Fraud and Asset Recovery in 2016 and Beyond

As part of the Who’s Who Legal: Asset Recovery 2016 guidebook, I was invited to participate in a roundtable discussion and give my insights about trends and issues facing asset-recovery lawyers and our clients today.

A couple of topics that I have been vocal about recently emerged from the roundtable that I know have deeply affected my practice and that I know my colleagues, especially those in the FraudNet network to which I belong, contend with on a regular basis.

Widening the Civil Route


I feel strongly that in France, we need to widen the path to try fraud cases following a civil route. France is still too restrictive in allowing victims to use civil proceedings to recover their assets. I’ve seen this in other jurisdictions as well.

There are too many hurdles facing victims. Of course, they can pursue the criminal route as French law allows them to be parties to criminal proceedings. But prosecutors often are too overwhelmed with cases and are not in a position to effectively deal with fraud cases, unless a major fraud case is at stake.

To be certain, we are seeing some progress in the frame of civil proceedings, but it is still a difficult battle. The partners in my firm and I will continue raising the awareness of the French judiciary on this topic through articles and conferences. –Read More.

Stéphane Bonifassi, Executive Director of FraudNet, specializes in white-collar crime litigation and complex commercial litigation involving criminal or quasi-criminal conduct. In recent years, he has regularly represented individuals as well as corporations, victims of fraud. His practice is international and often involves mutual legal assistance issues. He has also developed a strong practice in the field of confiscation and forfeiture, freezing orders, attachments and similar measures mostly involving international parties and raising issues such as transnational enforcement of judgments and orders, lifting the corporate veil or state immunities.

ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.

Loi Sapin 2 : « Le Parlement doit réintroduire la transaction pénale »

Dans son avis écartant du projet de loi Sapin 2 un mécanisme novateur de transaction pénale pour les infractions de corruption, le Conseil d’Etat sermonne le ministre en ces termes :

«… En l’absence de contradiction et de débat public, l’intervention de la justice perd sa valeur d’exemplarité et la recherche de la vérité s’en trouve affectée. »

Le Conseil d’Etat semble donc penser que la justice pénale actuelle, qui ambitionne de mener chaque dossier de corruption devant une audience de jugement, permet « exemplarité » et « recherche de la vérité ».
Pour ceux qui suivent ces affaires, cela fait au mieux sourire.
Les rares affaires qui sont jugées, souvent plus de dix ans après les faits, se terminent par des relaxes ou des peines de prison avec sursis et de faibles amendes. L’exemplarité est nulle. Quant à la vérité, tout le monde a oublié au moment du jugement quels étaient les faits et les protagonistes (s’ils sont encore vivants).

23e rang des Etats perçus comme les moins corrompus

Pour la corruption internationale, qui est un délit pénal depuis 2000, la justice française n’a rendu à ce jour qu’une seule décision condamnant des personnes morales. Et encore, cette condamnation prononcée le 26 février 2016 par la Cour d’appel de Paris dans l’affaire Pétrole contre nourriture n’est pas définitive, puisqu’un pourvoi en cassation est pendant.
La France se fait régulièrement étriller par la communauté internationale pour son laxisme contre la corruption. Alors qu’elle est la 6e puissance économique mondiale, elle ne figure qu’au 23e rang des Etats perçus par leur population, comme les moins corrompus selon l’indice de Transparency International.

Nos partenaires pour l’application de la Convention de l’OCDE sur la lutte contre la corruption d’agents publics étrangers perdent patience, en particulier les Etats-Unis. Des entreprises françaises ont été sévèrement sanctionnées par la justice américaine ces dernières années. Elles ont dû s’acquitter de sommes se chiffrant en centaines de millions de dollars (772 millions de dollars pour Alstom).

Pour dire les choses clairement, le contentieux de la corruption transnationale des entreprises françaises est aujourd’hui traité à Washington. La France abandonne de facto sa souveraineté judiciaire aux Etats-Unis et des millions d’euros de sanction tombent tout droit des comptes bancaires des acteurs économiques français dans les caisses du trésor américain.

