The Kleptocracy Asset Recovery Rewards Program
In late 2021, Congress established the Kleptocracy Asset Recovery Rewards Program (“KARR”). This is a pilot program designed to try to combat foreign government corruption. For background, Kleptocracy literally means “Rule by Thieves.” Kleptocrats are the thieving rulers. This law underlying KARR, which was overwhelmingly approved by the U.S. Congress in 2021, only pertains to thieving rulers of countries other than the United States. So adjust your thinking accordingly.
The new federal “Kleptocrat Bounty” law, as we call it, encourages whistleblowers of foreign Kleptocrats. The law does so by paying cash bounties to anyone (with some exceptions) who helps the government to:
- identify and recover stolen assets,
- forfeit proceeds of corruption, and,
- where appropriate and feasible, return those stolen assets or proceeds to the country harmed by the acts of corruption.
The KARR program may pay rewards up to $5,000,000.00 to qualified individuals who provide information leading to the restraint or seizure, forfeiture, or repatriation of “stolen assets” These assets must be linked to foreign government corruption.
The Department of the Treasury’s Office of Terrorism and Financial Intelligence has been assigned to manage KARR. They are supposed to coordinate with the Departments of Justice and State, and various U.S. federal law enforcement agencies. KARR serves as a so called force-multiplier for existing rewards programs targeted at a variety of illicit finance threats.
Under the statute KARR can make rewards up to a maximum of $5 Million for information from a whistleblower that leads to the:
- the restraint or seizure,
- forfeiture, or
- repatriation
of stolen assets that come within the United States or that come within the possession or control of any U.S. person or bank. This is a simplification, of course; the full text of the law underlying KARR is included here.
In addition to accepting all relevant information, KARR will advertise specific instances in which law enforcement seeks information leading to the restraint, seizure, forfeiture, or repatriation of stolen assets linked to foreign government corruption. Here are the first advertisements as of March 2022 (images added):
The U.S. Department of Justice and the Federal Bureau of Investigation seek information leading to the seizure, restraint, forfeiture, or repatriation of bribes or assets linked to bribes paid by Odebrecht S.A. and Braskem S.A. that are: (1) in an account at a U.S. financial institution, including a U.S. branch of a foreign financial institution; (2) that come within the United States; or (3) that come within the possession or control of any U.S. person. Persons who provide such information may be eligible for a reward under this Program or others. Odebrecht S.A., a global construction conglomerate based in Brazil, admitted in its guilty plea agreement with the U.S. Department of Justice that it paid $788 million in bribes to or for the benefit of government officials in 12 countries, including Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela between 2001 and 2016. Braskem S.A., a Brazilian petrochemical company, also admitted to paying approximately $250 million to Odebrecht to use to pay bribes to politicians and political parties in Brazil as well as at least one official at Petróleo Brasileiro S.A. For additional information, see the Department of Justice’s press release describing the bribery schemes to which the companies pleaded guilty.
The U.S. Department of Justice, the Federal Bureau of Investigation and other U.S. law enforcement agencies seek information leading to the seizure, restraint, forfeiture, or repatriation of assets linked to corruption involving the government of the Russian Federation that are: (1) in an account at a U.S. financial institution, including a U.S. branch of a foreign financial institution; (2) that come within the United States; or (3) that come within the possession or control of any U.S. person. Persons who provide such information may be eligible for a reward under this Program or others.
The U.S. Department of Justice, the Federal Bureau of Investigation, and the Internal Revenue Service Criminal Investigation seek information leading to the seizure, restraint, forfeiture, or repatriation of assets linked to corruption involving the Sovereign Wealth Fund of Malaysia, known as 1MDB, or related embezzlement that are: (1) in an account at a U.S. financial institution, including a U.S. branch of a foreign financial institution; (2) that come within the United States; or (3) that come within the possession or control of any U.S. person. Persons who provide such information may be eligible for a reward under this Program or others.
To begin the process to report original, inside information that you have on any of the above, or other kleptocrats (individuals or companies linked to foreign government corruption), you can contact KARR by phone or email, 202-622-2050 Kleptocracy_Rewards@Treasury.gov Here is the official program poster promoted by the DOJ.
