanding, etc. Non-Egmont Group
countries, even if they do not have an MOU, can exchange STR information on a voluntary basis between
FIUs.
B. Problems, Countermeasures
1. Our recommendation is that FIUs should be independent from politicians and governments and each
country should establish a suitable FIU according to its system. The aim of this recommendation is
that the FIU should not be interfered with by politicians.
2. In some countries, FIUs have investigative powers. In countries where the FIUs have limited
personnel and capacity, the introduction of investigative power to the FIUs may cause problems.
Therefore, the FIUs should focus on analysis and dissemination of information, not investigativon.
3. Most participants think that threshold requirements should be introduced in order that financial
institutions cannot avoid reporting of transactions. But the economy of one country may differ from
that of another. Our recommendation is that each country has to set its own threshold requirement
depending on its economy, because if the threshold is too low, the amount of information of
suspicious transactions will be huge, and it will be difficult for the FIU to analyse it efficiently.
4. If there is no clear definition of a suspicious transaction, setting a threshold alone is not enough
to detect suspicious transactions; criminals may easily circumvent the threshold set. The group
recommends that each country has to give a clear definition or standard of a suspicious transaction.
There might be two ways to give a clear definition or standard of a suspicious transaction:
a. Define it in law; or
b. Establish guidelines.
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The former has merit: the definition is clear, and the definition has legal force. The latter also has
merit: it is possible to provide detailed guidelines, and it is flexible; guidelines can be changed. So
each country has to give a clear definition or standard, depending on its legal system.
5. Asset disclosure requirements for appropriate public officials should be set up. That disclosed
information should be at least accessible to the competent investigative authorities.
III. MEASURES TO FREEZE/SEIZE THE PROCEEDS OF CRIME
A.Current Situation
1. Legislation for Rapid Freezing/Seizure
All participants’ countries have legislation for rapid freezing or seizure of relevant property. However,
each country has a different organ for freezing and seizing. In Sri Lanka, Guyana and Vietnam it is the police
who freeze and seize, but in Japan there is a need for a judicial order for the police or a public prosecutor to
execute. In Thailand freezing is done by committee; in Tanzania-Zanzibar there is a need for judicial order
to freeze property, and there is a need for the Director of Public Prosecutions to order the freezing of a bank
account.
2. Protection of the Rights of bona fide Third Parties
Confidentiality is maintained in all participants’ countries before the execution of the order of freezing
or seizure of relevant property. However, when the relevant organs are executing the order the owner is
informed. Also, in all countries the rights of the third party are protected. The third party can appeal against
the freezing or seizure order.
Co-operation between countries is done through Mutual Legal Assistance or agreements. In some
countries, a judicial order from a requesting country is required to accompany the request.
In some participants’ countries, the police or public prosecutor needs the order of a judge or court
to freeze the relevant property for confiscation. In such countries, it is difficult for the police or public
prosecutor to freeze the property quickly because more time is needed to pursue the order from a court.
Therefore, the property might be concealed or lost.
Our recommendation is that countries should consider adopting a system in which:
(i) police, public prosecutors or other competent authorities can temporarily freeze property quickly
without a judicial order (as an administrative measure);
(ii) if police, public prosecutors or other competent authorities can identify the relevant property
which can be confiscated, they should be able to freeze only that property. But if they cannot
identify the relevant property which can be confiscated, they should be able to freeze the whole
property of the suspect;
(iii)the owner of the property can appeal against the temporary freezing order, and if he or she can
prove that the property has a legitimate source, the freezing order might be cancelled (in order
to protect the right of the owner).
The aim of the recommendation is to regulate between quick and effective freezing of the property and
protection of rights of the third party owner.
For international co-operation, if confidentiality is not established in the requested country, there will be
a problem.
Our recommendation is that all countries should adopt a system of confidentiality before the freezing or
seizure of property, because if the owner of the property is aware of the request for freezing or seizure, the
property might be concealed or lost. In addition, to protect the rights of the bona fide third party, it is sufficiently
fair if there is a system whereby the owner can appeal against the freezing order, after its execution.
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International co-operation of freezing or seizure has two points for discussion. First, in some countries, it
is difficult to execute judicial orders of the requesting country quickly, because in some requested countries,
a judicial procedure to execute a foreign judicial order is required.
The group recommends that the court proceedings of the requested country should be simple, for
example, only registering judicial orders in the court of the requested country. Informal consultation should
be widely used before formal request.
The second problem concerns orders of the requesting country, including not only orders of judges
or courts but also orders of other competent authorities. In some countries, only judicial orders can be
executed in the requested country; it is difficult to execute orders of other competent authorities. For
example, in some countries, only committees can issue orders to freeze the property; such orders cannot be
executed in the requested country.
Our recommendation is that such countries should, like Guyana, consider adopting provisions in
accordance with the UNCAC, whereby orders of any competent authorities can be executed in the requested
country.
IV. CONFISCATION/DEPRIVATION OF THE PROCEEDS OF CRIME
A.Current Situation
1. Conviction-Based Confiscation
All participants’ countries have legislation on conviction-based confiscation. But the collection of
equivalent sum of the relevant property is not possible in some countries. If the property is transformed
or converted in all participants’ countries except Sri Lanka, it is possible to confiscate the property. If the
property is intermingled with other legitimate property, all countries have provisions to confiscate the
property, except Sri Lanka and Vietnam.
2. Non-Conviction Based Confiscation
On the issue of non-conviction based confiscation it was explained that Tanzania, Guyana and Thailand
have NCB confiscation provisions but Japan, Sri Lanka and Vietnam do not.
3. Administrative Forfeiture
Only Thailand has administrative forfeiture, which only applies in cases of tax and property tax evasion.
4. Confiscation without the Presence of Accused (ex parte )
Guyana, Sri Lanka and Tanzania have ex parte confiscation procedures but Japan, Vietnam and Thailand
do not have such procedures. However the ex parte procedure can be applied in civil confiscations in
Thailand.
5. Shifting the Burden of Proof
Currently, most participants’ countries have provisions for shifting the burden of proof to the accused/
defendant. But in Japan the provisions are only applicable under the Anti-drugs Special Law. In Sri Lanka
(Money Laundering Act), Guyana, Tanzania and Thailand the accused/defendant has to prove the property
has a legitimate source on the balance of probabilities.
6. Taxation of Criminal Proceeds
Legislation for taxation of criminal proceeds is only found in Japan and Tanzania. In Japan, proceeds of
crime are taxed after confiscation. In Tanzania, provisions of tax laws provide that any income accrued in
Tanzania is subject to tax.
All participants said that international co-operation in confiscation is possible in their countries through
MLA or agreements. In all countries, except Vietnam, judicial orders of confiscation from requesting
countries are required to accompany the request.
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1. Some countries do not confiscate proceeds transformed or converted or intermingled with other
legitimate property. The group believes that this is a problem, especially where the proceeds
cannot be found. Therefore, countries are urged to consider including collection of equivalent sums
of transformed or converted property and property intermingled with other legitimate acquired
property, because sometimes, it is difficult to prove connection between crime and the property.
The reason for the recommendation is that usually criminals conceal the property by converting or
transforming the property, and it becomes difficult to confiscate illicit property perfectly.
2. All participants’ countries should consider adopting a non-conviction based confiscation system.
Such a system has many merits, including that the level of proof is not higher than a conviction
based confiscation system and that competent authorities can confiscate the property even if the
defendant is not guilty. Also, competent authorities can confiscate the property even if the defendant
absconds or dies.
3. Administrative forfeiture is a simple and speedy procedure. However, the excessive scope of
administrative forfeiture can cause unfairness to the owner of the property. For instance, in Thailand,
the tax authority can exercise administrative forfeiture to confiscate all types of property, including
real property, without any limitation of amount of property. If the property owner wants to challenge
the confiscation, the property owner has to initiate the litigation in court which causes an unfair
burden.
The group suggests that, if countries want to adopt administrative forfeiture, some limitations
similar to the U.S. model should be considered; for example, that it is applicable to only monetary
instruments with some limitation of amount. And if the forfeiture order is challenged, the
government has to take the case to court for confirmation of forfeiture.
4. All participants considered that a system to shift the burden of proof to the defendant is a very useful
and effective system to confiscate illegitimate property. However, the presumption of innocence will
be at stake. Therefore, the group recommended that when they consider adopting such system, it
is important that the government should set basic requirements to be proved by the prosecutor. For
example, it could be required to prove that the defendant associated with the offender, that there is
a connection between crime and the property, or that the defendant committed a crime, before the
burden of proof is shifted to the accused.
5. Taxation of criminal proceeds is an effective measure to deprive criminals of the proceeds of crime.
Participants’ countries are urged to consider adapting or adopting taxation of proceeds of crime. It
was commented that, if taxation of crime proceeds is possible in addition to the confiscation of the
proceeds, it can impose additional damage on the criminals. It may also lead to deprivation of hidden
crime proceeds, which cannot be confiscated.
6. In international co-operation it has been learned that requirements are higher in some countries
which need judicial orders or a treaty or agreement. This procedure causes delay. So the group
recommends that all countries should lower requirements to meet reciprocity and include requests
from other competent authorities rather than only judicial orders. Countries should also establish
firm and fair procedures to make sure that confiscation is done properly.
V. RECOVERY OF THE CONFISCATED PROCEEDS OF CRIME
A.Current Situation
1. Returning the Proceeds of Crime
All participants’ countries have provisions for returning the proceeds of crime to individual victims. But
in Japan recovery is only possible for victims of organized crime and money laundering offences. The scope
of recovery of proceeds of crime in Japan is limited.
With regard to international asset recovery, all participants’ countries, except Thailand, have a system of
returning the proceeds of crime to the requesting countries.
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2. Asset Sharing
Only Sri Lanka has provisions on asset sharing; in other countries asset sharing is possible depending on
individual countries’ agreement. In Thailand asset sharing is not possible.
1. In some countries, the scope of returning confiscated proceeds is limited and sometimes there are
no funds to compensate victims. Thus the group recommended that countries with limited scope
should broaden the scope of recovery to victims. Also, each country should consider establishing a
fund, similar to the U.S.A. model, in order to compensate victims. But the fund should be subject to
domestic laws.
2. Our group recommends that all countries should consider introducing a law to return assets to
victim countries in order to comply with Article 57 of UNCAC. Property should be returned to the
origin countries where real victims are present. If a requested country returns the assets to the
victim country, the reciprocity principle can be asserted when the victim country returns the asset to
the requested country in the future.
3. Our group recommends that all countries should consider establishing a law or regulation on asset
sharing. When establishing the law or regulation, they can consider establishing a law or regulation
that allows deducting a reasonable amount of expenses in the requested country before returning
the assets. The percentage of asset sharing is decided by mutual agreement on a case by case basis.
Some participants consider that retaining some additional amount in the requested country is strong
incentive for the requested country and can hasten the procedures of asset recovery.
4. International co-operation is urged by requesting countries to ask for technical assistance from
international organizations, for example the Basel Institute on Governance, to help in consultation
on how asset sharing can effectively be achieved, if the requesting country faces some obstacles.
VI. CAPACITY BUILDING
Our group agrees that capacity building of investigators, public prosecutors and judges in attacking the
proceeds of crime is important. Therefore, holding of meetings, seminars and training of relevant officers is
imperative and indispensable.
Also, acquiring experience and expertise from organizations such as the Basel Institute on Governance
and UNAFEI is impertant. The responsible officers should not be rotated frequently and should be
specialized. If rotation is necessary, the head or supervisors of the department should not be rotated
frequently.
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GROUP 2
EFFECTIVE MEASURES TO PREVENT, DETECT AND
PUNISH MONEY LAUNDERING
Chairperson Co-Chairperson Rapporteur
Co-Rapporteur
Members
Visiting Experts Advisers Mr. Tetsuya Konno Mr. Rene Daniel Aldana Ramírez
Mr. Ubiratan Cazetta
Mr. Fazil Abdol Karimbaksh
Ms. Tuyet Mien Duong
Mr. Yehu Wangsajaya
Mr. Hirantha Buddhika Siriwardhana
Ms. Julia C. Bacay-Abad
Mr. Takashi Hashimoto
Ms. Shinobu Okada
Ms. Jean B. Weld
Mr. Wayne Walsh
Prof. Yuichi Tada
Prof. Fumihiko Yanaka
Prof. Toru Kawaharada
Prof. Junichi Watanabe
(Japan)
(Mexico)
(Brazil)
(Japan)
(Guyana)
(Indonesia)
(Sri Lanka)
(Philippines)
(Japan)
(Japan)
(USA)
(Hong Kong)
(UNAFEI)
(UNAFEI)
(UNAFEI)
(UNAFEI)
I. INTRODUCTION
On September 7 2010, Group 2 started its discussion, and elected, by consensus, Mr. Konno as its
chairperson, Mr. Aldana Ramírez as its co-chairperson, Mr. Cazetta as its rapporteur and Mr. Motomura as
its co-rapporteur.
The Group mission is to discuss effective measures to prevent, detect and punish money laundering
and, to do that, it agreed to conduct its discussion in accordance with the following agenda: 1) the basic legal
framework to address money laundering; 2) advanced legal frameworks and practices to prevent and detect
money laundering; 3) investigation and punishment of money laundering; and 4) promotion of international
co-operation.
II. SUMMARY OF THE DISCUSSIONS
A. Basic Legal Framework to address Money Laundering
1. Criminalization of Money Laundering
Considering the differences in the legislation of the participants’ countries, the group agreed that there
is a need to use FATF Recommendation 1 as a minimum goal to criminalize money laundering on the basis
of the United Nations Convention Against Illicit Trafficking in Narcotic Drugs (the Vienna Convention)
and the UN Convention on Transnational Organized Crimes (the Palermo Convention), observing at
least 20 categories of predicate offences: participation in an organized criminal group and racketeering;
terrorism, including terrorist financing; trafficking in human beings and migrant smuggling; sexual
exploitation, including sexual exploitation of children; illicit trafficking in narcotic drugs and psychotropic
substances; illicit arms trafficking; illicit trafficking in stolen and other goods; corruption and bribery; fraud;
counterfeiting currency; counterfeiting and piracy of products; environmental crime; murder; grievous
bodily injury; kidnapping, illegal restraint and hostage-taking; robbery or theft; smuggling; extortion;
forgery; piracy; and insider trading and market manipulation.
Furthermore, all participants agreed that tax evasion1 must be considered a predicate offence as part of
1 There have been debates on whether tax evasion should be included in the list of predicate offences to money laundering,
considering that tax evasion involves money that came from legitimate businesses or income. This issue was in fact mentioned
in the lecture of Mr. Daniel Thelesklaf of the Basel Institute on Governance. Nevertheless, there is no question that tax
evasion is a crime which deprives the government of much-needed revenue. Thus, whenever tax evasion is committed, the
money that is due to the government is unlawfully withheld by the tax offender. In effect, the money withheld becomes “illicit
money.” And when that “illicit money” is transacted, or converted to make it appear as having originated from legitimate
99
the efforts to enhance the fight against money laundering.
2. Keeping Bank Records for a Substantial Period of Time
The group considered that to effectively implement an anti-money laundering regime, it is essential for the
reporting entities to have a system of record-keeping which applies for a substantial period of time - at least
five years.
3. Establishing and Empowering FIUs
All participants agreed that FIUs should enhance the quality of their analysis in order to provide material
and intelligent “leads” to detect possible money laundering.
The FIUs of Japan and Hong Kong are set up under their respective police agencies, so those FIUs can
easily make use of police records, such as crime records, to analyse suspicious transaction reports (STRs).
But, Japan’s FIU is facing the problem of lack of access to information that other authorities possess.
On the other hand, Brazil’s and Mexico’s FIUs, which are under their respective Ministries of Finance,
and Sri Lanka’s FIU, which under its central bank, can also get information from police records, so it does
not matter under which authority an FIU stands as long as it can gain access to necessary information.
The Philippines’ FIU is an independent government agency which has the authority to conduct
investigation (including bank inquiries) relative to money laundering offences, initiate criminal complaints
for money laundering, institute action to freeze properties, and institute civil forfeiture proceedings against
properties or assets that are related to unlawful activities and money laundering offences.
All participants agreed that FIUs should have power to access a wide variety of information in order to
enhance the quality of analysis.
Brazil’s and Mexico’s FIUs can obtain a wide variety of information, such as tax records, assets
declarations of public officials, etc. and analyse STRs with aggressive use of information technology.
With regard to the above-mentioned discussion, it is reported that the Philippines’ and Sri Lanka’s FIUs
can obtain additional information as part of their investigative powers. Then we discussed whether FIUs
should have investigative powers, but we eventually found out that producing new authority often leads to
conflict with existing law enforcement agencies (LEAs), so we agreed that it is more important to establish a
co-operative relationship between FIUs and LEAs, such as setting up a task force, than to provide FIUs with
new investigative powers.
The group agreed that there is a need to strengthen the capabilities of FIUs and to empower them by
providing adequate human resources and efficient organizational structure, and more importantly, FIUs
should be spared from inappropriate interference, such as political interference.
4. Establishing a Suspicious Transaction Reporting System and Securing Compliance with it
All participants confirmed that their countries have STR systems, and breach of obligation to file STRs
can lead to administrative or criminal sanctions in every country.
All participants agreed on the importance of promoting awareness of reporting entities and building
good relationships between FIUs and reporting entities so as to enable/encourage them to have better
understanding of STRs.
All participants confirmed that Designated Non-Financial Businesses and Professions (DNFBPs) have
rarely produced STRs in their respective countries and agreed that it is necessary to consider enacting laws
that would require them to comply with the filing of STRs.
5. Utilizing Information Gathered and Analysed by FIUs
All participants were aware of the importance of STR analysis for the purpose of more effectively fighting
Money Laundering and Terrorism Financing. Unfortunately, as observed by most of the participants, STRs
sources, an offence of money laundering is committed. Thus, the group agreed that tax evasion should be included in the list of
predicate offences.
100
are not fully utilized by LEAs. Probably, it is due to insufficient analysis of STRs, lack of understanding on
the part of the LEAs as to the proper use of information obtained from STRs, or lack of proper co-ordination
between FIUs and LEAs. We also noticed that there are several issues surrounding analysis of STRs,
namely, lack of human resources, difficulty in allowing analysts to gain experience due to personnel rotation
cycles, limited access to information possessed by other authorities, and lack of feedback from investigative
authorities.
After confirming the current situation and issues that each country’s FIU is facing, and discussing
possible countermeasures, we agreed that it is desirable for FIUs to consider the following points:
•
•
•
•
•
•
To assemble staff with a variety of backgrounds, such as financial experts, LEA officials, lawyers, and
computer experts;
To have their own permanent staff (not be assigned staff on a rotation basis);
To provide their staff with adequate training so that they can have the latest information on ML
modus operandi;
To provide reporting entities with necessary information as well;
To develop IT systems, such as utilizing newer software to deal with vast quantities of information
and ensure the security of such systems;
To improve the quality of STRs disseminated to LEAs to facilitate utilization of such information.
On the other hand, LEAs should also be trained in the proper use of STR information and how to
maximize its use.
B. Advanced Legal Frameworks and Practices to Prevent and Detect Money Laundering
1. Extension of the STR System to Designated Non-Financial Businesses and Professions
Relative to FATF Recommendation 16, some participants reported that the legal profession is not subject
to an STR reporting obligation (in Japan, Brazil and Philippines). The Philippines’ FIU is proposing an
amendment to the the AM Law, which would require non-financial institutions to report STRs, but lawyers
raised concerns because of the privileged nature of lawyer-client communication. Indonesia faces the same
problem. One of the participants proposed that lawyers, for example, must pay a large amount of money to
retain their license to practice. Others, however, raised the concern that such a measure might limit the
freedom of the person to choose their occupation.
No one disagreed about the importance of adopting an STR reporting system that includes non-financial
institutions and the legal profession, even though it must include some kind of protection of lawyers’
privileged communication with their clients.
2. Increasing the Capacities of FIUs and Financial/Non-Financial Institutions to Detect Money Laundering,
including Development of Typologies
Recognizing the importance of the STR/CTR reporting system in the investigation of money laundering,
the group concluded that it is vital to maintain open and constant communication between the FIU and
the financial/non-financial institutions, adopting, for instance, the practices of most countries, where FIUs
regularly meet and confer with the financial/non-financial institutions and discuss matters relating to STRs.
3. Conducting Enhanced Scrutiny of Accounts of “Politically Exposed Persons”
The group considered that there is a higher possibility that Politically Exposed Persons2 (PEPs) can gain
illicit profits through unlawful means, such as bribes.
In accordance with FATF Recommendations 6 and 12, countries are required to take appropriate
measures to ensure that financial and designated non-financial institutions apply enhanced due diligence
with respect to PEPs, such as verifying the identity of the customer and beneficial owner before or during
the course of establishing the business relationship, obtaining senior management approval for establishing
business relationships with PEPs, and so on. However, we found that some countries do not have legislative,
2
According to the glossary of FATF Recommendation 40, “Politically Exposed Persons” (PEPs) are defined as individuals who
are or have been entrusted with prominent public functions in a foreign country, for example, heads of state or government,
senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, or important
political party officials. Business relationships with family members or close associates of PEPs involve reputational risks
similar to those with PEPs themselves.
101
regulatory or other enforceable requirements in respect of PEPs.
Considering the importance of preventing money laundering related to corruption, all participants
agree that every country should implement the requirements with regard to the PEPs so that there should
be no loophole for dirty money gained through corruption. And we also agreed that the requirements of
FATF Recommendations 6 and 12 should be extended to PEPs who exercise prominent public functions
domestically.
And there still remains the complex question of defining who should be regarded as a PEP. For instance,
as mentioned by Visiting Expert Mr. Daniel Thelesklaf, it is difficult to decide how long a person will be
considered a PEP after retirement. Thus, the participants consider it important to have a more specific
international standard for the definition of PEPs.
4. Asset Disclosure Requirement for Certain Public Officials
We noticed that Mexico, the Philippines and Brazil have asset disclosure systems for certain public officials.
All agreed that money laundering and corruption have a close relationship and, at least, that investigative
authorities should have easy access to information thereof in order to easily detect the proceeds of crime.
5. Co-operation and Information-sharing among Relevant Authorities
Some participants explained that co-operation among relevant authorities has not been so effective due
to a lack of information-sharing mechanisms and a lack of initiative on the part of relevant government
agencies to regularly meet and confer with each other. So in order to observe FATF Recommendation
31, all participants agreed that it is necessary to establish continuous and comprehensive mechanisms to
implement co-operation and information-sharing among relevant authorities. Some good practices shared by
the Philippines and Brazil are outlined below.
(i) Philippines
The National Law Enforcement Coordinating Committee (NALECC), whose membership includes all
relevant government agencies, serves as the forum for co-ordination of all official activities of such relevant
government agencies in law enforcement. The Committee holds meetings every three months during which
all concerns/issues affecting domestic co-operation are tackled and resolved.
(ii) Brazil
The National Strategy Against Corruption and Money Laundering (ENCCLA), which is co-ordinated
by the Ministry of Justice, is the primary policy-co-ordination mechanism in Brazil with respect to
money laundering, terrorism financing (ML/TF) and corruption. The Integrated Management Cabinet for
Prevention and Combat against Corruption and Money Laundering (GGI-LD), composed of 60 agencies,
meets once a year to identify ML/TF activities and review the effectiveness of the national system in order
to determine the main objectives for ENCCLA for the following year. The document that results from this
meeting establishes joint actions for GGI-LD members. ENCCLA is in charge of delivering this national
policy and also seeks to enhance the co-ordination of relevant government institutions and the private
sector. The full ENCCLA meets once per year, and a core group of ENCCLA’s members meet every three
months.
6. Measures to Prevent and Detect Cash Smuggling, including Border Control
All countries have adopted some kind of cash smuggling detection system (border form or customs
declaration), that enables monitoring of cash transportation. It is not clear, however, if all countries provide
this information to FIUs and the group determined that it is necessary to implement measures to share
information between different countries’ authorities, so that they can check if the same information was
provided in the country of origin and the country of destination.
C.Investigation and Punishment of Money Laundering
1. Effective and Proactive Enforcement of Anti-Money Laundering Legislation
The group agreed that it is quite important to monitor financial/non-financial institutions, especially
banks, so that they submit STRs appropriately, and that they should be punished when they do not comply
properly.
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Some FIUs, like Japan’s and Brazil’s, have no power to order reporting entities to rectify any omission,
but FIUs give relevant competent institutions notice that reporting entities do not comply with the
requirements.
2. Special Investigative Techniques, including Controlled Delivery, Communications Interceptions and
Undercover/Sting Operations
Even though they function under different requirements and conditions, the group found that each
country has special investigative techniques, such as communications interceptions and controlled delivery,
etc. In some countries they are frequently used to combat money laundering and predicate offences. But,
because of their complexity, investigators need constant training in such special investigative techniques.
All participants agreed that an IT system is also critical to allow investigators to make use of the
information collected through these special investigative techniques. For example, Mexico and Brazil are
equipped with information systems which integrate, visualize and analyse various information sources such
as bank accounts, tax records, phone records, etc.
Participants were also aware of technology-related issues which investigators may face due to the
increasing use of electronic devices. For example, in Brazil, there was a case in which the investigative
authority seized a database but was unable to crack a code. So Brazil has proposed a law to allow
investigative authorities to order companies to give information about how to crack a code.
3. Capacity Building of Investigators in Financial Investigation
FIUs and LEAs should improve their investigators’ capacities in order to fight effectively against complex
money laundering offences and predicate offences.
So, the group agreed that it is very important for FIUs/LEAs to develop their human resources by
constantly providing relevant training.
D.Promotion of International Co-operation
1. International Exchange of Information among Relevant Agencies, including FIUs
The group discussed the importance of promoting international co-operation among FIUs and other
relevant law enforcement authorities. Indeed, international co-operation has been consistently encouraged
under the Vienna Convention and the Palermo Convention. All of the represented countries except
Japan have ratified the Palermo Convention. International co-operation is also urged under the FATF 40
Recommendations, particularly Recommendations 35-40.
The group recognizes that money laundering is a global problem; it is an offence that knows no border. In
some cases, no single country can successfully detect, investigate and prosecute money laundering without
the assistance of other jurisdictions.
With the exception of Guyana, the FIUs of the participating countries are members of the Egmont Group.
The sharing of information through the Egmont Secure Web has been very helpful; many cases have been
investigated and prosecuted after receiving information from the counterpart FIUs, either on a voluntary
basis or upon request.
Participants from Japan and Indonesia explained that their FIUs can share information only if there is a
Memorandum of Understanding (MOU); others said that an MOU is not necessary to share information with
a requesting FIU as long as the requesting FIU is a member of the Egmont Group.
The participants also agreed that the same kind of information sharing among the other relevant LEAs
had been very helpful and fruitful. Also, information sharing through international organizations, such as
INTERPOL and IberRED,3 has been very useful.
2. Mutual Legal Assistance and Extradition in Cases of Money Laundering
It is natural that there are some formal channels of seeking and obtaining mutual assistance from foreign
states, i.e. through MLATs, bilateral treaties and regional treaties. But sometimes, these formal channels
involve difficulties, such as taking longer periods of time to obtain assistance or to comply with legal
3 IberRED means Rede Ibero-Americana de Cooperação Judicial (Ibero-American Network of Judicial Cooperation), an
international organization for Spanish and Portuguese speaking countries.
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requirements from a requested country due to differences in the legal system. Thus, the group agreed that
informal channels, such as FIU-to-FIU and LEA-to-LEA information sharing, are more expeditious; it is
encouraged that such kind of co-operation be promoted and maintained among us all, to communicate more
effectively, in tandem with the formal channels.
3. Joint Investigation with other Countries or Agencies
The group also recognized the need for joint investigation (among different jurisdictions) since
investigators cannot conduct investigations outside of their national territory. Hence, as presented by
Visiting Expert Ms. Jean Weld, joint investigation, such as Operation Mantis,4 is very helpful.
4. Obtaining Technical Assistance provided by International Organizations
Finally, the group also recognized the importance of receiving technical assistance from international
organizations such as the International Centre on Asset Recovery (ICAR),5 especially in the areas of training
and continuing education relative to investigation of money laundering, as part of the wider capacity building
of the investigators.
III. CONCLUSION
In conclusion, the group reached a consensus that, indeed, money laundering is a global problem that
needs a global solution. While international standards to combat money laundering have been set by
relevant international bodies, it is the observance thereof and compliance therewith by all jurisdictions that
determine real success in this fight. Legal frameworks and regulatory measures should be in place.
And while different jurisdictions adopt different systems that prove applicable to their peculiar
circumstances, what matters most is their ability to extend co-operation and willingness to provide
assistance to other jurisdictions in the investigation of money laundering and its predicate offences. Surely,
if all jurisdictions act as one in the fight against money laundering, this crime will find no place to flourish in
this world.
4 Operation Mantis is a multi-lateral initiative, conducted by the Roma Lyon Group in 2009, focusing on addressing bulk cash
smuggling, as mentioned in Ms. Weld’s report.
5 The International Centre for Asset Recovery is a institution supported by core funding from the Swiss Agency for
Development Cooperation (SDC), the UK Department for International Development (DFID) and the Principality of
Liechtenstein, as well as by project-specific funding from partners such as UNODC and the World Bank (through their Stolen
Asset Recovery Initiative, StAR) and the Council of Europe, that continued to develop and deliver a high number of asset
recovery capacity building programmes. ICAR is one branch of The Basel Institute on Governance (BIoG).
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PART TWO
Work Product of the 13th International Training Course on
the Criminal Justice Response to Corruption
UNAFEI
TACKLING CORRUPTION: THE HONG KONG EXPERIENCE
Steven Lam*
I. INTRODUCTION
The Independent Commission Against Corruption (or ICAC), is an independent dedicated agency tasked
to tackle corruption in Hong Kong. Today, Hong Kong is an international financial and service centre with
world-class facilities and infrastructure. One of the pillars of its success is a corruption-free government
and a level playing field for business. In fact, the ICAC has gone a long way in achieving this hard-earned
success.
II. BAD OLD DAYS – CORRUPTION AS A WAY OF LIFE
Corruption was a big problem in 1974, the year when the ICAC was born. Indeed, corruption tales could
easily be traced back to the middle of the last century, if not earlier. Before World War II the triads (criminal
gangs) in Hong Kong were already collecting protection money from the wealthy, with the assent of the
police. There were then some 65,000 triad members under the control of five families; this amounted to
well over ten times the size of the police force. During the War, the triads profited from collaborating with
the invaders. After liberation, they continued to run vice, drug and gambling rackets. More than two million
people arrived in Hong Kong between 1944 and 1950 and “the crowded Colony was chaotic.”1
Post-war Hong Kong was also a land of many opportunities. Economic recovery in the West created
added demands for manufacturers from relatively cheaper sources. The mainland of China adopted a closeddoor policy, and the wars first in Korea and later Vietnam further eliminated sourcing options for the West.
Strategically located in the heart of South East Asia, and with a seemingly endless influx of cheap labour,
Hong Kong suddenly emerged as an ideal production base both for an aspiring breed of local entrepreneurs,
and foreign companies looking for off-shore investment. It was at this time that Hong Kong earned the
reputation of a tourism paradise as “the Pearl of the Orient.”
The fateful blend of chaos and bloom resulted in some economic miracles, but also runaway corruption.
Often the management systems would find themselves unable to cope up with the exploding demands.
Bribes were seen by the unscrupulous as the key to a short-cut. By the 1960s, graft was widespread in the
public sector. Vivid examples included:
•
•
•
firemen negotiating for ‘water money’ before they would turn on the hose at a fire site;
ambulance attendants demanding ‘tea money’ before picking up sick persons;
even a hospital ‘amah’ would stretch out her hand for tips before bringing a patient a bedpan or a
glass of water.
The average citizen knew that offering bribes to the right person would facilitate an application for public
housing, schooling and other public services, and ‘tea money’ was quite necessary for the average learner in
a motor car to pass a driving test.
Hong Kong can now claim that it has one of the most efficient police forces in the world, practically at all
times. Almost from the day the Hong Kong Police Force was formed, it has been the single most important
factor for the maintenance of law and order. Yet in the early years, law enforcement and bribe-taking went
hand-in-hand. Corruption was once rampant within the Force. Front-line officers did, as a matter of routine,
* Acting Assistant Director, Independent Commission Against Corruption, Hong Kong Special Administrative Region, China.
1 Attributed to Kevin Sinclair, a New Zealand reporter who worked in Hong kong for many years, including for The Star, Hong
Kong Standard and the South China Morning Post.
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systematically cover up the criminal activities which they were tasked to eliminate. The worst times were
the post-war years when rumours had one police detective sergeant lamenting: “I woke up in the morning
and could not find my slippers. They were hidden beneath the layers and layers of floating bank notes that
were in my bedroom.”
Public discontent finally reached boiling point when, in the early 70s, thousands of people took to the
streets after a Chief Police Superintendent fled Hong Kong while under investigation by the relevant
authorities. The people wanted him back to face trial. Facing a governance crisis, the Hong Kong
Government took the grave decision to set up a dedicated and independent anti-corruption agency – the
ICAC. The ICAC was to bring back from London the wanted person who was subsequently jailed in Hong
Kong for four years. Things were set to change.
III. NEW CULTURE – “ANTI-CORRUPTION CAPITAL OF THE WORLD”
Those were the days. Now Hong Kong has transformed itself from a graft-plagued city into a place
distinguished by its strong anti-corruption regime. To quote the Secretary General of Interpol, Mr Ronald
Noble, Hong Kong has become “the anti-corruption capital” of the world.
According to Heritage Foundation’s 2010 Index of Economic Freedom, Hong Kong is rated as the world’s
freest economy for the 16th consecutive year, out of 179 economies assessed. The assessment is based on
various factors, including business freedom and freedom from corruption. The Corruption Perceptions Index
released by Transparency International in November 2009 shows that Hong Kong remains the 12th least
corrupt place, among 180 places polled.
Syndicated corruption in government departments has long been eradicated. The percentage of reports
alleging government corruption had substantially dropped from 86% in 1974 to about 37% in 2009. The
proportion of reports against police corruption also drastically decreased from almost 50% in the early years
to slightly over 10% nowadays.
Due to a growing awareness of the damaging effect of corruption on business, the private sector has
become more forthcoming in referring suspected cases to us. The proportion of private sector corruption
reports increased from about 13% of the total in 1974 to over 60% in recent years. Nowadays, as a place
which provides a fair business environment, Hong Kong attracts investors.
More importantly, the collective attitude towards corruption has fundamentally changed. As the first
ICAC Commissioner Sir Jack Cater said: “there can be no real victory in our fight against corruption unless
there are changes of attitude throughout the community.”
In the space of three decades, a new culture – a culture of probity – has evolved and taken root in our
community. The following indicators may illustrate the magnitude of changes in the social values and culture
of our society.
A. Low Public Tolerance of Corruption
In sharp contrast with public thinking 30 years ago, Hong Kong people nowadays adopt “near to zero” (if
not “zero”) tolerance towards corruption. The Annual Survey conducted in 2009 affirmed this observation.
On a 10-point scale (where 10 represents total acceptance and 0 represents total rejection), the average
score of public tolerance of graft in the business sector was as low as 1.6, while the tolerance level for
government corruption was even lower – only 1.1.
B. Non-anonymous Reports
Another indicator is the public’s increased willingness to divulge their identities in reporting corruption
cases to us. In the 1970s, only one-third of complaints were lodged non-anonymously. The figures surged to
50% in the 1980s and to over 70% in recent years. Such changes not only reflect our people’s intolerance
towards corruption but also their growing trust in the ICAC.
