RECOVERY OF STOLEN ASSETS – Part I

Petitioners collecting signatures to recover stolen assets

The “#gotagohome” campaign that started a few weeks back demanding the President to step down from office, was escalated to “#gotagohome and give back our money”. The people are not merely wanting a regime change but demanding in one voice that the “national wealth stolen by the rulers be paid back”. 

The questions that are looming in many a mind is how does one retrieve stolen assets? Is there a mechanism to bring back money that has been siphoned off?  Do we have adequate laws to engage in this exercise? Do we need new laws?  

The process of asset recovery can be broken down to three main stages: identifying and tracing assets; freezing and confiscating assets; and recovering and returning assets to their rightful owners. 

Identifying assets being the first step, is not simple, as any wrongdoer would invariably take measures to complicate the tracing of hidden funds in order to prevent it being retrieved. In addition, even where funds are traced, it would also be necessary to prove that the assets were unlawfully acquired.
Tracing assets would require conducting investigations to gather evidence to link the asset and the wrongful act by which the asset was acquired. 

"Freezing and confiscating assets entails the process by which the assets which are identified are frozen or confiscated through a judicial or administrative process in order to prevent the asset from being used by the perpetrator or lying to his benefit"

Freezing and confiscating assets entails the process by which the assets which are identified are frozen or confiscated through a judicial or administrative process in order to prevent the asset from being used by the perpetrator or lying to his benefit. The confiscation can follow a criminal conviction by a court or be non-conviction based, or administrative.

However, this entire process requires a commitment and coordination at national and international levels, supported by effective legislation, which would enable the authorities to take the necessary action in the recovery of stolen assets.  The success of the recovery process would depend on the level of cooperation between Sri Lanka and the states to which the assets have been siphoned off. 

UN Convention against corruption 

Internationally, the United Nations Convention Against Corruption (“UNCAC”) imposes the legal obligation on state parties to cooperate towards the recovery of stolen assets. The Convention covers five main areas: preventive measures, criminalization and law enforcement, international cooperation, asset recovery, and technical assistance and information exchange. 

The Convention’s core objective is asset recovery as stated in Article 51 thereof and dedicates an entire chapter to asset recovery (Chapter V). This chapter outlines, inter alia, measures to be taken for the prevention and detection of transfers of proceeds of crime (Article 52); measures for direct recovery of property (Article 53); mechanisms for recovery of property through international cooperation in confiscation and international cooperation for purposes of confiscation (Articles 54 and 55); and measures for the return and disposal of assets (Article 57). Several articles in other chapters also relate to asset recovery and the role of Civil Society Organizations. 

Particularly, in terms of Article 13, each State Party is obliged to take appropriate measures, within its means and in accordance with fundamental principles of its domestic law, to promote the active participation of individuals and groups outside the public sector, such as civil society, non-governmental organizations and community-based organizations, in the prevention of and the fight against corruption and to raise public awareness regarding the existence, causes and gravity of and the threat posed by corruption. 

The Convention makes further provision for the prevention and criminalization of money-laundering (Articles 14 and 23); protection of reporting persons or whistle-blowers (Article 33); compensation for damage (Article 35; cooperation between national authorities and the private sector (Article 39); bank secrecy (Article 40); and, mutual legal assistance (Article 46).

Once assets obtained through corrupt means have been identified and legally confiscated, they must be returned to their “prior legitimate owners” (UNCAC, Article 57). This final step in the asset recovery process can be complex, as it entails considering how to ensure the process is both transparent and accountable.

The entire asset recovery process relies mainly on effective cooperation between jurisdictions. Mutual legal assistance is covered in UNCAC (Articles 46; 54-57), and states are required to “afford one another the widest measure of legal mutual assistance in investigations, prosecutions and judicial proceedings”.

SL’s commitment to irradicate bribery, corruption, and recover stolen assets 
Currently 140 countries are parties to the UNCAC. Sri Lanka too placed its signature in Once assets obtained through corrupt means have been identified and legally confiscated, they must be returned to their “prior legitimate owners” (UNCAC, Article 57). In 2015, Sri Lanka has further reiterated its commitment to cooperate in the international arena to combat the transfer of proceeds of crime and recover such proceeds at the London Anti-Corruption Summit. 

