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Egypt: Recovering Stolen Wealth

AfricaFocus Bulletin
Feb 16, 2011 (110216)
(Reposted from sources cited below)

Editor's Note

As Egypt turns from the gripping drama of the 18 days that brought down the Mubarak regime, there are multiple issues on the agenda. Among them not the least important is recovery of stolen wealth from the assets of former President Hosni Mubarak and his colleagues. That task will not be easy, requiring political will, technical competence, and international cooperation among many countries. But the chances are enhanced by recent international efforts to increase transparency and government capacity to deal with such issues.

Much of this new international infrastructure has been directed at money laundering from drug smuggling and other explicitly criminal enterprises and at countering financial support for terrorism. But increasingly international agencies and civil society groups have stressed the potential for using these mechanisms to fight corruption, tax evasion, and other illicit financial flows.

This AfricaFocus Bulletin contains (1) a statement on recovery of Egyptian stolen assets, from the international civil society coalition of the United Nations Convention against Corruption, (2) the (Transparency International) Bangkok Declaration on Stolen Assets Recovery and the Management of Frozen Assets, of November 2010, and (3) a summary tip sheet on the January 2011 report from Global Financial Integrity on illicit financial flows.

Another AfricaFocus Bulletin released today on the web (at http://www.africafocus.org/docs11/ar1102.php), but not sent out by e-mail, contains a 2007 summary briefing from the U4 Anti-Corruption Resource Centre, on the importance of recovery of stolen assets as well as practical obstacles and suggested policies to strengthen such efforts.

For news stories on efforts to recover assets of President Hosni Mubarak, see http://tinyurl.com/45c4cvk

Websites with additional background information include:

Financial Action Task Force (FATF)
http://www.financialtaskforce.org

Global Financial Integrity
http://www.gfip.org

Middle East & North Africa Financial Action Task Force (MENAFATF) http://www.menafatf.org

International Centre for Asset Recovery (ICAR)
http://www.baselgovernance.org/icar/

U4 Anti-Corruption Resource Centre, Chr. Michelsen Institute http://www.u4.no

United Nations Convention against Corruption (UNCAC) Coalition http://www.uncaccoalition.org

Previous AfricaFocus Bulletins on illicit financial flows, corruption, and the recovery of stolen wealth include:

Africa: Penalizing Transparency
http://www.africafocus.org/docs11/gf1102.php

Equatorial Guinea: Oil but No Rights
http://www.africafocus.org/docs11/eq1102a.php and
http://www.africafocus.org/docs11/eq1102b.php

Africa: Profiling Cash Drains
http://www.africafocus.org/docs10/fin1004.php

USA/Africa: Two to Tango
http://www.africafocus.org/docs10/usa1002.php

Nigeria: Curse of the Black Gold
http://www.africafocus.org/docs08/nig0807.php

Lesotho: Anti-Corruption Actions
http://www.africafocus.org/docs06/les0611.php

Africa: Stolen Wealth
http://www.africafocus.org/docs06/corr0604.php

Africa: Fix Resource Leaks
http://www.africafocus.org/docs06/abug0602.php

Kenya: Githongo Report
http://www.africafocus.org/docs06/git0602.php

UK/Africa: The Damage We Do
http://www.africafocus.org/docs05/ras0507.php

UK/Africa: Commissioning Development?
http://www.africafocus.org/docs05/act0503.php

Kenya: Corruption Fight Stalling
http://www.africafocus.org/docs05/ken0502.php

Kenya: Anti-Corruption on the Agenda
http://www.africafocus.org/docs03ej/ken0301.php

Mozambique: Corruption and Murder
http://www.africafocus.org/docs03ej/moz0303.php

++++++++++++++++++++++end editor's note++++++++++++++++++++

Call for action on wealth illicitly transferred from Egypt

Cairo, Paris, Berlin, 11 February 2011

United Nations Convention against Corruption (UNCAC) Coalition

http://www.uncaccoalition.org

The UNCAC Coalition, a group of over 240 civil society organisations in more than 100 countries, including the Afro-Egyptian Human Rights Organization (AEHRO) and NADAFA-Egyptians against corruption, is deeply concerned about public wealth illicitly transferred out of Egypt.

