The Courage of its (Non) Convictions: The FATF Review of Asset Recovery

Asset recovery – the process by which the proceeds of crime are removed from perpetrators – is not a new concept. Indeed, having in place the necessary laws and processes has been a core element of the global evaluation process overseen by the international standard setter, the Financial Action Task Force (FATF), since its inception over 30 years ago. Despite this, asset recovery has often felt like an afterthought in the global debate; this has translated into stubbornly low global asset recovery rates, estimated at less than 1% of total global criminal proceeds.

However, after years in the wilderness, asset recovery is back in the limelight. Whether in the context of the US anti-kleptocracy drive, the so-called ‘freeze to seize’ debate on sanctioned Russian-linked assets, or the growing scale of crypto-asset confiscation, all the talk is that to be tough on crime, one needs to be tough on the proceeds of crime.

This has been recognised by the current FATF president, who has made asset recovery a priority for his tenure and, jointly with Interpol, has launched an initiative to ‘deprive criminals of their dirty money, marking a turning point in global efforts to recover illicit assets’. As part of this, the FATF is likely to examine ways in which it can usefully revise its standards and assessment methodology to drive up global asset recovery rates.

The Heart of the Issue – A Lack of Conviction

This focus on this issue by the FATF is to be commended. However, there is a risk that the consensus nature of the FATF’s decision-making, coupled with a significant schism in asset recovery theory, may inhibit the effectiveness of this project, driving the outcome to a lowest common denominator rather than the gear shift needed.

At the heart of this schism lies the question of what constitutes an appropriate and proportionate legal mechanism to deal with the assets of jurisdictionally fluid organised criminals and kleptocrats who perpetrate crimes in one jurisdiction and then stow the resulting assets in another, with a number of layers of obfuscation created in between. In many of these cases, securing a criminal conviction is not just difficult, but arguably an unrealistic prospect, meaning that post-conviction asset confiscation – the current minimum standard required by the FATF – is out of the question.

A Wolf in Sheep’s Clothing?

The increasing impotence of criminal law in reaching the proceeds of some of the most concerning national security threats has, over the past two decades, led a number of jurisdictions (including the UK) to implement non-conviction-based (NCB) asset confiscation – a legal mechanism which offers authorities the potential to take action against assets (rather than individuals) at a lower standard of proof in the civil courts in the absence of a conviction.

Herein lies the ideological schism. When viewed from a purely criminological standpoint, it is easy to make the case (as this author has done) that NCB asset forfeiture is simply a pragmatic response to the realities of the globalisation of crime and a necessary means of ensuring that categories of assets remain within the reach of the law. However, when viewed from a legal theoretical standpoint, opponents of these tools raise concerns regarding the extent to which they push at the boundaries of human rights compliance and circumvent the due process norms of criminal law. In short, to some, they are a criminal sanction dressed up as a civil measure.

The Guardian of the Debate

For an organisation as notoriously technocratic as the FATF, stepping into such an ideological debate may feel like a challenge for which it is not designed. And given its inability – as a consensus organisation – to simply overrule either side of the schism, what would be a realistic aim for the current exercise?

First and foremost, the FATF can position itself as the guardian of the debate. This means, at a minimum, creating a consensus that without alternative mechanisms to post-conviction confiscation, huge swathes of criminal assets are de facto insulated from the law. Beyond such an uncontroversial statement of fact, the review could usefully – and dispassionately – explore the consequences of this. One example would be the limitations placed on the very concept of the rule of law, which relies on everyone being equal before it, when – in asset recovery terms – they are clearly not.

Further, if the FATF wishes to really push the debate, it may choose to explore the real-world consequences of erring too heavily in asset recovery policy towards protecting qualified individual property rights over more collective and absolute ones. By way of example, there is a real-world consequence of protecting the qualified individual property rights of an oppressive kleptocrat, thus maintaining their powerbase and allowing them to continue to undermine a whole population’s absolute right to freedom of expression. In short, the FATF could use it position to achieve a consensus that asset recovery policy needs to balance the rights of the individual against the rights of the wider (global) community.

Levers for Change

But debate in this area, while necessary, is not action. How can the FATF operationalise a conceptual and theoretical debate through the levers available to it – revisions to its standards and methodology – in order to effect real-world change?

In terms of its standards, a good starting point would be to move beyond the criminal/civil divide and instead mandate a context-appropriate approach which achieves the end – ensuring assets remain within the reach of the law – regardless of the means. In doing so, the FATF could highlight emerging innovations which, rather than confronting the criminal/civil divide, find a way through. Consider, for example, Italy’s ‘societal danger’ model within its anti-mafia code, which we have written about previously, or the French ‘ill-gotten gains’ laws, which increase the perimeter of criminal law and thus the boundaries of assets within reach.

In terms of amendments to its methodology for assessing effectiveness (Immediate Outcome 8 – asset recovery), the FATF could require assessors to consider the extent to which jurisdictions are ensuring that laws and processes are innovating in response to changes in asset sequestration in a context-specific and jurisdictionally appropriate way. In this way, the FATF would institutionalise innovation by giving credit to jurisdictions that focus less on the means and more on the ends – ensuring crime doesn’t pay.

Walking the Line

In summary, the FATF has inadvertently stumbled into one of the key friction points inherent in modern liberal democracy – the tension between individual liberty and collective security. For a technocratic organisation like the FATF, addressing such philosophical tensions is uncomfortable. The easiest thing to do would be to step away and return to a place of safety. However, it should have the courage of its (non) convictions and find a way through the ideological minefield by reframing the response as one of context-specific innovation rather than criminal/civil divides.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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