STRESSING DISASTROUS EFFECTS OF GRAFT, DELEGATES IN
SECOND COMMITTEE WELCOME COMPLETION OF WORK
ON CONVENTION AGAINST CORRUPTION
Anti-Corruption Instrument Needs 30 Ratifications to Enter into Force
NEW YORK, 13 October (UN Headquarters) -- Delegates speaking in the Second Committee (Economic and Financial) this morning stressed the disastrous effects of corruption on national politics and economies, and welcomed the recently completed draft United Nations Convention against Corruption.
As the Committee took up corruption and the transfer of illicit funds, Italy’s representative, speaking on behalf of the European Union, said that openness and decentralization in the international financial system had made it vulnerable to criminal activities, including money-laundering, terrorism-financing and tax crimes. Lauding the recent completion in Vienna of negotiations for the draft convention, he called it a vital step forward in international law.
He said the corrupt diversion of scarce resources negatively affected a government’s ability to provide basic services and encourage sustainable economic, social and political development. Too often, corruption left its mark on the most vulnerable part of a country’s population -- the poor.
Kenya’s representative said corruption cost African countries several billions of dollars annually, diverting scarce resources meant for development, and keeping Africans mired in the vicious cycle of poverty. Transnational corruption accounted for an estimated 20 per cent of government expenditures in Africa, and a significant percentage of those illicit proceeds was in the hands of businesses and officials in developed countries.
Efforts in the global fight against corruption must include tracing, identification, investigation, criminal prosecution and sanctions, he emphasized. Such action should tackle the myriad social and economic concerns arising from corruption in Africa in order to send a strong message to public officials that safe havens and sanctuaries for corrupt proceeds no longer existed.
The Russian Federation’s representative stressed the importance of combating corruption through comprehensive laws, sound public management, transparency, and strong enforcement. The draft Convention against Corruption -- which contained provisions on anti-money-laundering policies, penalties for violators and enhanced cooperation to track, confiscate and return illegal assets -- was a key instrument in the fight against global corruption.
Introducing the report on preventing and combating corrupt practices and transfer of funds of illicit origin and returning such assets to the countries of origin, an official of the Crime Conventions Section of the United Nations Office on Drugs and Crime (UNODC) Division for Treaty Affairs, stressed that corruption and money-laundering had a cancerous effect on economies and politics worldwide. Citing the International Monetary Fund (IMF), he noted that annual global money-laundering was the equivalent of 3 to 5 per cent of global gross domestic product.
He said the draft convention should be sent to the General Assembly for discussion and adoption by the end of October, and that Mexico would host its high-level signing in Merida from 9 to 11 December. Noting that the anti-corruption convention needed 30 ratifications to enter into force, he expressed the hope that overwhelming international support would speed its entry into force, marking the beginning of new collective effort to fight global corruption.
Other speakers this morning were the representatives of Morocco (speaking on behalf of the “Group of 77” developing countries and China), Nigeria, Norway, Peru (on behalf of the Rio Group), Democratic Republic of the Congo, Nicaragua, Pakistan, United States, Indonesia, Israel and Lebanon.
The Committee will meet again at 10 a.m. tomorrow, Tuesday, 14 October, to take up its agenda item on sustainable development and international economic cooperation.
Background
The Committee had before it a report of the Secretary-General on preventing and combating corrupt practices and transfer of funds of illicit origin and returning such assets to the countries of origin (document A/58/125).
Prepared by the Centre for International Crime Prevention of the United Nations Office on Drugs and Crime, the report highlights progress made by the Ad Hoc Committee for the Negotiation of a Convention against Corruption, which includes measures for preventing corruption and combating the transfer of illicit funds.
Also reflected in the report is the global study on transferring funds of illicit origin, especially funds derived from corrupt acts, which was requested by the Economic and Social Council in 2001 and submitted to the Ad Hoc Committee at its fourth session in Geneva in January 2003. The global study examines problems in preventing and combating corruption and the transfer of illicit assets, particularly in cases of large-scale corruption.
