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New GAFILAT guide: Why asset recovery laws need to align with human rights and other international standards
A new guide to non-conviction based forfeiture published by GAFILAT, the Latin American body of the Financial Action Task Force FATF sets out good practices for this powerful but under-used form of asset recovery legislation. It also emphasises the need for laws to align with both domestic constitutions and international human rights standards. The GAFILAT guide was drafted by Oscar Solórzano in collaboration with the region’s Asset Recovery Network RRAG . Oscar is Head of Latin America at the Basel Institute on Governance and a Senior Asset Recovery Specialist with many years of experience supporting government partners across Latin America in high-profile, complex cases of corruption and asset recovery. In this Q&A, he explains the approach, relevance and impact of the Guía de Buenas Prácticas sobre Extinción de Dominio y Decomiso no Basado en Condena , which was published by GAFILAT in 2024 and financed by EU member states through the COPOLAD III cooperation programme. COPOLAD III is a consortium led by the Italo-Latin American Association IILA and FIIAPP of the Spanish Cooperation. 1\. What is the guide about and who is it for? This is a guide to good practices in non-conviction based forfeiture for Latin America. It analyses the existence and implementation of non-conviction based forfeiture mechanisms in the 18 GAFILAT countries, which provided useful data during the drafting process and very detailed comments during the review. The guide contains an analysis of economic criminality in Latin America and the public policy response. It also addresses the essential concepts and standards applicable to non-conviction based forfeiture, presents case studies and explores available data from GAFILAT countries. Policymakers, legislators, law enforcement and judicial practitioners, law students and civil society – including journalists who report on these complex topics – will benefit from the guidance. 2\. Why is there a need for guidance? The expansion of non-conviction based forfeiture legislation has accelerated in Latin America in recent years, and not necessarily in the most coordinated or harmonised way. In line with the updated FATF standards relating to asset recovery, it is expected that it will continue to expand in the region. In effect, the FATF’s updated Recommendations 4 and 38 make the adoption of non-conviction based forfeiture laws mandatory and seek to ensure that decisions based on these laws can be enforced internationally. The guide therefore appears at an ideal time. It proposes a way to harmonise this type of law while respecting the legislative diversity that exists in the region. 3\. The idea is that non-conviction based forfeiture can reduce economic and organised crime – even without the threat of criminal convictions. Can you justify that? Economic crimes are perpetrated for the purpose of obtaining illicit economic advantages. Laws that reduce such economic advantages are a concrete step forward. And jurisdictions with more powerful and varied legal tools are more likely to see their crime rates decrease, simply because there is a concrete societal response to the criminal phenomenon. Without comprehensive asset recovery laws and an effective judicial apparatus to implement them, various incentives for engaging in profitable criminal activity arise. Some studies show that the lack of effective legal mechanisms targeting criminal assets has, among other things, allowed an explosion of organised and economic crime in Latin America in all its manifestations. The same goes for the growth of public-sector corruption. Assets stolen through corruption have rarely been confiscated in the past, when asset recovery was only possible in the context of criminal proceedings. It is naïve to think that a legislative instrument alone can change the reality of crime in Latin America, where the most fearsome drug cartels operate and, according to all international indices, corruption is rampant from north to south. However, the empirical experience I have gathered while working for almost 15 years in this part of the world indicates that there is a positive difference in the criminal situation of countries that effectively implement asset recovery mechanisms. A robust legal toolkit for asset recovery also alters the behaviour of criminal organisations, which have to bear higher costs to develop more sophistication in their criminal activities or simply relocate their activity to jurisdictions less equipped with legal tools and the ability to wield them. In Peru, to take a positive example, non-conviction based forfeiture is proving a powerful way to get at numerous politicians who have been accused of corruption, but where criminal proceedings seem to be never-ending. The independence of Peru’s non-conviction based forfeiture law from criminal procedures allows prosecutors to target assets even if their owners inevitably slip through the nets of justice. 4\. What does the guide show about the prevalence and success of different forms of non-conviction based forfeiture in the region? On paper, there has been a lot of progress in the adoption of non-conviction based forfeiture in Latin America. Only two countries in the region do not have any form of non-conviction based forfeiture law. The most predominant form is arguably Extinción de dominio, which has existed for 13 years. Ten out of the 18 countries have incorporated it into their legal arsenals and apply it in various forms and degrees. Extinción de dominio is a flexible law that can operate in civil, criminal or administrative matters, or even completely independently. It has developed specific concepts that make it possible to broaden the grounds for asset forfeiture. It lists an extensive catalogue of rights of the defence which, as stated in the Guide, seem to go far beyond the internationally established standard. In practice, however, recovery rates remain modest in relation to the volume of criminal assets generated in and flowing through the region. The best practices guide argues that a lack of effective implementation of existing laws partially explains