Identifying and compensating overseas victims of corruption is a major challenge that prosecutors have yet to adequately address. As Jeffrey Kaplan recently discussed in a post for the FCPA Blog, when corruption is treated as victimless, it may allow those involved in the crime to “feel comfortable with their participation.”
Despite an undeniable rise in the global will to prosecute international corruption and overseas bribery, seldom do law enforcement agencies return funds to the victims of the corrupt scheme. In 2011, the United Kingdom introduced criminal infractions with the adoption of the Bribery Act. However, since its enactment, prosecutors have only sought £33 million ($40 million) in compensation from a total of £602 million ($736 million) secured through sanctions or settlements, representing less than 6 percent of the total sum levied. Why has there been so little compensation to those directly affected?
Our recent fieldwork in the Democratic Republic of Congo clearly demonstrates the devastating impact of corruption on the lives of tens of thousands of local residents directly affected at just one cobalt mine – the KMT mine (now called Metalkol RTR) in Kolwezi, a rich copper and cobalt tailings site considered one of the crown jewels of Congo’s mining assets.
The abrupt closure of the KMT mine in 2009 due to corruption resulted in 700 workers losing their jobs and corresponding benefits, and severely affected an estimated 32,000 Congolese residents who were deprived of clean drinking water, and plagued with ongoing air and water pollution, sickness and a lack of education opportunities.
These are the types of victims of corruption that law enforcement agencies should identify and seek to compensate. There may be an opportunity for the Serious Fraud Office to assist the Congolese victims. The closure and subsequent acquisition of the KMT mine is reported as being part of the SFO’s investigation into Eurasian Natural Resources Corporation (ENRC), one of the SFO’s longest-running cases. In January 2020, the first group of 16 Congolese residents stepped forward as potential victims in the case.
In overseas cases, compensation orders may present an ethical problem. The prosecuting country can appear to be enriching itself while providing little to those enduring the repercussions of corruption. This issue was debated by world leaders at the International Anti-Corruption Summit of 2016 in which the UK pledged not only to expose, pursue and punish those involved in corruption but also to compensate overseas victims of corruption and return stolen assets.
In 2018, the UK adopted the General Principles to compensate overseas victims (including affected States) in bribery, corruption and economic crime cases (the Compensation Principles) in answer to that commitment. The principles are progressive in establishing that UK law enforcement agencies shall identify overseas victims in all relevant cases and consider compensating them by using whatever legal mechanisms are available.
The Compensation Principles are a promising step forward, but they lack a comprehensive definition of “overseas victims.” To date, “affected states” are the primary recipients of the minimal funds being returned, as opposed to affected communities or individuals. While in some cases the state might be the appropriate recipient of such funds, in other cases it is not.
For example, where senior members of the government played a direct role in the corruption, not only is there a significant risk that the funds might be re-corrupted, it also sends a message that those responsible can act with impunity. In addition, by not directly compensating individuals or communities harmed by corruption, access to remedy is weakened. It risks creating a two-tier system between overseas victims of corruption and victims of other crimes.
Law enforcement agencies like the SFO should deepen their understanding of the victims of overseas corruption, quantify the harm and loss caused, and find the best legal avenues for compensation. Not doing so will render the Compensation Principles meaningless and the fight against corruption less effective and less fair.
The full RAID report can be viewed here.