[Joint House and Senate Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


116th Congress }                            Printed for the use of the             
1st Session    }      Commission on Security and Cooperation in Europe                     

======================================================================

	         Asset Recovery in Eurasia:
	        Repatriation or Repay the Patron?


[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]




                         February 13, 2019

                        Briefing of the
          Commission on Security and Cooperation in Europe
------------------------------------------------------------------------
                         Washington: 2019





      Commission on Security and Cooperation in Europe
                  234 Ford House Office Building                                    
                    Washington, DC 20515
                      202-225-1901
                      [email protected]
                      http://www.csce.gov
                         @HelsinkiComm


               Legislative Branch Commissioners
               
               
                     
     
              HOUSE				SENATE

ALCEE L.HASTINGS, Florida       	ROGER WICKER, Mississippi,
          Chairman			  Co-Chairman
JOE WILSON, South Carolina		BENJAMIN L. CARDIN. Maryland
ROBERT B. ADERHOLT, Alabama		JOHN BOOZMAN, Arkansas
EMANUEL CLEAVER II, Missouri		CORY GARDNER, Colorado
STEVE COHEN, Tennessee			MARCO RUBIO, Florida
BRIAN FITZPATRICK, Pennsylvania		JEANNE SHAHEEN, New Hampshire
RICHARD HUDSON, North Carolina		THOM TILLIS, North Carolina
GWEN MOORE, Wisconsin		        TOM UDALL, New Mexico
MARC VEASEY, Texas			SHELDON WHITEHOUSE, Rhode Island                   
          
                  Executive Branch Commissioners
               
               
                    DEPARTMENT OF STATE
                   DEPARTMENT OF DEFENSE
                  DEPARTMENT OF COMMERCE
                            [II]                
               

    The Helsinki process, formally titled the Conference on Security 
and Cooperation in Europe, traces its origin to the signing of the 
Helsinki Final Act in Finland on August 1, 1975, by the leaders of 33 
European countries, the United States and Canada. As of January 1, 
1995, the Helsinki process was renamed the Organization for Security 
and Cooperation in Europe (OSCE). The membership of the OSCE has 
expanded to 56 participating States, reflecting the breakup of the 
Soviet Union, Czechoslovakia, and Yugoslavia.
    The OSCE Secretariat is in Vienna, Austria, where weekly meetings 
of the participating States' permanent representatives are held. In 
addition, specialized seminars and meetings are convened in various 
locations. Periodic consultations are held among Senior Officials, 
Ministers and Heads of State or Government.
    Although the OSCE continues to engage in standard setting in the 
fields of military security, economic and environmental cooperation, 
and human rights and humanitarian concerns, the Organization is 
primarily focused on initiatives designed to prevent, manage and 
resolve conflict within and among the participating States. The 
Organization deploys numerous missions and field activities located in 
Southeastern and Eastern Europe, the Caucasus, and Central Asia. The 
website of the OSCE is: .


    The Commission on Security and Cooperation in Europe, also known as 
the Helsinki Commission, is a U.S. Government agency created in 1976 to 
monitor and encourage compliance by the participating States with their 
OSCE commitments, with a particular emphasis on human rights.
    The Commission consists of nine members from the United States 
Senate, nine members from the House of Representatives, and one member 
each from the Departments of State, Defense and Commerce. The positions 
of Chair and Co-Chair rotate between the Senate and House every two 
years, when a new Congress convenes. A professional staff assists the 
Commissioners in their work.
    In fulfilling its mandate, the Commission gathers and disseminates 
relevant information to the U.S. Congress and the public by convening 
hearings, issuing reports that reflect the views of Members of the 
Commission and/or its staff, and providing details about the activities 
of the Helsinki process and developments in OSCE participating States.
    The Commission also contributes to the formulation and execution of 
U.S. policy regarding the OSCE, including through Member and staff 
participation on U.S. Delegations to OSCE meetings. Members of the 
Commission have regular contact with parliamentarians, government 
officials, representatives of non-governmental organizations, and 
private individuals from participating States. The website of the 
Commission is: .


Asset Recovery in Eurasia: Repatriation or Pay the Patron?


                           February 13, 2019


                                 					 Page
                              PARTICIPANTS

    Paul Massaro, Policy Advisor, Commission on Security and 
Cooperation in Europe                                                       1

    Bryan Earl, Retired Supervisory Special Agent/Assistant General 
Counsel, Federal Bureau of Investigation                                    2

    Kristian Lasslett, Professor of Criminology and Head of School, 
Ulster University                                                           5

    Sona Ayvazyan, Executive Director, Transparency International 
Armenia                                                                     8

    Karen Greenaway, Retired Supervisory Special Agent, Federal Bureau 
of Investigation                                                           10

    Stacy L. Hope, Director of Communications, Commission on Security 
and Cooperation in Europe                                                  22


 
Asset Recovery in Eurasia: Repatriation or Pay the Patron?
                              ----------                              

                           February 13, 2019


    The briefing was held at 10:00 a.m. in Room 562, Dirksen Senate 
Office Building, Washington, DC, Paul Massaro, Policy Advisor, 
Commission on Security and Cooperation in Europe, presiding.
    Panelists present: Paul Massaro, Policy Advisor, Commission on 
Security and Cooperation in Europe; Bryan Earl, Retired Supervisory 
Special Agent/Assistant General Counsel, Federal Bureau of 
Investigation; Kristian Lasslett, Professor of Criminology and Head of 
School, Ulster University; Sona Ayvazyan, Executive Director, 
Transparency International Armenia; Karen Greenaway, Retired 
Supervisory Special Agent, Federal Bureau of Investigation; and Stacy 
L. Hope, Director of Communications, Commission on Security and 
Cooperation in Europe.

