Any views expressed in this article are those of the author and not of Thomson Reuters Foundation.
What happens when the fox takes over the chicken coop? Or to put it in another context, what can you do when those meant to be responsible for running a country’s economy turn it into their own personal enterprise, particularly when such take-over is carried out by formally legal - but de facto illegitimate - rules and regulations?
The answer to the first question is comprehensively set out in the World Bank’s recent paper on Tunisia, ‘All in the Family’. The report vividly describes how former President Ben Ali and members of his clan controlled a clutch of firms which generated 21% of all net private sector profits, through a patient penetration and capture of the economy. The result was a business and financial empire, with built-in advantages for associates of the former President and severe restrictions for any competition. In the words of the report, regulations “…appear disproportionately to assist the profitability of Ben Ali firms”.
Such a level of methodical and systematic capture challenges the ‘typical’ understanding of corruption, as officials secretly receiving bribes and other advantages in exchange for government contracts, or dishonest leaders or ministers straightforwardly pilfering state funds. In fact, many of the business undertakings by ex-President Ben Ali and his clan did not contravene the letter of the law. The problem lay in the law itself and the misuse of the wide discretion granted to officials under that legislation. The illegitimacy and illegality lay with the abuse of power by government officials to ensure their personal interests flourished. Therefore what is at stake here is deeper sense of justice and fairness.
After ex-President Ben Ali was driven from power in 2011, the Tunisian State confiscated - by law - this network of businesses inside the country. Such action is not possible when going after assets hidden overseas; the only way is to pursue them by seeking ‘mutual legal assistance’ (MLA). But the premise of MLA is that a crime has been committed and can then be investigated and proved. If the laws themselves have been perverted to serve a personal interest and appear to have been formally complied with, it becomes almost impossible to pursue recovery or seizure.
Since 2011, the Tunisian authorities have been actively working to recover foreign assets (with the assistance of StAR), through well-proven methods such as tracing them abroad, improving domestic coordination and seeking international cooperation. As a result of those efforts, some assets have now been recovered and work is continuing to get back more of what was stolen.
But as “All in the Family” highlights, such ‘traditional’ asset recovery efforts are in all likelihood insufficient. While it is theoretically possible to prosecute abuse of power, fraud, or conflict of interest offenses, it is unlikely to result in anything substantial being recovered, given the enormous challenge involved in proving these criminal behaviors and in establishing a link between an asset and a specific act. It is also far from obvious that foreign jurisdictions would be willing to enforce confiscation orders based on such offenses.
The Swiss experience in the Abacha and Duvalier cases – as well as subsequent legislative developments – provides innovative ideas on how this challenge can be tackled. In Haiti and Nigeria, an in-depth analysis of the economic, legal and institutional system was undertaken to show how a group of connected individuals had ‘captured’ parts of the State’s apparatus for their own benefit, acting as a criminal enterprise. Once this was proven, it was possible – in legal terms - to reverse the burden of proof, forcing the holder of the assets deemed to be controlled by members of this clique to prove their legitimate origin rather than the prosecutor having to demonstrate their illicit nature. On April 9, 2014, the Attorney General of Switzerland ordered the repatriation of the equivalent of USD 40 million to Tunisia following precisely such reasoning. While this decision is not yet enforceable and is likely to be appealed, such a development is both welcome and telling. The expected next step in the Swiss legal process will deserve a very close attention.
But at the current time, very few countries have the legal framework or case law to be able do this. Having more jurisdictions introduce and implement such legislation would be a major step forward.
Combating corruption requires making dishonest officials realize that there is no impunity for their actions or safe haven for the proceeds of their crimes. The ‘foxes’ must be made to understand that crime will not pay them any dividends – otherwise the chickens (the assets) will remain at great risk.
‘All in the Family’ shines a bright light on the legal challenges of recovering the rotten fruits of years of State capture. We believe it is the responsibility of the international community to foster innovation and check whether the current legal framework for asset recovery really addresses today’s reality of grand corruption, and can contend with the methods of the kleptocrats.
Jean-Pierre Brun is a Senior Financial Sector Specialist at the World Bank
This blog was first published on the website of the Stolen Asset Recovery Initiative (StAR), a partnership between the World Bank Group and the United Nations Office on Drugs and Crime (UNODC). It is republished here with their permission.
You can follow StAR on Twitter via @returningassets