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THE 13TH INTERNATIONAL TRAINING COURSE ON THE CRIMINAL JUSTICE RESPONSE TO CORRUPTION
C. Partnership
Meanwhile, the close partnership fostered between the anti-corruption agency and various sectors in the
community also demonstrates a fundamental change in the public’s attitude towards corruption.
Today, most government departments are no longer afraid of exposing the ‘black sheep.’ They have
become more forthcoming in referring suspected corruption cases to the ICAC and regularly seek assistance
in corruption prevention.
The ICAC has in recent years joined forces with the policy bureau overseeing civil service matters
and various government departments to launch integrity programmes amongst civil servants. Corruption
Prevention Groups have been formed in all major government departments to strengthen systems and
procedures to minimize opportunities for corruption.
The business sector, in the early years, resisted the ICAC for meddling in their affairs. Today, the ICAC
works hand-in-hand with various chambers of commerce, professional bodies and related regulatory bodies
to organize conferences, workshops and many other projects to raise awareness of business ethics.
In 1995, the ICAC set up the Ethics Development Centre under the auspices of six major chambers of
commerce to promote business ethics on a long-term basis. It has so far offered advice and assistance to
over 16,000 persons from local and overseas organizations.
D. Public Support
The local community now fully appreciates the benefits of freedom from corruption. From the Annual
Surveys conducted in the last 10 years, each year up to 98% to 99% of the respondents expressed support
for the anti-corruption cause.
E “Quiet Revolution” through an Holistic Approach
How have these miraculous changes come about? In the words of the former Governor who founded the
ICAC, it took nothing short of a “Quiet Revolution” to bring about these changes in the society.
To achieve this quiet revolution, the ICAC has from the beginning adopted a three pronged strategy of
attacking corruption on all fronts. When the agency was first set up in 1974, it embraced a holistic approach
in the fight against graft: rigorous law enforcement goes hand-in-hand with preventive measures in plugging
corruption loopholes in policies and systems and community education aimed at changing people’s attitude
towards corruption.
This comprehensive strategy has been hailed by Transparency International (TI)’s Global Corruption
Report as an effective world model in fighting corruption.
F. Rigorous Law Enforcement
In the early days of the ICAC, the public was sceptical about the effectiveness of the newly formed
agency. To achieve a real deterrent, rigorous and heavy attacks were launched against the corrupt in the first
few years. No stone was left unturned. A number of corrupt senior government officials, or “big tigers” as
described by the local media, were netted, prosecuted and sent to jail. As a result, corruption rackets, which
existed in government departments, were quickly crushed.
These rigorous enforcement actions sent a strong message to our citizens that the Government was
determined to stamp out corruption, and that the ICAC meant business.
As the corruption situation in the government improved, the ICAC spared no efforts in combating
corruption in the private sector. Under Hong Kong laws, the ICAC has to investigate bribery cases involving
both the public and private sectors.
Throughout these years, the ICAC continued, undaunted, to impartially pursue the corrupt. Wealthy
businessmen, chairmen and senior executives of listed companies, high ranking officials, legislators and
influential politicians have been brought to justice for committing corruption or related offences.
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Nowadays, the ICAC continues to be respected by the general public as a highly effective law
enforcement agency, which discharges its duties without fear or favour, and pursues each and every case
regardless of the background and position of the offenders.
G. Corruption Prevention
Enforcement work goes side-by-side with prevention efforts. The Corruption Prevention Department of
the ICAC has a statutory responsibility to minimize opportunities for corruption in government departments
and public bodies. This is done primarily through conducting assignment studies to examine the relevant
practice and work procedures of government departments and public bodies, to revise their work methods if
they are conducive to corruption, and to make recommendations against abuse.
There are three basic principles behind the recommendations on corruption prevention:
•
•
•
Procedural Simplicity: Providers of public services are advised to adopt the simplest procedures
possible for processing applications for their services. They are also advised to adopt the clearest
criteria possible to determine approval or otherwise. The purpose is to reduce queue up time and
minimize human discretion and therefore to take away the incentive to bribe;
Transparency: The public must be informed of their right to service and the ways and means to
lodge a complaint if they are not satisfied with the service they get; and
Accountability: The system should enable each public officer to be held accountable for what he or
she does at work or for his or her omissions.
The Corruption Prevention Department adopts a ‘partnership approach’ vis-à-vis Government
departments and public bodies, and would advise them to install within their organizations a “Corruption
Prevention Review Mechanism” to conduct regular reviews covering procurement or licensing matters,
or other operational procedures. Client departments are also encouraged to set up an “Integrity Steering
Committee” to look into matters pertaining to the integrity of staff. The Integrity Steering Committees have
worked very well, especially in the Disciplined Services Departments, including the police and customs.
They promote a healthy lifestyle and help their staff to handle financial matters, including cases of serious
indebtedness. They have contributed to a decline in complaints against the public sector.
The Corruption Prevention Department also provides consultative services to the Government for the
formulation of new legislation, policies and procedures to ensure that corruption prevention safeguards are
built in at the early stage. Furthermore, it acts as an adviser to the Civil Service Bureau of the Hong Kong
Government in the compilation and review of the Hong Kong Civil Service Regulations.
The Civil Service Regulations require all government officials to maintain a high level of integrity. Civil
servants are required to observe a Code of Conduct. There are strict regulations restricting the acceptance
of gifts or loans. All government officials are required to declare their investments on their first appointment
to the Civil Service. On assignment to a senior or sensitive post, an officer may be required to update their
declarations on a regular basis. Investment restrictions are also imposed on the holders of certain positions
to avoid possible conflicts of interest. Public officers are not allowed to use confidential or unpublished
information obtained in their official capacity to make profits. Failure to meet these requirements will
render an officer subject to disciplinary action, dismissal from the service, and, in serious cases, criminal
proceedings.
H. The Power of Education
The Community Relations Department, the third constituent department of the ICAC, is vested with the
responsibilities of:
•
•
educating the public against the evils of corruption; and
enlisting and fostering public support in combating corruption.
The public sector does not survive on its own, separate from the community. Public sector integrity can
be established and sustained only if the general public demand, treasure and support a probity culture for the
public sector and also for themselves. The Community Relations Department’s work programme to educate
the broader public and the Commission’s task to strengthen public sector integrity are, therefore, mutually
reinforcing.
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Public education aside, the Community Relations Department also makes dedicated efforts to help
enhance integrity in the public sector. Such efforts include:
•
•
•
Developing Codes of Conduct for government officials in respective departments and for the staff of
public bodies;
Conducting “experience-sharing sessions” using real-life case studies to illustrate how public
officers in their everyday work may come across corruption pitfalls;
Introducing an “Ethics Officer Programme” to Government departments and public bodies, whereby
a senior officer in each organization will be assigned as an Ethics Officer to plan and oversee anticorruption strategies for the organization. Regular meetings are arranged for Ethics Officers from
different organizations to discuss ethical management issues.
The ICAC’s work on enforcement, prevention and education complement each other. Practical
experiences gained from the investigation and detection of significant cases are carefully studied and
analysed. The results are used not only to construct preventive measures for the relevant organizations;
representative cases are also used as the bases for an action drama series. To date, the ICAC has, in
collaboration with a TV station, produced 13 series of action-packed anti-corruption stories, broadcast to
millions of viewers in Hong Kong and abroad.
I. The Laws
Given its Commonwealth heritage, bribery has been an offence in Hong Kong from as early as 1898,
with the enactment of the Misdemeanours Punishment Ordinance (MPO). The MPO was replaced in 1948
by the Prevention of Corruption Ordinance (POCO). In 1971, the POCO became the Prevention of Bribery
Ordinance (POBO), with new offences, heavier penalties and stronger investigative powers written into its
provisions.
The POBO aims to maintain a fair and just society by protecting the legitimate interests of public
institutions and employers, and by inflicting punishment on the unscrupulous and corrupt. It addresses
corruption in the public and private sectors.
In Hong Kong, the public sector comprises the Hong Kong Government, and a host of Public Bodies,
including the Legislative Council, Executive Council, District Council, and boards and committees appointed
by the Chief Executive or the Chief Executive in Council, or specified in the Prevention of Bribery
Ordinance, such as public utilities companies, regulatory agencies and advisory committees on different
policy areas, etc. Officers working in the public sector (Public Officers), are expected to uphold a high
standard of integrity to carry out their duties in the best interest of the community, and are therefore subject
to more stringent legislation than ordinary citizens in the private sector. Amongst the Public Officers,
government officials, being civil servants, are, first and foremost, required to observe more stringent rules
than the appointees to and staff of the public bodies.
Section 3 of POBO, which applies to government officials alone, is a blanket prohibition against all acts of
soliciting or accepting advantage unless special permission has been granted by the relevant authority. This
applies even if the act of soliciting or acceptance is unconnected with the officer’s official duty. Offenders are
liable to a fine and imprisonment for one year.
Section 4 of POBO deals with bribery and it applies to both government officials and staff of public
bodies. It prohibits them from soliciting or accepting any advantage offered as an inducement to or reward in
connection with the performance of their official duties. Any person offering such an advantage also commits
an offence. The requirement of “connection with official duty” means that the level of proof for conviction
is much higher for Section 4 than Section 3, and so are the penalties. The maximum penalties for Section 4
offences are a heavy fine and imprisonment for seven years.
Section 10 deals with possession of unexplained property and, again, it applies to government officials
alone. Section 10 stipulates that it is an offence for a government officer to maintain a standard of living, or
to possess or control assets which are not commensurate with his or her official emoluments, unless he or
she can give a satisfactory explanation to the court. This provision appears to be at variance with the notion
of presumed innocence usually expected under the common law. However, it is time-honoured and has been
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proven highly effective for use against hardcore corrupt officials believed to have been receiving bribes over
a long time but whose assets could not be linked to any specific corrupt deal. The highest penalty for this
offence is a 10 year custodial sentence plus fine and restitution.
Private sector corruption is governed by Section 9 of POBO which makes it an offence for any agent
to, without lawful authority or reasonable excuse, solicit or accept an advantage, or any person to offer an
advantage to an agent as an inducement to or reward for or otherwise on account of his or her (a) doing
or forbearing to do, or having done or forborne to do any act in relation to his or her principal’s affairs or
business; or (b) showing or forbearing to show, or having shown or forborne to show favour or disfavour to
any. The maximum penalties for Section 9 offences are a heavy fine and imprisonment for seven years.
The POBO is not bad law, but any law is only as good as it is enforced. Before the establishment of ICAC
in 1974, fighting graft was the sole responsibility of the Anti-Corruption Branch (ACB) of the Hong Kong
Police Force. The Head of ACB was an official three substantive ranks below the Commissioner of Police.
The total strength of the ACB was no more than 200 (actual strength 178 against an establishment of 217),
relative to the total police strength of 16,500 in 1974. Furthermore, the most notorious corruption suspects
were found from within the police force at that time. No surprise, therefore, that the ACB’s performance
was less than effective.
In Hong Kong, the anti-corruption horizons changed definitely with the enactment of the “Independent
Commission Against Corruption Ordinance” in February 1974. Notably:
•
•
•
the ICAC Ordinance would have a Commissioner appointed, who, one of the non-politically
appointed Principal Officers, would carry as much authority and be of a status equivalent to that of a
full-fledged Policy Secretary or the Commissioner of Police;
the ICAC was to operate independently. Independence means, as prescribed in the law, that the
Commissioner of the ICAC “shall not be subject to the direction or control of any person other than
the Chief Executive (the Governor of Hong Kong at that time)”; and
right at its inception, the ICAC was given the legal powers, the policy support, and the resources it
needed to pursue its tasks.
Initially the ICAC had 682 officers (actual strength 369), three times that of the Police Anti-Corruption
Branch. As of today, the Commission comprises 1,360 officers, operating on a budget of HK$701 million,
approximately 0.3% of the Government’s total expenditure.
IV. SUCCESS FACTORS
If there is a measure of success in the anti-corruption work of the ICAC, it should be attributed to the
persistent and concerted efforts of the community as a whole. In taking stock of ICAC’s experience in the
past three decades, several factors are considered to be particularly important in our war against corruption.
They can be interestingly summed up by the name – ICAC.
I for Independence – The ICAC operates independently from the rest of the government. Its
independence is guaranteed by the Basic Law, our mini-constitution, which states that the Commissioner is
directly accountable to the Chief Executive of the Hong Kong Special Administrative Region Government.
This special status enables the ICAC to discharge its duties impartially, without fear or favour, and is
instrumental in gaining the trust of the public.
C for Commitment –The Hong Kong Special Administrative Region Government has been firmly
committed to the anti-corruption cause, and renders full support to the ICAC. In Hong Kong, there is strong
anti-corruption legislation governing both the public and private sectors. At the same time, the ICAC is
given adequate investigative powers to effectively enforce the law, and sufficient financial resources to
discharge its duties.
A for Accountability – To inspire public confidence and support, the ICAC maintains a high degree of
accountability. Since its inception, an elaborate system of checks and balances has been put in place. Central
to this system is the establishment of independent advisory committees to monitor various aspects of our
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work, including the investigation of each and every case.
C for Community Support – Last but not least, throughout its history, the ICAC has had the community’s
strong support as a major motivating force in fighting corruption. Ninety per cent of our corruption reports
come from the public, and a majority of the complainants are ready to reveal their identities. The public’s
readiness to assist the ICAC is crucial to successful investigations and bringing the corrupt to justice.
V. CASE STUDIES
As mentioned earlier, the success of ICAC in Hong Kong is partly attributed to its rigorous enforcement
actions. The following three cases offer a glimpse of its hard work in the past few decades.
A.Case 1 – Senior Government Counsel Bribery Case
In 1990, an acting Deputy Director of Public Prosecutions in the then Legal Department (now the
Department of Justice) accepted bribes to pervert the course of justice due to heavy debts incurred from
investment losses in a fruit orchard in New Zealand. Despite attempts to circumvent ICAC investigation
and despite sneaking out of Hong Kong, he could not escape the long arm of the law. The doggedness and
perseverance of ICAC investigators eventually brought him to justice.
The ICAC commenced its investigation after receiving intelligence from an informant. The ICAC found
that assets of the former government counsel had jumped by more than HK$1 million in one year while his
annual official income was only around HK$500,000.
After a three-month investigation, it was decided there was no point in delaying any longer since the
former government counsel was handling several major commercial fraud cases at that time. To stop
him from influencing the prosecutions of those cases, he and his accomplices - two private lawyers, were
arrested. Though they were later released on ICAC bail, they were required to surrender their travel
documents to the ICAC.
The news came as a shock to the legal profession and the general public. The government counsel,
high-up in the top echelon of the Legal Department, was in charge of the Commercial Crime Unit of the
department that advised on prosecutions relating to major commercial frauds in Hong Kong. The community
was shaken to see such a senior official suspected of accepting bribes to pervert justice. The news also
raised the eyebrows of British Parliament members who wrote to express their grave concern over the
case and urged the Hong Kong government to ensure that the then Attorney General would handle the case
impartially.
Making sure justice was done, the ICAC deployed a task force headed by an Assistant Director of
Operations, and five other top investigators, to the investigation. Determined to uphold impartiality, the
government appointed an independent lawyer from private practice to provide the ICAC with legal advice
and assist in the prosecution of the case. And a two-year long daunting battle for justice was on.
The ICAC applied to the then Attorney General to suspend the former government counsel from duty
pending further investigation and issued notices under Section 14 of the Prevention of Bribery Ordinance to
require him to explain, within 28 days, where his financial resources had come from.
At that juncture, even though the ICAC had his passport, he looked relaxed, as if nothing had happened.
He even told everybody he would return to his homeland shortly. It seemed he was confident of walking
away from this. He exhausted every possible means to circumvent ICAC investigation. He even claimed that
his arrest was a result of a personality clash with ICAC officers over a case he had handled with them earlier
on.
Finding ways to get off the hook, the former government counsel first applied to extend the deadline of
explaining his assets for another 28 days by claiming that most of his assets were outside Hong Kong. He
then applied to the court to get his passport back to return to New Zealand to spend Christmas with his
family. The court approved his application, but the ruling was overturned after the ICAC filed an appeal to
the High Court.
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The most difficult task for investigators was to unearth his assets that had already been transferred out
to many different places overseas. The former government counsel even directed his solicitors and banks in
New Zealand not to divulge any information relating to his financial status to anybody without his approval.
Since the investigations had to be conducted in places that were beyond the jurisdiction of the ICAC, task
force members had to overcome many hurdles and race against time to gather sufficient evidence before
the expiry of the 56-day deadline. The ICAC investigators shuttled between different areas of New Zealand
during the period to conduct extensive inquiries.
With the help of the New Zealand police, the ICAC investigators went to the culprit's orchard to search
for evidence. Upon arrival at the orchard, it was found the culprit's parents had already burned all the bank
statements, documents and correspondence of the culprit, leaving a huge area of burnt grass at the back of
the orchard. But in one corner of a drawer of his parents’ bedroom, investigators managed to find a cheque
stub with the name “Berry Export” and a code written on it. With the stub, it was then possible to follow a
trail of illegal assets covered up by the culprit.
Berry Export turned out to be a shell company used by the former government counsel to conceal his
ill-gotten wealth. It was through this company he transferred, to Singapore, his first bribe to a bank account
opened under the maiden name of his mother. With this crucial piece of evidence in hand, the ICAC task
force was able to follow the asset trail.
After a three-week stay in New Zealand, the task force confirmed that the former government counsel
had assets of more than HK$16 million, including bank balances of NZ$2.4 million, three lots of land in New
Zealand and an orchard. The official emoluments in the 15 years he worked in the Legal Department came
to about HK$4.8 million. The way he covered up the ill-gotten gains was to bury the money in more than
25 bank accounts in different countries, including New Zealand, Australia, the United Kingdom, Taiwan, etc,
under the names of relatives and Berry Export. The money was believed to have included the backhanders
paid by the two lawyers in private practice in order to secure assistance from the former government
counsel in getting their clients acquitted.
The discovery of Berry Export was a breakthrough in collecting evidence against the former government
counsel. That was where the whole investigation turned. The former government counsel learnt from his
family we had this piece of information in hand. He then realized he could not fool around any more nor
could he cover up his corrupt practices.
At the scheduled day when the former government counsel was required to explain his financial
resources, he did not show up. ICAC officers believed he had jumped bail and left Hong Kong.
Subsequent ICAC investigations revealed that he, with the assistance of a private lawyer who was
an auxiliary police chief inspector, had fled to Huizhou on the Mainland via Macao. He then used a false
passport to sneak back to Hong Kong from Guangzhou, and then flew to Manila. There was no extradition
agreement between Hong Kong and the Philippines at that time.
Knowing there was no extradition agreement between Hong Kong and the Philippines, the fugitive
government counsel was confident that he could remain free and then sneak back to New Zealand. Such
smug calculations worked for only a while since the Immigration Department of the Philippines had already
amassed sufficient information to plan the counsel's arrest.
The fugitive counsel, who had been lying low in the hills of Manila, was seen frequenting a bar in the city.
The Philippines’ Immigration Department, with the help of Manila police, arrested him at the bar on March
29, 1990.
Since the Philippines’ Immigration Department was authorized by law to deport any person who entered
the country with a false passport, the fugitive counsel was sent back to Hong Kong the day after his arrest.
When he arrived at the Hong Kong Airport under the escort of Philippine Immigration Officers, he
was immediately arrested by ICAC officers, who handcuffed him and took him to the Central Magistracy
under high security. He was then charged for failing to explain his source of income in accordance with the
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Prevention of Bribery Ordinance and was put under ICAC custody pending a trial.
Weighed down by three months on the run, he looked relieved on his return to Hong Kong. He was very
co-operative from the moment of arrest. He confessed the entire truth of how he received bribes and how
he absconded. Owing to the additional evidence collated by the task force, he was charged with possessing
financial assets disproportionate to his present or past official emoluments, contrary to Section 10(1)(b)
of the Prevention of Bribery Ordinance. The total assets under his control were worth about HK$16.1
million, including about HK$2.3 million he held for a corrupt third party. Excluding loans and the official
emoluments, the value of the unexplained assets came to more than HK$12 million.
Wanting to reduce his imprisonment, he pleaded guilty and agreed to give evidence against other
defendants as a tainted witness. He was then detained in the ICAC Detention Centre for debriefing the
whole corrupt arrangement.
That was the first time a defendant was kept in the ICAC Detention Centre for a prolonged period to
give evidence. The ICAC task force had foreseen the possibility that this arrangement would be challenged,
so it had taken every preparation for this eventuality. Before he began to serve his sentence in the centre,
the task force carried out a detailed comparison between the detention regulations and facilities of the
Correctional Services Department (CSD) and that of the ICAC, and took all precautions to ensure the
treatment of the former government counsel was the same as that of inmates at prisons.
After an almost two-year court battle, the two private lawyers, a barrister and a solicitor, were finally
convicted of bribing the former government counsel with intent to influence the trial of court cases. They
were sentenced to seven years’ imprisonment. After an appeal, the barrister was further sentenced to an
additional two years’ imprisonment while the solicitor’s sentence was remitted to five years.
Another solicitor, who had received the former government counsel in Macau and assisted him in his
escape, was charged with helping the counsel to avoid arrest and prosecution. Convicted of perverting the
course of justice, the solicitor was sentenced to four years’ imprisonment. The former government counsel,
who was earlier sentenced to eight years’ imprisonment and was ordered to repay HK$12 million to the
government in restitution, was then sent to Siu Lam Prison to serve the rest of his sentence. He was given
a one-year remission of imprisonment by the then Governor.
The former Chief Justice Ti-Liang Yang handed down the punishment and said “This case demonstrated
the determination of the government in the fight against corruption and upholding the integrity of the
judiciary. Regardless of how senior a defendant in his official position and whatever his nationality, the case
will be dealt with impartially.”
B. Case 2 – Short Piling Case
Hong Kong has a large population in a limited territory. This shortage of land naturally means, however,
that land prices are high, and that people often have to lavish their lifetime's savings on buying an apartment.
If a hard-earned apartment turned out to be substandard, the owner would be devastated. “Jerry-building”
(substandard construction) for quick profit could turn people's dreams of owning a safe, comfortable home
into a life threatening nightmare.
In 1997, Hong Kong embarked on a massive public works programme. Although Hong Kong's economy
had been impacted by the Asian financial turmoil that began in October 1997, public housing construction
remained intensive from 1998 on. A series of scams related to substandard works, including short piling,
soon surfaced. In three years from 1998 to 2000, the ICAC initiated 142 prosecutions in cases of corruption
and fraud involving substandard construction works.
Instances of non-compliance in construction works for public housing gradually came to light from 1999
on. In December 1999, a monitoring survey indicated abnormal foundation settlement at two buildings that
were still under construction at a public housing estate. Experts were called in to carry out independent
investigations. They found that out of 36 large-diameter bored piles for two buildings, only four met the
requirements. Twenty-one were shorter than the prescribed length by two metres to 15 metres, while 11
were resting on soft mud instead of bedrock. In other words, an astonishing 90 percent or so of the bored
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piles in these two buildings failed to comply with standards and the already extensive superstructure was
being supported by the only 10 percent of bored piles that were fully compliant.
When the short piling was discovered, the two buildings had already been constructed up to their 33rd
and 34th floors respectively. The case aroused huge concern in the community. Eventually in March 2000,
the Housing Department (HD) announced that the two buildings would be demolished in the interests of
safety. In this one incident alone, public funds amounting to some HK$650 million had been squandered.
It is frightening to contemplate the fact that if the short piling had not come to light, as many as 656
households would have been placed in grave peril. The site was eventually turned into a leisure park.
1. ICAC Investigation
In October 1997, HD invited tenders for the necessary piling works from 27 contractors on their
approved list. Company ‘A’, a known experienced construction industry contractor, was the successful bidder
for the piling works of all five buildings.
The other main player in what would turn out to be a major scam was Contractor ‘B’. In February 1998,
Company ‘A’ subcontracted the works to Contractor ‘B’ immediately on being awarded the contract by HD.
As the entity that had signed the contract with HD, Company ‘A’ should clearly have informed HD of the
subcontracting arrangements which they had entered into. Yet they never once disclosed this arrangement.
Throughout the entire construction period, the role of Contractor ‘B’ as a subcontractor was concealed.
Contractor ‘B’ began piling works at the site in February 1998 using a vibrator that did not have sufficient
force to drive the temporary casings down to the founding level required by the contract. On top of this, the
contractors were coming up against a number of soil problems.
In an attempt to arrest this soil collapse, Contractor ‘B’ purchased quantities of the proprietary soil
stabilizer Super Mud (a chemical for strengthening the concrete) to reinforce those pile shafts without
installing temporary casings. The use of Super Mud was not in the method statement for the works. Given
the length of pile shafts without temporary casings, the Super Mud served little useful purpose.
In mid-June 1998, Contractor ‘B’ was troubled by financial problems and stopped using Super Mud.
Although construction problems were mounting, Contractor ‘B’ continued to ignore them and forged ahead
because the contract stipulated a fine of $170,000 per day for any work delay. Since the soil collapse situation
was never improved, the depth of many of the pile shafts was reduced, and as a result the related piles were
shorter than stipulated.
Faced with a project riddled with problems, major delays and the prospect of a huge fine, Contractor
‘B’ took the final step of resorting to a number of blatantly illegal acts, which were later revealed in the
operation, that they thought would cover up the non-compliant piling works.
After the severe short piling of these two buildings was discovered, HD reported to the ICAC in
December 1999, suspecting corruption. Two weeks later, Company ‘A’ also reported to the ICAC, alleging
that the works involved corruption.
HD told the ICAC that they would be holding a press conference on 9 January 2000 in order to calm
public concern as quickly as possible. They said that they would use this conference to announce that they
would be stopping the construction of the superstructure for the two buildings.
The ICAC realized that once this news broke, their investigations would be compromised to a
considerable extent. They now had only 10 odd days to master all the intricate details of the case if they
were to catch all the suspects in one dragnet.
Another hurdle which the investigators had to overcome was the intricate technical knowledge involved
in construction works. They had to learn about pile construction procedures in particular and the essentials
of the various processes, including checking methods. If the investigators could not learn the ropes in time,
how could they ever hope to uncover all the fraudulent tricks?
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To speed up the investigation, the ICAC temporarily attached a professional construction engineer
working in the Corruption Prevention Department to the Operations Department. He proved a veritable
walking encyclopaedia, providing prompt professional advice on a number of highly technical piling
construction issues. Within days, the investigators were absorbing new knowledge of piling works. As the
press conference loomed ever nearer, it was a real race against time.
On 8 January 2000, just one day before the press conference, the ICAC commenced arrest operations
and searched a number of places in the territory for two consecutive days. A hundred investigators were
deployed in the action, 21 search warrants were executed and eight persons were arrested, including
three HD officers, two ex-directors and three staff members of Contractor ‘B’. They were alleged to have
committed corruption and conspiracy to defraud by using short piles to save construction costs in relation
to the foundation works. During the operations, the ICAC seized a large amount of documents and exhibits.
Four shipping containers were needed to hold the substandard concrete cores alone.
The investigators had to interview all the suspects and witnesses and examine the seized documents,
progress records, and test records all within a very short space of time. The records seemed flawless,
however, and the investigators realized that they would now have to search for clues by reading between the
lines.
The short piling scam mainly involved three people who quickly became known as the “Contractor ‘B’
Trio”— two ex-directors of Contractor ‘B’ together with the site agent who was responsible for overseeing
the foundation works.
During interrogation, the two ex-directors and the site agent put forward various excuses and denied the
allegations. The site agent as well as the HD staff members, however, agreed that they had lunched together
but that all the lunch bills had been properly recorded. For convenience’ sake, these bills would first be
settled by Contractor ‘B’ and the HD site staff would later pay for each meal on a monthly basis. They had
played mahjong once and also twice visited karaoke bars together, sharing the costs among them. They
strongly denied any corrupt dealings and said this had nothing to do with any short piling.
There was insufficient evidence to support the alleged corruption. The ICAC investigation could still
move forward, however, because, pursuant to Section 10(5) of the ICAC Ordinance, if an investigation
into corruption leads to a suspicion that other offences (such as conspiracy to defraud) may have been
committed, the ICAC has the legal power to continue pursuing such a lead.
It soon came to light that some of the site staff were aware of construction irregularities during the seven
months when Contractor ‘B’ was in charge of the work. A site foreman employed by Contractor ‘B’ told an
ICAC investigator that, because the project was progressing so slowly, he had been instructed to drive the
temporary casings to a depth of only 20 to 30 metres below ground, rather than to founding level. He also
said that he knew that two ex-directors of Contractor ‘B’ had ordered the workers to use Super Mud to
stabilize the walls of excavated shafts without installing temporary casings for support.
The site foreman also pointed out that a few months after construction started, two to three lorry loads
of concrete were left over after workers had cast the concrete into two pile shafts. This was unusual because
the volume of concrete ordered ought to have matched the amount required to create piles of the prescribed
depth. Such a large excess could mean only one thing: the pile shafts were shorter than prescribed, and so
could not hold the correctly ordered amount of concrete.
An engineer stated that the two ex-directors and the site agent had told him to have workers shorten
the measuring tape that would be used to measure the actual length of the pile. This became known as the
“magic measuring tape.”
One piling worker revealed that this young engineer had asked him to drill the pile to at least 40 metres
when taking core samples. When the worker reported that the drilling had been impeded by blockages
within the pile, the engineer instructed him to tidy up the drill hole and shorten the tape before HD staff
measured the length of the pile.
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In line with the contract, Contractor ‘B’ employed a quality control engineer to inspect every item of
works to ensure compliance. The quality control engineer told ICAC investigators that he was supposed
to conduct quality control at the site, but in fact spent most of his time at another construction site of
Contractor ‘B’. He admitted that he had signed a number of confirmation documents without having actually
checked the quality of the works. He was merely a rubber stamp.
Although the staff of Contractor ‘B’ had revealed their modus operandi, the two ex-directors who had
masterminded the scam were loud in their denials. The site agents, who had been involved in yet another
short piling scam, had been found guilty of one count of conspiracy to defraud. Thereafter, the site agent told
the ICAC through his lawyer that he was willing to testify against the two ex-directors concerning this case.
Similarly, the site foreman and the assistant engineer also became tainted witnesses, and testified in the
case.
The case was heard in the High Court. In sentencing, the judge pointed out that the conspiracy to
defraud engaged in by the two ex-directors had caused HD to lose a huge amount of public funds. He said
that the cover-up of substandard piles by the defendants was detrimental to the construction works and
endangered the public. Further, deterrent sentences had to be handed down because, given the limited land
resources in Hong Kong, members of the public could well invest their life savings in housing.
In the end, the two ex-directors were convicted of one count of conspiracy to defraud and sentenced to 12
years in jail.
Nine HD staff members failed to perform their duties at the site. During the construction period, three
HD site officers turned a blind eye to the non-compliance of foundation works. They approved the works
without checking properly and failed to report progress to the project engineer. Disciplinary action was taken
against them by the Civil Service Bureau. The other six staff members were transferred to other posts.
Company ‘A’ had dishonestly subcontracted works to Contractor ‘B’, which was not an approved
contractor on the HD list, and they had not stationed a representative on site to supervise the construction
works. When Company ‘A’ took over the project from Contractor ‘B’, they continued to employ the same
team to manage the project, thus further covering up their malpractice.
HD took punitive action against Company ‘A’, including permanently delisting Company ‘A’ from its list
of approved contractors for constructing large diameter bored piles and demolition, and prohibiting its sister
company from undertaking any works for HD for two years.
The Government was deeply concerned about the short piling scam, and set up an independent
committee to critically review the whole issue. The committee published its report on 25 May 2000 and
recommended a number of improvement measures.
2. Responsive Measures
The Corruption Prevention Department of the ICAC, in conjunction with HD and related Government
departments, subsequently formulated anti-corruption preventive measures to plug loopholes. These
measures included:
(i) Strengthening of Works Supervision
A works supervision plan should be formulated before the commencement of works. Under the plan,
professionals should be involved in monitoring major procedures and the frequency of inspections should be
specified. All records relating to the works should be properly maintained.
(ii) Specifying Testing Procedures
Testing procedures, including how tests should be monitored, how frequent they should be, and the
detailed nature of samples for testing, should be clearly specified. In particular, tight controls should be
implemented over the extraction of samples and their secure storage and transport.
(iii)Monitoring Subcontractors
Contracts should include probity clauses covering such matters as codes of conduct and guidelines on
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conflicts of interest. The terms of the contracts should be so phrased as to deter main contractors and
subcontractors from turning to corruption and malpractice.
(iv)Enhancing Staff’s awareness of Corruption Prevention
Site supervisors’ understanding of the Prevention of Bribery Ordinance should be improved and their
ethical standards enhanced.
To tackle the series of short piling scams that had come to light since 1999, the ICAC set up a 45-man
task force in February 2000 to investigate reports of corruption involving short piles and jerry-built
construction works. The aim was to seek to begin investigations as early as possible so that timely remedial
measures could be taken before it was too late.
The number of corruption reports received by the ICAC concerning the construction industry has
dropped since 2002, from a high of 295 reports in 2001 to 114 reports in 2007. This decline indicates that
positive progress has been made in building a culture of integrity in the construction industry.
C.Case 3 – A Hong Kong Listed Company Case
As an international financial centre, the probity of Hong Kong’s stock market and financial institutions
is extremely important. Any attempt to undermine the integrity of the financial markets has an enormous
impact on the well-being and prosperity of our community. Allegations of bribery and corruption in listed
companies, especially where senior management are involved, are particularly difficult to investigate due
to the complicated accounting and paperwork trails that need to be examined in order to collect enough
evidence for a prosecution.
This case concerns a corruption allegation against the senior officials of Company ‘K’, a listed company
in Hong Kong. Company ‘K’ was the third largest television manufacturer and had over 200 sales offices in
mainland China. Its market capitalization was worth over HK$4 billion at that time.
The key persons in this case are two brothers, respectively the chairman and an executive director of
Company ‘K’, and their mother, Madam Lo.
In January 2001, Company ‘K’ issued a cheque for HK$500,000 in favour of a Mr Wong. The payment
voucher and accounting records disclosed such payment as “consultancy fee”. The cheque and payment
voucher were signed by the chairman.
During the same month, the executive director signed a four-year service contract on behalf of Company
‘K’ with retrospective effect from November 2000 with Wong for procurement of business for Company ‘K’.
Under the contract, Wong was entitled to receive a commission of 1% of the procurement amount and
share option (a right to buy the shares at a fixed price, usually below the market price of the shares) of 25
million shares of Company ‘K’ exercisable in four years at a price which was one-sixth of the share price
of Company ‘K’ at that time. Between April 2001 and May 2003, Company ‘K’, through a bank account in
Macao, paid Wong over HK$50 million by 10 cheques.
The investigation, including a fund tracing exercise, revealed that most of the money ended up in the
bank accounts held in the name of Madam Lo, after being laundered through a convoluted route. The
proceeds of a HK$500,000 cheque payment, after depositing into Mr. Wong’s bank account, which was
controlled by Madam Lo, were either withdrawn by Madam Lo or transferred to bank accounts of the former
chairman and Madam Lo.
The HK$50M in Mr. Wong’s bank account in Macao was transferred to bank accounts of Madam Lo and accounts in Mr. Wong's name held with securities trading companies controlled by Madam Lo as well.
The share options were deposited into Mr. Wong’s securities trading account and sold at the market at threefold its original price. At that juncture, there was evidence to show that the chairman and executive
director might have, through the corrupt assistance of Mr. Wong, stolen money from the company.
