By Nega Gerbaba Tolesa, For Addis Standard
On May 15, 2018 state media Ethiopian Prime Minster Abiy Ahmed (PhD) said his government was pursuing investigations on assets that were stolen & extorted from the country and deposited in foreign banks.
The Prime Minster informed the Federal Government Ministers on a meeting held at the PM office that various countries were cooperating with the investigative bodies to return the stolen assets. And in his first ever press briefing on Saturday August 25, he made a passing note, albeit less enthusiastically, about his government’s intent to pursue the chase and told the media that if they have verifiable information they can collaborate with his government. This is a big step in fighting corruption, which was unthinkable four months ago.
So far while the investigation is underway, going by the words of the Prime Minister, details of the investigation are not available to the general public. The Prime Minister added on Saturday that some countries were willing to cooperate with his government while others were reluctant. The first announcement created the impression among the general public that stolen assets deposited abroad will be easily returned. Yet little thought, let alone discussions, were invested to know how arduous the recovery of the stolen assets could be. Particularly, the process of recovering stolen asset is not easy given challenges Ethiopia is facing during this domestic transitional politics.
The effort to recover stolen assets at international level depends on proper investigation, political will, a well-functioning and competent domestic justice system, long time and financial resources as well as international cooperation with countries where the assets are believed to be hidden. Understanding the process of stolen asset recovery at international level and knowing the challenges at all levels is therefore essential to deal with frustrations associated with it.
Extent of illicit financial flow from Ethiopia
Reports from Global Financial Integrity estimated that the world has lost between $2 trillion and $3.5 trillion in (to) 2014 due to illicit financial flows; estimate of illicit outflows from developing countries to the developed world alone sum up to $620 billion in 2014. The source of these illicit financial flows are deliberate mis-invoicing in merchandise trade and leakages in the balance of payments (hot money flows) which are measurable and cash transactions, same-invoice faking, mis invoicing in services and intangibles, as well as hawala transactions, which are not registered in economic data.
Ethiopia has lost US $ 16.5 billion from 1970 to 2008 and since 2010 US $ 10 billion due to illicit financial flow totalling $26.5 billion. This ranged from USD $0.4 billion in 2004 to USD $5.6 billion in 2010.
The illicit financial flow from Ethiopia is conducted mainly through business personalities which are highly affiliated and controlled by government officials and through black markets as there are no foreign banks in the country which channels money. Increased corruption, kickbacks and bribery are main sources of illicit financial flows which ends assets in foreign jurisdictions which they are happy to receive.
In the past (1974), the Derg regime has tried to access the accounts held by the overthrown emperor Haile Selassie I, which it did not get positive response from Swiss Federal Justice and Police Department. After overthrowing the emperor, the Derg regime announced that all the assets held by the emperor outside of Ethiopia will be transferred to Ethiopia as the emperor ‘agreed and signed.’
There was no document which shows where those stolen assets were located and how much was stolen though estimates by the Derg regime stated as US $ 11 billion while others say it is in hundreds of million of dollars. The Swiss authorities were not convinced about the transfer from the emperor to the regime and to this date not a single penny has been recovered and returned to the country.
This year again, the PM’s announcement comes as a surprise after 44 years of the first attempt to recover Ethiopia’s stolen asset. Since the first attempt, many things have changed with the global politics and the determination of international community against stolen assets. For instance, the international community has now firmly understood money laundering and corruption differently than in the past. The UN has a convention on anti-corruption while Switzerland and the US have somewhat opened their doors to countries to cooperate on the investigations of stolen assets recovery.
But what is stolen asset recovery and what process countries need to follow in order to recover their stolen assets that flew out of their jurisdiction?
Stolen asset recovery process
The Stolen Asset Recovery Initiative (StAR) by World Bank Group and the United Nations Office on Drugs and Crime define asset recovery as “the process of tracing, freezing, and returning illegally acquired assets to the jurisdiction of origin.” This process has the purpose of preventing transfer of illicit assets and recovering when stolen assets are found. The subjects of asset recovery process are Politically Exposed Persons (PEPs), which are entrusted with prominent public functions, their families and close associates.
The Financial Action Task Force (FATF) includes individuals with prominent public functions domestically or in foreign countries like Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials, family members and close associates or PEPs who act on behalf of officials in money laundering and transactions.
The process of asset recovery takes a lot of steps and time. The following graph summarizes the process.
Source: Process for recovery of stolen assets, Brun et al.p.6.  MLA stands for: Mutual Legal Assistance
The process involves prosecution of the accused at home and in the jurisdiction of where the stolen assets found and confirming the criminal origin of the stolen assets as well as signing an agreement on the use of recovered funds. The process includes the management of returned assets, which needs a caution not to create a vicious circle of stealing back from the returned asset.
In asset recovery process countries usually use two mechanisms in their legal systems. The two methods are Conviction based and non-conviction based asset recovery systems.
