Reform drive: bolstering global asset recovery efforts has been a key priority of Raja Kumar's FATF presidency. Image: Associated Press / Alamy
The revised FATF standards for asset recovery and international cooperation are welcome, but they still do not fully address specific needs of Global South jurisdictions.
Asset recovery – the process by which the proceeds of crime are reclaimed from the hands of criminals – acts as a linchpin in the global fight against financial crime, as it dismantles the financial foundations of criminal enterprises and shows that ‘crime does not pay’. However, the global asset recovery picture has always been particularly grim: a (now outdated) estimate suggests that countries intercept and recover less than 1% of global illicit financial flows, underscoring the urgency of reforms.
To respond to the need for an ignited asset recovery response, in mid-November, the Financial Action Task Force (FATF) – the international standard-setter – released amendments to its Recommendations 4 and 38, targeting asset recovery and international cooperation. These long-awaited amendments – the first FATF updates on asset recovery since the 2012 publication of the Best Practices on Confiscation – mark the last of the watchdog’s efforts to upscale the recovery of proceeds of crime under Raja Kumar’s presidency.
According to Kumar, they are the ‘most significant reforms on the Recommendations related to asset recovery in decades’. The amendments respond to the need for stronger legislative tools and better information sharing mechanisms between jurisdictions.
However, global differences have emerged. Due to the international nature of illicit financial flows, the asset recovery response has to be cross-border, responding to the needs of both the countries from which the assets are plundered and those where the funds most often end up. With this in mind, a closer look at the updated FATF standards reveals that, while they target most key gaps in the asset recovery frameworks of the Global North, the same cannot be said for their impact in the Global South.
The Amended Recommendations
Igniting asset recovery efforts has been a key priority of the Singaporean presidency of the FATF, to send ‘a clear signal that we are acting to cripple organised crime syndicates, better protect society and contribute to sustainable economic growth’. The updated recommendations reflect this priority and mark the conclusion of a two-year project that the FATF undertook alongside partners such as INTERPOL to support countries in recovering more proceeds of criminal activity.
Due to the international nature of illicit financial flows, the asset recovery response has to be cross-border
Among the main reforms, the amendments introduce a new requirement for countries to establish a non-conviction-based (NCB) confiscation regime in their legal systems. NCB has proven to be a useful tool in the asset recovery arsenal and has been recommended by experts – including this author – to obviate some of the challenges of recovering proceeds when criminal prosecution is unlikely, or worse, impossible. This is because it allows authorities to go after assets, rather than individuals, at a lower standard of proof.
The updates also encompass recommendations for introducing tools for temporarily freezing and seizing assets at an early investigation stage to prevent asset flight, obligations for countries to recognise each other’s preliminary and final court orders in relation to the assets that are subject to confiscation, and the implementation of extended confiscation. This is a measure whereby criminals are deprived of assets that derive from a ‘criminal lifestyle’, or which exceed their known lawful income – a useful measure when proving a direct link between an asset and an offence is more difficult, such as in the case of kleptocratic wealth.
Finally, the recommendations advocate ‘good communication and informal cooperation’, which mostly translates into a greater use of Asset Recovery Inter-Agency Networks – informal networks of law enforcement agencies that operate at the regional and international level to facilitate the exchange of information and facilitate cross-border investigations.
A Global Response to Global Needs?
These recommendations appear to target some of the key issues that have hindered recovery efforts in countries such as the UK and Switzerland and in the EU. The synergy with reforms happening at the regional and national level in the Global North is evident: for instance, most of the recommendations’ amendments mirror proposals discussed at the EU level.
But what about the Global South? A CFCS work-in-progress analysis of common trends and recommended actions in Mutual Evaluation and Follow-Up Reports of countries within the Asia-Pacific Group (APG), the Caribbean Financial Action Task Force (CFATF), the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), the Financial Action Task Force of Latin America (GAFILAT) and the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) regions over the past five years shows that their asset recovery challenges have only been considered in the amended standards to a certain degree.
If the goal is to surpass the 1% mark in confiscated proceeds of crime globally, the response must consider the needs of Global South jurisdictions
Although a number of shortcomings related to asset recovery identified in the Global South Mutual Evaluation Reports are covered by the amended FATF standards, including the development of a comprehensive national policy on asset forfeiture and tools to prevent the dissipation of assets, multiple key recommendations for countries in the APG, CFATF, ESAAMLG, GAFILAT and GIABA regions are nowhere to be found. These include increasing resources for more effective investigations and recovery of proceeds of crime; the training of law enforcement officers, judges and prosecutors; and the publication of statistics on assets frozen, seized and forfeited. This is a clear miss by the FATF. These key points would substantially benefit asset recovery responses not just in Global South countries, but across the world. As it has often been argued, the successful recovery of assets is dependent not only on legislation, but also on effective enforcement, which is itself dependent on appropriate resourcing, capacity and capability.
Lighting the Match
The amendments to Recommendations 4 and 38 reinforce a comprehensive and coordinated approach to asset recovery, both domestically and internationally. The strengthened tools and mechanisms outlined in the updates resonate with the calls for improved asset management, international cooperation, and prioritisation of asset recovery efforts. However, they don’t necessarily respond to the needs of all FATF members in the same way.
If the goal is to surpass the 1% mark in confiscated proceeds of crime globally, the response must consider the needs of Global South jurisdictions. Bridging these gaps is essential for a more equitable and effective strategy for asset recovery on a global scale. Due to the international nature of illicit financial flows, the lack of resources and training for law enforcement agencies, prosecutors and judges in Global South countries can hinder the development of investigations and prosecutions elsewhere. The lack of comprehensive and up-to-date data also prevents a full understanding of the scale of financial crime and the adequacy of global efforts. It also affects Global North countries directly, too: as destination countries of looted money, they need to rely on skilled prosecutors and investigators in the Global South to ensure the safe return of proceeds of corruption.
In conclusion, while the amendments light the match for advancing asset recovery globally, the success of these reforms hinges on fostering a more inclusive approach that caters to the diverse needs of countries worldwide. By bridging the existing gaps, the FATF can strive towards a truly global asset recovery response, sending a resounding message that illicit activities will not go unpunished, regardless of geographical location.
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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Centre for Financial Crime and Security Studies