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Official Gazette

Wednesday, December 13, 2017

Criminalizing illicit enrichment: A chance to fight corruption and recover Vietnam’s stolen assets

Updated: 15:03’ - 17/06/2014

Alan Bacarese, Hoang Manh Chien, Nguyen Tuong Dung and Phan Thi Lan Huong[1]

The challenge facing Vietnam

Vietnam is striving to achieve a modern and progressive legal framework that is fit to challenge the rise of corruption within the country. The current reforms of the Penal Code offer a significant opportunity to make effective changes to the law and to the practice of dealing with corruption. Despite previous attempts to improve the anti-corruption legal framework by enacting, for example, the Law on Anti-Corruption 2005 (Amended in 2012) and providing regulations on assets and income declaration (since 2007), Vietnam continues to face many challenges in tackling corruption and has a significant task to ensure that those who work on behalf of the public should justify and be held accountable for their actions and decisions. The recovery of stolen assets also remains a challenge.

Illicit enrichment is one of a number of growing anti-corruption tools that can be deployed to challenge a myriad of corrupt offending by public officials. Defined, in the UN Convention against Corruption (UNCAC), as a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income

[2]

, there are around 48 countries that have to date adopted a specific offence of illicit enrichment, some, such as India and Argentina, dating back nearly 50 years. In 2009, Vietnam became a State Party to the United Nations Convention Against Corruption (UNCAC), which indicated some commitment to fighting corruption. However, Vietnam has not yet enacted an offence of illicit enrichment.

 

 

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Villas in a new urban center in Vinh Yen city, Vinh Phuc province__Photo: Hoang Lam/VNA

In countries where corruption has become a part of the fabric of everyday life and is pernicious and stubborn then creative legal strategies with which to tackle the underlying causes of the problem must be considered. Furthermore, in circumstances where the enrichment of public officials, at the expense of citizens and the state, is one of the most visible manifestations of such corruption, then the state should make all possible effort to recover such assets.

Putting a case for the enactment of an offence of illicit enrichment in Vietnam

Despite the significant economic reforms of recent years, and its transition from a centrally planned economy to a socialist-oriented Middle Income Country (MIC), Vietnam continues to suffer corruption at both a perception but also an empirical level.[3] Significant commercial opportunities increasingly now exist for individuals as the economy changes and opportunities for the private sector become more prevalent. Recent data from the Swiss Bank UBS, for example, suggests that for the period 2013-2014 the number of very rich people in Vietnam increased by 14.7% in 2013 (with 195 people now earning 20 billion USD combined per annum).[4]

At a perception level, the results of the Vietnam Provincial Governance and Public Administration Performance Index (PAPI) established that minor corruption is increasing; bribery is wide spread and tending to increase.[5] Vietnamese citizens remain concerned about the management of public finances, and the misuse of public resources raises the most ire with the population.

In this context the visible enrichment of a small, but growing, number of citizens, some of who are active participants in politics or connected to those in power, offers a plausible explanation for those divergent perceptions about anticorruption efforts.[6] It would be no surprise to learn that ordinary people in Vietnam do not believe that constitutional equal protection clauses under Articles 2 and 12 of the 2013 Constitution, broadly that no one is above the law, are being fully applied.[7]

International experience demonstrates that corruption is often perceived to be a secretive and complex myriad of concealed crimes. It is very difficult to detect and to bring to justice those that are responsible, and so the collection of evidence, sufficient to mount an investigation, is very difficult.[8] In addition, those who are involved often deploy their power and influences to prevent law enforcement forces from identifying the crimes.[9] And yet the visible signs of corruption, such as a luxurious life style and a significant increase of wealth, usually disproportionate to the legitimate income of the public official under suspicion, represent examples of illicit enrichment and of the significant challenges that law enforcement faces. It is for this reason that UNCAC seeks to ensure that state parties adopt appropriate and feasible measures to address illicit enrichment with a view to recovering proceeds of crime and those assets acquired from corrupt activity.

