C Explanatory memorandum
by Mr André Vallini, rapporteur
1 Introduction
1.1 Previous work by the Assembly
1. In
Resolution 2218 (2018), “Fighting organised crime by facilitating the confiscation
of illegal assets”, the Parliamentary Assembly invited all member
States to facilitate the confiscation of criminal assets by allowing for
non-conviction-based confiscation and by reversing the burden of
proof with regard to the illegal origin of assets, while at the
same time establishing appropriate safeguards.
2. In
Resolution 2279
(2019), “Laundromats: responding to new challenges in the international
fight against organised crime, corruption and money laundering”,
the Assembly called attention to the enormous amounts of illicit
funds laundered using various arrangements.
3. Lastly, in
Resolution
2365 (2021), “Urgent need to strengthen financial intelligence units
– Sharper tools needed to improve confiscation of illegal assets”,
the Assembly proposed practical measures to strengthen the bodies
set up to identify, seize and confiscate as many stolen assets as
possible.
4. The authors of a
motion for a resolution on “Follow-up to the Azerbaijani Laundromat
investigation” proposed that “the profit that Danske Bank has made
by being an instrument in the Laundromat must be channelled to Azerbaijani
civil society with the aim to address corruption, promote human
rights and democracy in Azerbaijan”.
1.2 Subject and aims of the current report
5. To avoid duplication with the
previous adopted resolutions and giving the impression that only
one country is affected by problems of grand corruption and money
laundering, the committee did not appoint a rapporteur for the motion
referred to above, which had initially been referred to it for report.
Instead, it called the Bureau to ask it to prepare a report on the
more general question in the above-mentioned reports by Mart van
de Ven (Netherlands, ALDE) and Sunna Ævarsdóttir (Iceland, SOC)
which had not yet been answered. The new
motion for a resolution,
Note tabled by the committee itself,
entitled “How to put confiscated criminal assets to good use?” was
referred to the committee for report. The committee appointed me
as rapporteur at its meeting on 28-29 May 2019.
6. As Mr van de Ven pointed out in the explanatory memorandum
of
Resolution 2218 (2018), the enormous profits made from corruption and
other criminal practices threaten our democracy and the social contract
on which our societies are based, under which the people pay taxes
and contributions; in return the State provides security and social
protection. The power bestowed on criminals by the colossal sums
they amass, which are then re-injected into the economy through
various laundering techniques, undermines the ordinary functioning of
our democracies and corrupts entire sectors of our economies.
7. The first step in breaking the criminal cycle is to dismantle
criminal practices by confiscating criminal assets, thus removing
the enormous financial power of criminal organisations, which enables
them to corrupt law enforcement bodies, the judiciary and even politics.
In view of the fact that in some societies, criminal practices have
been seeping into the system for decades, there is an urgent need
to “restore social justice”.
Note
8. Secondly, the social contract broken by the criminals must
be re-established using confiscated criminal assets to compensate
victims and rebuild communities destroyed by organised crime and
corruption.
9. More specifically, the process of recovering criminal assets
can be divided into four phases:
Note
- The
pre-investigative or pre-information-gathering stage, during which
the investigator verifies the source of the information that prompted
the investigation and determines its authenticity;
- The actual investigative phase, in which the proceeds
of crime located and identified during the pre-investigative phase
and evidence in respect of ownership are collated as part of more
formal processes (such as financial investigations to obtain and
analyse bank records); the success of the first two phases, and
thus the volume of seizures, depends on the effectiveness of “financial
intelligence units”, the strengthening of which was addressed in Resolution 2365 (2021);
- The judicial phase, during which the decision on confiscation
is finalised, if necessary following adversarial proceedings in
which accused persons or defendants are required to prove that they acquired
the assets lawfully. This phase may be made much more effective
by adopting the principle of reversing the burden of proof regarding
the legality of such assets, as the Assembly recommended in Resolution 2218 (2018);
- The disposal phase, when the confiscated assets are disposed
of by the State in accordance with the law (for example, to be re-used
for something of benefit to society).
