Policy paper

Framework for transparent and accountable asset return

Published 13 January 2022

Introduction

The proceeds of crimes covered by the UN Convention Against Corruption (UNCAC)— that is, bribery, embezzlement of public funds, money laundering and trading in influence and other abuses of official functions—must be returned to the requesting state in accordance with Article 57(3)(a) and (b) should the conditions therein be satisfied.

In cases which involve overseas requests for the return of such proceeds where there has been no conviction of any person, Article 57(3)(c) makes asset return discretionary, mandating only that “priority consideration” be given to returning the assets to the requesting State Party, to its prior legitimate owners or compensating the victims of crime.

The UK, as a signatory to UNCAC, is obligated to return funds where the conditions for mandatory return are met; however, the UK also exercises its discretion to return funds in appropriate cases when it is not otherwise mandated to do so (i.e. in line with Article 57(3)(c) of UNCAC). This Framework recognises that although cases require case-specific treatment, it should also provide principles to be considered in each case. Ultimately, any decision in England and Wales will be made by HM Government.

The purpose of this Framework is to ensure consistency, transparency, and accountability in HMG’s process of returning funds to other countries, where those funds are in scope of this Framework. The Framework sets out the process for return, the deduction of reasonable expenses, the stakeholders to be engaged throughout the return process and the mechanisms for return.

This Framework builds upon the principles agreed at the Global Forum for Asset Recovery (GFAR), which acknowledge that the asset return process should be transparent, accountable and in the best interests of both the requested and requesting state.

It aligns with the Compensation Principles agreed in 2017 between the Serious Fraud Office, the Crown Prosecution Service and the National Crime Agency, which relate to asset return as well as compensation. It also aligns with the asset return principles under the Commonwealth Schemes for International Cooperation in Criminal Matters.

Scope

1. This Framework covers the following (in England, Wales, and Northern Ireland) and relates to mandatory and discretionary asset return.

a) Confiscation orders (if a compensation order is not granted to the party to which the asset return would be made) made under Part 2 of the Proceeds of Crime Act 2002 (POCA), Criminal Justice Act 1988 or Drug Trafficking Act 1994

b) Orders for civil recovery and forfeiture under Part 5 of the Proceeds of Crime Act

c) Incoming Mutual Legal Assistance (MLA) requests and mutual recognition cases

d) Any other court or non-judicial resolutions, to which the state is a party (and therefore the state has a say in how or whether the money is returned) that include a finding that property is or represents the proceeds of crime, where the prior legitimate owner of the proceeds of crime is another country

2. This does not apply to court-ordered compensation or other court ordered financial penalties. Such orders should not be referred to as ‘asset return’ (see Annex A for further details).

3. This Framework covers the above mechanisms in cases where another country has requested funds are returned, whether that is via an incoming mutual legal assistance request or via another form of communication, no matter at what stage of the asset recovery process the request is received. The Framework also applies no matter at what stage of investigation/prosecution the request from the other country is made. It also covers cases where another country has not requested the return of funds, but there might nevertheless be reasons to return the funds (to, for example, their prior legitimate owners or to identifiable victims of the crime).

Determining whether funds should be returned

4. In asset return cases, funds are generally returned under Articles 57(3)(a) or (b) of the UN Convention Against Corruption (UNCAC) i.e. mandated, or under Article 57(3)(c) of UNCAC, i.e. discretionary.

5. It is possible to return recovered assets (as an alternative to realising those assets and returning the resulting funds). This document refers to ‘funds’ throughout but should be applied to the return of assets as well.

UNCAC

6. Articles 57(3)(a) and (b) set out the circumstances under which recovered funds must be returned to the requesting state (see Annex A), noting this may not always be feasible.

Returns under Article 57(3)(c) of UNCAC

7. Where the full criteria of Articles 57(3)(a) and (b) are not met, it may be appropriate to return funds, nonetheless. Article 57(3)(c) states that in “all other cases, give priority consideration to returning confiscated property to the requesting State Party, returning such property to its prior legitimate owners or compensating the victims of the crime”. Therefore, these returns may be ‘in line with’ Article 57(3)(c). For example, the criteria may be met save for the fact that no MLA request has been sent—in this case the funds would still come from corruption or another UNCAC crime and therefore should be returned.