A report by Global Financial Integrity released in January 2011 finds that Egypt is losing more than US$6 billion per year - US$57.2 billion in total from 2000 to 2008 - to illicit financial activities and official government corruption.

Earlier this week, allegations were published about the wealth of Egyptian President Hosni Mubarak and his family. This wealth should be thoroughly investigated, and if illicitly transferred should be immediately frozen and then repatriated

The repatriation of assets illicitly transferred from Egypt could provide much needed funds for development in a country where 40 per cent of the population lives on less than US$2 a day.

The return of stolen assets is a fundamental principle of the United Nations Convention against Corruption, which provides that States Parties shall afford one another the widest measure of cooperation and assistance in this regard.

The UNCAC Coalition urges the Egyptian government to follow the Tunisian example and to take all necessary measures to enforce their right to restitution.

The Coalition further encourages States where stolen assets are reported to be hidden to freeze any assets owned or controlled by persons deemed to be responsible for the misappropriation of state funds in Egypt and individuals and entities associated with them.

In full accordance with their obligations under the UNCAC, Governments should also ensure that banks apply "enhanced due diligence" procedures with respect to transactions involving the above-mentioned Politically Exposed Persons (PEPs). We call upon Governments to publish the amounts of assets frozen and the names of the banks which froze these assets.

Note to Editors:

The United Nations Convention against Corruption (UNCAC) is the most comprehensive global legal framework for combating corruption. It is a binding agreement ratified by 141 states on standards and requirements for preventing, detecting, investigating and sanctioning corruption.

The UNCAC Coalition was formed in 2006 and is composed of over 240 civil society organisations in more than 100 countries. Its goal is to promote the ratification, implementation and monitoring of UNCAC. Further information can be found at htttp://www.uncaccoalition.org. Also, you can follow us on facebook ('UNCAC Coalition' group) and Twitter
(http://twitter.com/uncaccoalition)

In November 2010, Transparency International adopted the Bangkok Declaration on Stolen Assets Recovery and the Management of Frozen Assets. Please see: http://www.transparency.org/news_room/latest_news/press_releases/2010/bangkok_declaration

Media contacts:

Engi M. El Haddad
Afro-Egyptian Human Rights Organization (AEHRO)
engi@aehro.org

Maud Perdriel
Association Sherpa
maud.perdriel-vaissiere@asso-sherpa.org
+ 33 (0) 1 42 21 33 25

Gillian Dell
Transparency International - Secretariat
gdell@transparency.org
Tel: +49-30-343-82017


The Transparency International Bangkok Declaration

Bangkok, Thailand, 9th November 2010.

The (Transparency International) Bangkok Declaration on Stolen Assets Recovery and the Management of Frozen Assets

We, the representatives of Transparency International (TI) meeting in Bangkok, Thailand, on 9th day of November 2010 at the 2010 Annual Members Meeting of TI call upon all governments to give high priority on the international agenda (at the Group of 20, in the African Union, ASEAN and similar organizations, at the United Nations and in the World Bank and at other multilateral official institutions), without delay, to the critical issues related to the repatriation of stolen assets.

This resolution reflects the fact that despite some asset recovery successes, several countries are experiencing difficulties today in their endeavor to trace, seize, recover and repatriate assets and money illegally appropriated and transferred abroad by their nationals and other collaborators. Moreover, well over US$ 140 billion has been illegally and corruptly appropriated from Africa alone, by politicians, soldiers, businesspersons and other leaders, and kept abroad in the form of cash, stocks and bonds, real estate and other assets. While the issue of the circulation of criminal proceeds and money laundering is now being addressed to some extent, the status of frozen assets for the duration of litigation or resolution of disputes arising out of the ownership of these assets is not being directly addressed.

Background and General Considerations:

In determining action-oriented recommendations (see below), leaders of the TI movement from more than 100 countries affirmed the fundamental human right to development of all peoples; took note of the September 2010, United Nations' High Level Summit on the Millennium Development Goals; and, emphasized the negative role that corruption has played in undermining fragile democracies and hindering efforts to sustainable development.