10. It is this last phase, the so-called disposal phase, that
is the subject of this report. The initial phases – the identification
and confiscation of illegal assets and the facilitation of this
through the reversal of the burden of proof and more efficient international
co-operation – are covered by the above-mentioned reports.
11. My aim is to promote the most “socially beneficial” possible
use of confiscated criminal assets in all the Council of Europe
member States. It is crucial to show society that the States are
intervening to restore justice and remove the negative role models
that organised crime groups and corrupt individuals may present.
It is also necessary to show that confiscated assets are returned
to those who have been directly harmed by such anti-social behaviour,
namely the direct and indirect victims who have been identified,
as well as society as a whole. The social re-use of confiscated
assets encourages favourable attitudes towards strategies to tackle organised
crime. It empowers communities that have been affected by serious
and organised crime to be better equipped to prevent and tackle
such crimes at the local level. Other positive effects include raising
awareness of preventing and combating serious and organised crime
within civil society, enabling it to become self-driven and more
participatory in these matters.
Note
12. To better understand the issue at stake, it is important to
clarify what is meant by “social re-use”. In the strictest sense,
social re-use demands that the proceeds of crime are openly given
back to society. Social re-use is therefore about disseminating
an important cultural message to the public, promoting the so-called “social
fight” against organised crime.
Note
13. In this report, I will begin by summarising the work already
carried out to this effect in the international community which
has been developing mechanisms intended to facilitate the confiscation
of illegal assets and their use for socially beneficial purposes
for some years. The United Nations Convention against Corruption (
UNCAC) of 2003, in particular, includes a chapter dealing
with asset recovery. It states that “the return of assets […] is
a fundamental principle of this Convention”. The year 2007 saw the
launch of the Stolen Asset Recovery Initiative (
StAR), a partnership between the World Bank and the United
Nations Office on Drugs and Crime (UNODC) to prevent the laundering
of the proceeds of corruption and to facilitate more systematic
and timely return of stolen assets. In December 2017, the United
Kingdom and the United States, with the support of StAR, co-hosted
a Global Forum on Asset Recovery (
GFAR). The GFAR adopted “Principles for Disposition and Transfer
of Confiscated Stolen Assets in Corruption Cases”.
Note The Washington Forum dealt with the recovery
of stolen assets on a world scale. The principles adopted at the
global level highlight common challenges in the recovery of illegal
assets both within the Council of Europe member States and in their relations
with one another.
14. On the basis of the contributions made by experts at our hearing
in January 2022,
NoteNoteNote the analysis of the replies to the
questionnaire sent to parliamentary documentation and research services
via the European Centre for Parliamentary Research and Documentation
(ECPRD),
Note and
the experience of Italy, which I was fortunate enough to study during
my fact-finding visit to Rome in March 2022, I shall make specific
proposals to ensure that confiscated criminal assets are put to
the best possible use in repairing at least some of the damage caused
to society by organised crime and corruption. I will begin by reviewing
the existing mechanisms in this area and the different approaches
which are already used in some Council of Europe member States.
I will then go over the principles governing the return of stolen
assets at the international level and end with some conclusions
and recommendations which have been encapsulated in the draft resolution
and recommendation.
2 Current international regulations
and how to improve them
15. Among the legal instruments
currently in place is a Council of Europe Convention on Laundering, Search,
Seizure and Confiscation of the Proceeds from Crime and on the Financing
of Terrorism (CETS No. 198, Warsaw Convention) and several legal
instruments of the European Union.
Note The UNCAC, which came into force
in 2005, is an important instrument at world level.
Note All these multilateral instruments
are intended to harmonise the confiscation laws of their respective
member States, to make for the mutual recognition of freezing and
confiscation decisions and to facilitate the exchange of information
between the Asset Recovery Offices of the States Parties.
2.1 Council of Europe
16. The
Warsaw
Convention, which came into force on 1 May 2008, is the first international
treaty covering the prevention and control of money laundering and
the financing of terrorism.
Note
17. The Warsaw Convention is intended to modernise and update
the Council of Europe Convention on Laundering, Search, Seizure
and Confiscation of the Proceeds from Crime of 1990 (
ETS
No. 141). The text addresses the fact that quick access to financial
information or information on the assets of criminal organisations
including terrorist groups is a key to successful preventive and
repressive measures. The aim of the Warsaw Convention is to improve
co-operation and assistance in investigations between States Parties and
to facilitate provisional or interim measures.