The international experiences show that this measure can, if used effectively, compel public officials to justify the origin of their significant increased assets against their legitimate incomes.[10] The criminalization of illicit enrichment will not only support the fight against corruption, but may also assist in the prevention of other acquisitive crimes, such as smuggling, tax evasion, and money laundering.

Next steps for Vietnam in the fight against corruption

The rationale for creating an offence of illicit enrichment is simple; it is intended to prevent corrupt officials from enjoying the benefits of their ill-gotten gains. In so doing the State can seek to remove the underlying motivation for corruption - taking the profit out of crime.

Vietnam already has adopted some modern measures that aim to challenge, or at least identify, such illicit gain and the recovery of those assets. In July 2013, the Government issued new Decree No. 78/2013 on the transparency of asset and income declaration (replacing previous Decree No. 37/2007 and Decree No. 66/2011). It compares favorably to other international examples, at least in terms of the scope of the assets and income that falls to be declared. However, the system of asset and income declarations in Vietnam is restricted to just public officials and does not extend to, for example, spouses, children or close relatives. This is a fundamental flaw, as increasingly public officials do not receive the benefit of the bribes, or other corrupt activity directly but usually through a trusted third party such as a family member.[11] Furthermore, there is a lack of regulation against a failure to make a declaration, or when full and accurate asset information is not submitted in a transparent manner; the agency in charge of organizing and supervising the system has no legal mandate to be able to undertake primary investigations and there is a lack of access, or sharing of the information with the investigation and prosecution agencies.

In terms of the confiscation of assets illicitly acquired, Article 41 of the Penal Code allows the State to confiscate objects or money acquired through the commission of crime, but only following a criminal conviction. Furthermore, Article 41 needs closer examination as it does not provide for the restraint of all assets, suspected of being the proceeds of crime, at the point of a formal investigation commencing, it works on the basis of object-based confiscation not value-based confiscation (meaning that if the assets or income have been dissipated there is often nothing left or its value has been used to purchase other items that are then beyond the reach of the law) and there is a lack of use of money laundering charges against those involved in receiving, converting, concealing or transferring assets and/or income wherever appropriate. Article 41 should be mainstreamed in its use with regard to all corruption investigations - reflecting both compliance with Vietnam’s international obligations and international best practice.

In such a difficult legal and law enforcement environment as that in Viet Nam it is no surprise therefore that in response, many countries have adopted the offence of illicit enrichment to strengthen their ability to fight corruption and recover assets. It remains a valuable complement to the traditional toolkit for combating corruption. The main challenge is to find ways to implement the principles inherent in Article 20 UNCAC in a manner that balances the rights of the accused with the right of society to eradicate corruption and recover illicitly acquired national wealth.

The key challenges to enacting an offence of illicit enrichment

In considering creating an offence of illicit enrichment that achieves both the State’s objectives and at the same time reflects the rights of the defendant with regard to proportionality, privacy and the presumption of innocence, a number of key challenges must be addressed.[12]

(1) Person of Interest

Illicit enrichment is intended to specifically target public officials. Therefore, there is a clear preference in the international conventions and among states in their national laws for including expansive definitions of public officials. By way of example, India has expanded the definition to include a wider range of individuals who have access to public resources or act in the public interest. Others have sought to extend the question of ‘persons of interest’ to include individuals who are family members of a public official and therefore may be considered as potential beneficiaries or accomplices involved in hiding the proceeds of corruption.[13]

(2) Period of Interest

The period of interest refers to the period during which a person can be held liable for having illicitly enriched him/herself. The clear delineation of a period of interest is intended to establish a nexus between the significant increase in wealth and the person of interest’s public service period in office. The setting of such a temporal limit or period of interest may also serve as a practical purpose in setting a baseline for investigators. Most illicit enrichment offences imply that the period of interest must refer solely to a public official and his/her period in public office. Countries such as the Philippines, China and India have restricted the period to the period whilst in office. Vietnam’s law on asset and income declaration is silent on what the ‘period of interest’ should be.