The TI membership underscored the significant history of official statements, declarations and conventions that relate to the issue of repatriation of stolen assets and the relative failure so far of official actions to match the official rhetoric. In this regard TI's Annual Meeting noted the developments in the international legal framework under the United Nations Convention against Corruption and the African Union Convention on Preventing and Combating Corruption; interventions aimed at creating a global socio-economic order, including, the Extractive Industries Transparency Initiative and the Stolen Asset Recovery Initiative (StAR) of the World Bank.

TI recalled the Nyanga Declaration of March 2001 by 11 TI African chapters, and the Nairobi Declaration of April 2006 by seven TI chapters and the Recommendations for TI Action on Asset Recovery adopted in Bali in October 2007. TI emphasised today that the issues raised in this declaration pertain to the injustices done to peoples in many parts of the developing world beyond the African region and that the repatriation of stolen assets is a matter of great concern to peoples cheated by corrupt leaders in many parts of Asia, the Middle East, Central and Eastern Europe, Latin America, as well as Africa.

TI noted that the international community needs to recognise that institutions, corporations or individuals who agreed to receive or facilitate the transfer, investment or management of stolen assets cannot morally be the entities dealing with the same funds during the period for which the funds are frozen. In addition, agents of many financial institutions still travel to countries scouting for investments and assisting with the movement of ill-gotten assets. Moreover, regardless of the fact that stolen wealth becomes identifiable, traceable and potentially recoverable, these agents are comforted by the fact that the freezing of the stolen assets has no repercussions on the financial institutions they represent. Recommendations:

Accordingly the TI global anti-corruption movement resolved at its Bangkok Annual Meeting that:

  1. Governments across the landscape of the developing world should take action to prevent assets from being stolen, prosecute those alleged to have stolen assets and demonstrate the political will to fight corruption in a meaningful way.
  2. Countries in which the stolen assets are located should respond swiftly to requests for mutual legal assistance and develop and enforce laws and regulations that prevent frozen assets from staying lodged with the same institution, corporate structure or individual that accepted the asset prior to the freezing order.
  3. Financial institutions which do not release frozen assets to the legally declared owner after a release order has been issued by the competent jurisdiction should be held legally liable.
  4. Financial institutions should release frozen assets accrued of interest calculated on the basis of time elapsed between freeze and release.
  5. The World Bank and/or Regional Development Banking Institutions should create escrow accounts for frozen assets and that all governments and the international community should, as a matter of priority, ensure the swift transfer of all frozen assets to these accounts.
  6. The international community should act to establish the necessary regulative framework for mutual cooperation and for such escrow accounts without delay. Given that the handling of stolen assets is illegal, it is unacceptable that so much wealth stolen from Africa and many other developing regions and supposedly frozen is allowed to circulate freely in the economies of some of the world's wealthiest nations in Europe, the Americas, the Middle East and diverse offshore havens.
  7. International initiatives aimed at the promulgation of a more just global socio-economic order, including campaigns for debt cancellation, should include an explicit focus on recovering and repatriating assets stolen from developing countries as a necessary condition to the realisation of a more just and fair global community.
  8. Countries should tighten their anti-money laundering efforts to ensure that funds illicitly appropriated from developing countries are not granted safe havens in banks or non-bank financial institutions, or through trusts or similar entities operating in those countries.

Adopted in Bangkok, Thailand, this 9th day of November 2010


Tip Sheet: Illicit Financial Flows from Developing Countries 2000 - 2009: New report updates 2008 Global Financial Integrity analysis of illicit capital flight out of developing countries, examines Asia region

Global Financial Integrity

http://www.gfip.org/

January 2011

Report Background:

In December 2008, Global Financial Integrity (GFI) released "Illicit Financial Flows from Developing Countries: 2002-2006," a groundbreaking report which used World Bank and IMF data to estimate the quantity and patterns of illicit financial flows coming out of developing countries. The report found that illicit financial flows out of developing countries were approximately $1.06 trillion in 2006.

Illicit Financial Flows Report Update:

Updating its 2008 report, GFI has expanded the range of years analyzed, updated existing figures based on new data, and included a focus on Asia.