    Mr. Massaro. Thank you all so much for being here. Good morning, 
and welcome to this briefing of the U.S. Helsinki Commission. The 
commission is mandated to monitor compliance with international rules 
and standards across Europe, which include military affairs, economic 
and environmental issues, and human rights and democracy. My name is 
Paul Massaro and I am a policy advisor for economic and environmental 
issues, including asset recovery.
    I would like to welcome you today on behalf of our bipartisan and 
bicameral leadership to discuss this topic so central to international 
anticorruption efforts. Asset recovery, or the process of repatriating 
funds previously stolen by corrupt officials, is one of the major 
facets of anticorruption work. Ideally, we would have a system through 
which assets recovered were directly returned to the people from whom 
they were stolen. These people would then directly benefit from the 
funds that were denied them by their corrupt leaders, and there would 
be a greater understanding of the benefits of the rule of law 
internationally.
    Unfortunately, there are big question marks around this process. 
Rather than the funds going back to benefit the people from whom they 
were stolen, these assets may re-enter the cycle of corruption, to be 
stolen once again by corrupt leaders. Instead of providing inspiration 
and impetus for the rule of law globally, this cycle of steal/recover, 
steal/recover undermines the rules of law and gives the impression that 
the whole system is a charade. It is imperative that this be avoided. 
But that is easier said than done with the anonymous financial 
architecture that currently exists in the West and enablers who assist 
transnational kleptocrats in their creative accounting.
    Clearly, there's more that must be done. There is an opening here 
for a foreign policy breakthrough if Western jurisdictions can, instead 
of hiding money, recover those funds and see them used in visible and 
constructive ways in the jurisdictions from which they were stolen. 
Rather than being viewed as a black hole for ill-gotten gains, the rule 
of law states of the West have the opportunity to be seen as defenders 
of the victims of corruption globally if they can develop creative 
methods to make those funds work for the people, not the autocrat.
    Finally, it should be noted that though asset recovery is a vitally 
important topic, only a small amount of funds is ever recovered. That 
is, in large part, due to how easy money laundering has become in the 
globalized world. Only through plugging the gaps that exist in the 
Western financial architecture--though policies such as beneficial 
ownership transparency--can we raise this amount of recovered funds and 
begin in earnest the long process of responsible repatriation.
    We're thrilled to have four brilliant panelists with us here today 
to explore this topic. First, we have Bryan Earl, to my left, formerly 
with the FBI. Bryan worked the Pavlo Lazarenko case, one of the 
earliest cases of the investigation and indictment of a transnational 
kleptocrat from Eurasia and, arguably, asset recovery case zero for the 
region. We'll then hear from Kris Lasslett of Ulster University. 
Professor Lasslett will speak to asset recovery efforts as concerns 
Kazakhstan, with an emphasis on how to approach asset recovery to an 
autocratic regime. Sona Ayvazyan will be the next speaker. She is the 
executive director of Transparency International Armenia and will speak 
to asset recovery efforts in her country. Finally, we will hear from 
Karen Greenaway, who just recently retired from the FBI. She will speak 
to asset recovery efforts in Ukraine.
    Thank you all very much for being here. And, Bryan, the floor is 
yours.
    Mr. Earl. Thank you very much, Paul. I'd like to first thank Paul 
and the commission for inviting me and us to come here today and talk 
about this subject that's been part of my life for over 20 years. As 
was indicated, I think I've been invited here to be a bit of a 
historical relic, talk about some work I did 20 years ago, which was 
sort of case zero. It laid the foundation for the effort to stop 
Eurasian public corruption and kleptocracy, and certainly stop it from 
infiltrating the United States financial system and the Western 
financial system. So in a number of ways, I'm here to sort of lay the 
groundwork for a lot of good work that's happened since.
    I can't possibly discuss the entire investigation in the 10 minutes 
I have. So what I'm going to do is talk about a couple of ways in which 
this investigation was the first. And I'll assume that a lot of you 
know a bit about it. It was the investigation that led to the 
prosecution of Mr. Pavlo Lazarenko out in San Francisco federal court 
in 2004, which was a long time ago. But it was a longer time ago the 
investigation began, in 1997. One of the ways it was a first, it was my 
first investigation. It was the first investigation I ever did.
    I joined the FBI in 1996 and was put on a Eurasian organized crime 
public corruption squad. And the big issue at the time was the capital 
flight that we saw coming out of the former Soviet Union, sort of an 
unexpected development of the fall of the Soviet Union. We saw lots of 
money and lots of people with lots of money, and no discernable ways of 
making that money legitimately come into places like San Francisco, and 
New York, and Miami, and London, and other places. And our job was to 
find out what was going on. And if anything illegal was going on, to 
stop it.
    And so I got handed, in December 1997, when I was a relatively new 
agent, one of the first MLAT [mutual legal assistance treaty] 
requests--in fact, it was the first one to come out of Ukraine. Another 
first. Dealing with Ukraine was new for us. It was a new nation. It 
hadn't existed as an independent nation before that. We had entered 
into mutual legal assistance treaty, and we received in the Lazarenko 
case the very first iteration of that--of a request under that treaty.
    To back up a little bit, when I joined the FBI in 1996, it just so 
happened that Mr. Lazarenko became prime minister of Ukraine. That was 
sort of a parallel thing going on with our careers. He became prime 
minister and was prime minister from 1996 to 1997. I received this MLAT 
request in 1997 because at that time he had been let go by President 
Kuchma as prime minister, and an investigation had started in Ukraine 
into his financial activities.
    And so the mutual legal assistance treaty request that I received 
was one of many that were sent out by the Ukrainians at that time, and 
it was the general prosecutor's office I worked with, all over the 
world to trace Mr. Lazarenko's assets and the financial activity that 
he was accused of engaging in, and that they had yet to investigate. 
And part of it was in San Francisco, so I started doing that. At the 
time, he became a member of Parliament, and continued his political 
activities.
    So another first for this, is I think it was the first time 
Ukrainians had access to a color printer, because this was a 35-page 
document that was in about seven different colors. I'm not sure why. I 
never really figured out why. I'm convinced that this particular 
translator had translated something Ukrainian into English, because it 
was very hard to understand. It was very hard to read. So I spent weeks 
and weeks just reading this document, coming in every day and reading 
it, and trying to figure it out.
    But in essence, I figured out that they described several fraud 
schemes in Ukraine, schemes in which money was generated. It wasn't 
stolen as much as it was generated by Ukrainian assets and Ukrainian 
labor, and then it was monetized by selling silicon, manganese, cattle, 
whatever it was that Ukraine produced. And then that money didn't go 
back to Ukraine. It didn't go back where it belonged. It stayed in 
Switzerland in accounts that they suspected were controlled by Mr. 
Lazarenko.
    And then my part of the case was, we had an associate of Mr. 
Lazarenko living in San Francisco who also had a tremendous amount of 
access to unexplained income--tens of millions of dollars of his own, 
hundreds of millions of dollars otherwise. And so I started 
investigating where that income came from. I did what every good 
investigator does. I followed the money back to where it came from. The 
Ukrainians were investigating it from the Ukraine side, and sort of 
following it forward. And in the middle there was Switzerland. Just--
not to put too fine a point on it, but there was Switzerland in the 
middle.
    And so we were conducting the investigation. The Ukrainians were 
working. We had received them as guests a couple of times, and then it 
was our time in December 1998 to go over to Ukraine and sit down with 
the Ukrainians, look at their documents, talk to their witnesses, and 
really verify whether what they were describing in this MLAT request 
was true. So a prosecutor and I got on a plane. And we were going over 
to Ukraine, December of 1998, the first time--another first--I'd ever 
been to the former Soviet Union. The first time the FBI had engaged in 
this kind of cooperation with the Ukrainians.
    And it was all very hush-hush, because back in 1998 things were 
new, and it was still very Sovietized. We land in Ukraine, in December 
1998, and there's all these people out in the airport with ``Free 
Lazarenko'' signs, chanting: Free Lazarenko. And we were quite 
surprised by that, because we thought we were on the QT, going in under 
the cover of night. But what had happened while we were in the air is, 
Mr. Lazarenko in one of his many foreign trips had entered Switzerland 
to do some business there, to move some money, to engage in political--
or, financial activity. Not political. And he had been picked up by the 
Swiss authorities because the Ukrainians had also sent an MLAT request 
to Switzerland.
    And there was a magistrate--investigating magistrate there in 
Switzerland that had received this request, was doing an investigation. 
And when Mr. Lazarenko came into Switzerland over land, they picked him 
up, put him in jail, and the investigation all of a sudden took off 
because once you have someone in custody, even in Switzerland, all of a 
sudden things become urgent. So that was why there were all these 
people in front of the airport chanting, ``Release Lazarenko.'' It 
wasn't us.
    But the good thing about it was--and the reason I tell this story--
was the investigating magistrate rushed to Ukraine to do what we were 
doing, to talk to the Ukrainians, to look at the documents, to 
interview the witnesses, to find out what the basis was of this 
request, to see if he could proceed with his investigation at the same 
time we were there. So in December of 1998, the Swiss, and the 
Ukrainians, and the Americans were all there at the same time. And we 
spent a week doing what I said--talking to witnesses, talking to 
investigators, reviewing documents, and sitting down together, during 
the day, at dinner, and creating the kind of relationships that ended 
up lasting for 5 or 6 years.
    We got to a conviction of Mr. Lazarenko in 2004. So that was 6 
years later. We worked with this Swiss magistrate and with those 
Ukrainian investigators and prosecutors for those entire 6 years. But 
it all started out with that meeting in Ukraine in 1998, in December. 
And my point in telling this story is that's what has to happen for 
these cases to be investigated--that kind of investigative liberty, 
resources, and just hard work needs to happen in order to identify the 
criminal activity that generates the income, to identify the assets, 
