With today's news that Switzerland has frozen suspected assets of deposed Egyptian president Hosni Mubarak – who stepped down Friday after weeks of protest – pressure is likely to mount to return those assets to Egypt. But paradoxically, the eventual success of Egyptians in making the transition to a democratically elected government may impede the process of repatriating that wealth.
Switzerland’s Restitution of Illicit Assets Act (RIAA), a new law that went into effect February 1, provides a roadmap for nations who seek Swiss government help in recovering funds that their corrupt leaders stored in Swiss banks.
The problem for Egypt lies in the nations the law defines as eligible for assistance under the new law.
"The Swiss law states that to actually recover the money, the leader must have led a 'failed state,' but it's unclear what exactly that means," said Tom Lasich, former director of training at the International Centre for Asset Recovery* in Basel, Switzerland. Lasich made his comments to Asset Recovery* Watch during an interview Wednesday regarding other deposed political leaders and global corruption.
"If [Egyptians] are able to keep their country stable, and if they make a successful democratic transition, they likely would not qualify as a failed state. The corrupt regime loses, democracy wins. They won't be in the same situation as, say, Haiti after [ex-dictator Jean Claude] Duvalier or Equatorial Guinea with [Teodor] Obiang. In those cases, the state could not support the asset recovery* actions because it was too corrupted from within."
Presumably, if a new democratically elected ruler emerges from the current political unrest, Egypt would not be considered a failed state, Lasich said.
In the cases of Duvalier, Obiang and several other so-called politically exposed persons, Switzerland has frozen assets suspected of being proceeds of corruption but has not transferred the funds to their purported sources. Lasich said this is usually because the countries are either too poor to undertake the legal process or the new ruling class – often friends of the previous rulers – is politically uninterested in pursuing the assets.
That may work against Egypt. Lasich said that a country that has shown it can overthrow corrupt leadership would likely not qualify as failed and would have to go through the expensive, lengthy and sometimes cost-prohibitive process of hiring professionals to recover the frozen assets, or assign officials to handle the job themselves.
Another problem will be who gets the money if it is returned. Jean Pierre Brun, senior financial sector specialist with the World Bank's Stolen Asset Recovery* Initiative, said that it is difficult to ensure the proceeds of corruption go to the victims – the country’s citizens – and not just to the next corrupt regime.
"Often, it just repeats the cycle," Brun said.
Mubarak's worth is estimated at between $40 billion and $70 billion, according to a poll of Middle East leaders conducted by the Guardian of London last month. Egypt is the 89th wealthiest country in the world in per capita gross domestic product.
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