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An operation was then mounted. The chairman and the executive director remained silent while Madam
Lo was not in Hong Kong. Mr. Wong admitted that he was not an employee of Company ‘K’ and did not
receive any commission, consultancy fee or share option. He only worked for Madam Lo to deal with rental
matters at a monthly salary of HK$10,000.
During the search of Madam Lo’s residence in Hong Kong, cheque books pre-signed by Mr. Wong were
found. Mr. Wong claimed he was told by Madam Lo to sign the cheque books and the service contracts
without knowing the contents.
The chairman and the executive director were later charged with conspiracy to steal and conspiracy to
defraud in respect of the consultancy payments made from Company ‘K’ to Mr. Wong’s accounts, purely
based on circumstantial evidence.
The trial, which lasted for over six months, involved expert witnesses on China's legal system from
both prosecution and defence, owing to the defence case that two former high ranking Chinese government
officials were appointed as consultants for Company ‘K’ but they were unwilling to sign a service contract or
to have their names revealed in the contract.
The defence produced a number of documents to support their case, including a series of handwritten
letters written by the former officials to the chairman to prove their employment during the material time.
The defence also made reference to an agreement signed by one of the former officials and Madam Lo, in
the presence of a lawyer, Mr. Xin. The agreement purported to support the defence case and protect the two
former officials in getting rewards from Company ‘K’.
The defence also revealed that the two former officials travelled from the office of Company ‘K’ in Hong
Kong to the lawyer’s office in Shenzhen, China, on 11 January 2001, to sign the agreement.
With the testimony of the expert witness, the defence case appeared to sound reasonable under the
Chinese legal system and made it a perfect defence.
The relentless efforts of the prosecution team uncovered two pieces of questionable evidence tendered
by the defence. One concerned a letter sent by one of the former officials to the chairman dated 10 April
2001.
The authenticity of the letter itself could not be challenged. However, the manufactured date of the
envelope containing the letter was found to be January 2002.
It was also transpired from the passport of one of the former officials that he left Shanghai, China and
travelled to the United States of America on 3 January 2001 and did not return to Hong Kong or China until
15 January 2001. This movement record made it impossible for him to be present in the meeting of signing
the agreement on 11 January 2001.
The trial judge cast doubts on the evidence adduced by the defence and eventually convicted the
chairman and executive director who were both sentenced to six years’ imprisonment.
When handing down the verdict, the trial judge commented that it was one of the most serious
commercial crimes of its nature, dealing as it does with the privileged position that both defendants had
betrayed their obligations to the company and its shareholders in the most grievous ways.
VI. CORRUPTION AS A LUBRICANT OF CRIME
The Hong Kong legislation against business corruption is relatively straightforward. It is stipulated
in Section 9 of the Prevention of Bribery Ordinance, as mentioned in paragraph 44 above, that any secret
commission, kickback, or other advantages given to, or solicited or accepted by an agent without his or
her principal’s consent would be an offence. In reality, the battle against business corruption is never that
simple. Corruption, by its very nature, is normally interwoven with other criminal activities. As illustrated
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in the last case study, they are all facilitated by corruption in one form or another.
In a “traditional” corruption related crime scenario, the role of corruption would have been quite clear. A
suspect may offer advantages to individuals who are in a position to help him or her to achieve a particular
goal which, in the context of economic crime, would be some kind of fraud or malpractice aiming at obtaining
private gain or causing loss to others. The corruption acceptor, more often than not, is not a participant
of the fraud or malpractice, i.e. he or she would only provide a service upon accepting a reward but that
whether or not the offeror eventually achieves his or her goal would not be of the acceptor’s concern. This
scenario can be conveniently termed as “service-based corruption.”
As time passes, the role of corruption is now very much blended with the fraudulent scheme, that is to
say, corruption becomes part and parcel of the criminal activities as a whole. In the scenario of a modern
economic crime, participants of which often include professionals such as legal practitioners, accountants,
or others with in-depth knowledge of a particular field, each of whom would provide advice or put up efforts
to assist the mastermind of the criminal plot to achieve his or her goal. In doing so, they are promised
advantages not on a piece-meal or service basis, but that rewards would be conferred upon the success of
the plot, i.e. they become a member of the criminal syndicate and share the ill-gotten gain as and when the
plot succeeds. Corruption in this kind of scenarios can be termed “entrepreneur-based”. Had their criminal
activities been successfully checked by the authority and the whole group of suspects brought to justice,
they would likely face some kind of global charges of conspiracy to defraud or other related offences rather
than corruption. In such scenarios corruption only serves as a lubricant to facilitate the smooth operation
of the plot but does not sufficiently reflect the criminality of the suspects. This changing role of corruption
in crime has rendered detection increasingly difficult, as the suspects would be in a much more cohesive
relationship than those in the “service-based” cases.
VII. KEY TO SUCCESS
As emphasized by the former United Nations Secretary General, Mr Kofi Annan, who said at Palermo
on the occasion of the opening of the United Nations Convention against Corruption for signing, “if crime
crosses all borders, so must law enforcement.” One key factor attributed to the success of the above
investigations is the excellent international co-operation between law enforcement agencies to help trace
corrupt proceeds and locate fugitives. Another key factor is to foster public support – both in terms of
intelligence provided for investigation and confidence in the organization as a whole.
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CORRUPTION CONTROL IN SINGAPORE
Koh Teck Hin*
I. INTRODUCTION
The Corrupt Practices Investigation Bureau (CPIB) is the sole agency responsible for combating
corruption in Singapore. CPIB was founded in 1952, even before Singapore gained independence from the
British. It is one of the oldest agencies in the world dedicated to fighting corruption, and we developed over
the past 58 years to our current state today.
On the whole, the overall strategic approach to fighting corruption applies across the board, with no
distinction made on whether it is petty corruption or high level corruption. No exception is made for anyone
and there are no ‘black areas’ where the law cannot deal with. In our experience, the same commitment to
action is necessary in order to be successful in curbing corruption at all levels.
II. CORRUPTION SITUATION
Since Singapore attained self-government in 1959, corruption control has been top of the government
agenda. When we took over from the British, corruption was prevalent. The Prevention of Corruption
Ordinance was weak. Corruption was not a seizable offence and the powers of the anti-corruption bureau
were inadequate. Public officers were poorly paid and the population was less educated, did not know their
rights and often the way to get things done was through bribery.
For a small city state, it was therefore vital of Singapore to control corruption for our national survival. It
was necessary in order to provide a conducive climate and a level playing field to spur economic growth. It is
a competitive advantage to attract foreign businesses to invest in our land.
Corruption control has become a strategic tenet of our system of governance. The smooth conduct of
government affairs had to be grounded on a rational basis, with clear rules for all to follow. It provides the
predictability and confidence for the public to rely on the government to discharge its duty without bias.
There had to be no room to tolerate those who hope for windfalls from powerful friends or from greasing
contacts in high places. For Singapore to succeed, we had to operate on a meritocratic principle, where
people can see that rewards are tied to the efforts that they put in, and not through corrupt means.
There was much reform required. The law was strengthened. Rigorous enforcement took place.
Government administration was improved. All these provided the impetus for Singapore’s transformation
from a corruption-infested city state to the present state we are in, where we enjoy a good reputation
worldwide. Singapore has been the third least corrupt country in Transparency International’s Corruption
Perception Index, and has been the least corrupt country as ranked by Political Economic & Risk
Consultancy (PERC) for the past 10 years.
The mood and resolve to vigorously curb corruption was echoed by the government as early as in 1960
when Parliament declared that it: “(was) determined to take all possible steps to see that all legislative and
administrative measures are taken to reduce the opportunities of corruption, to make its detection easier
and to deter and punish severely those who are susceptible to it and who engage in it shamelessly.”
The strong anti-corruption refrain was heard again and again, including this statement made in 1979 by
then PM Lee Kuan Yew, which best explains the need for a corruption-free Singapore: “The moment key
*
Deputy Director (Operations), Corrupt Practices Investigation Bureau (CPIB), Singapore.
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leaders are less than incorruptible, less than stern in demanding high standards, from that moment the
structure of administrative integrity will weaken, and eventually crumble. Singapore can survive only if
Ministers and senior officers are incorruptible and efficient [….] Only when we uphold the integrity of the
administration can the economy work in a way which enables Singaporeans to clearly see the nexus between
hard work and high rewards.”
And again emphasized by the then PM Mr Goh Chok Tong in Parliament in 1993 when he said:
“[…..] I have every intention to make sure that Singapore remains corruption free. I will not let standards
drop. And everyone should know that corruption in any form will not be tolerated. I expect all Ministers, all
MPs and all public officers to set good examples for others to follow …”
This is still the same position today and the will of government to stamp out corruption wherever it may
be is still very strong.
III. POLITICAL WILL
These sentiments reflect the determination and political will for the fight against corruption. Political will
is a key ingredient in the transformation effort from Singapore’s corruption infested past as it forms that all
important sub-structure, upon which all the super-structures of anti-corruption work rest. It provides the soil
and the nutrient which allows the seeds of anti-corruption work to germinate and grow. The government has
matched its words with deeds - it mobilized the public, and the entire civil service to fight corruption.
The year 1975 marked a major turning point in the fight against corruption. The Minister of State Wee
Toon Boon, then a serving Minister in the Government of the ruling party, was convicted of corruption. Such
results demonstrated to the public the resolve of the government to keep Singapore clean. And this has
garnered the public support in the ongoing fight against corruption. With the efforts put in and with public
support over the years, corruption was thus brought under control.
IV. FRAMEWORK OF CORRUPTION CONTROL
With a strong political will as the foundation, the framework of corruption control consists of four pillars,
consisting of 4As, as follows:
-
-
-
-
Effective Anti Corruption Acts (or laws)
Effective Anti Corruption Agency
Effective Adjudication (or punishment) and
Efficient Government Administration.
TEMPLE OF CORRUPTION CONTROL
EFFICIENT
ADMINISTRATION
EFFECTIVE
ADJUDICATION
EFFECTIVE ACTS
(OR LAWS)
EFFECTIVE
POLITICAL WILL
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A.Effective Acts (Laws)
Effective laws provide the basis for the fight against corruption. The law must define corruption offences
and their punishments and the powers of enforcement against it. As society and the environment changes
all the time, it is necessary to review the law periodically to ensure that it is up to date. The powers of
enforcement must be well provisioned so that they will have sufficient force and strength.
In Singapore, the principal law is the Prevention of Corruption Act (PCA). This governs the primary
offences of corruption and the powers of the enforcement agency, which is CPIB. In addition, there is
the Corruption, Drugs Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA)
which provides for the seizure and forfeiture of proceeds which a person convicted of corruption cannot
satisfactorily account for. The PCA was enacted in 1960 to replace the previous Prevention of Corruption
Ordinance. Since then, the Act had undergone numerous amendments to increase the powers of
investigation of the Corrupt Practices Investigation Officers, enhance punishments for corruption and to
plug loopholes to prevent exploitation by criminals.
The law must support law enforcement with a cutting edge. This is vital as corruption offences are
particularly difficult offences to deal with. Unlike general crime where there is a victim who tells us
everything that happened, in corruption offences, both the giver and the receiver are guilty parties who
have the motivation to hide and not tell the truth. This makes investigation and evidence gathering more
challenging. To be successful, the law must provide sufficient teeth for law enforcement.
The principal law we use is the Prevention of Corruption Act. The following are the distinctive features
which may differ from anti-corruption laws in other countries:
(i) The Act also allows CPIB to investigate corruption in both the public and private sectors and we
can deal with both the giver and the receiver. We have dealt with cases in the private sector since
the beginning. In some countries, anti-corruption agencies do not deal with private sector. It is
of strategic importance for Singapore to keep Singapore companies clean because if not, other
countries will not want to trade with Singapore and they will not want to invest money in Singapore.
We also deal with givers of bribes. If we don’t, they may continue to give bribes and escape
punishment and this will worsen the corruption situation due to the demand-supply dynamics.
(ii) There is a presumption clause – presumption of corruption when a public officer is found to have
received bribes. What this means is that a public officer charged in court has the duty to explain to
the court that what he or she received was not received corruptly. If he or she fails to explain to
the satisfaction of the court, he or she will be presumed to have received the money corruptly. Of
course, we do not just depend on this to secure conviction but we will bring all the evidence we have
to court and this presumption clause is an additional help for the prosecution.
(iii) Next, an acceptor of a bribe will be considered guilty even if he or she, in fact, had no power, right or
opportunity to return a favour to the bribe giver. This came about because some corrupt offenders
took bribes and then were unable to deliver the expected favour. Even so, they should not escape
punishment.
(iv) The Act forbids the use of customary practices, for example, giving/accepting of ‘red packets’ in
Chinese New Year as an excuse for giving/accepting bribes. No one can go to court and be excused
by saying that the bribe, disguised as a ‘red packet’, is goodwill money and nothing illegal. In the
past, CPIB was very busy during Chinese New Year and had to look out for bribes disguised as
goodwill money. Nowadays, with the enforcement actions taken, the public knows and offenders will
not try to use the festive occasion as a camouflage for bribe taking.
(v) The Act also empowers the Court to order bribe receivers to pay a penalty equal to the amount of
bribe received apart from punishment in the form of fines and/or imprisonment terms. This means
if accused took $1 million dollars, he or she has to surrender back that amount. This emphasized the
principle that the accused ought not to enjoy any benefit from any corrupt activity.
(vi) When a person is found to have committed corruption offence, the Principal could recover the
amount of the bribe as a civil debt. An example is the manager of a multi-national company (MNC)
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convicted of a corruption offence for receiving kickbacks for contracts he granted to others. He was
sentenced to 10 months’ imprisonment and ordered to pay a penalty of about $300,000, being the
total of bribes received by him. After the sentencing, the MNC commenced civil action under the
Prevention of Corruption Act to recover the bribes from the Manager. The manager appealed to the
Court of Appeal against the claim on the ground that he had already paid penalty to the State for the
bribes he had received and he could not be liable to pay the claim to the MNC, otherwise it would be
tantamount to making him pay twice for the same bribes. However, his appeal was dismissed by the
Court of Appeal. The court ruled that this was not double jeopardy and the law allowed for it. The
manager is thus still liable to pay the MNC.
(vi) The Act renders Singapore citizens liable for punishment for corrupt offences committed outside
Singapore and to be dealt with as if the offences had been committed in Singapore. We have dealt
with cases where Singaporeans commit corruption abroad and prosecuted them in Singapore.
Besides the PCA, there was enactment of the Corruption, Drug Trafficking and Other Serious Crimes
(Confiscation of Benefits) Act, CDSA in short, in 1999. The principle for the Act was to ensure that
corruption does not pay. It also covers the confiscation of benefits not only from corruption but also drug
offences and other serious crimes. The CDSA provides the Court with powers to confiscate pecuniary
resources and properties when a person is convicted of a corruption offence and cannot satisfactorily account
for those resources to be confiscated. The objective is to ensure that the perpetrators will not benefit from
corruption.
The Parliament has also enacted the Parliament (Privileges, Immunities and Powers) Act to ensure
that Members of Parliament will not benefit from a debate in the House in which he or she has a pecuniary
interest. It has also enacted The Political Donation Act to ensure candidates standing for political election
declare donations they received.
Other statutes regulating Government bodies have also incorporated provisions which deter corruption.
One such provision is in the Customs Act which specifically provides for penalties for receiving bribes, and
presumes any monies in the possession of a Customs Officer which cannot be accounted for to be corruptly
obtained.
B. Effective Enforcement
Having tough laws is no guarantee that there is effective enforcement. If there are tough laws but lax
enforcement, corruption will still flourish because the corrupted escape detection and investigation. The
situation will be like having a good battle plan but poor troops. It is therefore crucial to devote priority and
attention to setting up an effective enforcement agency.
In Singapore, CPIB is the only agency empowered to investigate corruption offences. Any other law
enforcement agency which comes across or receives reports on corruption will have to hand over the case to
CPIB.
CPIB has independence of action. We can investigate any person or corporation in government or the
private sector, however high in the hierarchy they may be. CPIB reports directly to the Prime Minister so
as to block any undue interference from any quarters and to ensure that CPIB favours no one particular
individual, department or agency but operates without fear or favour, regardless of colour, creed or social
status. In fact, CPIB's independence of action was guaranteed by the Constitution, with provision for the
elected President of Singapore to open the doors for investigation to proceed should the government of the
day block CPIB.
Our Bureau slogan “Swift and Sure” is the message to all corrupt offenders that there will be swift
action, certainty of results and justice will take its course. CPIB has always endeavoured to be a crack
investigative agency, purpose-driven and committed fully to our mission of “combat(ting) corruption through
swift and sure action”. Swift action suggests promptness of action, speed and timeliness while sure action
suggests certainty of action, resoluteness and result orientedness.
Having a strong capability is easier said than done. Our current success does not guarantee future
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success. In a way, it is a race against the corrupt and the criminal minded as they resort to use of technology
and more sophisticated modus operandi to commit corruption. There are more and more ways to hide
corrupt proceeds. It is incumbent on the enforcement agency to build enough capability to deal with them.
For example, in terms of computer forensic capability – we need to have the ability to extract evidence from
computers, financial investigation capability to follow the money trail and uncover hidden corrupt proceeds.
C.Effective Adjudication
Sure detection and strict enforcement of laws, no matter how effective, must however be complemented
by effective adjudication. Detection, prosecution and subsequent court conviction have specific deterrence
on offenders. This also has a general deterrence on the like-minded. Aided by the tough laws, the judiciary
successfully created a regime of punishment that is deterrent enough to hammer home, loud and clear, the
message that corruption does not pay.
There is transparency in the justice process as all court proceedings are open, public hearings. Decisions
are documented and subject to public scrutiny. Both the prosecution and the defence can appeal against any
decision made by the Courts.
Judgments from the court will provide some benchmarks as to the severity of offences and their
corresponding sentences. For instance, in a recent Appeal case involving a private banker convicted of
corruption involving bribes of $150,000 (Wong Teck Long vs PP ), when the accused appealed against his
conviction and sentence, the prosecution cross appealed on the sentence, the High Court not only dismissed
the accused’s appeal but enhanced his original sentence from four months’ to 15 months’ imprisonment. In
passing this judgment, the CJ said: “To safeguard the overall public confidence in the integrity of our banking
and financial industry as well as Singapore’s reputation as a regional and financial hub, punishment for
deplorable and corrupt acts, such as that of the appellant, must be swift and harsh so that a strong message
will be sent out to the offender at hand and would-be offenders that Singapore does not, and will not, without
exception, condone corruption.”
In another corruption case involving short supply of marine bunkers (PP vs Lim Teck Chye ), as it was
a private sector business case (which tend to attract fines rather than imprisonment), the court had this
judgment: “It could not be said that only corruption offences involving public servants…. harmed the public
interest concern for the preservation of the integrity of the public service and the administration of justice.
Corruption offences committed in the private sector may do so as well, as private corporations provided
public service functions ….. The corrupt actions of the appellant … had the potential to adversely affect
public confidence in the independence of the marine surveyors and Singapore’s bunkering industry. It
was therefore untenable to draw a strict line between corruption offences committed in the private sector
and those committed in the public arena (for the purposes of sentencing), and a custodial sentence was
warranted in this case…”
With the court’s sentencing, it has sent a strong message to the corrupted and to would-be offenders to
think twice before committing corrupted acts.
As part of sentencing, the court will also impose a financial penalty on the offender equal to the amount
of bribes the offender had taken. So this again sends a clear message that the offender is not allowed to enjoy
any of his or her ill gotten gains.
On top of this, in cases involving government procurement or contracts, administrative actions are taken
to cancel the contract and/or to debar suppliers who were convicted of corruption offences from future
government contracts for up to five years.
Apart from criminal sanctions, the Prevention of Corruption Act also provides for recourse to civil suit
for recovery of bribe monies in addition to criminal prosecution. This was tested in the court last year.
The CPIB had prosecuted a facilities manager in a large private company for corruption. He took bribes of
almost $300,000 in return for awarding contracts. He was convicted and sentenced to 10 months’ jail and
ordered to pay to the State a penalty of about $300,000, equal to the amount of bribes he had pocketed. After
the prosecution was over, his company brought a civil suit against him to recover the amount of bribes he
had accepted whilst employed by them. The accused appealed to the court against this, stating that since
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he had been ordered to pay back the penalty, he cannot be asked to pay twice, and on this second occasion
through the civil suit. The Court of Appeal dismissed his appeal stating that the law expressly provided
for two distinct provisions - a criminal proceeding to disgorge benefits and civil proceedings to recover the
bribe monies-and therefore it is possible that there can be a double disgorgement and it can act as a further
deterrence against corruption. This sends the message very clearly to corrupt offenders that they will be
made to pay heavily for their corrupt activities.
V. EFFECTIVE ADMINISTRATION & GOOD GOVERNANCE
A.Preventive & Administrative Measures in the Public Sector
Alongside the statutory measures dealing with corrupt offenders, a proactive approach to curb corruption
was adopted in the Government. With the full support of Parliament and the Heads of Government
departments, strict rules and regulations have been formulated to govern the conduct of public officers. A
high standard of discipline is demanded of these officers such as:
a) a public officer cannot borrow money from any person who has official dealings with him or her;
b) a public officer’s unsecured debts and liabilities cannot at anytime be more than three times his or
her monthly salary;
c) a public officer cannot use any official information to further his or her private interest;
d) a public officer is required to declare his or her assets at his or her first appointment and also
annually;
e) a public officer cannot engage in trade or business or undertake any part-time employment without
approval; and
f) a public officer cannot receive entertainment or present in any form from members of the public.
The commitment of Ministers and Heads of Government departments similarly resulted in the
establishment of administrative measures to reduce the chances of public officers getting involved in
corruption and wrongdoings. These measures include:
a) identifying and removing opportunity for corruption in Government work procedures;
b) streamlining cumbersome administrative procedures and slashing red tape to provide an efficient
and transparent civil service so that no one needs to recourse to corrupt civil servants to get things
done;
c) reviewing public officers’ salary regularly to ensure that they are paid adequately and comparable to
that of the private sector;
d) reminding Government contractors at the time when contracts are signed that bribing public officers
administering the contract may render their contracts to be terminated. A clause to this effect forms
part of the standard contract conditions.
B. Efficient Administration
The last pillar is efficient administration, which is also a key to reducing corruption. An efficient
administration is one which values integrity and incorruptibility. The Singapore Civil Service prides itself
on living its core values of Integrity, Service and Excellence. Hence, we have put in place measures to
ensure that the right persons with the right values are in the service. Another important aspect of an
efficient administration is that it can foresee and anticipate the needs of the public (inclusive of businesses)
and is able to react appropriately, coming up with measures to meet its customer’s needs. If we have tough
enforcement, but the government of the day is inefficient in meeting public needs, then opportunities are
open for corruption to seep in to ‘make things happen.’
The civil service in Singapore initiated major reforms in May 1995 under the “Public Service in the
21st Century” (PS21) to attain sound administrative governance, organizational excellence and service
orientedness. Such improvements in efficiency and effectiveness in public service delivery can act against
corruption and reduce its opportunities. This is because a service delivered promptly and with no hassle
leaves less room for corruption compared to a service which takes a long time and has tedious processing
stages.
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Under PS21, there were several major initiatives to reduce bureaucracy and cut red tape, such as:
•
The Pro-Enterprise Panel Movement
The Pro-Enterprise Panel receives and vets suggestions from the public to help ensure that
government rules and regulations are supportive of a pro business environment in Singapore. The
panel is led by the Head of Civil Service, with members from the private sector, such as Chief
Executive Officers of companies. The public and companies can provide suggestions through the
internet (www.pep.gov.sg) and these suggestions may result in changes in the rules and regulations.
•
The Zero-In-Process (ZIP)
This aims to reduce inefficiencies in services whereby the public has to visit several agencies for
related reasons. In the past, issues which cut across agencies were tossed around from one agency
to another. The ZIP makes sure that such cases do not slip between the cracks by identifying lead
agencies and forming ZIP teams to tackle and propose solutions on difficult cross-agency issues.
•
The POWER (Public Officers Working to Eliminate Red-tape)
This aims to reduce bureaucracy by eliminating obsolete public sector rules. The goal is to give
public officers greater flexibility with operational issues and raise awareness that we should enforce
the spirit and intent of the regulations rather than complying with them mindlessly. It also allows
public officers to cut red tape whenever they spot it. A POWER website has been set up to receive
suggestions from public officers and to channel them to the respective regulators for follow up
action.
•
The Cut-Red Tape Movement
Under this, civil servants are encouraged to reduce red tape within the government. Through the
internet, the private sector and public can write to the government with suggestions on cutting of
red tape. Such feedback can promote transparency and reduce business costs. There is a Cut Waste
website where the public can submit their observations/suggestions on areas where government can
cut expenditure. The government ministry concerned will have to respond to the public’s query and
have their reply posted in the website for all to see. This helps to keep government on its toes and
help to minimize wastage of government spending, if any.
The Singapore Government’s main aim of undertaking the PS21 initiative is to improve efficiency
and effectiveness in the provision of its public services. Nonetheless, it has an important side benefit of
corruption prevention. Firstly, by empowering and engaging officers for continuous improvement, we hope
that the public servant becomes more engaged. An engaged officer takes pride in his or her work and is less
likely to succumb to corruption. Secondly, by cutting red tape, making services easier and more accessible,
it provides less opportunity for public officers to ask for bribes to grease a transaction. By seeking feedback
from the public and being transparent in its policies and service standards, it leaves little room for public
officers to solicit for bribes.
A parallel move to upgrade the civil service and to position the government to better serve the nation in
the digital age was also embarked upon through the e-Government Action Plans (eGAP). The first such plan
was from 2000 - 2003, the second from 2003 - 2006 and we are now in the third plan known as iGov2010,
running from 2006 - 2010. iGov aims at delivering excellent public services as well as connecting the
citizens to the government. Electronic services already in place or to be implemented target at providing
higher levels of convenience, efficiency and effectiveness for the public. E-governance measures serve to
engage citizens more widely through use of infocomm technology.
One of the many e-services initiatives is the introduction of the e-Citizen portal where citizens can
access government services from the comfort of their homes, eg to lodge a police report or to renew
their passports. They can also use it to lodge a corruption report with CPIB. The service standards of
various departments are also published in the portal so that the public can know what to expect. Another
e-government initiative is the business.gov.sg portal. This portal provides the public with information and
assistance in planning their businesses and starting companies. One of the services provided by this portal
is the online business licensing service (OBLS). With OBLS, someone starting his or her new business can
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apply and get the relevant permits and licenses from the comfort of his or her home or office without him or
her having to physically go to the various government departments. Before OBLS, when a business wished
to apply for various licenses, it needs to go to different departments and some licenses required them to go
to a few departments. For example, to get a hawker license one has to go to the Ministry of Environment
and the Urban Redevelopment Authority as well. After the implementation of this system, all the applicant
has to do is to log onto this system and submit the applications on-line and the system will route it to the
relevant departments, hence saving time for the applicant. Today members of the public can apply, renew
or terminate different types of license though this on-line portal. Some 69 licences from 19 government
agencies are on OBLS. The turnaround time to obtain all the licences was cut from 21 days to just eight
days. This service was very well received and in 2005, it has won the prestigious UN Public Service Award.
Another service is the Gebiz – the government procurement portal on the internet. Today, most
Government procurement is done through the internet and it is open for all, including international
businesses who wish to take part. In Gebiz, the posting of the tender requirements is online, the submission
of the bids is online, the deadline is controlled by the computer and the results at the end of tender are
automatically published for all to see. This leaves little room for corruption or abuse compared to the manual
system.
Although the primary driver behind our e-government action plan was not about corruption control, it
does have such an important side benefit. It reduces the visits to government service counters, service
turnaround time and cost of delivery. If we think about it, if a government service can now be obtained from
the comfort of our homes, at the click of a mouse, what chance is there for someone to interfere in between
to solicit a bribe for the purpose of greasing the transaction.
This inter-relationship between efficiency and corruption control is succinctly summed up in an old
article of Bob Crew of South China Morning Post when he said: “The theory is that the administration is so
tight, so efficiently run and controlled, that there is no room for corruption which thrives much better in an
inefficient administration in which there are plenty of loopholes for it to flourish unnoticed and unchecked,
where there is scope for hoodwinking and beating the system.”
This was an article from way back in the 1970s but it is still relevant today.
VI. REGIONAL & INTERNATIONAL EFFORTS
A.Study Visits
As the sole anti-corruption agency in Singapore, CPIB has been the destination for various study visits
and attachments for public officials and counterpart agencies, including countries in the Asia Pacific Region.
The visitors are attracted to Singapore mainly because of its international reputation for being effective in
controlling corruption. In the spirit of regional co-operation and networking, CPIB hosted official visits and
attachments by Government officials from various countries. In recent years, officials visited CPIB were
from countries such as China, Bangladesh, Brunei, Indonesia, India, Nepal, Bhutan, Cambodia, Thailand,
Vietnam, Macau, Hong Kong, Australia, Kenya, Ghana, Zimbabwe, Kuwait, Jordan, Solomon Islands, Qatar,
Russian Federation, Pakistan etc.
To be in the know of the latest international development in anti-corruption matters which could impact
on Singapore, CPIB has increased its participation in various corruption-related overseas conferences/
seminars.
CPIB has also actively established good working relationships with its counterparts in the region
and beyond. Assistance is also provided to foreign counterparts in the area of law enforcement, where
appropriate, with the understanding of reciprocal assistance from them in the future.
B. Specialized Workshops
CPIB regularly organizes an international workshop, known as Anti-Corruption Expertise (ACE)
Workshop with regional participation. We have conducted three runs so far with the following themes –
“Excellence in Investigation” in August 2006, “Excellence in Computer Forensics” in September 2007 and
“Excellence in Management of Anti Corruption Agencies” in October 2008. Speakers at the workshops
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came from Singapore, Malaysia, Hong Kong, Korea, United States, United Kingdom, Australia and France.
The aim of the workshops is to share Singapore’s experience and expertise and to bring professionals
together for cross-learning. CPIB will continue to organize ACE workshops in the future to benefit officials
from the region.
We have also conducted a customized Anti Corruption Management and Investigation Course – a five-day
programme done for regional counterparts at cost recovery basis. Officials from Bhutan’s Anti-Corruption
Commission and from Cambodia’s Anti Corruption Unit have attended.
C.International Fora
CPIB is actively engaged in international fora and meetings that discuss corruption matters. It is
a pioneer member of the ADB-OECD Anti-Corruption Initiative, which meets twice a year. In 2008,
Singapore hosted the 12th meeting as well as the 6th Regional Anti-Corruption Conference where more than
120 participants took part. CPIB has joined the International Association of Anti-Corruption Authorities
(IAACA). It is a member of APEC Anti-Corruption Task Force (ACT) and last year, we chaired the
discussions of the ACT. Within the ASEAN region, there is a MOU on Preventing and Combating Corruption
amongst anti corruption agencies of the ASEAN region which CPIB is involved in. CPIB is one of the first
four agencies which signed the MOU in Dec 2004 in Jakarta, along with the agencies of Malaysia, Indonesia
and Brunei. The objective of the MOU was to enhance mutual sharing, capacity building and strengthen
collaborative efforts in anti-corruption matters.
VII. LESSONS LEARNT
Based on our experience in combating corruption, I like to highlight the following learning points.
Firstly, mere systems, structures and processes do not necessarily provide the template for success. The
magic is in the sincerity of purpose; genuine efforts - not less than honest labour - and the overall operating
climate. CPIB has the structures, systems and processes that were allowed to work, given the right
operating environment created by a strong political will. Unless the will to succeed is forged, much of any
anti-corruption programme will remain a passive idle declaration. Clearly, it is as much a question of fixing
the hearts and minds as it is a question of fixing the system.
Secondly, it is strategic to focus on the three related areas of enforcement, legislation (or law) and
adjudication, as a package. Any weaknesses in any one link in this three-link chain can be fatal. Strong and
effective legislation that will make detection and conviction of offenders easier is tactical, as this provides
the cutting edge for more effective enforcement and ultimately, more effective adjudication. All three areas
are essential in anti-corruption work. If one piece is ineffective, the whole is ineffective.
Thirdly, we adopted, from the onset, a simple, no-frills and largely enforcement-oriented approach, in
the belief that deterrence through sure detection, prosecution and ultimately conviction in a court of law is
the most tactically tenable and strategically sound plan of action. By taking strong action against offenders,
we avoided being side-tracked unnecessarily by the bark when we should be directing efforts on the bite.
The maxim is: “Keep it simple, do it well”. Early success was thus possible through focused action and
unity of purpose. Success, eventually, begets success. This generates a momentum of its own, creating a
virtuous spiral.
Fourthly, public support is vital in any anti-corruption programme, and is best won through successful
action against the corrupt, regardless of colour, creed or station in life and executed without fear or favour,
firmly and fairly. Such clear, demonstrable success is the surest way of winning public assent.
VIII. CONCLUSION
Corruption is a problem that needs to be dealt with in both the public sector and private sector. Singapore
has adopted a total approach in both sectors for a long time.
Today, CPIB has to a large extent helped to curb corruption in Singapore. It has a crucial role to play
in keeping the country clean, and our tireless efforts to prevent and control corruption and uphold a high
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standard of transparency would not have been possible without capitalizing on the four pillars of anticorruption, namely strict laws, enforcement without fear or favour, tough punishment from the Courts and
effective government administration. The anti-corruption measures must be applied consistently across the
board, regardless of whether it is petty corruption or high level corruption.
However, we are mindful that our past successes is no guarantee for the future and we do not for a
moment think that corruption will never take root in Singapore. We know complacency will lead to a
downfall. Therefore, the fight against corruption is still a necessary job for all of us.
I hope my sharing has been useful to you. The experience of Singapore may not be replicated exactly
anywhere else as every country has its unique character and circumstances. Nonetheless, corruption is an
universal problem common amongst mankind. We therefore have scope for sharing and learning from each
other. And we all have a common duty to join hands to fight the disease of corruption and make the world a
better place to live in.
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INVESTIGATION AND PROSECUTION OF CORRUPTION OFFENCES
Koh Teck Hin*
I. INTRODUCTION
My first paper, (Corruption Control in Singapore) outlines the corruption control framework that has been
put in place in Singapore. The Corrupt Practices Investigation Bureau (CPIB)’s mandate is to enforce and
investigate all corruption offences. Through persistent enforcement efforts, we are able to keep corruption
levels low. We must ensure that the corrupt offender feels that corruption is a high risk business and that they
will be caught and dealt with for their crimes. The law and the enforcement agency must combine to give bite to
anti-corruption efforts.
II. PURPOSE
We know that different anti-corruption agencies around the world adopt different approaches and
strategies in their enforcement and investigation into corruption offences. This paper has two purposes:
(i) Firstly, to share our experiences; and
(ii) Secondly, an understanding of the investigation approaches and strategies of other countries can
further enhance the basis for mutual co-operation and assistance. By understanding one another in
investigation matters, we can facilitate support for one another.
III. A TOTAL APPROACH TO ENFORCEMENT & INVESTIGATION
A. Approaches & Strategies to Investigation
CPIB is under the Prime Minister’s Office. We report to the Prime Minister and not to any other
minister or government authority. This gives us functional independence so that no government body can
question us or influence us in our enforcement and investigation efforts.