the poor performance. The quality of implementation is influenced by political, economic and social interests. These are not necessarily addressed in the guide, which limits itself to technical and legal issues. However, the guide proposes some concepts and comparative practices that have the modest objective of guiding national authorities in applying this indispensable tool. 5\. What are success factors and challenges? In many Latin American countries, non-conviction based forfeiture is only taking its first baby steps. But from a Darwinian perspective of law – i.e. survival of the fittest – I observe that the laws that thrive are those that align with international standards and the constitutional rights of the countries that adopt them. In other words, those laws that develop around recognised global standards and practices but that are also designed to work in specific local contexts. Since 2020, together with my colleagues and many passionate and competent local partners, I have implemented programmes promoting non-conviction based forfeiture laws in the region. That experience has helped me to see that there is a group of countries that have what we can call a “European” approach to the issue, and whose laws apply only in a narrow set of scenarios. Others have more hard-hitting practices that evoke the laws used in countries such as the United States, and have transposed common law practices and principles into civil law frameworks without further reflection. Despite an increase in asset recovery rates, in many cases this has led to distortions and challenges, which are partially explored in the guide. 6\. What does the guide tell us about non-conviction based forfeiture in international cases? International asset recovery is a very different animal from domestic asset recovery and has political implications. That said, since 2014 several Latin American countries have tried to pierce the once impenetrable veil of the European financial system with non-conviction based forfeiture procedures. Switzerland and then Luxembourg were the first European countries to accept these laws as valid, in particular in relation to decisions based on Extinción de dominio. Today, almost all countries accept provisional measures based on these laws and some can directly enforce the resulting decisions. Even if the practice of enforcing non-conviction based forfeiture judgments is not abundant, we hope that the new standards adopted by the FATF on this matter will help to accelerate international asset recovery. 7\. The guide emphasises the need to align laws with international human rights standards. Why? In my opinion, this is fundamental. It is inconceivable that the ideals of justice can be achieved to the detriment of human rights. Rather than a random matter left to the discretion of states, respecting human rights in the adoption of non-conviction based forfeiture laws is an international treaty obligation. Most countries adhere to the so-called control of conventionality doctrine, i.e. the obligation to align any domestic legal instrument or practice with binding rules arising from international treaties such as the American Convention of Human Rights. This presupposes that the adoption of any domestic rule and practice on non-conviction based forfeiture must respect human rights and the practice of human rights courts. This is a condition sine qua non of any asset recovery law. The guide cites two examples of setbacks to the use of non-conviction based forfeiture laws in the region on the basis of human rights deficits. We can agree or disagree with the premises used by the countries’ High Courts to reach their conclusions. But what is clear is that a lack of consideration for human rights can also play a paralysing role. This challenge is vividly illustrated in Peru right now, where the Ombudsman has filed a claim against the use of non-conviction based forfeiture with the Constitutional Tribunal on the grounds that it could violate the right to property and the principle of the presumption of innocence. On a more positive note, a human rights lens can enhance the application of this type of law, especially in the context of international cooperation. On the one hand, more attention to human rights brings more legitimacy and acceptance to laws and therefore better recovery rates. On the other hand, a human rights lens also offers national legislators the ability to adopt more incisive standards when there are, for example, elements of organised crime or other exceptional conditions that make the application of some human rights more flexible. 8\. How does the guide help navigate the human rights topic in practice? As the guide explains through a study of the jurisprudence of the European Court of Human Rights, the issue is constantly evolving. The guide provides Latin American legislators and practitioners with examples of how to develop the human rights approach in a clearer way and enables them to critically review concrete non-conviction based forfeiture cases in various parts of the world. It emphasises two human rights that are central to non-conviction based forfeiture: the right to property and the right to a fair trial. This will be enormously beneficial in ensuring that new or revised non-conviction based forfeiture laws in Latin America are in line with the updated FATF Recommendations. The guide advocates for the adoption of laws that are in harmony with human rights principles and specifies that their international enforcement is a recognised standard. Similarly, the interpretative notes to the revised FATF Recommendations 4 and 38 – and the very coherence of the FATF system – indicate that the respect for human rights is fundamental to the adoption and application of these laws. The human rights perspective is likely to be an important element in the forthcoming fifth round of FATF Mutual Evaluations in GAFILAT countries, where the technical compliance and effectiveness of these laws with FATF standards will be under the microscope. Learn more See the Guía de Buenas Prácticas sobre Extinción de Dominio y Decomiso no Basado en Condena . Read a related blog by Oscar Solórzano: FATF seeks to change the landscape of international asset recovery: what this means for Latin America.