find out where they are, and then to, you know, land charges in court, 
pursue those charges, and get a conviction.
    I'm not going to tell blow-by-blow for 6 years, but I thought it 
would be important for you to know how the whole thing began. We then 
did what we had to do. We went all over the world. We talked to 
witnesses. We talked to investigators. We established basically that 
Mr. Lazarenko, after 6 or 8 years as a politician--locally and then 
nationally in Ukraine--ended up with $7[00] or $800 million in his 
various accounts.
    There was one particular bank that he had--he and some partners had 
sort of purchased down in Antigua. It was called Eurofed--European 
Federal Credit Bank, at the time. This is going back for me a ways. And 
we traced money back to him. And that was the basis of our U.S. 
account, because that money had come through the United States. He had 
violated U.S. law by moving money--the corresponding accounts of that 
particular bank were in San Francisco. And that's where we were. No 
money ever makes it to Antigua. It was just debits or credits on a 
ledger down there. But the money actually ended up in corresponding 
accounts in Antigua. And those were the basis of our charges.
    So we ended up with a conviction in 2004 of Mr. Lazarenko based on 
the fact that he had been involved in a number of schemes to generate 
income that had occurred in Ukraine during the time he was in power. 
Largely people that he had influence over were involved in those 
schemes. And then he siphoned off about 50 percent of the profits and 
put them in his bank account, so that he could push through his 
political aspirations. That was the basis of the case. That was the 
conviction.
    And then while that investigation was going on, another parallel 
asset recovery case was begun out here in Washington, DC. by a good 
friend of mine, FBI agent Debra LaPrevotte, who is now retired as well. 
And she doggedly pursued that case for much longer than my 6 years, for 
decades it seems, in order to not only go after Mr. Lazarenko 
criminally but also go after the assets and recover the assets, and get 
them back to Ukraine, where they belonged.
    So that's an overview of the investigation that I was involved in. 
It gives you a flavor for the kind of hopes and dreams we had back 
then. We thought at the time that this was the next big thing. In 1996, 
there was nothing sexier than asset recovery--capital flight out of the 
former Soviet Union and going after corrupt Russian and Ukrainian 
officials. We thought we were going to do this our whole career.
    The reason it didn't go like that, I think, was September 11th, 
2001. We were hit with a terrorist attack and all the resources--there 
are limited resources in the government, as everyone knows here, and 
resources got dedicated to antiterrorism--as they should have been. And 
when there's finite resources and you get some siphoned off to bigger 
priorities, the lower priorities get fewer.
    And so by 2004, very frankly speaking, when we took this to trial 
and got our conviction, I was frankly being asked by a number of people 
in my organization: Why are you still working this violation? Who cares 
about Ukrainians and Russians anymore? We've got people knocking down 
buildings. We've got people blowing up London. And you're worrying 
about politicians? And so at that time I decamped and went to Kyiv, 
Ukraine and Moscow, Russia, and represented the FBI over there for 6 
years. And then I, very frankly, shifted over to the cyberthreats 
coming out of Ukraine and Russia, because that became the big thing 
that everyone cared about.
    But now the issue's back. I've since retired from the FBI, but 
historically, that's the way it went. We had a lot of resources. We had 
a lot of support. And we, I think, did a good work in the 
investigation, the prosecution of Mr. Lazarenko. And I would have done 
that for 25 years, if I could have. But the resources went away, and I 
was unable to continue that process. So it sort of ended with that. The 
asset recovery element was pursued by my partner, Debra LaPrevotte, in 
the Washington field office.
    So that's a background. And I'm happy to answer questions later.
    Mr. Massaro. Thank you so much, Bryan. And it may have taken 20 
years, but I definitely think we are back to it, and in the biggest way 
possible. Certainly in the last few years I think a lot of people have 
recognized the fundamental national security importance of this sort of 
work. So thank you so much for walking us through that incredibly 
important, essential case to understanding the efforts today. So now, 
coming into today, we'll move on to Kris.
    Thank you.
    Mr. Lasslett. Thanks very much, Paul, for convening this event. So 
I'm just going to talk a little bit about the other side of asset 
recovery, where we get to the stage of asset return. My colleagues 
would probably speak here about the many challenges that we face in 
actually freezing and seizing the assets. But when returning it, the 
challenges don't end because we often face a situation where 
significant volumes of stolen assets are seized by a returning nation, 
and they're aiming to return it to injured parties in another nation. 
But intervening between them is a state that is still deeply impacted 
by corruption and may even indeed be a kleptocracy.
    So how, in that situation, can you assure that the hundreds of 
millions of dollars of stolen assets actually makes it back into the 
hands of the injured parties, and not back into the pockets of the 
people who stole it in the first place? And this is where and why we 
need a robust system for facilitating asset return. And the dangers of 
not having a robust system for facilitating asset return is brought to 
the fore by cases I've been researching with my colleague Tom Mayne 
on--known as Kazakhstan two. Kazakhstan two is not to be confused with 
Kazakhstan one. Kazakhstan one, in the asset recovery community, is a 
very famous case of asset return where $117 million of frozen assets 
was returned by the Swiss and U.S. Governments to Kazakhstan.
    And it was done very publicly, though a third-party mechanism known 
as a BOTA fund. A BOTA fund was a completely independent fund, a 
foundation. It had independent governance. It was arm's length from the 
Kazakh Government. And it was arm's length because they wanted to avoid 
the money being potentially abused a second time around. And they 
brought in some international not-for-profit organizations--I think it 
was IREX and Save the Children--who were there to do the work on the 
ground in applying the money. And it was seen as one of the most 
successful asset return cases in a very difficult environment.
    I'm dealing with Kazakhstan two, which is a different asset return 
case. It involves the sum of $48.8 million. And it has a very different 
history. It begins with silence. No one knew about this money--that it 
had been frozen or that it had, indeed, been returned. I was given a 
tip-off by a colleague in Switzerland who said: Have you heard about 
this asset return? And we hadn't. No one had. So we proceeded--we were 
told that this money was returned through two programs--an energy 
efficiency program and a Youth Corps program.
    So the first thing that we did was, we went out and we were told 
that the World Bank acted as the mediator. So we went to the World Bank 
website, where we found the Youth Corps program and the energy 
efficiency program. However, when we found it they said that this was 
money--it added up almost to $48 million--that was provided by the 
Swiss development agency. It was aid money that was being used to fund 
these projects. So from the World Bank's side, it was aid money, not 
stolen asset.
    We then got the contract numbers and found the original trust 
agreements between the Swiss Development Agency and the World Bank and 
the grant--the sub-granting from the World Bank to the Kazakh 
Government. Not one mention that this money was frozen asset or was 
being returned to the victims of corruption in Kazakhstan. It was all 
presented as aid money. So the mystery continued. Then we found one 
obscure reference, published on the Swiss Government website on the 
21st of December 2012, as people were jetting off for Christmas, 
stating that money had been frozen in 2011--48.8 million [dollars].
    It was being returned to Kazakhstan through an energy efficiency 
and Youth Corps program project. And that it emanated from a money 
laundering case. The details of who was involved in this money 
laundering case weren't made clear. All we know is that they 
voluntarily consented to the return of this $48.8 million. We weren't 
made aware of whether they were given anonymity, whether they were 
given a non-prosecution agreement. We assume they were, in order to 
consent to this money. But subsequent inquiries to the Swiss Government 
has not produced any answers to date.
    So the first danger was that no one knew this was an asset return 
case. No one was watching how the money was being used. And we know 
that having the scrutiny of the media and civil society is absolutely 
essential to responsible asset return. Then, to compound the danger, 
the money was not returned through a third-party mechanism. It was 
returned--we followed the case of the Youth Corps program, which was 21 
million [dollars]. In that case, it was returned directly to the 
implementing agency, which was the Kazakh Ministry for Education and 
Science.
    So they had the money and were now responsible for applying the 
money, procurement, financial management. And this is a country where 
the public service is decimated by corruption and mismanagement. The 
groundwork, the day-to-day work of the Youth Corps program would then 
be done by a coordinating agency who would be appointed through public 
tender. And the World Bank would provide oversight of this process.
    So, we were concerned by that--two layers of concern. The third 
layer of concern came when we looked at the tender for the implementing 
agency. IREX, who had successfully executed the BOTA fund, had bid it, 
and had lost. Who had won? Three NGOs in Kazakhstan that were the 
initiative--created at the initiative of President Nazarbayev, were 
funded by the government, and the head of the consortium was the 
president's daughter. So we had restituted assets being returned to the 
victims of corruption, and it was going first to a coordinating agency 
who was run--headed by the president's daughter. So you can imagine all 
our hair on all our arms, and legs, and every other place, was now 
standing up.
    So then we thought, well, the biggest danger in a place like 
Kazakhstan, where we're going to see this significant volume of money 
get lost, is during the procurement and during sub-granting. Because 
that was how the money was going to get spread out. Unfortunately, the 
World Bank did not publish the tender information that it had promised 
to publish. We could not get the information that it had undertaken to 
release. It didn't do it. It still hasn't done it. The Kazakh 
Government has released some tender information. It was very selective. 
It wasn't full information. And it was only some of the contracts. But 
we took that information and we began to conduct some groundwork. And 
we came across a number of key themes.
    First, we came across evidence of potential fraud. Some of the 
money was being sub-granted out to host institutions who had run these 
Youth Corp programs. And we had a source who said that they were told 
that if they were to run one of these programs it was meant to be 
tendered through a competitive, independent process. The coordinating 
agency would be hand-picking host organizations, and that if his 
