Grand corruption — abuses of power for personal gain at the highest levels of government — is all too common.
The World Bank estimates that $20 to $40 billion is stolen from developing countries every year. Because of the often times sensational nature of such embezzlement, much is written about the phenomenon. Watchdogs track the flow of illicit finances, donor countries spend millions to strengthen governance, and on the front lines, nongovernmental organizations, activists and journalists risk their lives to expose abuses of power. Yet with so much attention paid to preventing corruption, the issue of what to do with stolen money once it is recovered often goes overlooked.
In one case in Kazakhstan more than 200,000 of the country’s poorest and most vulnerable citizens directly benefited from the return of $115 million in disputed assets. The funds were distributed transparently through a local foundation, the BOTA Foundation, informed by local civil society with international oversight, which proved it is possible to reverse the impact of corruption.
Seizing stolen assets
There are currently hundreds of cases being pursued by the U.S., U.K., Switzerland, Lichtenstein and other countries where stolen assets have been discovered. The governments work in tandem with technical experts from organizations such as the Stolen Asset Recovery Initiative and the International Center for Asset Recovery to identify and seize stolen funds.
Together these parties have tracked, recovered, and frozen hundreds of millions of dollars — unfortunately still only a fraction of total funds stolen globally. The recovery phase often takes years with large commitments of money and effort from countries to seize funds and prosecute criminals. The stakes are therefore that much higher to put the recovered funds to productive use.
The challenge of returning stolen assets
Previous attempts to return funds to national treasuries have yielded poor results. In returning the plundered assets of former Nigerian dictator Sani Abacha, portions of the more than a billion dollars in stolen funds were delivered directly to the Nigerian government. Without budget transparency or external monitoring it has been impossible to track the use of these funds and to find out whether or not the money has reached the country’s poor citizens, those who suffered most from Abacha’s pillaging of state coffers.
Civil society needs to play a role in asset return. When government officials plunder state treasuries or extract bribes for concessions, those living in poverty, citizens who are most dependent upon social services, suffer the most. Independent local and international NGOs are best positioned to ensure that returned assets are put to the most productive use.
Local organizations know the needs on the ground and together with international NGOs can identify interventions that will yield the best development impacts, and most importantly, meet international standards for transparency.
Such a strategy is not without precedent. In 2003, American businessman James Giffen was arrested and charged with violating the Foreign Corrupt Practices Act and money laundering for channeling bribes for oil deals in Kazakhstan. Later that year, the U.S. Department of Justice and Swiss investigators began pursuing what would become the biggest ever bribery investigation into foreign deals. Settlement of the case ensured that the $84 million frozen in Giffen’s Swiss bank account plus any interest accrued were to be repatriated through an independent organization.
The BOTA Foundation’s success in returning funds in Kazakhstan
To safeguard the process, a predominantly Kazakhstani board of trustees, the World Bank, and three government parties — the U.S., Switzerland, and Kazakhstan — were charged with monitoring the transparent repatriation of more than $115 million in disputed assets. The World Bank contracted IREX, an international NGO based in Washington, D.C., to build the BOTA Foundation, oversee its operations, and ensure that the funds were used for their intended purpose.
Over nearly six years, the BOTA Foundation successfully and transparently returned disputed assets to vulnerable children, youth, and their families in Kazakhstan, directly reaching more than 200,000 beneficiaries. BOTA implemented three streams of programs: grants to social service organizations, scholarships for Kazakhstani youths to attend university, and small cash transfers to poor families on the condition of participation in education and health-related programs.
Close to $80 million — nearly 69 percent of the total funds — was disbursed directly to the people of Kazakhstan, about 15 percent went to direct program costs and only 15.6 percent was spent on operations and overhead. The transparency afforded by channeling funds through a local foundation managed by an international NGO ensured that the government parties were able to account for every dollar spent throughout the process.
Future opportunities to return stolen funds
In a recent case the vice president of Equatorial Guinea was found to have amassed more than $300 million through corruption and extortion. In reaching a settlement, the U.S. DOJ scored a victory, showing that corrupt individuals can be held to account and striking a blow against impunity for criminals. The money from the sale of more than $30 million in assets rightly belongs to the citizens of Equatorial Guinea — it was the citizens’ money that was stolen to purchase luxury goods — but how should that money be returned?
Building off the BOTA example, the DOJ’s settlement stipulates that $20 million will be given to a charity “to be used for the benefit of the people of Equatorial Guinea.” The technical details of the return are yet to be ironed out, but the DOJ is making clear that global civil society has a role to play in safeguarding the return of assets.
Investigators in Ukraine and Uzbekistan are in the process of recovering millions in stolen assets. Transitioning countries in the Middle East such as Libya and Syria have billions that have yet to be uncovered. If the international community works with governments and civil society to reinvest these billions, citizens would experience tangible benefits, and corrupt leaders would be held accountable for their actions. Such a strategy can be a powerful tool to ensure justice and break the cycle of corruption.
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