The study notes that sums transferred by former high officials were often believed to be in the hundreds of millions or even billions of dollars, and highlights the economic hardships of victim nations. It examines obstacles to recovering such funds, including laundering or concealment of assets, as well as problems after funds are recovered, such as competing claims.
Recovery of Funds
Urging States to clear away obstacles in the financial services sector to tracing and identifying illicit funds, the report suggests that financial institutions should lay down comprehensive due diligence programmes, including “know-your-customer” principles, to ease transparency and block illicit funds. States should also expand existing anti-money-laundering provisions to include foreign corruption as a predicate offence, which would trigger proactive requirements and reactive measures.
A major obstacle for States in recovering illicit funds, the report states, is a lack of funding for investigations and foreign legal proceedings. In financing such activities, it notes, the global study suggested allowing law firms and investigators to work for fees contingent on recovering assets; allowing private interests to conduct legal proceedings and share any recovery with States; using loans from concerned donors; and seeking reimbursement from financial institutions that have failed to identify or block suspicious transactions.
The report finds that international cooperation and harmonizing diverse legal systems, especially substantive, evidentiary and procedural provisions, are vital in recovering illicit funds. Among other measures, nations should adopt legal measures permitting courts to enforce a valid final judgement from a foreign jurisdiction ordering the confiscation of corrupt proceeds. They should also consider designating government bodies to handle requests for assistance, and adopting measures allowing information on illicit funds to be forwarded.
Return of Funds
According to the report, the global study suggested setting up clear rules for allocating recovered funds and assets in resolving the problem of competing claims. Such rules should consider compensating the victims of crime; supporting anti-corruption programmes; and meeting expenses incurred by the State where the funds or assets were found. In addition, allocating a certain amount of such funds to servicing national debt and enhancing good governance would be appropriate. States should also consider setting up asset forfeiture funds to hold and disburse assets in resolving competing claims, a mechanism that would allow an informed and impartial individual or tribunal to sort through conflicting claims made against recovered assets.
The report also suggests sharing recovered funds with States that had assisted or eased the forfeiture, which would offer a financial incentive for States to work together towards successful recovery. As a general rule, the amount of shared funds would reflect the proportional contributions of the States, as compared to assistance given by other law enforcement participants.
Prevention
In attempting to block illicit transfers, the report recommends that States set up financial intelligence units to review suspicious transactions, analyse financial information and exchange information. When planning and implementing due diligence programmes, States should consider enhanced diligence for unusual financial transactions, creating client-identification records on unusual transactions, and obliging individuals to report suspicious transactions to competent authorities.
The United Nations, the report states, could assist countries lacking the resources or technical expertise to prevent illicit transfers, and could act as a repository for information on due diligence and suspicious transactions. The International Money-Laundering Information Network (IMoLIN) database, created by the Global Programme against Money-Laundering of the United Nations Office on Drugs and Crime, has already provided the basis for a secure Web site where Member States could share information on due diligence and suspicious transactions.
The report concludes that the spirit of compromise within the Ad Hoc Committee for the Negotiation of a Convention against Corruption should lead to agreement on various aspects of the illicit transfer of funds. It notes that the transfer and return of such funds is not specifically regulated by any existing international legal instruments against corruption, and that successfully completing the future convention would be the first international step to tackle the problem.
Also before the Committee was a letter dated 14 July 2003 from the Permanent Representative of Morocco to the United Nations addressed to the Secretary-General (document A/58/204).
Introduction of Reports
DIMITRI VLASSIS, Officer-in-Charge of the Crime Conventions Section of the United Nations Office on Drugs and Crime (UNODC) Division for Treaty Affairs, introduced the report of the Secretary-General on preventing and combating corrupt practices and transfer of funds of illicit origin and returning such assets to the countries of origin (document A/58/125). In presenting the text, he said that, although the full extent of illicit funds transfer was impossible to measure precisely, corruption and money laundering clearly had a cancerous impact on economies and politics worldwide, threatening the stability of societies and the rule of law. Annual global money laundering was the equivalent of 3 to 5 per cent of global gross domestic product (GDP), according to the International Monetary Fund (IMF).