Our approach in investigation is a total approach . This ensures we have a good control over the situation
and we can contain corruption cases as far as possible. This simply means:
a) Firstly, no case is too small to investigate. For example, a motorist is stopped for drunk driving and
he tries to bribe the traffic police officer to get off the hook. He will be charged in court. If a foreign
visitor is at our immigration control point at our border and he did not meet the entry requirements
but tries to bribe the immigration officer, he will be charged in court. In short, corruption is not
tolerated and all cases will be investigated and dealt with seriously.
b) Secondly, we deal with cases regardless of rank and status. Even serving ministers have been charged
and chief executive officers of major companies have been dealt with too. There is no exemption for
the ‘big fish’ or for anyone in high places. We have in the past investigated and prosecuted ministers
for indulging in corruption-related activities. In a case involving Wee Toon Boon, then Minister of State
for Environment, he was charged with corruption involving a sum of about $840,000/-. He had used his
ministerial status to make representation on behalf of a property developer in return for gratifications,
which included a bungalow and free air travel tickets for his family. He was subsequently convicted and
sentenced to imprisonment and also ordered to pay a penalty. And Teh Cheang Wan, another Minister
for National Development, was investigated for accepting two bribes totalling $1 million in return for
helping two property developers to retain and acquire pieces of land for development. However, Teh
* Deputy Director (Operations), Corrupt Practices Investigations Bureau, Singapore.
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committed suicide before he could be formally charged in Court.
c) We are prepared to deal with both givers and receivers of bribes. Under our law, they are equally
culpable. However, sometimes we may not charge the giver if he or she was under duress when he
or she gave the bribe or there were some other compelling reasons which led to the offence.
d) We can deal with corruption in all areas, in any industry or business sector, in all branches of
government, the judiciary, Parliament, political parties, non government organizations. There
is no area where the law does not permit the CPIB to investigate. The powers given to CPIB to
investigate also apply equally to all sectors. In this way, CPIB helps to keep government clean and
ensures healthy economic activities in the private sector.
e) We don’t leave it to various government authorities to deal with the problem. For example, if there
is an issue involving Immigration Department, we don’t just leave it to them. We will take over
corruption investigation and, if necessary, the immigration investigation as well. In some cases, we
may jointly investigate with them so that a complete resolution of the corruption and immigration
offences can be achieved. We may also help government departments review their systems to
remove or change those procedures which may be vulnerable to corruption.
f)
We are prepared to investigate based on anonymous complaints. However, we need to be very
careful so that we are not “used” by someone who is malicious and wants to cause harm to others.
We will process the information and there is a weekly session where the Directorate members
(comprising of Director and Heads of Operation Units) will meet to decide if investigation should be
conducted on the complaints received.
CPIB is also empowered to investigate other offences, besides corruption. This is extremely important
because corruption crime may not exist in isolation. It may occur and be mixed with other crimes such as
cheating, commercial crimes, etc. Therefore any anti corruption agency must have the power to question
suspects on the full range of offences, otherwise there will be severe limits placed on investigations and the
accused person will probably be able to get away from the punishment that he or she deserves.
CPIB can also refer non-corruption offences to other specialized enforcement agencies like the Singapore
Police Force, Immigration Department etc. when these were detected during the course of our investigation.
We make it easy for anyone to report corruption offences. The CPIB is very accessible. The public can make
reports by calling our 24-hour hotline, or they can visit our office at any time. They can also send us letters by
post or fax. They can also report from their homes via the CPIB internet website (www.cpib.gov.sg) or send us an
email. By opening up all possible venues for reporting, we hope that those who have come across or are aware of
corruption cases will have less difficulty and unwillingness to report.
B. Corruption in the Private Sector
As mentioned, CPIB is empowered to investigate corruption in both the public and private sectors. Our
corruption control efforts in the private sector are not only confined to businesses. It also includes non-profit
organizations and charity organizations. In recent times in Singapore, charity organizations have come under
investigations by the authorities. CPIB has also stepped in when there is corruption committed by personnel
of charity organizations. This strict stance on corruption in charity organizations is necessary so as to deter
offenders from taking advantage of kindhearted people to enrich themselves.
Some may ask why there is a need to deal with private sector corruption cases. There are good reasons
why CPIB has to deal with the private sector, namely:
a) Corruption in the private sector affects public interest. Some used to erroneously think that private
sector corruption is a private affair between the giver and the taker. But consider the following.
When a supermarket purchaser take bribes from a supplier, the supplier will inevitably mark up its
cost to cover the bribes. In so doing, the supermarket which purchased the goods at a higher price
will sell it an even higher price. It is the public that suffers in the end.
b) Singapore is a small nation without natural resources. It has to depend on trade and foreign
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investment. To attract investment, we have to ensure that business cost is low and corruption,
whether in the private or public sector, increases business costs.
c) The private sector is a key pillar of the Singapore’s economy. It drives national economic growth.
We need to have a level playing field for all and the private sector must be clean in order for foreign
businesses to want to work with us and to invest in Singapore.
d) The private and public sectors are also intertwined, which is another reason why it matters that
CPIB watches over the private sector as well. As more and more government functions become
outsourced to the private sector, many private companies are now performing functions once used to
be performed by the government. Corruption in the private sector which affects strategic functions
can also impact the key areas of government and society at large.
e) A lot of the private sector enterprises have huge public shareholdings as well. If the enterprise is
not well run and commits crimes, then its share price may be affected and this in turn affects the
interests of the public.
C. Types of Private Sector Cases
Private Sector corruption cases can come in various forms – some of the cases we have seen in the
private sector are:
a) Cases involving contracts or procurement of services or supplies. The corrupt offender receives
kickbacks in return for awarding contracts. An example of a recent case involves senior management
of a car company receiving expensive gifts in return for awarding agency contracts.
b) Cases involving corrupt offenders who supervise contractors or suppliers, for example, not checking
on the quality of work or product delivered and overlooking deficiencies. This can result in serious
repercussions. An example, in building works, we have dealt with clerks of work who took bribes
to overlook certain deficiencies. We have also dealt with inventory or warehouse staff who were
corrupted and accepted imitation or substandard goods delivered by suppliers in return for bribes.
c) There are those who are corrupt and have access to sensitive data and divulge to unauthorized
persons in return for some rewards. These cases involve people working in areas where there
are storehouses of data about customers and they abuse it by passing on to persons such as illegal
moneylenders who were looking for their debtors and private investigators tracing whereabouts of
persons of interest.
d) There are those who are in positions of authority such as the CEO or General Manager, who took
bribes and granted approval for various matters in favour of the bribe givers.
e) In some cases, corruption is mixed with other offences. For example, the corrupted may also cook
the company’s books when they try to hide the corrupt transactions. They may manufacture false
invoices to reflect fictitious transactions. Once uncovered, they will be dealt with by CPIB. Our
officers are also empowered to investigate other crimes uncovered in the course of corruption
investigations.
IV. INVESTIGATION STRATEGIES
So, what is the magical formula for the CPIB to sustain the good efforts of our government and to
effectively fight corruption? In order to achieve this mission, we approach it through a framework of action
which involves four linked competencies, that is Intelligence, Interview, Forensics and Field Operations.
Success in solving corruption cases hinges on the interplay of these core competencies.
A. Intelligence
The first competency – Intelligence. Intelligence work is critical in the current landscape of constant
threats and vulnerabilities. It involves the collation and processing of information for specific objectives,
so you can say that intelligence work is really investigation in the covert sense. Intelligence work often
provides the basis for successful investigation. CPIB’s many successes in cracking major corruption
cases were largely attributed to the proactive approach and the efficiency of our exceptional intelligence
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capability. Our Intelligence Division adopts both a pro-active and re-active stance - we have projects which
are intelligence-led operations, which involve ‘live’ cases where our Intelligence Division centralizes
its efforts in collation, analysis and ‘live’ monitoring. We also have cases which are sent for intelligence
enrichment. For such cases, the Intelligence Division plays a supportive role to our Operations Units in
their investigations, providing critical information such as establishing identities, relationships, housing
targets, etc. during the pre-operation and operation phases.
To stay on top of the situation, we need to continue to build on its capabilities and strong expertise,
and expand on its current resources and established networks and relationships. Our Intelligence Division
is in close liaison with our overseas counterparts such as Hong Kong’s ICAC (Independent Commission
Against Corruption), and Malaysia ACC (Anti-Corruption Commission), as well as our local intelligence
agencies from the Singapore Police Force, Immigration & Checkpoints Authority and Central Narcotics
Bureau, etc. Information and expertise are shared robustly amongst these agencies, resulting in mounting
of joint operations or co-ordinated operations on some cases. Some examples include the investigations into
Citiraya, a public listed company, when CPIB and the Commercial Affairs Dept (CAD) of the Police Force,
moved in to uncover corruption and commercial offences. Another example is the co-ordinated operation
in the National Kidney Foundation (NKF) saga, which involved CPIB and CAD looking into various aspects
of the excesses by the former CEO of NKF and others. We know full well that law enforcement is effective
only when we can deal with the problem in its totality and the need for collaboration is there.
B. Interview
It is often challenging to deal with corruption cases where more often than not, the complainant is as
likely to be culpable of the corrupt act as the accused person. Lines are blurred, and our officers are hard
pressed to find a clear-cut situation where there is a distinct perpetrator and victim. In corruption cases,
our officers are frequently confronted by complainants or witnesses who are not forthcoming, for fear that
what they say may implicate them. Hence, it is imperative that our officers are equipped with all aspects of
investigative work, particularly their ability to sieve out the truth from witnesses, as well as to discern the
innocent from the guilty. This brings us to the second competency - “Interview.”
An interview, simply put, involves the questioning of a person regarding his or her involvement or
suspected involvement in a criminal offence. There are many reasons why people choose not to give the
necessary information, or choose to mislead by giving false information. Hence, it is important for our
officers to be flexible enough to switch modes to tailor to the different situations or types of persons being
interviewed.
Our judicial courts are quite stringent these days, increasing the weightage given to other admissible
evidence, as opposed to merely just accepting positive statements given by accused persons. As a result,
we have to emphasize greatly developing the interview skills of our officers, which can be the determining
element in reducing the time and resources devoted to highly complex investigations.
With regard to interview, we make use of polygraph machines and we find it very useful. However, we do
not use the test result as evidence in Court but only as an aid to investigation.
C. Forensics
Another area which we pay much attention to these days is Forensics, or specifically, Computer Forensics
– which is becoming indispensable in our investigations.
The sheer complexity of illicit transactions, whether it is at the individual, syndicate or corporate levels,
requires an incredible level of expertise and capability from our officers. Criminals’ little black books have
undergone a major facelift and have progressed to PDAs, smart phones, and personal desktops; the amount
of records detailing corrupt transactions electronically is overwhelming.
To overcome this challenge, CPIB set up a Computer Forensics Unit, with officers coming from the
Operations Division performing on a part-time basis, trained to handle the collection, preservation,
anaylsis and court presentation of computer-related evidence. Our officers are in regular contact with our
counterpart from the Criminal Investigation Department’s Technology Crime Forensic Branch to share
experiences and pointers in this area.
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There are various cases where forensic evidence played a big part in solving cases. I foresee in the near
future, with great advances in technological tools, software, and elaborate IT infrastructures, computer
forensics will play an even more proactive role, in tandem with intelligence, as opposed to being a mere
investigative support and response mechanism.
D. Field Operations
The last competency is Field Operations. By field operations, I refer to the range of investigative
activities carried out in the field, such as search and seizure, field enquiries, raids and arrests. How the
operations are being carried out and how much information security is exercised over it will determine the
success of any operation. This cannot be overlooked and the capability needs to be developed and worked on
continuously.
E. Interplay of the Four Competencies
The synergy from the interplay of these four competencies – Intelligence, Interview, Forensics and
Operations - is critical to the success of cracking some of our major cases. Operation Crossover is one
such case, showcasing the interplay of these elements. In this case, our Intel asset had given us sufficient
details on who were the main players of the syndicate in Citiraya involved in the diversion of the computer
chips; who were the staff from client companies that were bribed; and their modus operandi. Our Intel asset
also told us the exact container, kept in the free trade zone, containing a shipment of computer chips to be
enrouted to Hong Kong. With this information, an operation was mounted, resulting in the seizure of that
container. Subsequently, through intensive interrogations and interviews, the parties involved admitted to
the corrupt activities. Forensic searches and analysis carried out on (a computer notebook of) Ng Teck Boon,
one of the main players, also contributed to the cracking of this case – it revealed records of shipments of
computer chips fraudulently obtained through corrupt means and inflation of the company’s accounts. This
piece of evidence, together with other physical evidence such as uncrushed computer chips, seized from
Teck Boon’s company and warehouse, led to his confession and admissions of other parties involved in the
scam.
The four competencies interact and, by extracting the appropriate value from each one and allowing each
to leverage off the other, achieve maximum results. At various junctures, any one of these pillars will play
a more significant role to provide the breaking point for successful solution of cases. For example, if crucial
evidence was hidden in computers and, through computer forensics, investigators are able to retrieve the
evidence, then this may prove to be the key to solving the case in hand. Similarly, the interview competency
may play the bigger role when skilful interrogation of suspects leads to confessions or the gathering of
critical evidence which is instrumental in solving the case.
V. EVIDENCE GATHERING & PROSECUTION
What we are mindful of is that for us to be successful in investigation, we need to emphasize evidence
gathering. This is always a challenge due to the following reasons:
a) Corruption offenders will hide and not tell the truth; and
b) There are increasingly sophisticated modus operandi and methods to transact and hide bribe monies.
When we apply our minds in using the four competencies of intelligence, interview, forensics and field
operations, we also focus on collecting and consolidating the evidence. From the evidence, we review the
case. Sometimes, we sit together in case conferences to go through these issues: “Do we have the evidence
to charge anyone? What evidence is there when we proceed to charge?” We make use of an evidence matrix.
This matrix has facilitated our case review and decision making process. Evidence of accepting/receiving/
obtaining gratifications is reflected in the table, where officers document actus reus , inputting details of
the corrupt transactions which the subject has admitted to in his or her statements, e.g. when did the
transaction occur, who did he or she hand the gratification over to, what is the documentary evidence, etc.
Next to the information is the detailing of documentary or other evidence of giving/offering/promising of
the corrupt transactions. Usually, for easier reference, the evidence for giver and receiver involved in the
same transaction are placed next to each other, quoting the exact paragraph of the subject’s statements from
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which the information was extracted. As for the evidence on corrupt intent, it is also recorded in the table,
and it includes details such as what are the gratifications meant for.
We are also mindful that we need to address the legal aspects. In the Singapore system, CPIB does
not have in-house legal experts. We understand that in some countries, the anti-corruption agency has its
own in-house legal experts and some agencies also conduct prosecution themselves. CPIB depends on
the Attorney-General’s Chambers (AGC) for legal advice. Under our law, we cannot charge a person in
court for corruption unless the Attorney-General gives his or her express consent. So there is a division of
responsibilities and a check and balance. We in CPIB are the operational experts in investigating corruption
offences. But we need the legal experts from AGC. Together, when both operational experts and legal
experts agree that there is a case, we can then proceed to charge offender in court. Once prosecution is
mounted, CPIB officers will work together with prosecutors to present the evidence in Court.
In terms of prosecution, as we are prepared to prosecute both the givers and receivers of bribes, we have
to stage our prosecution of the accused persons in sequential order. Sometimes the receiver is prosecuted
first and the giver is the prosecution witness. After the case is over, the giver is prosecuted and the
receiver in turn becomes the witness. This can present some challenges, especially when there is not much
independent evidence apart from what the giver and receiver say about the crime. Therefore, as we adopt
this tough stance against both sides of the corruption crime, it is the responsibility of CPIB to ensure that it
gathers strong evidence on the case so as to be able to prosecute all parties involved. So far, our conviction
rate is of above 95% each year and this bears testimony to the strength of cases brought to the Court.
There are instances where the only evidence we have is from the giver and the giver is not willing to
testify unless given immunity from prosecution. As a rule, the Attorney General’s Chambers does not grant
immunity easily. It will be under exceptional grounds if immunity is granted.
There may be cases in the public sector, where after investigation, there is no evidence of corruption
but there is evidence that the public official had infringed some government rule or regulation. In such
situations, CPIB will provide the information to the Public Service Commission or to the officer’s
Department or Ministry for them to take departmental disciplinary proceedings against the said officer.
In some cases, apart from dealing with the culprits, after the case is over, CPIB may identify flaws or
loopholes in the system, work process or procedures of the affected government department and offer some
recommendations or suggestions for them to consider as they work towards plugging the loopholes.
VI. STRATEGIC THRUSTS
To discharge its role effectively, CPIB must stay on top of the situation at all times and its capability must
be kept up to the mark. To ensure this, CPIB embarks on three strategic thrusts, namely Strengthening
Operational Capabilities, Forging Networks & Partnerships and Investing in Organisational Excellence.
In “Strengthening Operational Capabilities,” CPIB seeks to improve on investigation capabilities such as
document examination, computer forensic, financial investigation. We need to hone our skills in the areas
required.
In “Forging Networks & Partnerships,” CPIB forges partnerships with local and international entities.
To ensure good governance and to combat corruption effectively, CPIB recognizes the need to strengthen
international and regional co-operation and liaison. As such, CPIB actively participated in various anticorruption initiatives and international fora, such as the United Nations Convention against Corruption
(UNCAC) – Conference of State Parties, ADB/OECD Anti-Corruption Initiative, ACT Task Force (APEC
Anti-Corruption and Transparency Task Force), MOUs amongst anti corruption agencies of the ASEAN
region and the International Association of Anti Corruption Authorities (IAACA).
In “Investing in Organisational Excellence,” CPIB invests heavily in training her people and encourages
staff to do knowledge sharing and innovation. We regularly do in-house learning where we bring all
operational staff together for training. We may invite experts from various government Ministries and from
private industry to address the officers on issues of topical interest. When there are new areas of work,
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we will build new capabilities. For instance, with the opening of the two Integrated Resorts with casinos
operations in Singapore, CPIB may have to tackle casino-related corruption cases. Therefore, CPIB has
built up its capability to deal with this challenge. CPIB is also active in outreach programmes to raise public
awareness through regular talks, especially for public officers in the enforcement agencies, on the pitfalls of
corruption. Selective outreach is done with specific industry sectors.
VII. CONCLUSION
While Singapore has successfully controlled corruption, this is no guarantee that it is always easy to
suppress corruption. There are various challenges we face in investigating corruption offences.
a) Firstly, the changing nature of corruption. While behaviour and motivation of the corrupted may be
similar, the methods used have transformed greatly. There is more sophistication seen in corruption
today. More complex methods are used. The corrupt transactions are more complicated, going
through various loops and intermediaries. There are more methods used to hide the money trail
such as bank transfers, false accounting, phantom workers, camouflage payments of various types.
Computers are often used in the commission of the offence such that where we used to seize paper
records in the past, today, we seize a lot of computers and electronic media. It is thus important
for the enforcement agency to continually upgrade its capability and ensure its personnel are well
trained and well skilled.
b) Secondly, there is internationalization of the issue of corruption. Corruption offences can cross
international borders. This brings with it challenges for law enforcement and where necessary, we
need to work with foreign counterparts in investigating corruption cases. At the international level,
there is also greater interest by governments around the world in dealing with corruption.
Corruption is a dynamic phenomenon and CPIB continues to have an important role to play in keeping
Singapore clean, and our efforts to combat corruption and uphold a high standard of transparency would not
have been possible without synergy with the whole of government. In addition, we also require our fellow
law enforcement members, like all of you, to join in and help in the fight against corruption to make the
world a better place to live in.
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THE UNITED NATIONS CONVENTION AGAINST CORRUPTION:
AN OVERVIEW WITH SPECIAL FOCUS ON THE PROVISIONS RELEVANT
TO CRIMINAL JUSTICE AUTHORITIES
Demostenes Chryssikos*
I. INTRODUCTION
The United Nations Convention against Corruption (hereinafter: UNCAC), represents a major step
forward in the global fight against corruption, and constitutes the culmination of efforts of the international
community to put in place a normative instrument against corruption of a global range.
While the development of the Convention reflects the recognition that efforts to control corruption
must go beyond the criminal law, criminal justice measures are still clearly a major element of the package.
The Convention requires States parties to undertake appropriate action towards enhancing criminal justice
responses to corruption. The relevant requirements relate to a wide range of issues, from criminalization to
prosecution, adjudication and sanctions, and from jurisdiction to confiscation powers, all of which are to be
considered in the context of both domestic criminal justice action and international cooperation, including
asset recovery.
What follows is a brief overview of the provisions of the UNCAC with a focus on those relevant to
criminal justice authorities. In this context, the presentation will highlight the content of Chapter III of the
Convention on “Criminalization and law enforcement” and will further deal with selected aspects of criminal
justice interest from a transnational perspective, as regulated in Chapters IV and V on “International
co-operation” and “Asset recovery” respectively.
II. THE “DOMESTIC CONTEXT”:
AN OVERVIEW OF THE CRIMINALIZATION PROVISIONS OF THE UNCAC
Going back to the negotiation process for the elaboration of the United Nations Convention against
Transnational Organized Crime (hereinafter: UNTOC), 1 it should be noted that the provision on the
establishment of the offence of corruption was the subject of extensive debate. In view of the fact that
corruption is one of the methods used by organized criminal groups to facilitate their action, it was deemed
appropriate to include two provisions in the Convention targeting corruption only in the public sector.2 This
was done on the understanding that the UNTOC could not cover the issue of corruption in a comprehensive
manner and therefore a separate international instrument would be needed for that purpose.
The subsequent negotiations for the elaboration of a broad and effective convention against corruption3
led to the adoption of the UNCAC by the General Assembly in October 2003. Being the first global legally
* Crime Prevention and Criminal Justice Officer, Division for Treaty Affairs, Corruption and Economic Crime Branch, United
Nations Office on Drugs and Crime, Vienna. The opinions expressed in this article are those of the author and do not reflect
the views of the United Nations.
1 General Assembly resolution 55/25 of 15 November 2000, annex I.
2 Article 8 of the UNTOC criminalizes specific conducts related to corruption in the public sector, namely the active and
passive bribery involving a public official (para.1) or a foreign public official or international civil servant (para. 2), as well
as the participation as an accomplice in these offences (para. 3). Article 8 also incorporates a definition of “public official” as
the person who provides a public service, as defined in the domestic law and as applied in the criminal law of the State Party
in which this person performs that function (para. 4). In addition, States Parties are required to adopt measures designed to
promote integrity and to prevent, detect and punish the corruption of public officials (article 9).
3 Carried out by an open-ended intergovernmental Ad Hoc Committee for the Negotiation of a Convention against Corruption,
which was established by the General Assembly in its resolution 55/61 of 4 December 2000, with terms of reference that were
taken note of by the Assembly in its resolution 56/260 of 31 January 2002.
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binding instrument against corruption, the UNCAC includes a comprehensive set of criminalization
provisions, both mandatory and optional, covering a wide range of acts of corruption. In addition, it requires
States parties to ensure a minimum level of deterrence through specific provisions on the prosecution,
adjudication and sanctions in corruption-related cases.
Going beyond the existing regional instruments in the context of the Council of Europe, 4 the
European Union,5 the Organization of American States,6 the Organization for Economic Cooperation and
Development7 and the African Union,8 all of which are designed to operate in a more limited environment,
the UNCAC intends to serve as a vehicle to facilitate, among others, concerted action against corruption
from a criminal law perspective.
States Parties to the UNCAC are, thus, obliged to establish as criminal offences the following conducts:
4 The Criminal Law Convention on Corruption (1999), already in force since 1 July 2002, aims at the coordinated criminalization
among Member States of the Council of Europe of the following corruption-related practices: active and passive bribery of domestic
and foreign public officials (arts. 2, 3, and 5); active and passive bribery of national and foreign parliamentarians and of members of
international parliamentary assemblies (arts. 4, 6 and 10); active and passive bribery of officials of international organizations (art.
10); active and passive bribery of judges and officials of international courts (art. 11); active and passive trading in influence (art. 12);
money laundering of proceeds from corruption offences (art. 13); and account offences connected with corruption offences (art. 14).
In addition, following the precedent of the European Union Joint Action of 22 December 1998, adopted by the Council on the basis
of article K.3 of the Treaty on the European Union, it specifically targets corruption in the private sector by criminalizing active and
passive bribery in this field (arts. 7 and 8). Furthermore, States Parties are obliged to establish as criminal offences aiding or abetting
the commission of any of the criminal offences laid down in the Convention (art. 15). The Additional Protocol to the Convention,
opened for signature on 15 May 2003, extends the criminalization obligation to active and passive bribery of domestic and foreign
arbitrators (arts. 2-4), as well as to active and passive bribery of domestic and foreign jurors (arts. 5-6).
5 The Convention drawn up on the basis of Article K.3 of the Treaty on the European Union on the protection of the European
Communities’ financial interests, adopted by the European Union Council on 26 July 1995, provides for the criminalization of
fraud affecting the financial interests of the European Communities (art. 1). The First Protocol to this Convention, adopted by
the Council on 27 September 1996, criminalizes the passive and active corruption of a Community official or national official
that damages or is likely to damage the financial interests of the European Communities (arts. 2 and 3), while the Second
Protocol, adopted by the Council on 19 June 1997, criminalizes money-laundering (art. 2).
The Convention drawn up on the basis of Article K.3 of the Treaty on the European Union on the fight against corruption
involving officials of Member States of the European Union, adopted by the Council on 26 May 1997, requires Member States
to criminalize any kind of passive and active corruption of a Community official or a national official (arts. 2 and 3) and not only
that related to the financial interests of the European Communities.
6 The Inter-American Convention against Corruption, already in force since 6.3.1997, requires States Parties to criminalize the active
and passive bribery of a government official or a person who performs public functions; any act or omission in the discharge of duties by
a government official or a person who performs public functions for the purpose of illicitly obtaining benefits for himself (herself) or for a
third party; the fraudulent use or concealment of property derived from any of these acts; and the participation as a principal, co-principal,
instigator, accomplice or accessory after the fact, or in any other manner, in the commission or attempted commission of, or in any
collaboration or conspiracy of these acts (arts. VI and VII). In addition, subject to its Constitution and the fundamental principles of its legal
system, each State Party is required to criminalize transnational bribery (art. VIII) and illicit enrichment (art. IX). See also Manfroni, “The
Inter-American Convention against Corruption. Annotated with Commentary”, Lexington Books, Oxford 2003, pp. 37-73.
7 The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, already in
force since 15 February 1999, requires States Parties to establish as a criminal offence the active bribery of a foreign public
official so that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain
business or other improper advantage in the conduct of international business (art. 1 para. 1). Measures should further be
taken at the national level for criminalizing the complicity in, including incitement, aiding and abetting, or authorization
of an act of bribery of a foreign public official, as well as the attempt and conspiracy to bribe a foreign public official to the
same extent as attempt and conspiracy to bribe a domestic public official (art. 1 para. 2). The Convention also requires that
each Party that has made bribery of its own public official a predicate offence for the purpose of the application of its moneylaundering legislation shall do so on the same terms for the bribery of a foreign public official (art. 7).
8 The African Union Convention on Preventing and Combating Corruption, adopted in 2003, requires the criminalization of the active
and passive bribery of a public official; any act or omission by a public official in the discharge of his (her) duties for the purpose of illicitly
obtaining benefits for himself (herself) or for a third party; the diversion by a public official of property entrusted to him (her) by virtue of his
(her) position; the active and passive bribery in the private sector; the trading in influence; the use or concealment of proceeds derived from
corruption-related offences; and the participation in any manner in the commission or attempted commission of, or in any collaboration or
conspiracy to commit, corruption-related offences (arts. 4 and 5 para. 1). States Parties are also required to establish as criminal offences the
laundering of the proceeds of corruption (art. 6) and, subject to the provisions of their domestic law, the illicit enrichment (art. 8).
Similar, more or less, provisions are included in the Southern African Development Community (SADC) Protocol, adopted
in 2001, which was the first sub-regional anti-corruption instrument in Africa, criminalizing, inter alia, the acts of corruption
relating to an official of a foreign State (art. 6).
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•
•
•
•
•
•
Active and passive bribery of national public officials (art. 15);9
Active bribery of foreign public officials and officials of public international organizations (art. 16,
para. 1);10
Embezzlement, misappropriation or other diversion by a public official (art. 17);11
Laundering of proceeds of crime (art. 23);12
Obstruction of justice (art. 25);13 and
Participation in any capacity such as an accomplice, assistant or instigator in an offence established
in accordance with the Convention (art. 27, para. 1).14
In addition, States Parties are further required to consider the criminalization of the following conducts:
•
•
Passive bribery of foreign public officials and officials of public international organizations (art. 16,
para. 2);15
Active and passive trading in influence (art. 18);16
9
In accordance with art. 15, States Parties must establish as criminal offences the following conducts:
(a) Active bribery, defined as the promise, offering or giving to a public official of an undue advantage, in order to act or
refrain from acting in matters relevant to official duties. Legislation is required to implement this provision;
(b) Passive bribery, defined as the solicitation or acceptance by a public official of an undue advantage, in order to act or
refrain from acting in matters relevant to official duties. Legislation is required to implement this provision.
10 According to art. 16, para. 1, States Parties must establish as a criminal offence the promise, offering or giving of an undue
advantage to a foreign public official or official of an international organization, in order:
(a) To obtain or retain business or other undue advantage in international business;
(b) That the official take action or refrain from acting in a manner that breaches an official duty.
11 In accordance with art. 17, States Parties are required to establish as a criminal offence the embezzlement, misappropriation
or diversion of property, funds, securities or any other item of value entrusted to a public official in his or her official capacity,
for the official’s benefit or the benefit of others.
12 In line with art. 23, States Parties must establish the following offences as crimes:
(a) Conversion or transfer of proceeds of crime (para. 1 (a) (i));
(b) Concealment or disguise of the nature, source, location, disposition, movement or ownership of proceeds of crime (para.
1 (a) (ii)).
Subject to the basic concepts of their legal system, States must also criminalize:
(a) Acquisition, possession or use of proceeds of crime (para. 1 (b) (i));
(b) Participation in, association with or conspiracy to commit, attempts to commit, and aiding, abetting, facilitating and
counselling the commission of any of the offences mandated by article 23 (para. 1 (b) (ii)).
Under art. 23, States Parties must also apply these offences to proceeds generated by a wide range of predicate offences (para.
2 (a)-(c)).
13 In accordance with art. 25, States parties must establish the following two criminal offences:
(a) Use of physical force, threats or intimidation or the promise, offering or giving of an undue advantage either to induce
false testimony or to interfere in the giving of testimony or the production of evidence in proceedings in relation to
offences covered by the Convention (art. 25, subpara. (a));
(b) U se of physical force, threats or intimidation to interfere with the exercise of official duties by a justice or law
enforcement official in relation to offences covered by the Convention (art. 25, subpara. (b) ).
14 Art. 27, para. 1, requires that States Parties establish as a criminal offence, in accordance with their domestic law, the
participation in any capacity such as an accomplice, assistant or instigator in an offence established in accordance with the
Convention. An interpretative note indicates that the formulation of paragraph 1 of article 27 was intended to capture different
degrees of participation, but was not intended to create an obligation for States parties to include all of those degrees in their
domestic legislation (A/58/422/Add.1, para. 33).
15 Art. 16, para. 2, requires that States Parties consider establishing as a criminal offence, when committed intentionally, the
solicitation or acceptance by a foreign public official or an official of a public international organization, directly or indirectly, of
an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from
acting in the exercise of his or her official duties.
16 Under art. 18, States Parties must consider establishing as criminal offences:
(a) Promising, offering, or giving a public official an undue advantage in exchange for that person abusing his or her influence
with an administration, public authority or State authority in order to gain an advantage for the instigator;
(b) Solicitation or acceptance by a public official, of an undue advantage in exchange for that official abusing his or her
influence in order to obtain an undue advantage from an administration, public authority, or State authority.
141
•
•
•
•
•
•
Abuse of functions (art. 19);17
Illicit enrichment (art. 20);18
Active and passive bribery in the private sector (art. 21);19
Embezzlement of property in the private sector (art. 22);20
Concealment (art. 24);21 and
Any attempt to commit, or preparation for, an offence established in accordance with the Convention
(art. 27, paras. 2 and 3).
The inclusion of optional criminalization provisions was deemed necessary because of constitutional
impediments or other fundamental legal principles in some countries which prevent them from establishing
the relevant criminal offences in their domestic law.22
Several articles in the “criminalization part” of the UNCAC contain safeguard clauses which operate as
filters regarding the obligations of States parties in case of conflicting constitutional or fundamental rules,
by providing, for example, that States must adopt certain measures “subject to [their] constitution and the
fundamental principles of [their] legal system” (art. 20), or “subject to the basic concepts of [their] legal
system” (art. 23, para. 1(b)).
17 In
accordance with art. 19, States Parties must consider establishing as a criminal offence the abuse of function or position,
that is the performance of, or failure to perform, an act in violation of the law by a public official in order to obtain an undue
advantage.
18 Pursuant to art. 20, States Parties must consider establishing as a criminal offence illicit enrichment, that is a significant
increase in assets of a public official that cannot reasonably be explained as being the result of his or her lawful income.
19 In accordance with art. 21, States Parties must consider establishing as a criminal offence:
(a) Promising, offering, or giving an undue advantage to a person who directs or works for a private sector entity, in order
that he or she take action or refrain from acting in a manner that breaches a duty (subpara. (a));
(b) Soliciting or accepting undue advantage by a person who directs or works for a private sector entity, for him or herself
or for another person, in order that he or she take action or refrain from acting in a manner that breaches a duty
(subpara. (b) ).
20 Pursuant to art. 22, States Parties must consider establishing as a criminal offence the intentional embezzlement by a
person who directs or works in a private sector entity, of property, private funds, or other thing of value entrusted to him or
her by virtue of his or her position.
21 According to art. 24, States Parties must consider establishing as a criminal offence concealment or continued retention of
property in other situations besides those set forth in art. 23, where the person knows that the property is the result of any of
the offences established in the Convention.
22 An interesting example is that of illicit enrichment. The obligation for States Parties to consider creating such an offence
is subject to their constitution and the fundamental principles of their legal system. This effectively recognizes that the illicit
enrichment offence, in which the defendant has to provide a reasonable explanation for the significant increase in his or her
assets, may in some jurisdictions be considered as contrary to the right to be presumed innocent until proven guilty under
the law. The presumption of innocence is invoked because the crime of illicit enrichment hinges upon presuming that the
accumulated wealth is corruptly acquired, unless the contrary is proved.
Therefore it is important for national legislators to take into consideration when drafting relevant legislation potential conflicts
with human rights law standards of fair trial and due process rights, which, particularly with regard to the presumption of
innocence, may entail the following:
• that it is upon the prosecution to prove the guilt of the accused person (burden of proof);
• that it is the right of the accused not to testify against himself/herself; and
• that the accused has a right of silence.
As far as the burden of proof is concerned, it has been argued, thus raising concerns about potential infringements of the
abovementioned fair trial standards, that the prosecution is relieved of the full burden of proof, since it needs not directly
adduce evidence of corruption, but shifts the burden of proof to the accused requiring him to refute that the wealth is illicitly
acquired.
However, the point has also been clearly made that there is no presumption of guilt and that the burden of proof remains on
the prosecution, as it has to demonstrate that the enrichment is beyond one’s lawful income. The prosecution merely suspects
that the wealth of the accused was illicitly acquired and places the burden of proof to the accused to adduce the contrary. This
may, thus, be viewed as a rebuttable presumption. Once such a case is made, the defendant can then offer a reasonable or
credible explanation.
