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The StAR Quarterly
January 2022
Table of Contents
Dear all,
 
We hope the New Year started well for you. For StAR, 2021 ended on a high note - with our first physical mission in almost two years, to the Conference of States Parties to UNCAC in Egypt in December, a golden opportunity to reconnect with current partners and meet new ones. Great as technology may be, there is no substitute for meeting people in the flesh and discussing face to face, unmediated by phone or computer.

The StAR day, by now a fixed part of the CoSP, allowed us to add our perspective to the current issues that are on the international asset recovery agenda, put new issues on there and showcase some of our most recent work, notably our most recent publication on the execution of foreign confiscation orders abroad. The spotlight piece discusses the day in more detail. Throughout the coming year and beyond, we will be drawing attention to these topics. We look forward to collaborating with all of you, civil society, governments and private sector, policy makers and practitioners, to make sure our voice continues to be heard.

On behalf of the StAR team,
Emile
Country Engagements
In Mongolia, StAR maintained its engagement with law enforcement and prosecutorial agencies through workshops on how to conduct investigations on the Dark Web and more trainings on financial investigations to familiarize staff on how to use a case management system for their investigations.
 
The StAR team advised authorities in Moldova on strengthening their asset declaration law. The team commented on two versions of the law which resulted in multiple positive developments including the addition of disclosure of declarant's and family members' expenses to acquire services, explicitly including expenditures in the control of significant changes in wealth of public official and adding disclosure of virtual assets. In addition, StAR also provided technical assistance in writing the draft law on measures related to the selection of candidates for administrative positions in bodies of self-administration of judges and prosecutors and the amendment of some normative acts. 

In Ukraine, the StAR team conducted a workshop for the National Anti-corruption Bureau (NABU) investigators on cryptocurrency, which provided an introduction to digital currency, blockchain and good practices for cryptocurrency investigations. 

In December, StAR organized a virtual training session on the fundamentals of financial investigations for senior level investigators  and managers of the Anti-Corruption Agency of Kazakhstan. During the training, participants were introduced to the strategies and approaches to the financial investigation of corruption offences and had a discussion on practical issues and good international practices to address them.
New World Bank risk assessment tool covering shell companies and beneficial ownership-related risks
 
Shell companies and other forms of legal structures (such as limited liability partnerships) have emerged as a primary mechanism for moving large amounts of illicit funds around the world, and many countries struggle with the implementation of international standards on beneficial ownership. Over the past year and a half, StAR worked closely with the World Bank’s Financial Integrity team to develop a new module of the World Bank’s National Risk Assessment (NRA) tool for money laundering/terrorist financing risks, and test the new tool with authorities in Panama in 2021.

The new module focuses specifically on money laundering risks related to companies, trusts, and other legal persons and arrangements and on identifying gaps in a country’s beneficial ownership regime. The module provides a comprehensive methodology for country authorities to systematically review and assess risks related to companies and other legal structures that are incorporated or registered in their jurisdiction, as well as risks related to foreign-registered structures.

Due to the multi-jurisdictional nature of corporate networks that are abused to launder criminal proceeds, cross-border risks are heavily emphasized throughout the module. It includes, for example, a review of online advertising of corporate service providers offering “offshore” company formation/administration services for non-residents and an assessment template of risk factors related to foreign-registered companies with a ML-relevant link to the jurisdiction. 

The new tool is structured in four components, which can be adapted by authorities to suit their jurisdiction’s specific needs:
  1. A detailed mapping exercise of different types of legal structures that can be created under national laws and the legal & regulatory frameworks that govern them
  2. A money laundering threat assessment focused on collecting enforcement data, identifying typologies of shell company abuse, and drafting case studies
  3. A national vulnerability assessment focused on identifying gaps and weaknesses in the jurisdiction’s overall beneficial ownership regime and assessing the strength of the jurisdiction’s existing mitigation measures to address risks of illicit abuse of legal structures
  4. An entity risk assessment to identify risk factors that are specific to different types of legal structures, e.g. corporation, LLC, LLP, trust, foundation, etc.
The development of this module and two other new NRA modules on virtual assets and on non-profit organizations was funded by the European Union under the Cariforum program.

First implementation of new tool to support Panama’s anti-money laundering efforts
 
In 2021, the new module was implemented for the first time by authorities of Panama to support their risk assessment of legal persons. This assessment is a requirement in Panama’s FATF action plan to address long-standing deficiencies in its AML/CFT systems, particularly related to transparency of beneficial ownership of legal entities and arrangements.