Note
18. The Warsaw Convention raises the question of compensation
for victims for the first time.
Note Priority was given to restoring confiscated
proceeds to the requesting State Party so that it could compensate
victims or restore these proceeds or property to the legitimate
owner.
Note Besides the main
consideration behind establishing the principle that illegal assets
should be recovered – namely depriving criminal organisations of financial
resources – the need to compensate the victims of crime is now taken
into account.
19. However, Article 25, paragraph 2, of the Warsaw Convention
merely provides that State Parties must give “priority consideration”
to returning confiscated property to victims and does not therefore
make it an absolute requirement for victims to be compensated. Nor
does the Warsaw Convention mention the possibility of social re-use
of confiscated assets, beyond compensating direct victims.
20. A new Council of Europe initiative could be useful therefore
to promote compensation for victims and social re-use, thus paving
the way for binding international guidelines on the social re-use
of confiscated assets.
2.2 European Union
22. Paragraph
47 of the preamble to the new Regulation states that “frozen property and confiscated property
could be earmarked, as a matter of priority, for law enforcement
and organised crime prevention projects and for other projects of
public interest and social utility”.
23. Article 30, paragraph 6(d) of this Regulation also proposes
that “the property may be used for public interest or social purposes
in the executing State in accordance with its law, subject to the
consent of the issuing State”.
24. The wording of
Regulation
(EU) 2018/1805 does not differ substantially from that of
Directive
2014/42/EU of the European Parliament and of the Council of 3 April
2014 on the freezing and confiscation of instrumentalities and proceeds
of crime in the European Union. This instrument provides that “Member
States shall consider taking measures allowing confiscated property
to be used for public interest or social purposes”.
Note
25. Although the social re-use of confiscated assets has now been
raised, it is still only one of a number of options. The EU’s legal
framework does not set compulsory minimum standards for the disposal
of confiscated assets in the Member States’ national jurisdictions.
26. An
in-depth
study on the re-use of confiscated assets for social purposes
was commissioned and published by the Committee on Civil Liberties,
Justice and Home Affairs of the European Parliament in 2012. The
abstract of this study points out “that at the EU level only limited
attention has been given to the final destination of confiscated
assets and that within member States using confiscated assets for
social purposes is not a widely established practice”.
Note
27. The authors of this study make the following recommendations:
Note
- a Directive aiming at the establishment
of coherent and transparent procedures in the member States, requiring
an option for socially re-using confiscated criminal assets and
civil society being able to make suggestions as to specific projects
of social relevance;
- the creation of a European Asset Recovery Database accumulating
statistics on how confiscated assets were used on the national level;
- the creation of a European Stolen Asset Recovery Fund;
- setting up a European Asset Recovery Office.
28. Another major study financed by the EU entitled “RECAST –
RE-use of Confiscated Assets for Social Purposes: towards common
EU standards” distinguishes the social re-use of confiscated assets
from the traditional process of transferring confiscated assets
to the State budget. A report forming part of this
studyNote showed that EU member States have
very different mechanisms for making good use of confiscated criminal assets.
29. According to this study, there are currently two models for
the social re-use of property confiscated in the European Union:
firstly, an indirect or traditional approach, in which the confiscated
proceeds are transferred to a State budget or a victim compensation
fund to be used later. Secondly, a direct re-use approach, which
implies that once the assets become State property, funds are directly
allocated to social or institutional re-use.
30. When confiscated assets are merged into the State budget,
they are of course used for public purposes, but the public cannot
make the link between their public re-use and the criminal origin
of the confiscated assets. The thing that distinguishes social re-use
of confiscated assets from their traditional transfer to the State
budget is the visibility of confiscated criminal assets for the
citizens that benefit from them and for society as a whole.
Note The
importance of this visibility was also stressed by all of the experts
at our hearing in January 2022.
