The Road To Brazil

On 12 August, the G20’s Anti-Corruption Ministerial Meeting convened for the last time under the current Indian presidency. Unsurprisingly, asset recovery was a key area of focus for the G20 participants. Ministers reaffirmed their commitment to making the recovery and return of proceeds of crime a key policy objective – both at the domestic level by enforcing effective legal powers, tools and measures, and at the international level via effective coordination and communication, and timely execution of cross-jurisdictional asset recovery requests.

It’s fair to say that asset recovery has been a hot topic in the world of financial crime over the last year. From Russia’s aggression in Ukraine, which led many G20 countries to step up their response to the proceeds of crime, to the Financial Action Task Force’s (FATF) increased interest in the topic, organisations and governments across the world have committed to increasing their efforts to recover stolen assets.

Indeed, there are multiple reasons why policymakers should be paying more attention not only to catching criminals, but also to recovering the assets they’ve stolen. Recovering assets from criminals is an effective deterrent, underlying the principle that crime does not – or should not – pay. For countries that have been decimated by corrupt politicians, recovered assets can be reinvested in education, infrastructure and other projects, increasing public trust and strengthening the rule of law and democratic institutions.

The G20 has a crucial role to play in global asset recovery efforts, not least as G20 countries are very often the destination of choice for plundered assets. The lack – or inefficacy – of asset recovery and return mechanisms has a devastating impact on the economies of the countries from which the assets are originally stolen: it halts growth, increases inequalities and corrupts democratic processes. There is, therefore, a moral imperative for G20 countries to boost their efforts in relation to asset recovery.

The G20’s Approach to Asset Recovery

Hopes were high when India was placed at the helm of the G20. The country had previously argued for the inclusion of asset recovery in the G20’s anti-corruption commitments in 2018. Under the Indian presidency, “strengthening asset recovery mechanisms related to corruption” has been identified as one of the priority areas.

This commitment is echoed at the global level by the FATF’s approach to enhancing global asset recovery mechanisms. Last year, the FATF and Interpol announced an initiative to upscale the global response to asset recovery and “to deprive criminals of their dirty money”. This includes revising the FATF’s Recommendations 4 and 38, a long overdue action.

Despite some improvement over the last 15 years, it is clear that current international asset recovery mechanisms are still not good enough

This is not the first time, however, that asset recovery has been a focus of the G20. In 2011, the G20 adopted nine principles on asset recovery. Inter alia, the principles require countries to make asset recovery a policy priority, implement legislation to support the application of global anti-money laundering standards, establish a wide range of legislative options for asset recovery, and adopt laws that facilitate international cooperation. Under the Indian presidency, resources have been collated from a small number of G20 countries (currently Canada, Mexico, Turkey and India) to provide step-by-step guides to asset tracing, requesting mutual legal assistance and asset recovery in each jurisdiction.

More broadly, G20 countries have been engaged in many initiatives to improve global asset recovery mechanisms, focused in particular on the sharing of information and expertise. For example, Argentina, Mexico and Brazil are members of the GAFILAT Asset Recovery Network which was established in 2009 to facilitate the identification, tracing and recovery of criminal proceeds. Data shows an increased number of consultations since the network’s inception, especially in relation to drug-trafficking offences.

All these actions are commendable. However, despite some improvement over the last 15 years, it is clear that current international asset recovery mechanisms are still not good enough.

Assessing the Current State of Asset Recovery in the G20

While asset recovery is undeniably a key area of focus for G20 countries, at the national level the results still leave much to be desired. The latest FATF Mutual Evaluation Reports (MER) for some G20 countries provide a mixed picture.

South Africa, for example, has a moderate effectiveness rating on issues related to asset confiscation. The authorities have managed to demonstrate positive results in the recovery of proceeds of crime, particularly in the areas of fraud and economic crime. However, wider efforts on recovering assets from state capture and proceeds moved to other countries have been less successful and have only been undertaken more recently. Following its mutual evaluation, South Africa was grey-listed by the FATF; as part of its action plan, it has to address issues around enhancing the identification, seizure and confiscation of proceeds and instrumentalities of a wider range of crimes.