8. Any final decision on asset return, where the funds are remitted to the Home Office, will be made by the Home Secretary. The Department of Justice in Northern Ireland administers assets recovered using confiscation orders, however civil recoveries and cash, account and listed asset forfeitures are remitted to the Home Office at present.

International Engagement

9. Where an MLA request has been received, communications with the requesting government during the investigation or prosecution phase should be between central authorities unless the central authorities agree otherwise.

10. Although a requesting state may express a view as to operational activity in the UK, operational activity is a matter for the UK. Engagement with a requesting state will usually only relate to the return of potential assets.

When no MLA request has been made:

11. For departments or agencies without an international presence, international engagement should be undertaken via central Government departments—the FCDO in the first instance.

Recovery of reasonable expenses

12. UNCAC states in Article 57(4) that “the requested State Party may deduct reasonable expenses incurred in investigations, prosecutions or judicial proceedings leading to the return or disposition of confiscated property pursuant to this article” (noting that HMG understands the use of ‘confiscated’ throughout UNCAC to refer to all asset recovery measures, including non-conviction based measures, as set out in Annex B). The purpose of this is to recover fair and reasonable costs attributable to the investigation.

13. In line with UNCAC, the default position would be that reasonable expenses should be deducted from recovered funds in all cases that are covered by this Framework, noting paragraphs 15-20. HM Treasury would expect that reasonable expenses are recovered.

14. Where there is an intention to recover reasonable expenses, in order to manage expectations, this should be flagged to the recipient country at an early stage. Law enforcement and prosecution agencies should calculate expenses using their standard procedures. This should be transparent.

Reasonable expenses following MLA requests

15. If the recovery of assets is made pursuant to an MLA request, convention is that the requested state will cover the costs of executing the request for assistance, including the costs of recovery, unless there is a claim for exceptional costs, or the matter falls within UNCAC.

16. This convention is included in most MLA treaties.

Decision making

17. The net recovered funds are remitted to the relevant bank account (Home Office typically, in some cases HM Treasury). If reasonable expenses are agreed to be deducted by any law enforcement or prosecution agency, these costs will be remitted back to the relevant law enforcement or prosecution agencies.

18. In the process of deducting expenses, representations will be made from the relevant agency and other parts of HM Government to ensure the most suitable outcome is reached, having regard to the value of:

a) loss sustained by the receiving country

b) funds recovered

c) the requested reasonable expenses to be deducted.

19. In cases where the law enforcement or prosecution agency does not remit funds to the Home Office, they must engage relevant stakeholders before determining the value of reasonable expenses to seek to deduct.

20. There is no requirement to recover reasonable expenses and in exceptional circumstances it may not be desirable or appropriate to do so, for example:

a) Law enforcement or prosecution may choose not to recover costs in a particular case, or in any cases.

b) Any activity paid for as part of HMG’s development expenditure should not be counted as reasonable expenses.

c) Civil recoveries may make use of a cost order, where in principle the defendant pays the litigation costs (this would avoid reasonable expenses being paid twice).

d) The FCDO may advise against deducting reasonable expenses—this will be taken into account by the returning agency/department when determining the amount to be returned. For example, it may be advised to return the full amount recovered to a developing country (see OECD list of ODA-eligible countries).

Mechanism for return

21. Article 57(3)(c) of UNCAC provides that states should give priority consideration to the return of confiscated property to requesting countries, to the “prior legitimate owners” and/or to victims, noting that it may not always be feasible to identify prior owners or specific victims. The Home Office will consider returning confiscated assets to prior legitimate owners and/or victims if they are identifiable but, in many cases, the appropriate mechanism for return of funds will be to another country’s central government, who may be best placed to enhance the position of victims and/or identify and provide restitution to prior legitimate owners.

22. Funds can be returned via a variety of mechanisms including direct asset return, an asset return fund, a multilateral/HMG-funded programme or through civil society. The mechanism must be agreed by the recipient country, and we must prioritise transparency and preclusion of the funds benefitting any alleged perpetrators while seeking agreement.

Decision making

23. Law enforcement, prosecution agencies and other bodies outside central government remain responsible for the investigation and prosecution of cases, as well as any subsequent litigation. These agencies are operationally independent and central government departments play no decision-making role in investigation and prosecution. However, when steps taken during the investigation/prosecution affect the asset return process—such as the intervention of the recipient government in the court process or discussion of a settlement—central Government departments may make representations to law enforcement and prosecution agencies, which the latter may wish to consider, noting the operational independence of the agencies.