CAUTION
The terms of this new, as yet untested law, can be tricky for those wishing to receive a bounty, without unnecessarily endangering themselves, especially compliance with the new law’s procedures, many of which are not yet formulated. See for instance the actual language of the law, formally known as the Kleptocracy Asset Recovery Rewards Act’ at 31 USC 9703(c), which states the Department of the Treasury shall create procedures for: “(1) identifying actions with respect to which rewards will be offered; (2) the receipt and analysis of data; and (3) the payment of rewards and approval of such payments.” See Kleptocracy Asset Recovery Rewards Act (full text).
It is also important to understand the provisions of 31 USC 9703(e)(4), which states:
(4) Protection measures. – If the Secretary determines that the identity of the recipient of a reward or of the members of the recipient’s immediate family must be protected, the Secretary shall, consistent with applicable law, take such measures in connection with the payment of the reward as the Secretary considers necessary to effect such protection.
Any would-be Kleptocrat bounty hunters would be well advised to seek the assistance of competent legal counsel, although this is not required to start the process. They should also carefully consider the confidentiality issues and personal risks involved. Kleptocrats are not generally known for their forgiveness and do not want their pirate chests unearthed and taken from them.
Further, it is important to note the provisions of 31 USC 9703(f), which states:
(f) Ineligibility, Reduction in, or Denial of Reward.-
(1) Officer and employees. – An officer or employee of any entity of Federal, State, or local government or of a foreign government who, while in the performance of official duties, furnishes information described under subsection (b) shall not be eligible for a reward under this section.
(2) Participating individuals. – If the claim for a reward is brought by an individual who the Secretary has a reasonable basis to believe knowingly planned, initiated, directly participated in, or facilitated the actions that led to assets of a foreign state or governmental entity being stolen, misappropriated, or illegally diverted or to the payment of bribes or other foreign governmental corruption, the Secretary shall appropriately reduce, and may deny, such award. If such individual is convicted of criminal conduct arising from the role described in the preceding sentence, the Secretary shall deny or may seek to recover any reward, as the case may be.
You should also carefully examine subsection (j) “Definitions, of 31 USC 9703. Id. Kleptocracy Asset Recovery Rewards Act. For instance, the definition Foreign government corruption at subsection (j)(3), which states:
The term ‘foreign government corruption’ means corruption, as defined by the United Nations Convention Against Corruption.
Id. (See comment below noting that the referenced UN treaty does not define “corruption.” This is an apparent error in drafting the law.) Also see subsection (j)(8), which states:
Stolen assets. – The term ‘stolen assets’ means financial assets within the jurisdiction of the United States, constituting, derived from, or traceable to, any proceeds obtained directly or indirectly from foreign government corruption.
An in-depth study of the law reveals many red flags, many areas of ambiguity and dangers to whistleblowers. KARRA now only lays out a basic framework for its whistleblower program. Many questions remain as to how it will work in practice. For instance, as noted above the provision quoted above that defines “foreign government corruption” by reference to the United Nations Convention Against Corruption. The problem with that vague reference is that the UN treaty provides no definition of “foreign government corruption.” See: United Nations Convention against Corruption, Chapter One, Article Two (Use of Terms); but consider generally Chapter 3, Criminalization and law enforcement, Articles 15-25, where the treaty discusses various types of criminal behavior, describing generally, several kinds of bribery, embezzlement, trading in influence, abuse of functions and laundering of proceeds of crime.
Additionally, KARRA does not specify what it means for information that “leads to” the detention of “stolen assets.” The law as currently written also fails to provide guidance on award amounts or minimums.
The general framework provisions of this law provide great flexibility to KARRA based on the “restraint” or “seizure” of stolen funds, which can be temporary in nature. Here today, gone tomorrow.
Finally, unlike other whistleblower programs, such as the False Claims Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, KARRA does not contain confidentiality or anti-retaliation provisions. Most attorneys urge caution in reporting any information to KARRA.