National jurisprudence has provided examples of shifting the burden of proof so as to give way to statutory exceptions and
public policy needs. In other cases, arguments were made in favour of striking a fair balance between public and individual
interests. In general, there is always a need to comply with the so called “proportionality principle” when judging on the
impact of such criminalization measures on human rights standards.
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According to art. 65, para. 1, of the UNCAC, “each State Party shall take the necessary measures,
including legislative and administrative measures, in accordance with fundamental principles of its domestic
law, to ensure the implementation of its obligations under this Convention”. The purpose of this provision is
to ensure that national legislators act to implement the provisions of the Convention in conformity with the
fundamental principles of their legal system.
Implementation may be carried out through new laws or amendments of existing ones. Domestic
offences established in accordance with the requirements of the UNCAC, whether based on pre-existing
laws or newly established ones, will often correspond to offences under the Convention in name and terms
used, but this is not essential. Close conformity is desirable, but is not required, as long as the range of acts
covered by the Convention is criminalized.
Pursuant to art. 65 para. 2, of the UNCAC, “each State Party may adopt more strict or severe measures
than those provided for by this Convention for preventing and combating corruption.”
III. THE “DOMESTIC CONTEXT”:
AN OVERVIEW OF THE LAW ENFORCEMENT PROVISIONS OF THE UNCAC
As in the case of the UNTOC, the UNCAC has included a wide array of law enforcement measures in
its Chapter III, destined to support the criminalization provisions and ensure their effectiveness. Such
measures include the following:
•
•
•
Establishment of jurisdiction over offences falling within its scope of application (art. 42);23
Liability of legal persons (art. 26);24
Prosecution, adjudication and sanctions in corruption-related cases (art. 30);25
23
The UNCAC requires that States Parties establish jurisdiction when the offences are committed in their territory or
on board aircraft and vessels registered under their laws. States Parties are also required to establish jurisdiction in cases
where they cannot extradite a person on grounds of nationality. In these cases, the general principle aut dedere aut judicare
(extradite or prosecute) would apply (see arts. 42, para. 3, and 44, para.11). In addition, States Parties are invited to consider
the establishment of jurisdiction in cases where their nationals are victimized, where the offence is committed by a national or
stateless person residing in their territory, where the offence is linked to money-laundering planned to be committed in their
territory, or the offence is committed against the State (art. 42, para. 2). Finally, States Parties are required to consult with
other interested States in appropriate circumstances in order to avoid, as much as possible, the risk of improper overlapping
of exercised jurisdictions (art. 42, para. 5). States Parties may also wish to consider the option of establishing their jurisdiction
over offences established in accordance with the Convention against Corruption when extradition is refused for reasons other
than nationality (art. 42, para. 4).
24 Art. 26 requires that States Parties adopt such measures as may be necessary to establish the liability of legal persons for
participation in offences covered by the UNCAC. The obligation to provide for the liability of legal entities is mandatory, to the
extent that this is consistent with each State’s legal principles. There is no obligation, however, to establish criminal liability in
view of the divergent approaches followed in different legal traditions. Civil or administrative forms of liability for legal entities
are sufficient to meet the requirement set forth in art. 26. Nevertheless, whatever form it takes, the liability of legal persons
shall not affect the criminal liability of the natural persons who have committed the offences. In addition, States Parties have
an obligation to provide for effective, proportionate and dissuasive sanctions, which may be criminal on non-criminal and may
also include monetary sanctions.
25 Art. 30 encompasses provisions with regard to the investigation and prosecution of corruption-related offences and the
important complex issue of immunities. The article devotes significant attention to sanctions – both criminal sanctions strictu
sensu and “ancillary” sanctions –, as well as provisions on disciplinary measures and sanctions relating to the gravity of the
offence or linked to the nature of the offence, such as disqualification. Finally, the article deals with the rehabilitation of offenders.
Art. 30 requires that:
• States parties provide for sanctions which take into account the “gravity” of that offence (para. 1).
• States parties provide for an appropriate balance between any immunities or jurisdictional privileges accorded to its public
officials for the performance of their functions and the possibility, when necessary, of effectively investigating, prosecuting
and adjudicating offences established in accordance with the Convention (para. 2).
• Decisions on release pending trial or appeal take into consideration the need to ensure the presence of the defendant at
subsequent criminal proceedings (para. 4).
• The gravity of the offences concerned should be taken into account when considering the eventuality of early release or
parole of persons convicted of such offences (para. 5).
Besides these mandatory provisions, art. 30 stipulates in a non-mandatory manner that:
• States parties consider establishing procedures through which a public official accused of an offence established in
143
•
•
•
•
•
•
Long statute of limitations for offences covered by the Convention (art. 29);26
The freezing, seizure and confiscation of proceeds of crime derived from offences established in
accordance with the Convention (art. 31);27
The protection of witnesses, experts and victims (art. 32);28
The protection of reporting persons (art. 33);29
The establishment of independent authorities specialized in combating corruption through law
enforcement (art. 36);30
The co-operation with law enforcement authorities (art. 37);31
accordance with the Convention may, where appropriate, be removed, suspended or reassigned by the appropriate
authority (para. 6).
• States parties consider establishing procedures for the disqualification for a period of time determined by domestic law, of
persons convicted of offences established in accordance with the Convention from: (a) holding public office; and (b) holding
office in an enterprise owned in whole or in part by the State (para. 7).
• States parties endeavour to promote the reintegration into society of persons convicted for offences established pursuant
to the Convention (para. 10).
26 Art. 29 lays down the obligation of States Parties to establish, where appropriate, under their domestic law a long statute of
limitations period in which to commence proceedings for any offence established in accordance with the Convention, as well as
to establish a longer period or provide for the suspension of the statute of limitations in cases where the alleged offender has
evaded the administration of justice.
27 Article 31 deals with confiscation — the permanent deprivation of property by order of a court or other competent authority, as
defined by art. 2(g) of the Convention — as the most important legal tool to deprive offenders of their ill-gotten gains. The regime
promoted by the Convention revolves around the concept of the confiscation of “proceeds of crime”, defined by art. 2(e) of the
Convention as “any property derived from or obtained, directly or indirectly, through the commission of an offence.”
Art. 31 also establishes the minimum scope of the confiscation of the proceeds of crime in paras. 4, 5 and 6. As a
complementary measure, para. 8 recommends that States Parties consider reversing the burden of proof in order to facilitate
the determination of the origin of such proceeds, a concept already applied in several jurisdictions which needs, however, to
be distinguished from a reversal of the burden of proof regarding the elements of the offence which is directly linked with the
presumption of innocence.
Art. 31 further requires specific measures for two other important elements of the confiscation regime: international
cooperation (para. 7) and the protection of third-party rights (para. 9).
28 Art. 32 includes both mandatory and non-mandatory provisions. As a mandatory provision, art. 32, para. 1, requires that
each State Party must take appropriate measures in accordance with its domestic legal system and within its means to provide
effective protection from potential retaliation or intimidation for witnesses and experts who give testimony concerning
offences established in accordance with the Convention and, as appropriate, for their relatives and other persons close to them.
Paragraph 2 specifies certain measures that States Parties may envisage in order to provide for the necessary protection of
witnesses and experts as required by para.1. While para. 2(a) includes a provision on procedures for the physical protection
against intimidation and retaliation, para. 2 (b) focuses on evidentiary rules ensuring the safety of witnesses and experts with
regard to their testimony.
Para. 3 is a non-mandatory provision requiring State Parties to consider implementing cross-border witness protection through
relocating victims who may be in danger in other countries. Para. 4 requires States Parties to apply the provisions of art. 32 to
victims insofar as they are witnesses. Art. 32, para. 5, requires States Parties to enable the views and concerns of victims to be
presented and considered at appropriate stages of criminal proceedings against offenders. This provision is relevant in cases in
which a victim is not a witness.
29 Art. 33 is a non-mandatory provision. However, States Parties may wish to keep in mind that the provision complements the
article dealing with the protection of witnesses and experts. Art. 33 is intended to cover those individuals who may possess
information which is not of such detail to constitute evidence in the legal sense of the word. Such information is likely to
be available at a rather early stage of a case and is also likely to constitute an indication of wrongdoing. In corruption cases,
because of their complexity, such indications have proved to be useful to alert competent authorities and permit them to make
key decisions about whether to launch an investigation. The UNCAC uses the term “reporting persons”. This was deemed to
be sufficient to reflect the essence of the intended meaning: while making clear that there is a distinction between the persons
referred to with this term and witnesses. It was also deemed preferable to the term “whistle-blowers” which is a colloquialism
that cannot be accurately and precisely translated into many languages.
30 Art. 36 mandates States Parties to have in place a body or bodies or persons specialized in combating corruption through law
enforcement, performing investigative and possibly prosecutorial functions.
31 As a mandatory provision, art. 37 obliges States Parties to take appropriate measures to encourage persons who participate
or who have participated in the commission of an offence established in accordance with the Convention to supply information
useful to competent authorities for investigative and evidentiary purposes and to provide factual, specific help to competent
authorities that may contribute to depriving offenders of the proceeds of crime and to recovering the proceeds. Moreover, art.
37 obliges States Parties to protect such persons, mutatis mutandis, as provided for in art. 32, para. 4.
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•
•
•
The co-operation between national authorities (art. 38);32
The co-operation between national authorities and entities of the private sector, in particular
financial institutions, relating to matters involving the commission of corruption-related offences
(art. 39);33
The curtailment of bank secrecy in the case of domestic criminal investigations of relevant offences
(art. 40).34
IV. THE “TRANSNATIONAL ELEMENT”:
A SELECTED OVERVIEW OF UNCAC PROVISIONS ON INTERNATIONAL CO-OPERATION
MEASURES AIMED AT ENHANCING CRIMINAL JUSTICE RESPONSES TO CORRUPTION
Corruption is not any more an issue confined within national boundaries, but a transnational phenomenon
that affects different jurisdictions, thus rendering international co-operation to combat it essential.
The UNCAC incorporates detailed and extensive provisions on international co-operation, covering all
its forms, namely extradition (art. 44), mutual legal assistance (art. 46), transfer of sentenced persons (art.
45), transfer of criminal proceedings (art. 47), law enforcement co-operation (art. 48), joint investigations
(art. 49) and co-operation for using special investigative techniques (art. 50). These provisions are
generally based on the precedent of the UNTOC, sometimes going beyond it,35 and provide a much more
comprehensive legal framework on relevant matters than that of the existing regional instrument.
What follows is a selected reference to key issues of certain international co-operation measures
prescribed in the UNCAC and aimed at enhancing criminal justice responses to corruption.
A.Extradition
The UNCAC attempts to set a basic minimum standard for extradition and requires States Parties that
make extradition conditional on the existence of a treaty to indicate whether the Convention is to be used
as a legal basis for extradition matters and, if not, to conclude treaties in order to implement article 44 (art.
44, para. 6(b)), as well as bilateral and multilateral agreements or arrangements to enhance the effectiveness
of extradition (art. 44, para. 18). If States Parties do not make extradition conditional on the existence of a
treaty, they are required by the Convention to use extradition legislation as legal basis for the surrender
of fugitives and recognize the offences falling within the scope of the Convention as extraditable offences
between themselves (art. 44, para. 7).
Recent trends and developments in extradition law have focused on relaxing the strict application
of certain grounds for refusal of extradition requests. Attempts have been made to ease, for example,
difficulties with double criminality by inserting general provisions into treaties, either listing acts and
32
Art. 38 requires States Parties to take all necessary measures to encourage co-operation between public authorities or
public officials and authorities responsible for investigating and prosecuting criminal offences established in arts. 15, 21 and
23 of the Convention (bribery of national public officials, bribery in the private sector and laundering of the proceeds of crime
respectively). This provision is particularly relevant to cases of early notification of potential offences to agencies with the
powers and expertise to investigate and prosecute them. Such notification is essential to ensure that perpetrators do not flee
the jurisdiction or tamper with evidence and the movement of assets can be prevented or monitored.
33 Art. 39 complements art. 38 in that it encourages co-operation between public authorities and private sector entities.
Many corruption cases are complex and covert, and will not come to the attention of the relevant authorities or their
investigation would be frustrated without the co-operation of private sector entities, especially financial institutions, as well
as private citizens. Early notification by relevant private sector bodies or early co-operation with investigative agencies is
important to the identification and safeguarding of potential evidence and the initiation of inquiries. In particular, the role
of the financial institutions – or those institutions involved in high-value commercial activity - is central to the effective
prevention, investigation and prosecution of offences established in accordance with the UNCAC. While financial institutions
have obligations to report suspicious activity or transactions, this should not be seen as the limit to co-operation where an
institution has suspicions about other activities, such as opening of accounts or other activity.
34 States Parties are required in art. 40 to remove any obstacle that may arise from protective laws and regulations to domestic
criminal investigations relating to offences established under the UNCAC.
35 It should be noted that one of the innovations of the UNCAC is that it foresees the provision of mutual legal assistance even
in the absence of dual criminality, where this is consistent with the basic concepts of the domestic legal systems and such
assistance involves non-coercive measures (art. 46, para. 9(b)).
145
requiring only that they be punished as crimes or offences by the laws of both States, or simply allowing
extradition for any conduct criminalized and subject to a certain level of punishment in each State.36
The UNCAC also allows for the lifting of the double criminality requirement by stipulating that a State
Party whose law so permits may grant the extradition of a person for any of the offences covered by the
Convention which are not punishable under its own domestic legislation (see art. 44, para. 2).37
The reluctance to extradite their own nationals also appears to be lessening in many States. The UNCAC
includes a provision that reflects this development: In cases where the requested State party refuses
to extradite a fugitive solely on the grounds that the fugitive is its own national, the State Party has an
obligation to bring the person to trial (art. 44, para. 11). This is an illustration of the principle of aut dedere
aut judicare (extradite or prosecute) and further requires the establishment of the appropriate jurisdictional
basis (art. 42, para. 3). Article 44, para. 12, further enables the temporary surrender of the fugitive on the
condition that he or she will be returned to the requested State Party for the purpose of serving the sentence
imposed. Where extradition is requested for the purpose of enforcing a sentence, the requested State Party
may also enforce the sentence that has been imposed in accordance with the requirements of its domestic
law (art. 44, para. 13).
Moreover, recent developments suggest that attempts are being made to restrict the scope of the political
offence exception or even abolish it. The UNCAC excludes the political offence exception in cases where the
Convention is used as legal basis for extradition (art. 44, para. 4).
B. Mutual Legal Assistance
The increasingly international mobility of offenders and the use of advanced technology and international
banking for the commission of offences make it more necessary than ever for law enforcement and judicial
authorities to collaborate and assist each other in an effective manner in investigations, prosecutions and
judicial proceedings related to such offences.
In order to achieve that goal, States have enacted laws to enable them to provide assistance to foreign
jurisdiction and increasingly have resorted to treaties or agreements on mutual legal assistance in criminal
36
For comparative purposes, see the relevant developments in the European Union with the adoption of the Framework
Decision on the European Arrest Warrant and the surrender procedures between EU Member States, which is based on the
principle of mutual recognition of judicial decisions as the cornerstone of judicial co-operation in criminal matters within the
European Union. The Framework Decision defines “European Arrest Warrant” (EAW) as any judicial decision issued by a
Member State with a view to the arrest or surrender of a requested person by another Member State, for the purposes of
conducting a criminal prosecution or executing a custodial sentence or a detention order (art. 1, para.1). The EAW may be
issued for acts punishable by the law of the issuing Member State by a custodial sentence or a detention order for a maximum
period of at least 12 months or, where a sentence has been passed or a detention order has been made, for sentences of at least
four months (art. 2 para. 1).
One of the innovations of the EAW process is that the deeply ingrained double criminality principle in traditional extradition
law is no longer verified for a list of 32 offences, which, according to art. 2, para. 2, of the Framework Decision, should be
punishable in the issuing Member State for a maximum period of at least three years of imprisonment and defined by the law of
this Member State. These offences include, inter alia, corruption and laundering of the proceeds of crime. For offences which
are not included in this list or do not fall within the three year threshold, the double criminality principle still applies (art. 2,
para. 4).
37 Whenever dual criminality is, however, necessary for international co-operation, art. 43, para. 2, of the UNCAC requires that
States Parties deem this requirement fulfilled, if the conduct underlying the offence for which assistance is sought is a criminal
offence under the laws of both co-operating States, regardless of the legal term used to describe the offence or the category
within which such offence is placed. By making it clear that the underlying conduct of the criminal offence neither needs to
be defined in the same terms in both States nor does it have to be placed within the same category of offence, the Convention
introduces an explanatory clause to reinforce a generic double criminality standard. In doing so, it explicitly minimizes the
significance of the particular legislative language used to penalize certain conduct and encourages a more pragmatic focus on
whether the underlying factual conduct is punishable by both contracting States, even if under differently named statutory
categories. This is an attempt to remove some of the reluctance to international co-operation where the requested State Party
does not fully recognize the offence for which the request was submitted. Although some requested States Parties may seek to
establish whether they have an equivalent offence in their domestic law to the offence for which international co-operation or
other legal assistance is sought (punishable above a certain threshold), the Convention clearly demands that a broad approach
to this issue is taken by the requested States Parties.
146
matters. Such treaties or agreements usually list the kind of assistance to be provided, the requirements
that need to be met for affording assistance, the obligations of the co-operation States, the rights of alleged
offenders and the procedures to be followed for submitting and executing the relevant requests.
The UNCAC generally seeks ways to facilitate and enhance mutual legal assistance, encouraging States
Parties to engage in the conclusion of further agreements or arrangements in order to improve the efficiency
of mutual legal assistance. In any case, art. 46, para. 1, requires States Parties to afford one another the
widest measure of mutual legal assistance in investigations, prosecutions and judicial proceedings in relation
to the offences covered by the Convention.
In the absence of an applicable mutual legal assistance treaty, paras. 9-29 of art. 46 shall apply in relation
to requests made in accordance with the UNCAC. If a treaty is in force between the States Parties concerned,
the rules of the treaty will apply instead, unless the States Parties agree to apply paragraphs 9-29. In any
case, States Parties are also encouraged to apply those paragraphs if they facilitate co-operation. In some
jurisdictions, this may require legislation to give full effect to the provisions.
From a practical point of view, it is also important for States Parties to ensure the proper execution of a
mutual legal assistance request made under art. 46 of the UNCAC. Since the procedural laws of State Parties
differ considerably, the requesting State Party may require special procedures (such as notarized affidavits)
that are not recognized under the law of the requested State Party. Traditionally, the almost immutable
principle has been that the requested State Party will give primacy to its own procedural law. That principle
has led to difficulties, in particular when the requesting and the requested States Parties represent different
legal traditions.
According to art. 46, para. 17, of the UNCAC, a request should be executed in accordance with the
domestic law of the requested State Party. However, the article also provides that, to the extent not contrary
to the domestic law of the requested State Party and where possible, the request should be executed in
accordance with the procedures specified in the request.
Art. 46, para. 8, specifically provides that States Parties cannot refuse mutual legal assistance on the
ground of bank secrecy. It is significant that this paragraph is not included among the paragraphs that only
apply in the absence of a mutual legal assistance treaty. Instead, States Parties are obliged to ensure that no
such ground for refusal may be invoked under their legal regime.
C.Joint Investigations
Article 49 of the UNCAC encourages, but does not require, States Parties to enter into agreements or
arrangements to conduct joint investigations, prosecutions and proceedings in more than one State, where a
number of States Parties may have jurisdiction over the offences involved.
Practical experience has shown that joint investigations raise issues related to the legal standing and
powers of officials operating in another jurisdiction, the admissibility of evidence in a State Party obtained
in that jurisdiction by an official from another State Party, the giving of evidence in court by officials from
another jurisdiction, and the sharing of information between State Parties before and during an investigation.
In planning joint investigations, and identifying those issues to be addressed prior to undertaking any
work, consideration may need to be given to the following factors:
•
•
•
the criteria for deciding on a joint investigation, with priority being given to a strong and clearly
defined case of serious transnational corruption;38
the criteria for choosing the location of a joint investigation (near the border; near the main suspects, etc.);
the use of a co-ordination body to steer the investigation if a number of different jurisdictions are
involved;
38
The challenge, in this context, is to ensure that joint investigations are handled in a proportionate manner and with due
respect to the suspect’s human rights.
147
•
•
•
•
•
•
•
•
the designation of a lead investigator to direct and monitor the investigation;
agreements on the collective aims and outcomes of joint working, the intended contribution of each
participating agency, as well as the relationship between each participating agency and other agencies
from the same State Party;
addressing any cultural differences between jurisdictions;
assessing the pre-conditions of the investigation as the host State Party should be responsible for
organizing the infrastructure of the team;
the liability of officers from a foreign agency who work under the auspices of a joint investigation;
the level of control exerted by judges or investigators;
financing and resourcing of joint investigations; and
identifying the legal rules, regulations and procedures to determine the emerging legal and practical
matters.39
D.Special Investigative Techniques
Article 50 of the UNCAC requires States Parties to take measures to allow for the appropriate use
of special investigative techniques for the investigation of corruption. It first advocates in paragraph
1 the use of controlled delivery and, where appropriate, electronic or other forms of surveillance and
undercover operations on the understanding that such techniques may be an effective weapon in hands of
law enforcement authorities to combat sophisticated criminal activities related to corruption. However,
the deployment of such techniques must always be done to the extent permitted by the basic principles of
domestic legal systems and in accordance with the conditions prescribed by domestic laws. Paragraph 1 also
obliges States Parties to take measures allowing for the admissibility in court of evidence derived from such
techniques.
Paragraph 2 accords priority to the existence of the appropriate legal framework that authorizes the use of
special investigative techniques and therefore encourages States Parties to conclude bilateral or multilateral
agreements or arrangements to foster cooperation in this field, with due respect to national sovereignty
concerns.
Paragraph 3 provides a pragmatic approach in that it offers the legal basis for the use of special
investigative techniques on a case by case basis where relevant agreements or arrangements do not exist.
Paragraph 4 clarifies the methods of controlled delivery that may be applied at the international level and
may include methods such as intercepting and allowing goods or funds to continue intact or be removed or
replaced in whole or in part. The method to be used may depend on the circumstances of the particular case
and may also be affected by the national laws on evidence and its admissibility.
In general, the deployment of special investigative techniques requires from the competent investigative
authorities to take into serious consideration the legal and policy implications of their use and therefore
a careful assessment of the appropriate and proportionate checks and balances to secure human rights
protection needs to be pursued.
V. THE PROVISIONS OF THE UNCAC ON ASSET RECOVERY
In what has been recognized as a major breakthrough compared to existing international instruments
against corruption, the UNCAC contains a comprehensive chapter (Chapter V) on asset recovery. Beginning
with stating that the return of assets pursuant to that chapter is a “fundamental principle” and that States
Parties shall afford one another the widest measure of co-operation and assistance in that regard (art. 51), the
Convention includes substantive provisions laying down specific measures and mechanisms for co-operation
with a view to facilitating the repatriation of assets derived from offences covered by the UNCAC to their
country of origin.
39
Such matters may include: the pooling, storage and sharing information; confidentiality of the activities, the integrity and
admissibility of evidence; disclosure issues (a particular concern in the common law jurisdictions); implications of the use of
covert operations; appropriate charges and the issue of retention of traffic data for law enforcement purposes.
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Chapter V also provides for mechanisms for direct recovery of property (art. 53) and a comprehensive
framework for international co-operation (arts. 54-55), which incorporates, mutatis mutandis, the more
general mutual legal assistance requirements and sets forth procedures for international co-operation
in confiscation matters. These are important powers, as criminals frequently seek to hide proceeds,
instrumentalities and evidence of crime in more than one jurisdiction, in order to thwart efforts to locate and
seize them.40 41
With regard to the return and disposition of assets, Chapter V of the Convention incorporates a series of
provisions that favour return to the requesting State party, depending on how closely the assets are linked to
it in the first place. Thus, the Convention imposes the obligation for States Parties to adopt such legislative
and other measures that would enable their competent authorities, when acting on a request made by
another State Party, to return confiscated property, taking into account the rights of bona fide third parties
and in accordance with the fundamental principles of their domestic law (art. 57, para. 2). In particular, the
Convention requires States Parties that receive a relevant request in the case of embezzlement of public
funds or of laundering of embezzled public funds to return the confiscated property to the requesting State
on the condition of a final judgement in the latter State (although this condition can be waived) (art. 57, para.
3 (a)). In the case of any other offences covered by the Convention, two additional conditions for the return
are recognized alternatively, i.e. that the requesting State reasonably establishes its prior ownership of
such confiscated property or that the requested State recognizes damage to the requesting State as a basis
for returning the confiscated property (art. 57, para. 3 (b)). In all other cases the requested State shall give
priority consideration to returning confiscated property to the requesting State, returning such property to
its prior legitimate owners or compensating the victims (art. 57, para. 3 (c)).
VI. EPILOGUE
The UNCAC, as a powerful manifestation of the collective political will of the international community to
put in place a benchmark and a source of aspiration in the fight against corruption, attaches great importance,
among others, to the adoption and implementation of measures geared towards rendering criminal justice
responses to corruption, both at the domestic and international levels, more efficient.
States parties’ law makers, from their side, need to establish an adequate and comprehensive legal
40
Art. 55, para. 1, in particular, mandates a State Party to provide assistance “to the greatest extent possible” in accordance
with domestic law, when receiving a request from another State Party having jurisdiction over an offence established in
accordance with the UNCAC for confiscation of proceeds of crime, property, equipment or other instrumentalities, either by
recognizing and enforcing a foreign confiscation order, or by bringing an application for a domestic order before the competent
authorities on the basis of information provided by the other State Party.
41 Under art. 54, para, 1 (c), of the UNCAC, States Parties, in order to provide mutual legal assistance pursuant to art. 55
with respect to property acquired through or involved in the commission of an offence established in accordance with the
Convention, must, in accordance with their domestic law, consider taking such measures as may be necessary to allow
confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of
death, flight or absence or in other appropriate cases.
While confiscation without a criminal conviction (NCB confiscation) should never be a substitute for criminal prosecution, in
many instances, such confiscation may be the only way to recover the proceeds of corruption and to exact some measure of
justice. Countries that do not have the ability to confiscate without a conviction are challenged because they lack one of the
important tools available to recover stolen assets. NCB confiscation is valuable because the influence of corrupt officials and
other practical realities may prevent criminal investigations entirely, or delay them until after the official has died or absconded.
Alternatively, the corrupt official may have immunity from prosecution. Because an NCB confiscation regime is not dependent
on a criminal conviction, it can proceed regardless of death, flight, or any immunity the corrupt official might enjoy.
Although an increasing number of jurisdictions are adopting legislation which permits confiscation without a conviction,
international co-operation in NCB confiscation cases remains quite challenging for a number of reasons. First, it is a growing
area of law that is not yet universal; therefore not all jurisdictions have adopted legislation permitting NCB confiscation or
enforcement of foreign NCB orders or both. Secondly, even where NCB confiscation exists, the systems vary significantly.
Some jurisdictions conduct NCB confiscation as a separate proceeding in civil courts (also known as civil confiscation) with
a lower standard of proof than in criminal cases (balance of probabilities); others use NCB confiscation in criminal courts and
require the higher criminal standard of proof. Some jurisdictions will only pursue NCB confiscation after criminal proceedings
were abandoned or unsuccessful, while others pursue NCB confiscation in proceedings parallel to the related criminal
proceedings.
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framework to give practical effect to the relevant provisions of the UNCAC. However, the main challenge
for States parties is to improve the capacities of criminal justice institutions to effectively combat corruption
domestically, co-operate internationally in the investigation, prosecution, and adjudication of corruptionrelated offences and further enhance asset recovery mechanisms to return the proceeds of crime to the
country of origin.
In this regard, UNODC provides, upon request, specialized substantive and technical expertise to
competent authorities and officials of Member States with specific emphasis on international co-operation
and criminalization. The recent establishment of the Implementation Review Mechanism of the UNCAC
provides the opportunity for collecting, systematizing and assessing valuable information on how technical
assistance needs in the abovementioned fields can be identified and on possible ways and means to meet
those needs in the context of reviewing the implementation of the Convention.
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UNODC ACTIVITIES IN PROMOTING AND FACILITATING
THE RATIFICATION AND IMPLEMENTATION OF THE UNCAC
The Role of the Conference of the States Parties to the UNCAC, as well as its Working Groups
Demostenes Chryssikos*
I. A GENERAL OVERVIEW OF THE WORK OF UNODC
IN THE ANTI-CORRUPTION FIELD
The UNODC, through its Thematic Programme on Action against Corruption and Economic Crime, acts
a catalyst and a resource to help States ratify and effectively implement the provisions of the United Nations
Convention against Corruption (hereinafter: UNCAC). The primary goal of the anti-corruption work done
by UNODC is to provide States with practical assistance and build the technical capacity needed to ensure
compliance with the requirements of the Convention. The main activities, in this connection, relate to:
•
•
•
•
The support for the ratification and implementation of the UNCAC;
The support for the development of anti-corruption policies and institutions, including preventive
anti-corruption frameworks;
The provision of expert legislative advice for the purpose of securing full implementation of
domestic legislation in line with the Convention; and
The provision of assistance to strengthen national capacity to apply such legislation.
In its capacity as the guardian of the UNCAC and Secretariat of the Conference of the States Parties
to the Convention, UNODC is mandated to support the newly established mechanism for the review of
implementation of the Convention and assist the Conference in identifying technical assistance priorities
and developing appropriate responses to corruption.
II. UNODC SPECIFIC SERVICES FOCUSING ON TECHNICAL ASSISTANCE NEEDS
The UNCAC provides a comprehensive framework for concerted action at the national and international
levels to prevent and combat corruption. As such, the Convention can be used as a benchmark for the
design, implementation and evaluation of technical assistance programmes and projects geared towards
enhancing the capacity of Member States to deal effectively with the challenges posed by corruption.
Bearing this in mind, UNODC has been developing a series of technical assistance services to meet the
growing demands of Member States in this field. An indicative list of such services includes, inter alia, the
following:
•
•
Provision of ad-hoc and long-term advice and expertise to support the development of a wide
range of policies and programmes of action to ensure the effective implementation of the UNCAC
provisions on the prevention of corruption (such as national anti-corruption strategies and action
plans, codes of conduct, asset declaration systems, conflict of interest policies and human resource
management systems based on principles of efficiency, transparency and objective criteria);1
Provision of ad-hoc and long-term advice and expertise to support the development of domestic
legislation aiming at ensuring full compliance with the provisions of UNCAC. In addition to legal
advisory services, the development of such tools as legislative guides, model legislation and
electronic libraries is another pillar of legal assistance provided by UNODC;
* Crime Prevention and Criminal Justice Officer, Division for Treaty Affairs, Corruption and Economic Crime Branch, United
Nations Office on Drugs and Crime, Vienna. The opinions expressed in this article are those of the author and do not reflect
the views of the United Nations.
1 See Chapter II of the UNCAC.
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•
•
•
•
•
•
•
•
•
•
2
Provision of specialized expertise and assistance to countries on the Convention’s innovative
provisions on asset recovery;2
Provision of ad-hoc and long-term advice and expertise to support States Parties in setting up
and strengthening the institutional framework required by UNCAC in the areas of prevention,
investigation, prosecution and international co-operation to combat corruption, including asset
recovery. UNODC assistance, in this connection, focuses on the creation or support of operationally
and politically independent and adequately staffed and resourced anti-corruption bodies, specialized
anti-corruption law enforcement, financial intelligence units and central authorities responsible
for mutual legal assistance. Specific activities include advisory services on the design of the terms
of reference of such institutions, the delineation of their mandate, powers and procedures, as
well as assistance in building the professional skills and operational capacities of their staff. Once
established, further support may be required in the management of the institutions, including
the development of operational policies and procedures, the identification of priorities and human
resources development;
Assistance in building training capacities and programmes (through the development of training
curricula, training manuals, training of trainers and the design of cost-effective methods and tools
for the conduct of training, including computer-based training) to ensure that countries can build a
body of highly skilled anti-corruption practitioners. The required skill-sets include the development
and strategic planning of anti-corruption policies, the investigation, control and punishment of
corruption, the preparation of requests for mutual legal assistance, the tracing, seizing, confiscation
and return of the proceeds of corruption, the evaluation and strengthening of institutions, public
service management, and the management of public finances;
Provision of assistance to States Parties in enhancing the integrity, accountability and oversight of
their criminal justice and security institutions with a view to enhancing their capacities to effectively
carry out their mandate, implement the provisions of UNCAC and reduce their vulnerability to
corrupt practices;
Placement of anti-corruption advisors and mentors to ensure longer-term engagement and
sustainability of day-to-day technical expertise and operational support;
Facilitating the exchange of good practices in the various fields covered by the Convention through
the support of international and regional associations of anti-corruption authorities as well as the
organization or regional and sub regional workshops, meetings, and training events;
Conduct of corruption risk assessments and strengthening of national capacities to carry out these
assessments, in order to acquire a profound knowledge and understanding of the challenges posed by
corruption (scope, nature, causes and contributing factors) as well as of the weaknesses of the laws,
institutions, and policies in any given country, as a basis for sound policy development and technical
assistance and as benchmarks for the evaluation of progress;3
Provision of support to Governments in raising awareness about the negative impact of corruption
through targeted information campaigns and effective work with the media;4
Supporting elements of the civil society in strengthening the demand for good governance through
the International Anti-Corruption Day campaign, awareness-raising about the negative impact of
corruption in daily life and encouraging a more active stand against corruption;
Building and strengthening partnerships between the public and the private sector against
corruption, and promoting, in this regard, the business community’s engagement in the prevention
of corruption by, inter alia , developing initiatives to promote and implement public procurement
reform and identifying elements of optimal self-regulation in the private sector;5
See Chapter V of the UNCAC.
The cornerstone of this work is the assistance to Member States in using the software-based comprehensive selfassessment checklist developed to assist States Parties in reporting on their implementation of UNCAC and in identifying
challenges in implementation and technical assistance needs. This also includes the support to the UNCAC Review of
Implementation Mechanism, based on the self-assessments submitted by reviewed countries and on a peer review, which will
identify technical assistance needs and ensure that the gaps identified will be filled by prioritizing the delivery of technical
assistance as an integral part of the mechanism (see below).
4 See http://www.unodc.org/yournocounts.
5 See http://www.unodc.org/unodc/en/corruption/private-sector.html.
3
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III. THE CONFERENCE OF THE STATES PARTIES TO THE UNCAC:
POLICY, GUIDANCE AND DECISIONS
A. Role and Mandate
Pursuant to article 63 of the Convention, the Conference of the States Parties to the UNCAC was
established to improve the capacity of and co-operation between States parties to achieve the objectives set
forth in the Convention and to promote and review its implementation.
The Conference of the States Parties to the UNCAC is tasked with supporting State Parties and
signatories in their implementation of the Convention, and provides policy guidance to UNODC for the
development and execution of anti-corruption related activities. It has held three sessions to date (the last
one in November 2009) and established working groups to assist it in its work in the fields of review of
implementation, asset recovery, technical assistance and prevention.
The Conference has adopted far-reaching resolutions at each of its sessions and has mandated UNODC to
implement them, including through the development of technical assistance projects.
B. First Session: Amman, Jordan, 10-14 December 2006
The Conference at its first session adopted eight resolutions aimed at strengthening the ratification and
implementation of UNCAC.6 In Resolution 1/1, the Conference paved the ground for the establishment, at
a later stage, of the UNCAC Review of Implementation Mechanism by recognizing the necessity of such a
mechanism and establishing an open-ended intergovernmental working group to make recommendations on
how to best achieve this goal.
