The US Department of Justice Now Uses Anti-Money Laundering and Civil Forfeiture Laws to Seize US Assets of Corrupt Foreign Government Leaders and Their Associates

17 December 2012, by Sandy Sierck.

US Department of Justice (DOJ) prosecutors have long used civil and criminal asset forfeiture remedies to supplement criminal proceedings against drug dealers and mobsters. The concept is simple: US prosecutors seek not only to punish wrongdoers but also to deprive them of the fruits of and means of their criminal acts. For example, this includes not only the money a bank robber has stolen but also the get-away car.

Now DOJ is employing these remedies to seize the US assets of leaders of foreign governments who have stolen funds that properly belong to their governments and their citizens, oil royalty revenues for example. Such corrupt leaders are typically called “kleptocrats.” Use of these forfeiture remedies is a crucial element of the DOJ’s Kleptocracy Asset Recovery Initiative, announced in 2010. Under the Initiative, the US is extensively applying its anti-money laundering law to the movement of such stolen foreign government funds to or through the US financial system. By this means the US is, as a practical matter, taking jurisdiction over at least some of the activities of corrupt foreign government officials. In doing so, the US does not need to obtain a conviction for the corruption that preceded the money laundering. The US simply makes a credible allegation of such corruption. In particular, corruption of and by foreign government officials is now specifically added to the long list of predicate criminal offenses under the US anti-money laundering law.

A US criminal asset forfeiture proceeding comes into play only after there is a money laundering conviction. In contrast, the companion US civil asset forfeiture law is an in rem proceeding against the US assets of the alleged foreign kleptocrat. Typically DOJ files a civil asset forfeiture complaint at the time it commences a criminal money laundering case against the kleptocrat or his agents. This civil proceeding provides protection against the removal of assets from the US while the criminal charges are pending, subject to procedural safeguards; typically the foreign owners of the assets do not appear in the US to contest the forfeiture. Civil asset forfeiture proceedings are especially important in transnational crimes involving large flows of money that can easily be moved in and out of the US.

On 23 October 2012, Lanny Breuer, head of the US DOJ’s Criminal Division, gave an important speech at a corruption compliance forum in London in which he highlighted the expanding US efforts to prosecute corruption. Breuer first described the increasing volume of criminal and civil cases filed under the US Foreign Corrupt Practices Act (FCPA) as well as the Department’s increased cooperation with counterpart anticorruption prosecutors in other countries. Then Breuer highlighted recent cases under the Kleptocracy Asset Recovery Initiative. These include:

  1. Equatorial Guinea. In July 2012 the Justice Department filed a civil asset forfeiture complaint against approximately US$ 70 million in US assets belonging to the son of the allegedly corrupt President of Equatorial Guinea. The son’s US assets subject to seizure include a $38.5 million Gulfstream jet, a mansion in California and US$ 1.8 million worth of Michael Jackson memorabilia.
  2. Nigeria. Also in July of this year, at the Justice Department’s request, a federal district court issued a civil asset forfeiture order covering over US$ 3 million of US-based assets representing funds apparently stolen by a regional governor in Nigeria; in October the Department obtained “restraints” against an additional US$ 4 million of the regional governor’s US assets, including a residence in Washington, D.C.

This Nigerian asset seizure case is notable for another reason. A Nigerian non-governmental organization, The Socio-Economic Responsibility and Accountability Project (SERAP), in late July asked the Nigerian government to request the US government to return these seized assets to Nigeria, to be held in trust for the people of Nigeria. In a written response to SERAP, the Nigerian government said it would do so, but has not yet done so. It will be interesting to learn how the US responds to such a request.

SERAP’s request here is also important because it is part of a broader effort by SERAP and other NGOs to ensure that the proceeds of corruption are returned to the actual victims of corruption. To that end, SERAP earlier this year requested the US Securities and Exchange Commission’s Enforcement Division to establish a case-by-case process to permit the return of civil penalty and disgorgement proceeds that major companies pay to settle US FCPA cases to the victim foreign government entities that were injured by such corruption. SERAP did so in part because the US FCPA does not provide a private damage remedy for victims. The SEC’s Enforcement Division has not provided a substantive written response to SERAP’s request, and for now may be hesitant to do so absent an emergent international consensus concerning the ultimate use of such penalty proceeds.

In conclusion, one must turn back to the subject of civil asset forfeiture proceedings involving the US assets of foreign kleptocrats. There will surely be more of them. The question remains as to what the US should do with the seized proceeds. Other NGOs in other cases should do as SERAP has done by urging their home country governments to request the US to turn over such proceeds in trust to the people of the kleptocrat’s home country. Fundamental fairness surely compels the US to do so.

About Alexander W. (Sandy) Sierck

Volunteer counsel for SERAP under the aegis of the International Senior Lawyers Project, New York, email hidden; JavaScript is required is senior counsel to the Washington law firm of Cameron LLP and is an adjunct professor at the Georgetown University Law Center, where for 14 years he has co-taught a course on international white collar crime.