International Asset Recovery Against Corruption

Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violation of human rights and erodes the order of society. This evil phenomenon, which intimately relates to the development of economy, is found in all countries. It is traditionally contended that corruption is a key element in economic underperformance and a major obstacle to poverty alleviation and development, but corruption is also aggravated rapidly in newly emerging economies. Corruption spreads widely in society life, which threatens political democracy, economy development, life and health, education, environment and justice of society.As regards to the diversity and universality of corruption, international community attaches importance to corruption offenses. The ultimate goal of corruption offenses is the obtainment of economic benefits, and the most essential measure to suppress this crime is the recovery of the proceeds. United Nations passed United Nations Convention against Corruption(UNCAC) in 2003, which is the only one internationally binding legal documents. During thirteen years after the convention came into force, the convention is enforced globally and widely. United Nations recalled United Nations Convention against Organized Crime, Inter-American Convention against Corruption, the Convention on the Fight against Corruption involving Officials of the European Communities or Officials of Member States of the European Union, the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions adopted by the Organization for Economic Cooperation and Development, the Criminal Law Convention on Corruption and the Civil Law Convention on Corruption adopted by the Council of Europe, the African Union Convention on Preventing and Combating Corruption. UNCAC is formed by five parts as following: prevention, criminalization, international cooperation, asset recovery as well as technology assistance and information sharing. As the innovative and crucial part, asset recovery is closely linked to other parts of UNCAC.UNCAC has provided legal framework for asset recovery, while other international organizations, regional organizations and nations also offered approaches to asset recovery respectively. With regards to the differences on legal systems, social economy, politics and culture among nations, it is worthy to be noted that the practice of asset recovery in one nation is distinct from the others. The object of this study is devoted to observing the legal framework of asset recovery against corruption, analyzing the factors influencing asset recovery and pursuing the approach to fulfill asset recovery successfully.In order to realize the goal above, it is essential to have an overall and comprehensive observation on asset recovery. International asset recovery refers to criminal approach, civil approach and administrative cooperation. In addition, asset recovery in China is also worthy to be noticed. Except introduction and conclusion part, this study has five chapters as follows.The first Chapter is about “The Overview of International Asset Recovery against Corruption”. The objective of this chapter is to discuss the concept of corruption and corruption offense, define the terms related to international asset recovery, seek the barriers to recover illicit asset on the basis of the observation of international and domestic practice. This part will lay a foundation for the following chapters by discussion of basic terms, definitions and systems. This Chapter also explores the main barriers to asset recovery. Firstly, corruption and corruption offense are two legal concepts without an internationally agreed meaning. The draftsman of UNCAC attempted to avoid the discussion of the definition of corruption and corruption offenses, but only required state parties to criminalize some conducts listed in UNCAC, and consider to criminalize some non-mandatory offenses listed in UNCAC. However, the differences of corruption and corruption offenses in legal systems lead to some offenses will not be prosecuted, and the political will to recover proceeds of crime diverse across countries. Secondly, varied means of money laundering give rise to the difficulties to trace and identify the transfer of proceeds of crime. Money laundering could help individuals to conceal the nature, origin, placement, disposition, transfer, ownership and other interests of assets. The widespread money laundering needs nations to devote amount of professional, financial and technological resources to trace and identify the assets. Thirdly, the differences of legal systems make challenges for asset recovery, including differences of protection of property, procedure and evidence law, as well as mutual judicial assistance. Countries will confront difficulties both in substantive law and procedure law in asset recovery.The Second Chapter is about “Criminal Approach to International Asset Recovery against Corruption”. Criminal approach includes recognition and enforcement of foreign confiscation order and confiscation of proceeds of crime of foreign origin. Recognition and enforcement of foreign confiscation order, as a traditional means to asset recovery, needs not only judicial assistance treaties as basis, but well-performed domestic confiscation system as safeguards. United Nations and European Union has realized this issue. UNCAC and New European Union Directives emphasizes the cooperation between countries as well as the coordination of domestic systems. Confiscation of proceeds of crime of foreign origin is also beneficial for asset recovery. States could establish criminal jurisdiction of money laundering, foreign bribery and theft to confiscate the proceeds of crime of foreign origin. This approach also requires the states recovering the asset provide claim as a legitimate owner of property. Well-established judicial assistance will also be helpful. In addition, civil Confiscation is an advantageous approach, which can confiscate assets 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. States can confiscate property of foreign origin without a criminal conviction, or recognition and enforcement the civil confiscation order issued by another state. Since confiscation is generally regarded as a criminal punishment, the attitude of states toward recognition and enforcement of foreign criminal judgment is always conservative. As regards to the impact of international law on national law, criminal law is the most challenging area. Comparing to civil and commercial law, states attach more importance to criminal law out of the sovereignty concern. Besides, confiscation order may include the detection, freezing, seizure of confiscation of property, which is also under the regulation of nation's financial management system. Therefore, only a few multilateral treaties and bilateral agreements stipulate mutual recognition and enforcement of confiscation order. The divergences among states on domestic law contain the asset liable to confiscation, civil confiscation and the standards of proof of confiscation. Some