Latin America’s model law on non-conviction based forfeiture of illicit assets turns 10 – what now?
A model law on non-conviction based forfeiture NCBF , drafted 10 years ago by UNODC to support countries in Latin America in their efforts to recover stolen assets, will be updated following four days of intense discussions among practitioners and asset recovery experts from across the continent. Specialists from our International Centre for Asset Recovery ICAR team in Latin America were among those contributing to the discussions of the NCBF Model Law Ley Modelo de Extinción de Dominio . Extinción de Dominio is the dominant form of NCBF mechanism in Latin America, including in Peru, where ICAR is assisting the authorities in rolling out a national system for NCBF and has seen some encouraging successes. A model for NCBF laws across Latin America Central to the participatory review process of the NCBF Model Law, the meetings sought to illuminate its contribution to efforts to recover stolen assets in countries that have implemented such an NCBF mechanism. Speakers highlighted that the Model Law has served as a reference document for many countries in drafting NCBF legislation that fits their domestic legal systems and contexts. These laws have since helped to recover assets arising from organised crime and corruption. The discussions also highlighted good practices and aspects that require updating in line with the fast-evolving field of asset recovery, such as how to recover assets held in the form of cryptocurrencies, and evolutions in international judicial cooperation. Other key points included issues the possibility of extending international instruments, such as the Inter-American Convention on Mutual Assistance in Criminal Matters, to specifically include forms of NBCF. Participants called for more guidance on developing suitable mechanisms to manage seized and confiscated assets, as well as on procedural aspects specific to this type of law. These are areas in which countries that are further ahead in the implementation of Extinción de Dominio mechanisms can usefully take the lead. Sharing on-the-ground experiences with NCBF laws Oscar Solórzano, the Basel Institute’s Head of Latin America and Senior Asset Recovery Specialist, presented some practical case studies that demonstrate the challenges of international judicial cooperation in asset recovery. On the other hand, he pointed to encouraging experiences of such international cooperation from Peru, which has succeeded in recovering assets from abroad using its 2019 Extinción de Domino law see case links below . Oscar also remarked positively on the progress made by some European jurisdictions in recognising the validity of this model of NCBF legislation. Dennis Cheng, Senior Asset Recovery Specialist, moderated a panel reflecting on the significant advances made in Latin America in respect of NCBF over the last 10 years and participated in the closing session. Promoting innovation in asset recovery Participants in the four-day meeting included prosecutors, judges, academics and policymakers from Argentina, Bolivia, Brazil, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay and Peru. Many of these are leading voices in the asset recovery field who are also involved in the Asset Recovery Knowledge Community established by ICAR earlier this year. It is hoped that the reflections and knowledge products emerging from the Asset Recovery Knowledge Community will support the legal foundations of the NCBF Model Law as it is revised over the coming months, as well as its application in practice. Learn more See the UNODC press release: UNODC conmemora los diez años de la Ley de Modelo de Extinción de Dominio. Encouraging cases based on Peru’s 2019 Extinción de Dominio law include the Ibárcena case involving a deceased Navy General, the Russian arms dealer case, the military aircraft case of Moshe Rothschild Chassin, and the recent terrorist financing case of The Nun La Monja . A comprehensive description of all cases can be found in the 1,100-page Compendium of Jurisprudence on Extinción de Dominio published in July by Peru’s Procuraduría General del Estado.
First meeting of the Asset Recovery Knowledge Community in Latin America explores international cooperation in cases of non-conviction based forfeiture
Twenty-five practitioners from 12 countries gathered online on 29 June for the first virtual meeting of the new Knowledge Community on Asset Recovery in Latin America. An initiative of the Basel Institute’s International Centre for Asset Recovery, the regional Knowledge Community provides a collaborative space for interaction between leading practitioners in the field of asset recovery and international judicial cooperation in criminal matters. The purpose is to develop a critical mass of knowledge on asset recovery, with an emphasis on non-conviction based confiscation, and to disseminate this knowledge among both members and the wider asset recovery community. Ultimately, the knowledge should help countries to improve their capacity to recover stolen assets by introducing novel legal tools into their legislative systems and implementing them more effectively. Lessons learned from international cooperation over the “Nun” case At this inaugural session, practitioners discussed a case study illustrating how Peru had applied its non-conviction based forfeiture legislation, extinción de dominio , to achieve a confiscation order for assets intended to fund the Shining Path terrorist organisation. Oscar Solórzano, Senior Asset Recovery Specialist and the Basel Institute's Head of Latin America as well as the case study’s author, explained the challenges of obtaining mutual legal assistance and how they were overcome in this precedent-setting case. The detailed case study is available here: Case study: The Nun – Confiscating assets of the Shining Path terrorist organisation Estudio de caso: La monja – Decomisando los activos de la organización terrorista Sendero Luminoso Setting the foundations for future events The session also saw the presentation of the Knowledge Community Steering Committee members, plus an overview of the Community’s plans for the rest of 2021.