Report Findings include:

  • Illicit outflows increased from $1.06 trillion in 2006 to approximately $1.26 trillion in 2008, with average annual illicit outflows from developing countries averaging $725 billion to $810 billion, per year, over the 2000-2008 time period measured.
  • Illicit flows increased in current dollar terms by 18.0 percent per annum from $369.3 billion at the start of the decade to $1.26 trillion in 2008. When adjusted for inflation, the real growth of such outflows was 12.7 percent.

Real growth of illicit flows by regions over the nine years is as follows:

  • Middle East and North Africa (MENA) 24.3 percent,
  • developing Europe 23.1 percent,
  • Africa 21.9 percent,
  • Asia 7.85, and
  • Western Hemisphere 5.18 percent.
  • Asia accounted for 44.4 percent of total illicit flows from the developing world followed by Middle East and North Africa (17.9 percent), developing Europe (17.8 percent), Western Hemisphere (15.4 percent), and Africa (4.5 percent).

Top 10 countries with the highest measured cumulative illicit financial outflows between 2000 and 2008 were:

  1. China $2.18 trillion
  2. Russia $427 billion
  3. Mexico $416 billon
  4. Saudi Arabia $302 billion
  5. Malaysia $291 billion
  6. United Arab Emirates $276 billion
  7. Kuwait $242 billion
  8. Venezuela $157 billion
  9. Qatar $138 billion
  10. Nigeria $130 billion

Illicit Outflow Drivers, Trends:

  • Trade mispricing was found to account for an average of 54.7 percent of cumulative illicit flows from developing countries over the period 2000-2008 and is the major channel for the transfer of illicit capital from China.
  • Bribery, theft, kickbacks, and tax evasion were the greatest conduit for the illicit financial flows from the major exporters of oil such as Kuwait, Nigeria, Qatar, Russia, Saudi Arabia, the United Arab Emirates, and Venezuela.
  • Oil exporting countries, like Russia, the United Arab Emirates, Kuwait, and Nigeria, are becoming more important as sources of illicit capital.
  • Mexico is the only oil exporter where trade mispricing was the preferred method of transferring illicit capital abroad.
  • With half a trillion in illicit outflows in 2008 alone, Asia accounted for the largest portion of illicit financial flows from the developing world. Over the nine-year period examined, 89.3 percent, on average, of total illicit flows from Asia were transferred abroad through trade mispricing.
  • Financial flows from Malaysia have more than tripled from $22.2 billion in 2000 to $68.2 billion in 2008. This growth rate, seen in few Asian countries, may be a result of significant governance issues affecting both public and private sectors.
  • In real terms, illicit outflows through trade mispricing grew faster in the case of Africa (28.8 percent per annum) than anywhere else, possibly due to weaker customs monitoring and enforcement regimes.
  • GFI projects that in 2009 illicit flows from developing countries will total $1.30 trillion. This represents a significant slowdown from the 18.0 percent rate of growth over the period 2000-2008. This projected slowdown of illicit financial outflows is mainly due to a decline in trade mispricing resulting from a slowdown in world trade in the wake of the global financial crisis.

Implications for Economic Development Policy:

The illicit outflows measured in this report are approximately 10 times the amount of official development assistance (ODA) going into developing countries. The ratio of illicit financial flows coming out of developing countries compared to ODA is 10-1, meaning that for every $1 in economic development assistance which goes into a developing country, $10 is lost via these illicit outflows.

Solutions: Increasing transparency in the global financial system is critical to reducing the outflow of illicit money from developing countries.

Recommendations for achieving greater transparency:

  • curtail trade mispricing,
  • require country-by-country reporting of sales, profits and taxes paid by multinational corporations,
  • require confirmation of beneficial ownership in all banking and securities accounts,
  • require automatic cross-border exchange of tax information on personal and business accounts, and
  • harmonize predicate offenses [offenses included by definition in other offenses] under anti-money laundering laws across all Financial Action Task Force cooperating countries.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please write to this address to subscribe or unsubscribe to the bulletin, or to suggest material for inclusion. For more information about reposted material, please contact directly the original source mentioned. For a full archive and other resources, see http://www.africafocus.org


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