Press Room
 

October 2, 2006
HP-127

Prepared Remarks of Pat O’Brien
Assistant Secretary for Terrorist Financing and
Financial Crimes
Swiss Federal Department of Foreign Affairs
Seminar: "Return of Illicit Assets of Politically
Exposed Persons"

Good morning, Ambassador Seger, Ambassador Haas, and conference participants. I would like to thank the Swiss Government for its leadership in the area of repatriating assets and for hosting us today as we strive to advance our international coordination in this area. This is a very important topic that affects all reaches of the globe. Whether your country's coffers have been looted by public corruption, you have information concerning the movement of such funds through your country, or you are assisting in the return of illicit proceeds, I thank each of you for your contributions today as we work together to find solutions.

The United States Government has recently embarked on a new government-wide strategy to combat kleptocracy around the world. The Strategy calls upon the existing tools and authorities of a range of government agencies – which I will speak to in more detail shortly – including our Departments of Justice, State, Homeland Security and the Treasury. This initiative is new in its comprehensive approach and emphasis on engaging our international partners in our efforts.

Indeed, the President of the United States launched in August the Strategy to Internationalize Efforts Against Kleptocracy to combat high level corruption, deny safe haven to bad actors, and recover assets. The initiative intends to fulfill the commitments our President, along with other G8 leaders, made to combat corruption. These began with the Evian Summit in 2003 and were most recently expressed in St. Petersburg in July.

That commitment by G8 leaders zeros in on high-level public corruption. The commitment shares some of the same key objectives of this seminar in the focus on politically exposed persons. The statement underlined the need to work with international financial centers to deny safe haven to assets illicitly attained by corrupt individuals and develop best practices for working together to achieve this. The St. Petersburg statement also emphasized the importance of existing international foundations such as the United Nations Convention Against Corruption (UNCAC) that strengthens countries' ability to prevent corruption, cooperate in the investigation and prosecution of cases, and adopt procedures to recover assets stolen by corrupt officials. I am happy to report that the U.S. Senate approved the Convention on September 15 to enable the United States to join the 64 current parties to the Convention. We look forward to the first Conference of State Parties in December to review implementation measures, including the provisions for effective asset recovery.

I would like to highlight the work of G8 countries on the Asset Recovery Initiative which lays out principles and options for the disposition and transfer of confiscated proceeds of grand corruption based on the UNCAC provisions. I believe a copy of this Initiative has already been distributed to you as part of the seminar's materials. The guiding principles are clear that the circumstances of each case will be very different and the principles propose some procedural structures to help us think about the transfer of assets in more practical terms.

Current U.S. efforts to fight kleptocracy coincide with other important developments in this area, including the recent discussion of the Governance and Anti-Corruption Framework by the World Bank Board of Governors in Singapore a few weeks ago. The Framework promotes strengthened technical assistance as well as improved collaboration on asset restitution.

I would also like to highlight the work of the Financial Action Task Force, which continues to examine the links between anti-corruption and AML/CFT issues and the work of one of the related regional bodies, the Asia/Pacific Group (APG). The Group's typology work identified Politically Exposed Persons (PEPs) as an area in which jurisdictions need more guidance and clarification. Additionally, the Group is sponsoring an in-depth research paper that intends to assist jurisdictions in developing appropriate safeguards against corruption in anti-money laundering/counter-terrorist financing (AML/CFT) regimes. I look forward to the results of this research which are due out next year.

As I mentioned earlier, I would like to review the U.S. Government's current authorities and tools it employs to fight kleptocracy with a specific focus on protecting the international financial system from the proceeds of corruption relevant to the seminar's objectives.

I begin by outlining some of domestic regulatory requirements we have in the U.S. to prevent and detect possible abuse of the financial system by kleptocrats. These include:

  • Customer Identification Program requirements in connection with opening accounts – specifying identifying information to be requested from customers and risk-based procedures for verifying their identities, so that financial institutions can form a reasonable belief that they know the true identity of each customer.
  • Enhanced scrutiny of private banking accounts established or maintained by, or on behalf of, senior foreign political figures, their immediate family members, and their widely and publicly known close associates – collectively, PEPs.
  • Risk-based procedures and controls to ensure that financial institutions are not knowingly or unwittingly assisting PEPs in hiding or moving the proceeds of foreign corruption.
  • Requiring financial institutions to report:
  • Transactions that they know or suspect involve funds derived from illegal activity, are designed to evade the Bank Secrecy Act (the principal AML/CFT regulatory regime in the United States), or have no apparent lawful purpose, to the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury and the U.S. financial intelligence unit; and
  • Each transaction in currency exceeding $10,000 (or multiple currency transactions aggregating to over $10,000) also to FinCEN;
  • Requiring financial institutions to collect and maintain records relating to transmittals of funds in the amount of $3,000 or more.
  • Requiring all persons to report the transport, mailing, or shipment of currency or monetary instruments in excess of $10,000 into or out of the U.S.

