Asset Recovery Handbook A Guide for Practitioners Jean-Pierre Brun Larissa Gray Clive Scott Kevin M. Stephenson Asset Recovery Handbook Asset Recovery Handbook A Guide for Practitioners Jean-Pierre Brun Larissa Gray Clive Scott Kevin M. Stephenson © 2011 Th e International Bank for Reconstruction and Development / Th e World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1 2 3 4 13 12 11 10 Th is volume is a product of the staff of the International Bank for Reconstruction and Development / Th e World Bank. Th e fi ndings, interpretations, and conclusions expressed in this volume do not necessarily refl ect the views of the Executive Directors of Th e World Bank or the governments they represent. Th e World Bank does not guarantee the accuracy of the data included in this work. Th e maps in this book were produced by the Map Design Unit of Th e World Bank. Th e boundaries, colors, denominations, and any other information shown on these maps do not imply, on the part of Th e World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. Rights and Permissions Th e material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. Th e International Bank for Reconstruction and Development / Th e World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete informa- tion to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Offi ce of the Publisher, Th e World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN: 978-0-8213-8634-7 eISBN: 978-0-8213-8635-4 DOI: 10.1596/978-0-8213-8634-7 Library of Congress Cataloging-in-Publication Data Brun, Jean-Pierre, 1962- Asset recovery handbook : a guide for practitioners / Jean-Pierre Brun and Larissa Gray. p. cm. Includes bibliographical references and index. ISBN 978-0-8213-8634-7 — ISBN 978-0-8213-8635-4 (electronic) 1. Forfeiture—Criminal provisions. 2. Searches and seizures. I. Gray, Larissa. II. Title. K5107.B788 2011 345’.0773—dc22 2010048779 Contents Preface xi Acknowledgments xiii Acronyms and Abbreviations xv Introduction 1 Methodology 2 How the Handbook Can Be Used 3 1. Overview of the Asset Recovery Process and Avenues for Recovering Assets 5 1.1 General Process for Asset Recovery 5 1.2 Legal Avenues for Achieving Asset Recovery 9 1.3 Use of Asset Recovery Avenues in Practice: Three Case Examples 14 2. Strategic Considerations for Developing and Managing a Case 19 2.1 Gathering Facts: Initial Sources of Information 19 2.2 Assembling a Team or Unit, Task Forces, and Joint Investigations with Foreign Authorities 22 2.3 Establishing Contact with Foreign Counterparts and Assessing Ability to Obtain International Cooperation 25 2.4 Securing Support and Adequate Resources 27 2.5 Assessing Legislation and Considering Legal Reforms 28 2.6 Addressing Legal Issues and Obstacles 29 2.7 Identifying All Liable Parties 34 2.8 Specific Considerations in Criminal Cases 34 2.9 Implementing a Case Management System 38 3. Securing Evidence and Tracing Assets 41 3.1 Introducing a Plan and Important Considerations 41 3.2 Creating a Subject Profile 43 3.3 Obtaining Financial Data and Other Evidence 43 3.4 Identifying Relevant Data: Examples from Commonly Sourced Documents 61 3.5 Organizing Data: Creating a Financial Profile 71 3.6 Analyzing Data: Comparing the Flows with the Financial Profile 72 3.7 Garnering International Cooperation 74 4. Securing the Assets 75 4.1 Terminology: Seizure and Restraint 75 4.2 Provisional Order Requirements 76 4.3 Pre-restraint or Pre-seizure Planning 79 4.4 Timing of Provisional Measures 85 4.5 Exceptions to Restraint Orders for Payment of Expenses 86 4.6 Ancillary Orders 87 4.7 Third-Party Interests 87 4.8 Alternatives to Provisional Measures 89 5. Managing Assets Subject to Confiscation 91 5.1 Key Players in Asset Management 92 5.2 Powers of the Asset Manager 93 5.3 Recording Inventory and Reporting 94 5.4 Common Types of Assets and Associated Problems 95 5.5 Ongoing Management Issues 99 5.6 Consultations 101 5.7 Liquidation (Sale) of Assets 101 5.8 Fees Payable to Asset Managers 101 5.9 Funding Asset Management 102 6. Mechanisms for Confiscation 103 6.1 Confiscation Systems 105 6.2 How Confiscation Works 107 6.3 Confiscation Enhancements 114 6.4 Third-Party Interests 118 6.5 Confiscation of Assets Located in Foreign Jurisdictions 119 6.6 Recovery through Confiscation for the Victims of Crime 119 6.7 Disposal of Confiscated Assets 120 7. International Cooperation in Asset Recovery 121 7.1 Key Principles 122 7.2 Comparative