organization was picked could he please supply two fake bids, so it 
could look competitive. So that was the first evidence we had of 
potential fraud going on.
    Then we found out that money through procurement and sub-granting 
was actually going to Zhas Otan, the youth wing of Nur Otan, the 
president's ruling party. So they were getting money directly from 
these restituted assets. We then came across also procurement--
contracts going to organizations to engage in PR for the Youth Corps 
program. And they were quite sizable, indeed. For one tender, you could 
get paid $1,800 U.S. to write a favorable article about the Youth Corps 
projects--$1,800 U.S. When we asked the BOTA people about how much they 
paid for similar promotional articles, they said $90. So we saw quite a 
significant inflated contracting.
    We came across one award of $300,000 of restituted assets belonging 
to the people of Kazakhstan that was spent on 60 videos. And these 
videos--the ones that we saw--were nothing short of propaganda for the 
government--pictures of President Nazarbayev going across the world 
meeting ministers, with rousing music, celebrating the greatness of the 
motherland. So this was restituted assets being spent on propaganda. 
And also when we began to release some of our preliminary results, we 
found that the World Bank eventually published a procurement plan, 
very, very late, several years after we'd expected it.
    And we straightway saw something very odd. Forty percent of the 
contracts from their procurement plan went to one company. And all 
those contacts were for one service, divided up into, I think, 14 
different contracts, adding up to 750,000 [dollars]. Now, when you see 
one company getting 40 percent of contracts and they're divided up into 
small amounts but come to a cumulative total that would require 
international bidding--competitive bidding, you start to raise 
questions.
    So just to conclude, I think what this case really raised for us 
was, at best--at worst, should I say--the restituted money returned by 
Switzerland through the World Bank to Kazakhstan has been the subject 
of fraud and corruption. That's at worst. At best, it's been used for 
some noble purposes, but also it has definitely been used to further 
the aims of Nur Otan Party in its autocratic control of the country. 
And it's been to further their ideological ingraining of their rule in 
young people in Kazakhstan. And this is extremely important that we 
develop mechanisms to ensure this doesn't happen again.
    And this is a problem that's going to face the United States in 
particular, as they look to return nearly a billion dollars U.S. of 
money belonging to the people of Uzbekistan, where they're going to 
face the same very complex environment, the very same levels of 
corruption. And hopefully the U.S. Government will learn from the 
mistakes of the Swiss and do something much better and successful this 
time around.
    Thank you.
    Mr. Massaro. Thank you so much, Kris, for that alarming example. 
One thing you said in there really stuck out to me, and that is the 
role of the media in highlighting this and keeping the lights on and 
everyone's attention on these sorts of things. I think that that cannot 
be emphasized enough. And I hope we see more of that in the future. And 
I think that there's been some really excellent reporting from groups 
like OCCRP [Organized Crime and Corruption Reporting Project] or others 
recently. And I think we'd all love to see that grow. So thanks very 
much, and let's move on to Sona.
    Ms. Ayvazyan. Thank you for this opportunity to speak.
    For about two decades, Armenia was ruled by a kleptocratic regime, 
where an accepted way of governance was the embezzlement of funds, 
while the exploitation of natural resources, monopolies, kickbacks, law 
and policymaking for personal gains of certain individuals and clients. 
Though since 2003 Armenia and the government declared the fight against 
corruption and joined a number of international conventions and 
initiatives, there has not been any significant change. And the 
corruption perception index was fluctuating during recent years, and is 
in fluctuation still, around 35, indicating systemic corruption.
    Most of the so-called fight against corruption was of imitative 
nature, mainly in order to convince the international donors to provide 
more financial assistance to the country. Meanwhile, there was no true 
political will to eradicate something which was the source of power for 
the leadership of the country. In 2018, the Armenian people mobilized 
against the corruption and injustice in the country, and through 
peaceful demonstrations managed to remove the kleptocrats. Now for the 
first time, we have a government--or, better to say, we have a leader 
who is genuinely interested in eradication of corruption and has 
intention to take bold steps toward this end. Such interest and such 
intention were demonstrated by putting an end to corruption pyramidal 
schemes and activated detection of corruption crime with engagement of 
former hiring officials and their relatives.
    With the new government, there came much hope for justice, but also 
an extreme raise of expectations that need to be met. One of the 
expectations is the recovery of assets stolen from the Armenian people. 
Many high-ranking officials of the corrupt regime managed to accumulate 
wealth both inside and outside of the country, including the U.S. and 
EU countries. According to global financial integrity, the illicit flow 
from Armenia during 2004-2013 was $9.8 billion. And it showed growing 
dynamics over years. Currently, the asset recovery is the priority for 
the anticorruption agenda of the new government. In its 5-year program, 
which is being discussed on these days in the Parliament of Armenia, 
the government proposes revision of the legal framework for the asset 
recovery and strengthening international cooperation as part of its 
fight against corruption agenda.
    In addition, the government puts a particular emphasis on the 
transparency of beneficial ownership, and also intends to continue its 
fight against the organized crime and money laundering. Nevertheless, 
aside from just willing to recover the stolen assets, there are a 
number of problems that need to be addressed by the new government 
related to the policy, legal framework, institutional framework, human 
resources and the justice system. There is no policy with regard to 
asset recovery. Obviously the previous government didn't need that. And 
there is nothing at the moment. How is it going to be performed? What 
will be the principles to be followed? What will be the criteria, 
thresholds, procedures, et cetera? And lack of clear and transparent 
mechanism will pose risks for discretionary approaches that might put 
at risk the integrity of process, as we heard just now in the case from 
Kazakhstan.
    In terms of the legal framework, there are certain limitations that 
need to be addressed, particularly the constitution prescribes that the 
laws and other legal acts deteriorating the condition of a person 
should not have retracted effect. So there is a need to elaborate and 
come up with some methodology which will allow to pursue stolen asset 
cases. Armenian legislation prescribes for conviction-based asset 
recovery. There is no civil procedure to confiscate property for the 
state. And hence, it's worth to consider the adoption of the so-called 
civil forfeiture. There is no prescribed responsibility for the legal 
entities for criminal acts. And meanwhile we know that money generated 
through corruption are used for money laundering through companies.
    The institutional framework is underdeveloped. There are a number 
of law enforcement bodies with overlapping and missing authorities and 
lack of independent, specialized law enforcement entity which could 
deal with corruption-related cases. There is a need to establish a 
specialized entity as soon as possible in order to deal with such 
cases. This entity should also have a dedicated unit for the search of 
the property, both inside and outside the country. There shall be a 
decision of how and who will be managing the confiscated assets. The 
investigative authorities shall possess all the tools for adequate 
examination of cases, and have access to respective databases, property 
declarations, and bank information.
    As there has never been a practice of asset recovery in the 
country, there is a serious lack of capacities and skills for search of 
assets, for understanding of corruption schemes and money laundering 
schemes. The problem of capacity shall be resolved through 
specialization of institutions as well as series of capacity-building 
efforts that will involve officials of those institutions. In order to 
have a more holistic approach, we should mention that there is a need 
to address also justice-related issues. According to the constitution, 
it says that nobody can be deprived of its property without judicial 
procedure, which brings us to address the issues of the judiciary. 
Currently in Armenia, we have a pretty discredited judicial system.
    And now, though we have this legitimate legislative and legitimate 
executive, the judiciary is considered to be corrupt, unprofessional, 
and it is considered one of the five most corrupt institutions in the 
country. Justice reforms should take place with a special focus on 
increasing the public trust. In parallel with working in these 
directions to improve the system on a short-term basis, the authorities 
should prove that there is--that the political reason is not merely a 
wish. But they should also show operative reaction to the articles of 
investigative journalists, which were plenty, and now so they continue, 
and launch their own investigations. They shall reopen the cases that 
have been closed or suspended during the previous regime.
    As of today, we have two major cases of stolen assets that have 
been revealed through Panama Papers and Paradise Papers. In one case, 
which was before the revolution, it was Panama Papers mentioned the 
name if Mihran Poghosyan, the head of the Compulsory Enforcement Unit 
of Judicial Acts, who the case was opened against him. However, not 
much efforts have been taken apparently for investigation, and the case 
was closed. And soon after that, he was elected as a member of 
Parliament, via very controversial elections. This case needs to be 
reopened during this new government.
    And another case revealed by Paradise Papers is related to Gagik 
Khachatryan, who for many years held high positions in the government. 
He was the minister of finance, head of the Committee of State 
Revenues. And though the case has been published after the revolution, 
there hasn't been any concrete progress. There hasn't been any progress 
and investigation by the law enforcement bodies to pursue this case of 
stolen assets. The government needs to show as soon as possible to take 
concrete and practical steps to indicate that it has a political will 
to restore the assets and return the assets to the country.
    Thank you.
    Mr. Massaro. Thank you so much, Sona, for speaking to Armenia's 
current opportunity. We're all rooting for you.
    So with that, we'll move on to Ukraine. Karen, please take it away.
    Ms. Greenaway. Good morning. Thank you all for coming today. So how 
do you talk about asset recovery in our world today? The focus here 
obviously is repatriation, but what you're hearing also is the 
frustrations not just in repatriation but even getting to the point 
where you get the asset in the first place. And so, summing that up and 
moving forward as to where we are what we can do better, I think is 
