UK offers safe haven for corrupt assets

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Posted 9 December 2013 by Transparency International UK

Major changes are required if the UK is to detect, freeze and seize the corruptly-obtained assets that are flowing undetected through the financial system, a Transparency International UK (TI-UK) report found today.  The anti-corruption watchdog has announced the creation of an expert taskforce to examine the possibility of creating a new law against corrupt enrichment.

The current levels of asset recovery in the UK are insignificant compared to the scale of the problem. On a global level, the UN has estimated that the detection rate of illicit funds is as low as 1 per cent for criminal proceeds, and the seizure rate is only 0.2 per cent.  Slow results in cases such as the Arab Spring countries have highlighted that the current system is flawed in both the countries of origin and the recipient countries.  Meanwhile, corrupt individuals continue to enjoy their illegal wealth, and the citizens from whom it was stolen continue to suffer.

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.

TI-UK’s paper has been launched to mark the UN’s International Anti-Corruption Day.  Closing down the safe havens: ending impunity for corrupt individuals by seizing and recovering their assets in the UK analyses the blocks in the system that are preventing recovery of the proceeds of grand corruption located in, or routed through, the UK, and makes 21 recommendations that could radically improve asset recovery rates.

The paper’s headline recommendations are:

  • 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 more 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.

“While we acknowledge that the Arab Spring has given a new impetus to asset recovery efforts in the UK, we believe that more fundamental changes are necessary.  At present, corrupt individuals are able to hide their stolen money here in the UK.  The rates of detection and seizure are so low, that there is effectively a culture of impunity. The UK has an opportunity to provide global leadership in this area, complementing its existing efforts in aid transparency and promoting good governancesaid Robert Barrington, Executive Director of Transparency International UK.

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