states do not establish the rules of confiscation proceeds of crime of foreign origin and civil confiscation because of human right protection. Return of confiscated asset is another important step for asset recovery. Unless the fruits of the crime are taken away from the perpetrators and returned to the rightful parties, people's trust in the rule of law and the criminal justice will be eroded. States shall abide the domestic law and bilateral agreements when return the confiscated assets. However, it is to be noted that Switzerland recently released a new federal act. According to the newly-issued act, Switzerland can freeze and restitute the assets of politically exposed persons originated from foreign corruption immediately after the act is found. Confiscated asset sharing is encouraged to facilitate the international cooperation in the area of asset recovery. UNCAC highlights the necessity of return and disposal of confiscated asset in accordance with the domestic law. Confiscated asset sharing is originated from the equitable asset program between federal agencies and non-federal agencies of the United States. UNCAC encourages states parties to give special consideration to conclude agreements on a case-by-case basis for asset sharing. Although the developing countries initially did not accept the asset sharing policy, an increasing number of countries have adopted this policy with the development of international cooperation. The management of confiscated assets after return is also crucial. Some states did not utilize the confiscated asset faithfully and effectively, which has been notified by international organizations and some states. Lack of supervision system, some governments accepting retuned confiscated asset may facilitate the asset to engage in a new round of corruption. Management of returned-confiscated assets has drawn attention of international community, but it has to be admitted that the international organizations and other states cannot regulate the management of confiscated assets in the governments accepting retuned confiscated asset substantively due to the protection of sovereignty.The third Chapter is about “Civil Approach to International Asset Recovery against Corruption”. As a creative tool in UNCAC, UNCAC requires state party to take measures to permit another state party to initiate civil action. The innovation of this provision is to regard a state as a civil party and to give a new approach for asset recovery. However, as a non-self-executive treaty, claimant cannot invoke UNCAC directly to file the lawsuits, but pursue a cause of action in the domestic law system. The popular cause of action includes breach of fiduciary, contract claim, tort claim and proprietary claim. Civil actions based on criminal actions are another choice for plaintiffs. States choosing civil approach have to consider about procedure, evidence, forum shopping and provisional measures regulated by domestic rules of the forum. Private remedies for corruption originated from domestic law. Claimants are allowed to institute legal proceedings on the basis of breach of beneficiary, breach of contract, tort damage and proprietary claim in the United States and United Kingdom, since corruption is regarded as a damage in the two countries. Philippines, Nigeria, Kenya, Peru have recovered illicit asset overseas successfully through civil lawsuit in the United States and United Kingdom. The advantages of private remedies lie on the lower proof standard to raise a claim. But the deficiencies are also obvious, especially the great expenditure of time and money, as well as the unfamiliarity towards foreign law system will be obstacle for claimants. Moreover, it's easier for states to raise their claims in embezzlement cases, but harder in bribery cases. States are required to provide stronger proof to prove the relationship between corruption conducts and damages suffered. Generally speaking, the civil approach, so far not extensively and effectively utilized, is adopted by states much less than the criminal approach.The fourth Chapter is about “Administrative Cooperation in International Asset Recovery”. Administrative cooperation plays a crucial role in asset recovery, especially the network building of financial intelligence unit as well as the informal assistance. Individuals often engage in money laundering through cash smuggling and incorporation of company or trust fund. They will also lauder money with the help of the financial institutions and professionals. The practitioner engaged in asset recovery could supervise the international transfer of proceeds of crime and provide the intelligence to enforcement agencies through gathering, analysis, distribution and exchange of financial intelligence under the help of network of financial intelligence unit. Informal assistance mainly refers to joint investigation, information communication and assistance in tracing, freezing, seizure and confiscation of proceeds of crime. Secret, widespread and high-speed is the three main features of the transfer of proceeds of crime. Control of the transfer of proceeds of crime needs the powerful international administrative cooperation. So far, the non-binding obligation of international convention and the soft-law standards of international professional organizations provide low motivation for international administrative cooperation. The network of financial intelligence unit involves the regulation areas both of criminal law and financial law. The governments supervision towards financial institutions and the self-regulation of financial institutions are contributed to the fight against money laundering. On the other hand, out of the pursuit of financial freedom and the maximizing of self-interests, some financial institutions are reluctant to enforce the anti-money laundering measures. As regards to informal assistance, the differences on political will and enforcement capacity among countries influence the states to perform the subsidiary and support function in asset recovery.The fifth Chapter is about "Towards A New Framework of Asset Recovery against Corruption in China". So far, China has established a fundamental framework on the basis of international law and national law. However, China's transactional corruption, financial corruption and collective corruption leads to the difficulty of recovering asset from abroad. According to the provisions of UNCAC, lack of international cooperation in confiscation, incomplete return and disposal of confiscated asset system, low utilization of civil remedies and insufficient administrative cooperation and are the main obstacles for asset recovery for China.There are some solutions to overcome these barriers. From legal perspective, to establish the mechanism of international cooperation in confiscation, to well utilize civil remedies, to set up the system of return of confiscated assets and asset sharing, to enhance the administrative cooperation are possible choices for China. However, implementing these measures will also confront in-depth