Insights & Reports > Kroll Global Fraud Report

Preventing the transfer of the criminal proceeds of corruption must become the new focus in asset recovery. While the 2005 UN Convention against Corruption, fast-acting criminal and civil “freezing” measures, among other tools have brought significant progress in recent years, the odds are still heavily stacked against countries seeking to recover these funds.

To begin with, high level corruption usually involves powerful government officials who will have weakened, or allowed corruption to infiltrate many domestic institutions. Although current international arrangements require a high level of evidence before asset freezing and recovery can begin, much of this evidence may still be in the hands of the corrupt officials themselves.

Another advantage for the wrong-doer is that today’s global financial system, especially its speed, makes concealing money extremely easy. In particular, the often huge amount of money involved in this type of activity lets perpetrators engage in highly advanced money-laundering.

Next, the investigative and legal processes necessary to recover funds deposited in foreign accounts are complex, therefore requiring highly technical skills/ability for those pursuing them. They are also costly and time consuming – usually lasting for years – so that success can depend on the funds available for the case. The necessary tasks include conducting financial investigations, forensic accounting, requesting mutual legal assistance, and obtaining a solid understanding of relevant laws in the countries where the assets have come to rest. In states with rampant corruption, such capacities and resources are often simply not there. Indeed, their absence probably helped create the conditions that facilitated the corruption in the first place.

Finally, after all these hurdles are overcome, foreign states can be reluctant to return assets to a new regime when there is a perceived risk that the money will only be looted again by the latest crop of officials.

Given these obstacles, recovery efforts are all too often unsuccessful or produce marginal results. Instead of restitution, preventing corrupt officials from exporting their assets to begin with would be a much more efficient use of resources. While the international community may not be able to prevent corruption within any given country, it can make it difficult for the perpetrators to export their gains for safekeeping. Moreover, it is perfectly feasible to fashion global arrangements to ensure that accurate records are created and kept for any transfer that does occur. These could prevent the money from being concealed and make it much easier to trace and locate, as well as to establish entitlement to it, later on. The onus should be placed on financial institutions to conduct wider and deeper gathering of relevant information. A long term analysis of this data could help combat corruption because the enormous amount of money involved and the large numbers of transactions needed to conceal it should reveal indicative patterns. Such intelligence would make tracing that much easier. Finally, financial entities should be encouraged to keep records for a much longer period of time than at present in order to make such analysis easier.

In addition to reducing the need to repatriate the proceeds of corruption, with all the attendant difficulties, such preventative measures could alleviate the fears of some countries that the assets returned would most likely become prey to corrupt practices again, and therefore ease their hesitation to cooperate. Countries embarking on a recovery effort might even consider committing a certain percentage of the returned assets to help strengthen the national institutional and legal anticorruption framework as a way to reduce both the scale of the problem and the concerns of other states.

As with any crime, restitution is good, but prevention is better.

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Charles Carr is head of fraud prevention and anti-corruption for Europe, Middle East and Africa. He was previously head of the Milan office and country manager for Mexico and specializes in fraud prevention programs and training. He previously spent time as an oil futures broker for Kidder Peabody.

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