31. This EU study also presents the various institutional approaches
in the member States, identifying three models: a centralised approach
with specialised central institutions, a centralised approach with
non-specialised institutions and a decentralised approach. The study,
co-authored by one of the experts at our hearing, Ms Vettori, recommends
adopting a centralised approach with a specialised institution for
the management of confiscated assets and their social re-use. The
study’s other recommendations to Member States include ensuring
civil society participation, both in the decision-making process
regarding the social re-use of confiscated assets and as beneficiaries
of the assets in question.
2.3 The United Nations Convention against
Corruption and the StAR Initiative
32. The UNCAC introduced a new
framework to facilitate the search, freezing, seizure, confiscation
and return of assets stolen by means of corruption and hidden in
foreign jurisdictions. The confiscation of the proceeds of criminal
activities is regarded as a vital tool in the fight against criminal
organisations.
33. The UNCAC is the most comprehensive instrument for international
co-operation in the recovery of stolen assets. It includes a specific
chapter (Chapter V) on asset recovery, whose aim is to return property
to its legitimate owners, including countries cheated by their own
corrupt leaders. Article 51 of the Convention stipulates that “the
return of assets pursuant to this chapter is a fundamental principle
of this Convention” and Article 57 states explicitly that States
Parties must give priority consideration to “returning such property
to its prior legitimate owners or compensating the victims of the
crime”.
34. Although this convention was regarded as a major step in the
right direction, it still does not make express reference to the
subsequent use of confiscated funds. At no point, in fact, does
it mention the re-use of confiscated criminal assets for social
or community projects.
35. The
UNODC and the World Bank have launched both the Stolen Asset
Recovery Initiative or
StAR Initiative and other measures relating to the confiscation and
recovery of assets. The StAR Initiative supports international efforts
to put an end to tax havens for the proceeds of corruption and offers
platforms for dialogue and co-operation. Accordingly, it facilitates
contacts between the various authorities involved in illegal asset recovery.
36. The StAR initiative works with world organisations, particularly
the Conference of States Parties to the UNCAC, the G8, the G20 and
the Financial Action Task Force (FATF), to win over decision makers
and liaise with them.
37. The role of civil society in the process of illegal asset
recovery was discussed in depth at the
GFAR. The principles adopted at this forum follow on from
the work of the UNODC and the appeal launched in the Addis Ababa
Action Agenda (
AAAA) for the international community to devise good practices
in the area of confiscated illegal asset recovery.
38. The GFAR principles not only point to the need for international
co-operation on transfrontier illegal asset recovery,
Note but also
place particular emphasis on transparency and accountability in
the return and disposition of recovered assets.
Note Information on the transfer and administration
of returned assets should be made public and made available to the
companies concerned. To ensure that criminals do not benefit any
further from their ill-gotten gains, it is important to establish
clearly who will be the beneficiaries of the recovery process.
Note
39. Lastly, and very importantly, the GFAR principles talk of
the inclusion of non-government stakeholders. Consequently, “civil
society, non-governmental organizations and community-based organizations
should be encouraged to participate in the asset return process,
including by helping to identify how harm can be remedied”.
Note It is also specified that this inclusion must
be provided for and permitted by law, which is only the case in
some Council of Europe member States, as highlighted above.
3 Examples of best practices in re-using
confiscated assets in the Council of Europe member States
40. A majority of the EU member
States covered by the two studies outlined above (paragraphs 21-31)
have not, or not yet, adopted rules to enable or promote the social
re-use of confiscated criminal assets. The replies to my ECPRD questionnaire
show that this is also true for most of the Council of Europe member
countries that are not part of the European Union. Nevertheless,
some European countries have well-established systems to re-use
confiscated assets for social purposes, which may be linked to their
long history of combating organised crime.
3.1 Italy
41. In Italy, various projects
linked to the good use of confiscated assets (
beni
confiscati) have already been set up.
NoteNoteNoteNoteNote The idea of social re-use of confiscated
assets arose in the mid-1990s, when Law No. 109/1996 (
LEGGE
7 marzo 1996, n. 109) allowed the use of assets confiscated from the mafia
for social purposes. This legislation has made it possible, for
example, to transfer confiscated property belonging to a mafioso
or obtained by corruption to a social co-operative.
