IN October 2010, Switzerland’s Federal Act on the Restitution of Assets of Politically Exposed Persons obtained by Unlawful Means (commonly referred to as the Return of Illicit Assets Act or “RIAA”) was passed by both houses of the Swiss Parliament. It became effective on February 1, 2011.
Although Switzerland has returned over $1.6 billion lying in various Swiss Bank Accounts – money which was illegally obtained and stashed by Politically Exposed Persons (PEPs)*, the developing countries did not have enough wherewithal to get the money back. This was mainly because these countries were not able to provide the Swiss Federal Criminal agencies with proper support to do the due diligence necessary to establish the link of the money to the depositor and its origin.
(The Swiss Federal Banking Commission in its guidelines on money laundering defines a PEP as a “person occupying an important public function”)
Though the money can be brought back using the Mutual Legal Assistance (“MLA”) – which formally establishes the framework to request the money back from the Swiss Banks, but the process had issues. The RIAA will help overcome those issues and make it easier to recover the money back. One example of the effect of change will be:
For example, if, because of the judicial and/or administrative inadequacies of the state involved, it is impossible to conduct a proper exchange of information or if there are no relevant criminal prosecution sanctions in place in the affected state, as is required under Swiss law, the affected state is presently unable to recover assets illegitimately deposited in Swiss bank accounts. The RIAA will allow restitution to states previously unable to obtain relief from Switzerland.
Another change in the framework is that the burden of proof in establishing whether the monies in question have been legitimately earned or not has been moved from the Swiss Authorities to the PEP.
Under the RIAA, the Swiss government has also increased the due diligence requirements in transactions involving PEPs and the burden of proof in establishing legitimate entitlement to the deposited funds has shifted from the Swiss authorities to the PEP. The Swiss government and/or its relevant agencies will no longer have to prove that the monies are deposited unlawfully or derive from illegitimate origins. Rather, a presumption of unlawful origin will automatically arise where a PEP’s wealth is subject to an extraordinary increase connected to the exercise of his public office and the level of corruption in the country of origin or surrounding the term of office is high. If the depositor is unable to prove a legitimate origin of his assets held in Swiss bank accounts, an assumption of illegitimate acquisition may be lawfully made and allow the Swiss Federal Administrative Court to confiscate the assets and ultimately repatriate the assets to the affected state.
The Courts’ power to confiscate illegitimately acquired assets extends to cases where the affected state fails to commence proceedings for the return of the assets. In these cases, the confiscated assets will be used to finance initiatives in the affected state (or country of origin of the illegitimately acquired assets) to the benefit of the population rather than any private financial institution in the affected state. (emphasis added)
Corruption in the highest level of the Governments is a scourge that affects many countries in the world.
According to World Bank estimates, corruption among holders of public office accounts for the misappropriation of between $20 and $40 billion each year. This corresponds to 20 to 40 percent of annual global development aid.
Coinciding with the RIAA in Switzerland, the World Bank President Robert Zoellick’s efforts to establish the StAR Initiative. The Stolen Asset Recovery Initiative (StAR)–is a partnership between the World Bank Group and the United Nations Office on Drugs and Crime that supports international efforts to end safe havens for corrupt funds.
Zoellick believes that “there should be no safe haven for those who steal from the poor.” The powerful have been looting the wealth of the poor for far too long. This has to be stopped.
StAR is based on Four Pillars. They are:
StAR helps countries establish the legal tools and institutions required to recover the proceeds of corruption. It helps them develop the specific skills needed to pursue asset recovery cases, through sharing knowledge and information, and providing hands-on training in asset tracing and international cooperation on legal matters. StAR helps countries apply these tools and skills by facilitating contacts between jurisdictions in support of asset recovery cases.
StAR works with and helps bring together governments, regulatory authorities, donor agencies, financial institutions, and civil society organizations from both financial centers and developing countries, fostering collective responsibility and action for the deterrence, detection and recovery of stolen assets.
StAR generates knowledge on the legal and technical tools used to recover the proceeds of corruption, promoting the sharing of global best practices.