Any meaningful solution to the problem must include assets recovery and return to the country of origin, proof that the international community would not tolerate such unlawful conduct, he continued. Drafting of the new convention against corruption -- which includes a substantial chapter on asset recovery as a fundamental principle and specific measures for its return –- was successfully completed on 1 October. The international community must join forces in the spirit of cooperation, pragmatism and flexibility to ensure that the convention, pending adoption by the General Assembly during its current session, becomes operational quickly.
Statements
ABDELLAH BENMELLOUK (Morocco), speaking on behalf of the "Group of 77" developing countries and China, said that while governments had the primary responsibility of fighting corruption and the transfer of illicit funds, their actions must be supported by regional and international efforts to adopt and implement instruments to fight corruption.
National efforts to fight corruption must also be supplemented by actors in the global economy, he continued. That required cooperation at the international level. He welcomed the working group’s conclusion in Vienna of the convention against corruption, noting that it had worked out clear-cut rules that could be applied both nationally and internationally.
ANTONIO BERNARDINI (Italy), speaking on behalf of the European Union, as well as acceding and associated States, said corruption impoverished national economies and undermined democracy and the rule of law, affecting a country’s basic political, social and economic structure. The diversion of scarce resources by corrupt parties affected government ability to provide basic services and encourage sustainable economic, social and political development. Even worse was that too often corruption had the greatest impact on the most vulnerable part of a country’s population -- the poor.
The European Union welcomed the recent completion in Vienna of the negotiation of a convention against corruption, he said, describing it as an important advance in international law. Increasing financial interdependence at the global level had created new opportunities for illegal financial practices, often fuelled by funds originating from corrupt practices at the national and international levels. The use of the international financial system for illicit purposes had become a major concern.
He added that the international financial system’s high degree of openness and decentralization made it vulnerable to criminal activities, including money laundering and the financing of terrorism, tax crimes and circumvention of both national and international regulations. The European Union was concerned that in some cases corporate entities were expressly created for such illicit purposes.
EVGENY STANISLAVOV (Russian Federation) said his country attached great importance to combating corruption through comprehensive legal regulations, preventive measures based on sound management, incorruptibility and transparency, and strong enforcement. The draft Convention against Corruption -- which contained provisions in anti-money-laundering policies, penalties for violators and enhanced cooperation to track, confiscate and return illegal assets -- was a key instrument in the fight against global corruption.
He said the Russian Federation was doing its part to fight money laundering. It had adopted a federal anti-money laundering law in 2001; guidelines for official conduct for State employees in 2002; and an anti-corruption bill in 2003. In addition, officials were hammering out a national anti-corruption programme and action plan. The Russian Federation had also become a full member of the Egmont Group and had been admitted to the Financial Action Task Force.
B.P.Z. LOLO (Nigeria) said he was pleased the working group in Vienna had completed work on the Convention against Corruption, and hoped it would soon be operational. Corporate scandals and unsavoury reports about public administration pointed to the urgent need for international cooperation in tackling deep-rooted corruption.
Pointing out that anonymity in financial transactions aided corruption, he added that a lack of financial expertise and questions of legal jurisdiction and strict prosecution standards impeded many countries’ efforts to fight it. Any success in fighting corruption would depend on cooperation at the national, regional and international levels.
Regarding the use of recovered illicit funds, he disagreed with the idea of using them to help settle the national debt, noting that they would be put to better use in funding education, water systems, health services and infrastructure, as well as in eradicating poverty.
JOHAN LOVALD (Norway) said corruption was particularly harmful to developing countries with small or weak economies. The poor could not afford to pay bribes in order to receive social services. Combating corruption must be at the top of the United Nations agenda in order to achieve the millennium target of halving global poverty by 2015. The draft United Nations Convention against Corruption, the first global anti-corruption instrument, addressed many important issues, he said, lauding the inclusion of provisions concerning private-sector corruption and the repatriation of illicit funds.