Note
42. The body responsible for the allocation of confiscated assets
is the National Agency for the Administration and Allocation of
Assets Seized and Confiscated from Organised Crime (
Agenzia Nazionale per l’amministrazione e la
destinazione dei beni sequestrati e confiscati alla criminalità,
ANBSC), as set up by
Decree-Law
No. 4 of 4 February 2010.
Note During my information visit, I
have had an in-depth discussion with its director, the prefect Bruno
Corda. A good number of the “best practices” recommended in the
draft resolution are the result of this meeting.
43. Fifteen years after the adoption of
Law
No. 109/1996, the effects are tangible. Houses formerly owned by
the mafia have been transformed into police stations, cultural or
apprenticeship centres, drug user support centres or accommodation
centres for refugees and migrants.
Note According to figures from the ANBSC
(as of 22 March 2022), 33 098 buildings have been confiscated, of
which 13 479 are still managed by the ANBSC and 19 616 have been
permanently assigned (including 8% of the State and 92% to the regions
and local authorities).
44. During my information visit to Rome, I had the opportunity
to visit a particularly impressive project, which is part of the
“Talento & Tenacia” initiative of the region of Lazio and the
city of Rome – a finalist in a competition organised by the European
Union. An entire neighbourhood had been “colonized” by a powerful
mafia clan. The State succeeded in reconquering this territory by
knocking down a gigantic villa (built without permit) and replacing
it by a “parc of legality” complete with sports fields, library
etc. Other villas in this neighbourhood which belonged to the same
clan were transformed into a reception centre for young people in
difficulty (including young unaccompanied migrants), a social centre
for autistic children and in premises for different social and sports
clubs. I was able to speak freely with the association activists
and the young people concerned, who obviously enjoyed this beautiful
living space. Most importantly, the inhabitants of the neighbourhood
were not, or not any longer, afraid of the clan’s vengeance. The
State has visibly earned the trust of the local population by making
a long-term commitment.
45. Another famous example is the
Libera Terra project,
Note which was set up
to promote development in historically “problematic” regions. This
organisation fosters the social and productive rehabilitation of
property confiscated from mafia groups, particularly agricultural
land. In this way, Libera Terra promotes respect for the environment
and the dignity of its workers and for organic farming.
46. Another noteworthy example is the “Café de Paris” in Rome,
which used to belong to the crime families of the Calabrian ‘Ndrangheta
and was confiscated in 2008. The café opened up again in November
2011 and is managed now by the ANBSC. It sells agricultural produce
farmed by the organisation Libera Terra referred to above.
47. Such direct use of confiscated mafia items was considered
preferable to selling them at public auction, which carries the
risk that the assets will end up being bought back by the criminals
themselves or by front men and women. In addition, many potential
buyers would not dare to defy the power of a crime syndicate by
buying “their” property.
Note
48. During my fact-finding visit to Rome, I also met key persons
from the Ministry of Justice
NoteNoteNoteNoteNoteNoteNoteNote who
explained to me the Italian system of confiscation, which involves
several stages, and of the social reuse of confiscated assets. Legislation
and administrative practice need to be adapted regularly to deal
with changing criminal activities and to take advantage of experience
gained over time. The percentage of cases in which the seized property
must be returned to the person concerned at the end of the legal
proceedings is very low (2-3%), hence the interest of making good
use of the confiscated property from the start, even if in very
rare cases the necessary investments are lost or the person concerned
must be compensated. New support measures for local authorities
are being prepared, as well as improvements to the system of temporary
administration of confiscated businesses designed to help them overcome
the “legality shock” (see para. 67 below). A key case in point is
that of the port of Ostia, subject to a seizure of a volume of more
than € 250 million, which must of course continue to operate.
3.2 Spain
49. The Spanish system provides
for the social re-use of confiscated assets only if they derive
from offences linked to drug trafficking.
Note The Confiscated Assets Fund (
Fondo de bienes decomisados por tráfico ilícito
de drogas y otros delitos relacionadosNote) was set up by
Law
No. 17/2003. The law provides for the sale of assets deriving from
drug trafficking and the laundering of the proceeds of such trafficking
and the allocation of the proceeds of such sales to a public fund.