"Once assets obtained through corrupt means have been identified and legally confiscated, they must be returned to their “prior legitimate owners” (UNCAC, Article 57)"

Sri Lanka having become a signatory to the UNCAC in 2004, except for a few steps that were taken during the yahapalanaya regime, effective measures have not been taken over the last 18 years to enact laws to give effect to the provisions of the UNCAC. 

This is despite the fact that at the Global Forum on Asset Recovery (GFAR) in December 2017, Sri Lanka being one of the four focus countries (others being Nigeria, Ukraine and Tunisia), developed and adopted the GFAR Principles and pledged to prioritize the recovery of stolen assets. At this forum, the two co-hosts (UK and US) and the four focus countries (Nigeria, Ukraine, Tunisia, Sri Lanka) developed and adopted ten principles for disposition and transfer of confiscated stolen assets, the GFAR Principles.

However, these efforts have failed to translate into domestic laws.

As observed by the Supreme Court in the case of Singarasa vs. AG, the framework of our Constitution adheres to the dualist theory. Therefore, when Sri Lanka enters into a treaty or accedes to a covenant or convention such as the UNCAC, there must necessarily be separate enabling legislation enacted in the country. 

Even though the 19th Amendment to the Constitution introduced a new Chapter XIXA, (Article 156A), by which the Commission to Investigate Allegations of Bribery and Corruption Act was given constitutional recognition and further constitutional provisions were made to enact a new law to provide for measures to implement the UNCAC and any other international Convention relating to the prevention of corruption to which Sri Lanka is a party, such enabling legislation was not brought into force. 

In a shocking move, the current regime repealed this new Article 156A from the Constitution, through the 20th Amendment.  This goes to demonstrate the commitment, or the lack thereof, of the present government to eradicate corruption. 
An Anticorruption Action plan was developed for 2019 to 2023, approved by the Cabinet and launched on March 18, 2019. However, the effective implementation of this plan too has halted consequent to the regime change in 2019. 

Another positive move that didn’t see its results through, is the Special Presidential Taskforce on Recovery of State Assets (START) which was appointed in 2015 as the body to coordinate Sri Lanka’s efforts on asset recovery. i.e. to investigate, identify, trace, seize and transfer to Sri Lanka assets stolen from Sri Lanka. 
One of the primary tasks of this body was to convene a drafting committee to prepare a policy and legislative policy on proceeds of crime, involving different stakeholders.

Despite this committee having proposed a new law titled “Proceeds of crime Act of Sri Lanka”, no action has been taken to enact this law. The initial steps taken by this task force to seek assistance from international agencies to recover stolen assets, have also not been advanced.  

Developments in other jurisdictions 

Internationally advancements have been made where countries committed to irradicating bribery and corruption have identified the important role played by the asset recovery process to combat corruption. This has resulted in these States enacting laws to assist in the process of the recovery of stolen asset.   

Further, the Stolen Asset Recovery Initiative (StAR) which is a partnership between the World Bank Group and the United Nations Office on Drugs and Crime (UNODC) promotes implementation of Chapter V of the UNCAC and supports international efforts to end safe havens for corrupt funds. Countries can request StAR assistance by sending a written request to the StAR Secretariat or the World Bank Country Director. StAR works with developing countries and financial centers to prevent the laundering of the proceeds of corruption and to facilitate more systematic and timely return of stolen assets.

Another international agency that is of assistance is the Interpol. Since identifying corruption as a priority crime area in 2007, INTERPOL has emerged as a central point of contact for member countries for information on asset recovery and related investigations.

Several developed countries such as the USA, UK and Switzerland have sound mechanisms in place to recover stolen assets. In 2010, the Department of Justice of the USA launched the Kleptocracy Asset Recovery Initiative to provide further support to cooperation in this area. There are a variety of mechanisms through which the United States can assist in the identification and tracing of criminally derived assets.