In March 2020, Panama adopted a new law that creates a beneficial owner registry (Law 129 of 2020) but the registry has not been implemented yet. Under this law, beneficial ownership information will be submitted to the new registry by resident agents – lawyers that fulfil company administration functions for some types of entities. A further law, adopted in December 2021, reduces the timeframe for legal  entities to notify their resident agent of changes in beneficial ownership information from 30 to 15 working days and for resident agents to update such information in the registry within 5 working days (Law 254). The registry will not be public; and law enforcement authorities can access information held in the registry upon request, via the supervisory body, Superintendencia de Sujetos no Financieros (SSNF).

In March 2021, the WB’s Financial Integrity team held a series of workshops with a working group of government agencies, including the Public Registry, FIU, Superintendence of Non Financial Subjects (SSNF), Ministry of Economy and Finance, Public Ministry, Prosecutor’s Office and private sector representatives from law firms, bar association, trust sector and notaries. The workshops were led by a StAR expert and served as an introduction to the module and overview of the methodology. The assessment itself is a self-assessment which was completed by authorities using the new WB tool.

After several months of data collection and analysis, Panama’s anti-money laundering commission (CNBC) approved the report on money laundering risks of legal persons and arrangements in November 2021.  This represents an important step to address the country’s money laundering vulnerabilities, because a comprehensive and honest assessment of the risks related to legal entities incorporated in Panama informs decisions about where additional safeguards to stop abuse of shell companies for criminal purposes are most urgently needed. The report was discussed during an in-person World Bank mission to Panama in November 2021 and a StAR expert participated in the report’s launch event.

The World Bank’s Financial Integrity team has been supporting Panama for the last three years in closing the gaps to comply with international AML/CFT standards, both through technical assistance and lending operations. Aside from the assessment of risks of misuse of legal persons, the WB team also supported Panama in understanding their risks of terrorism financing (completed) and risks of money laundering from tax crimes (ongoing).
In December, StAR participated at the International Forum: Kleptocracy and International Financial Flows organized by Ukrainian authorities with experts contributing to panels on the era of digitalization and cryptocurrency and challenges and opportunities in asset tracing, freezing, recovery and management in Ukraine and lessons learned from the international perspective.


StAR Coordinator virtually presenting at the International Forum: Kleptocracy and IFFs, December 2021

In the same month, StAR presented on the role of financial disclosure in preventing and countering corruption at the Kuwait Anti-Corruption Authority Hybrid Forum as part of events organized on the International Anti-Corruption Day, and presented the main recommendations of the new StAR technical guide on automated risk analysis of asset declarations at the Australian Commission for Law Enforcement Integrity (ACLEI) Corruption Prevention Community of Practice meeting.


StAR participation at the ACLEI Corruption Prevention Community of Practice meeting, December 2021

On behalf of StAR, the team participated in two intersessional meetings of the FATF Policy Development Group in January 2022 where final issues related to the revision of Recommendation 24 on beneficial ownership transparency were negotiated following a public consultation on the text of the revision. The StAR team has been actively involved in this process since the beginning of the review of the influential standard on beneficial ownership in February 2020; we provided inputs to the text of the interpretative note and the new glossary definitions of nominator, nominee director and nominee shareholder. During the most recent round of discussions, StAR highlighted the extent of criminal abuse of nominee director and nominee shareholder services for shell companies and supported stronger measures to address this problem. Revisions to R24 are expected to be adopted at the FATF plenary meeting in early March 2022.
New StAR Publication   
 
In December, as part of the 9th Conference of the States Parties (CoSP) to the UNCAC, StAR launched its latest publication, Orders Without Borders: Direct Enforcement of Foreign Restraint and Confiscation Decisions. This book offers an in-depth analysis of the concept of the direct enforcement of foreign restraint and confiscation orders which is a crucial step in the process of asset recovery, including existing legal approaches and related challenges. The publication analyses 31 jurisdictions representing different United Nations regional groups and legal systems (civil law / common law / mixed systems) in order to provide a meaningful picture of the situation worldwide from which generally applicable guidance can be drawn. 
Conference Room Paper, prepared by the StAR Initiative for the CoSP 9, on StAR’s data collection on international asset recovery efforts in corruption cases

Initial findings from the StAR survey are presented in a conference room paper for the CoSP titled “Mapping international recoveries and returns of stolen assets under UNCAC: an insight into the practice of cross-border repatriation of proceeds of corruption over the past 10 years”.
Spotlight On
9th Session of the Conference of the States Parties to the United Nations Convention Against Corruption


UNODC Executive Director addressing delegates at the 9th CoSP, December 2021 (@UN DGC)

Over 2100 participants from governments, regional and intergovernmental organizations, civil society, academia, and the private sector from more than 150 countries attended in-person and virtually from December 13 – 17 2021, the ninth session of the Conference of the States Parties the United Nations Convention against Corruption (UNCAC).  