The fund then divides up the money between the beneficiaries. Under
Article
3 of the Law, the beneficiaries of the fund may be the law enforcement
authorities and the prosecution services tasked with combating drug
trafficking. Among the other beneficiaries are NGOs and other non-profit-making
organisations working in the area of substance abuse, regional and
local authorities and governments, the government delegation for
the National Anti-Drug Plan or international organisations and institutions.
Note
3.3 United Kingdom/Scotland
50. The Scottish Government has
set up a unique programme, which takes funds recovered through the
Proceeds
of Crime Act 2002 and invests them in community programmes, facilities
and activities for young people.
Note
51. Since 2008, £110 million have been committed to community
initiatives run by partner organisations in Scotland’s 32 local
authorities. Organisations which make a funding request must have
proved that they can offer activities and opportunities to the young
people, families and communities most affected by crime.
Note
3.4 France
52. A law of 2010 (
Law
No. 2010-768 of 9 July 2010) is intended to facilitate the seizure and confiscation
of the proceeds of crime. To improve the management of confiscated
assets, this law also set up the Agency for the Management and Collection
of Seized and Confiscated Assets (
AGRASC).
53. AGRASC sees both to the good management of confiscated assets
and, once the final decision has been taken, their transfer to the
general State budget or, in the case of a conviction for a drug-related
offence, to a special fund managed by the Inter-Ministerial Task
Force on Drug Use and Addiction (
MILDECA). MILDECA was set up in 1982 as a specialised body tasked
with co-ordinating ministerial work to combat drug addiction.
Note It
manages a Support Fund, set up in 1995.
Note The fund is financed
by criminal assets confiscated in drug cases and is allocated to
the anti-drug trafficking services and prevention activities. The
Fund’s receipts are allocated to the Ministry of the Interior, the
Ministry of Justice, the Ministry of Finance and the Ministry of Social
Affairs.
Note
54. In 2016, an amendment was made to the Law on Equality and
Citizenship (
Law
No. 2017-86 of 27 January 2017) whose aim was for confiscated immovable property to
be used for public-interest or social purposes.
Note The amendment was declared unconstitutional
and set aside by
Constitutional
Court decision No. 2016-745 of 26 January 2017. The Constitutional Court’s reasoning that this provision
was “manifestly without any prescriptive effect”, does not, however,
preclude the introduction of a new law with a more precisely defined operational
scope.
55. As we saw above, current French legislation includes some
provisions which are moving towards greater public participation
in illegal asset recovery. As it stands, however, French law does
not yet provide for direct social re-use of confiscated assets.
4 Returning confiscated assets at international
level
56. As we have seen, the existing
international regulations on standards for returning confiscated
assets to the States from which they were stolen are still quite
vague and have little if any binding force (see paragraph 34 above).
The reason why States Parties have not been able to agree on more
strongly worded, clearer and binding texts is that the debate hinges
on two sensitive issues: national sovereignty and corruption, including in
politics.
57. Requesting States – the States seeking to recover illegal
assets – rightly argue that it is their money that has been stolen
and that they therefore have a sovereign right to dispose of it
as they see fit. The requested States, on the other hand, say that
safeguards must be put in place to prevent the money from being
stolen again – particularly in countries with notoriously high levels
of corruption, or where the funds in question have been stolen with
the involvement of those still in power or close to it. The requesting
States believe that the requested States are as much to blame for
the original theft, as their financial centres harboured the stolen assets.
In turn, the requested States argue that unless there is proof that
the recovered assets will not be stolen again, it is difficult for
them to justify the resources that must be allocated to their own
criminal proceedings.
58. Both positions are understandable, but in the interests of
the common goal – ensuring the greatest possible confiscation of
illegal assets and their use to repair the damage caused by organised
crime and grand corruption – there must be agreement that asset
recovery is a shared responsibility. It is now widely accepted that
countries that enable the theft of public funds and those that enable
these funds to be hidden in their financial systems share responsibility
for corruption. We have also made headway in recognising that the recovery
of stolen assets is therefore a shared responsibility. This has
not yet resulted, however, in the recognition that the countries
on both sides of the equation also have a shared interest and responsibility
to ensure that stolen assets are used for socially beneficial purposes.
