Send the Bill to the Dictator
What would happen if the billions of dollars stolen by corrupt officials, gangs, and crooked corporations every year could be spent on development instead?
Corruption is the enemy of development. Corrupt officials embezzle an estimated $1 trillion dollars from government coffers every year according to a Center for Strategic and International Studies’ 2014 report. Earlier this year, the African Union/United Nations estimated that, in Africa alone, corporations, and organized crime steal $50 billion annually. To protect the investments of international donors and the welfare of citizens who need assistance, there is an urgent need to prevent further corruption. But what about money that has already been stolen? Can stolen funds be returned to their rightful owners, the people of the countries from which the funds were stolen? Can justice be done?
The answer is yes.
There are already real examples of stolen assets being recovered and effectively returned to meet the needs of developing societies. From Eastern Europe to Africa there are bright spots of progress — and the potential of major boosts of funds to developing countries at no taxpayer expense is enormous. If even a fraction of the billions of pilfered dollars now moving from bank account to bank account were recovered and returned to the people from whom they were stolen, citizens would benefit and corrupt officials would be held accountable. The problem, however, is that the process for recovering and returning stolen funds is complex and takes years and years to complete. To fulfill its promise as both an instrument of justice and a powerful force for international development, the international community, government leaders, and citizens need to speed up the return of stolen assets.
One of the best recent examples of how this can be done is a Kazakhstani non-profit organization called the BOTA Foundation. Created in 2008 with the support of the World Bank, and through an agreement among the Governments of Kazakhstan, the United States, and Switzerland, it was tasked with returning more than $115 million in disputed assets from foreign banks. It focused on a mission that all parties could get behind: improving the lives of vulnerable children and youth suffering from poverty in Kazakhstan through investment in their health, education, and social welfare. BOTA distributed the assets to the poorest people of Kazakhstan through needs-based scholarships for youth to attend institutions of higher education, direct cash transfers to encourage and enable households to access early childhood education and prenatal health services, and funds to non-governmental organizations to create or expand of social services such as a crisis hotline for at risk youth, and a new foster care model. [Full disclosure: our organization, IREX, helped to establish and support the work of the BOTA Foundation.]
Hans Jurgen, former deputy general counsel of the World Bank, said in an interview that the BOTA program “demonstrated for the first time that in cases of these types of funds, it is possible to come up with a mechanism whereby, at the end of the day, the money is being spent for the intended purposes and that actually the poor people benefit from these funds.” BOTA recently wrapped up its work, completing its distribution of the funds, making now an opportune time to review what was learned — and how those lessons can be applied to future efforts.
The process of asset recovery is notoriously slow and complex. Evidence has to be collected in the countries where the money was taken and possibly in foreign jurisdictions to identify and trace the stolen assets. Then, if enough evidence exists, the funds can be secured. Finally, whether by criminal or civil actions, a legal judgment must be obtained to transfer the legal ownership. Only then can the arduous process of returning them begin.
Previous asset return efforts have yielded mixed results, casting doubt on what dividends they might deliver for development in the future. One particular case, Switzerland’s 2004 return of nearly $500 million looted by late Nigerian dictator, Gen. Sani Abacha, has come under scrutiny by Nigerian citizens, and Nigerian and international accountability organizations. The return lacked transparency, critics say, produced poor results in the projects it funded, and, ironically, created further corruption. Funds can also take a decade or more to percolate into actual projects. The stolen assets that funded the BOTA Foundation were frozen by the United States in 1999 and it took 10 years before they even began to reach the people of Kazakhstan. To give another example, the United States has been working since 1999 to recover and return an estimated $250 million worth of assets stolen from Ukraine by former Prime Minister Pavlo Lazarenko. Nothing has been returned to date. In 2014, Switzerland began efforts to recover nearly $200 million in assets allegedly stolen from Ukraine by another former prime minister, Viktor Yanukovych.
Current cases, even successful ones, face the daunting task of how to return assets. The United States Department of Justice (DOJ) recently reached a settlement in a civil forfeiture case against the assets in the United States owned by the vice president of Equatorial Guinea, Teodoro Nguema Obiang Mangue, that he purchased with the proceeds of corruption. The settlement stipulates that these assets, valued at $30 million, will “be used for the benefit of the people of Equatorial Guinea.” The details of the return are yet to be ironed out, but the DOJ is making clear that the people from whom the assets were stolen must benefit. Asset recovery involving much larger sums is also under discussion in countries ranging from Nigeria to Ukraine.