barriers. Firstly, the international cooperation in confiscation needs the will of criminal cooperation among different states. Secondly, it is necessary to establish the mechanism of management of asset after receive confiscated asset from aboard. Thirdly, if choose to utilize private remedies, state and the state-owned corporations shall consider how to prove the damage or raise the ownership of the property in bribery case. Fourthly, enhancing administrative cooperation needs the corresponding capacity of financial intelligence unit and the law enforcement.Asset recovery against corruption has been recognized by the international community. Comparing to the universal desire, the reality seems dissatisfactory. The report of international or regional reports and the statistics from global civil society organization against corruption show international asset recovery does not achieve the goal. The reasons may come from three reasons: the interaction between international law and national law, the synthesis of criminal and civil law, the balance of conflicts between suppression of crime and protection of human rights.The interaction between international law and national law worsens the difficulties of asset recovery. Although asset recovery can be followed by international law with the guidance of international organization, the asset recovery is closely linked to economic policy, democracy and rule of law of one state. Since the Westphalia treaty was concluded, one of the most important of sovereignty is that state can establish and enforce their own criminal law, and it is the area that was affected less by globalization. The divergence of states towards criminal law is unavoidable. Criminal law is used to be internal affair. However, with the deepening of globalization, corruption and asset recovery are drawn attention from international community. Nonetheless, the contradiction and conflicts between national sovereignty and international norms still exist. The divergence on the desire to combat corruption, the definition of corruption offense, the measures of anti-money laundering and financial supervision, the capacity of technology and professionals give rise to the dissatisfaction of the execution of international convention in the states. From the prevention and detection of transfer of proceeds of crime, the investigation, prosecution and adjudication of corruption, to the return of asset and asset sharing, every step needs well-performed judicial assistance. Even in private remedies, the cooperation in procedure and evidence is also significant. Cooperation is built on mutual trust and information sharing, but it may be impeded by too wide-ranged reason of refusal, too rigorous conditions of judicial assistance and too time-consuming proceeding. Due to sovereignty of state, international community and some states cannot interfere the management of asset after return. In the state with serious embezzlement, poor management of asset will induce another round of corruption.The synthesis of criminal law and civil law will also hinder asset recovery. International anti-money laundering industry requires states to supervise financial institutions and combat money laundering. Criminal charges are reliant on the evidence provided by financial institutions, but financial institutions may fail to abide by criminal law because of pursuit of business benefits or bank secrecy requirement. As a result of the requirements from both financial law and criminal law, amounts of shell banks, illegal private banks and tax heavens offer more approach for corruption offender. The mobility of proceeds of crime may cause several states to assert jurisdiction, and criminal concurrent jurisdiction might violate the principle of double criminality. The cooperation for confiscation involves of property ownership and financial regulation, thus, the widespread system of recognition and enforcement of confiscation order has not yet been established. Civil proceedings may be impeded by criminal proceeds in other states in evidence collection. In the civil lawsuits based on criminal actions, claimants may not gain remedies because of the criminal adjudication.Balance of conflict of interests between combating corruption and protection of human rights is essential issue in asset recovery. Both in criminal approach and civil approach, the right of property of offender and third party may be affected. Some states may require more sufficient evidence, more complicated judicial and administrative proceedings because of protection of the rights of property when combat corruption. Civil confiscation is a useful tool in asset recovery, but it is not be widely accepted owing to concern of human right. Principle of protection the right of property may be utilized by corruption offender, and they may claim the ownership through private remedies to delay asset recovery and transfer, sell or dissipate property. Offender may also invoke due process, non-self-incrimination and double criminality to refuse to testify in the court, which might impede criminal proceeding. China has also been influenced by the three above reasons. Firstly, From the perspective of mechanism and enforcement, to establish the domestic system and satisfy the requirements of international cooperation are crucial. Secondly, It is important to utilize both criminal law and civil law in asset recovery. Except for criminal governance, financial regulation and civil law shall also be considered. Thirdly, the protection rules of human rights and property rights of other states shall be noticed, in order to facilitate asset recovery.As regard to international asset recovery against corruption, international community has reached an agreement. International and national law system so far has been basically established, but the enforcement mechanism and international cooperation still needs to be enhanced and improved. Fortunately, both international society and China has realized the problem. Continuous concern of asset recovery from the United Nations Drugs and Crime office, World Bank, the United Nations Development Program, the United Nations Economic and Social Council, International Monetary Fund, Organization for Economic Cooperation and Development, European Union, Council of Europe, Organization of American States, African Union, Financial Action Task Force, Asia-Pacific Economic Cooperation is an inspiring phenomenon. At the same time, the ambition of China to combat corruption, the achievements in judicial cooperation and asset sharing are also welcomed.Asset recovery is beneficial for the steady and safety of society, manifests democracy and justice, promote global development and rule of law. Asset recovery needs the well-performed mechanism and actual implementation. Transferring of proceeds of crime across countries is a global phenomenon affecting society and economy, and only the joint action of states, international organizations, non-governmental organizations, civil society and community organizations can asset recovery be fulfilled.