24. The actual return process will be led by the department or agency that is responsible for administering the funds at the time that the return is made (the returning department or agency):

a) When the funds are remitted to the Home Office, the Home Office will be responsible for the asset return.

b) Law enforcement or prosecution agencies will be responsible for overseeing the return of funds that are not remitted to the Home Office, e.g. where funds are transferred from the defending party to another country under the terms of a settlement. The law enforcement agency may defer responsibility for asset returns to the Home Office in such cases.

Timelines

25. Due process can take time, which can become a source of frustration and concern for many recipient countries. However due process must be followed. HMG should seek to return funds within the shortest reasonable timeframe. When known, timelines should be shared with the recipient countries where practicable.

Agreements

26. Funds cannot be returned to another government without a case-specific agreement. A memorandum of understanding (MoU) should be sought rather than a treaty, where possible, though a treaty may be the preferred option. Treaties can take 3-12 months to conclude; if a recipient country requests a treaty, they must be made aware of these timelines. A MoU does not create legally binding obligations. Instead it reflects political or administrative arrangements/commitments. MoUs are not subject to the domestic ratification procedure under the Constitutional Reform and Governance Act, and nor are they usually laid before Parliament or published. They are also not registered by the UN, which treaties are, so there is more scope for reflecting discrete commitments etc.

27. Few bilateral agreements exist that can facilitate asset return. Where an appropriate agreement exists, the agreement should be used, with an annex detailing the specifics of the particular return added to that agreement.

28. If a new agreement is written, the drafting responsibility will by default belong to the returning department or agency that is responsible for the funds. This will usually be the Home Office. The diplomatic relations will belong to the FCDO (at post).

29. If the funds are transferred directly from the defending party to the other country, e.g. where funds are transferred from the defending party to another country under the terms of a settlement, the lead investigation/prosecution agency will be responsible for ensuring that the funds are returned via an agreement with all parties as per the Framework. This reflects the fact that the funds will not enter the Home Office’s bank account during this process. The agency may defer responsibility for this to the Home Office.

30. Any agreement must detail the steps that the recipient government will take to ensure the funds are put to their intended use (jointly agreed by all governments party to the agreement). Where possible, an agreement should detail the reporting mechanism(s) to ensure accountability and transparency for HMG.

31. Due diligence should be performed by the returning agency or department on the bank account and account holder that is due to receive the funds.

32. If no agreement can be reached with the recipient country, engagement with civil society organisations (CSOs) in the UK, and CSOs/UK embassy in-country may be able to provide potential reasons for this. It may be necessary to consider whether the terms of the proposed agreement pose a disproportionate burden on the recipient country, or whether HMG should consider returning funds through HMG/third party programming.

Overseas Security & Justice Assistance (OSJA)

33. If funds are returned through funding a project abroad related to security or justice assistance, an OSJA assessment may be required. If the project has been identified or suggested by the FCDO, the assessment will be completed by the FCDO. In other cases, the returning agency or department will have responsibility.

Alternative mechanisms for return

34. It is possible that a third party may seek to achieve asset return objectives by applying to be recognised as a victim in ongoing asset recovery proceedings, and/or by bringing a civil claim as a private litigant to recover the funds frozen/restrained by law enforcement/prosecution in England and Wales.

35. HMG fully supports individuals’ and governments’ rights to do this. However, we encourage engagement with the applicant in such cases to ensure the most effective mechanism for asset return is being pursued. Ownership of this engagement will sit with the Home Office and the FCDO.

36. In general, the most effective way for requesting states to see assets returned is to cooperate with law enforcement and prosecution agencies in England and Wales, where a case has already been commenced.

Appeals

37. As part of this process the lead agency that has recovered the assets may need to consider holding funds for the relevant period of time before repatriation, in accordance with this Framework, to allow for any legal appeal to be determined, or allowing any period for appeals to be brought to expire. Whilst there is always a risk of an appeal being lodged out of time, holding the funds up to the standard time allowed for appeal, will reduce the risk of a claim for a refund.