most important.
    On the good side, the United States has been at the forefront of 
trying to do a repatriation of assets. But I have to tell you, being 
the investigator who was brought in--Bryan set the stage for asset 
recovery after the change in government in Ukraine back in 2014. And I 
followed him in to a position in the FBI where we were working with a 
number of investigators and analysts to try to help the Ukrainians 
recover the assets that had been stolen by the Yanukovych regime.
    And in talking about what's Sona's bringing, there were all kinds 
of challenges within the government of Ukraine. They didn't have an 
investigative body. The investigations were left with individuals who 
were the same people who were supposedly investigating corruption 
before the government changed. Not having the laws in place to support, 
never mind the investigations, the repatriation of assets, having an 
asset management agency.
    We here in the United States have the U.S. Marshal Service is 
responsible for asset management once we seize assets under criminal 
forfeiture. But having an agency that is responsible--in my career in 
investigating transnational organized crime from the former Soviet 
Union, we seized a number of assets--including very valuable assets. 
The problem was is that somebody's got to take care of those assets. If 
it's an ongoing business, you've got to have people run the business.
    If it's bank accounts--like in the particular case that Bryan was 
talking about with Lazarenko--which, by the way, is not settled yet; 
that money is still outstanding, and the bank in the interim that he 
had purchased nearly collapsed under the weight of the money that was 
frozen in it--you have had people who have been involved in the 
receivership and the maintenance of that bank. So, all of these things 
go to not just the capacity of the country to regain the assets that 
had been stolen from them, which we can't--as the FBI or the Department 
of Justice--do without their assistance.
    To the point of, let's say we get the assets back, now we are 
dealing potentially with a country who may have changed its leadership 
or not. For example, in Nigeria the leadership has changed and is very 
engaged in recovering assets that we are still trying to forfeit from 
the Sani Abacha regime. They have their own say in the way that they 
want this to work. And so you come into these countries--like Ukraine, 
like Bryan first did and then I did--and you say, Okay, tell us what 
happened. And you have these people who look at you like a deer in the 
headlights. And they go, Well, our assets were stolen. And we go, 
Great. Can you give more help than that? Just telling me that is not 
enough.
    Some investigative journalists, and some civil society had done 
some really good work, and they had some good leads out there. But 
unfortunately, some of those leads were old. And the biggest problem, 
frankly, with asset recovery, as Paul mentioned in the beginning here, 
is--I'll use the analogy of a drug trafficker who makes cash. I've done 
searches in homes of drug traffickers. And what happens is they have 
all of this disposable cash, they have to spend it on stuff. And so one 
home that I did many, many years ago--because some of you probably have 
never even seen these--the guy decided he was going to buy some 
alligator shoes and a belt, which were very stylish in the 1990s but 
don't have a great resale value.
    And so the biggest problem with asset recovery, is that assuming 
you can get to the point that you can get the asset, a lot of times the 
money has been spent on stuff that no longer has a resale value out in 
the community. So in one of the recent cases the FBI did, where we 
seized quite a bit of property related to a theft from the government 
of Malaysia and the people of Malaysia, a significant portion of the 
money is never going to be recoverable because it was spent on non-
recoverable items--like tickets to the Olympics or gambling in Las 
Vegas.
    So now we are working with the government of Ukraine trying to get 
back money. They're telling us these exorbitant amounts of money that 
had been stolen. But we still have to have an idea as to how this 
person actually stole the money. So one particular lead that we 
followed up on--which was already old--we were looking for $400 
million. At the time that I left, we had not found a significant pot of 
money of that $400 million because it had been moved through 10,000 or 
more transactions, some of which had taken it from $10 million down to 
$1,500 that was spent on furniture in Spain. And that's not 
recoverable.
    So first you have the challenge that you have a country now, like 
Armenia, that has significant amounts of money that have been taken 
from it. They don't have the legal structures to put into place. You're 
trying to work with a host country, like we were working with the 
Ukrainians. And they are trying to, with civil society and NGOs, put 
the legal structure in place to get people up to speed to be able to 
help in order to do this. But then you've got all of those people who 
were there before this happened and were working in the government when 
it happened. And they might have the desire to get the money back, but 
they don't have the capacity.
    So you're working with all of these structures. But we did a lot of 
things that we have learned lessons from what we did do in Ukraine for 
potentially the next country like Armenia, Venezuela, that we have put 
into place, like trying to build capacity very quickly within the 
organization, trying to put mentorship in there to help them really sit 
down with these organizations to get the investigations going, to get 
us what we need in order to be able to freeze the money and forfeit it 
under our civil statute.
    For those of you who don't know, we do have a civil procedure 
called non-conviction-based forfeiture, where we can forfeit money for 
countries. And that's what we're talking about here. Not criminal 
statutes. That's a separate authority, where we'd have to charge 
somebody with a crime--the United States--the asset would have to be 
linked to the crime, or the person. I wish there was some of that in 
Lazarenko.
    So now you get to the point where you get enough information to 
work with a country or get somebody to work with. And let's say the 
best-case scenario, you get the asset. And then you have the question, 
what's going to happen? Who should get the asset back? Depending on the 
capacity of the country, because, again, we're going back to that 
discussion about asset management.
    So, for example, in the example of Malaysia, we seized a yacht, 
which we immediately turned over to the Malaysians. And now the 
Malaysians have to try to resell that yacht. And so it becomes very 
difficult for asset repatriation when you're talking about things like 
real estate, boats, et cetera. So let's focus then on repatriation of 
assets sitting in a bank account--the best-case scenario from us.
    We have a number of countries who will honor our civil forfeiture 
orders. So the money is sitting out in these accounts. And then 
eventually we get the order to forfeit, which we have gotten order to 
forfeit and repatriated money to a number of countries, like 
Kazakhstan. Now we've got to decide how to do that. Well, there's a 
whole separate part of the Department of Justice, that all they do is 
negotiate how to return this. But the country gets a say in how that 
money gets repatriated. Of course they should. They're the sovereign. 
The money was stolen from them and their people.
    But the challenge is, is that often the people who are sitting at 
the table talking about the repatriation still are, you know, in some 
ways, connected to the corrupt environment. And so what I have talked 
about before I retired from the FBI and since then, is that I believe 
that civil society and NGOs should take a bigger role in inserting 
themselves in these negotiations. I understand that there is some 
concern that NGOs and civil society, that might, you know, taint the 
work that they are doing, in that it looks like they're self-interested 
by potentially getting some of this money. But on the other hand, I 
think that you can put it in the BOTA trust for their benefit.
    And I'm saying in a large amount that it has to be the entire $300 
million, or whatever it might be. Maybe $10 million to do something to 
further a group of civil society organizations. Because the government 
will is obviously important, but the people's will has been the most 
important part of furthering asset recovery around the world--the 
people being on top of what's going on with the government corruption.
    So I would use, for example, Odebrecht--a construction company out 
of Brazil. Once it came out that Odebrecht had been a massive violator 
of anti-bribery statutes, a number of demonstrations were held in 
countries where Odebrecht worked that really put the pressure on their 
own governments to get engaged, to get involved in asset recovery.
    So what about our friends back here in Ukraine? Well, the bad news 
is, is that we have not been able to return a single dollar to Ukraine.
    Why is that? Well, part of that is because, thanks to Mr. 
Lazarenko, a pittance amount of money actually came into the United 
States. It was moved in U.S. dollars. That's pretty much out in the 
open now. But it was moved through what we call correspondent banking 
accounts, which allows us to get those transactions, but it doesn't 
give us necessarily the ultimate destination of the money. It also 
doesn't tell us how the money was generated in the first place, or 
necessarily who even put it in the account that it was transferred out 
of or into.
    And so what we found is that while a significant amount of money 
was moved in U.S. dollars, using the existing systems that I think 
Latvia's now seriously trying to rectify, some other countries are not 
trying to rectify, which is this connection of shell companies--
beneficial owners who were paid $5 to sign their signature to a 
corporate incorporation document, and who had no control over the 
corporation once it was created. Hundreds of millions of dollars moved 
very, very quickly. And, through company, after company, after company, 
and then ultimately in many cases dissipating sometimes back into 
Ukraine.
    Part of our frustration, and the Ukrainians have worked to rectify 
that, was even if we had gotten an order and we could show that money 
had gone back into Ukraine to a house or something like that, we 
couldn't get the Ukrainians to honor our civil forfeiture order. But 
they have changed those laws, thanks to civil society working with the 
government to say, Hey, look, we need to have our own asset management 
and our own asset forfeiture program.
    When you hear the stories initially from Ukraine--the $4 billion, 
$9 billion, $10 billion that was out there--it becomes very hard then, 
with the country to tease down what we're actually talking about in 
terms of money that we can find and money that we can forfeit. So kind 
of going forward and the lessons learned from Ukraine is, No. 1 is, 
these structures that are out there that Paul was talking about in the 
beginning make it very easy to dissipate lots of money very quickly. 
And when you have a lot of time lag--2, 3, 4 years--the farther you get 
out from it the easier it is to move the money from account, to 
account, to account, and make it much more difficult for us to sit and 
actually get what we need.
    No. 2 is, this system that getting those records through the mutual 
legal assistance treaty process is very painfully slow, as Bryan can 