We also rely heavily on information sharing between federal law enforcement agencies and financial institutions, and also among financial institutions, to safeguard the financial system. Information sharing occurs between FinCEN and FIUs in other jurisdictions.

Another important way in which information is shared is through the issuance of advisories by FinCEN to financial institutions regarding risks associated with terrorist financing and money laundering.

For example, in April of this year, FinCEN issued guidance to financial institutions in connection with providing financial services to Belarusian senior regime officials. FinCEN issued this advisory to alert financial institutions and protect against a potential money laundering threat involving senior Belarusian officials seeking to move misappropriated public assets through the U.S. financial system.

Subsequently in June of this year, the President issued Executive Order 13405 Blocking the Property of Certain Persons Undermining Democratic Processes of Institutions in Belarus. This executive order explicitly incorporated kleptocratic behavior as a basis for designation. This action, known as a targeted financial sanction, can impose economic sanctions on foreign kleptocratic regimes by declaring a national emergency when particular individuals, entities or jurisdictions pose a threat to national security, foreign policy or the economy of the United States.

The U.S. government can issue an executive order unilaterally or in concert with a United Nations Security Council Resolution. The order requires all U.S. persons under U.S. jurisdiction – which includes financial institutions and their foreign branches – to identify and block all property of designated persons located in the United States or persons otherwise subject to U.S. jurisdiction. The order also precludes U.S. companies and individuals from engaging in business with designated persons.

Another unique tool available to the U.S. Treasury Department is one provided for under section 311 of the USA PATRIOT Act, which authorizes the Secretary of the Treasury to designate a foreign jurisdiction, foreign financial institution, class of transactions, or type of account as being a "primary money laundering concern" and apply special measures to address such vulnerabilities. These measures include enhanced record-keeping and reporting requirements, and can also include prohibiting U.S. financial institutions from establishing or maintaining correspondent or payable-through accounts in connection with a jurisdiction, financial institution, class of transaction, or type of account determined to be of primary money laundering concern. This regulatory authority – distinct from a sanction – can potentially be used to alert financial institutions of a particular foreign public corruption-related money laundering problem. It can cut off identified financial jurisdictions or institutions that may be employed by kleptocrats to launder proceeds of corruption through the U.S. financial system.

These authorities and tools allow the U.S. to reach many kleptocrats, but there are many that we cannot reach. In countries where U.S. economic ties are weaker, our tools are less effective. We therefore call upon the participants here today to work together for more concerted action in such instances and ensure there are no safe havens for kleptocrats in any jurisdiction.

Another important building block to deny kleptocrats' use of the financial system is increasing technical assistance in countries so that we may fulfill the obligations of the UNCAC and comply with the FATF standards. The UNCAC requires countries to have an adequate legal framework in order to tackle corruption and we must help countries to make sure that signatories can live up to all the commitments of the Convention.

Our strategy relies heavily on international cooperation and we look forward to working with you and other partners in the effort to deny kleptocrats' use of the financial system to place, hide, and move illicit assets. The world international centers are particularly critical in this since it is in these centers where illicit assets of PEPs either rest or flow through. For this, I urge you to engage your private sector and enlist their support and further strengthen the financial system's controls and vigilance to prevent the entry of illicitly acquired assets. The relationship between kleptocracy and money laundering is clear. Effective implementation of the FATF standards can be a crucial component of our joint efforts to combat kleptocracy.

I believe today there is greater momentum and improved ability to coordinate on the operational level through FIU sharing and mutual legal assistance programs. We need to think of new ways of improving collaboration; we all know that it takes concerted action to have success in fighting grand scale corruption. I hope here in Lausanne we have the opportunity to establish a core network of countries to work both on specific cases that emerge and on developing best practices that future cases will benefit from.

There is a strong foundation of work on this topic forged here in Lausanne and in other international for a – we need to capitalize on these past developments and the current momentum to find practical ways to cooperate with one another. Again, I would like to thank the Swiss Federal Department of Foreign Affairs for convening us here today on this important topic and applaud each country's participation to advance international cooperation on asset recovery.