Stolen Assets Recovery Framework: There is much room for improvement

The rallying call for recovering stolen assets during the 2022 protests is still fresh in our minds. If the Abacha loot could be returned to Nigeria by Switzerland, could Sri Lanka not do the same? 
In response to the protests and building on the work done by experts over many years, the agreement between the Government of Sri Lanka (GoSL) and the IMF now contains a structural benchmark where the GoSL has committed to enact a Proceeds of Crime Act (POCA) in keeping with international standards by April 2024. 
In March 2023, the Minister of Justice appointed a committee chaired by Supreme Court Justice Yasantha Kodagoda. Dated April 10, 2024, the182-page report of the POCA Committee, now available on the website of the Ministry of Justice, sets out a framework for an upcoming Proceeds of Crime Act. 

The current framework is a good start with room for improvement

While the current framework creates a well-thought-out system, I argue that it is also in need of significant improvement, for two main reasons: First, because it is not strong enough to prevent the re-stealing of assets that have been recovered; and second, because the framework leaves space for abuse of power in the name of asset recovery. I make two further points. One, that the framework should provide more scope for public participation in the asset recovery process–especially in terms of legal standing and right to information, and two, that it should not be unduly rushed–more public consultation and improvements are needed before the framework is translated into a law for Sri Lanka.

Stolen assets are at risk of being re-stolen during recovery

Wherever there is a large pot of money, the risk of theft is high. In this framework, the Proceeds of Crime Management Authority (PCMA) and the Victims of Crime Reparation Trust Fund (VCRTF) are designed to deal with large sums of money.
The PCMA manages assets under investigation, safeguarding against depreciation or loss. Upon court confiscation, 80% goes to the VCRTF for victim compensation. Recovered assets will, for the most part, be vested in these two funds. Both funds face risks like fraud, corruption, embezzlement, etc., necessitating robust safeguards.
International experience shows us that this risk is very high. Nigeria found that public officials plundered Abacha assets even after they were returned to Nigeria by the authorities in Switzerland, after long investigations and negotiations. In Ukraine, officials at the highest levels of its asset management authority (ARMA) colluded with others to severely undervalue assets worth USD 17 million to their own advantage. 
We should not allow the same corrupt systems that allowed assets to be stolen to once again benefit a few at the cost of the many.

Safeguarding Due-Process

The proposed law needs to balance swift action for asset recovery, while protecting individuals’ rights during asset investigations. 
The current draft raises concerns of potential procedural overreach, especially considering past abuses of power by the Sri Lanka Police. For instance, the Framework allows Investigation Officers to issue Notices Calling for Explanation to any person suspected of possessing proceeds of crime. Even in countries such as Nigeria and the United Kingdom where new legislation has been introduced on asset recovery, such requests typically require judicial orders and are limited to public officials or politically exposed persons. 
The approach in Sri Lanka’s draft law lacks strong precedent and warrants further scrutiny. Given the risk of investigative powers being abused for political or personal agendas, more safeguards are needed, possibly through additional checks, such as judicial sanction, early in the process.

Enabling public participation in asset recovery

The United Nations Convention Against Corruption (UNCAC) in Article 13, calls for active participation of civil society and non-governmental actors in the fight against corruption, including access to information and greater contribution to decision-making.
More specifically, Principle 10 of the asset recovery principles formulated at the Global Forum on Asset Recovery in 2017 (GFAR Principles) recommends that “individuals and groups outside the public sector, such as civil society, non-governmental organisations, and community-based organisations” should be encouraged to engage in the asset return process. 
Legal standing in criminal proceedings: This is an important means by which public participation in asset recovery can be enhanced. A useful example of such a case comes from France, where two civil society organisations, Sherpa and Transparency International France, successfully filed action in the French courts against Theodorin Obiang, the former Vice-President of Equatorial Guinea.
The current Framework extends only to victims who seek the right for compensation through civil action for losses incurred due to criminal activities. However, it is also vital to grant legal standing to citizens to intervene in ongoing criminal proceedings or independently apply to court, even if they are not direct victims or authorised representatives. 
In crimes involving the abuse of public resources, the “victims” are often the general public, and direct victims may lack the resources for legal action. Legal standing is especially crucial when the state fails to initiate criminal proceedings, even when assets are re-corrupted. 
Right to Information and Transparency: The proposed Framework is silent on the right to information. Furthermore, it makes it an offence for certain information to be shared. It also states that this law would supersede all other laws. This is ill-advised. There is no reason to make provision to shield information through the POCA, when the Right to Information Act of Sri Lanka already contains a comprehensive and positive regime of information disclosure for transparency, accountability and anti-corruption. 
Proactive measures to enhance transparency and public accountability through disclosing information about the assets seized and recovered, and encouraging public monitoring, could mitigate the risk of re-corruption of the assets under the authority of PCMA and VCRTF. Simply reporting to Parliament and subjecting the PCMA to audits would be insufficient in asset recovery law. 

There is value to wider public consultation

While the Framework offers a solid foundation for discussion, the lack of public consultation on it thus far is a notable oversight–especially as the legislation is a response to a clear public demand.
Addressing grand corruption, that is entrenched in the top tiers of society, requires dismantling well-networked and politically connected structures of corruption. That means, implementing such laws demands political will from those that are possibly connected to the crimes. High-level culpability in the crime that is being targeted, means that a successful law is not likely to emerge only through a high-level consensus.

The big picture

Sri Lanka is embarking on an important step. Recovering proceeds of crime (including stolen assets) requires tracing, seizing, freezing and confiscating them by the state, while navigating the laws of different countries. 
The current Framework is a good starting point. Improvements are needed to it to ensure that the assets in question do not disappear or move as soon as an investigation commences, and for there to be better due-process safeguards, including for the people that are accused. Law should not be abused, even in the quest for justice and reparations. Furthermore, the Framework can be improved to provide legal standing for the wider public in the recovery process, and to remove the current features that compromise the right to information and transparency. 
This is a law that will tend to be resisted by the powerful and politically connected. What I have outlined are a set of four improvements that can be crucial to make the law effective and meet the legitimate expectations of the Sri Lankan public. The law-making process should not be so rushed as to seriously compromise its intended goal.
The writer is the Head of the Governance and Anti-Corruption research division at Verité Research. The article was written with assistance from Janithrika Jayasundara, a Research Analyst at Verité Research.

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