Deux écoles

Les entreprises françaises surveillent avec attention les règles américaines de lutte contre la corruption de peur de se retrouver dans la ligne de mire des procureurs américains, mais elles ne craignent pas la justice française ; et c’est bien la justice américaine qui sert l’exemplarité et la recherche de la vérité contre la corruption, par le biais de cette transaction pénale que rejette le Conseil d’Etat.

Face à l’échec de la justice française, il y a deux écoles : soit doter la justice de moyens supplémentaires, soit changer de méthode et permettre à la justice de transiger avec les entreprises, comme le proposait la loi Sapin 2 et comme le font non seulement les Etats-Unis, mais encore l’Allemagne, le Royaume-Uni et les Pays Bas.

Dans le camp du renforcement des moyens, revendication sans espoir à court ou moyen terme, le syndicat de la magistrature, Anticor et Sherpa fustigent la transaction pénale. Evoquons pourtant les coûts d’une enquête de corruption. La société Siemens, poursuivie par les procureurs américains et allemands en 2008, a dépensé environ 550 millions d’euros en honoraires d’avocats et d’auditeurs pour faire réaliser une enquête interne en vue d’une transaction avec la justice.

Ce chiffre est à comparer avec le coût des services de police judiciaire en France, évalué à 4 milliards d’euros par la Cour des comptes. Siemens a dépensé 1/8e du budget annuel de la police judiciaire française ! Les autres procédures menées aux Etats-Unis coûtent régulièrement plus de 100 millions d’euros à l’entreprise qui réalise l’enquête à ses frais. Le gouvernement américain a compris depuis longtemps qu’il ne pouvait plus financer ces enquêtes extrêmement complexes, d’où l’appel à la transaction. Mais selon le Conseil d’Etat, la justice française doit s’en priver…

Efficacité contre incantations

La procédure pénale française n’est plus adaptée à la délinquance économique et financière. Devant la complexité des montages financiers et le raffinement des stratégies de corruption, les juges d’instruction en sont réduits à chercher des aiguilles dans des bottes de foin. Sans la coopération des entreprises aux enquêtes, la justice française continuera à s’agiter dans le vide.

Transparency International France avait fait une étude très approfondie sur la transaction et conclu à son efficacité. Cette étude méritait une meilleure réponse que les sempiternelles incantations de quelques associations reprises de manière bien surprenante par le Conseil d’Etat en quelques paragraphes sentencieux.

Pour répondre au Conseil d’Etat, rappelons que le juge n’est pas écarté de la procédure de transaction puisqu’il la valide. L’exigence de publicité de la justice est prise en compte. La transaction est certes négociée à l’abri des regards publics – sans quoi elle n’aboutirait jamais – mais l’accord de transaction et l’ordonnance de validation sont publiés sur Internet. On aimerait qu’il en aille autant des jugements et arrêts rendus par les juridictions du fond en France où trouver une décision relève du parcours du combattant !

Le Parlement doit donc se saisir du débat et réintroduire la transaction pour donner à la justice française les moyens de l’exemplarité et de la recherche de vérité en matière de criminalité économique et financière. Car aujourd’hui, en ces matières, la justice française se marginalise de plus en plus, au vu et au su de la communauté internationale… et des délinquants.

Stéphane Bonifassi (Avocat au barreau de Paris) et Juliette Lelieur (Maître de conférences à l’université de Strasbourg).

The Global Impact of the Panama Papers Leak

Following the leak of what we’ve now come to know as the Panama Papers, I joined Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration, Friederike Röder, France Director of the NGO One and Serge Michel, a journalist at Le Monde, on the TV channel France 24, to share my thoughts about the global impact of this leak.