59. We must also recognise that the purpose of recovering and
socially re-using illegal assets is to deter people from committing
corruption in future and to break the corruption networks which
undermine our democracies and sustainable and equitable growth and
threaten peace and stability.
60. How, then, can this collective responsibility be put into
practice in terms of sharing and using confiscated illegal assets?
Many countries choose to plough the money into their treasury. This
is a simple approach, but it only works if recipient governments
are now better able and willing to protect public funds from theft,
which does not always seem to be the case. This practice also overlooks
a second potential benefit of recovering illegal assets, the symbolic
but powerful value of using them to prevent crime, break up criminal
networks and repair the damage caused by corruption. Showcasing
the use of recovered assets for such purposes sends a message to
the public that governments are serious about tackling corruption
and have successfully recovered money. Social use of this kind makes
people aware of what a difference it makes when public funds are
used for their benefit rather than stolen, making them less likely
to accept corruption. I will make some practical suggestions on
how to do this in the next and last section.
5 Conclusions and proposals
61. The idea of using confiscated
criminal assets for civil society and for social purposes is not
entirely new and has already been taken up by State and non-State
partners. However, apart from certain initiatives that are well
thought out but limited in scope, the use of ill-gotten gains for
the common good is not a widespread practice in the Council of Europe
member States. In truth, only limited attention has been paid to
the “final destination” that confiscated assets should have.
Note This is supported not only by the
extensive but decade-old studies at EU level (see above paragraphs
21-31), but also by the results of the survey I conducted at the
end of 2021 via the ECPRD (see appendix).
62. Every successful recovery of stolen assets not only represents
a victory in the fight against corruption and organised crime but
also shows that there is no impunity for those who enrich themselves
at society’s expense.
Note However, for society or, better
still, for the sectors most devastated by crime to be able to take
full advantage of the recovery of criminal assets, we need clear
criteria and guidelines. Just as the process of asset recovery must
be efficient and transparent, an appropriate legal framework must
also be established for the re-use of confiscated assets for social
purposes. Both the experts at the hearing in January 2022 and those
I spoke to during my fact-finding visit to Italy made some interesting
suggestions.
63. With regard to the underlying objective of asset recovery
as a means of combating organised crime and corruption, the use
of confiscated assets for related purposes should be considered.
Our expert Ms Fenner, from the Basel Institute on Governance, provided
the example of Peru, where confiscated funds had been used to strengthen
the infrastructure of the country’s criminal justice system for
recovering illegal assets. In this way, States are able to self-finance
the growth of their illegal asset recovery capacities, enabling
far more stolen funds to be recovered in future thanks to a snowball
effect.
64. The Italian examples of police re-using sports cars confiscated
from the mafia and turning capos’ luxury villas into care homes
for overstressed police officers and their families fit into this
symbolic pattern of highly visible poetic justice – the fruits of
crime being put at the service of the police. Such direct re-use
of State-confiscated assets also protects against the risk that,
in the event of a sale, criminal groups will themselves buy back
“their” assets and/or threaten reprisals against any other interested
party daring to do so.
65. With regard to using asset recovery as a means of exposing
and repairing the damage done by corruption, the money should be
ploughed back into the place it was stolen from – namely into the
economic sector or region affected by that crime. Compensation should
be paid to those who were directly affected wherever possible; but
identifying individual victims can be costly and time-consuming.
Widening the circle of impact to include, for example, communities,
regions and economic sectors, may be enough to fulfil the aim of providing
symbolic and visible redress.
66. An important and particularly difficult issue is the seizure
of “mafia” businesses. On the one hand, such companies distort competition
to the detriment of legal companies by avoiding the payment of taxes
and social security contributions for their workers and by subsidizing
their offer prices through the laundering of funds of criminal origin
(drugs, usurious loans etc.). This costs jobs in the legal sector,
in addition to generating profits for organized crime. On the other
hand, authorities who shut down mafia businesses must overcome the popular
perception that “the mafia provides jobs, the State ²fires”. The
solution advocated in Italy is to do everything possible to help
potentially viable confiscated businesses to overcome the “legality
shock” caused by the loss of illicit advantages, in co-operation
with employers’ associations, trade unions and banks. The objective
is therefore to put these businesses in the position to function
normally, with a view to subsequent takeover. The buyers must be
persons whose reliability has been rigorously established, including
by using the "anti-mafia" databases of the regional public prosecutor's
offices, which are accessible also to the National agency for the
administration of seized assets.
