Returning assets indirectly through third-party entities

Read our new report Indirect Asset Return Through Third-Party Entities

Indirect return mechanisms describe the practice of returning recovered money across borders indirectly via third-party entities that stand between cooperating governments. These entities might be called in to aid in the negotiations, as well as in the process of the distribution of the returned assets, especially in situations where there are challenging relationships between the negotiating governments and when the receiving countries lack the necessary corruption controls to mitigate the risk of re-looting the assets.

In the past, asset returns have been channeled to the country of origin in this way through projects implemented by multilateral organisations, special mechanisms established for the purpose of the return, or through the involvement of non-governmental organisations. The BOTA Foundation, Abacha II, US – Equatorial Guinea and Jersey – Kenya returns are some examples of cases where third parties have been involved in the disposal of funds, and which are analysed in this paper. While not an exhaustive list of cases which involve third-party entities, they offer an indication into some of the economic, social and political challenges, as well as opportunities, that might arise with returns conducted through the use of third parties.

Benefits of this kind of return include, for example, increasing transparency and oversight of the return process by involving a third-party entity independent from the governments involved. This increased transparency and oversight, together with additional safeguarding measures usually championed by third-party entities, such as conflict of interest policies, can then lower the risk of misappropriation of the returned assets. This is especially relevant in countries with a weak rule of law or fragile contexts. Moreover, the third-party entities involved can provide additional capacity to the process, ranging from their programmatic strengths to oversight and negotiating skills.

However, the involvement of third parties often comes at a cost of higher administrative and financial burdens versus directly returning assets. The amount of these additional costs directly depends on the number of safeguarding measures and layers of oversight that are placed upon the return, which might need to be higher in politically challenging contexts. Another challenge is that these third-party entities are often chosen in closed-door negotiations between governments and not following an open tendering process or CSO perspective, which raises transparency and accountability concerns. Additionally, because projects run by third-party entities usually run only for a limited time and are contingent on the funds from an asset return, questions over the future and sustainability of such programmes, especially without any government involvement, can be raised. Lastly, because the involvement of third-party entities in practice means the imposition of conditionalities on the asset return process, it can be perceived by the receiving government as a threat to its sovereign rights over the assets and in practice lead to protracted negotiations over the return modalities.

In order to weigh in the opportunities and challenges that the indirect return brings, policy makers and civil society members should consider several factors when deciding to advocate for this type of return:

  • An assessment of the rule of law in the receiving country should be made. Indirect return mechanisms are best suited for environments that require additional monitoring safeguards provided by an independent third-party entity or when the relations between cooperating governments are challenging.
  • The type of organisation and expertise that are needed should be guiding principles when deciding which independent organisations will be tasked with receiving the returning funds and distributing them via their programmes. Moreover, third parties should be appointed through a public process, where possible, and the public and civil society should be given information about why particular organisation(s) were chosen and not chosen.
  • Civil society organisations representing local populations and the victims of corruption should be involved in negotiating, monitoring and distributing recovered assets. In countries with weak and repressed civil society, or where expertise is lacking, the involvement of international organisations can fill this gap or to work together with local organisations. However, local organisations should be included as much as possible, even if this means investing into building their capacity to do so over time.
  • Return modalities should adhere to international standards and best practices regarding transparency, accountability and integrity. Of particular importance to indirect returns is publishing monitoring and evaluation information created by third-party entities, as well procurement documents related to the contracting processes and detailed texts and agreements on the modalities of the return.  

Read more

Indirect Asset Return Through Third-Party Entities
Indirect return mechanisms describe the practice of returning recovered money across borders indirectly via third-party entities that stand between cooperating governments.

Management and Oversight of Independents Return Funds
This report explores international best practices for the oversight of independent return mechanisms, drawing on both principles and examples from other returns. In doing so, it explores the unique characteristics that the Social Protection Fund will operate within.

Best Practices for Independent Return Funds: Lessons Learned for Venezuela
Thsi report explores more general best practice when it comes to establishing an independent return mechanism. Drawing on experiences from Kazakhstan, Equatorial Guinea, Uzbekistan and Nigeria, it discusses how transparency, accountability and participation can be built into return mechanisms and identifies recommendations for the Venezuela fund.