Here are my four main points:

  1. Because of an efficient US tax fraud policy, there are very few Americans included in the Panama Papers.French newspaper LeMonde addressed this phenomenon in its article – the one I reference in my interview. And The New Yorker also posed this question in its coverage of the Panama Papers, presenting some of the same points.
  2. Public registries of companies’ beneficial ownership is not the magic wand some people think it is. Public registrars are not armed to check the information provided to them on such a complex issue as the identity of a beneficial owner. The World Bank STAR initiative took on this topic in its “Puppet Masters” report, to which FraudNet gave its contribution.
  3. Companies’ service providers (and this includes law firms) should always have the information about beneficial ownership available. This information should be available on the basis of a judge order for law enforcement as well as for victims of fraud. Law firms, when they act as company service providers, should not abuse legal privilege or confidentiality rules, as in the case of Mossack Fonseca.
  4. Finally, I raised the question as to whether whistleblowers should be rewarded as the US legislation provides for.

Watch the two-part debate here:
“Haven Forbid: Panama Papers, how to stop tax dodging?” on France 24


ICC FraudNet
is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.

ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.

Conférence de la Commission Italie du Barreau de Paris

Conférence de la Commission Italie du barreau de Paris : comparaison des justices pénales française et italienne

Le 19 février dernier dans la Bibliothèque de l’Ordre des Avocats de Paris en présence de la responsable de la Commission Italie du barreau de Paris Me Martina Barcaroli et de l’Ambassadeur d’Italie en France Monsieur Giandomenico Magliano s’est tenue une rencontre de la Commission portant sur « L’évolution de la justice pénale en Italie et en France vue par les praticiens à travers des grands procès des derniers 20 ans ». J’ai été invité à intervenir aux cotés de Monsieur Renaud Van Ruymbeke, Premier Vice-Président du Tribunal de grande instance de Paris et Monsieur Lorenzo Salazar, substitut du Procureur général à la Cour d’appel de Naples.

J’ai concentré mon intervention sur un point principal de comparaison, à savoir, l’indépendance du parquet en Italie. J’ai fait remarquer que l’indépendance du parquet « à l’italienne »1 perçu comme un modèle par beaucoup en France, soulève la question du contrôle démocratique de leurs actes. D’ailleurs, Monsieur Lorenzo Salazar a lui-même indiqué que cette indépendance pouvait créer une certaine « anarchie » quant à l’application des lois en Italie. J’ai notamment souligné que l’indépendance du parquet n’est pas en soi nécessaire à une justice pénale efficace en matière économique et financière et que c’est même plutôt l’inverse. Ainsi, dans les pays où la lutte contre la corruption internationale est la plus efficace à nos jours, les Etats-Unis et l’Allemagne, le parquet n’est pas indépendant, mais, au contraire, considéré de manière claire comme étant rattaché au pouvoir exécutif.

J’ai également évoqué la question de la concurrence des justices pénales en matière économique et financière et j’ai indiqué qu’à mon sens, tant la justice italienne que la justice française avaient pour l’instant perdu la partie.

Ce sont les procureurs américains qui mènent la danse notamment par l’utilisation de la transaction pénale et ce, y compris à l’encontre de sociétés françaises ou italiennes spectaculairement sanctionnées aux Etats-Unis.

Enfin, dans la mesure où la justice pénale italienne a choisi de passer d’un système inquisitoire (avec juge d’instruction) à un système accusatoire, et dans la mesure où une telle évolution serait possible en France, j’ai considéré que l’expérience italienne devait être analysée de près pour tenter d’en retenir les qualités mais aussi d’en éviter les défauts, notamment quant à la durée des procès.


1L’une des différences majeures entre la France et l’Italie, est que les procureurs sont réellement indépendants, et qu’il n’y a pas cette hiérarchie qui existe en France entre le procureur, le procureur général et le ministère de la Justice.

The Year of Governments Living Dangerously

In the midst of agonizing media coverage of international terrorism, a massive flow of refugees into Europe and the shifting sands of politics around the world, government fraud and corruption managed to make news in 2015. It was the year of governments living dangerously as enormous frauds crippled economies, burdened already beleaguered taxpayers and all but destroyed trust in government and political leadership in some countries.

Although it may not be clear whether instances of government fraud are actually increasing, we do know that the size, scope and complexity has grown over the years. As citizens of a global economy, we also recognize that sooner or later, we all feel the ripple effect.