(3) Significant Increase in Assets

The international Conventions contain a requirement for a ‘significant increase in assets.’ - a relative rather than an absolute definition.[14] Certainly, given the potential sensitivities over illicit enrichment and the availability of other routes (for example a conviction for bribery or embezzlement followed by an order for confiscation), those who deploy illicit enrichment legislation should recognize its specific role in focussing on the proceeds of corruption when other routes are problematic or not available and also on those proceeds which are seen as unacceptable.

So once there is agreement on a ‘significant increase’ in income or assets, then the question should turn to whether the increase is one of a disproportionate nature rather than whether the assets are commensurate with lawful income or not. There is very little international clarity on the definition of ‘disproportionate’, leaving an element of discretion to the prosecutor; although in some countries the discretion is removed.[15]

(4) Intent

Although an intent to commit a criminal offence, a mens rea, is usually considered an essential ingredient in the definition of any criminal offences many states appear to have dispensed with the traditional model of mens rea and have adopted a legal approach in illict enrichment that relies upon inference from factual circumstances. Many of those countries have largely adopted a definition that allows for an adverse inference of knowledge to be drawn from, for instance, significant transfers of funds from individuals or entities with which the public official has no legitimate business relationship, large cash payments or savings made by the public official or the continued and clear use of luxurious properties which are inexplicably acquired, and which lack a lawful explanation.

(5) Absence of Justification

The international norms identify the lack of a reasonable justification to explain the level of enrichment under suspicion as an essential element of the illicit enrichment offence. It is this use of the notion ‘that he or she cannot reasonably explain’ that invokes a shift in the burden of proof to the suspect which many countries see as insurmountable as this shifting of the burden of proof from the prosecutor to the accused is seen as infringing the fundamental principle of the presumption of innocence. This raises questions about the role of the prosecutor and their burden and what can be used as cogent evidence.[16] The issue, as with all cases, will be one for the court to assess.[17]

Criminalizing illicit enrichment in Vietnam in the forthcoming amendments to the Penal Code will not only provide a valuable instrument for those with responsibility for the investigation and prosecution of serious corruption but it may also act as a deterrent to those involved in committing such offences. Vietnam’s legislation is already inadequate in the context of the confiscation of proceeds from corruption.[18] The importance to address the issue of the recovery of assets from corruption has never been higher.

Has the moment arrived for Vietnam to enact an offence of illicit enrichment?

Any overview of the anti-corruption law in Vietnam must conclude that the law has no teeth, does not provide an adequate sanctioning mechanism and the Penal Code only defines general crimes in very broad terms making no exception for technically complex offences such as those contained within the UNCAC, and in particular offences such as illicit enrichment.[19] The amendments made to the law so far have been piecemeal and without real conviction. There is a need for greater clarity in how the law regulates corruption specific crimes together with appropriate penalties, and in particular that convictions for criminal offences lead to the recovery of illegally acquired assets. There is clearly a need for a greater appreciation that new provisions, such as illicit enrichment, should have a role to play.

Vietnam should be cognizant that in the last ten years, there seems to be a significant shift in international criminal justice from the traditional model of punitive justice towards a new ‘profit-oriented’ paradigm of criminal law - focusing on the confiscation of ill-gotten gains. This is particularly true of corruption. The underlying theory is clear: by increasing the effectiveness of legal instruments to detect, seize and confiscate ill-gotten gains this will reduce the motivation for engaging in these criminal activities. The use of illicit enrichment as an offence to challenge such acquisitive crime is gaining a momentum in many countries seeking to reform their laws in accordance with this new mood.