tell you from his investigation. That work is not prioritized--getting 
somebody to be able to write the information correctly, and then 
getting somebody to honor it. And I can tell you in the one case that 
we looked at, a country that should be our very good friends took 2 
years to honor one of our MLATs--two years. And by that time, of 
course, the bad guy had been able to move the $50 million we thought we 
had many, many times.
    So, like I said, let's say you can get all of those things, and the 
stars align, and you put the money in the account to get ready to 
return it. We as the investigators--or, in my old position--don't have 
a lot of say in what happens to the money afterwards. And that's why I 
think civil society can and should take a bigger role in monitoring 
what happens to the money, and making their own voices heard as to how 
they would like to see it repatriated.
    But finally, I think, there has to be a recognition here that when 
this money is seized and frozen, it is the property of the sovereign. 
And so for the government official who's going to be in the 
negotiation--what is his role in terms of all of this? And I can tell 
you that that--in particular in these countries like Kazakhstan and 
Uzbekistan--the sovereign is asserting their right, as they should. You 
do question whether that is on behalf of the people or on behalf of 
themselves. But there has to be a methodology to monitor that, which 
has been typically through the World Bank, which has its good sides and 
its downsides.
    And how that gets done through the World Bank, and some of the 
projects that they do, also has some limitations, including the fact 
that the project managers in some of these projects sit here in 
Washington, and aren't in these countries when they get these projects, 
as well as the fact that the documents that World Bank generates are, 
for me as an investigator, unavailable because they are privileged 
documents. So even if they identify a crime in these repatriated 
assets, they can't turn around and tell the FBI that there's a crime 
there. They have their own internal process of review, which has its 
limitations. And they have tried to refer some to criminal cases. But 
that's stuff that's written into the structure of the World Bank. And 
those are other considerations that may be out there to change.
    But believe me when I tell you, as Bryan can tell you from his 
work, is it's not a lack of interest or desire on the part of 
investigators or prosecutors in the U.S. to do that. And we have a few 
more than we did a few years ago. We have about 45 to 50 people that 
now do this work in the FBI and DOJ--not as much as there could be, but 
more than we had. But the mechanisms that frustrate you in getting this 
done are some of the things that I think that we could be much more 
proactive as a government in working.
    So with that, I will turn it back over to Paul.
    Mr. Massaro. Great. And thank you so much, Karen, for that 
comprehensive and important account of your recent work. And I know a 
lot of that is said from experience. And I know you were in the field. 
And it's really important to have you here today.
    So we're going to go ahead and move to the Q&A now. I'm going to 
ask a couple questions, and then we'll call on the audience. If you'd 
like to ask a question please just raise your hand, name, affiliation, 
and who your question is for. So I'll give an example right now. I'm 
Paul Massaro, U.S. Helsinki Commission, and my question is for Bryan.
    And I'd like to start from kind of the 30,000-foot level, and 
thinking about kind of the U.S. national security strategy and how this 
has changed, and where things are going. And, Bryan, I know you've 
lived through many transformations of this, having worked at the FBI 
during a very turbulent period. I think many people in this room 
recognize the national security threat posed by having large amounts of 
autocratic wealth in the country. This gives these guys access to elite 
circles; it gives them levers of power to push. Last I read 30 percent 
of Manhattan was just piggybanks. That's a problem. That's a problem 
for the United States, not just a problem for the people that it's 
stolen from.
    And if we see kind of the 21st-century foreign policy as an 
interlocking ideological conflict between, on the one side, democracy, 
human rights, and the rule of law, and on the other side 
authoritarianism, transnational organized crime, and globalized 
corruption, then we're in a really tough position right now, just given 
the way that money's moving, and the anonymous way it's moving, and 
anonymous goods.
    So my question is, what does it take to get the resources? What 
does it take to get the prioritization? What does it take to see the 
national security strategy say: Transnational organized crime and its 
new relationship with the nation-state is a humongous threat to the 
United States? And, how can Congress be a part of that, and how can 
civil society be a part of that? And how can we move toward that 
recognition?
    Mr. Earl. Well, the good news on what it takes is it's happening 
more than it did, say, 10 years ago. Like Karen mentioned, in 2014 the 
FBI established what's now three private corruption squads--one in New 
York, one in DC, and one in L.A., that devote their entire time and 
efforts to these sorts of issues. That didn't happen in 2005-2006. It 
happened in 2014. So we're going in the other direction. The pendulum's 
coming. So it takes resources. It takes certainly the people that are 
working in this area are interested and motivated, and they're doing 
good work. And I know DOJ's very supportive of all that. And I know 
that the money laundering/asset recovery section has a bunch of very 
good, very professional people.
    So the mechanism is there from the law enforcement, prosecution, 
and investigative side. It needs more resources, of course, but 
everything does, right? And nobody has everything that they need. But I 
think it's gotten the attention certainly of policymakers and people 
within the executive branch. I guess what Congress can do is provide 
more resources. [Laughter.] That's always what they can do.
    But the problem, of course, is being recognized. And I think it's 
recognized more now than it used to be. There's two problems with this 
piggybank that Manhattan represents. No. 1, the wealth is in the wrong 
place. Money that's been generated through either the natural resources 
or the labor of the people in Kazakhstan, or Ukraine, or Russia, 
whatever, is sitting in Manhattan in townhomes--in $50 million 
townhomes, or whatever it is. That's just fundamentally immoral and 
unfair. And so the wealth is a problem by itself. It should be back 
where that wealth was generated doing good, growing infrastructure, 
producing wealth for the people that actually deserve it--the people 
where the wealth came from.
    And No. 2, the people who own this wealth, the oligarchs--and I can 
give you a list--we don't want them either. [Laughs.] We don't want 
their money, and we don't want them, because they're the kind of people 
who do not respect the rule of law. They'll corrupt our system. They'll 
bribe our people. They'll take advantage of our financial system. I 
have always said that these oligarchs coming out of the former Soviet 
Union, and the rest of the world, couldn't move the money they move, 
they couldn't get away with what they've done, without our system.
    Now, our system was made to promote legitimate business. And it 
does that very well. And 95 percent of the business that it promotes is 
legitimate. But if you put 5 percent of poison in the soup, you don't 
want to eat the soup, right? It's that 5 percent of illegitimate 
business that can corrupt and is, I think, corrupting our system--both 
through the wealth being in the wrong place and also having the people 
that just simply don't respect rule of law. They don't respect decency. 
And they don't respect ownership. All they respect is power and money. 
And I'm being a little dramatic, but there's no other reason to amass 
$800 million. You don't need that to live. You don't need that to live 
well. You need that to maintain power and influence and outdo your 
buddy, who has $900 million.
    And I think we're recognizing that more and more, especially with 
all the turbulence that's happening in the world. It's gotten a lot 
better since 2014. But it took the ouster of Yanukovych and the 
annexation of Crimea and all those very dramatic events for it to get 
people's attention. If it's not in the newspaper, sometimes the 
government doesn't pay attention to it. And that needs to change.
    Mr. Massaro. Oh, yes, please, Karen.
    Ms. Greenaway. So I also want to add, I'm not sure people do 
understand how damaging taking dirty money really is to the United 
States. I like to use the analogy of--if you've ever lived out in the 
far west--a dry streambed. Dirty money is like a rainstorm coming into 
a dry streambed. It comes very quickly, and a lot of it comes very 
fast, and the stream fills up, and then it gets dry again. So what if 
you are a company that's purchased by dirty money? That dirty money is 
not going to be a steady flow into and out of the account so that you 
can run that company the way--or the business the way it's supposed to.
    So what happens? Well, maybe you don't pay the electric bill the 
way you're supposed to this month, or you own real estate and you're 
not paying the FedEx bill on time, or the tax bill comes due. Because 
it's dirty money, and because you sunk 23 million [dollars] or 48 
million [dollars] of it into the purchase of that property, now you got 
to go find some other money to pay all of the bills that go with it. 
And so what does that do if that's now a business that has U.S. workers 
employed in it? And their operating incomes are constantly being 
drained so that the oligarch can pay for his next yacht bill, or 
whatever it might be?
    What happens is, of course, is that the safety standard goes down. 
But people don't want to say anything because they want that job, and 
they need that job, and they need that business in their community. And 
I've asked a number of people to look at this. Look at our communities 
where it turns out, oh, by the way, we have a Russian oligarch that 
owns a business there. And look at how that business is functioning. 
And what you're going to find out is that after 2008, when the 
financial institutions collapsed, essentially, in the United States--
was there was a fire sale for a lot of our properties.
    And as a result, what we have is people who don't live in the 
United States, who don't have any intention of really investing in the 
United States, but they needed a place to put their money. And that 
business down the road was a perfect place to put it. And so now what 
we're seeing is, of course, that those businesses, some of their assets 
that they were used to purchase in the first place have gone dry. For 
example, banks out of Ukraine. Now the money is drying up. And now 
those businesses are going into default. And maybe that's the only 
business in that community that's employing people.
    So I think it's hurting small-town America. I just don't think that 
we've come to that realization yet, because so much money flows into 
our country that that kind of looks like a one-off. When you really 
look at it, there really is a pattern out there. It doesn't just hurt 
the country it comes from. It hurts our country as well. And it hurts 
the financial institutions as well that end up relying on that money in 
order to keep themselves going.
    Mr. Massaro. Thanks so much, Karen.
    Could we take some questions from the audience? Yes, please. So, 
