[Draft 1] - Repeal Concerning Financial Fraud

[Simone]

Motivation

This is fairly straight forward: GA177’s main operative clause is this:

“4. Member-state shall ensure that all victims of fraud shall receive compensation for their loss equal to or greater than the value of the loss and that this compensation shall be derived from the fiscal and/or material assets of the perpetrator of the act of financial fraud which resulted in the loss,”

There are three problems:

• What happens if the fraudster doesn’t have any money left? In fact this actually incentivizes the fraudster to leave no money behind and spend it all first. Even the Bernie Madoff case has so far involved recovering only 91% of the principal so far, much of that from suing other people.
• What happens if the government can’t pay either? Ireland falls under the “financial fraud” definition in this particular resolution regarding the alleged mis-mananagement of its banking system.
• As an example, Anglo Irish Bank CEO David Drumm was sentenced to six years in jail for hidden loans which brought down the Irish economy altogether eventually in 2008. But Ireland didn’t have the money to pay either. (The EU/IMF “Economic Adjustment Programme ended up involving an EUR 85 billion loan).
• What happens to a head of state looting the state that is governed by that head of state? That’s happened plenty of times in human history.

I believe the outstanding resolution is essentially doing nothing, because the fact that misrepresentation and fraud are criminal offences should be covered by RNT.

Replacement

Any replacement depends on how much interest there is for the WA to get involved in arresting warlords etc., which involve considerable expansion of WA powers. Any thoughts appreciated on this.

Draft 1
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The World Assembly (WA),

Acknowledging the noble intent of GA177 to prevent financial fraud against members of the public and state institutions;

Concerned that the main operative clause of GA177 states that WA members shall ensure that “all victims of fraud shall receive compensation for their loss equal to or greater than the value of the loss and that this compensation shall be derived from the fiscal and/or material assets of the perpetrator of the act of financial fraud which resulted in the loss,”

Flummoxed that, in the opinion of the WA:

• The said provision indirectly perversely incentivises fraudsters to retain no material assets and spend it on yachts, fast cars, expensive international artwork, and other luxuries;
• Losses from fraud schemes (especially those on a large scale) frequently exceed the available assets of convicted fraudsters, and, in some cases, exceed even the fiscal capabilities of WA states;

Further noting, since the passage of this resolution:

• Protection for savers and investors have been enhanced through GARs 625 and 723;
• Tort law reforms have been in place through GARs 447 and 515;

Expressing the opinion that:

• The enforcement of domestic fraud cases is best left to WA states depending on the circumstances of the case, and that fraud cases with an international element can be resolved through mechanisms on cooperation on all forms of criminal offences;
• State-based looting and pillaging, or malfeasance by government officials (or the heads of state or heads of government) are arguably better regulated at the WA level, given the potential need to extradite any alleged criminals through extraordinary means;

Looking forward to a potential replacement addressing the aforesaid matters, if deemed appropriate by the WA,

Hereby repeals the target resolution, Concerning Financial Fraud.
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