The Conference also decided to establish an information-gathering mechanism (Resolution 1/2) on the
implementation of the UNCAC, using a self-assessment checklist, a tool which was later expanded and
incorporated in a software-based application for the purposes of the review of the Convention.7
The Conference further called on States Parties and signatories to adapt their laws and regulations to
bring them into conformity with the provisions of the Convention (Resolution 1/3).
In Resolution 1/4, the Conference decided to establish an open-ended intergovernmental working group
on asset recovery to assist it in developing knowledge on the topic, to facilitate the exchange of information
and to identify areas for capacity-building in requesting and carrying out mutual legal assistance for asset
recovery.
The Conference, in Resolution 1/5 on technical assistance, also decided to establish an open-ended
intergovernmental working group on technical assistance to review needs, provide guidance on priorities
and promote co-ordination of technical assistance where provided, and recommended the convening of an
international co-operation workshop on technical assistance (Resolution 1/6).
The Conference addressed the issue of bribery of public officials in Resolution 1/7 and invited UNODC,
other relevant public international organizations, and States, to initiate an open-ended dialogue on the issue
and report to the second session of the Conference.
In Resolution 1/8, the Conference decided to consider best practices in the fight against corruption at its
next meeting.
C.Second Session: Nusa Dua, Indonesia, 28 January-1 February 2008
The Conference at its second session adopted five resolutions on, respectively, review of implementation,
technical assistance, asset recovery, adapting legislation and regulations, and bribery of officials of public
international organizations. These resolutions built upon the goals and achievements of implementation
of its prior resolutions, in particular with recommendations formulated by each of the three established
working groups.8
6
See http://www.unodc.org/unodc/en/treaties/CAC/CAC-COSP-session1-resolutions.html.
See http://www.unodc.org/unodc/en/treaties/CAC/self-assessment.html.
8 See http://www.unodc.org/unodc/en/treaties/CAC/CAC-COSP-session2-resolutions.html.
7
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In Resolution 2/1, the Conference called upon States Parties and signatories to submit proposals for
terms of reference for a review mechanism and the working group on review of implementation was tasked
to review these proposals and submit draft terms of reference to the Conference at its third session for its
consideration, action and possible adoption.
The Conference welcomed the analysis of the information gathered and collated using the selfassessment checklist on the implementation of the UNCAC in Resolution 2/2, requesting the working group
on technical assistance to continue developing recommendations on how best to meet the needs identified.
The Conference also requested the working group on asset recovery to continue engaging in this highly
innovative and technical field (Resolution 2/3).
It further renewed its call for adaptation of laws and regulations to be in full compliance with the
provisions of the UNCAC in Resolution 2/4 and requested UNODC in Resolution 2/5 to focus on
methodologies of co-operation between public international organizations and States parties in investigations
of corruption involving international public officials.
D. Third Session: Doha, Qatar, 9-13 November 2009
The Conference at its third session, held in November 2009, adopted landmark Resolution 3/1 on the
review of the implementation of the Convention. In that Resolution, the Conference established a review
mechanism aimed at assisting countries to meet the objectives of the Convention through a peer review
process. A more analytical overview of the mechanism is presented separately in this paper. It should be
mentioned, however, at this point, that the experience of a voluntary pilot review programme carried out
by UNODC from 2007 to 2009 had provided the Conference with lessons learned on methods for reviewing
implementation of the Convention and several features of the pilot programme were introduced into the
terms of reference of the review mechanism.9
Emphasis was also placed by the Conference on preventive measures (Resolution 3/2), establishing a
working group to further explore good practices in this field. In this respect, the importance of building
public-private partnerships was highlighted, because businesses are now lagging behind Governments in
fighting corruption, especially after the establishment of the Review Mechanism.
Resolution 3/3 on asset recovery welcomed the recommendations of the working group on asset recovery
and the work undertaken by the Secretariat to implement those recommendations. It emphasized the
ongoing importance of international co-operation for asset recovery and urged States to take a proactive
approach when using the provisions of the Convention. The Conference renewed the mandate of the working
group on asset recovery and tasked it, inter alia, to develop best practices in asset recovery including
through the studies produced by the Stolen Asset Recovery Initiative.10
Resolution 3/4 on technical assistance welcomed the work of UNODC, in particular efforts to gather and
analyze information through the self-assessment checklist, and the recommendations of the working group
on technical assistance. The Secretariat was also, inter alia , tasked with further developing its database of
anti-corruption experts and forging partnerships with assistance providers as well as the public and private
sectors. In view of its decision to establish the review mechanism, the Conference decided to fold the
mandate of its working group on technical assistance into the work of the mechanism.11
9
See http://www.unodc.org/unodc/en/treaties/CAC/pilot-review.html.
With a view to encouraging and facilitating systematic and timely return of assets stolen through acts of corruption, under
the framework of UNCAC, UNODC established in 2007 a partnership with the World Bank Group under the joint Stolen Assets
Recovery (StAR) Initiative. The StAR initiative has been focusing on lowering the barriers to asset recovery; building national
capacity for asset recovery; and providing preparatory assistance in the recovery of assets.
11 For an overview of the Resolutions adopted by the Conference at its third session, see http://www.unodc.org/unodc/en/
treaties/CAC/CAC-COSP-session3-resolutions.html.
10
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IV. THE WORKING GROUPS ESTABLISHED BY THE CONFERENCE:
AN UPDATE ON THEIR WORK
A.Working Group on Technical Assistance
As mentioned above, in its resolution 1/5, the Conference of the States Parties to the UNCAC decided to
establish an interim open-ended intergovernmental working group to advise and assist the Conference in the
implementation of its mandate on technical assistance.
In the same resolution, the Conference also decided that the working group should perform the following
functions:
•
•
•
•
•
Review the needs for technical assistance in order to assist the Conference on the basis of the
information provided by States to the Conference;
Provide guidance on priorities, based on programmes approved by the Conference and its directives;
Consider information gathered through the self-assessment checklist approved by the Conference;
Consider information, as appropriate and readily available and in the areas covered by the
Convention, on technical assistance activities of the Secretariat and States, including successful
practices, as well as on projects and priorities of States, other entities of the United Nations system
and international organizations;
Promote the co-ordination of technical assistance in order to avoid duplication.12
Throughout its work, the working group has stressed the crucial role of technical assistance in promoting
the implementation of the Convention and reiterated that delivery of such assistance had to be based on
needs identified by the recipient State. In addition, it has reaffirmed that the delivery of technical assistance
had to be informed by the guiding principles on aid effectiveness contained in the Paris Declaration on Aid
Effectiveness. Those principles included flexibility, transparency and respect for priorities identified by
recipient States.
The working group acknowledged that the implementation of the Convention at the country level should
be a gradual and ongoing process, to be mainstreamed into the development agenda. That would allow for
technical assistance needs to be addressed on a long-term basis and in a more coordinated and effective
manner.
The working group also recognized the need to establish or strengthen mechanisms to promote the
coordination of technical assistance in support of States’ efforts to implement the Convention. While
acknowledging the value of existing mechanisms, the working group stressed that for co-ordination to be
effective, it had to be pursued at the national level and had to involve donors, partner States and UNODC. In
this connection, the group supported initiatives to further promote co-ordination among technical assistance
providers, in particular the use of a matrix to map needs identified through the self-assessment checklist, and
to facilitate the delivery of technical assistance to meet identified needs.
As the identification of technical assistance needs and priorities, and the subsequent delivery of
assistance, were seen as directly linked to the mechanism to review the implementation of the Convention,
the Conference of the States Parties to the UNCAC decided, in its resolution 3/1, that the Implementation
Review Group, the mechanism established by the Conference in accordance with article 63, paragraph 7, of
the UNCAC to assist it in the effective implementation of the Convention, should be in charge of following up
and continuing the work of the working group on technical assistance.
B. Working Group on Asset Recovery
As mentioned above, the Conference of the States Parties to the UNCAC adopted at its first session
resolution 1/4, in which it decided to establish an interim open-ended intergovernmental working group to
advise and assist the Conference in implementing its mandate on the return of proceeds of corruption.13
12
13
See http://www.unodc.org/unodc/en/treaties/CAC/working-group3.html.
155
Reaffirming that Chapter V of the Convention presented a unique framework for asset recovery, the
working group has devoted part of its discussions to challenges to the asset recovery process in practice. It
has paid particular attention to a series of practical problems and obstacles hampering assistance and efficient
co-operation in this field, including those related to divergences in legal systems. In addition, the working
group placed emphasis on ways to address the lack of capacity of prosecutors, investigators and financial
intelligence units to deal with asset recovery cases. It found that the exchange of information between
investigative and prosecutorial authorities of requesting and requested States was often hindered by a
deficit in trust between institutions at the national and international levels. Another challenge noted was the
excessive length of proceedings.
The working group has further discussed positive examples, good practices and areas for action in the
field of asset recovery. It has been stressed throughout its work that States should strive to have the most
comprehensive legal frameworks in place and take all necessary steps to enable practitioners to make
the best possible use of the legal tools in place. Moreover, particular attention was devoted to the need to
develop a common understanding of standards for procedural and evidentiary requirements in requesting and
requested States and to make use of modern information technology in evidentiary procedures and for the
fast-tracking of information processing.
The working group has further discussed technical assistance approaches to supporting asset recovery
such as capacity-building and training, gap analyses, the drafting of new laws where necessary, the facilitation
of the mutual legal assistance process, knowledge dissemination and the provision of practical tools such as
case management systems. In this vein, it was noted that urgent and concerted action was necessary to build
or strengthen trust among co-operating States and to promote informal channels of communication through,
inter alia , the establishment of a network of focal points. Those focal points would be designated officials with
technical expertise in international co-operation and be in a position to assist their counterparts in effectively
managing requests. Further, the establishment of regional networks similar to the Camden Asset Recovery
Inter-Agency Network (CARIN) was encouraged.
The working group noted with appreciation the work of the StAR initiative in developing practical guides
and practitioners’ tools and the work of UNODC in establishing a knowledge management consortium and
a legal library on anti-corruption issues. It further discussed the importance of adopting an operational,
practical and analytical approach to developing knowledge products and of ensuring broad consultations
with experts from States from all regions and representing all legal systems. Moreover, it underlined the
importance of co-ordinating efforts between existing initiatives in order to maximize the use of expertise and
resources, and forge further partnerships for asset recovery and technical assistance.
C.Working Group on Prevention
As briefly mentioned above, the Conference of the States Parties to the UNCAC decided at its third
session to establish an interim open-ended intergovernmental working group to advise and assist it in
the implementation of its mandate on the prevention of corruption. The Conference also decided that the
working group should perform the following functions:
•
•
•
•
14
Assist the Conference in developing and accumulating knowledge in the area of prevention of
corruption;
Facilitate the exchange of information and experience among States on preventive measures and
practices;
Facilitate the collection, dissemination and promotion of best practices in corruption prevention;
Assist the Conference in encouraging cooperation among all stakeholders and sectors of society in
order to prevent corruption.14
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V. THE IMPLEMENTATION REVIEW MECHANISM OF THE UNCAC:
STRUCTURE, MAIN FEATURES AND GOALS AND GUIDING PRINCIPLES
A.Legal Mandate
As briefly mentioned above, the Conference of the States Parties to the UNCAC adopted a landmark
resolution at its third session held in Doha, Qatar from 9 to 12 November 2009, to establish a Mechanism
for the Review of Implementation of the UNCAC. Resolution 3/1 sets out the Terms of Reference for the
Mechanism (annexed to the resolution), marking the achievement of negotiations which were initiated at the
first session of the Conference in 2006. With this Mechanism, States Parties have undertaken to review their
implementation of UNCAC provisions through a peer review process. Reviews will be conducted on the basis
of each State’s self-assessment, submitted through the comprehensive self-assessment checklist endorsed
by the Conference at its third session.
B. Structure and Terms of Reference: A Brief Overview
The Terms of Reference (TOR) of the Review Mechanism specify that:
•
•
•
•
•
•
•
•
•
•
The UNCAC will be reviewed by way of a peer review process – each State Party shall be reviewed
by two other States Parties, with the State Party under review being actively involved.
The selection of the State Party under review and of the reviewing States will be carried out by
drawing of lots. Each State will be reviewed by a State from its own regional group and one from
another.
Each review phase shall be composed of two review cycles of five years each and all States Parties
must undergo the review within the cycle.
The first review cycle will cover UNCAC Chapters III (criminalization and law enforcement) and
Chapter IV (international co-operation).
The second review cycle will cover Chapter II (preventive measures) and Chapter V (asset
recovery).
An initial desk review will be based on the responses to the comprehensive self-assessment
checklist. States under review shall endeavour to conduct broad consultations including all relevant
stakeholders when preparing their responses.
Active dialogue between the country under review and the reviewers is a key component of the
process.
Country visits will be conducted when agreed by the State under review, and States shall facilitate
engagement with all relevant stakeholders.
A country review report will be prepared under the ownership of the country under review. The
executive summary of this report will be an official United Nations document.
The Mechanism has an Implementation Review Group (IRG) which shall have an overview of the
review process and provide recommendations and conclusions to the Conference.
C.Goals and Objectives of the Review Process
The review of implementation of the Convention and the Mechanism are under the authority of the
Conference, in accordance with article 63 of the Convention. Consistent with the Convention, in particular
article 63, the purpose of the review process shall be to assist States Parties in their implementation of the
Convention. In this regard, the review process, inter alia , shall:
•
•
•
•
Promote the purposes of the Convention as set out in its first article;
Provide the Conference with information on the measures taken by States Parties in implementing
the Convention and the difficulties encountered by them in doing so;
Help States Parties to identify and substantiate specific needs for technical assistance and to promote
and facilitate the provision of technical assistance;
Promote and facilitate international co-operation in the prevention of and the fight against corruption,
including in the area of asset recovery;
157
•
•
Provide the Conference with information on successes, good practices and challenges of States
parties in implementing and using the Convention;
Promote and facilitate the exchange of information, practices and experiences gained in the
implementation of the Convention.
D.Guiding Principles and Characteristics of the Review Mechanism
The Mechanism is an intergovernmental process which shall:
•
•
•
•
•
•
•
•
•
•
Be transparent, efficient, non-intrusive, inclusive and impartial;
Not produce any form of ranking;
Provide opportunities to share good practices and challenges;
Assist States parties in the effective implementation of the Convention;
Take into account a balanced geographical approach;
Be non-adversarial and non-punitive and shall promote universal adherence to the Convention;
Base its work on clear, established guidelines for the compilation, production and dissemination of
information, including addressing issues of confidentiality and the submission of the outcome to the
Conference, which is the competent body to take action on such an outcome;
Identify, at the earliest stage possible, difficulties encountered by States Parties in the fulfilment
of their obligations under the Convention and good practices adopted in efforts by States parties to
implement the Convention;
Be of a technical nature and promote constructive collaboration, inter alia , in preventive measures,
asset recovery and international co-operation;
Complement existing international and regional review mechanisms in order that the Conference
may, as appropriate, co-operate with those mechanisms and avoid duplication of effort.
In conformity with Article 4 of the UNCAC, the Mechanism shall not serve as an instrument for
interfering in the domestic affairs of States Parties but shall respect the principles of equality and
sovereignty of States parties. Furthermore, the review process shall be conducted in a non-political and nonselective manner.
The Mechanism shall also promote the implementation of the Convention by States Parties, as well as
cooperation among States Parties. It shall further provide opportunities to exchange views, ideas and good
practices, thus contributing to strengthening co-operation among States parties in preventing and fighting
corruption.
The Mechanism shall take into account the levels of development of States Parties, as well as the
diversity of judicial, legal, political, economic and social systems and differences in legal traditions.
The review of implementation of the Convention is perceived as an ongoing and gradual process.
Consequently, the Mechanism shall endeavour to adopt a progressive and comprehensive approach.
E. Guidelines for Governmental Experts and the Secretariat in the conduct of Country Reviews
The Conference of the States Parties to the UNCAC also adopted in its resolution 3/1 Guidelines for
governmental experts and the secretariat in the conduct of country reviews, as well as a Blueprint for the
country review report, which were then finalized by the Implementation Review Group at its first meeting
from 28 June to 2 July 2010.15
15 CAC/COSP/IRG/2010/7,
158
Annex I and Appendix.
PARTICIPANTS’
PAPERS
PARTICIPANTS’ PAPERS
EFFECTIVE LEGAL AND PRACTICAL MEASURES FOR COMBATING
CORRUPTION
Rehman Khan*
I. INTRODUCTION
There is no doubt that the globalization of crime via internationally organized criminal syndicates has
created an enabling environment for corruption to thrive. Corruption manifests itself in various forms and
the causes of organized crime are also complex.1
According to the World Bank, corruption hinders economic efficiency, diverts resources from the
poor to the rich, increases the cost of running businesses, distorts public expenditure and deters foreign
investment.2
It has further been observed that corruption has the effect of distorting the allocation of resources by
sharply increasing the cost of goods and services; diverting scarce resources to lesser or non-priorities and
thereby seriously neglecting fundamental needs particularly basic needs such as food, health and education;
acting as a disincentive by possibly deterring prospective economic activities and investment; and lastly, of
increasing the likelihood of other crimes.3
This is even the case in democratic systems such as the one obtaining in Botswana. Although there is no
clear correlation between levels of democracy and those of corruption, democratization leads to increased
political and civil freedoms which often amounts to giving licence without responsibility to the benefit of
existing and emerging political elites.4 It is further true that the effects of corruption are particularly harmful
in developing countries in that the few available resources are not used in the most effective and equitable
way. In this way it has been observed that corruption is the cause and consequence of under-development
and poverty in general.5
In the 1960s, Botswana was listed among the world’s least developed countries due to its lack of
strong public sector institutions or qualified citizens or personnel. Today she is listed as the least corrupt
country on the African continent and is further ranked number 37 globally.6 However, this should not be
misconstrued to mean that these low levels of corruption are tolerable or that our public institutions are
very effective in combating this phenomenon. Quite a number of government activities are vulnerable to
corruption, including: public procurement, allocation of state land, revenue collection, appointment to posts
in central and local government, and local government contracts.
In 1994, the Directorate on Corruption and Economic Crime (DCEC), whose primary function and
mandate is to combat corruption, was established following general indications that corrupt practices were
on the increase, as evidenced by incidents of illegal land dealings in Mogoditshane and the first biggest
corruption case to be reported to the Directorate involving Botswana Housing Corporation.
* Assistant Director of Public Prosecutions, Directorate of Public Prosecutions, Botswana.
1 World Bank, Report on governance and development, 1992 at P116.
2 The World bank Group, Corruption; a major barrier to sound and equitable development , 7 October 1996.
3 Lala Camere, Costly crimes, commercial crime and corruption in South Africa, ISS Monograph Series No 5 September 1997.
4 B. Harriss- White and G White, Corruption, liberalization and democracy IDS Bulletin 27 (2) 1996 at page 3.
5 Frisan, Corruption and development at page 4.
6 Transparency International, Corruption Perception Index, accessed on 2 August 2010 .
159
It is apposite to mention that apart from the Botswana Police Service, which has powers to investigate
acts of corruption as proscribed under the Penal Code,7 the DCEC is the only public institution in the
country whose primary function and mandate is to combat corruption. The Directorate was created in terms
of Section 3 of the Corruption and Economic Crime Act.8 Since its establishment, the DCEC has pursued its
mandate through a three-pronged strategy based on investigation, prevention and public education.
II. FUNCTIONS OF THE DIRECTORATE
The functions of the Directorate as listed under Section 6 of the Act are as follows:
(a) To receive and investigate any complaints alleging corruption in any public body;
(b) To investigate any alleged or suspected offences under this Act, or any other offence discovered
during such an investigation;
(c) To investigate any alleged or suspected contravention of any of the provisions of the fiscal and
revenue laws of the country;
(d) To investigate any conduct of any person, which in the opinion of the Director, may be connected
with or conducive to corruption;
(e) To assist any law enforcement agency of the government in the investigation of offences involving
dishonesty or cheating of the public revenue;
(f) To examine the practices and procedures of public bodies in order to facilitate the discovery of
corrupt practices and to secure the revision of methods of work or procedures which, in the opinion
of the Director, may be conducive to corrupt practices;
(g) To instruct, advise and assist any person, on the latter’s request, on ways in which corrupt practices
may be eliminated by such person;
(h) To advise heads of public bodies of changes in practices or procedures compatible with the effective
discharge of the duties of such public bodies which the Director thinks necessary to reduce the
likelihood of the occurrence of corrupt practices;
(i) To educate the public against the evils of corruption; and
(j) To enlist and foster public support in combating corruption.
It can be observed that the Section confers a variety of functions on the Directorate, some of which are
reactive and others proactive. The proactive functions listed in paragraphs (d), (i) and (j) have the potential
to bring about the greatest rewards despite being too demanding at times.
III. DEFINITION OF CORRUPTION UNDER THE ACT (CECA)
At the outset it is important to point out that the word ‘corruption’ has its origins in the Latin word
‘corruptus’ which means ‘to break’. It actually emphasizes the destructive tendency of corruption on the
moral fabric of society and the confidence entrusted to those holding public and private office.9 The Oxford
English Dictionary defines corruption as “the perversion or destruction of integrity in the discharge of the
public duties by bribery or favour; the use or existence of corruption practices especially in a state, public
corporation etc.”
The United Nations Convention against Corruption (UNCAC) does not define corruption but
acknowledges its link with other forms of crime, especially organized crime and economic crime as well as
money laundering.10 On the other hand, the Southern African Development Community Protocol against
Corruption11 defines it as any act referred to in Article 3 thereof and includes bribery or any acts performed
by persons entrusted with responsibilities in order to obtain undue advantage for themselves or others.
7
Sections 99-110.
Act 13 of 1994.
9 Collin Nicholas QC, Tim Daniel, Martin Polaine and John Hatchard (eds) Corruption and misuse of public office (2006) Oxford
University Press at page 1.
10 See Preamble to the Convention.
11 It was signed on 14 August 2001 in Malawi by all heads of state and Government of the SADC community.
8
160
The Corruption and Economic Crime Act (CECA) of 1994 does not define corruption but creates several
offences of corruption committed in both the public sector and private sector.12 The basic elements that run
through almost all of these offences is the receiving and offering of valuable consideration. The receiver
commits corruption if he or she accepts directly or indirectly, or agrees or offers to permit his or her conduct
as a public officer to be influenced by any valuable consideration to be received by him or her, or by any
other person or from any person. The giver also commits a similar offence if the valuable consideration or
promise thereof is given with the same intention as above.
It matters not whether the gratification is received for personal gain or that of someone else. The Act
makes reference to valuable consideration which in terms of Section 23 thereof, is wide enough to cover
any conceivable thing of value that can be given to a person as an inducement to act in a certain way. The
definition extends to:
(a) Any gift, benefit, loan, fee, reward or commission consisting of money or of any valuable security or
of other property or interest in the property of any description;
(b) Any office, employment or contract;
(c) Any payment, release, discharge or liquidation of any loan, obligation or other liability, whether in
whole or in part;
(d) Any other service or favour, including protection from any penalty or disability incurred or
apprehended or from any action or proceedings of a disciplinary, civil or criminal nature, whether or
not already instituted;
(e) The exercise or forbearance from the exercise of any right or any power or duty; and
(f) Any offer, undertaking or promise, whether conditional or unconditional, of any valuable
consideration within the meaning of the provisions of the preceding paragraphs.
IV. OFFENCES OF CORRUPTION UNDER THE ACT (CECA)
Part IV of the Corruption and Economic Crime Act has five sections that deal with corruption of public
officers as follows:
•
•
•
•
•
Section 24 - Corruption by a public officer;
Section 25 - Corruption in respect of an official transaction;
Section 26 - Acceptance of a bribe by a public officer after doing the act;
Section 27 - Promise of a bribe to a public officer after doing the act;
Section 29 - Bribery for giving assistance in regard to contracts.
Four sections deal with corruption in relation to procurement, tendering and contracting namely:
•
•
•
•
Section 28 - Corrupt transactions by or with agents;
Section 30 - Bribery for procuring withdrawal of tender;
Section 32 - Bribery in relation to auctions conducted by or on behalf of any public body.
A ‘public body’ is defined under Section 2 of the Act as “any office, organisation, and establishment
or body created by or under any enactment; and includes any company in which 51 per cent or more
of the equity shares are owned by the Government of Botswana.”
The other offences created by the Act are “cheating of public revenue” contrary to Section 33 and
“possession of unexplained property” contrary to Section 34. With regard to the last offence, it is an offence
for one to maintain a standard of living beyond one’s available legal resources. Any property or pecuniary
resources held in trust for or on behalf of an accused person, or given by the accused as a loan or gift without
adequate consideration, shall be deemed to have been under the control or in the possession of the accused
until the contrary is proved.
12
Part IV of the Act, Sections 24 - 33.
161
The act does not seek to penalize the giving or acceptance of valuable consideration as a reward or
compensation for something already done in the past, as a result of which, some acts of corruption may go
unpunished.
V. CORRUPTION OFFENCES IN THE PENAL CODE (CAP 08:01) LAWS OF BOTSWANA
The Penal Code creates various offences under the heading “Corruption and the Abuse of Office” as
follows:
•
•
•
•
•
•
•
•
Section 99 - Official Corruption;
Section 100- Extortion by public officers;
Section 101- Public officers receiving property to show favour;
Section 102- Officers charged with administration of property of a special character or with special
duties;13
Section 103- False claims by officials;
Section 104- Abuse of office;
Section 384- Corrupt practices by and of agents; and
Section 385- Secret commission on government contracts.
Other offences in the Penal Code include, “stealing by persons employed in the Public Service” (Section
276), ”stealing by clerks and servants” (Section 277), “stealing by Directors or officers of companies”
(Section 278), and “stealing by agents,” etc. (Section 279). Perjury and subordination of perjury are
proscribed by Section 111, conspiracy to defeat justice and interfere with witnesses is proscribed by Section
120 and various offences relating to judicial proceedings are proscribed by Section 123.
VI. CUSTOMS AND EXERCISE DUTY ACT (CAP 50:01) LAWS OF BOTSWANA
Section 90 (1) (j) and (k) make it a serious offence for any person to give or promise to give, directly or
indirectly, any reward to an officer or person employed by the government in respect of the performance
of duties under the Act. An officer who demands or receives such reward in the circumstances described
above is also guilty of an offence. Upon conviction such person shall be liable to a fine not exceeding P20,000
or treble the value of the goods in respect of which the offence was committed, whichever is greater, or to
imprisonment for a period not in excess of five years or to both.
In terms of Section 97 (A) the Director of Customs and Exercise may from time to time publish in the
Government Gazette a list of names and addresses of persons who have been convicted of offences in terms
of Sections 86 to 97 of the Act and the particulars of the fines or sentences imposed.
VII. CORRUPTION STATISTICS FOR 2007, 2008 AND 2009
Year
Total Reports
2006
2007
2008
2009
1778
1460
1851
1992
Report Investigated
by the DCEC
617
487
613
669
Analysis of data published by the DCEC over the past four years reveals that most of the cases of
corruption and fraud reported and prosecuted before the courts were perpetrated by very junior officers in
central and local government such as accounts clerks, vehicle examiners, vehicle licensing officers, labour
and immigration officers and low-ranking officers of the Police Service and Army.
13
It criminalizes the discharge of duties by persons employed in the public sector who are charged with judicial or
administrative duties respecting property of special character or respecting the manufacture, trade or business of a special
character whilst having, directly or indirectly, a private interest in the property, manufacture, trade or business referred to.
162
It may well be that this low-level corruption occurs as result of delegating authority to relatively junior
and poorly paid public officials to control the collection of government revenue, issuance of licences, permits
and other official documents. Lack of adequate supervisory and auditing mechanisms or absence of periodic
inspections could be other contributing factors.
Other interesting cases worth mentioning which were investigated by the Directorate include fraud
perpetrated by junior officials of the Government Central Medical Stores and certain individuals. The
government lost P21 million in payment of pharmaceutical drugs that were never delivered. The case is still
pending before court and the accused persons have been charged with several counts of obtaining by false
pretences contrary to Section 308 of the Penal Code.
Another case involves a corporate body registered under the company laws of Botswana under the name
and style “Daisy Loo (Pty) Ltd.” The company, through its managing director, conspired with some senior
technical officers of Gaborone City Council to defraud the latter of the sum of P24 million for providing bush
clearance, tree trimming and grass cutting services under some dubious contracts. The cheque that was
issued as payment by the City Council was subsequently seized by the Directorate of Public Prosecutions
as an exhibit for the ongoing trial. The accused are facing charges of conspiracy to defraud14 and giving
false information to a person employed in the public service15 in addition to a charge of obtaining by false
pretences.
Another interesting case is one involving a company called “Tourism Consortium (Pty) Ltd” and its
managing directors, one of whom committed suicide whilst proceedings were still pending before court,
and was a former boss of Botswana’s Debswana Mining Company. The case for the state is that the said
accused persons and others made false presentations to the former President of the Republic of Botswana
and Cabinet Ministers to the effect that Tourism Development Consortium (Pty) Ltd was a vehicle through
which Debswana (a company partly owned by Botswana) intended to contribute to the diversification of
Botswana’s economy, as a result of which the government allocated it a very big piece of land in Gaborone
when in actual fact such company was not in existence at that time.
The case is also still pending before court on charges ranging from giving false information to a person
employed in the public service, forgery, obtaining registration of a title deed by false pretences, conspiracy
to defraud, conspiracy to prevent lawful disposal of property for its lawful value, receiving unlawfully
obtained property, stealing by servant and cheating of public revenue.16
A more recent case that has raised eye brows with regard to Government tendering procedures is one
involving a company called “RFT Botswana (Pty) Ltd” which tendered for the supply to Botswana Police
Service of aviation ground support equipment. One of the directors of this company is the current Minister
of Defence, Justice and Security who holds various portfolios under his supervision, one of which is the
Botswana Police Service.
It is alleged that the minister is guilty of corruption in violation of the provisions of Section 31(1) of the
Corruption and Economic Crime Act by failing to declare his interest in the tendering as aforesaid, in his
capacity as director and shareholder of the said company that won a Government tender worth millions of
pula.17 The minister pleaded not guilty to the charge and has also resigned from his cabinet post.
VIII. CURRENT SITUATION OF PROBLEMS AND CHALLENGES IN
THE INVESTIGATION, PROSECUTION, CONFISCATION AND RECOVERY OF ASSETS
A.Challenges in Investigation of Cases
Reports obtained from the Directorate on Corruption and Economic Crime indicate that, on a yearly
14
Contrary to Section 312 as read with 24 of the Penal Code.
Contrary to Section 131 of the Penal Code.
These offences are contrary to the provisions of Sections 131(a), 344 as read with 339, 314 as read with 24, 312 as read with
24, 393(c), 317 as read with 24, 271 as read with 277 of the Penal Code, respectively, as well as Section 33 of the CECA.
17 See Article 9(e) of UNCAC that, inter alia, calls for appropriate measures to be taken to deal with declaration of interest, in
particular, public procurements.
15
16
163
basis, over 600 cases are classified for investigation and the proportion of such cases far exceeds the
number of officers available to investigate them. This situation is brought about by the high attrition rate of
experienced officers in search of better paying jobs. This results in low case completion rates.
Furthermore, the proportion of cases where the reporters prefer to remain anonymous has steadily
increased over the years and currently stands at 21.69%.18 This is a great challenge for the Directorate
in that it is very difficult to follow up this type of report and thus lose out on vital information that could
advance the course against corruption. Factors that might be responsible for this unfortunate state of
affairs could include the lack of a clear protection plan for whistleblowers and this might expose them to
victimization and, in some cases, loss of employment.
Some cases of corruption and abuse of the office19 are investigated by the police, who often lack
the necessary training and resources, resulting in compromised investigations. Legal and institutional
constraints within which the DCEC operates might in certain circumstances hinder its effectiveness. In
terms of Section 15 (2) of the CECA, the Directorate is prohibited from accessing any documents and
information which the President deems to be likely to prejudice national security.
The Act further gives officers of the Directorate the power to arrest without warrant any person
suspected of having committed an offence under the Act20 but without making provision for post-arrest
detention. As a result such persons have to be taken before the police to be dealt with in accordance with the
provisions of the Criminal Procedure and Evidence Act. This means that accused persons have to be warned
and cautioned for offences by officers who have not taken part in the investigations.
In terms of Section 16 of the Act the Director is required to apply to a magistrate for permission to seize
travel documents of anyone suspected of having committed an act of corruption. This can lead to suspects
skipping the country once allegations or investigations of corruption come to the fore.
Furthermore, there is no provision in the Act that empowers the DCEC to tap telephones in order to
obtain evidence or further investigations as is the case in other jurisdictions with similar legislation.21
B. Prosecution of Cases
No prosecution of an offence committed under Part IV of the Corruption Act can be instituted without
the written consent of the Director of Public Prosecutions22 who is the dominis litis in so far as prosecution
of criminal matters at the public instance is concerned.23 Such powers have been delegated to officers of the
DCEC in terms of Section 8 of the Criminal procedure and Evidence Act. Currently there is only one officer
handling prosecution as and when requested by the office of the DPP to assist due to manpower constraints.
Just like DCEC, the office of the DPP is also faced with massive resignations of experienced prosecutors.
This in turn results in cases taking too long to be completed and consequently loss of public confidence in
the prosecuting authority.
Lack of specialization does not only affect the magistracy but extends to the DPP’s office as well. The
absence of specialized training to deal with corruption related issues has a negative impact on capacity
building for prosecutors. In the end the quality of prosecution is compromised.
C.Freezing and Confiscation of Proceeds of Crime
The Act empowers the Director of Public Prosecutions to apply for a restraining order whenever a person
investigated for an act of corruption has been charged or is about to be charged for an offence. However,
such application has to be made under Section 8 of the Proceeds of Serious Crime Act. In this connection,
identification of property representing the proceeds of crime still remains a daunting task for investigators
18
DCEC Case Statistics, Source Type Status Report compiled on 2 August 2010.
This is with regard to offences under the Penal Code.
Section 10 of CECA.
Article 50 of UNCAC encourages States Parties to use appropriate special investigative techniques in order to effectively
combat corruption.
22 Section 39 of CECA.
23 Section 7 of the Criminal Procedure and Evidence Act (Cap 08:02) Laws of Botswana.
19
20
21
164
and prosecutors alike. Failure to establish a connection or link between the alleged unlawful activity and
the property concerned results in criminals getting away with proceeds of crime that they eventually use to
commit more crimes.
It is also very difficult to prove that property is an instrumentality of an offence without sufficient evidence
to show that it was used as a means or instrument in the commission of the offence, or that it was otherwise
involved in the commission of the offence.24
As far as confiscation orders are concerned, they can only be applied for by the Director of Public
Prosecutions after conviction for acts of corruption or cheating of the public revenue under the Act. The
application also has to be in terms of the provisions of the Proceeds of Serious Crime Act.25 This means that
criminals can get away with instrumentalities and proceeds of crime in the event they are acquitted. In this
way our legal regime is not strong enough to ensure that criminals are completely stripped off the benefits of
crime.
D.International and Regional Co-operation
The Mutual Assistance in Criminal Matters Act26 enables Botswana to get assistance with regard to
the provision and obtaining of international assistance in criminal matters. There is also the Extradition
Act,27 which allows for extradition to Botswana of persons accused of committing crimes in the country but
present in the jurisdiction of other countries to which the Act applies.
The absence of an extradition treaty with a requested state often makes it difficult to get the required
assistance. Even where these instruments are in place, various legal requirements and restrictions,
jurisdictional problems and differences in criminal law and procedure often pose serious barriers to
co-operation and mutual legal assistance.
