According to Yury Fedotov, Executive Director of UNODC and Ngozi N. Okonjo-Iweala, Managing Director of the World Bank;
In situations where individuals, organizations or nations have been defrauded, civil proceedings are reliable in recovering what was taken. The legal process via which this recovery is made is referred to as “Asset tracing and Recovery”. Many times, assets may have been stolen, spent, sold, deposited in another’s name or even moved across borders. Tracing these assets, therefore, becomes a necessity.
Assets are transmissible, therefore the ownership of assets may move from one person to another. The legal concept used by common law jurisdictions for a creditor to examine this chain of transmission in recovering his assets is referred to as ‘Asset Tracing’. Asset recovery ‘AR’ has to do with the process of returning assets to the rightful claimant.
This article considers a few of these tools as harmonized tracing laws for AR, which include;
- SANCTIONS: These are basically restrictive measures, restrictions on designated persons, such as freezing assets, restrictions on investments and financial services. It is a tool that has been used to fight corruption, with few of its regime designed to aid AR. Sanctions are context-specific, and usually aids protection of assets in the recovery process.
- CONSTRUCTIVE TRUST ‘CT’: This arises where a person seeks to be unjustly enriched by another man’s property which he holds on his behalf. Here, the Court awards CT as a remedy, orders the defendant to transfer ownership to the plaintiff, and reimburse the plaintiff for loses caused. Muschinki v Doddo (1985) 160 CLR 583. For CT to be awarded, the plaintiff will have to trace the acquisition of the property to the funds that have been Misappropriated by the defendant.
- BENEFICIAL OWNER/OWNERSHIP ‘BO’: Here, a person enjoys the benefit of ownership although the property’s title is in another’s name. Ownership or control here is indirect. It is, however, important to identify who BOs are in order to prevent, detect, investigate and prosecute those responsible for illegal activities, it also helps in criminal prosecution, asset recovery, and proper application of sanctions. After such BOs are identified, all the related assets can be confiscated or disgorged. Transparency of the BO of legal structures is key for successful asset recovery and aids tracing which is important so as to ensure the effective coordination of investigation of illegally acquired assets and the proceeds of crime.
Generally speaking, tracing may prove difficult in certain situations due to many factors; Judgement problem, co-mingled proceeds, cyber crime, long Court processes, it however is an effective legal process employed in asset recovery.