Civil Society Organisations (CSOs)

38. CSOs have an important role to play in asset return, in particular providing insight into the most appropriate mechanism of return and ensuring transparency.

39. HMG should consider engaging relevant domestic and international CSOs promptly once it is agreed in principle that funds should be returned under this Framework.

40. These groups can advise on the likelihood of funds being put to use as agreed by the central government and which organisations in the country may be best placed to deliver programmes or projects in the country if required. Domestic CSOs can provide a link between HMG and CSOs in the recipient country, who may provide valuable insight into the circumstances of that country.

41. The responsibility for engaging with civil society groups in this context belongs to the returning department or agency.

Monitoring

42. When funds are returned via HMG programming or a CSO, effective monitoring will be required by the returning department or agency to enable HMG to deliver on its transparency requirements. The mechanism for monitoring will be determined on a case-by-case basis; if funds are returned through an existing FCDO programme or project, the mechanism to monitor the use of funds will already be in place.

43. Many CSOs will have a process for monitoring projects. Lack of funding should not be a barrier to effective monitoring, as monitoring costs can be included in the project cost, i.e. funded by the returned funds.

44. If funds are retuned to another government, reporting on use of funds will be included in the return agreement. Nonetheless, CSOs in that country may be able to support HMG in monitoring the use of the funds and holding the government to account.

Transparency

45. All memoranda of understanding or other agreements which oversee the return of funds abroad must be published. Where possible, other documentation relating to the use of funds must be published or, if published on the recipient government’s website, a signpost can be provided on GOV.UK.

46. All returned assets must be recorded. The Home Office will hold this data for the whole of the UK; if the Home Office does not undertake the asset return, this information must be provided by the law enforcement/prosecution agency to the Home Office.

Annex 1. Definitions

Asset return

Asset return is the return of the proceeds of corruption-type crimes to the requesting State and/or to the assets’ prior legitimate owner and/or to victims of the crime, in accordance with Article 57(1) of UNCAC.

Asset share

It is important that there is no confusion between the concepts of asset return and asset sharing; they are quite different. Asset sharing follows MLA requests that lead to asset recovery and is a recognition of joint efforts between jurisdictions to recover criminal proceeds and to encourage further co-operation in the area of asset recovery. This applies to recovered criminal proceeds from all types of criminality, except those offences set out in UNCAC.

Consolidated Fund

Assets recovered using POCA orders are generally paid into either the Home Office, or HM Treasury Consolidated Fund in cases involving the SFO.

Court-ordered compensation

Any order made under a statutory provision by a UK court ordering a party to pay a sum of money to another named individual or organisation e.g. pursuant to s.130 Powers of Criminal Courts (Sentencing) Act 2000.

Court-ordered financial penalty

Any order made under a statutory provision by a UK court ordering a party to pay a sum of money to another party or to the court, other than a compensation or confiscation order, as defined in the Scope section of the Framework.

Mandatory asset return

Article 57(3)(a) and (b) in UNCAC mandate asset return when the criteria below are met. Cases not falling in (a) or (b) come within paragraph (c) which says “in all other cases, give priority consideration to returning confiscated property to the requesting State Party, returning such property to its prior legitimate owners or compensating the victims of the crime”. Paragraph (c) refers to non-mandatory asset returns. The UK notes that it may not be possible to identify the prior legitimate owners or the victims. The UK understands the use of “confiscated” to apply to both criminal and civil (non-conviction based) forms of recovering the proceeds of crime.

In accordance with articles 46 and 55 of this Convention and paragraphs 1 and 2 of this article, the requested State Party shall:

(a) In the case of embezzlement of public funds or of laundering of embezzled public funds as referred to in articles 17 and 23 of this Convention, when confiscation was executed in accordance with article 55 and on the basis of a final judgement in the requesting State Party, a requirement that can be waived by the requested State Party, return the confiscated property to the requesting State Party;

(b) In the case of proceeds of any other offence covered by this Convention, when the confiscation was executed in accordance with article 55 of this Convention and on the basis of a final judgement in the requesting State Party, a requirement that can be waived by the requested State Party, return the confiscated property to the requesting State Party, when the requesting State Party reasonably establishes its prior ownership of such confiscated property to the requested State Party or when the requested State Party recognizes damage to the requesting State Party as a basis for returning the confiscated property;

Where article 55 refers to international cooperation.