In the UK, laws have been enacted enabling a private prosecution (criminal prosecution pursued by a private person or body and not by a statutory prosecuting authority), whereby anyone can bring a private prosecution. 
These advancements made in other jurisdictions amply illustrate that asset recovery is a powerful tool to combat corruption. As has been discussed in many international reports, legal actions for pursuing asset recovery are diverse and may include any of the following mechanisms: 

• Domestic criminal prosecution and conviction-based confiscation, followed by  Mutual Legal Assistance (MLA) request to enforce orders in foreign jurisdictions. 
• Non–Conviction based (NCB) Confiscation, followed by an MLA request to enforce orders in foreign jurisdictions. 
• Private civil actions, including formal insolvency proceedings. 
• Administrative confiscation. 
• Other avenues, such as taxation, fines, and compensation orders in criminal trials. 
• In addition, jurisdictions sometimes are able to take legal action by joining proceedings launched by foreign jurisdictions. 

Turning back to the issue at hand, in order to seek assistance from international agencies to retrieve stolen assets, it is vital that investigations commence locally, paving the way to prosecutions. For this purpose, in the absence of a comprehensive legal regime for recovery of stolen assets, one has no option but to seek recourse from the existing legal provisions.  

Prevention of Money Laundering Act 

A good starting point would be the Prevention of Money Laundering Act, No. 5 of 2006, as amended, which has been enacted, inter alia, to prohibit money laundering in Sri Lanka.
“Money laundering” has been defined in Section 3 of the Act as “Any person, who (a) engages directly or indirectly in any transaction in relation to any property which is derived or realised, directly or indirectly, from any unlawful activity or from the proceeds of any unlawful activity; (b) receives, possesses, conceals, disposes of, or brings into Sri Lanka, transfers out of Sri Lanka, or invests in Sri Lanka, any property which is derived or realised, directly or indirectly, from any unlawful activity or from the proceeds of any unlawful activity, knowing or having reason to believe that such property is derived or realized, directly or indirectly from any unlawful activity, or from the proceeds of any unlawful activity shall be guilty of the offence of money laundering and shall on conviction after trial before the High Court be liable to a fine which shall be not less than the value of the property in respect of which the offence is committed and not more than three times the value of such property, or to rigorous imprisonment for a period of not less than five years and not exceeding twenty years, or to both such fine and imprisonment.

"Unlawful activity" has been defined very broadly in the Act by bringing in offences under several laws to constitute an unlawful activity. Of such offences, the offences under the Bribery Act as well as the following offences under the Penal Code, i.e, Dishonest misappropriation of property (sections 386), Criminal breach of trust (Section 388), cheating by personation (Section 399) and Cheating with knowledge that wrongful loss may be thereby caused to a person whose interest the offender is bound to protect (Section 401), are deemed to constitute an unlawful activity for the purposes of this Act. 

Section 4 has introduced an important provision whereby certain presumptions are made under the Act. Accordingly, for the purposes of any proceedings under this Act, it is deemed until the contrary is proved, that any movable or immovable property acquired by a person has been derived or realized directly or indirectly from any unlawful activity, or are the proceeds of any unlawful activity, if such property- 

(a) being money, cannot be or could not have been- 
(i) part of the known income or receipts of such person; or 
(ii) money to which his known income or receipts has or had been converted; or 
(b) being property other than money, cannot be or could not have been- 
(i) property acquired with any part of his known income or receipts;    and 
(ii) property which is or was part of his known income or receipts; and 
(iii) property to which is any part of his known income or receipts has or had been converted.

It is interesting to note that a similar presumption is also available in Section 23A of the Bribery Act No. 8 of 1973, as amended. Therefore, if a public servant is possessed of money or any other asset that cannot be or could not have been acquired with any part of his known income or receipts, the Prevention of Money Laundering Act as well as the Bribery Act deems such assets to have been acquired through an unlawful activity or acquired by bribery. 

For example, if a parliamentarian and his family are using several luxury vehicles (which are beyond the legally entitled vehicles) and are engaged in frequent foreign travel and/or own several properties in their names or in the names of their extended family, where such property could not have been acquired by means of such person’s known income, then based on the presumption in the Prevention of Money Laundering Act, a reasonable assumption can be made that such assets could not have been acquired from the known income or receipts. Similarly, it would also be grounds to prosecute such person under the Bribery Act as such assets would be deemed to have been acquired by bribery.  

