Posted on December 11, 2022.

The release of the Pandora Papers, nearly 12 million leaked financial records, exposes the extent to which the world’s wealthiest and powerful use legal loopholes to launder money, avoid paying taxes and hide assets. While much of the financial activity is not illegal itself, it is precisely the type that is used to conceal the proceeds of corruption. More than 330 public officials in more than 90 countries, including 14 current world leaders, have been implicated in the papers’ release. This trove of information provides us with a guide to how the global cost of corruption has swelled to around $1 trillion annually (more than $20 to 40 billion of that loss from developing countries) and also insights into how to fight it.

The revelations in the Pandora Papers have inspired Republican and Democrat lawmakers in the United States to take another look at regulating global corruption, including evasive financial practices. Indeed, Reps. John Curtis (R-Utah) and Tom Malinowski (D-N.J.) are co-chairing a new congressional caucus against kleptocracy, and they have a strong ally in the White House. President Biden has repeatedly touted fighting corruption as a top foreign policy priority of the United States, and in a June memo officially established countering corruption as a core national security interest.

While the transparency that investigative reporting like the Pandora Papers provides and potential US regulations are important steps to reduce illicit financial flows, there is another powerful but often overlooked anti-corruption mechanism in our toolkit: asset recovery and return. Through this mechanism, which Biden cites in his memo, stolen funds can be returned to their rightful owners – citizens – in a fair and effective manner. But achieving justice in this way will require investment and reform.

Asset recovery is a process that roots out the proceeds of public corruption and gives them back to the countries and people from which they were originally stolen. When implemented well, asset recovery can provide needed development funds, right the wrongs of corruption and rebuild social trust. If even a fraction of the billions of pilfered dollars were recovered and returned to the people from whom they were stolen, citizens would benefit and corrupt officials would be held accountable, all without expense to taxpayers. To fulfill the twin goals of justice and development, lawmakers should urgently invest in asset recovery efforts as a way of taking on kleptocracy and achieving positive social change.

The BOTA Foundation shows the potential and power of asset recovery. Founded in 2008 by the governments of Kazakhstan, US and Switzerland, and civil society leaders in Kazakhstan, it was set up as a means of returning more than $115 million in assets stolen from government coffers to vulnerable Kazakh children, youth and their families. BOTA distributed these funds to the country’s poorest people through needs-based scholarships for youth to attend institutions of higher education, direct cash transfers to encourage and enable households to access early childhood education and prenatal health services, and the expansion of social services such as a crisis hotline for at-risk youth and a new foster care model.

Fortunately, there are opportunities to apply the lessons from BOTA and other past efforts today. Frozen assets in Ukraine belonging to former President Yanukovych are ripe for return, pending the result of ongoing litigation. Officials in Sierra Leone and Angola are also litigating cases that have the potential for asset recovery. Some countries, such as Mozambique, are passing laws extending their capability to recover illicit assets, while others like Kenya are confiscating assets at an increasingly rapid pace.

To fully capitalize on these opportunities, lawmakers aiming to elevate asset recovery efforts will need to invest in four key areas:

• Increased money and manpower for the Department of Justice Money Laundering and Asset Recovery Section (MLARS) kleptocracy team, which is responsible for investigation and litigation to recover the proceeds of foreign official corruption.
• Better inter-agency coordination at all levels between MLARS, which freezes stolen assets and USAID, which should be brought in to coordinate their return in an efficient and impactful manner.
• Stronger legislation to allow the US to freeze foreign assets suspected of being illicitly gained. Lawmakers should follow the example set by countries like Switzerland to pass legislation providing opportunities for legal cooperation between the US and states where the assets originated, and to allow governments to start working on how to return the cash – and how it will be spent – as soon as the recovery process starts.
• More engagement in and support for ways to share information and evidence, such as the World Bank’s Global Asset Recovery Forum and smaller regionally focused forums that engage civil society and government actors. Media training or investigative reporting initiatives are also valuable to raise awareness.

Corruption is both a cause and result of poor governance, imposing steep costs on societies as it holds back economic and human development. The process of asset recovery has the potential to reverse those costs. Currently over $4 billion in assets have been frozen and await either adjudication or disbursement; a massive source of potential funding for social programmes in developing countries, which could quickly overtake current levels of official development assistance.

The Pandora Papers offer a sobering look at how deeply entrenched evasive financial practices and corruption have become globally. US lawmakers and the Biden administration should capitalize on the current moment with corruption at the forefront of public consciousness, and broad bipartisan appeal for anti-corruption reform, to invest in asset recovery to the benefit of millions of people worldwide. We should not let this moment pass.

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