again, if you could say name, affiliation.
    Questioner. My name is Bob Homans. I'm with Aperio Associates. And 
I'm a part-time resident of Ukraine.
    Karen, you've just gotten on the board of an organization called 
AntAC, which is doing some incredible work. One of the things that 
they're doing, as I understand it, is working with Kyiv-Mohyla Academy 
to start training people, like forensic accountants, investigators, 
lawyers, and so forth. I was wondering if you could elaborate on that 
work a little bit further. And I also think the audience would like to 
know a little bit more about AntAC itself, and the people who run AntAC 
who have been incredibly courageous.
    Ms. Greenaway. Yes. So AntAC is a civil society organization in 
Ukraine. And it's founded by some very intelligent, hardworking young 
people, some of whom have been trained in the United States. But they 
were there at the Maidan and they have been committed ever since to 
trying to work with the Ukrainian Government to do exactly what I've 
been talking about: investigative reform, judicial reform, legislative 
reform. They are very thoughtful about what they are looking for in 
terms of trying to change what's going on in Ukraine.
    They are accredited with really being the organization that was 
leading civil society and pushing changes like developing an 
independent investigative unit, the National Anti-Corruption Bureau, 
the special prosecutor's office. They are working very closely for the 
creation of an anticorruption court. And they are very vocal about 
getting on Twitter and Facebook about immediate action that needs to 
happen as it relates to supporting those institutions.
    I think they are really a model for civil society. And their next 
step is, in talking with one of the leaders of the organization, is 
that now they're trying to look to themselves to be a more sustainable, 
long-term development type of institution. As I like to tell them, 
after the Maidan happened, they were in a kind of the hair-on-fire 
moment where they're trying to get the assets back, and they're trying 
to do all of these things. And they realized that that was exhausting 
their personnel, and also putting themselves at some security risk.
    I will say that they have been attacked a number of times by the 
law enforcement institutions in Ukraine, particularly the intelligence 
services. But what they realized is that they see themselves as an 
honest broker of trying to make sure that the Ukrainian Government 
lives up to its commitments. So they're currently meeting with the 
government official--or the presidential candidates. Ukraine will be 
electing a new president the end of March to talk about what their 
anticorruption platform is going to be.
    And then the other thing that they have really worked with--and I 
have told them that it's extremely important--is having some sort of 
board and connection with all the other civil society and NGO 
organizations in the country so that if somebody has a specialty, let 
that person run with the specialty, and let them do what they do best. 
And then you put your resources to doing something else, so that it's a 
holistic approach to government development. But they also realized 
too, you can't just punish people in government. You have to build good 
leaders.
    So one of the things that they're also working to do with their 
other civil society and NGOs in the country is work to build good 
leadership for the next generation of leaders in Ukraine, so that we 
get away from the model of the expectation that a particular 
individual's son or close friend is going to be the one who's going to 
be the next person in the party to run the country. So they have done 
some really great work in Ukraine and continue to do great work.
    But I should also say too the important point of the supervisory 
board, which I might not actually assume my duties for a few months, is 
to make sure that they're also transparent and that they have 
independent individuals overlooking the decisions that they make and 
review the decisions that they make. So we see ourselves on the 
supervisory board as to make sure that there's no question that what 
they're doing is transparent and open to the public. And if anybody has 
any questions of how the money's spent or the decisions are made, that 
there's another board that's overlooking what they're doing.
    Mr. Massaro. Thanks so much, Karen.
    Okay, yes, right here up front.
    Questioner. Thank you. Everybody said very interesting things, but 
I'll limit my question to Professor Lasslett. I'm Robert Thomason. I'm 
a reporter for MLex. My question relates to some recent changes in 
asset recovery, and what your critique is of it, relating not only to 
Kazakhstan two but in general.
    Switzerland adopted a new law in 2016 where it outlines what it 
will do in asset recovery following the London summit. There was a 
global asset recovery forum. And here in the United States, we have the 
Global Magnitsky Act, which can sanction PEPs [politically exposed 
persons] for acts of significant corruption. So--and the story you told 
about Kazakhstan two started in 2011, before some of these new 
initiatives came to bear--so I'd just like to ask your critique of 
recent changes.
    Mr. Lasslett. Yes, well I think it's not necessarily so much a 
critique. I think there's very positive things happening. We have the 
GFAR [Global Forum on Asset Recovery] principles that have been 
developed. And they're looking at developing a standardized 
international framework for responsible asset return. At the moment 
they're, however, articulated at a very broad aspirational level. But 
they contain things, like there should be full right to transparency 
with respect to returned assets, and take that as an example. A very 
noble and important ideal, but actually delivering it is very difficult 
because you need the administrative processes to be put in place to 
ensure that from the moment where things can become transparent and 
made public, they are made transparent and public. And so at the 
moment, what we see is the birth of a new policy framework that's 
emerging at an international level and at a national level about how we 
do responsible asset recovery.
    The work that needs to be done is to develop an international 
administrative framework that we can develop to implement policy, 
because policy's a dime a dozen if you don't have good administrative 
processes to put it in place. So if we're to have transparent asset 
return, if we're to have accountable asset return, if we're to have 
asset return that, as Karen would say, incorporates civil society, you 
can't just have that in a noble policy statement. You need to have 
concrete administrative processes that all states sign up to 
implementing that will allow that to happen. So they need to say from 
day one, the second that we've frozen those assets, seized them, that 
we're going to engage civil society in that conversation. And here are 
the forms through which we're going to do it. And those are the sort of 
things that need to take place.
    I mean, the United States at the moment, they're having to work 
with Uzbekistan money of nearly a billion. They're consulting with 
civil society, they're supportive, but there's no established 
framework. We're all doing it kind of ad hoc, working on positive 
interpersonal relationships. But there's no clear fulcrum to which we 
can point to. So I think we've got some broad policy statements at the 
moment. They need to be put into international law in ways that are 
enforceable. We need to have that replicated in national laws. And then 
we need to, crucially, have public administration that can make the 
principles of responsibility practical.
    And if I could, just 2 seconds, say something, just an issue [Paul] 
raised there. You raise a question about the national security. And I 
mean, we've got to remember, on the one hand we have these very 
important initiatives going on. But on the other hand, the United 
States, the United Kingdom where I'm based, are actively creating 
frameworks that attract the illicit flows. I mean, they call London 
Londongrad, because we've set up everything you want over there to 
launder your money straight from Scottish LLPs, where you can set up a 
limited liability partnership and no one need to know whoever set it 
up--it's a Seychelles company that's behind it--through to having 
service providers who will set it up for you and get a bank account, 
and you'll be able to begin your laundering needs. You'll have lawyers 
there to protect, you'll have real estate investment brokers there to 
help you.
    The United States faces the same problem. It's not the BVI--the 
British Virgin Islands--you need to come in there and show 
identification. There's actually regulation with setting up a company 
there, though it's odious that they have a zero percent tax rate for 
corporations. However, you can come to Delaware and set up a company in 
about 10 minutes.
    Mr. Massaro. Or do it online.
    Mr. Lasslett. You can do it online. And set it up in 10 minutes. So 
our jurisdictions are providing do-it-yourself money laundering kits. 
And also, we have a cadre of high-price lawyers, high-price 
accountants, high-price executives who are providing privacy services, 
asset protection services, and tax minimization services--everything 
kleptocrats want. And so you've seen colleagues here, we're working 
around on very limited resources trying to stop this. And the people 
that are fighting against us have billions behind them. That's the 
challenge.
    Mr. Massaro. Thank you very much, Kris.
    Let's get back there, please.
    Questioner. Rick Messick from the Global Anticorruption Blog.
    And I have a question for those who have been fortunate enough to 
paw through the documents of a correspondent bank transactions. Tell 
me, can't you see from the records of the U.S. correspondent bank where 
large chunks of money come in? And don't we impose--or, shouldn't we 
impose if we don't--some sort of AML [Anti-Money Laundering] 
requirements on U.S. correspondent banks? The example I'm thinking 
about is where $700 million of Jho Low's money moved out of Malaysia 
into some private Swiss bank, right after one of the first 1MDB 
transactions. And of course, it moved through a U.S. correspondent bank 
because it was all in dollars. So I would think somewhere we would have 
a record that $700 million from the government of Malaysia went through 
this U.S. correspondent bank on the way back to Jho Low's account in 
the private Swiss bank. And therefore, wouldn't the U.S. correspondent 
bank have said, Gee, $700 million going to from the government of 
Malaysia to the account of some young private citizen? Is there that 
kind of evidence? And shouldn't we be imposing some sort of AML due 
diligence to sort of catch that kind of thing?
    Mr. Massaro. Sounds like maybe a Karen question.
    Ms. Greenaway. So the answer is, is that, yes, you can see the 
transfer. You may not always see what the account is attached to based 
on the transfer. But my experience is, depending on the bank, because a 
few of them have gotten some challenges thanks to the U.S. Department 
of Justice. You know, they will now try to impose AML standards on the 
people who are using their correspondent accounts. Some of the 
bankers--and I've presented with bankers before and talked to 
compliance officers before--will tell you they're limited as to how far 
they can go, depending on what the bank that is doing the transaction 
maintains in terms of its own standards. So there is potential to see 
some of that, depending on how detailed the information is.
