15 June 2013, London — Britain risks becoming a safe haven for corrupt foreign officials to stash ill-gotten gains due to systematic failures to go after billions of dollars laundered into onshore bank accounts and prime property, law enforcement experts and campaigners say.
Many investigations into stolen assets parked in Britain don’t get off the ground because the Home Office routinely fails to respond to requests from other countries for help, according to Britain’s former chief anti-money laundering officer.
“When an investigation is initiated from the victim country and monies are suspected to be in the UK, the requests go out through all the proper channels, but there’s no great keenness to comply,” said David Thomas, who was head of Britain’s Financial Intelligence Unit from 2006 to 2010.
“The mindset is that we’ll just be giving ourselves a headache… This could be abused by a corrupt official as the chances of them losing their assets in the UK are getting slimmer.”
The World Bank estimates that each year developing nations lose between $20 billion and $40 billion through corruption, much of it siphoned from public funds into the murky offshore financial system.
Successful international asset recovery is notoriously difficult because of the often complex web of transactions used to hide illegal sources of money, as well as a lack of cooperation between different countries and legal jurisdictions.
Between 1994 and 2009, only $5 billion of stolen assets were recovered globally — less than 2 percent of the lowest estimated amount stolen annually — according to analysis by the World Bank and U.N. Office of Drugs and Crime.
“It is clearly not a priority for the Home Office but there is always a good reason for this — there is a finite amount of resources,” Thomas told Thomson Reuters Foundation.
“But there has been no attempt to fix it either and so it’s always going to be an unhappy ending for the victim countries.”
DISCREET BANKS AND MANSIONS
London, with its discreet private banks and luxury real estate market, was a destination of choice for the now dead Libyan dictator Moammar Gaddafi, whose property portfolio in the city was reported to be worth up to 1 billion pounds ($1.6 billion).
More than two years after Gaddafi’s fall, Britain has only returned to Libya a 10-million-pound north London mansion owned by Saadi Gaddafi, the dictator’s third son, who controlled the property through a British Virgin Islands registered company.
As host of next week’s Group of Eight summit of rich industrialised countries, British Prime Minister David Cameron has pledged to “break through the walls of corporate secrecy”.
Transparency campaigners hope Cameron will enact rules requiring member countries to publish information on the “beneficial” – or ultimate – ownership of anonymous shell companies, which are the most widely used method for laundering the proceeds of crime, corruption and tax evasion.
But Thomas said Britain’s leadership on financial transparency should also include greater openness about its own investigations into illegal wealth being harboured in Britain and its overseas territories.
“There’s no accountability on the public sector side. What the authorities choose to do or not do to follow a line of investigation is not in any way tested, challenged, compared or evaluated,” he said.
The UK Central Authority (UKCA), a team within the Judicial Cooperation Unit in the Home Office, is responsible for handling incoming requests for help from foreign authorities that suspect stolen assets have been dumped in Britain.
The UKCA is supposed to pass requests onto investigative bodies including the Serious Organised Crime Agency, the Serious Fraud Office and the Crown Prosecution Service.
But Thomas described the UKCA as a “misnomer” and said there was in fact no effective central authority to process requests.
The Home Office refuted the claim, saying in a statement: “The UK is committed to providing mutual legal assistance to help other countries investigate and recover stolen assets. The UK Central Authority deals with requests promptly and in accordance with international obligations and domestic law.
“We are working to make the asset recovery process quicker, more robust, and more effective. Tackling bribery and corruption will be a key priority for the Economic Crime Command in the new National Crime Agency.”
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COUNTRIES PUSH BACK
The UKCA was restructured in 2007 following criticism from lawyers and the Financial Action Task Force on Money Laundering (FATF), a group set up by the G8 in 1989 to develop anti-money laundering regulations, that it was slow to respond to requests.
The Home Office declined to release statistics on the number of asset-recovery requests received from foreign authorities, how many had been referred to investigative bodies and how many cases were pending.
Jeremy Carver, a lawyer and senior adviser to Transparency International-UK, said little had changed since he told a House of Commons Select Committee in 2001 that other countries “dread” having to make a request to the UKCA.
“There is no doubt that the UK government would like to ‘up their game’ on this; but its performance has barely changed,” he said. “This seemed to be the view from a meeting I had at the end of last year with those particularly concerned with the topic in the government.”
Some countries making the requests are pushing back.
Last year, the Egyptian government sued the British Treasury and Foreign Commonwealth Office, seeking a judicial review for the British government’s sluggish response to freeze assets linked to toppled leader Hosni Mubarak.
A BBC investigation found that British authorities waited over a month after the Egyptian revolution before moving against assets linked to Mubarak and 18 associates, more than enough time to transfer money out of the country.
In contrast, Swiss authorities waited less than 30 minutes after Mubarak’s resignation to freeze his assets.
Britain has since taken steps to speed up its work with Egypt, forming a task force and putting a prosecutor in the region to help with technical assistance.
But Robert Barrington, executive director of Transparency International UK, said Britain’s inability to rapidly freeze assets remained a glaring weakness.
“There are two indicators that the UK is taking asset recovery seriously,” he said. “One is to provide the resources to tackle these detailed and time-consuming cases, which doesn’t happen. The second is the ability to freeze assets in a very short time.
“The Swiss have a law in place that allows them to freeze assets in minutes, Britain does not.”
*Alex Plough, Reuters