What do these crimes in far flung parts of the world have in common? A look at the economic tragedies in Moldova, Guatemala and Brazil — three of the largest, most complex cases that made headlines in 2015 – reveals some common themes and potential strategies.

They did not occur over night. The participants were all part of a system that not only allowed, but enabled fraud to take place on a large scale. While the bulk of the fallout may have happened in 2015, these schemes had been operating or were in the planning stages for years.

The governments of Moldova and Brazil were entangled with another enormous entity with strong ties to government. In Moldova, it was the banking system. In Brazil, it was Petrobras, the government oil company. In Guatemala, the business of politics and fundraising was so intertwined with government that the process was corrupt, lacking a strong enough system of checks and balances.

In all three cases, there was a history of corruption, not enough oversight and inadequate strategies and enforcement in place to protect the government and taxpayers. All three countries also include large numbers of poor and working poor with much to lose.

18Immediate action to address these weak links must include aggressive efforts to recover hundreds of millions in stolen assets that rightly belong to taxpayers. Amidst the news of potentially crippling financial frauds, there is good news. Earlier this year, after 16 years of negotiations, a deal was reached in which Switzerland agreed to give Nigeria U.S. $380 million, allegedly stolen by the former military dictator Sani Abacha and stored in European bank accounts. In addition, asset recovery professionals won a landmark court victory in 2015 in the UK in the largest corruption and asset recovery case ever undertaken by the Municipality of Sao Paulo and the government of Brazil outside of Brazil.  The judgment, which will have a significant effect on the law of civil fraud internationally, entitles the government to U.S.$28 million.

As the sagas continue, here’s both an update and a look back at three of the largest government corruption scandals of the year.

Moldova

A billion dollar bank fraud was discovered in the former Soviet Republic of Moldova, estimated to be about 15 percent of the country’s GDP. The fraud cleaned out three of the country’s banks, and plunged Moldova, already the poorest country in Europe, into recession. A huge bailout rescued the banks, but at the hefty price of a half of the country’s annual budget.

Since the scandal broke, the government has been on the verge of collapse with a rapid fall in the value of the leu, the national currency, and a steep rise in the cost of living. Thousands have taken to the streets to protest, calling for the resignations of government leaders. Earlier this month, Moldova’s former Prime Minister Vlad Filat was arrested and detained on charges of theft of Moldova’s money from Banca de Economii.  Analysts fear that with political parties in disarray, Russia may take control.  Read full post.

Stéphane Bonifassi, of Lebray & Associés, specializes in representing victims of fraud, and is the executive director of ICC FraudNet. Named one of the world’s Most Highly Regarded Individuals by Who’s Who Legal: Asset Recovery 2015, he is the former president of the criminal law commission of the International Association of Lawyers (UIA) and the former chair of the business crime committee of the International Bar Association (IBA). Bonifassi regularly speaks and writes about issues including corruption, fraud, asset recovery and mutual legal assistance. He contributed to the book, Asset Tracing & Recovery: the FraudNet World Compendium, and his article The Long Arm of the Law – Obtaining Jurisdiction and Evidence in France, was published in International Legal Practitioner.

ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.

Why You Are Probably a Victim of International Corruption

If you are reading this, chances are you have been affected by international corruption. Because this type of fraud occurs in the shadows in the form of bribery and other financial crime — and it happens to corporations and governments rather than individuals — the problem generally fails to arouse media attention or public anger sufficient to facilitate change. People know it’s a problem, but it’s not personal.

However, those of in the field of asset recovery understand that we are all ultimately victims of these crimes. Just how big is the problem? This month at ICC FraudNet’s annual conference, held this year in Vienna, one of our featured speakers, Martin Kreutner, executive secretary of the International Anti-Corruption Academy (IACA) based in Laxenburg, Austria, shared some sobering statistics – even to me and our members who tackle fraud around the world every day.

