Criminal Assets

A Little Lateral Thinking

From the start of the movement to confiscate assets from transnational criminals, lawmakers have recognized the overlaps between categories of criminal behavior and organization. As the recent resolutions from the UN Security Council attest, they have seen that one person’s terrorist may be another’s freedom fighter – or organized criminal.
Until recently, our willingness to see the links between organized crime, drug trafficking, and terrorism, has not been matched by our willingness to see the relationship between corruption and other ‘macro-crimes’.
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In this article, we discuss how prosecutors in one state – Switzerland – have profited by thinking outside the standard categories, using organized crime legislation to recover state assets where corrupt officials could not be convicted of their crimes.

The Abacha case

Switzerland’s innovative approach to asset recovery emerged during the international effort to recover assets stolen by Nigerian president, Sani Abacha. Twenty years in government had allowed General Abacha to accumulate an extraordinary fortune at the expense of the Nigerian state. His death in 1998 ended his five-year presidency, triggered a transition to democracy and marked the beginning of an outgoing campaign to recover Nigeria’s stolen wealth.
Investigations revealed that Abacha had worked through a network of family members and business associates to steal state assets and hide them in foreign jurisdictions. The Swiss government was approached in 1998 and 2000 with regard to assets in Swiss accounts. Various Swiss banks had already begun reporting assets of the Abacha family to the Financial Intelligence Unit (FIU). In 2003, when criminal proceedings against Abacha’s son had stalled, Switzerland was approached again with a further request for the immediate repatriation of frozen funds.

The Swiss laws

The Swiss Federal Office of Justice (FOJ) agreed to repatriate the assets ahead of conviction, relying on Art 74a International Mutual Assistance in Criminal Matters Act (IMAC) and Art 59 (now Art 72) Swiss Criminal Code. Art 74a IMAC enables the FOJ to return frozen assets to another state for the purposes of confiscation or delivery to the rightful owner. As a rule, handover occurs at the end of the foreign proceedings based on a ‘final and executable order’ from the requesting State. However, ‘handover may intervene at any stage of the foreign proceedings’ under Art 74a(3) IMAC.
In handing-over the Nigerian assets without a ‘final and executable’ order, the FOJ applied the organized crime provisions of (then) Art 59 Swiss Criminal Code. Art 59 mandated the confiscation of ‘all assets, which are subject to the power of disposal of a criminal organization’ and created a rebuttable presumption that assets of an organization’s participants and supporters are at its disposal. Under Art 260ter a criminal organization keeps its structure and personnel secret and pursues goals of committing crimes of violence or enriching itself by criminal means. Deeming the Abacha clan ‘a criminal organization’, the FOJ declared the assets would be confiscated unless they were shown to have a legitimate source.
The FOJ’s decision was upheld by the Swiss Federal Tribunal in 2003. It found that Art 74a IMAC should be read with Art 59 Swiss Criminal Code even though the provisions were not expressly linked. Art 59 reversed the presumption that confiscation follows conviction and – in the context of MLA proceedings – constituted one of the exceptional circumstances in which Switzerland may repatriate assets ahead of a final foreign order. In the case at hand, the Tribunal found Abacha, his family and associates had established a criminal structure, the goals of which were to profit from corrupt transactions, including the embezzlement of funds from the Nigerian Central Bank. As Abacha’s sons were clearly participants in this organization, their assets were liable to confiscation in the absence of evidence of a legitimate source. As no such evidence was forthcoming, the assets were handed-over to Nigeria for use in aid projects.
Though the immediate result of the Federal Tribunal’s decision was the repatriation of some USD 508 million to Nigeria, the Abacha case has had much broader ramifications. Within Switzerland, it has opened up an avenue for repatriating stolen state wealth when corrupt officials cannot be prosecuted for their crimes. This was recently demonstrated by the decision of the FOJ to repatriate approximately USD 6 million to Haiti if relatives of former dictator, Jean-Claude Duvalier, do not show the legitimate origin of the assets by the end of September 2008.
For asset recovery specialists outside Switzerland, the Abacha and Duvalier cases show how prosecutors can use organized crime legislation to overcome the impunity of corrupt officials, especially when non-conviction based forfeiture legislation is lacking. And, as states introduce even tougher laws in relation to the freezing and confiscation of terrorist assets, it is perhaps a reminder of the importance in asset recovery of a little lateral thinking.

Radha Ivory is currently carrying out a PhD at the International Centre on Asset Recovery.