The week-long event took place in Sharm El-Sheikh, Egypt and, as with previous biennial sessions of the Conference, it continued to set records as the first session to be organized in hybrid format, combining in-person and virtual participants in a successful effort to adjust the event to the restrictions imposed by the ongoing covid-19 pandemic.

The ninth session of the Conference concluded with the adoption of eight resolutions and a decision for the United States to host the tenth session of the conference in 2023. The resolutions covered a range of key topics, including the new challenges related to international cooperation in the prevention of and fight against corruption during times of emergencies and crisis response and recovery, and a follow-up to the political declaration approved at the Special session of the United Nations General Assembly against corruption, held in June 2021.

UNODC’s newly established Global Operational Network of Anti-Corruption Law Enforcement Authorities (GlobE Network) was also the subject of one of the adopted resolutions, which invited States to join the GlobE Network and to participate in and make the best use of opportunities for cooperation through the network, the Stolen Asset Recovery (StAR) Initiative and other cooperation mechanisms.

Notably, the work of StAR was welcomed and recognized in various resolutions that also encouraged States parties to continue to work with the Initiative, in particular in the areas of beneficial ownership transparency and data collection on asset recovery and returns.

Asset Recovery and Beneficial Ownership Transparency at the COSP

The United Nations Convention against Corruption was adopted in December 2003 and remains the most comprehensive and universal instrument against corruption. The Convention was the first to establish asset recovery as a fundamental principle to the fight against corruption. In keeping with this, asset recovery continued to be a key topic throughout the ninth session of the CoSP, whether in plenary discussions and the resolutions adopted, or in the several special events and bilateral meetings that took place during the event.

The main resolution to address asset recovery this time was on “Enhancing the use of beneficial ownership information to facilitate the identification, recovery and return of proceeds of crime” and it was tabled by Nigeria, Pakistan and the State of Palestine. This is the first time that a resolution entirely dedicated to the topic of beneficial ownership was adopted by the Conference of the States Parties to the UNCAC.

Among other measures, the resolution called upon States parties to ensure access to beneficial ownership information on companies, encouraged them to collect and maintain beneficial ownership information, and called upon them to adopt a multipronged approach to beneficial ownership transparency through appropriate mechanisms such as registries that provide access to relevant information to facilitate the investigation and prosecution of cases of corruption and the identification, recovery and return of proceeds of crime.

Furthermore, the resolution asked UNODC and the StAR Initiative to make available online information on States parties that maintain a registry or alternate mechanism on beneficial ownership information, together with methods of how to make requests for such data.

This new mandate reinforces the importance of the work that the StAR Initiative has already been doing in supporting countries, including through a new project funded by the United States on enhancing transparency of beneficial ownership and raising awareness of beneficial ownership risks to combat money laundering.

The importance of strengthening asset recovery mechanisms and the work of the StAR Initiative were also recognized in the resolutions to strengthen international cooperation during times of emergencies and crisis response and recovery; to follow-up to the special session of the General Assembly against corruption; to enhance international anti-corruption law enforcement cooperation; to follow-up to the Marrakech declaration on the prevention of corruption; and to promote anti-corruption education, awareness-raising and training.

In addition, more than 70 special events were organized on the margins of the Conference, featuring panels on a broad range of topics. Asset recovery was the theme of approximately 10 special events, one of them being the StAR Day organized and hosted by the Stolen Asset Recovery Initiative, covering various related issues such as beneficial ownership transparency, recovery of assets based on civil and administrative anti-corruption proceedings, illicit financial flows, non-conviction based asset forfeiture and asset management.