El Salvador’s rule-of-law election deserves our support – here’s how
On February 3, 2019, 37-year-old former mayor of San Salvador Nayib Bukele – the charismatic, anti-establishment, fringe-party candidate – won 53 percent of the vote in El Salvador’s presidential election. He takes office in June. The challenge confronting Bukele is stark, especially when it comes to the rule of law. But there are concrete things the international community can do to help the new president and his citizens. Unlike all the other electoral contests since the 1992 civil war, Salvadoran voters rejected both the conservative ARENA and left-of-center FMLN parties. Citizens’ distrust of the traditional parties stems largely from their disgust at pervasive corruption: three of the country’s past four presidents have been indicted on charges including illicit enrichment, embezzlement, and money laundering. El Salvador ranks 105 of 180 on Transparency International’s Corruption Perceptions Index. All too often, police officers shake down motorists on highways, gangs extort shopkeepers and taxi drivers, and politicians brazenly raid state coffers, leading to sclerotic government institutions that fail to provide basic services and public security, which in turn contributes to the migrant crisis spanning the United States, Mexico, and Central America. Keenly attuned to Salvadorans’ corruption fatigue, Bukele promised his supporters that, if elected, he would keep public officials from stealing public funds. That promise was short on details, but the international community can play a key role in filling in those plans and strengthening the institutions around Bukele’s administration. Here are four recommendations for shaping international support in El Salvador’s fight against corruption: Strengthen the presence of the state, one community at a time Corruption proliferates when no one is looking. But state resources are finite and—certainly in El Salvador’s case—scant, so government cannot be everywhere at once. The U.S. Agency for International Development USAID has embraced an empirically driven approach called Place-Based Strategy PBS , which promotes communication and collaboration among civic partners but does so in a way that targets specific communities and locales. The idea is to focus attention in a carefully selected location so that successes can be demonstrated, replicated, and scaled. PBS addresses the physical, social, structural, and economic conditions of a community that affect the well-being of the children, families, and individuals who live there. In the United States, it has yielded great results in settings such as the Harlem Children’s Zone in New York, the Kalamazoo Promise initiative in Michigan, and the Community Action Project in Oklahoma, raising indicators in public health, education, and family cohesion. In Central America, USAID has supported PBS in Honduras, for example, through its Unidos por la Justicia project, where PBS is helping to strengthen police-community relationships 60 municipalities in Honduras. By focusing resources in those locations, the project is seeing improvements in citizens’ perception of security, according to surveys of more than 600 citizens. Similarly, USAID’s Asegurando la Educación project works in Honduras’ vulnerable urban areas—in collaboration with district councils—to improve schools’ abilities to reduce school-based violence in at-risk communities. For example, this model promotes “Educators for Peace” professional development programming for 3,000 teachers from 115 schools working in contexts of crisis. PBS is no panacea. And, as in Honduras, like most development approaches it requires intimate collaboration with local governments and stakeholders, all aligned around measurable goals. But we know enough to say that PBS is a promising approach for El Salvadoran stakeholders seeking to cut corruption and violent crime. Help implement effective laws – reform those that get in the way El Salvador has strong laws on the book but does not effectively implement them. For example, the Illicit Enrichment Law calls for candidates to disclose their assets before and after they leave office, yet public officials have found legislative loopholes through which to steal public funds. Closing these loopholes—including those that allow conflicts of interest to flourish—is essential. In addition, El Salvador has ratified several international law instruments, signed on to commitments such as the UN Convention Against Corruption, and promulgated a 2011 Access to Information Law that paves the way for El Salvador’s Open Government Commitment. The international community can provide assistance to actually enforce these instruments, so their impact is felt by the citizens they are designed to protect and empower. Support auditors Salvadoran investigators need better tools to help them “follow the money.” For example, the Supreme Court’s Probity Unit and other institutions charged with tracking, investigating, and prosecuting corruption and recovering assets need technical support. In some 14 years of work with USAID to improve El Salvador’s tax administration, enhance budgeting, and mobilize domestic resources, DAI has seen firsthand how when administrative processes—particularly those involved in public procurement—are trackable, transparent, and systematized, and managerial discretion is minimized, corruption is mitigated and development indicators such as child mortality rates can improve. In