Conviction based asset recovery bases itself on criminal trial and conviction. It is through criminal trial process that involves in Personam order against a person through establishing a proof of guilt ‘beyond reasonable doubt’. The forfeiture can be object based or value based in which the state have to prove assets are proceeds of crime or value based showing the benefit of the criminal without proving the connection between the crime and specific objective of the property.
Non-Conviction based is a forfeiture method known as civil forfeiture or in rem forfeiture action against the asset not against individual. Here the claimant have to bring a separate claim to proof the assets are tainted that it is a proceeds of a crime.
The burden of proof is relatively easy that the forfeiture can be possible even if there is insufficient evidence for criminal conviction and give a chance to the owner of the property to proof otherwise. In situations when criminal conviction is not possible when the suspect is fugitive, dead or died before conviction, immune from criminal prosecution, the violator is unknown and asset are found, when the asset is held by third party who knows the property is result of a crime, and if the evidence is not sufficient for criminal conviction Non-Conviction based asset recovery plays an important role.
The process is not strait forward and not easy as it seems because of involvement of foreign jurisdictions which have different standards of due process of law, bank secrecy laws, criminality of acts, willingness of cooperation, and etc.
Challenges in Ethiopia’s effort of stolen asset recovery
At present, Ethiopian government has more domestic tasks than ever as the country is fresh out of four years protest induced political crisis which rocked the country and into an unpredictable transitional period dominated by inter-communal clashes among Ethiopians in different parts of the country, and an attempt by the government to create peaceful environment, prepare for the next election which needs negotiations, reforming institutions and repealing draconian laws, among others.
These tasks will take away a lot of resources and time from focusing on recovery of stolen assets. It is known that political will is essential for successful fight against corruption. The move from PM and the popular support he enjoys shows that there is willingness for fighting corruption and recovering the stolen assets. Though everyone involved in the illicit financial flow and corruption needs to be investigated, for purpose of recovering the stolen assets, it is good to focus on the big fishes.
In time of transitions, the legitimacy of governments has been contested by countries. This is true when countries leaders ousted by coup d’état, ruling beyond terms set in the constitution. The issue of legitimacy cannot be a challenge for Ethiopia at this time as the change is in the existing government system.
Instead, lack of resources and experts to locate stolen assets will be a challenge for Ethiopia at this time. The existing institutions in the country are weak and lack independence which is essential to conduct investigation. The influence of the persons who have stolen assets have to be expected as they are fighting back to keep their interest and wealth created through corruption. This will be another challenge the government will face now.
Bank secrecy laws of destination countries
Some countries have stringent banking secrecy laws which prohibit divulging information to third parties. They use it to protect their clients’ accounts confidentiality. Violation of the banking secrecy will be punished criminally. Without the bank accounts information, it is difficult to find the banks holding the stolen funds. Cooperating with other countries especially informally and at later using mutual legal assistance is what Ethiopia can use.
Complexities of finding assets
There is high chance of finding deposited cash in Banks. But at this time this is not easy as it easy to conceal stolen assets through reinvesting in shell companies, real states, and stocks are making difficult to trace the money as the criminals leave no paper trail. This can be evidenced from the recent data leaks on Panama papers, from Panamanian Law firm and Corporate Service Provide Mossack Fonseca and Paradise papers which named a lot of shell companies from Ethiopia.
Though the papers exposed these companies there is no investigation conducted or measures taken against these companies. This shows the extent persons travel to hide the stolen assets and challenges countries like Ethiopia face to recover the stolen asset.
Due process requirement of countries
In order to convince countries for cooperation and Mutual Legal Assistance, there needs a respect for a convincing due process requirement which includes procedural and substantive due process of law. Which can only be fulfilled by independent and strong judicial system. In which Ethiopian judicial system lacks to convince as it stands now. Building the judicial system to be strong and independent is not what a country do over night.
Context of Ethiopia’s’ corruption and defense of being corrupt
Transparency International last ten years report shows that Ethiopia is the most corrupt country as the graph below. This report can be used in international cooperation aspects as countries look into the stolen assets origin. In countries like Swiss, when countries show their regimes are corrupt and hidden assets are found there, per Foreign Illicit Assets Act of 2015 it is presumed that the funds are of illicit origin and gained through the exercise public function. Then the accused person has to show the assets acquired legitimately which will not be easy for public officials.
If we see Ethiopia, in 2017 Ethiopia ranked 107 out of 175 countries with 35 with the scale 0 highly corrupt and 100 clean, which shows there is a long way to go to fight corruption and to dry the source for illicit financial flow.
Experiences of countries in asset recovery
Domestic stolen asset recovery usually follows the domestic laws and a legal system which is relatively easy because of the asset is found under their jurisdiction. The courts can put order of confiscation and execution on the asset. At international level the process involves different legal systems with different legal traditions.
As a principle, countries which signed United Nations convention against corruption have a duty to follow suspicious transactions which involves Politically Exposed Persons and their associates.