StAR DAY


StAR team and panelists at the StAR Day during CoSP, December 2021 (@UN DGC)

In recent years, the StAR Day has become an established part of the CoSP, providing participants with a full day of sessions and dialogue on asset recovery challenges, good practices and innovation, and new tools and knowledge products. In Sharm El-Sheikh, a new session of the StAR Day was organized by the StAR team and various partners. The event was organized in an innovative hybrid format, which allowed for dozens of in-person participants in Sharm El-Sheikh, over 300 online participants and panelists from across the world to join the sessions throughout the day.

The event featured six panels in total and opened with a High-level session on “ The state of play for asset recovery”. Speakers included the Deputy Minister for Prosecution Service at the Ministry of Justice of the Republic of Korea, the Head of the Joint Anti-Corruption Unit at the Home Office of the United Kingdom, the Managing Director of the ICAR at the Basel Institute on Governance, and the President of the International Association of Prosecutors. Among other topics, speakers reflected on the importance of formal and informal networks of cooperation, the challenges of bridging the gap between commitments and concrete actions in asset recovery and the importance of transparency in general, including on beneficial ownership, as a measure of accountability and tool against corruption.

The second panel, titled “Orders without Borders: The Direct Enforcement of Foreign Restraint and Confiscation Decisions” - co-organized with the International Center for Asset Recovery (ICAR) - marked the launch of the new StAR publication on the direct enforcement of foreign confiscation orders “Orders without Borders”. Speakers provided an overview of the publication and of current approaches used by South Africa and jurisdictions of the European Union and challenges encountered. Issues related to confiscation orders derived from non-conviction based forfeiture mechanisms, in particular in Latin America, were also discussed.

The third panel, “Data and Transparency in Asset Recovery and Returns”, provided participants with an update on the StAR Initiative’s new global survey to collect data on efforts to recover and return proceeds of corruption in a systematic way. The initial findings of the survey are available in the conference paper produced by the StAR Initiative for the CoSP. The session also presented the experience of Nigeria in collecting data on asset recovery and returns and the new initiatives launched by the United Kingdom to release official statistical information about assets restrained, recovered and returned under the UNCAC and to publish the MoUs that govern the return of stolen assets to another jurisdiction.

In the fourth session, “Ending the Shell Game – Why Fighting Corruption and Going After Dirty Money Relies on Global Beneficial Ownership Transparency” - co-organized with Nigeria and the UNCAC Coalition - speakers from Nigeria, Cambridge University, Open Ownership, International Consortium of Investigative Journalists and Transparency International Ukraine addressed several issues related to beneficial ownership in the context of cross-border corruption investigations and asset recovery. The session also aimed at de-mystifying different elements of the CoSP resolution on “Enhancing the use of beneficial ownership information to facilitate the identification, recovery and return of stolen assets”.


Panelists discussing beneficial ownership transparency at the StAR Day during CoSP, December 2021 (@UN DGC)

At the fifth panel, “Standing as Victim of Corruption and Damages” - co-organized with the International Bar Association's Subcommittee on Asset Recovery - the StAR team and IBA presented a new publication that is being developed on avenues available to victims to obtain compensation for damages from corruption and who has standing to demand such damages in different legal systems. In addition, experiences from Costa Rica and from civil society represented by the UNCAC Coalition were featured in the discussions.

In the sixth and final session of the day, “Taxing Corruption: How Can Anticorruption and Tax Authorities Work Together?” - co-organized with the Institute of Austrian and International Tax Law - speakers from Uganda and France highlighted their experiences with how cooperation between tax and law enforcement authorities can mutually support each other’s work to strengthen tax collection and the recovery of the proceeds of corruption. The StAR team and the Institute for Austrian and International Tax law also presented the work that is being developed in this area.

Country Engagement on the Sidelines

The StAR team supported various delegations from client countries during the CoSP in the organization of bilateral meetings to discuss specific requests for cooperation. The objective of the meetings was to facilitate discussions between “requesting” and “requested” States parties to overcome barriers in asset recovery in specific cases. Despite the reduced capacity of delegations attending the Conference due to the covid-related travel restrictions, the StAR team also had the opportunity to meet with different representatives of States parties and discuss new or potential country engagements.

Our sincere gratitude goes out to our donors:


Government of Luxembourg*
Norwegian Agency for Development Cooperation (Norad)*
Swiss Agency for Development and Cooperation (SDC)
UK Foreign, Commonwealth and Development Office (FCDO)
U.S. State Department Bureau of Narcotics and Law Enforcement Affairs (INL)*

*Contribution only through UNODC
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Our mailing address is:
starinitiative@worldbank.org

Website:
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Twitter:
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