the context of increasing tax revenues, El Salvador increased its social spending by more than US$100 million per year between 2007 and 2018. Stand with civil society Healthy civil society is essential to the anti-corruption agenda. Encouragingly, El Salvador stands as one of six pilot countries to participate in the U.N.’s Sustainable Development Goal 16 on peace and access to justice, which promises to increase access to justice globally by 2030. Journalists, private businesses, human rights defenders, and victim service providers have built their institutional capacity through activities such as leveraging social media, engaging in youth-power movements, and improving coordination at the grass tops and grass roots levels. However, journalists still lack vital investigative capacity, advocates don’t leverage all the available data, and victims of violence fear reprisals. There is still plenty of room to bolster the efforts of government and nongovernmental groups working to support fairness and the rule of law. As Gallup’s State of the Global Workplace shows, Salvadorans are hard-working, entrepreneurial, and resilient people. But without oversight and accountability, the institutions that condition their daily lives decline and apathy soars—opening the doors to graft. The nation’s recent elections are a plea to shut those doors. Empowered Salvadorans who can exercise their rights and expect services rather than corruption from their government are more likely to stay in El Salvador and join in building the safe, prosperous, and inclusive country they deserve. This guest blog was contributed by Chantal C. Agarwal, Senior Governance Specialist at international development company DAI. The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of the Basel Institute on Governance. Responsibility for errors of fact likewise remains with the author. Photo: Santo Tomas municipal building, by Chantal Agarwal.
Publications
Working Paper 38: Cryptocurrencies in Asia and beyond: law, regulation and enforcement
The crypto industry has exploded in recent years, and authorities in different countries have been reacting in very different ways. Some have banned cryptocurrencies, while others are embracing them to varying degrees. Some are working hard to align their anti-money laundering regulations with FATF standards, while others are turning a blind eye. A few countries have confiscated huge quantities of crypto assets linked to crime and money laundering. Others are at square one in terms of enforcement, risking becoming a hub for crypto crime and money laundering and posing a serious vulnerability in the world’s financial system.
This Working Paper draws on a detailed analysis of how selected countries are addressing legal, regulatory and enforcement issues around cryptocurrencies and other virtual assets. The analysis is focused on Asia, but set in the context of global trends in crypto law, regulation and enforcement. It explores critical questions that will shape policies around virtual assets at the corporate, national and international levels:
- What is working in terms of crypto regulation and enforcement?
- What are the implications of different policy choices on crypto assets – for the industry, for the countries themselves and for global financial integrity as a whole?
- What would the crypto wave possibly bring next?
The Paper also highlights broader developments needed to bring light and clarity to laws, policies and practices around the crypto industry, such as collaboration between both market players and governments.
Jurisdictions touched upon in this Working Paper alphabetically include Bhutan, Central African Republic, El Salvador, Hong Kong SAR, India, Indonesia, Japan, Kazakhstan, Malaysia, Myanmar, Russia, Singapore, South Korea, the Philippines, the People’s Republic of China, Thailand, Ukraine and Vietnam.
A list of key terms and abbreviations have been prepared in the Annex to this Working Paper for the readers’ easy reference.
About this Working Paper
This Working Paper is a collaboration between Dorothy Siron, Co-Managing Partner, Zhong Lun Law Firm LLP and Federico Paesano, Senior Financial Investigation Specialist, Basel Institute on Governance.
Dorothy Siron provided the bulk of the analysis and discussion, while Federico Paesano provided a selection of case studies and was co-author of the seven recommendations contained in section 4. The collaboration was facilitated by the International Academy of Financial Crime Litigators, an independent, non-partisan global centre that shapes and advances financial crime litigation practices for the future.
The publication is part of the Basel Institute on Governance Working Paper Series, ISSN: 2624-9650. It is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND 4.0).
Suggested citation: Siron, Dorothy, and Federico Paesano. 2022. “Cryptocurrencies in Asia and beyond: law, regulation and enforcement.” Working Paper 38, Basel Institute on Governance. Available at: https://baselgovernance.org/publications/wp-38
Disclaimer: This Working Paper does not, and is not intended to, constitute and/or substitute legal or other professional advice. The content of this Working Paper is updated as of 4 May 2022 and is intended for general informational purposes only. No representations have been made as to its accuracy and completeness. You should seek independent legal or other professional advice before acting or relying on any of the information contained herein.