Resort to informal requests which are less cumbersome and capable of yielding quick results may not
always pass constitutional muster.
IX. CONCLUSION
Botswana is one of the countries on the African continent that is replete with laws, policies and
regulations aimed at combating corruption. However, much still needs to be done to make these laws
more effective in addressing modern trends of crime and conform to international best practice. For
example, there is no law that addresses bribery of foreign public officials and officials of public international
organizations, as recommended under UNCAC.
The absence of whistleblower and witness protection legislation makes it very difficult to get the full
participation and co-operation of all stake holders, particularly the public.28
Botswana’s failure or reluctance to ratify the United Nations Convention against Corruption further
makes it practically impossible to get international assistance from other countries since most of the
instruments ratified so far are not of universal application like the UN Convention.
Lack of political will on the part of politicians to declare their investments, assets and substantial gifts
or benefits is another area of great concern and this creates a lot of suspicion of corruption. This does not
accord well with Article 9(e) of the Convention.
24
See Article 31 of UNCAC which deals with freezing, seizure and confiscation of proceeds of crime, property, equipment or
other instrumentalities used or to be used in the commission of crime.
25 Section 3 of the Act.
26 Act 20 of 1990 Cap 08:04, Laws of Botswana.
27 Act 18 of 1990 Cap 09:03, Laws of Botswana.
28 See Articles 33 and 32, respectively, of UNCAC.
165
EFFECTIVE LEGAL AND PRACTICAL MEASURES FOR COMBATING
CORRUPTION
Pinthip Leelakriangsak Srisanit*
I. INTRODUCTION
Corruption, a parasite on society, has existed in Thailand for a long time. Corruption is not restricted to
a particular country or a region, but it appears to be a global problem, and causes particularly huge damage
to developing countries, such as Thailand, especially in terms of bribery and fraud in public procurement.
All over the world, countries try to find effective measures to deal with corruption, including legislative and
social measures.
Corruption occurs in both the public and private sectors. This paper will nevertheless focus on
corruption in the public sector. Although corruption does not have a specific definition, it can be generally
defined as ‘abuse of public authority or power for a private gain’. This reflects a conception that corruption
occurs when an official exercises the power or authority of his or her office or position for personal interest.
‘Corruption’ is not limited only to monetary gain; it may rather take other forms of benefit, such as discounts
when buying goods or services, or receiving stocks or shares in a company without the name of the holder
being specified, etc.
The Corruption Perceptions Index (CPI) measures the perceived level of public sector corruption
in 180 countries around the world. A higher CPI means a lower level of corruption or a cleaner public
administration; for example, a country with CPI of nine is cleaner than the one with a rating of five. The
higher CPI of the developed countries indicates a situation of more transparency than countries with lower
ratings.1 If we focus on Asian countries, the index shows that the CPI of developed countries, like Japan
and Singapore, are higher than those of developing countries or under-developed countries. In the selected
CPI scores below, Thailand and India were at same rating of 3.4; Indonesia was rated 2.8; Cambodia 2;
and Myanmar 1.4. This means that in Thailand corruption seems to be less of a problem in comparison to
Indonesia, Cambodia and Myanmar.
Myanmar (Burma) 1.4
Cambodia 2
Philippines 2.4
Indonesia 2.8
Thailand 3.4
India 3.4
China 3.6
Malaysia 4.5
Rep. of Korea 5.5
United States 7.5
Japan 7.7
Singapore 9.2
0
2.5
3.4
5
Source: Corruption Perceptions Index (CPI) 2009
*Public Prosecutor, International Affairs Department of the Office of the Attorney General.
1 http://www.transparency.org/policy_research/surveys_indices/cpi/2009
166
7.5
10
The current situation of corruption in Thailand is divided into two scales: grand corruption and petty
corruption. Grand corruption is generally committed by high level public officers who gain more benefits
from abuse of their authorities. For example, a minister or a chief of a public organization can abuse his or
her authority for private gain by committing corruption in public procurement. This is categorized as grand
corruption because he or she gains a lot of money from doing so and it causes huge damage to society. On
the other hand, petty corruption normally consists of routine practices committed by lower ranking public
officers who gain not much benefit. When a traffic police officer abuses his or her authority by demanding
money from a car driver who violated a traffic regulation in return for not issuing a traffic ticket, it is
classified as petty corruption. Although just one instance of petty corruption does not cause gross social
harm, all such petty acts together destroy the government’s credit vis-à-vis the citizenry and eventually
result in huge damage to society as well.
II. LEGAL ASPECT
Thai legislators have enacted various laws and regulations to prevent and combat corruption. They are
divided into two categories in connection with their nature: substantive law and procedural law.
A. Substantive Law
Regarding substantive law, there are two major types of laws in Thailand punishing acts of corruption: the
Thai Penal Code and the Organic Act on Counter Corruption B.E. 2542 (1999).
The provisions of the Penal Code incriminating acts of corruption are contained in Articles 147 to 157
and those that aggravate the punishment for specific officers are stipulated in Articles 200 to 202. Article
147 punishes officers who commit embezzlement in their duties with imprisonment from five to 20 years
or imprisonment for life and fine of 2,000 to 40,000 Baht.2 Besides, Articles 148 to 150 punish officers
conducting various types of bribery with imprisonment from five to 20 years or imprisonment for life or
the death penalty. Article 151 incriminates wrongful exercise of an officer’s function damaging the State
with a maximum imprisonment for life; meanwhile, Article 152 punishes officers who have a conflict of
interest in their duties with a maximum imprisonment of 10 years. In addition, Articles 153 to 156 impose
criminal sanctions, up to imprisonment for life, on corrupted of officers whose duties concern accountancy
functions. A general offence is prescribed in Article 157 as misconduct in office punished with a maximum
imprisonment of 10 years. Moreover, aggravating circumstances are contained in Articles 200 to 202, which
aim to increase punishment for corruption committed by officers whose duties are concerned with criminal
justice such as the police, public prosecutors or judges.
In addition to imprisonment and fine, when officers obtain money from corruption, these benefits shall
be considered properties which shall be forfeited at the Court’s judgment, according to Article 34 (1) of the
Thai Penal Code. The forfeiture of properties has a deterring effect from committing corruption.
The Organic Act on Counter Corruption BE. 2542 (1999) establishes an independent organization called
the National Anti-Corruption Commission (NACC). The function of NACC will be explained in the section
on competent authorities below. Apart from the Thai Penal Code, the Organic Act on Counter Corruption
incriminates certain acts of corruption. For example, the conflict of interest prescribed in Article 100 shall be
punished with imprisonment not exceeding three years and fine not exceeding 60,000 Baht or both. Bribery
incriminated in Article 103 shall have the same punishment as conflict of interest.
B. Procedural Law
In the sphere of procedural law, Thailand has five major laws dealing with the procedure of corruption
cases: the Thai Criminal Procedure Code; the Organic Act on Counter Corruption B.E. 2542 (1999); the
Anti-Money Laundering Act B.E. 2542 (1999); the Act of Mutual Legal Assistance in Criminal Matters B.E.
2535 (1992;) and the Extradition Act B.E. 2551 (2008)
The Criminal Procedure Code is the principal Code applied to every criminal case, including cases of
corruption. Whenever specific Acts do not mention certain proceedings, these acts normally refer to the
Criminal Procedure Code in order to apply general principles to such proceedings.
2
As of the end of July 2010, the exchange rate is about 32 baht for 1 US dollar.
167
The Organic Act on Counter Corruption B.E. 2542 (1999) not only establishes the National AntiCorruption Commission (NACC) but it also imposes powers of initial investigation of corruption in Thailand.
In connection with the Anti-Money Laundering Act B.E. 2542 (1999), it is an additional measure
combating corruption. Corruption is one of the predicate offences for the purpose of forfeiture of assets
obtaining from corruption. This act establishes the Anti-money Laundering Office (AMLO), with the
authority to temporarily restrain, seize or freeze assets involved in corruption. This measure is categorized
as a civil forfeiture system; it does not require a conviction from a criminal court.
The Act of Mutual Legal Assistance in Criminal Matters B.E. 2535 (1992), being in line with the
UN Model Law on Mutual Legal Assistance in Criminal Matters and international standards, provides
a basic framowork for international co-operation in the process of criminal litigation from the beginning
of investigation to the end of trial. Many types of assistance can be provided, such as locating persons,
searching and seizing objects or documents as evidence, taking statements of witnesses and confiscating of
assets.
Under the Extradition Act B.E. 2551 (2008), Thailand can extradite a person to a requesting country,
and also make a request to foreign countries to extradite a fugitive to Thailand. At present, we now have
bilateral treaties with 13 countries regarding mutual legal assistance and 14 countries in relation to
extradition. However, the rule of reciprocity is applied where there is no treaty between the requesting
and the requested country for the widest possible co-operation. In addition, Thailand also signed a Mutual
Legal Assistance Treaty with ASEAN countries in 2006. The process is now pending upon the reviewing and
amending of the domestic legislation.
Finally, Thailand has many other legal methods of dealing with corruption. Corresponding to international
standards, in December 2003, Thailand signed the United Nations Convention against Corruption (UNCAC),
but we have not yet ratified it. The completion of domestic legislative modifications would enable Thailand
to ratify this convention in the near future. Currently, there are still four main points of incompatibility
with the UNCAC: asset recovery (implementation of a value-based confiscation); mutual legal assistance in
criminal matters; definition of ‘foreign officer’ (current Thai law incriminates only corruption by or to Thai
officers); and the statute of limitations.
III. COMPETENT AUTHORITIES CONCERNED
Many government authorities are set up for monitoring, preventing and efficiently suppressing
corruption cases, including the National Anti-Corruption Commission (NACC); the Office of Public Sector
Anti-Corruption Commission (PACC); the Office of the Attorney General (OAG); the Ombudsman; the
Office of the Auditor General; the Royal Thai Police; the Anti-Money Laundering Office (AMLO); the
Department of Special Investigation (DSI); and the Supreme Court’s Criminal Division for Persons Holding
Political Positions. These organizations have the mutual objectives of ensuring transparency, fairness,
accountability and guaranteeing civil rights. This paper will however focus on some of these agencies’ roles
and functions.
A. National Anti-Corruption Commission (NACC)
To strengthen anti-corruption efforts, the 1997 Constitution and the Organic Act on Counter Corruption
B.E. 2542 (1999) added to the the checks and balances of State by establishing the National Counter
Corruption Commission (NCCC) as an independent agent. The NCCC has a number of duties and
responsibilities both in prevention and suppression. This commission is responsible for inquiring into all
kinds of corruption offences committed by all levels of government officials. As a consequence, the NCCC
has encountered a caseload problem. The best way to solve this problem is to limit the NCCC’s exercise
of its power only to corruption cases conducted by politician and high-ranking government officials. So, the
2007 Constitution changed the official title of NCCC to the National Anti-Corruption Commission (NACC)
and it has been vested with only three functions: (1) declaration and inspection of assets and liabilities; (2)
prevention of corruption; and (3) suppression of corruption.
The NACC is responsible for corruption cases against persons holding political positions, i.e. the
Prime Minister, Ministers, Members of the Senate, Members of the House of Representatives, and high-
168
ranking government officers who are accused of being unusually wealthy, committing an offence of abuse
of power and authority according to the Penal Code, or committing an offence of dishonesty in office or
corruption according to other laws. The role of the NACC is to complete an initial investigation of corruption
cases. After completion of inquiry files, the NACC will forward the investigation file with adequate legal
background to the government agency for which the accused works to start disciplinary action, if there
is a well founded basis. Otherwise, if the NACC finds grounds to believe that a criminal offence has been
committed, it would refer the inquiry file to Office of the Attorney General for further criminal prosecution.
B. Office of Public Sector Anti-Corruption Commission (PACC)
Due to the overloaded casework of the NCCC, the 2007 Constitution established the NACC and Office
of Public Sector Anti-Corruption Commission (PACC) to deal with corruption cases. The PACC is the
newest investigation authority under the Ministry of Justice.3 This office is responsible for corruption cases
conducted by lower-ranking government officials. After completion of inquiry files, the case shall be referred
to the agency concerned in the same way as the proceedings for the NACC, as mentioned above. However,
the PACC has not yet exercised its full functions, pending the drafting of regulations; meanwhile, the NACC
temporarily handles its cases.
C. Office of the Attorney General (OAG)
According to the current Constitution, the Office of the Attorney General (OAG) is an independent
organization. The OAG is authorized to suppress corruption in both the private and public sectors.
Therefore, the Office of Attorney General plays an important role in deciding whether to prosecute all of the
corruption cases in Thailand.
After conclusion of inquiry files by the NACC, if a corruption offence is found, the case shall be submitted
to the Attorney General for criminal prosecution. Then, if there is sufficient evidence for a prosecution’s
charge of corruption, the Attorney General shall prosecute the accused in the Supreme Court’s Criminal
Division for Persons Holding Political Positions (in cases where the accused is politician) or in other
competent courts (in cases where the accused is a State official). On the other hand, in case of insufficient
evidence, the OAG and the NACC shall set up a joint working committee to collect further evidence
necessary for the Attorney General. After receiving such further evidence, the Attorney General will make
a prosecution order. However, if the joint working committee fails to reach that point, the NACC by itself has
the power to proceed the case to the competent court or ask a private lawyer to do so.4
In addition, the Attorney General is acting as the central authority in international co-operation in
criminal matters: mutual legal assistance and extradition, as mentioned in section II above.
D. Supreme Court’s Criminal Division for Persons Holding Political Positions
There are five specialized courts in Thailand: the Labor Court, the Tax Court, the Central Intellectual
Property and International Trade Court, the Bankruptcy Court and the Juvenile and Family Court. At
present, there is no permanent specialized court for corruption cases. However, the Supreme Court’s
Criminal Division for Persons Holding Political Positions was established in 1999 by the 1997 Constitution
and Article 8 of the Organic Act on Criminal Procedure for Persons Holding Political Positions B.E. 2542
(1999) for fair and speedy trial of corruption offences committed by politicians.5
This specialized division of the Supreme Court has the power and duty to try and adjudicate cases against
persons holding political positions who have been accused of becoming unusually wealthy, committing
an offence of malfeasance in office according to Penal Code, committing an offence of dishonesty in office
or corruption according to other laws. The quorum of this court consists of nine Judges of the Supreme
Court who are selected by a plenary session of the Supreme Court on a case by case basis. The trial in this
specialized division court is founded upon the inquisitorial system.6 The orders and decisions will be final
and disclosed. Nonetheless, decisions can be appealed to a plenary session of the Supreme Court only if
there is fresh evidence in the case.7
3
http://www.pacc.go.th/index.php?mod=about_profile
The Organic Act on Counter Corruption 1999, Section 97.
5 http://www.supremecourt.or.th/webportal/maincode/index.php?lang=en&base=24
6 Ibid .
7 Constitution of the Kingdom of Thailand 2007, Article 278.
4
169
Statistics indicate that few cases have been submitted to and disposed by this specialized division of the
Supreme Court: one case in 2001, two cases in 2002, one case in 2003, one case in 2004, two cases in 2007,
20 cases in 2008 and nine cases in 2009.8
IV. PERSPECTIVE IN COMBATING CORRUPTION
As I have already mentioned in Section II above, the magnitude of punishment of corruption offences,
according to the Thai Penal Code and others, is currently at the highest level, i.e. the death penalty and life
imprisonment. Nevertheless, it seems that the number of corruption cases in Thailand has not declined.
In order to solve this problem, two alternative solutions are proposed for further consideration. Firstly,
we increase the magnitude of punishment to deter the government officer from committing corruption.
Secondly, we increase the probability of prosecution of corruptors for the same reason. Both of these
solutions could discourage the corruptors but the further question is which one is suitable for Thailand?
Regarding Becker’s Economic model of crime,9 he offers that we should raise the offender’s costs
and limit the offender’s benefits in order to reduce the offender’s incentive for engaging a criminal act.
Becker’s model is relevant to a cost-benefit analysis which is generally accepted by current leading
economists. He further suggests that the offender’s costs consist of the combination of the magnitude of
punishment and the probability of punishment. If we raise the magnitude of punishment, such as increasing
periods of imprisonment, the offender’s cost would consequently be raised. It would be the same if we
raise the probability of punishment by strengthening police units or using modern technology in criminal
investigation. In accordance with the Becker recommendation, increasing the magnitude of punishment
would have less effect on government budgets. On the other hand, the government needs to spend more
to invest in the law enforcement sector to increase the probability of punishment, including investigators,
public prosecutors and criminal courts. Therefore, Becker prefers increasing the magnitude of punishment
because it is more economical, compared to the other solution.
In my opinion, to combat corruption in Thailand, I believe that increasing the probability of punishment is
more suitable in Thailand for the following three reasons.
Firstly, according to Article 149 of Thailand’s Penal Code, we have already increased, since 1959, the
magnitude of punishment to the highest level (death penalty) for those who are found guilty of bribery
(although the amount of fine is still out of date and of a low rate). However, it is obvious that such measures
did not effectively eradicate corruption in Thailand. Therefore, prosecution of corruptors should be
augmented to reduce corruption.
Secondly, corruption is categorized as a ‘victimless crime’ from which only the State suffers.
Consequently, nobody files a complaint to the police when it is committed. Offenders are not intimidated by
the threat of capital punishment because they are certain that their wrongs have not been noticed by others.
However, Thai law has already introduced some measures to facilitate reporting of corruption by citizens by
issuing complaints to the NACC or PACC to begin the investigation process, as I mentioned above.
Finally, in the aspect of evidence, corruption leaves few traces for detectives to investigate. This has
a dilutive effect on investigation and punishment. Therefore, the severity of capital punishment would be
diluted in the eyes of corruptors because of a lack of evidence.
For these three reasons, I propose a reinforcement of all law enforcement units to be the best solution
for combating corruption in Thailand. Although the government must invest a large budget in every law
enforcement unit; enlarging or adding to the organization, using modern investigating methods as well
as effective international co-operation, the outcome of such investment would be more profitable for the
country. Since corruption poses a serious harm to society, a high investment in combating corruption would
absolutely not be wasteful.
8
http://www.supremecourt.or.th/webportal/maincode/index.php?lang=en&base=24
Gary S. Becker, “Crime and Punishment: An Economic Approach”, in Essays in the Economics of Crime and Punishment,
1974 at www.nber.org/chapters/c3625.pdf
9
170
V. CONCLUSION
Corruption is considered a widespread problem in many nations. It is a serious transnational
phenomenon which significantly hinders economic and social development. In addition to the various
sanctions of law enforcement agencies to combat corruption, social networks or solidarity of the people
can effectively strengthen anti-corruption measures by giving the information to the justice authorities.
Finally, education can be a sustainable anti-corruption measure in which the government should invest. An
academic curriculum should inculcate the moral values of the citizenry as well as anti-corruption measures
for children who will become the government officers of the future.
171
ANTI-CORRUPTION IN VIETNAM
Do Thi Phuong*
I. INTRODUCTION
Corruption is a global challenge, a very serious matter for many countries, including Vietnam. Vietnam
has to face the serious effects of corruption, specifically: great damage to property of the State, community
and citizens; obstacles in the development process; effects on ethical standards; negative influence on
civil servants; and a decrease in the people’s trust in the State. In the face of these challenges, the State of
Vietnam has taken specific actions, and expresses the determination to struggle against this type of crime.
On 10 December 2003, by the order of the Prime Minister, the General Inspector of the State of Vietnam
signed the United Nations Convention Against Corruption (UNCAC), affirming with the international
community that Vietnam is willing to co-operate with related countries within the framework of the
Convention and bilateral treaties. On 30 June 2009, the President of Vietnam signed a document approving
the UNCAC and it became effective from 18 September 2009.
In its anti-corruption efforts, Vietnam has implemented many measures including policies, administrative
measures and criminal settlement measures. This paper addresses only the regulations of Vietnamese
criminal law against corruption and the reality of the judgments of these cases in Vietnamese courts.
II. CONCEPT OF CORRUPTION AND CORRUPT ACTS UNDER VIETNAMESE LAW
According to Article 1(2) of the Anti–Corruption Law: 1 “‘Corruption’ means acts committed by persons
with positions and/or powers which abuse such positions and/or powers for self-seeking interests.”
A.Corrupt Acts
1. Corruption: Acts committed by Persons with Positions and/or Powers
“Persons with positions and/or powers” shall include: 2
(i) Public servants;
(ii) Officers, professional army men, defence workers in agencies or units of the People's Army; officers,
non-commissioned officers, professional-technical officers, non-commissioned officers in agencies or
units of the People's Police;
(iii) Leading, managerial officials in state enterprises; leading, managerial officials being representatives
of the State's contributed capital portions at enterprises;
(iiii)Persons assigned tasks or official duties who have powers while performing such tasks or official
duties.
2. Making Corrupt use of Job Title or Rights to Commit a Crime.
Government Decree No 64/1998/ND-CP, dated 17 August 1998, detailing and guiding the implementation
of the Ordinance Against Corruption:3 “Taking advantage of one’s position and power is an act committed
by a position and power holder who uses his/her working position, working relations, his/her agency or
organization's name or uses the working position or influence of another position and power holder to gain
*
Judicial Inspector of the Supreme People’s Court of Vietnam.
This Code was passed by the National Assembly of the Socialist Republic of Vietnam, XIth Legislature, at its 8th session on
29 November 2005.
2 Article 1(3) of the Anti–Corruption Law.
3 The Ordinance Against Corruption was replaced by the Anti–Corruption Law.
1
172
illegal benefits or act against law.”
3. Corrupt Acts must be Motivated by Profit
Article 2(5) of the Anti–Corruption Law provides: “Self-seeking interests mean material and/or spiritual
interests which are obtained or can be obtained by persons with positions and/or powers through corrupt
acts.”
B. Corrupt Acts
Corrupt acts include:4
•
•
•
•
•
•
•
•
•
•
•
•
Embezzling properties;
Taking bribes;
Abusing positions or powers to appropriate properties;
Taking advantage of positions or powers while performing tasks or official duties for self-seeking
interests;
Abusing powers while performing tasks or official duties for self-seeking interests;
Taking advantage of positions or powers to influence other persons for self-seeking interests;
Committing forgeries in work for self-seeking interests;
Offering bribes or bribe brokerage by persons with positions and/or powers to settle affairs of
agencies, organizations, units or localities for self- seeking interests;
Taking advantage of positions or powers to illegally use state properties for self-seeking interests;
Harassment for self-seeking interests;
Failure to perform tasks or official duties for self-seeking interests;
Taking advantage of positions or powers to cover up law violators for self-seeking interests;
illegally hindering, intervening in examinations, inspections, auditings, investigations, prosecutions,
adjudications or judgment executions for self-seeking interests.
III. PENAL CODE PROVISIONS AND INSUFFICIENCY IN MEETING
REQUIREMENTS OF THE UNCAC
A.Provisions of the Penal Code of Vietnam on Crimes of Corruption
The Penal Code of the Socialist Republic of Vietnam, approved by the 10th National Assembly on 21
December 1999, being effective as from 1 July 2000, contains a chapter (Chapter XXI) to regulate crimes
relating to position (including crimes of corruption and other crimes relating to position). The crimes of
corruption regulated in the Penal Code include seven articles (from Article 278 to Article 284) regulating the
crime and punishment for the following crimes: embezzling property (Article 278); receiving bribes (Article
279); abusing positions and/or powers to appropriate property (Article 280); abusing positions and/or powers
while performing official duties (Article 281); abusing powers while performing official duties (Article 282);
abusing positions and/or powers to influence other persons for personal profits (Article 283); forgery in the
course of employment (Article 284). On 19 June 2009, the 12th National Assembly approved the Law on
Amendment and Supplement of some Articles of the Penal Code in order to amend, supplement, abrogate or
replace some articles, items, and word phrases of the Penal Code 1999. According to the Law, the minimum
amount of money to hold a person criminally responsible for embezzling property, receiving bribes, abusing
positions and/or powers to appropriate property, or abusing positions and/or powers to influence other
persons for personal profits increased from 500,000 dong to 2,000,000 dong.
B. Insufficiency in the Vietnamese Criminal Law
The United Nations Convention against Corruption requires the States Parties to criminalize the
specified acts in the Convention from Article 15 to Article 25, consisting of bribery of national public
officials; bribery of foreign public officials and officials of public international organizations; embezzlement,
misappropriation or other diversion of property by a public official; trading in influence; abuse of functions;
illicit enrichment; bribery in the private sector; embezzlement of property in the private sector; laundering
of proceeds of crime; concealment; and obstruction of justice. Comparing provisions on crimes of corruption
and related acts in the Vietnamese criminal law with the requirements of the UNCAC, there are some
insufficiencies, outlined below.
4
Article 3 of the Anti–Corruption Law.
173
1. Illicit Enrichment
Article 20 of the UNCAC requires that each State Party, subject to its constitution and the fundamental
principles of its legal system, shall consider adopting such legislative and other measures as may be
necessary to establish as a criminal offence, when committed intentionally, illicit enrichment, that is, a
significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his
or her lawful income.
According to Article 2 of the Penal Code of Vietnam, only those persons who have committed crimes
defined by the Penal Code shall bear the penal liabilities thereunder. Reviewing criminal offences established
in the Penal Code of Vietnam, “illicit enrichment” has not yet been established as a criminal offence in
Vietnam.
2. Bribery and Embezzlement of Property in the Private Sector
According to Article 21 and Article 22 of UNCAC, each State Party shall consider adopting such
legislative and other measures as may be necessary to establish bribery and embezzlement of property in
the private sector as criminal offences, when committed intentionally in the course of economic, financial or
commercial activities.
Existing Vietnamese legislation has not yet admitted bribery and embezzlement of property in the
private sector as a criminal offence in any legal documents.
IV. CRIMES OF CORRUPTION IN THE VIETNAMESE COURTS
According to data of the Vietnam Supreme People’s Court, from 2008 to the first three months of 2010,
the courts handled 690 cases at first instance, with 1,624 offenders committing crimes of corruption, in
which:
•
•
•
In 2008 there were 332 cases with 789 offenders;
In 2009 there were 302 cases with 710 offenders;
The first three months of 2010 there were 56 cases with 125 offenders.
Among the 1,624 offenders, 36% were sentenced but placed on probation, 28% were sentenced to
imprisonment for less than three years, 18% were sentenced to imprisonment for between three to seven
years; 8% were sentenced to imprisonment for between seven to 15 years; and 2% were sentenced to
imprisonment from between 15 to 20 years.
Among seven corruption crimes, the majority of offenders embezzled property, received bribes and
abused positions and/or powers while performing official duties. Only a few offenders abused powers while
performing official duties; abused positions and/or powers to influence other persons for personal profits; or
committed forgery in the course of employment.
See the specific figures in the chart below.
Crime
2008
2009
Embezzling property
Receiving bribes
Abusing positions and/or powers while performing official
duties
Abusing powers while performing official duties
Abusing positions and/or powers to influence other persons
for personal profits
Abusing positions and/or powers to appropriate property
Forgery in the course of employment
436
123
335
37
First Three
Months of 2010
53
10
157
206
41
7
23
6
0
1
0
55
11
105
3
15
0
174
V. CURRENT SITUATION OF AND CHALLENGES IN ANTI-CORRUPTION MEASURES
A.Investigation
A specialized investigation agency against corruption was established in Vietnam. This is the
Investigation of Corruption Department of the Ministry of Public Security. The duties of this agency consist
of: assisting the Director General of Police and Head of Police Agency in directing and guiding police in the
investigation of corruption cases; directly investigating particularly serious corruption cases; and organizing
prevention and fighting of crimes of corruption.
However, this agency is not capable enough to be relied upon. It seems that the investigators do not deal
with corruption properly. This is because the Ministry of Public Security is a governmental agency and it
may be open to informal influence by high-ranking officials from several levels of hierarchical bureaucracy. If
the investigators do not adhere to the decision of their superiors they may lose their jobs.
B. Adjudication
Although Article 16 of the Criminal Procedure Code stipulates that: “During trial, judges and jurors
are independent and abide by law only,” in fact the judiciary is not sufficiently independent to make fair
judgments in corruption cases. Sometimes even the judiciary itself is corrupt.
C.Low Salaries of Government Officials and Employees
Low government wages combined with weak monitoring systems are breeding grounds for corruption
and misuse of public resources.
In Vietnam, public servants’ incomes are insufficient for living and are relatively low or perceived as
unfair in comparison to private sector salaries. The average take-home pay of an ordinary government
employee is barely enough to meet their periodic expenses. For this reason, in order to ensure their daily
needs, some government officials and employees have committed corrupt acts.
However, it is posited that the low salary of government employees should not be underscored as a major
cause of corruption since corruption is even more rampant and on a larger scale when it comes to highranking officials.
D.Lack of Personnel in Anti-Corruption Agencies
Anti-corruption agencies lack personnel. Consequently, investigators, prosecutors and inspectors must
deal with more than the number of cases they can effectively handle.
The lack of personnel is caused by the following main reasons: low salaries, thankless work, and a
pressurized working environment with a high risk of job loss.
E. Lack of Training and Skills in Anti-Corruption Investigation, Prosecution and Adjudication
Investigators, prosecutors and adjudicators who deal with corruption cases should have deep knowledge
and specialist skills. Unfortunately, most often, they merely learn the rudiments of investigation,
prosecution and adjudication in their work. Therefore, they work mainly in accordance with their
experience. The lack of trained personnel is due to lack of budgetary support.
F. Difficulty in Supervision and Transparency of Income and Property of Public Officials
Supervision and transparency of income and property of public officials is an effective anti-corruption
measure. However, it is difficult to implement.
According to Government Decree No 64/1998/ND-CP dated 17 August 1998, detailing and guiding
the implementation of the Ordinance Against Corruption, declaration forms shall be studied and referred
to only in cases where declarants commit corruption acts by inspecting agencies, investigating agencies,
procuracies and courts. The declaration forms shall be considered by the competent officials as one source of
information before appointment or task allocation. According to this regulation, the declaration is irregularly
enforced; purpose, scope and object declaration are limited. Again, if the declarants are not honest, they will
not be disciplined or examined for penal liability. Consequently, prevention of corruption is not efficient.
175
G.Lack of Co-operation between the Citizens and the Government in Anti-Corruption Measures
In order to mount an efficient response to corruption, anti-corruption agencies should have the full
co-operation of the citizenry. Unfortunately, this is not true in Vietnam. The general public does not
co-operate with anti-corruption measures because of the fear of possible negative repercussions and because
of the lack of encouragement. In fact, there are many cases of the general public discovering corrupt acts
but they do not dare denunciate because of the fear of the retaliation. Thus, it is very important to build
protection and encouragement measures for whistleblowers.
Article 55 (3) of the Criminal Procedure Code of Vietnam stipulates:
“3. Witnesses shall have the following rights:
(a) To ask the bodies which have summoned them to protect their life, health, honor, dignity, property
and other legitimate rights and interests when participating in the procedure;
(b) To complain about procedural decisions and acts of agencies and persons with procedureconducting competence;
(c) To be paid by the summoning agencies the travel and other expenses as prescribed by law.”
However, this provision is too general and difficult to implement. It should be worded concretely. The
Supreme People’s Court, The Supreme People’s Procuracy and Ministry of Public Security were assigned to
draft a Joint Circular guiding the protection of witnesses. But, at present, it has not been published.
V. CONCLUSION
Corruption is an evil that exists not only in a specific regime or country, but in all places where power is
not checked and supervised. Corruption prevention is both an urgent duty and long-term duty. In the face of
more and more complex occurrences of this type of crime, Vietnam has been taking dynamic actions aiming
at executing effectively the criminal law of Vietnam as well as the UNCAC. On 12 May 2009, the Prime
Minister of Vietnam signed the Resolution promulgating the national strategy on corruption prevention until
2020; it further affirms the determination of Vietnam in the war against this dangerous type of crime.
176
APPENDIX A:
PROVISIONS OF THE PENAL CODE OF VIETNAM ON
CRIMES OF CORRUPTION
Article 278. Embezzling property:
1. Those who abuse their positions and/or powers to appropriate the property which they have the
responsibility to manage and which is valued between two million dong and fifty million dong, or
which is under two million dong but falls into one of the following cases, shall be sentenced to
between two and seven years of imprisonment:
a) Serious consequences are caused;
b) The offenders have already been disciplined for such acts but continue to commit them;
c) The offenders have already been sentenced for one of the offenses stipulated in Section A of this
Chapter, not yet entitled to criminal record remission but continue to commit them.
2. Committing the crime in one of the following circumstances, the offenders shall be sentenced to
between seven and fifteen years of imprisonment:
a) In an organized manner;
b) Employing treacherous and dangerous tricks;
c) Committing the offense more than once;
d) Appropriating property valued between fifty million dong and two hundred million dong;
e) Causing other serious consequences.
between fifteen and twenty years of imprisonment:
a) Appropriating property valued between two hundred million dong and five hundred million dong;
b) Causing other very serious consequences.
4.Committing the crime in one of the following circumstances, the offenders shall be sentenced to
twenty years of imprisonment, life imprisonment or capital punishment:
a) Appropriating property valued at five hundred million dong or more;
b) Causing other particularly serious consequences.
5. The offenders may also be banned from holding certain posts for one to five years, be subject to
a fine of between ten million dong and fifty million dong, the confiscation of part or whole of their
property.”
Article 279. Receiving bribes:
1. Those who abuse their positions and/or power, have accepted or will accept directly or through
intermediaries money, property or other material interests in any form valued between two million
dong and ten million dong, or under two million dong but in one of the following circumstances
in order to perform or not to perform certain jobs for the benefits or at the request of the bribe
offerers, shall be sentenced to between two and seven years of imprisonment:
a) Serious consequences are caused;
b) The offenders have already been disciplined for such acts but continue to commit them;
c) The offenders have already been sentenced for one of the crimes stipulated in Section A, this
Chapter, not yet been entitled to criminal record remission but continue to commit them.
between seven and fifteen years of imprisonment:
177
b) Abusing positions and/or powers;
d) Knowing clearly that the bribes are the State's property;
e) Asking for bribes, harassing or employing treacherous tricks for bribes;
f) The bribe is valued between ten million dong and under fifty million dong;
g) Causing other serious consequences.
between fifteen and twenty years of imprisonment:
a) Appropriating property valued between fifity million dong and under three hundred million dong;
twenty years of imprisonment, life imprisonment or capital punishment:
a) Appropriating property with valued at three hundred million dong or more;
5. The offenders shall also be banned from holding certain posts for one to five years, may be subject to
a fine between one and five times the value of the bribe, and/or the confiscation of part or whole of
property.”
Article 280. Abusing positions and/or powers to appropriate property:
1. Those who abuse their positions and/or powers to appropiate other persons' property valued
between two million dong and under fifty million dong or under two million dong but causing serious
consequences, have been disciplined for such act or sentenced for one of the offenses defined in
Section A, this Chapter, not yet entitled to criminal record remission but continue to commit it, shall
be sentenced to between one and six years of imprisonment.
between six years and thirteen years of imprisonment:
b) Employing perfidious and dangerous tricks;
c) Committing the crime more than once;
d) Dangerous recidivism;
e) Appropriating the property valued between five million and under two hundred million dong;
f) Causing other serious consequences.
between thirteen and twenty years of imprisonment.
a) Appropriating the property valued between two hundred million dong and under five hundred
million dong;
twenty years of imprisonment or life imprisonment..
a) Appropriating property valued at five hunderd million dong or more;
5. The offenders shall also be banned from holding certain posts for one to five years, and/or may be
subject to a fine of between ten million to fifty million dong.”