StAR advocates for the strengthening and effective implementation of Chapter 5 of the UNCAC and other international standards to detect, deter and recover the proceeds of corruption. Working with global forums such as the Conference of States Parties to the UNCAC and its asset recovery working group, the Financial Action Task Force, and other multinational bodies, StAR fosters collective global public action and helps countries implement agreed standards.
Let’s look at some definitions used in this framework:
Stolen Assets are the proceeds of corruption: money, properties, or other assets, amassed through corrupt acts. These include bribery, embezzlement, misappropriation of property or funds, trading in influence, and abuse of functions in the public sector.
Asset Recovery is the process by which the proceeds of corruption are recovered and returned to the country of origin.
Financial Centers are jurisdictions (typically countries or territories) that offer a wide range of financial services, particularly to international and non-resident clients.
As per the StAR Report, three success stories in the past decades have been Peru, Nigeria and Philippines. But in the past year or so, with the passing of the RIAA, there have been more success in repatriation efforts of the Stolen Assets.
The StAR report briefly describes the Case Study for the success of repatriation efforts by Philippines:
In 1986, the Republic of the Philippines filed a request for mutual assistance with the Swiss authorities in connection with the repatriation of Marcos deposits in Swiss banks. Twelve years elapsed before these deposits weretransferred to escrow accounts in the Philippine National Bank (PNB) and another six years passed before the concerned $624 million was transferred to the Philippine Treasury. In between, several major legal hurdles had to be crossed, including presenting evidence that the monies were the product of embezzlement, diversion of public property, and plundering of the public treasury. Only after the Philippine government won a ruling that the monies could be moved out of Switzerland without a final conviction of Mrs. Marcos under article 74A of the International Mutual Assistanceon Criminal Matters Act (IMAC) was the money moved to the Philippine National Bank in 1998. It was released to the Philippine Treasury in 2004 following a Philippine Supreme Court decision ordering the forfeiture of the Marcos Swiss deposits in July 2003.
Quite apart from the hurdles faced by developing countries in asset recovery, at least three other sets of events have shone a spotlight on the problem of assets stolen by corrupt leaders.
- First,starting in 1997, several important pieces of international legislation against corruption, bribery, and transnational organized crime have been adopted. The landmark UN Convention Against Corruption (UNCAC), which came into force in December 2005, includes a chapter exclusively devoted to asset recovery, attesting to the need to address this problem urgently.
- Second, the 9/11 terrorist attack of the United States in 2001 has intensified the campaign against the financing of terrorism and money laundering. The main financial centers of the world, in being seen as a safe haven for the stolen assets of corrupt leaders, criminals, and terrorists, face a higher reputational risk today than they did 10 years ago.
- Third, developing countries themselves are gearing up to recover stolen assets and use the proceeds to fund development programs and facilitate the achievement of the Millennium Development Goals (MDGs)
(Emphasis Added and structured for easy reading)
Recently, the Swiss Government asked the Kenyan Government to apply for the illegitimate money that is lying in the Swiss Banks and it will work to repatriate it back.
But in a recent about-face and change in its banking laws, the Swiss government is asking Kenya to request restitution of its billions in stolen funds believed to be stashed away in Swiss banks.
Mwalimu Mati, the head of The Mars Group, says most of the stolen funds are either in secret accounts in banks in Switzerland or other European countries. The looted funds include over Sh158 billion from the Goldenberg scandal and Sh112 billion from Anglo-Leasing scam.
“The Swiss government is willing and ready to respond and act immediately to ensure that money looted and kept in our bank accounts is returned,” Switzerland’s ambassador to Kenya Jacques Pitteloud told the Sunday Nation.
In fact, Switzerland’s ambassador to Kenya Jacques Pitteloud, went further to say that even if the Government does not ask for the money, Switzerland will freeze the accounts and channel back to Kenya through Development Projects.