Transnational crime must not be allowed to thrive because of international loopholes and lack of common standards, he continued. The draft convention was a first step in the right direction, but must be effectively enforced to end money-laundering and corruption. States should ratify the convention as soon as possible and ensure its effective implementation through sound, objective follow-up mechanisms.
MARCO BALAREZO (Peru), speaking on behalf of the Rio Group, said corruption surpassed frontiers and endangered nations, as well as international society as a whole. Its transnational nature called for a universal response involving governments, international organizations, non-governmental organizations and civil society. It was necessary to repatriate illicit assets speedily and unconditionally, he said, as well as to provide effective legal assistance that would allow nations to bring financial criminals to justice.
He said he was pleased that the draft Convention against Corruption had been completed two years after the international community had committed to it. The instrument would make a real difference to the quality of life for millions of people around the world. It had an historic transcendence since it extended current legal standards on the subject. It also provided essential elements for fighting corruption, including legal assistance to ensure criminal prosecution and prompt extradition.
WANJUKI MUCHEMI (Kenya) said corruption polluted the social, economic, political and moral fabric of developing countries. Corruption cost African countries several billions of dollars annually, diverting scarce resources meant for development, and keeping Africans mired in the vicious cycle of poverty. Transnational corruption accounted for an estimated 20 per cent of government expenditures in Africa, and a significant percentage of those illicit proceeds was in the hands of businesses and officials in developed countries. That situation raised questions about the morality of policies requiring poor nations to continue to pay heavy debt burdens to foreign governments whose lending practices involved the corrupt diversion of funds.
Efforts in the global fight against corruption must include tracing, identification, investigation, criminal prosecution and sanctions, he continued. Such deterrent action would undoubtedly address the myriad social and economic development issues resulting from corrupt practices in Africa, having a positive impact of the lives of average Africans. Moreover, that would send a strong message to public officials that safe havens and sanctuaries for proceeds from corruption no longer existed.
EMPOLE LOSOKO EFAMBE PAUL (Democratic Republic of the Congo) noted that corrupt practices could compromise the political and social development of States. The international community must set up the appropriate legal framework to fight it, and the recently completed convention represented major progress. Corruption had various causes, including poverty, bad government, conflict, terrorism, and trafficking, and social instability.
The negative effects of corruption were a serious threat to global well-being, he said, adding that his country would do its utmost to fight corruption at the national, regional and international levels. It had already set up a brainstorming group on money-laundering and published guidelines on standards for credit and other financial institutions. However, the country lacked the adequate resources to put its anti-corruption machine fully into motion and required assistance from the international community.
EUGENIO CANO (Nicaragua) said his country was committed to ending corruption, a major cause of poverty, in order to build the international community’s trust and attract investment for much-needed jobs and services. Officials had drafted a National Integrity Plan to end corruption in public office and to engage civil society in creating more transparent, effective public management. At the international level, Nicaragua had joined and ratified the United Nations Convention against Transnational Organized Crime, the Central American Convention on the Prevention and Repression of the Laundering of Money and Other Assets from Illegal Drug-trafficking and Related Crime, and the Treaty of Mutual Legal Assistance in Penal Matters.
Nicaragua was an active participant in negotiating the draft United Nations Convention against Corruption, he said. The treaty was an important point of reference for areas requiring international cooperation, notably mutual legal assistance, money-laundering and asset recovery. It also served as a consensus for preventing, criminalizing and sanctioning public and private corruption.
RAZA HAYAT HIRAJ (Pakistan) said his country had taken several measures to prevent and fight corruption. A process had been set in motion, through the National Accountability Bureau, to ensure that all elected representatives and the private sector functioned transparently and remained accountable to the people. However, without firm support at the global level, national efforts to fight corruption were unlikely to achieve the desired results. In particular, the international community must make efforts to repatriate illegally acquired funds and repatriate or prosecute people indicted for corrupt practices in their home countries.
He expressed the hope that the Convention against Corruption would support national efforts by preventing easy access and safe havens for illicit funds in the form of offshore financial centres, anonymous accounts and stringent secrecy laws. The international community should also assist with the investigation and prosecution of corruption-related offences, as well as with the tracing and recovery of proceeds from corruption and their repatriation to the country of origin. It should also cooperate in the areas of corporate governance, information exchange and transparency in international monetary transactions.