178
Article 281. Abusing positions and/or powers while performing official duties:
1. Those who, for self-seeking or other personal motivation, abuse their positions and/or powers to act
contrarily to their official duties, causing damage to the interests of the State and the society and/
or the legitimate rights and interests of citizens shall be sentenced to non-custodial reform for up to
three years or from one year to five years of imprisonment.
between five and ten years of imprisonment:
b) Committing the offense more than once;
c) Causing serious consequences.
3. Committing the crime and causing very serious or particularly serious consequences, the offenders
shall be sentenced to between ten and fifteen years of imprisonment.
a fine of between three million dong and thirty million dong.”
Article 282. Abusing powers while performing official duties:
1. Those who, for self-seeking or other personal motivation, act beyond their powers contrarily to their
official duties, causing damage to the interests of the State and the society, and/or to the legitimate
rights and interests of citizens, shall be sentenced to between one and seven years of imprisonment.
between five and twelve years of imprisonment:
c) Causing serious consequences.
3. Committing the crime and causing very serious or particularly serious consequences, the offenders
shall be sentenced to between ten and twenty years of imprisonment.
4. The offenders shall also be banned from holding certain posts for one to five years, may be subject to a
fine of between three million dong and thirty million dong.”
Article 283. Abusing positions and/or powers to influence other persons for personal profits:
1. Those who abuse positions and/or powers, have accepted or will accept directly or through
intermediaries money, property or other material interests in any form valued between two million
dong and under ten million dong, or under two million dong but causing serious consequences,
have already been disciplined for such act but continue to commit it, to use their influence and
incite persons with positions and powers to do or not to do something within the sphere of their
responsibility or directly related to their work or to do something they are not allowed to do, shall be
sentenced to between one and six years of imprisonment.
2. Committing the offense in one of the following circumstances, the offenders shall be sentenced to
between six years and thirteen years of imprisonment:
c) The money, property or other material interests are valued between ten million dong and under
fifty million dong;
d) Causing other serious consequences.
between thirteen and twenty years of imprisonment:
179
a) The money, property or other material interests are valued between fifty million dong and under
three hundred million dong;
twenty years of imprisonment or life imprisonment:
a) The money, property or other material interests are valued at three hundred million dong or more;
a fine of from one to five times the amount of money or the value of the property they have earned
for their personal profits.”
Article 284. Forgery in the course of employment:
1. Those who, for self-seeking or other personal motivation, abuse their positions and/or powers to
commit one of the following acts, shall be sentenced to between one and five years of imprisonment:
a) Amending or falsifying contents of papers, documents;
b) Making and/or granting counterfeit papers;
c) Forging signatures of persons with positions and powers.
between three and ten years of imprisonment:
b) The offenders are persons responsible for making or granting the papers and/or documents;
d) Causing serious consequences.
3. Committing the crime and causing very serious consequences, the offenders shall be sentenced to
between seven and fifteen years of imprisonment.
4. Committing the crime and causing particularly serious consequences, the offenders shall be
sentenced to between twelve and twenty years of imprisonment.
5. The offenders shall also be banned from holding certain posts or doing certain jobs for one to five
years, may be subject to a fine of between three million dong and thirty million dong.”
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APPENDIX B
COURT SYSTEM OF THE SOCIALIST REPUBLIC OF VIETNAM
Supreme People’s Court
Central Military Court
People’s Courts of provinces, and cities
directly under the central authority
Regional Military Courts
and equivalents
People’s Courts of districts, prefectures,
towns and cities under provincial authority
Area Military Courts
181
REPORTS
OF THESERIES
COURSE
RESOURCE MATERIAL
No.83
GROUP 1
IDENTIFYING AND PUNISHING CORRUPT OFFENDERS
Chairperson
Co-Chairpersons
Rapporteur
Co-Rapporteurs
Members
Visiting Expert
Advisers
Mr. Rehman Khan
Ms. Seneviratne Ranjani
Mr. Hiroyuki Ito
Ms. Marmarie Satin-Vivas
Mr. Velasco Arturo Ponce
Mr. José Portillo Martinex
Mr. Julio Abarca
Mr. Prastiono Endri
Mr. Mthombeni Dumisani
Mr. Atsushi Maekawa
Mr. Shinji Yamaguchi
Mr. Steven Lam
Prof. Naoyuki Harada
Prof. Fumihiko Yanaka
(Botswana)
(Sri Lanka)
(Japan)
(Philippines)
(Mexico)
(Paraguay)
(El Salvador)
(Indonesia)
(Zimbabwe)
(Japan)
(Japan)
(Hong Kong)
(UNAFEI)
(UNAFEI)
I. INTRODUCTION
Group 1 started its discussion on 1 November 2010. The group elected, by consensus, Mr. Khan as its
chairperson, Ms. Seneviratne and Mr. Ito as its co-chairpersons, Ms. Satin-Vivas as its rapporteur, and Mr.
Arturo and Mr. Portillo as its co-rapporteurs. The group, which was assigned to discuss “Identifying and
punishing corrupt offenders,” agreed to conduct its discussion in accordance with the following agenda: 1)
Measures to encourage persons or bodies that have useful information on corruption, etc. to supply the
information to, and co-operate with, investigative and prosecutorial authorities; 2) Proactive measures to
collect information and/or evidence; 3) Identifying and tracing crime proceeds; 4) Seizure, freezing and
confiscation.
A. Measures to Encourage Co-Operation with Investigative and Prosecutorial Authorities
Firstly, each member reported on the situation in his or her country with regard to the sub-topic
“mitigating punishment/granting immunity from prosecution to a co-operative person.” The Philippines,
Indonesia, El Salvador, Mexico and Paraguay have similar laws on this subject. In the Philippines, the
law deals with general criminal offences including corruption charges. However, in Mexico, it deals with
organized crimes only, and in Paraguay, only kidnapping and terrorism offences. In Zimbabwe and Botswana,
legislation provides for the granting of immunity to a co-accused to testify as a witness for the state on a
voluntary basis. This applies to some criminal offences, including corruption charges; once immunity is
granted one cannot be charged for the same offence. This procedure is used in cases where there is not
enough evidence to prosecute. In Japan and Sri Lanka, there is no similar law.
The group discussed the effect of the law and system regarding this sub-topic. Mr. Mthombeni from
Zimbabwe said that the law is very effective in his country. Generally, every offender has to be prosecuted
but the state may not have strong evidence against a co-accused. With the assistance of a co-accused, the
case against the chief perpetrator becomes very strong. However, it is still discretionary on the part of the
state whether to proceed with the case with or without giving immunity to a co-accused.
Mr. Khan from Botswana said that the purpose of the law is really to tell the truth. The immunity is
granted after the giving of testimony by the witness (co-accused) to the court to eliminate a motive of false
incrimination. The witness is introduced as a tainted witness and he or she is informed of the procedures
and rules. The co-operative person can still provide useful information against a co-accused. If properly
implemented, the law is very effective.
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The group discussed “Witness and/or Whistleblower Protection”. All participants agreed that “Witness
and Whistleblower Protection” is very important.
In Japan, there is a law on informant protection, though the law is not limited to corruption. It covers
workers who belong to an organization or company who spot misconduct and report the same to the
investigation/administrative authority or mass media. The informant or employee who reported must not
be harmed and if removed from employment, the removal is considered invalid. However, there are still
problems, for example, what does the statement “the whistleblower should not be harmed” mean? If the
employer fires the whistleblower for giving information, there is a clear violation of the law or in another
situation, if a whistleblower-employee is transferred to another department which he or she does not like,
will the employer be punished in such case? Hence, the potential whistleblower is reluctant to speak up.
In addition, several countries have a law or provision on witness protection. In El Salvador, there is a
programme which explains how the law is implemented; a means or a tool of the government for the people
to be aware that there is such a law.
Mr. Mthombeni interposed that people should always be free to report allegations of corruption without
fear, although this does not reflect the reality ‘on the ground’: if there is no confidence in the authorities,
coupled with the absence of political will to combat corruption, people cannot come out because the
defendant cannot be prosecuted after all.
The group also discussed “reporter-friendly mechanisms to encourage reporting by citizens, raising
public awareness of such measures” and “reporting obligations or mechanisms of related investigative
agencies and public officials.”
Most members of the group reported that their governments encourage citizens to report corruption
through telephone, mail, e-mail and websites. However, people prefer to stay quiet.
Anonymous complaints are entertained as a lead for further fact-finding investigation; for example, in the
Philippines, anonymous complaints are entertained by the Office of the Ombudsman. However, complaints
cannot be used as evidence per se in court. In some other countries, like Zimbabwe and El Salvador,
anonymous complaints cannot also be used as evidence. One of the reasons is that witnesses should be
cross-examined in court.
Mr. Ito declared that in Japan, in cases of corruption crime, citizens report to the police or prosecutors,
but in some cases, the mass media is used as it is an independent entity which has no links to government
agencies. If there are media reports, such information is likely to attract public attention, which may prompt
the authorities to conduct an actual investigation.
Several countries have implemented efforts to raise public awareness. In Zimbabwe, the Anti-Corruption
Commission, Transparency International, the Law Society and the Ministry of Justice conduct public
awareness programmes especially on the evils of corruption.
In Sri Lanka, the Anti-Corruption Commission conducts seminars in government departments; conducts
competitions regarding corruption in schools; distributes pamphlets about corruption to inform the public;
and broadcasts on the issue on radio and TV.
Mr. Khan from Botswana said the problem is in the rural areas where there is no access to broadcast
media and no regular circulation of newspapers, which makes it difficult for the public to become aware
of these anti-corruption mechanisms. The DCEC conducts seminars in schools to instil in the students
knowledge of the evils of corruption at an early age but this is not enough. So, it is necessary to ensure
effective measures to communicate with the entire population and to include anti-corruption lectures in
schools.
Mr. Maekawa averred that in Japan, it is stipulated in the Criminal Procedure Code that “A government
official or local government official shall file an accusation when they believe an offense has been
183
committed.” However, government officials are not well trained or are not aware of their obligations. Mr.
Velasco said that in Mexico, public officials are obliged to report everything they know, but many public
officials keep quiet about any corruption by other public officials. Mr. Abarca stated that in El Salvador,
omission of reporting by public officials is considered a crime.
Some expressed the opinion that there should also be measures to protect the reporter, and also that
appropriate incentives, such as promotion or assistance in any form, should be given, especially when a low
ranking public official reports the corrupt activities of a superior or a high-ranking public official.
Summary of recommendations:
1.When a reasonable report is made, there should be immunity from prosecution and mitigation of
punishment and other incentives should also be considered;
2.Throughout investigation and trial, witnesses and whistleblowers should be protected from pressure
and retaliation;
3.There must be an organization for implementing reporter-friendly mechanisms: a strong authority,
independent and trusted by the citizens. As for the ways of reporting, there must be direct reporting
to anti-corruption agencies as well as indirect reporting through letters, mails and websites. There
should be an independent contact window in order to protect the identity of a witness from high
ranking officials;
4.There is a need to establish a system to facilitate reporting by a public official of acts of corruption to
appropriate authorities and consider disciplinary and other measures for violation of such measures;
5.There must be continuous education on the evils of corruption.
B. Proactive Measures to collect Information and/or Evidence
The group discussed following sub topics: 1) Investigation of related offences; 2) Use of publicly
available information (e.g. media reports, NGO reports, financial statements and securities reports of listed
companies, websites); 3) Search and seizure and other traditional measures; and 4) Special investigative
techniques (e.g., wiretapping and other electronic surveillance, undercover/sting operations).
Mr. Yamaguchi from Japan said that the criminal investigation of corruption and the collection of evidence
sometimes starts from investigation of related offences. Mr. Prastiono from Indonesia said investigators
will also look for other offences related to corruption cases committed by a suspect. Crimes that are often
associated with cases of corruption involved the banking system and money laundering. However some
participants stated that in their countries, investigation commences after a formal complaint is made, in
principle.
In the Philippines, collection of information can be done through the use of media reports and nongovernmental reports, while in cases of financial statements, a court order should first be obtained.
The group agreed that searches and seizures are very important measures to collect evidence or to find
facts. Hence, the investigation agency must conduct searches and seizures thoroughly.
Regarding special investigative techniques, Ms. Seneviratne informed the group that in Sri Lanka, a
decoy is used in bribery cases but not in corruption cases. In Indonesia, there is a law which specifically
allows evidence from wiretapping to be used as evidence in trial. In Mexico, they use special investigative
techniques but they are complicated because of lack of equipment and trained personnel. Sting operations
can be done in bribery and corruption cases. This involves the use of a pinhole camera on the agent and
teaching him or her how to act in front of a public official while conducting a sting operation. Wiretapping is
also allowed but there should be a request for a warrant in corruption cases. In a sting operation, the agent
will not be punished. However, there is no undercover operation for corruption because of lack of equipment
and training.
The group discussed “Inter-agency co-ordination in corruption investigation: how to establish
relationships and exchange information.”
184
In Japan, there is a personnel exchange between investigative agencies and district prosecutors offices
and tax offices so that they can understand each other’s investigation and co-ordinate even better. Mexico
has excellent inter-agency communication but the problem is that there are too many agencies fighting
against corruption.
Ms. Satin-Vivas stated that in the Philippines, the Department of Justice (DOJ) has concurrent
jurisdiction to conduct preliminary investigation of corruption charges and forwards its findings to the
Ombudsman who will file the case in the anti-corruption court. The tax agency conducts tax evasion
investigation, then forwards the complaint to the DOJ to conduct preliminary investigation. The AMLC also
conducts fact-finding investigations in cases of money laundering, then forwards the complaint to the DOJ
for preliminary investigation.
Summary of recommendations:
1.It is important that there is active inter-agency co-ordination, especially in gathering of information.
If there is a successful fight against corruption there will be a smooth flow of information from each
concerned agency;
2.In order to identify corruption cases, we should use special investigative techniques such as
wiretapping, undercover operations and sting operations. These measures can be very effective in
investigation of corruption cases so they must be used proactively and appropriately;
3.Criminal sanctions should be considered against persons, bodies or corporations which prevent or
block collection of information and/or evidence during investigations.
C.Identifying and Tracing Crime Proceeds
Under the topic “Identifying and Tracing Crime Proceeds,” the group discussed the sub-topics: “access to
bank information”; “access to government information (e.g., public procurement records, family/birth/marriage/
residential registrations, tax declarations, asset declarations); “access to financial, business and corporate
records (e.g., securities and bond transactions, financial statements/securities reports, registered board
members of corporations); “utilization of FIU information”, “disclosure and reporting requirements for officials”
and “ensuring the secrecy of investigation”.
Mr. Yamaguchi disclosed that in Japan, collection of information for investigation purposes is easily
accessible. In case of bank information, a warrant is not necessary as long as there is a written request to
perform this inquiry. The investigator can directly ask for information. As to government, financial, business
and corporate records or information, an investigation is made through a written request and the answer will
also be in a written document. If the information is to be obtained from a private company, the investigator
will explain the purpose and the companies usually do not refuse. Public officials, except members of the Diet
and cabinet members, do not have disclosure and reporting requirements of their assets. However, if public
officials receive gifts whose value exceeds 5000 yen, they have to report it to the government. As to the
secrecy of investigation, each public official has an obligation not to disclose any information to anyone; there
is no exchange of documents or evidence with other agencies. In the absence of criminal sanction, secrecy of
investigation works effectively.
In Sri Lanka, the Corruption Commission (CIABOC) has the power to give notice to any bank to produce
cheques or any other documentary evidence relating to the investigation of a suspect. The Commission
also has the power to access any government information, to summon any person to produce a document or
other things in his possession and to examine financial, business and corporate records.
In Botswana, the anti-corruption investigators (DCEC) have the power to require in writing any person
to produce, within a stipulated time, all books, records, returns, reports, data stored electronically and any
document relating to the function of any public or private body. Any person who fails to comply with the
request shall be guilty of an offence. Both the police and the DCEC investigators can access and utilize FIU
information as long as a court order is obtained.
The Philippines and Indonesia both have bank secrecy laws but when it comes to money laundering
activities, the Anti-Money Laundering Council (AMLC) and the Indonesian Financial Transaction Reports
185
and Analysis Centre (INTRAC), respectively, act as FIUs which have the authority to require banks or other
financial institutions to provide transaction records of a suspected money launderer. In El Salvador, there is also
access to bank information as provided in the Law Against Money Laundering. A request may be made by the
prosecutor or judge.
In Indonesia, government agencies work closely together for easier collection of evidence as each has its
own procedure to follow. As to reporting requirements for officials, the government requires every person
who applies for public office to submit data concerning his or her financial information and assets owned before
he or she occupies such office.
In the Philippines, although government records such as birth and marriage certificates, business
registration, land titles etc. are considered public documents, a court order is still needed to access them.
There is a pending Freedom of Information bill which will require all government agencies to make available
for scrutiny and reproduction such documents, as well as those pertaining to official acts and transactions
entered into by the government.
In El Salvador, the police, prosecutor and judge can access government and financial, business and
corporate records, or information used during the trial proceedings since they are available digitally, but
there must be a request to the bank and appropriate agencies. The Financial Investigation Unit, which
directs the investigation in cases of money laundering, is under the Attorney General’s Office.
In Zimbabwe, whenever there are investigations and there is a need for a particular bank account to
be monitored, there is full co-operation of the bank and copies of accounts’ transactions can be used as
evidence in court. While public documents can always be inspected by the public after payment of an
administrative fee, investigative authorities always have access to such documents for free. Denial of access
or co-operation may amount to obstruction of justice or defeating the course of justice.
In Mexico, there is access to bank information but the problem is authorities have to wait for eight
months before receipt of the information. There is also access to government information but Mexico is
composed of 32 states and each has its own records so it is too difficult to get complete information. As
to access to financial, business and corporate records, the problem is that corrupt officials are hiding their
money in others’ accounts abroad.
Mr. Martinez stated that in Paraguay, access to bank and government information, as well as to financial,
business and corporate records are available through public prosecutors or judges’ requests. FIU information
is not well utilized since it only has administrative duties. Disclosure of public officials’ information is
mandatory upon judges or prosecutors’ requests. There are minimum measures to maintain secrecy of
information.
With regard to disclosing and reporting of public officials’ assets, some participant-countries are required
to submit them and some are not. As regards secrecy of investigation, some participant countries criminally
sanction a person who divulges information to others.
The group also had a discussion regarding outside activities of public officials, employment, investment,
assets, money, objects or profits. The systems differ in each country. Each country has different
requirements. The group agreed that it is very necessary that there are requirements in place that should be
followed.
186
Table 1. Reporting requirements for public officials by category and country
Key: ✓= reporting required
X = reporting not required
Outside
Activities/
Employment
Investments
Assets
Substantial gifts
or benefits
Disciplinary
sanctions
Botswana
✓
X
X
✓
✓
El Salvador
✓
✓
✓
✓
✓
Indonesia
✓
✓
✓
✓
✓
Mexico
✓
✓
✓
✓
✓
Paraguay
✓
✓
✓
✓
✓
Philippines
✓
✓
✓
X*
✓
Sri Lanka
✓
✓
✓
✓
✓
Zimbabwe
✓
X
X
✓
✓
Japan
✓
✓
✓
✓
✓
* In the Philippines, public officials are not allowed to receive gifts or benefits.
187
GROUP 2
STRENGTHENING THE CAPACITY AND ABILITY OF CRIMINAL JUSTICE
AUTHORITIES, THEIR PERSONNEL AND LEGISLATION
Chairperson Co-Chairperson Rapporteur Co-Rapporteurs Members Advisers Ms. Harippriya Jayasundara
Mr. Masanori Mizuno
Mr. Douglas Stravos Diniz Moreno
Ms. Pinthip Leelakriangsak Srisanit
Mr. Shusaku Tatara
Mr. Sayed Wali Sadat Ms. Vicky Muanji Kabiku Mr. Sami Sleman Faqi Al-Surchi
Mr. Rajkumar Koirala Mr. Pervez Tariq
Ms. Do Thi Phuong
Mr. Toshio Hirano
Prof. Kumiko Izumi
Prof. Yuichi Tada
(Sri Lanka)
(Japan)
(Brazil)
(Thailand)
(Japan)
(Afghanistan)
(DR Congo)
(Iraqi Kurdistan)
(Nepal)
(Pakistan)
(Vietnam)
(Japan)
(UNAFEI)
(UNAFEI)
I. INTRODUCTION
Group 2 started its discussion on 1 November 2010. The Group elected, by consensus, Ms. Jayasundara
as its chairperson, Mr. Mizuno as its co-chairperson, Mr. Douglas as its rapporteur, and Ms. Srisanit and Mr.
Tatara as its co-rapporteurs.
The group, which is assigned to discuss “Strengthening the Capacity and Ability of Criminal Justice
Authorities, their Personnel and Legislation,” agreed to conduct its discussion in accordance with the
following agenda:
1) Criminalization, focusing on gaps between the mandatory requirements of the UNCAC and legislated
offences of the respective countries;
2) Ensuring necessary independence of the criminal justice authorities to fight corruption;
3) Integrity of the personnel of criminal justice authorities to fight against corruption;
4) Impartiality, transparency and accountability in the relevant decisions in criminal proceedings; and
5) Strengthening the capacity of the criminal justice system in dealing with corruption cases, including
specialization;
In addition, the group decided to include political will and media as additional topics.
The discussion began with all participants sharing information about their countries’ measures regarding
the main topic. The group agreed that the Government’s will to prevent corruption is a starting point in each
country to improve the capacity and ability of criminal justice authorities, their personnel and legislation.
A.Criminalization
The group discussed criminalization, focusing on gaps between the mandatory requirements of the
UNCAC and legislated offences of the respective countries. They began by arguing why corruption is
still rampant in each state despite whether or not the provisions exist in their jurisdictions in accordance
with the UNCAC. Each participant filled the table attached detailing which mandatory and non-mandatory
provisions were incorporated in their countries.
B. Ensuring Necessary Independence of the Criminal Justice Authorities
The group discussed independence of judges, prosecutors and investigators. Most participants stated
that they have good laws securing the independence of the judiciary but in reality there is a big gap between
theory and practice in their countries. According to participants, prosecutors must conduct their duties
188
independently, but in some countries they cannot, as they are appointed by political parties or politicians,
which can undermine their independence.
The lectures of visiting experts, Mr. Koh and Mr. Lam, were referred to, especially their agencies’
independent investigative powers. Considering the characteristics of these agencies, it is indispensable to
investigate without fear or favour. However, participants agreed that it is paramount to have a system of
checks and balances to ensure that investigators, prosecutors and judges do not exceed their prerogatives.
C.Integrity of Criminal Justice Personnel
The group discussed recruitment procedures; minimum qualifications in the recruitment of judges
and prosecutors, such as aptitude tests; and minimum age and competitive examinations, all of which can
influence the integrity of authorities when investigating corruption cases. Most of the participants stressed
the importance of criminal records as a mandatory requirement to check the integrity of authorities.
However, no consensus was reached on whether someone under investigation by the authorities, or with a
pending decision in the Criminal Court, can be prohibited from applying for a government post.
The majority of the participants stated that a code of conduct for judges and prosecutors exists in their
respective countries. The participant from Nepal informed the group of the existence of Judicial Monitors
and the participant from Congo highlighted the application of the Code only to magistrates. However, some
participants declared the absence of guidelines in their countries.
All participants agreed that it is necessary to maintain the integrity of legal authorities through effective
training to improve knowledge, maintaining an appropriate level of remuneration and a job rotation system.
The group agreed that an efficient monitoring system is the most important measure to be taken. Some
participants included the declaration of assets as one of the most effective mechanisms to check the
continuous integrity of authorities.
Most of the represented countries have systems for removing or dealing with misconduct of personnel
attached to the criminal justice system but it differs from country to country. The participant from
Afghanistan stated that there is a specific body to deal with disciplinary actions. The participant from
Pakistan referred to the efficiency of disciplinary actions in his country. The participant from Nepal informed
the group that there is no provision applied to the District Court and Appellate Court, but the Supreme
Court Justices can be impeached by Parliament with a two thirds majority. The participant from Japan
declared that judges can only be impeached by the Special Court comprised of 15 members of the Diet and
that this framework is based on the concept of checks and balances. The participant from Brazil declared
that disciplinary actions are normally conducted internally but an independent body is more effective to
prevent misconduct and to ensure impartiality of investigation.
In addition, the group agreed that it is important to establish an independent body to investigate/
prosecute cases of corruption in existing criminal justice authorities. The participant from Brazil stated
that there is an independent body in his country which has achieved considerable results in investigating
misconduct of members of the Judiciary. The participant from Pakistan informed the group that in his
country there is a special court for corruption. In Thailand, there is a specialized Court division dealing with
corruption cases, but only for high-ranking officers and politicians. There is also an independent agency
which is responsible for inquiring into all kinds of corruption offences committed by all levels of government
officials. The participant from Japan stated that such an agency does not exist and declared that it is
unnecessary to establish an independent body as the internal monitoring system is sufficient to investigate
and prosecute corruption matters. The participant from Iraqi Kurdistan added a commentary about the lack
of enforcement powers and the absence of transparency in his country.
D.Impartiality, Transparency and Accountability in the Relevant Decisions in Criminal Proceedings
Most of the participants stated that their countries have mechanisms regarding disqualification and
recusal of judges. These mechanisms can be viewed as follows: a) a judge can recuse him or herself from a
case and b) Litigants can ask for disqualification and recusal of judges.
In addition, most of the participants stated that their countries’ court systems have three levels; all
have an upper level court that can review a lower court’s decision upon being appealed by parties including
189
prosecutors. Pakistan has a system named “judicial review” under which each party can ask the same judge
to review its decision and/or appeal to a superior court if not satisfied.
Regarding transparency, the group discussed the role of the mass media, which is often more proactive
in reporting than other types of reporting agencies. In most countries, the media report court decisions
in some important cases. In Congo, the Government encourages the media to broadcast trials in some
cases including corruption, rape and homicide. The participant from Iraqi Kurdistan stated that an
independent media in his country is neither strong enough nor sufficiently equipped to report cases.
In Kurdistan, the media is controlled by political parties and it has a monopoly on reporting relevant
information. The participant from Nepal informed the group that print media publishes judicial decisions
on a regular basis. In addition, he said that NGOs such as Transparency International also contribute to
reporting relevant decisions to the general public. The participant from Pakistan stated that the mass
media can pass information on corruption to the Supreme Court and in some cases the Supreme Court
initiates investigation based on media reports. The participant from Brazil highlighted the importance of
transparency and the proactive media in his country, which make the public aware of corruption cases.
E. Strengthening the Capacity of the Criminal Justice System in dealing with Corruption Cases,
including Specialization
The group agreed that it is necessary to have an expert, such as a taxation expert, to assist criminal
authorities in corruption cases. Most of the participants stated that in their respective countries when
investigators, prosecutors and judges need expertise they can request it from specialists such as
accountants, computer experts, etc., who can assist the authorities by delivering a report in advance and/or
explaining his or her opinion before the courts.
The participant from Vietnam pointed out that lack of financial support from the government has led
to a lack of expertise and insufficient training courses. The participant from Thailand said that there is a
specialized court division in her country dealing with corruption cases but only for high-ranking officers and
politicians. In addition, there is an independent agency in Thailand which is responsible for inquiring into all
kinds of corruption offences committed by all levels of government officials. The participant from Pakistan
added that there is a specialist anti-corruption court in that country.
Regarding fair and speedy trial, the participant from Thailand mentioned that there is a time limit
for every process provided by law. A participant from Japan stated that two years is considered the time
limit in criminal cases, but it is not mandatory. The participant from Brazil informed the group that the
Constitution Act 1988 was recently amended to include the right to speedy judicial decision as a fundamental
right. However, although some cases are given priority, such as those involving litigants who are more
than 60 years old, corruption cases are treated as an ordinary process in the criminal court. Regarding
fair and speedy investigations, some participants pointed out that it depends on the number of cases each
investigator or prosecutor has at a given time.
Most of the participants agreed that it is very important to have specialized agencies to investigate and
prosecute as these cases require expertise and experience. The group also reached a consensus that it is
necessary to manage corruption cases swiftly.
Some countries have a specialized court to deal with corruption cases due to the number of suits
involving these issues. In this particular aspect, participants agreed that establishment of a specialized court
depends on the workload of the court rather than how independent it may be. The participant from Thailand
informed the group that there is a specialized court division dealing with corruption cases but only for highranking officers and politicians, and there is also an independent agency which is responsible for inquiring
into all kinds of corruption offences committed by all levels of government officials. The participant from
Nepal stated that there are special investigators in his country, but there is no governmental will to establish
a special court to deal with corruption cases. The participant from Brazil added that corruption cases must
have priority in his country and a specialized court is essential. However, first of all, it is necessary to
identify which cases are in fact corruption cases in the Brazilian jurisdiction.
Most of the participants agreed on the importance of interagency co-ordination in corruption
investigations.
190
A participant from Japan explained that some public prosecutors work for other organizations temporarily,
while dealing with corruption cases. As a consequence, Japanese prosecutors can make connections with
these bodies to get information and co-operation from them.
All participants discussed how investigators can obtain necessary expertise from third parties. In Sri
Lanka, as there are no in-house experts, prosecutors can ask for the issuing of a court order to obtain
information from a third party. The participant from Sri Lanka also stated that people tend to follow and
respect court orders. The participant from Vietnam pointed out that investigators can obtain information
directly without any Court order as long as they are at the stage of investigation.
The group answered a question by a Japanese participant, to the effect that court orders are usually
followed and respected in their respective jurisdictions. However, the effectiveness and enforcement of
court decisions depends on the level of political influence in each country.
F. Political Will
The group agreed that strong political is a fundamental key to combat corruption. Some participants
recognized that there is no political will to combat corruption in their countries. The participant from
Congo stated that the President is engaged in combating corruption. The participant from Brazil considered
political will necessary not only to check whether there is compliance with the UNCAC provisions but also
the effective application of the law. In Brazil, some essential reforms are necessary but it is fundamental to
consider the eradication of corruption as a priority in his jurisdiction. The participant from Brazil highlighted
the importance of establishing a strong education system, focusing on ethical principles to change the
mentality that corruption is a way of life for many Brazilians.
G.Media
The group agreed that an independent media plays an important proactive role to ensure transparency
and accountability in combining corruption in their countries. Most of the participants stated that the media
in their countries is very proactive and can effectively combat against corruption and also educate the public.
The participant from Kurdistan stated that information regarding corruption offences is monopolized by
media owned by political parties. Although there exists an independent media in Kurdistan, it is not strong
enough to work proactively to combat corruption.
III. RECOMMENDATIONS
At the end of the discussion, the group reached a consensus on the following conclusions and
recommendations:
1.Each country should enact laws in accordance with the UNCAC and ensure strict adherence to the
laws that exist.
2.Each country should ensure the independence of criminal justice authorities from the interference of
the executive and the legislative branches and from the hierarchy of the respective bodies.
3.In selecting investigators, prosecutors and judges, the highest standards, should be maintained (e.g.
adequate salary, qualifications, training, professional security and independence, highest standards of
ethics and selection purely on merit), to promote integrity and to ensure an effective criminal justice
system.
4.Each country should ensure strict application of disciplinary actions in the event of misconduct on
the part of judicial officers and have an effective review system on judicial pronouncements.
5.Special investigating expertise and proper case management are essential to strengthen the capacity
of the criminal justice system. Interagency co-operation and co-ordination are equally essential.
Establishment of a special agency to deal with corruption matters can also be considered in relation
to the number of corruption cases prevalent in their respective countries.
6.A strong political will and the support of the general public are essential in order to realize expected
standards set out in the UNCAC.
7.A proactive and independent media to promote an awareness of corruption cases amongst the
general public is important. Participation of the general public in a complaint mechanism would be
effective.
191
APPENDIX
COMMEMORATIVE PHOTOGRAPHS
• 146th International Training Course
• 13th International Training Course on the
Criminal Justice Response to Corruption
UNAFEI
The 146th International Training Course
Left to Right:
Above
Mr. Walsh (Hong Kong), Prof. Higuchi, Prof. Kawaharada
4th Row
Ms. Sasabe (Staff), Mr. Nagata (Staff), Mr. Saito (Staff), Mr. Inoue (Staff), Ms. Iwakata (Staff), Ms.
Tani (Staff), Ms. Chihara (Staff)
3rd Row
Ms. Sakai (Chef), Mr. Kawai (Chef), Mr. Suzuki (Staff), Mr. Takahashi (Staff), Ms. Yamada (Staff),
Mr. Morishita (Japan), Mr. Konno (Japan), Mr. Tsuji (Japan), Mr. Nassib (Tanzania), Mr. Siriwardhana
(Sri Lanka), Mr. Manabe (Japan), Mr. Vanderhyden (Guyana)
2nd Row
Mr. Karimbaksh (Guyana), Mr. Cazetta (Brazil), Mr. Fukuda (Japan), Ms. Bacay-Abad (Philippines),
Mr. Goonesekera (Sri Lanka), Mr. Ramírez (Mexico), Mr. Yehu (Indonesia), Ms. Okada (Japan), Ms.
Duong (Vietnam), Mr. Igusa (Japan), Mr. Motomura (Japan), Mr. Jumpon (Thailand), Ms. Obayashi
(JICA)
1st Row
Mr. Jimbo (Staff), Mr. Iida (Staff), Prof. Izumi, Prof. Sakonji, Prof. Tada, Deputy Director Ukawa,
Ms. Weld (USA), Director Sasaki, Mr. Thelesklaf (Switzerland), Prof. Harada, Prof. Wakimoto, Prof.
Watanabe, Prof. Yanaka, Mr. Kobayashi (Staff), Ms. Lord (LA)
The 13th International Training Course on
the Criminal Justice Response to Corruption
Left to Right:
Above:
Mr. Lam (Hong Kong), Prof. Watanabe
4th Row:
Mr. Jimbo (Staff), Ms. Iwakata (Staff), Ms. Yamada (Staff), Mr. Takahashi (Staff), Mr. Nishitani
(Staff), Mr. Saito (Staff), Mr. Inoue (Staff), Ms. Tani (Staff), Ms. Chihara (Staff), Ms. Kita (JICA),
Mr. Kobayashi (Staff), Mr. Suzuki (Staff)
3rd Row:
Ms. Sakai (Chef), Mr. Kawai (Chef), Ms. Sasabe (Japan), Mr. Mizuno (Japan), Mr. Maekawa
(Japan), Mr. Al-Surchi (Iraq), Mr. Ponce (Mexico), Mr. Prastiono (Indonesia), Mr. Khan (Botswana),
Mr. Yamaguchi (Japan), Mr. Mthombeni (Zimbabwe)
2nd Row:
Mr. Tatara (Japan), Mr. Delcid (El Salvador), Mr. Sadat (Afghanistan), Mr. Pervez (Pakistan),
Mr. Koriala (Nepal), Ms. Muanji Kabiku (DR Congo), Ms. Satin-Vivas (Philippines), Ms. Srisanit
(Thailand), Ms. Jayasundara (Sri Lanka), Ms. Seneviratne (Sri Lanka), Ms. Do Thi (Vietnam),
Mr. Moreno (Brazil), Mr. Ito (Japan)
1st Row:
Mr. Iida (Staff), Prof. Harada, Prof. Wakimoto, Prof. Yanaka, Deputy Director Ukawa,
Mr. Chryssikos (UNODC), Director Sasaki, Mr. Koh (Singapore), Prof. Izumi, Prof. Kawaharada,
Prof. Sakonji, Prof. Tada, Ms. Lord (LA)

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