STOP KLEPTOCRATS THE EU MUST NOT BE A VAULT FOR THE WORLD’S STOLEN ASSETS Call for a sweeping reform of EU asset recovery policy Transparency International is a global movement with one vision: a world in which government, business, civil society and the daily lives of people are free of corruption. With more than 100 chapters worldwide and an international secretariat in Berlin, we are leading the fight against corruption to turn this vision into reality. Transparency International EU (TI EU) leads the movement’s EU-focused advocacy aimed at preventing and addressing corruption as well as promoting integrity, transparency and accountability in the EU institu- tions and in EU internal and external policies, programmes and legisla- tion. www.transparency.eu Authors: Laure Brillaud and Matilde Manzi Illustration and design: Cynthia Raphaël Every effort has been made to verify the accuracy of the information contained in this report. 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CONTENTS 2 EXECUTIVE SUMMARY 3 THE EU’S STOLEN ASSETS PROBLEM 5 GAPS IN EU ASSET RECOVERY POLICY AND PRACTICE 7 RECOMMENDATIONS 14 ANNEX A : Case Studies 19 ANNEX B : Civil Society Principles for Accountable Asset Return 1 TRANSPARENCY INTERNATIONAL EU EXECUTIVE SUMMARY In recent years, scandals involving misap- corrupt individuals and their money. Asset propriation of public funds and money-laun- recovery makes crime less lucrative, saps dering by foreign politicians, business mag- criminals of their power, deprives them of nates and their family members have laid “seed money” and provides resources to bare the role of the EU as an attractive desti- compensate victims.2 It can act as a true nation for their ill-gotten gains and public deterrent by demonstrating that the risk of money stolen from third countries. This being sanctioned and having assets confiscat- stolen wealth ends up in bank accounts, ed is too high. luxury goods, or high-end property across Europe. This is why Transparency International is calling for a comprehensive reform of EU However, despite notorious cases of individ- asset recovery policy to ensure that stolen uals laundering money in Europe making assets held in the EU do not remain in the the headlines, the EU performs poorly when hands of kleptocrats and criminals, and are it comes to confiscating and returning these instead returned to their rightful owners. looted assets. It is estimated that within the As the EU envisions a revision of its asset EU only 2.2% of criminal proceeds are recovery legislation in 2021, it should con- seized, and an even smaller percentage sider introducing provisions to facilitate: (1.1%) are confiscated. Very little is returned to victim populations.1 • The confiscation of stolen assets in situa- tions where securing a prior conviction is By failing to address loopholes in its asset not possible; recovery system, the EU is enabling the • The return of assets to the country of impoverishment of the countries from origin in a transparent and accountable which the stolen money originated, and manner and for the benefit of the victim allows this dirty money to be diverted into populations; Europe. • The collection and systematic publica- tion of data on Member States’ asset The recovery of illegal assets held within recovery efforts disaggregated on a its borders is critical if the EU wants to case-by-case basis. stop serving as an attractive destination for 1 Europol, Does crime s�ll pay?, Criminal Asset Recovery in the EU – Survey of Sta�s�cal Informa�on, 1 July 2016, pp.4,11. Retrieved from h�ps://www.europol.europa.eu/publica�ons-documents/does-crime-s�ll-pay 2 Council of Europe, Figh�ng organised crime by facilita�ng the confisca�on of illegal assets, 26 March 2018. Retrieved from: h�p://seman�c-pace.net/tools/pdf.aspx- ?doc=aHR0cDovL2Fzc2VtYmx5LmNvZS5pbnQvbncveG1sL1hSZWYvWDJILURXLWV4dHIuYXNwP2ZpbGVpZD0yNDUwNyZsYW5nPUVO&xsl=aHR0cDovL3NlbWFudGljc GFjZS5uZXQvWHNsdC9QZGYvWFJlZi1XRC1BVC1YTUwyUERGLnhzbA==&xsltparams=ZmlsZWlkPTI0NTA3 2 TRANSPARENCY INTERNATIONAL EU THE EU'S STOLEN ASSETS PROBLEM In recent years, scandals involving embez- Despite notorious cases making the head- zlement of public funds and money launder- lines, the EU continues to perform poorly ing by foreign politicians and business mag- when it comes to confiscating and returning nates have laid bare the role of the EU as an this loot. EU asset recovery efforts are not attractive destination for their ill-gotten paying off and recent reforms have only gains. This stolen wealth sits in the coffers of produced marginal progress.4 It is estimat- European banks, or is invested