An estimated $1 trillion dollars is paid in bribes every year around the world, Kreutner said, resulting in significant losses to governments. In some African countries, bribes accounted for losses of up to 25 percent of the GDP, while in Asia the number was close to 17 percent. In Europe, the figure is estimated at between 5 to 10 percent of the GDP. Given our global economy, the effects are also global, including public discontent. The latest Eurobarometer survey found that about 76 percent of Europeans believe corruption in government is widespread, and more than half believe it has increased in their own countries. Not only Europeans are distrustful of their government. In the U.S., according to a recent Gallup poll, about 75 percent of Americans believe corruption in the government is widespread.

The IACA is an international organization established to contribute to the fight against corruption through education, research and cooperation among nations.

Kreutner was just one of the experts who addressed ICC FraudNet members at the conference, and participated in panel discussions focused on fraud trends and strategies we use to help victims recover their assets and hopefully a sense of well-being. The purpose of the event is to increase worldwide cooperation in the fight for fair competition and a business environment free of corruption and fraud. For example the keynote speaker was Elena Panfilova, vice chair of Transparency International (TI) and the chair of TI Russia, whose speech included information about tracing property in foreign jurisdictions.

Read the full post.

Stéphane Bonifassi, of Lebray & Associés, specializes in representing victims of fraud, and is the executive director of ICC FraudNet. Regarded as a Most Highly Individual by WhosWhoLegal: Asset Recovery 2015, he is the former president of the criminal law commission of the International Association of Lawyers (UIA) and the former chair of the business crime committee of the International Bar Association (IBA). Bonifassi regularly speaks and writes about issues including corruption, fraud, asset recovery and mutual legal assistance. He contributed to the book, Asset Tracing & Recovery: the FraudNet World Compendium, and his article The Long Arm of the Law – Obtaining Jurisdiction and Evidence in France, was published inInternational Legal Practitioner.

ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit.

Thank You, Le Monde

Thank you to Le Monde for providing the platform that allowed me to expose the French government’s lenience in international corruption cases. Your recognition of the opinions of citizens like myself is a reminder of the importance of a free press, and that our voices matter.

http://www.lemonde.fr/idees/article/2015/03/26/l-incantatoire-lutte-contre-la-corruption-de-christiane-taubira_4602213_3232.html?xtmc=l_incantatoire_lutte&xtcr=2

The People’s Money $$

ICC FraudNet members talk about working for victims in the world of complex fraud, asset tracing and asset recovery.

Stéphane Bonifassi

The biggest misconception people have about complex fraud is

People believe that the criminal justice system is in a position to arrest the villains and from there to give the money back to the victims. It simply doesn’t work this way. Whether fraudsters are caught or not, this is not the way victims are going to obtain redress. If victims want to obtain redress they will have to address the issue themselves with the help of lawyers and professionals who specialize in asset tracing and recovery.

The biggest misconception government officials have about complex fraud is

Often, government officials believe that states can obtain redress (should it be for tax fraud or corruption or embezzlement) with the help of States where the funds are located through mutual assistance requests.  This is not an efficient way to proceed. Victimized states have to organize a task force dedicated to recovering assets. And success stories often happen when external lawyers, receivers and forensic consultants are hired.

The greatest challenges in asset tracing and recovery in my part of the world are

In France and, generally in continental Europe, there are no efficient discovery/disclosure mechanisms. This makes our work difficult but there are ways to circumvent this issue. In addition, liquidators/receivers are a small and protected profession which doesn’t allow bankruptcy mechanisms to efficiently bring victims together to obtain redress. Finally, the judiciary is insufficiently aware of these hurdles and as such, is too protective of the privacy of potential fraudsters.

The greatest challenges worldwide are

Fraudsters take advantage of various loopholes in various jurisdictions where they hide the stolen assets. This is what makes asset recovery difficult, and this explains the importance of being able to build a team of specialized asset recovery lawyers and professionals worldwide.