    And remember, though, that the messaging that was what the, you 
know, transaction is for goes separate from the actual movement of the 
money. So what I mean by that is, is that in a correspondent 
relationship you don't always see--other than it goes from account A to 
account B, and then potentially the name of the account, more 
information about what that money is for. That also being said, just to 
give you some idea, a few years ago I talked to our financial crimes 
enforcement network because I was talking to them about the problem of 
some cases we'd done on the organized crime side, where U.S. citizens' 
or foreign citizens' ATM cards were stolen, and then they would be re-
encoded in the United States, and then the bad guys would cash out.
    And I would say for the court cases we needed to find the victims, 
and we would talk to banks. And banks would say, Look, we just pay out 
here, and it's $1,000. Once they find out in Switzerland it's been 
stolen from their account, the Swiss bank just reimburses them. And I 
said, Well, how does this whole settlement work? And I couldn't find a 
banker who could answer my question. And so I asked FinCEN [Financial 
Crimes Enforcement Network]. I said, Can you tell me, is there a way to 
tell how much happens in terms of settlement? And FinCEN said: We try 
to just do 1 week of settlement--and what I mean by settlement is how 
much money moves between banks in the United States and outside of the 
United States through our correspondent accounts, and where they are 
going. And they said it was in the trillions of dollars, and there was 
no way we could keep a handle on that.
    So, yes. There is a record. Yes, you can look at it. Should you put 
an AML requirement? Most banks now, because they have gotten in trouble 
for it, do try to put that on the people that use their correspondent 
accounts. But it is limited as to what they can ask, depending on the 
country. And then also, for example, if it's a private bank in 
Switzerland, there's still some differences in rules there. But the 
settlement between banks in the United States and their correspondent 
account is just incalculable. So to see one $700 million transaction, 
unless you're looking for it--is just $700 million of potentially a 
trillion or $20 trillion that went through some of these correspondent 
accounts in a week.
    Mr. Massaro. Thanks so much, Karen.
    We have a question right here.
    Questioner. Thank you. I'm Oksana Bedratenko from Voice of America.
    Karen, you described in detail how difficult it is to track money 
after some time passes. Could you comment, is it realistic for 
Ukrainians to expect any asset recovery from the Yanukovych's regime 
cases at this point in time?
    Ms. Greenaway. That's a really hard question to answer. I can tell 
you that I did everything--and my team did everything we could--to try 
to help the Ukrainian people to get back their money. I'm still hopeful 
that there's money out there to get. And so I'm not going to say it's 
completely out of the question. There is still stuff ongoing that I 
cannot comment on, and I can no longer be a part of, because I have 
retired. So I'm not saying it's out of the question, but we're not 
going to find $9 billion. And it breaks my heart, because, you know, 
there are a lot of people who really, really worked really, really hard 
to try to do that. But, like it was said already, the financial system 
is just set up to benefit the people who have the money and not the 
people who are trying to get it back.
    Mr. Earl. And let me just make a quick comment, just to give some 
context. The money that generated Mr. Lazarenko's wealth, or the 
activity that generated his wealth, occurred back in the mid-1990s. And 
as we heard today, asset recovery has happened yet to Ukraine. It's 
over 20 years later. So it's a complicated, difficult, and sometimes 
impossible task.
    Mr. Massaro. Thank you, guys.
    Yes, right over there, please.
    Questioner. Hi. Valeria Jegisman, also with Voice of America.
    I was wondering whether you could touch on Russian dirty money? I 
know it's not directly the topic of this panel, but still Russian dirty 
money is a big topic now in the United States. And we can see that the 
political will of the United States is growing to--in general--just to 
tackle money laundering and corruption. So, yes, I just appreciate your 
comment on Russian dirty money.
    Thank you.
    Ms. Greenaway. So my history in doing this work is really--I lived 
in Russia and I worked in Russia before I came in the FBI. And I first 
encountered money stolen from Russian citizens when I was a private 
citizen in St. Petersburg in 1991--how shall I say--the thief in chief 
is now the thief in chief of the country. And everybody knew what was 
going on. The problem with recovery of Russian money, as we have seen 
in the theft that was involving Mr. Browder's company, Hermitage 
Capital, about capacity and building capacity in the places where the 
money is coming from, is I have to have a partner to work with. I have 
to have somebody in Russia who ultimately is going to give me bank 
accounts.
    I did a number of cases in my career where I really did try to work 
with Russian investigators. I think in the 1990s it was a lot easier. 
One of the first cases I had involved a Russian who I will not 
identify, who is still out there, who was basically using his 
position--and the accounts attached to his position--to write himself 
checks and buy property in the United States. And we had a very 
draconian process of trying to get cooperation. We'd write essentially 
a letter. So I dutifully wrote my letter, and got a Russian 
investigator engaged. And they went to get the records. The records 
were in the hinterland. And on the way back from the hinterland, the 
truck with the records, and the person driving the truck, were blown 
up. And there went my records.
    But, being persistent, I did keep trying. But really, the point 
that really killed our cooperation related to organized crime and money 
laundering was when the previous president--interim president, whatever 
you want to call him--got rid of the organized crime investigative 
unit. Said, we're done. We tackled organized crime. It's all good. So 
all of that experience of people who really were trying to do the right 
thing and did some actually great cases. In San Francisco early on 
there was a massive corruption case in San Francisco where the 
government of Russia was shipping diamonds into San Francisco, trying 
to create their own diamond exchange, and using the Russian consulate 
out there. And they arrested a number of people. The investigator from 
Russia did a fabulous job. And he was not only demoted, he was beaten 
up and thrown out of the force.
    So on that happy note, my answer is I would be happy to try to get 
money back for the people of Russia and hold for as long as it's needed 
till they would be ready to take it back in a way that it was going to 
actually benefit the people of Russia. But I can't get the most basic 
financial record out of the Russians to be able to do that. And I 
don't, frankly, trust when the Russians send us a request that what 
they're giving to me is legitimate records, because I know the way it 
works there. And I don't trust that the people who are making the 
request aren't making it for a political reason. And so our work that 
we try to do on organized crime, basically, essentially ended in 2009. 
And I would be very reluctant to try to start that that relationship 
again.
    Mr. Massaro. Thanks so much, Karen. Okay, we have a quick final 
external question.
    Ms. Hope. Thank you. We have a question online from Lester Salamon 
from Johns Hopkins University.
    He says: Praise for Kristian's comment about the success of the 
BOTA asset return process. How can we make this a more general 
approach?
    Mr. Lasslett. Well, I think that it's to look at what were the 
ingredients behind what made BOTA successful. And I think there it was 
the fact that it was arm's length from government. It had an 
independent board overseeing it. It engaged civil society in that 
board. And it also had a very tight financial management system. BOTA 
worked at a certain place, in a certain time. It's not necessarily that 
you'd want to take that exact same framework and do it the exact same 
way in other regions. But you can take the principles that worked and 
apply that.
    And so that goes back to my previous comment. It's about beginning 
to have a more rigorous international framework, where we go beyond 
just having notional guiding principles that are signed up for after a 
conference, which is what we have not, into something that's more 
enforceable in international law. And then we sit down together with 
governments, civil society, and experts, and try and define more 
concrete public administrative approaches that can be used to make 
those principles work in different regions, and in different ways. So I 
think that's the key thing.
    I think the other key thing is to really have a strategy. One of 
the things we see with asset return is that it's seeing that if you 
just return the asset and spend it on broadly charitable services, that 
that's somehow an appropriate use. I mean, of course, it's good to 
spend money on books for underprivileged kids, or whatever it might be, 
but, I mean, there's got to be a strategy behind it. And that's a 
strategy that's got to be developed between policymakers and civil 
society. That is, can we use this money as a long-term tool to try and 
counter corruption in the country? So, you know, and that's a standard 
framework.
    If you go to other areas, like transitional justice which deals 
with post-conflict environments, if we do a reparations and restitution 
in other areas, it's a basic principle that when you're doing 
reparations, when you're doing restitution, when you're doing post-
conflict justice, you need to have a strategy to use your resources in 
order to tackle the underlying sources of the problem. And asset 
recovery gives us a chance to use money, to not simply return it to a 
population but to also to use that money to prevent the problem 
happening again, to tackle the problem at its source. And that's what I 
think is a real strength in future asset return.
    Mr. Massaro. Thank you so much to our panel. We're going to close 
there. I encourage you to come talk to our panelists after we're 
finished.
    Thanks so much.
    [Whereupon, at 11:33 a.m., the briefing ended.]

                             [all]


            This is an official publication of the Commission on
                    Security and Cooperation in Europe.

                  < < < 

                  This publication is intended to document
                  developments and trends in participating
                  States of the Organization for Security
                     and Cooperation in Europe [OSCE].

                  < < < 

           All Commission publications may be freely reproduced,
            in any form, with appropriate credit. The Commission
            encourages the widest possible dissemination of its
                               publications.

                  < < < 

                      www.csce.gov       @HelsinkiComm

                 The Commission's Web site provides access
                 to the latest press releases and reports,
                as well as hearings and briefings. Using the
         Commission's electronic subscription service, readers are
            able to receive press releases, articles, and other
          materials by topic or countries of particular interest.

                          Please subscribe today.