The EU’s struggle to recover the proceeds of grand corruption

Last year’s report by Transparency International EU (TI EU) about asset restitution in Europe showcases what is a rather ‘unequal race’. On the one hand, we have autocrats and officials from non-EU countries attempting to hide their illegally acquired assets (tens of billions of dollars) in the European Union (EU). On the other hand, we have the EU member states trying to ‘catch up’ by freezing these assets and returning them to their rightful owners – the populations of the victim states.

An unequal race

These victims are the countries afflicted by autocratic regimes that drain the countries’ domestic budgets in a ‘self-service’-manner. One might think that the EU states – rich and democratic, supported by the EU’s institutional framework – have an easy job of it when confronted by this situation. Yet, the opposite is true. What we are faced with here in terms of fairness is highly reminiscent of ‘the 100-metre race scene’ from Sacha Baron Cohen’s 2012 satire “The Dictator”. And this comparison is not far-fetched at all: it is the EU states – divided and limited by legal regulations and moral considerations – that draw the short straw in the face of clever and unfettered rulers from beyond the EU.

The report lists many individuals accused of embezzlement. It includes ‘old foes’, who have tried to hide assets on EU soil: Saddam Hussein of Iraq, Muammar Gaddafi of Libya, Ben Ali of Tunisia, Hosni Mubarak of Egypt, Mobutu Sese Seko of the Democratic Republic of the Congo and Viktor Yanukovych of Ukraine. The list is longer still and includes other, lesser-known figures accused of similar transgressions. Interestingly, the report states early on that grand corruption “undermine(s) the stability of individual states” (p.3). Thereby TI EU makes it clear that it certainly does not side with the accused autocrats.

Any attempt to oppose corrupt rulers who steal money from their state’s budget sounds admirable. In fact, large-scale corruption only undermines these states in the long run. In the short-term the opposite is true: the embezzlement of funds stabilises the regimes of offending states. This momentary ‘stability’ is then used to justify these corrupt regimes that often have little respect for human rights in general.

Congratulations EU asset recovery, you have been really effective… NOT

The report is not exactly a hymn of praise for the state of asset recovery of EU countries. In the period 2010-2014, only 1.1% of illegal assets in EU countries were confiscated. And in 2006-2012, the only country that in fact returned assets was the UK. (Yes, that UK, which left the EU as a consequence of its 2016 Brexit referendum result!). On the another hand, the TI report praises the EU for two pieces of legislation. One is a 2014 Directive on the freezing and confiscation of instrumentalities and proceeds of crime in the EU. The other is a 2018 Regulation on the mutual recognition of freezing and confiscation orders.

However, the report criticises the fact that these two instruments do not go far enough. The poor legal systems in the ‘victim’ countries slow down the entire repatriation process. This is not the only problem, though. Of course also the suspects’ continued influence in these states often hampers asset restitution. This is the case either because the money returns directly into the hands of those that embezzled it in the first place. Or, in other cases, members of the same autocratic regime take such cases to the Court of Justice of the European Union, else the country’s Ministry of Foreign affairs sabotages the process on a diplomatic level. A major problem is also the separateness of EU asset freezes from national-level Mutual Legal Assistance (MLA) repatriation. MLA is either not requested by the victim state at all, or the cooperation collapses on the way because of problems in that country.

In its recommendations, the TI EU report singles out (non-EU) Switzerland as an example of how asset recovery is done right. The Swiss 2015 Federal Act on the Freezing and the Restitution of Illicit Assets held by Foreign Politically Exposed Persons provides a coherent framework that combines the freeze with the return of assets.

The report asserts that EU sanctions should be not only country-based, but ‘horizontal’. This would allow reaching individual perpetrators. Beyond that, non-conviction based (NCB) methods shall become a part of the 2014 EU Directive. This means that the focus would not only be the person accused of the crime, but the proceeds of that crime themselves. Such an approach seems sensible, as it would lower the threshold that conviction-based methods entail (which stipulate that confiscations are only possible if the perpetrator has been convicted for his/her embezzlement beforehand).

Greater responsibility for the holding states

The report speaks out in favour of using ‘legal presumptions’, by which it in a way catapults us into the year 2054. That is the year in which the plot of “Minority Report” (2002) takes place. In the film, a special police unit with the ability to look into the future captures murderers before they have committed their crime. In a sense, this is the direction into which the ‘legal presumptions’-tool goes. Here, the burden of proof is reversed and the accused has to prove his innocence. This makes convictions possible, even if there is not 100% of proof that a criminal act has been committed, as long as there is the (legitimate) ‘presumption’ that this has occurred.

The report continues by exploring how the handling of confiscated assets should be written into EU legislation and asserts that EU member states should be more systematic about collecting their data in this regard. This would allow for the comparison of member states’ performance regarding asset restitution. Finally, the TI EU advocates the empowerment of the member states. As such, the entire process of the assets’ freeze and – repatriation should be managed rather by the holding states than the victim countries.

The idea to let mainly the holding states manage the process might be conceived by the victim states as a neo-colonial approach. It seems rather unambitious to mostly just accept the problematic conditions in the victim states and their institutional-, judicial- and political- make-up in what are primarily developing countries and to say that EU states – as they are ‘functioning much better’ – ‘will manage’. Of course, this is linked to TI EU’s ambitious vision of investing the recovered funds in the victim states for the benefit of their development.

However, it is not difficult to guess how such sugar-coated ideas end up. The report neglects the fact that it would make much more sense to let victim states lead the charge. This would then not limit the positive effects of such forms of international cooperation to asset restitution only. It would truly help to improve the situation in victim states long-term. Entrusting victim states with the responsibility in connection with some form of direct benefit for the holding states would tremendously increase the latter’s incentive to help fix the victim states’ institutional deficits instead of doing everything for them. This would address the causes and not just the symptoms.

But apparently – before anything can change for the better – we will have to wait until Switzerland passes another act: one that this time will address how industrialised states can aid fundamental reforms of political systems in developing countries. Maybe only then will EU member states finally be able to help victim states lastingly – if not by taking then own initiative, then at least by copying Switzerland… again.

by Thomas Ewert

Thomas Ewert is an alumnus of Maastricht University, where he did an M.Sc. in European Studies, graduating in 2019. He also holds an M.A. in International Security Studies from London Metropolitan University. He can be contacted at t.ewert@student.maastrichtuniversity.nl

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