Therefore, on any analysis the current reforms in Vietnam offer a suitable opportunity to enact a new law on illicit enrichment that should drive the reforms of the institutions so that in due course they will be able to properly function and play their part in an effective system of tackling, specifically, illicit enrichment and, more broadly, corruption.

This article concludes that there are a discrete number of areas other areas that also warrant potential attention for those tasked with the reform agenda. Apart from enacting an offence of illicit enrichment, the Criminal Procedure Code also requires careful thought to ensure that it is effective in providing a framework for the collection and verification of evidence, special investigation techniques, and the independence of judicial institutions, mutual legal assistance and extradition.

Vietnam should also try to establish an efficient and effective mechanism for controlling declarations of asset and income. This could be done by revising Decree No. 78/2013 to ensure that the scope of those covered by the law extends to assets and income registered under the name of a public official’s family members and other relevant individuals. Many of the current corruption cases in Vietnam often reveal that the proceeds of corruption are registered under the name of the family members of a public official. Therefore, the laws need to specify who is responsible for asset and income declaration of his/her family member. In addition, the current regulations only apply for public officials when they are in position; hence, the time of declaration needs to be extended to a suitable period of time after their retirement or departure from public office.

The process for controlling declaration of asset and income could also be strengthened by introducing an independent agency to receive, review and enforce the regulations on assets and income declaration and to be supported in developing expertise, data and modern techniques, and being granted jurisdiction over national and local public officials thus creating equality of treatment for all public officials. The new agency should also have power to use administrative, and where necessary, criminal sanctions and confiscation measures for violations of the regime.

Furthermore, Vietnam should also concentrate on strengthening international cooperation in its fight against corruption and, in particular those agencies with the power to play a role in this, such as the Central Bank’s Financial Intelligence Unit (FIU). A practical international cooperation channel would enhance the efficiency of detecting, investigating, and confiscating proceeds of corruption. In addition, strengthening the functions of FIU and the other related organs is very important for fighting corruption in the globalization and integration period. The FIU should play a central role in providing analysis to the law enforcement agencies in order to investigate in a more effective and proactive manner.

With this momentum in mind criminalizing illicit enrichment in the forthcoming amendments to the Penal Code, along with some of the other measures proposed above, would not only provide a valuable instrument for those with responsibility for the investigation and prosecution of serious corruption but it may also act as a deterrent to those involved in committing such offences. Furthermore, and critically important, the successful implementation of such a law might prove to be central to restoring the trust of the public in the rule of law and even, perhaps, in public officials.

The choices are increasingly clear.-



[1] Alan Bacarese is a UK lawyer and specialises in white-collar crime and, in particular, transnational bribery and corruption. Hoang Manh Chien is a retired investigator and was Deputy Director of the Police Investigation Department on Corruption Related Crimes. Phan Thi Lan Huong is a lecturer of law in Hanoi and has in-depth knowledge of local government, decentralization and public administration reform and legal frameworks for public officials. Nguyen Tuong Dung worked for the UN for over 20 years and was the Programme Officer at the United Nations Office on Drugs and Crimes (UNODC), and participated in Vietnam’s self-assessment of the implementation of the UNCAC in 2011.

[2] Article 20 of UNCAC reads, “Subject to its constitution and the fundamental principles of its legal system, each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, illicit enrichment, that is, a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income”.

[3] Between 1990 and 2010, Vietnam’s economy has grown at an annual average rate of 7.3 percent, and the per capita income almost quintupled.  It is now a case study in development textbooks - Deepak Mishra, Vietnam Development Report 2012: Market Economy for a Middle-Income Vietnam (The World Bank, December 6, 2011), http://documents.worldbank.org/curated/en/2011/12/15546780/vietnam-development-report-2012-market-economy-middle-income-vietnam.

[4] Wealth-X ‘World Ultra Wealth Report 2013 - 2014 (UHNW)’, http://www.wealthx.com/wealthxubswealthreport/#wealthreport.