Overview of Informal Assistance and MLA Requests 127 7.3 Informal Assistance 131 7.4 MLA Requests 138 7.5 Cooperation in Cases of Confiscation without a Conviction 156 7.6 Cooperation in Civil Recovery (Private Law) Cases 157 7.7 Asset Return 158 8. Civil Proceedings 159 8.1 Potential Claims and Remedies 160 8.2 Bringing a Civil Action to Recover Assets 169 8.3 Final Dispositions 173 8.4 Formal Insolvency Processes 174 vi I Contents 9. Domestic Confiscation Proceedings Undertaken in Foreign Jurisdictions 177 9.1 Jurisdiction 177 9.2 Procedure for Beginning an Action 178 9.3 Role of the Jurisdiction Harmed by Corruption Offenses in Foreign Investigation and Prosecution 179 9.4 Ensuring Recovery of Assets from the Foreign Jurisdiction 183 Appendix A. Offenses to Consider in Criminal Prosecution 187 Appendix B. Explanation of Selected Corporate Vehicles and Business Terms 193 Appendix C. Sample Financial Intelligence Unit Report 199 Appendix D. Planning the Execution of a Search and Seizure Warrant 201 Appendix E. Sample Document Production Order for Financial Institutions 203 Appendix F. Serial and Cover Payment Methods in Electronic Funds Transfers 209 Appendix G. Sample Financial Profile Form 213 Appendix H. Possible Discussion Points with Contacts—Informal Assistance Stage 235 Appendix I. Mutual Legal Assistance Template and Drafting Tips 237 Appendix J. Web Site Resources 241 Glossary 249 Index 253 Boxes 1.1 Legal Framework for Asset Recovery 10 1.2 Alternative Means of Recovering Assets 15 2.1 Role and Contribution of FIUs in Asset Recovery Cases 21 2.2 Obstacles to International Cooperation 26 2.3 Strategic Decisions in Peru—Legislation Allowing Plea Agreements 28 2.4 Prosecution of Accounting, Records, and Internal Control Provisions in the United Kingdom and the United States 36 2.5 Examples of Challenges in Establishing the Elements of the Offense 37 3.1 Checklist for Collection of Basic Information 44 3.2 Tracing and Recovering Assets—Efforts in the United Kingdom 46 3.3 Elaborating Sufficient Grounds for a Search Warrant 55 3.4 Important Items to Seize 56 3.5 Documentation to Be Requested from Financial Institutions 58 Contents I vii 3.6 Retention Orders 59 3.7 Forms and Documents Related to the Wire Transfer Process 65 3.8 Red Flags in Contracts, Payment Documentation, Payment Records, and Payment Mechanisms 69 4.1 Drafting Affidavits 78 4.2 An Example of Pre-restraint Planning Decisions in Practice 83 6.1 Historical Background and Recent Developments in Confiscation 104 6.2 Issues Encountered in Determining the Proceeds of Crime—A Case Example 110 6.3 Using “Related Activities” to Capture the Full Benefit 118 7.1 Connecting With People—A Case Example from Peru 124 7.2 Contact Points for International Cooperation 125 7.3 Disclosure Obligations—A Barrier to MLA Requests 127 7.4 Investigative Jurisdiction in France, Switzerland, the United Kingdom, and the United States 133 7.5 Facilitating Informal Assistance 134 7.6 Spontaneous Disclosures from Switzerland 137 7.7 Selecting a Legal Basis to Include in an MLA Request 139 7.8 Overcoming Dual Criminality—Illicit Enrichment and Corruption of Foreign Public Officials 142 7.9 Bank Secrecy and Fiscal Offenses—A Ground for Refusing MLA? 146 7.10 Avoiding Rejections of MLA Requests That Are Overly Broad 149 7.11 Worldwide Orders in the United Kingdom 153 7.12 Requirements for Direct Enforcement of MLA Requests for Confiscation in the United Kingdom and the United States 154 7.13 Asset Recovery Pursuant to an MLA Request in France 158 8.1 Case Examples of Proprietary (Ownership) Claims 160 8.2 The U.S. Racketeer Influenced and Corrupt Organizations (RICO) Statute 163 8.3 Compensation for Damages Where Assets Are Misappropriated 164 8.4 Fyffes v. Templeman and Others (2000) 166 8.5 World Duty Free Company Limited v. The Republic of Kenya (2006) 167 8.6 Disgorgement of Profits—Practice in the United States 168 8.7 Circumstantial Evidence Considered in Federal Republic of Nigeria v. Santolina Investment Corp., Solomon & Peters, and Diepreye Alamieyeseigha (2007) 170 8.8 Requirements for Restraint Orders in France, Panama, and the United Kingdom 171 8.9 The Ao Man Long Case 173 8.10 Enforcement of Judgments When the Defendant Is Absent from the Proceeding 174 9.1 Establishing Jurisdiction Where Limited Acts Have Occurred in the Territory 179 9.2 Establishing Jurisdiction over Nationals in the United Kingdom and the United States 180 viii