SICHAN SIV (United States) said the draft United Nations Convention against Corruption was a breakthrough on the Committee’s agenda item on preventing and combating corrupt practices and illicit funds transfer and would hopefully lead to effective action and results. The United States was among the 130 countries that had met since January 2002 to finalize the text under the auspices of the United Nations Office for Drugs and Crime (UNODC). The outcomes of those talks was a document containing an entire chapter on government measures to prevent corruption and another on expediting the asset-recovery process among nations, the first such provision in an international anti-corruption convention.
The text also incorporated several recommendations mentioned in the Secretary-General’s report, such as enhanced scrutiny of accounts and enforcement of valid foreign judgements, he said. It was hoped that the document would become part of a legally binding international agreement that would serve as a basis for increasing cooperation and strengthening individual and collective efforts in the fight against corruption.
Mr. WIRENGJURIT (Indonesia) said corruption was one of the greatest threats to democracy as it created a serious barrier to effective resource mobilization for poverty eradication and sustainable development. Preventing and combating corruption was imperative and must address good public and corporate governance. The fight against corruption and effective procedures for illicit funds recovery were not solely a domestic problem, but a common responsibility of all Member States. International cooperation must include technical assistance and stronger human and institutional capacity to enable countries to formulate effective public- and private-sector anti-corruption strategies.
Indonesia was doing its part by adopting anti-crime and anti-corruption measures aimed at strengthening the legal system and public governance, he said. In 1999, Indonesia had passed a law to eradicate corruption, and in 2002 it had set up an anti-corruption commission and enacted a law to counteract money-laundering and deny funds to terrorist organizations. In addition, officials had just created an independent financial intelligent unit for money-laundering prevention and elimination.
MOSHE SERMONETA (Israel) said the illicit acquisition of personal wealth by senior public officials could be particularly damaging to national economies and could jeopardize social, economic and political development. According to the study on the illicit funds as it appeared in the Secretary-General’s report, much of the monies transferred by high-level officials and former leaders, often in the hundreds of millions of dollars and in some cases in the billions of dollars, was derived from corrupt acts.
Israel had actively participated in the negotiations on the draft Convention against Corruption, he said. The document’s most significant breakthrough was the inclusion of a provision on the recovery of illicit funds and their return to the country of origin. Israel supported additional provisions that would permit States to prosecute those who committed acts of bribery and embezzlement against international organizations. The draft, he said, presented an opportunity for greater cooperation not only among States, but also between States and organizations.
MAJDI RAMADAN (Lebanon) said corruption and the transfer of illicit funds endangered the stability and security of societies, undermined democracy and threatened sustainable development by depriving nations of scarce resources. The international community should make efforts to harmonize national laws in order to prevent corruption, encourage cooperation between States and ensure good corporate governance in a globalized world dominated by huge multinational corporations.
The Lebanese Penal Code had made acts of corruption offences liable to sanctions, he said, adding that it requested the confiscation of movable and immovable property derived from such acts. The Lebanese law on Illicit Enrichment applied to public officials or persons acting in their name when enrichment occurred through bribery, trading in influence or other means.
Mr. VLASSIS, in closing remarks, said the draft Convention against Corruption would be available in all official United Nations languages on 17 October and would be distributed to delegates in New York at the beginning of next week. The document was expected to be sent to the General Assembly for discussion and adoption by the end of October. Mexico would host the high-level signing of the convention in Merida from 9 to 11 December.
He said the Merida conference would be similar to the meeting in Palermo, Sicily, for the United Nations Convention on Transnational Crime, during which 124 of the 149 participating delegations signed the document. That Convention, which required 40 ratifications, had entered into force on 29 September 2003 following the fortieth ratification in July. The anti-corruption convention required 30 ratifications to enter into force. It was hoped that the lower number of ratifications necessary and the overwhelming international support for the anti-corruption treaty would expedite its entry into force and operation, marking the beginning of new and increased collective efforts to fight global corruption.
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