Last month, the European Commission announced that as of early April, nearly €30 billion in Russian assets belonging to Putin’s oligarch cronies had been frozen by EU member countries. These included boats, helicopters, real estate and works of art, paid for with money stolen from the Russian people by kleptocrats with privileged access to state revenues and assets. For a long time, these state-sponsored thieves could count on the West to turn a blind eye, as they invested their dirty money in yachts, homes and luxury goods – even passports and political parties. It took a brutal war of aggression to finally get the EU and its international partners to act.
As research by Transparency International and others has shown, the EU has long been an attractive destination for anyone looking to hide their ill-gotten wealth. Kleptocrats around the world, including brutal dictators, corrupt business magnates, their families and associates, have been able to hide their funds in the EU with impunity.
Zine El Abidine Ben Ali, the former Tunisian dictator, is a good example. His kleptocratic system stole about a third of his country’s total GDP. A significant portion of his wealth was invested in European properties and luxury goods. More than a decade has passed, but the wealth stolen from the Tunisian people has still not been returned. Other prominent cases include Gulnara Karimova, the jet-setting daughter of the former dictator of Uzbekistan; Viktor Yanukovych, the disgraced former president of Ukraine; Hosni Mubarak, the former Egyptian autocrat; and corrupt businesswoman Isabel Dos Santos, daughter of the former leader of Angola.
As these cases have shown, freezing stolen assets is often the easy part. It is rare for frozen assets to be confiscated, and even rarer for them to be returned to victim populations. According to Europol data, 2.2% of EU crime proceeds are seized or frozen, and only 1.1% is ultimately confiscated. By not fixing the flaws in its asset recovery system, the EU is allowing the impoverishment of the countries from which the stolen money comes.
In most cases, forfeiture of assets requires a criminal investigation. The investigation must in turn prove that the property in question was acquired illegally. Confiscation is sometimes possible if the wrongful “owner” of the assets is convicted. But with organized crime groups and kleptocrats, this is rarely feasible. It can be difficult to link laundered money and assets to specific crimes, and there is also a risk that dirty assets will go missing before an investigation is complete.
For this reason, some member countries allow confiscation of assets without prior criminal conviction, by criminal or civil court order. There are no common European rules and substantial differences exist between countries. This must change.
In 2014, the European Parliament and the Council adopted the Asset Recovery Directive, which sets minimum rules for the freezing, management and confiscation of assets of criminal origin. Under this directive, confiscation without a criminal conviction is possible, but only in exceptional cases. Even then, procedural barriers can prove insurmountable, as shown by the recent decision by the EU Court of Justice to unfreeze the assets of former dictator Mubarak.
After years of pressure from civil society groups and others, the European Commission is expected to present a recast of the directive next week. The updated rules should aim to do three things.
First, the scope of non-conviction-based confiscation should be broadened to facilitate the seizure of assets suspected of having been stolen.
Second, the EU should follow the example of France last year by ensuring that returned assets benefit victimized populations. Anti-corruption, rule of law and accountability mechanisms should be in place to ensure oversight of recovered assets. Where the country in question is unable to provide the necessary safeguards, civil society should be involved to enhance transparency and accountability.
Third, data on member countries’ asset recovery efforts should be collected and published in a systematic way to ensure transparency and accountability. This will allow for more thorough monitoring and better coordination of asset recovery efforts across the EU.
The war in Ukraine has starkly exposed how complicit the EU and its member countries have been in helping Putin and his cronies hide their dirty money. Freezing their stolen assets is an important first step. But it shouldn’t stop there. The stolen assets must be confiscated and, when the conditions are right, returned to those who paid the price for Russia’s slide into kleptocracy. There are signs that the EU is ready to consider innovative solutions. The Commission reportedly intends to make circumventing sanctions an EU crime, giving countries the legal basis to confiscate frozen assets. European Council President Michel said last week that confiscated Russian assets should be sold to help rebuild Ukraine.
A revamped and harmonized regulation on asset recovery has the potential to ensure that in the future no oligarch or kleptocrat, whether from Russia or elsewhere, would consider hiding their loot in the European Union. At the same time, concerted international action must be taken to ensure that no jurisdiction in the world – be it a G7 member or a tropical tax haven – is a safe destination for stolen funds. When it comes to stolen assets, there should be nowhere for their “owners” to hide them.
Transparency International EU’s asset recovery program is supported by the Open Society Foundations.