67. As I saw in Italy, good social re-use of confiscated assets
requires a solid legal and institutional framework, ensuring a transparent
process and fair and visible results. The legal framework and administrative practice
must be updated regularly, as is the case in Italy, in order to
counter the avoidance and adaptation strategies used by the criminal
structures. It is useful to have civil society closely involved
both in the decision-making process and in the reception and management
of confiscated assets. It is therefore unfortunate that, according
to the responses received via the ECPRD, NGOs are almost never involved
in decision making and are seldom beneficiaries. The legal framework
should also provide safeguards against conflicts of interest and abuse,
such as the cases that have been reported in some US States.
Note To
ensure democratic oversight, it is also important that parliament
receives regular public reports detailing the criminal assets seized
and the use made of them. I was impressed by the fact that in Italy
the National Agency for the Administration of Seized Assets and
the Ministry of Justice present reports to both chambers of parliament
twice a year.
68. Italy’s experience appears to show that a centralised approach
with a specialised central institution (such as the
ANBSC) is more effective than a centralised approach with
non-specialised institutions (for instance ministries and public
prosecutor’s offices) or the decentralised approach based on specialised
or non-specialised local and regional bodies that is taken by other
countries which re-use confiscated assets for social purposes. A
great deal of expertise and management skills are required for handling
movable and immovable assets intended for direct re-use, as well
as for selling or renting them either at market prices or at preferential conditions
in duly justified cases. The expertise acquired within a specialised
institution may then be made available to stakeholders at local
level. Having a central body that decides how to distribute confiscated
assets may also prevent conflicts of interest which may lead to
the type of abuse reported in the United States. Lastly, central
specialised institutions may also act as key contact points in cases
involving the return of confiscated illegal assets at international
level.
69. In terms of international co-operation in tackling grand corruption,
foreign bribery convictions offer another interesting possibility.
Many countries have made it a crime for domestic companies to commit
bribery abroad. Courts fine them or order them to return ill-gotten
gains, but this money is usually collected by the country in which
the corrupt companies are based, although the bribery took place
in a foreign country which suffered the resulting damage. I believe
it would be fairer to share these funds with the countries which
are victims and with civil society organisations involved in tackling
corruption. The rationale behind this is the same as for the social
re-use of confiscated assets: using dirty money to fight corruption.
70. This report, which has been in preparation for more than two
years, has sadly gained in topicality following the war of aggression
launched against Ukraine by the Russian Federation. On the one hand, oligarchs
close to power have been hit with strong targeted sanctions, including
the freezing of their assets in Western countries; on the other
hand, Russian bombings and other acts of war in Ukraine have caused enormous
damage, and triggered a wave of refugees unprecedented in Europe
since the Second World War. It therefore seems logical to make use
of frozen assets that lend themselves to it, in particular houses
and apartments, to accommodate Ukrainian refugees. The next step
would be the final confiscation of these assets. According to the
logic of this report, these are indeed illicit assets, stolen by
the oligarchs from the Russian people. They should therefore in
principle be returned to the Russian people. But as we have seen
above, the return of illicit assets seized abroad to their country
of origin does not make sense when the “thieves” are still close
to power because the risk of a new embezzlement of these funds is
then high. At the same time, Russia's aggression has generated a
large debt (also in financial terms) of Russia vis-à-vis Ukraine.
The Russian Federation will have to compensate Ukraine for the enormous
damage caused by the bombing of infrastructures and housing that
continues to this day. A logical solution would therefore be to
operate an “offsetting of claims” by paying the illicit assets confiscated
from the oligarchs into the future fund for the reconstruction of
Ukraine. I made a proposal to that effect in the draft resolution.
