Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Presented By:- Martin S. Kenney Martin Kenney & Co., Solicitors Preferred Area of Practice: International Fraud Third Floor, Flemming House P.O. Box 4740, Road Town Tortola British Virgin Islands VG 1110 Presented To: A Meeting of FraudNet, Commercial Crime Services Division, International Chamber of Commerce Rio de Janeiro, Brazil, Friday, 13th April, 2007, at 11:15 a.m. – 12:30 p.m. at Iberostar Hotel, Rio de Janeiro Recovery of the Proceeds of Grand Corruption Against the State – An Overview of the Anglo-Saxon Approach and of the UN Convention Against Corruption. Martin Kenney & Co., Solicitors Preferred Area of Practice: International Fraud

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Introduction – Corruption Defined Transparency International : Misuse of entrusted power for private gain. Transparency International : Misuse of entrusted power for private gain. No universally recognized definition, however, tends to include the following acts:conflict of interests, embezzlement, fraud, bribery, racketeering, political corruption, nepotism, sectarianism and extortion. No universally recognized definition, however, tends to include the following acts:conflict of interests, embezzlement, fraud, bribery, racketeering, political corruption, nepotism, sectarianism and extortion. World Bank estimates of corruption: US$80 billion yearly (a ‘dark number’). World Bank estimates of corruption: US$80 billion yearly (a ‘dark number’).

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Introduction: Definition of Grand Corruption Massive personal wealth is acquired from States by senior public officials or others using corrupt means. Massive personal wealth is acquired from States by senior public officials or others using corrupt means. Also known as kleptocracy; tantamount to theft. Also known as kleptocracy; tantamount to theft. Distinguishing features of grand corruption include (a) the scale of wealth acquired by corrupt means and (b) the seniority of the officials involved. Distinguishing features of grand corruption include (a) the scale of wealth acquired by corrupt means and (b) the seniority of the officials involved. Embezzlement and misappropriation of state assets are among the activities representing grand corruption. Embezzlement and misappropriation of state assets are among the activities representing grand corruption.

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Challenges of Grand Corruption Global threat to good governance and the Rule of Law. Global threat to good governance and the Rule of Law. What can one country do when the fruits of grand corruption that took place elsewhere are found in its territory? To whom should a suspicious transaction report (or a “SAR”) be made? Who or where does it repatriate the assets to? What about the law of foreign sovereign immunity ?. What can one country do when the fruits of grand corruption that took place elsewhere are found in its territory? To whom should a suspicious transaction report (or a “SAR”) be made? Who or where does it repatriate the assets to? What about the law of foreign sovereign immunity ?.

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Global Response: International Conventions Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The Inter-American Convention Against Corruption. The Inter-American Convention Against Corruption. The Criminal Law Convention Against Corruption of the Council of Europe. The Criminal Law Convention Against Corruption of the Council of Europe. The African Union’s Anti-Corruption Convention. The African Union’s Anti-Corruption Convention. The United Nations Convention Against Corruption (the “UNCAC”). The United Nations Convention Against Corruption (the “UNCAC”).

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 The UNCAC First binding international treaty designed to combat corruption; its missions include: First binding international treaty designed to combat corruption; its missions include: (a) ensure that no place in the world is exempt from the obligation to return looted assets, and(a) ensure that no place in the world is exempt from the obligation to return looted assets, and (b) invalidate old excuses to cover corruption such as bank secrecy laws. To do so, the UNCAC rests on three pillars:(b) invalidate old excuses to cover corruption such as bank secrecy laws. To do so, the UNCAC rests on three pillars: (i) the prevention and criminalization of corruption, (i) the prevention and criminalization of corruption, (ii) international cooperation, and (ii) international cooperation, and (iii) asset recovery. (iii) asset recovery.

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 The UNCAC: Asset Recovery Article 31 deals with freezing, seizure and confiscation orders. Article 31 deals with freezing, seizure and confiscation orders. Duty to take measures to enable the identification, tracing, freezing or seizure of proceeds of crime derived from corruption in order to facilitate their eventual confiscation. Duty to take measures to enable the identification, tracing, freezing or seizure of proceeds of crime derived from corruption in order to facilitate their eventual confiscation. Duty to take measures to regulate the administration of frozen, seized or confiscated property. Duty to take measures to regulate the administration of frozen, seized or confiscated property. Calls for international cooperation and directs each signatory country to empower its Courts to order that bank, financial or commercial records be made available or seized. Calls for international cooperation and directs each signatory country to empower its Courts to order that bank, financial or commercial records be made available or seized. Shifts the burden of proof onto defendants to prove the lawful origin of any apparent proceeds of corruption. Shifts the burden of proof onto defendants to prove the lawful origin of any apparent proceeds of corruption. Criminalisation of extra-territorial corruption. Criminalisation of extra-territorial corruption.

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Challenges in the Fight Against Corruption UNCAC: does not deal with return of assets. UNCAC: does not deal with return of assets. UNCAC: phrased in terms of “facilitating” tracing, seizure and freezing of property. UNCAC: phrased in terms of “facilitating” tracing, seizure and freezing of property. Mutual legal assistance. Mutual legal assistance. National Sovereignty. National Sovereignty. Diplomatic Immunity. Diplomatic Immunity.

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Brazil Transparency International Corruption Perception Index put Brazil in 70th place out of 150 (with Finland in 1 st place and Haiti in 150 th place). Transparency International Corruption Perception Index put Brazil in 70th place out of 150 (with Finland in 1 st place and Haiti in 150 th place). Government has 22,000 public posts to fill at its discretion. Government has 22,000 public posts to fill at its discretion. Discretionary budget = PT Government accused of paying monthly bribes of $12,000 to lawmakers. Discretionary budget = PT Government accused of paying monthly bribes of $12,000 to lawmakers. Triborder Area. Triborder Area.

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Issues for Consideration International Cooperation International Cooperation Secrecy. Secrecy. Speed of the investigation. Speed of the investigation. Mutual Legal Assistance. Mutual Legal Assistance. Choice of law. Choice of law.

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Proprietary Claims [Anglo-Saxon] Malfeasance Malfeasance Conversion Conversion Breach of fiduciary duty Breach of fiduciary duty Monies had and received Monies had and received Restitution Restitution Equitable tracing of assets Equitable tracing of assets Equitable charges on property Equitable charges on property Constructive trusts Constructive trusts

Meeting of Fraudnet, Rio de Janeiro 13 April 2007 Mechanisms to Recover the Proceeds of Corruption [Anglo-Saxon] Freezing and Seizure Orders. Freezing and Seizure Orders. Confiscation Orders and Civil Forfeiture conversion. Confiscation Orders and Civil Forfeiture conversion. Norwich Pharmacal / Bankers Trust Orders. Norwich Pharmacal / Bankers Trust Orders. Mareva Injunction. Mareva Injunction. Anton Piller Order. Anton Piller Order.