[5] See www.papi.vn

[6] There is already anecdotal evidence of a number of high ranking and wealthy officials who live a luxury lifestyle, fund their children’s expensive overseas education and have several houses/real-estate…despite their official salary being modest.

[7] The 2013 Constitution, Article 2: “The Socialist Republic of Vietnam is a State of the people, from the people, for the people. All State power belongs to the people and is based on an alliance between the working class, the peasantry, and the intelligentsia.”, and Article 12: “The State exercises the administration of society by means of the law; it shall unceasingly strengthen socialist legality.”

[8] Nihal Jayawickrama,et al, (2002) ‘Legal provisions to Facilitate the gathering of Evidence in Corruption Cases: Easing the Burden of Proof’. UNODC

[9] Lindy Muzila et al, (2012) ‘On The Take: Criminalizing Illicit Enrichment to Fight Corruption: World Bank.

[10] Ibid

[11] Note for example the UK SFO case against Bill Lowther, alleged in 2003 to have helped to obtain a place at Durham University for the son of Le Duc Thuy, the former governor of the Vietnam central bank, and to pay for his accommodation and fees, see The Guardian, 20.11.2012 - http://www.theguardian.com/law/2011/sep/20/businessman-bill-lowther-accused-durham

[12] See Muzila and others (2012) On The Take: Criminalizing Illicit Enrichment to Fight Corruption, - for an in depth discussion and explanation of these key components.

[13] In Vietnam there are different definitions provided by, for example, the Law on Public Officials and Civil Servants (Article 4, section 2); the Penal Code (Article 277) and the Law on Anti-Corruption (Article 1, section 3).

[14] See UNODC Travaux Preparatoires of the UNCAC, (UNODC 2010, fn. 14) - the word ‘significant’ was retained in that particular provision, as it reflected existing practice in several states and provided further reassurance that the provisions of the article would not be used unreasonably. Available at http://www.unodc.org/unodc/en/treaties/CAC/travaux-preparatoires.html .

[15] India, for example, has set a threshold of 10 percent of known sources of income through its jurisprudence. Specifying a threshold for illicit enrichment in statutes may prevent prosecutions where the amounts concerned are trivial and yet the corruption could still be serious. However, it may also send a signal that a certain level of corrupt conduct will be tolerated, unless the threshold sets an extremely low bar. China focuses on the control of pecuniary resources or disproportionate assets. Argentina defines the level of enrichment in terms of net worth, taking into account debts or other obligations that have been cancelled.

[16] The European Court on Human Rights has affirmed that the shifting of the burden of proof is appropriate within rule-of-law principles. This is particularly so when the responsibility to prove the underlying nature of the criminal act remains with the prosecution.

[17] See, for example, Bhogilal Saran v. State of M.P., CRA 1060/2004 (2006), INMPHC 274 (11 November 2006); N. Ramakrishnaiah TR.LRS v. State of Andhra Pradesh (2008), INSC 1767 (17 October 2008) - Lindy Muzila et al, (2012) On The Take: Criminalizing Illicit Enrichment to Fight Corruption (World Bank Publications), http://star.worldbank.org/star/publication/take-criminalizing-illicit-enrichment-fight-corruption.

[18] According to the provisions of UNCAC confiscating the proceeds of corruption or asset recovery is a ‘fundamental principle’ of the Convention and the substantive provisions set out in Chapter 5 of UNCAC provide a framework for such assets to be traced, restrained or frozen, seized, confiscated or forfeited and returned to victims of corruption.  However, as a pre-condition for combating corruption there must be a workable, effective set of sanctioning and enforcement mechanisms contained in an appropriate set of laws and other regulations.

[19]  Jairo Acuna-Alfaro, “Anti-Corruption during 2013: More of the Same Challenges” (February 26, 2013), http://english.vietnamnet.vn/fms/government/67326/anti-corruption-during-2013--more-of-the-same-challenges.html.


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