A year in review: Struggling to retrieve stolen assets
The year gone by was one of mixed results for Luxembourg in its efforts to track and recover stolen assets hidden in the country, as the Grand Duchy continues to struggle with a reputation as a soft touch for those wishing to conceal illicit funds.
Luxembourg courts cleared the final hurdles in transferring back almost €1 million to Peru in funds from corrupt arms deals in April – the second such agreement in less than six months – but those success stories were undermined by EU action against the country over its money laundering rules and the disclosure that the government had failed to respond to a global World Bank survey aimed at tracking efforts to recover stolen assets, 18 months after it was first issued.
The year began with Luxembourg’s enforcement efforts yet again making headlines for all the wrong reasons. In February, the OpenLux joint investigation by more than a dozen media outlets around the world reported that Russian mafia bosses, cronies of the Venezuelan regime and organised crime figures in Italy were among those stashing their money in the Grand Duchy.
In the midst of that criticism, work by Luxembourg’s Justice Ministry and courts was, however, continuing to secure some victories in the battle to recover stolen assets. In April, a court judgment issued the confiscation of around $1 million (€843,000) from corrupt arms deals buried for years in a Luxembourg bank account by a former commander general of the Peruvian navy.
Marco Antonio Ibárcena Dworzak, the account’s beneficial owner, failed to exercise his right to appeal against the ruling related to his late father, clearing the path for the money to be returned to Peru.
Peruvian money trail
Antonio Américo Ibárcena Dworzak, who died in 2018, was a close associate of Alberto Fujimori, Peru's president from 1990 to 2000, and his intelligence chief Vladimiro Montesinos. Both are in prison for authorising killings carried out by death squads.
The Dworzak ruling followed a separate agreement at the end of 2020, in which Luxembourg committed to returning nearly €10 million to Peru which had been stashed in the Grand Duchy decades ago by Montesinos, who also profited from corrupt arms deals.
Yet despite those positive steps, the country was soon in the firing line once more over its seemingly casual approach to full compliance with international treaties. In June, the European Commission said that it was taking Luxembourg to court over its failure to fully transfer new EU rules to stop money laundering into national law. The deadline for imposing the EU directive passed in 2016.
Covid-19 to blame for non-response
The country’s endeavours were under fresh scrutiny again in August after a parliamentary question sparked by a Luxembourg Times story which revealed that the government had failed to respond to an international survey requesting details on its asset recovery efforts.
The World Bank asked countries to update it on progress in recovering the funds in April 2020 but Luxembourg had not submitted an answer, the organisation said. Justice Minister Sam Tanson cited the outbreak of the Covid-19 crisis as the reason why the government had not replied to the survey.
The World Bank’s public database listed three active cases in Luxembourg – Montesinos, an unnamed Uzbekistan government official and former Nigerian military leader Sani Abacha - although the country's court service said it was unable to provide a breakdown of ongoing legal battles linked to corrupt funds stashed in the country, citing data protection issues and difficulties in establishing the exact number of cases.
Responding to the Luxembourg Times story, CSV deputy Laurent Mosar asked Tanson whether the inability to respond to the World Bank survey could “have a negative impact” when the international anti-money laundering watchdog, the Paris-based Financial Action Task Force (FATF), carries out its next assessment of the country, expected to take place next year. Luxembourg failed a previous FATF test in 2010 before getting a clean slate four years later.
It is time for Luxembourg to up its game on recovering corrupt funds, the Transparency International action group said in its latest annual report, published in April.
The organisation ranked Luxembourg as having "little to no enforcement" in relation to foreign bribery and said no cases had commenced at all in the three years from 2016, with one case "concluded with sanctions" in the same period.
The year ended with Luxembourg's parliament finally approving the creation of a register which will show details of meetings between lobbyists and deputies, two years after the proposal was first tabled, although the watered-down bill contains exemptions for several groups and no apparent system of checks.
Parliament previously introduced a code of conduct in 2014, but it was criticised as lacking teeth in a 2019 report by the Group of States against Corruption (GRECO) - a transparency body of the Council of Europe. A European Commission report in July said the country's members of parliament effectively “apply their own code of conduct” regarding lobbying.