In an Oped piece for New York Times, Mark V. Vlasic, the Head of Operations of World Bank’s StAR Secretariat shared how Jean-Claude “Baby Doc” Duvalier’s illegitimate and now frozen assets to the tune of $5.8 million will be repatriated back to Haiti. He also explains why the passing of the R.I.A.A law was an important piece of this puzzle to get the Stolen Assets back:
With the Swiss Assembly’s passage of R.I.A.A., it is expected that the last barriers to repatriating Duvalier’s frozen assets — an effort that began in 1986 — will finally be removed, and approximately $5.8 million will be soon returned to Haiti, a country desperately in need of good news and money. (Had the law not passed, the Swiss freeze would have expired, and the funds would have been returned to the Duvalier family.) [Emphasis Added]
As Vlasic says it clearly, this is not the first time that Stolen Assets have been repatriated back to a country from which they were stolen. this has been going on for last 20 years. It has required efforts to be made from the Government of a country, but its not unheard of.
To be fair, Swiss efforts to return stolen assets are not new. According to Swiss reports, over the last 20 years the government has returned more than $1.5 billion in assets of criminal origin — including assets from some of the most famous kleptocrats in history such as Sani Abacha of Nigeria, Ferdinand Marcos of the Philippines and Carlos Salinas of Mexico. Despite these successes, however, asset recovery cases are not easy. They are governed by complex laws and international treaties, and as in the case of Duvalier, many languish for decades.
India and its Black Money
Depending on whom you talk to, the black money stashed in foreign banks could range from $1.5 Trillion to $9 Trillion. Apparently, the difference is huge between the two estimates, however the proportions we are talking is unbelievably large.
India tops the list for black money in the entire world with almost US$1456 billion in Swiss banks (approximately USD 1.4 trillion) in the form of black money. According to the data provided by the Swiss Banking Association Report (2006), India has more black money than the rest of the world combined. To put things in perspective, Indian-owned Swiss bank account assets are worth 13 times the country’s national debt.
One of the largest depositors is the “royal family” of India – the Gandhi Family.
Independent reports published through 1991 to 2011 calculated the financial net worth of India’s most powerful and traditionally ruling family (the Nehru-Gandhi political dynasty) to be anywhere between $9.41 billion (Rs 42,345 crore) to $18.66 billion (Rs 83,900 crore), most of it in the form of illegal monies. Harvard scholar Yevgenia Albats cited KGB correspondence about payments to Rajiv Gandhi and his family, which had been arranged by Viktor Chebrikov, which shows that KGB chief Viktor Chebrikov sought in writing an “authorization to make payments in US dollars to the family members of Rajiv Gandhi, namely Sonia Gandhi, Rahul Gandhi and Paola Maino, mother of Sonia Gandhi” from the CPSU in December 1985.(Emphasis added)
Is it any wonder that when someone like Baba Ramdev or Anna Hazare – two village groomed lacking in market and media savvy persons pick up the fight with the politicians whose entire careers depend on keeping up the Gandhi Family at the helm while they loot – there is a complete media onslaught?
Interestingly, one of the main argument against the Campaign against Corruption has been that this entire effort is “Naive”. Apparently, the analysts – some very prominent ones want us to believe that things like repatriation of money from Swiss Banks to the country of origin are as outlandish and childish dreams as Spiderman fighting the country’s enemies.
But when you peek outside the media controlled frenzy and brain washing, and one pours over the information that is available about the efforts like StAR Initiative and the laws like RIAA, one finds that it is now ridiculously easy to actually do what Ramdev is suggesting!
In fact, some countries were successful in doing even in the absence of RIAA! Such corrupt countries as Philippines and Nigeria are the poster childs for the efforts in repatriation of black money.
When even Nigeria can get some money back, and Indian Journalists try to frame the issue as a Spiderman-like fantasy, then its a statement on the level of buy in that has happened in the media by the Politically Exposed Persons (PEP). For, this article has taken no more than an hour of research on the internet while I was doing my other work, and I know an hour later that repatriation of black money back to its origin country is not only ridiculously easy, its something that Swiss Government is willing to do for Kenya even if the country’s leadership doesn’t apply for it! Forcefully!
If Kenya’s example is anything to go by, then India’s PEP-politicians must be working overtime to stop the Swiss Authorities.
And, that is the irony of the matter!
The Restitution of Illicit Assets Act, RIAA
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