Read Full Post

Stéphane Bonifassi, of Lebray & Associés, specializes in representing victims of fraud, and is the executive director of ICC FraudNet, an international network of independent lawyers who are leading civil asset recovery specialists in each country. He is the former president of the criminal law commission of the International Association of Lawyers (UIA) and the former chair of the business crime committee of the International Bar Association (IBA). Bonifassi regularly speaks and writes about issues including corruption, fraud, asset recovery and mutual legal assistance. He contributed to the book, Asset Tracing & Recovery: the FraudNet World Compendium, and his article The Long Arm of the Law – Obtaining Jurisdiction and Evidence in France, was published in International Legal Practitioner.

ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. FraudNet has been recognized by Chambers Global as the world’s leading asset recovery legal network.

Note to Governments: Laws Can Help or Hinder International Fraudsters

Business and financial laws with dull sounding names may not be interesting to the average hard-working citizen of any country. However, criminals looking to literally get away with $1 billion, find them fascinating. Case in point, the discovery last November that three leading banks in the former Soviet republic of Moldova, the poorest nation in Europe, had been virtually cleaned out. A large scale international fraud scam made off with $1 billion, estimated to be about 15 percent of the country’s GDP.

Based on an investigation and report by international private investigation firm Kroll, lax Limited Partnership Laws in Scotland, specifically the Limited Partnerships Act of 1907, helped make it possible for criminals to carry out the crimes, thanks to the absence of tax reporting obligation and lack of sufficient controls by the Scottish treasury. Growth of limited partnerships in Scotland has been explosive over the past five years, and law enforcement estimates that many of these are shell companies used for money laundering.

In complicated crimes like this one, other factors also play a role. Accusations of wrong- doing including money laundering have followed Moldova’s business and political leaders for years, and this recent scandal resulted in the resignation of former Prime Minister Chiril Gaburici after citizens took to the streets in May to protest the scandal following release of the Kroll report.

 

The report found that individuals and legal entities linked to Ilan Shor, a 28-year-old millionaire businessman, took control of the banks. Shor recently denied involvement in an interview with the BBC, but the report found that financial trails in several countries all lead back to Shor.

First, the ownership structure of these banks (Unibank, Banca de Economii and Banca Sociala) was modified through the integration of new shareholders. The shareholders’ companies were incorporated shortly before the purchase of the banks’ shares. These companies acquired the shares through limited partnerships in the UK and Latvia, but most significantly in Scotland.

While the spotlight may be on Scotland, laws in other countries and cities around the world, have been unwitting accomplices to fraud, as criminals took advantage of loopholes to the detriment of victims.

As executive director of  ICC FraudNet, I, along with our members regularly see the aftermath of various laws thwarted in country after country by financial criminals. ICC FraudNet is an international network of independent lawyers who are the leading civil asset recovery specialists in each country. While Scotland is in the spotlight today, it could be your country and government tomorrow.

We have also seen and participated in cases where assets were found and returned. For those who will be instructed by Moldova to recover these assets, it will be an uphill battle to obtain information and analyse it in order to be able to freeze, attach and eventually recover the assets. While some of Moldova’s assets are no doubt gone forever, some can be returned with expert help.

This will have to be done in a coordinated way with the help of lawyers, forensic accountants and investigators in various jurisdictions. FraudNet attorneys have seen the effectiveness of this coordinated global strategy in their work on high-profile cases, including the recovery for Nigeria of assets stolen by General Sani Abacha, the dictator who embezzled billions during his five year reign of terror and the recovery of assets in the case of Allen Stanford, whose investment company was the vehicle for the second largest Ponzi scheme in American history.

READ FULL POST

Where is Moldova’s Money?

The government of the former Soviet Republic of Moldova is still reeling from a billion dollar bank fraud discovered last November, that cleaned out three of its banks — the equivalent of 15 percent of the country’s GDP.  Already the poorest nation in Europe, Moldova plunged into a recession, as a massive bailout rescued the banks at a cost of half the country’s annual budget.

After almost a year and a lengthy investigation, the questions remain for Moldova and its citizens, the real victims in this colossal fraud. Where is Moldova’s money, and can these assets ever be recovered?

