What Will Happen to Qaddafi’s Frozen $30 Billion?

Crime, Money, Politics

Apparently bombing his compound isn’t the only way to hurt a dictator: in late February of this year, President Obama signed an executive order commanding the U.S. Treasury to seize the assets of Libyan despot, Muammar Qaddafi, which at $30 billion is the largest asset-freeze in U.S. history.

But what does that mean, exactly? Is it like when your dad teaches you a lesson about responsibility by keeping your allowance and confiscating your Xbox for a month? Does Qaddafi get his stuff back if he plays nice? Where is it all kept, exactly? Does the U.S. Treasury get to use some of it for, say, the biggest office holiday party of all time, or do they just keep an eye on it?

Show Me the Money

When the assets of evil despots are seized by foreign treasuries, it doesn’t mean that a team of armed guys wearing sunglasses literally busts in and starts packing up piles of cash and priceless statuary from the dictator’s mansion. In our technological age, “freezing” assets refers to an order that no financial transfers may be made into or out of the financial accounts of those despots or their families. This is done not just with the hopes of getting the bad-guy leader to willingly step down and go into exile, but also to protect funds that rightfully belong to the country’s nationals and/or victims of the ousted regime. Asset freezing is usually done together by member states of the United Nations, and financial institutions that don’t comply face fines and possible prosecution for aiding an international criminal. Asset freezes of this sort can go on for years or even decades.

But What About the Cash in the Mattress?

The thing about wealthy despots is that they never have just  a single account at their local savings and loan. Usually they have numerous accounts, investments, holdings, real estate, trusts, and shell companies that make finding all of it next to impossible. Treasuries that are seizing a dictator’s assets depend on the help of banks, which may have to search carefully to find everything before it disappears. This is one way some ousted dictators are able to lead a fairly comfortable life even in exile.

Sometimes, too, the dictator will have holdings in global companies, the freezing of which can make it difficult for those companies to continue doing business. However, in the case of Libya, if it is decided that the money invested in those companies belongs to the Libyan people, as opposed to Quaddafi and his regime, those holdings will be unfrozen.

Is the Money Ever Returned?

Though nations participating in an asset freeze can make it all but impossible for the leader, his family, and his corrupt government officials to get to access the loot, treasuries don’t actually take physical possession of any of it. Blocked accounts just sit there, accruing interest, until such time as everyone agrees the despot has learned his lesson and gives it back, or until his death, when it either continues to age like fine wine, or a court rules to transfer it to a new government.

As for stocks and investments, banks may decide whether to ignore them, allowing them to potentially lose value or become worthless over time, or they often apply for permission from the Office of Foreign Affairs to liquidate—allowing the value to then accrue interest—or manage them. Because the purpose of asset freezing is as much to protect money for successor governments or future lawsuits against the regime as it is to punish the ousted despot, permission is typically granted.

So How Do Things Look For Qaddafi?

Qaddafi is pretty much out of luck if he ever wants to shop at Gucci again. Given that he is a raving lunatic and will likely be charged with crimes against humanity, the chances of him getting a dime back in his lifetime are virtually nil. In fact, so far Uganda is the only country who will even have him within their borders if he is ousted from Libya. He could potentially appeal the freeze in international court, but the U.S. doesn’t recognize that authority, so it wouldn’t do him any good.

What’s more likely is that, after his death, either the money will be given by the courts to a U.S.-recognized replacement government, if the President can convince them it was ill-gotten, or the money will continue to be held as collateral for potential lawsuits brought against Qaddafi’s regime. For Libyan and foreign nationals victimized by Qaddafi’s crimes, there may be restitution someday. Unfortunately, it will be a long, complex, and difficult process for those who deserve a piece of his fortune to actually get it.