The Prevention of Money Laundering Act in Section 7 makes provision for a Police Officer not below the rank of an Assistant Superintendent of Police, where there are reasonable grounds to believe that any person is involved in any activity relating to the offence of money laundering and it is necessary for preventing further acts being committed in relation to such offence, issue an order (hereinafter referred to as a "Freezing Order") prohibiting any transaction in relation to any account, property or investment which may have been used or which may be intended to be used in connection with such offence. The Freezing Order can be issued on the person who is believed to be involved in the activity and on any other person or institution who or which may be required to give effect to such Order.

The Prevention of Money Laundering Act further provides several mechanisms to seek assistance from foreign states for offences under the Act. Firstly, the Schedule to the Extradition Law, No. 8 of 1977 has been amended to include an offence of Money Laundering. Secondly, the Act mandates that resort could be had to the provisions of the Mutual Assistance in Criminal Matters Act, No. 25 of 2002, wherever it is necessary for the investigation and prosecution of an offence in providing assistance as between the Government of Sri Lanka and other States who are either Commonwealth countries specified by the Minister by Order or Non-Commonwealth countries with which the Government of Sri Lanka entered into an agreement in terms of the Act. 

CIABOC and Bribery Act 

The Commission to Investigate Allegations of Bribery or Corruption (CIABOC) Act, No. 19 of 1994, in Section 3 stipulates that the function of the Commission is to investigate allegations contained in communications made to it under section 4 and where any such investigation discloses the commission of any offence by any person under the Bribery Act or the Declaration of Assets and Liabilities Law No.1 of 1975, direct the institution of proceedings against such person for such offence in the appropriate court.

Therefore, any person can, with a written communication, inform the CIABOC of an allegation of bribery or corruption against a person or draw the attention of the Commission to any recent acquisitions of wealth or property or to any recent financial or business dealings or to any recent expenditures by a person, which are to the knowledge of the person, is not commensurate with the known sources of wealth or income of such person.

If the Commission is satisfied that the communication is genuine and that the communication discloses material upon which an investigation ought to be conducted, the Commission is bound to conduct an investigation for the purpose of deciding if to prosecute or take any other suitable action either under the Bribery Act or the Declaration of Assets and Liabilities Law or any other Law.
The Commission has been granted vast powers under section 5 of the Act whereby the Commission can;

(a) procure and receive evidence, written or oral, and to examine any persons to procure, evidence;
(b) require any person to attend before the Commission;
(c) summon any person to produce any document or other thing in his possession or control;
(d) direct the manager of any bank to produce documents.  
(e) direct the Commissioner-General of Inland Revenue to furnish documents;
(f) direct the person in charge of any department, office or establishment of the Government or the Mayor, Chairman, Governor or chief executive, howsoever designated, of a local authority, Provincial Council, scheduled institution or a company in which the Government owns more than fifty per centum of the shares, to produce document in his possession;
(g) direct any person to furnish a sworn statement in writing setting out all movable or immovable property owned or possessed by such person. 
(h) prohibit, any person in respect of whom a communication has been received, the spouse, or his close family or any other person holding any property in trust for such person from transferring the ownership of, or any interest in, any movable or immovable property; 
(i) require, the Controller of Immigration and Emigration to impound the passport and other travel documents of any person in respect of whom a communication has been received for such period not exceeding three months; and
(j) require any police officer, to take steps to prevent the departure from Sri Lanka of any person in respect of whom a communication has been received for a period not exceeding three months.

Further, in terms of Section 11 of the CIABOC Act, where the material received by the Commission in the course of an investigation conducted discloses the commission of an offence by any person under the Bribery Act or the Declaration of Assets and Liabilities Law, the Commission is obliged to direct the Director-General to institute criminal proceedings against such person in the appropriate court and the Director-General must institute proceedings accordingly. 

At the conclusion of such prosecution, if a court convicts a person of an offence under the Bribery Act, in terms of Section 28A(1), the court is empowered, in lieu of imposing a penalty or fine, to make order that any movable or immovable property found to have been acquired by bribery or by the proceeds of bribery, be forfeited to the State. 

To be continued.