in yachts, ed that within the EU only 2.2% of criminal luxury goods, or high-end property in Euro- proceeds are seized, and an even smaller pean capitals. percentage (1.1%) are confiscated. Very little is returned to victim populations.5 It is believed that the family of former Tuni- sian President, Zine El Abidine Ben Ali, hid as By failing to address loopholes in its asset much as 15 billion euros - equivalent to recovery system, the EU is enabling the about one third of the average annual GDP impoverishment of the countries from of Tunisia - in bank accounts across the which the stolen money originated, and world, many of them in Europe. Meanwhile, allows this dirty money to be diverted into Gulnara Karimova, daughter of the former Europe. On average, 1 trillion EUR of illicit leader of Uzbekistan, channelled stolen money is believed to circulate around the money into banks, offshore companies, world every year - half of which comes from luxury goods and property in at least 9 EU developing countries.6 countries (see Table 1 and Annex A).3 3 h�ps://transparency.eu/wp-content/uploads/2020/07/upload_asset_recovery_compress.pdf 4 Report from the Commission to the European Parliament and the Council, Asset recovery and confisca�on: Ensuring that crime does not pay, COM/2020/217 final. Retrieved from: h�ps://ec.europa.eu/home-affairs/sites/homeaffairs/- files/what-we-do/policies/european-agenda-security/20200602_com-2020-217-commission-report_en.pdf 5 Europol, Does crime s�ll pay?, Criminal Asset Recovery in the EU – Survey of Sta�s�cal Informa�on, 1 July 2016, pp.4,11. Retrieved from h�ps://www.europol.europa.eu/publica�ons-documents/does-crime-s�ll-pay 6 h�ps://www.europol.europa.eu/crime-areas-and-trends/crime-areas/economic-crime/money-laundering and h�ps://www.unodc.org/documents/data-and-analysis/Studies/Illicit_financial_flows_2011_web.pdf 3 TRANSPARENCY INTERNATIONAL EU TABLE 1 ESTIMATES OF ASSETS ALLEGEDLY STOLEN... Estimates of EU jurisdictions through which the money stolen allegedly has been transferred, invested or concealed stolen assets € € ­ € ­ € € ­ ­ ­ SOURCE: h�ps://sanc�onswatch.cifar.eu/ and www.transparency.eu/wp-content/uploads/2020/07/upload_asset_recovery_compress.pdf 4 TRANSPARENCY INTERNATIONAL EU GAPS IN EU ASSET RECOVERY POLICY AND PRACTICE Confiscation is a complex process which offence was committed. Proceedings can be seeks to deprive criminals of the proceeds of delayed or stalled by poorly-functioning their crimes. It is rendered even more diffi- legal or judicial systems, or because the cult by the transnational nature of financial individuals targeted are in power and have crime and money laundering. Money laun- control over these institutions. As a conse- dering is used to disconnect the proceeds of quence, the stolen assets or property crime from the original offence in order to remain in corrupt hands. give these funds the appearance of legality. As a result, even if suspicious financial flows Over the past decade, the EU has put con- are detected, it is not always easy to connect siderable effort into enhancing its asset them to a specific criminal act and criminal.7 recovery framework. In 2014 it adopted the Even if this connection is made, confiscation ‘Directive on the freezing and confiscation may not happen because it is too difficult to of instrumentalities and proceeds of crime secure a conviction in the country where the in the EU’ 8 (the 2014 Directive), which is 7 Commission staff working document- Analysis of non-convic�on-based confisca�on measures in the European Union. Retrieved from: h�ps://ec.europa.eu/transparency/regdoc/rep/10102/2019/EN/SWD-2019-1050-F1-EN-MAIN-PART-1.PDF 8 Direc�ve 2014/42/EU of the European Parliament and of the Council of 3 April 2014 on the freezing and confisca�on of instrumentali�es and proceeds of crime in the European Union. Retrieved from: h�ps://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0042 The Direc�ve establishes minimum rules on the freezing of property with a view to possible subsequent confisca�on and on the confisca�on of property in criminal ma�ers. EUR-Lex (official website to EU law, interna�onal agreements and other public documents). 5 TRANSPARENCY INTERNATIONAL EU currently under review. Then in 2018 it However, there are still legislative gaps that adopted two new instruments, a ‘Directive make it difficult to recover stolen assets on combating money laundering by criminal without a prior request from the victim law’ and a ‘Regulation on the mutual recog- state, or a conviction of the perpetrator in nition of freezing and confiscation orders’.9 that jurisdiction.