What we’ve learned from other complicated large scale fraud cases is that while the process can be arduous, asset recovery is possible for victims. Sadly, efforts rarely  retrieve all the funds they are owed. Many victims are still waiting for payouts from complex international cases. However, when the losses are enormous, recovery of large sums of money is more than worth the effort. We also know that the best chance for success requires utilizing key strategies the bad guys use in order to help victims regain their money and some sense of control over their financial lives.

The Criminal Strategy

A report by international private investigation firm Kroll found that individuals and legal entities linked to Ilan Shor, a 28-year-old millionaire businessman, took control of the banks. Shor recently denied involvement in an interview with the BBC, but the report found that financial trails in several countries all lead back to Shor. First, the ownership structure of these banks (Unibank, Banca de Economii and Banca Sociala) was modified through the integration of new shareholders. The shareholders’ companies were incorporated shortly before the purchase of the banks’ shares. These companies acquired the shares through limited partnerships in the UK and Latvia, but most significantly in Scotland. The Shor Group was then able to place at the head of the three banks people that authorized fraudulent financial transactions such as loans for companies within the Shor Group. These funds were then transferred on to offshore entities. Shor took over as chairman of Banca de Economii in April 2014, and is also mayor of a small town in Moldova.

Recovering Moldova’s Assets

The Moldovan government, which is still attempting to find and prosecute the perpetrators, can choose between two asset recovery strategies, and time is of the essence.  It can work with enforcement authorities in jurisdictions where the assets could be traced. Experience shows that this approach is hardly effective, because it lacks the level of cross-border coordination and expertise required. While some funds may be recovered, it is always a small percentage of the losses.

Whoever was the mastermind behind this large cross-border fraud put together an international network of various companies and individuals with specific skills to implement the scheme. In order to retrieve Moldova’s assets, the government must employ a similar strategy. Not only logical, this strategy has also proven to be effective. In the relatively small number of success stories, a team approach has worked.

A case of this magnitude and international reach requires an international network of professionals (respected lawyers in the field, accountants and asset tracing and recovery specialists), experts primed to work together and with law enforcement to track and retrieve stolen assets.

Lawyers who understand asset recovery and have experience in complex cases know how to foster effective collaboration with enforcement authorities in the countries involved.

Instituting the proper legal protocols can ensure efficient gathering and use of the information needed to recover the assets or to make claims against entities or individuals who have taken part in the fraud. Accountants and asset tracing specialists work with attorneys to follow the money in complex cases where the assets and the criminals have scattered across the world.

I am the executive director of ICC FraudNet, an international network of independent lawyers who are leading civil asset recovery specialists in each country. Its membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. FraudNet has been recognized by Chambers Global as the world’s leading asset recovery legal network.

Prevention is key, and this fraud shows that in Moldova and in other countries involved in the fraud, flaws in the regulations allowed the crime to occur. Moldova was ripe for picking, and the criminals knew it. However, even with stronger regulation, fraudsters will continue to develop new schemes to go around the checks and controls in place. Therefore, it is important to understand that the work of asset recovery specialists must be part of any strategy. Enforcement authorities and the judiciary are not sufficiently equipped to handle such large scale complex transnational cases in which fraudsters exploit the weaknesses of each jurisdiction to make off with millions. When it takes a network to perpetrate a complex international fraud, an experienced network has the best chance of recovering the assets.

ICC FraudNet’s FraudTalk is a thought leadership platform to share ideas and solutions to combat international fraud through civil asset tracing and recovery tactics.

ABOUT THE AUTHOR

Stéphane Bonifassi, of Lebray & Associés, specializes in representing victims of fraud, and is the executive director of ICC FraudNet, an international network of independent lawyers who are leading civil asset recovery specialists in each country. He is the former president of the criminal law commission of the International Association of Lawyers (UIA) and the former chair of the business crime committee of the International Bar Association (IBA). Bonifassi regularly speaks and writes about issues including corruption, fraud, asset recovery and mutual legal assistance. He contributed to the book, Asset Tracing & Recovery: the FraudNet World Compendium, and his article The Long Arm of the Law – Obtaining Jurisdiction and Evidence in France, was published in International Legal Practitioner.