Similarly, Indonesia has also achieved a moderate level of effectiveness on asset confiscation according to the FATF. One of the key elements of the country’s anti-financial crime strategy is optimising asset recovery, and while the authorities do pursue illicit assets laundered abroad, the amounts effectively recovered transnationally are low. The most recent Mutual Evaluation Report shows the assets that have been repatriated to victims in cash, which amounted to only €4.75 million from 2017 to early 2023.

While new laws to boost recovery are welcome, what is needed from Global North countries is operational capacity and a willingness to engage with “victim” countries in the Global South

At the European level, MONEYVAL, the Council of Europe’s anti-money laundering and counterterrorist financing body, warned in its annual report for 2022 that the recovery of proceeds of crime against states is insufficient. According to its chair, Elżbieta Frankow-Jaśkiewicz, there is an “urgent need for [European countries] to greatly improve their results in confiscating and managing criminal assets, adopt stricter sanctions and increase the number of convictions for serious money laundering offences”.

There are signs that some G20 members are listening to calls for better international cooperation and providing increased assistance to developing countries. In November 2022, France introduced a mechanism aimed at returning the proceeds of the sale of illicit assets that have been confiscated in the country. The law enables the state of origin to make requests for mutual legal assistance for the return of assets. States can now bring an action before French courts to seek redress and have rights of ownership – this can be done via the opening of an independent investigation in France or by starting civil proceedings. While new laws to boost recovery are welcome, however, what is needed from Global North countries is operational capacity and a willingness to engage with “victim” countries in the Global South. This is currently one of the main weaknesses of G20 countries.

An exception, Italy, has been regarded by many as a “beacon” for asset recovery efforts. Italians understood quite early on that mafia members could still operate from inside prison walls. What really hurt them was taking their assets. The country is now one of the leaders in the recovery of assets globally and has created dedicated asset recovery liaisons in relevant host countries. Early this year, the country’s Guardia di Finanza also hosted a Learning and Development Forum on behalf of the FATF to share best practices and “make a difference in the fight against financial crime”.

What More Do G20 Countries Need to Do?

It was argued in a previous commentary on G7 commitments that stale thinking and paraphrased commitments were the main threat to the group’s efficacy in the fight against illicit finance. The same can be said about the commitments made by the G20. There are clearly pockets of good practice across the G20, and G20 countries are rightly promising higher international standards. But, as ever, these promises need to be followed by concrete action, particularly when it comes to areas where the G20 should excel, like information sharing and international collaboration. The step-by-step guides referenced above are a case in point; so far, only four G20 countries have contributed, but these could prove to be an invaluable resource.

As India’s presidency of the G20 comes to a close, its successor, Brazil, should continue to prioritise asset recovery and – in particular – the G20’s commitments around improved international collaboration and coordination. The last Ministerial Meeting noted the countries’ commitment to update their information on existing guides to international cooperation requests, which is a promising start. If asset recovery remains a priority for the G20 – and if G20 countries can deliver on their commitments – the fight against corruption might stand a chance of seeing some much-needed improvement.

Maria Nizzero is a Research Fellow at the Centre for Financial Crime and Security Studies at RUSI. Her research examines the UK economic crime landscape, asset recovery, with a focus on sanctioned frozen assets and proceeds of kleptocracy, and the foreign policy dimension of illicit finance, including active financial measures. Her other research interests include the EU financial crime response, the serious and organised crime-terror nexus, and financial crime involving high value goods.

Maria Sofia Reiser is a Research Analyst at RUSI’s Centre for Financial Crime and Security Studies. Her recent work has focused on restricting kleptocracy by empowering civil society activists and investigative journalists in East Africa, the Western Balkans and Latin America with greater knowledge of domestic and international anti financial crime standards.