Learning from the example of BOTA, there are a few important steps that future proponents of stolen asset return should take.
First, they should collaborate with the government, but maintain independence. Returning assets in a sovereign country without putting those assets at risk for further corruption is a tricky political balancing act, particularly in countries with governments that are new or have poor governance records. Balancing the voice and authority of the host government while also protecting the integrity of the process and the investment of those who used resources to recover and return the assets is difficult — but it is important to try. The right mix creates an environment that best safeguards funds and increases impact. While BOTA’s independence from the government reassured stakeholders that the assets would be safeguarded, collaboration was important to ensure both short- and long-term results. The government of Kazakhstan learned from BOTA’s experience, testing child-welfare service delivery models and ultimately adopting several of BOTA’s programs to improve government accountability and efficacy. For future asset return efforts, if government support is available and not a threat to the integrity of the return process, this support can significantly improve the long term results of the work.
Second, these efforts should align social needs and political priorities. The BOTA Foundation created a safe space for asset return by selecting a morally irreproachable mission — its work to improve child welfare — addressing the real needs of the country, and aligning that mission with the political agenda of the host government. The projects funded by BOTA contributed to the government’s own social development priorities and the needs of poor households, and was a priority for civil society organizations in Kazakhstan. BOTA was able to administer its programs with little contention since all stakeholders agreed that improving the lives of poor children; youth is a priority for Kazakhstan. For future asset return efforts, particularly in contexts where those who were implicated in harboring the assets are still in power, it is important to respond to a need shared by all stakeholders involved.
Third, they must create an oversight structure robust enough to provide legitimacy but not so burdensome as to prevent progress. There must be enough oversight by enough of the right parties to provide the checks necessary for confidence in both the financial transactions as well as program results. Additionally, and very important from an operations perspective, the parties providing oversight must have the bandwidth to handle the multitudes of decisions, approvals, and ultimately implementation of the return. BOTA had a multi-tiered structure. IREX, a board of trustees, the World Bank, and three government parties were responsible for ensuring that assets were returned transparently, to the benefit of poor Kazakhs. Though the structure was effective in safeguarding the funds BOTA was responsible for, it caused delays and frustrations. For future asset return cases, it would be helpful to streamline the process as much as possible.
Finally, citizens as individuals, or represented through civil society or community-based organizations should be involved in all phases of the process. They can assist by providing evidence and information from the ground to trace funds; designing return mechanisms by identifying and vetting needs and potential in country partners; implementing specific components of the program; and monitoring the return by documenting achievements, challenges, and impact. Citizens and organizations also have the ability to lobby on behalf of those most affected by corruption — the poorest of the poor. In the BOTA example, Kazakhstani citizens advocated to the United States and Switzerland for the funds to be returned for the benefit of the people of Kazakhstan. They helped manage the return by sitting on the BOTA Foundation’s board of directors. They helped monitor the asset return by talking openly to the media about what BOTA was doing, where the money was going, and whom it was benefitting.
Beyond these lessons, there are several concrete steps that states could take that would improve the process of holding corrupt leaders accountable and returning stolen assets to people in need. First, what the World Bank and U.N. Convention Against Corruption call “requested countries” (those trying to return assets) can enact legislation that makes it quicker and easier to freeze assets suspected of being proceeds of corruption. For example, in 2011 the Swiss passed a law that to make it easier for them to freeze and return assets suspected of being illicitly gained. Second, “requested countries” and “requesting countries” (the proposed beneficiaries of returned assets) need better ways to share evidence and information to bring cases to successful conclusions. Third, both requested and requesting countries should start working on how to return the cash — and how it will be spent — as soon as the recovery process starts, drawing on lessons learned from past experiences. Otherwise, it can take years from the time a settlement is reached until the assets are returned to the people in need.
Corruption is both a cause and result of poor governance on country and global levels, imposing steep costs on societies as it holds back economic and human development. Returning stolen assets to people in need is a big idea that satisfies twin objectives of justice and development. It also frees up new resources for development at a time of global financial constraint. Recovering and returning these looted funds offers the alluring potential to right wrongs committed by corrupt officials, rebuild public trust, and invest in the development of countries most affected by graft. The international community should seize this opportunity to promote international justice and development — letting those who abuse their power for personal gain foot most of the bill.
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