The banks that take deposit of those assets and process them also have obligation to check the background of beneficiaries and report high values accounts to the financial authorities of countries. From the reports countries know who have transacted how much money those persons have in their banks. As an option putting diplomatic pressure and campaigning for high publicity to make countries to take action to recover the assets can be taken.
Countries recently implemented different mechanisms to recover their stolen assets. Recent cases of Saudi Arabia and Zimbabwe are experiences Ethiopia can look into. In Saudi Arabia the assets exist in the country, Saudis Attorney General freeze bank accounts and the assets, arrested the persons and on negotiation settlements recovering between US $ 50 billion and US $ 100 billion agreeing not to press charges on those who cooperate.
On the other hand the Zimbabwe’s new president Emmerson Mnangagwa opened three months amnesty window for the officials to return stolen assets stashed abroad by officials and companies or face prosecution. At the end of amnesty period, in February 2018, Zimbabwe recovered US $ 850 million. These two examples are options which didn’t fully involve the process of prosecution. These consent of those who stole the money to return the assets for not get prosecuted traded.
Others like Nigeria have fought all the way in their own legal system and in legal systems of Swiss, UK, USA, France and other countries. It took Nigeria more than 20 years to recover the stolen assets and it is still continuing negations.
Overcoming challenges: ways forward
At international level United Nations Convention Against Corruption which Ethiopia has signed and ratified is used to get cooperation between countries. After the convention there is initiative, The Stolen Asset Recovery Initiative (StAR), by World Bank and UN office on Drugs and Crimes to support developing countries on systematic return of stolen assets. Using this initiative to develop institutions and experts to trace and return stolen assets is essential. In addition International Centre for Asset Recovery (ICAR) gives training and policy advice based on the need of countries. Getting help from these institutions until the country build its own capacity is the option to ease the process.
Building and reforming institutions
Building strong and independent institutions needs to be a priority for the current administration. In the past Ethiopian Anti-corruption Commission and the Attorney General offices are accused of politically motivated charges to divert public attention while letting the big fishes slip through the system. This type of institutions cannot fight corruption let alone drain the sources of corruption. Working on building institutions and closing the loopholes that paved the way for illicit financial flow and corruption are essential to achieve the desired result. It is also good to work on checks and balances, accountable and transparent institutions and procedures of institutions and government bodies.
One of the bodies entrusted to track illegal flow of finances is Financial Intelligence Center established with purpose of coordinating institutions to fight money laundering and financing of terrorism. Till now it is not visible in achieving anything. Re-establishing and using this institution to tackle illicit flow of assets out is the country is essential.
Management of recovered assets
Getting conviction and confiscations as well as enforcing these orders are not the end of the process of recovering stolen assets. Before returning the assets countries need some guarantee of transparency and good governance that returned money will be used for a legitimate purpose. Countries which return the money and international institutions want to make sure that the cycle of stealing do not continue. So they make arrangements with international organizations and civil societies on the management and utilization of the returned assets.
Experience of other countries on how they handled returned asset management differs. Peru established independent body that administer fund after return of assets stolen by Vladimiro Montesinos, head of Peru’s intelligence service. Nigeria’s returned assets agreed to be monitored by the World Bank on the condition the fund goes to projects that alleviate poverty. In Kazakhstan an international NGO was set up between USA, Swiss and Kazakhstan and operates independently and worked on youth development and energy efficiency. Ethiopia can take the experience of other countries to manage the funds or create its own method to use the fund for the benefit of its people.
Recovering the stolen assets is about depriving the profit of the crime and discouraging others from stealing. If successful the effort will change the perception of getting to government office to accumulate wealth, by showing no one will use stolen assets as it will be taken away even if they hide it outside of the country. If the actions are not taken it will roll back the changes that are at the infancy, erodes rule of law and hampers growth as the much needed assets to build the country will flow out of country. With the existence of legal hurdles at international level, domestic weak justice system and weak commitment from the government, Ethiopians shouldn’t count on the stolen assets for next few years. AS
Editor’s Note: Nega Gerbaba Tolesa studied law and Peace and Security(MA) at AAU IPSS. He is currently finishing his LL.M at Saarland University, Germany.
 Brun, Jean-Pierre et al, Asset Recovery Handbook: A Guide for Practitioners, Stolen Asset Recovery Initiative. The International Bank for Reconstruction and Development / The World Bank, 2011.
 Ethiopian companies and persons mentioned in the papers include: Poly Ethiopia Petroleum Company Limited, Girma Agriculture (Ethiopia) Inc, Volone Giancarlo, Kedir Jemil Sherif, Jan Kasahun Laubjerg, Nejib Abba Biya,
Mark Christoper Chapman, Mulugheta Hailemariam and Brox Worku. Offshore Leaks Database by The International Consortium of Investigative Journalists https://offshoreleaks.icij.org/search?c=ETH