When corrupt politicians, public officials and business people steal public funds, they prefer to keep those funds in safe places. The UK is one such safe place. These funds laundered in and through the UK represent misery for millions of people around the world. The money has been stolen from health and education budgets, from infrastructure and law enforcement, and many other areas of public spending. This both degrades those services and removes funds that should rightfully be invested in their country of origin.
The funds can be laundered through legitimate businesses, property, sporting clubs, gambling, expensive cars, jewellery, art, investing in the stock market, or buying a private education for relatives. The funds can also be held in cash, ready to move at a moment's notice, or the UK financial and professional services industry can be used as part of a worldwide laundering process designed to hide the money's origins.
Shockingly, in 2011, the UN Office on Drugs and Crime assessed that over 99 per cent of illicit funds flowing through major economies and offshore centres every year are not detected by law enforcement. We think that this estimate is optimistic.
Transparency International UK research Closing Down the Safe Havens: Ending impunity for corrupt individuals by seizing and recovering their assets in the UK published today, sets out ways in which the situation can be improved. We believe these stolen funds should be identified, frozen, seized and - with proper safeguards - returned to the rightful owners.
We identify three areas in which the UK could incorporate good practice from other countries relatively quickly. These include enabling more rapid freezing of assets, following the Swiss model; taking on corruption cases even when they are being obstructed by the origin state, following good examples in France; and focusing and coordinating UK law enforcement resources, such as the US have done with their Kleptocracy Unit.
However, it should be remembered that, in relation to the assessed scale of illicit financial flows, all countries are failing to achieve significant asset recovery. The report notes that the UK is doing well by international standards and there is political momentum behind making improvements. However, it concludes that incremental improvements to the current system are insufficient to tackle the scale of the problem, and bold changes are needed in both legislation and approach.
We make three major recommendations that we believe, over the longer term, could substantially improve asset recovery rates:
• Consider creating a new law against corrupt enrichment. The government should consider creating new legislation that allows for suspicious assets of politicians and public officials, which are clearly in excess of reasonable expectations of their wealth, to be seized unless they can be proven to have been obtained legitimately.
• Improve the front-line defences in the private sector. The private sector - including banks, lawyers and accountants - needs to be engaged by the government as an ally in asset recovery; if necessary, through the use of powerful sanctions to deter complicity.
• Invest in asset recovery. The resources currently allocated to investigation and prosecution are inadequate to the size of the task. More could be done if the investigation and enforcement costs were reimbursed from the assets seized, before returning them. The UK government should explore this mechanism and develop a new international consensus on it.
The UK is well-placed to use the expertise of its law enforcement and its jurisdiction over the UK financial sector to achieve a step change in asset recovery. However, the UK, and other jurisdictions, will need to take a much more proactive stance, actively hunting down and seeking out corrupt illicit funds in order to be effective against the scale of the crime. Until then, corrupt individuals will continue to enjoy their illegal wealth with impunity, and the citizens from whom it was stolen continue to suffer.