Unexplained Wealth Orders and London Property Bargain Hunters: Part II

Last week I dangled before readers hunting for a home in an upscale London neighborhood the possibility that prices might take a sudden nose dive. Britain’s recently enacted law on Unexplained Wealth Orders (UWO) authorizes law enforcement agencies to seize a property if the owner cannot show it was bought with monies honestly come by. Given estimates some 40,000 U.K. properties can’t pass this test, I suggested it was possible the London real estate market could soon be flooded with properties for sale at bargain basement prices as those fearing an UWO try to dump them before law enforcers confiscate them.

But to the great disappointment of GAB readers looking for bargains on London properties, I explained that another new law makes this scenario highly unlikely.  Those trying to offload a property purchased with criminally obtained money are, under U.K. law, committing the crime of laundering money, and thanks to the recent tightening of the U.K. money laundering rules, British real estate agents must alert authorities to any transaction where they suspect money laundering.  With enactment of the UWO law, selling a property of questionable provenance now at less than full market price would scream money laundering. So loudly that no real estate agent no matter how hard of hearing could ignore it.

While the post dampened the hopes of readers thinking the UWO law might shave a couple of million pounds off a place in Mayfair, Knightsbridge, or other neighborhood where many anticorruption activists now dwell (okay, or more likely wish they dwelled), it did serve my real purpose: to prompt reader reactions.    And so it did. Continue reading

The Persistence of Phony Statistics in Anticorruption Discourse

Early last month, UN Secretary General António Guterres delivered some brief opening remarks to the Security Council at a meeting on the relationship between corruption and conflict. In these remarks, Secretary General Guterres cited a couple of statistics about the economic costs of corruption: an estimate, attributed to the World Economic Forum (WEF), that the global cost of corruption is $2.6 trillion (or 5% of global GDP), as well as another estimate, attributed to the World Bank, that individuals and businesses cumulatively pay over $1 trillion in bribes each year. And last week, in her opening remarks at the International Anti-Corruption Conference, former Transparency International chair Huguette Labelle repeated these same figures.

Those statistics, as I’ve explained in prior posts (see here and here) are bogus. I realize that Secretary General Guterres’ invocation of those numbers shouldn’t bother me so much, since these figures had no substantive importance in his speech, and the speech itself was just the usual collection of platitudes and bromides about how corruption is bad, how the international community needs to do more to fight it, that the UN is a key player in the global effort against corruption, blah blah blah. Ditto for Ms. Labelle–her speech used these numbers kind of like a rhetorical garnish, to underscore the point that corruption is widespread and harmful, a point with which I very much agree. But just on principle, I feel like it’s important to set the right tone for evidence-based policymaking by eschewing impressive-sounding numbers that do not stand up to even mild scrutiny. Just to recap: Continue reading

What Would Senator Warren’s Anticorruption Bill Really Mean for Advocacy Groups? 

Last month, Senator Elizabeth Warren introduced her Anti-Corruption and Public Integrity Act, a 300-page blueprint for how to counter the structural enablers of public corruption in the United States. Included among her many proposals (which are detailed at length here) is a set of new lobbying regulations. Many civil society groups—most notably Oxfam—have praised the bill for bringing “an end to lobbying as we know it.” This enthusiasm is understandable, as few professions are decried with the special fervor Americans reserve for lobbyists. The very word conjures up images of slick, well-heeled, sleazy political operators who manipulate and corrupt the political system for their corporate clients. But of course lobbyists are a much more diverse group. Some lobbyists work for big pharma, banks, or the gun industry, but others work for the girl scouts, the environment, or the poor. Indeed, some work within anticorruption organizations. And so while there are many things to like about Senator Warren’s bill, including many of the proposed new lobbying regulations, it’s a bit odd that none of the anticorruption organizations that have praised the bill (see, for example, here and here) appear to have acknowledged (at least publicly) how the bill’s lobbying restrictions would affect their own work.

With that in mind, there are at least four aspects of the Warren bill that should concern anticorruption groups and other civil society advocacy organizations:

Continue reading

Anticorruption Bibliography–October 2018 Update

An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

Unexplained Wealth Orders: Godsend for London Property Bargain Hunters?

Those looking for bargains in London real estate may want to follow developments in National Crime Agency v Mrs A [2018] EWHC 2534 closely. The case is the first to rule on Unexplained Wealth Orders, Britain’s new tool for halting the purchase of British properties with money derived from corruption, human trafficking, and other wrongdoing perpetrated on a massive scale.  In its October 3 decision, the court held that Zamira Hajiyeva, owner of a tony Knightsbridge townhome, must tell authorities how she could afford the place when her only means of support is a husband now serving 15 years for defrauding the Azerbaijan state-owned bank he ran. If she cannot show the house was bought with money from legitimate sources, the U.K. National Crime Agency will seize the property, now worth an estimated £15 million.

The Hajiyeva case could prompt a run on London real estate.  Owners of other properties with a questionable provenance may decide to dump them on the market at fire sale prices rather than wait for the NCA to confiscate them.  If so, there could indeed be many bargains on offer.  Transparency International U.K. estimates £4.2billion (US$5.4 billion) worth of U.K. properties are held by those at risk of receiving an UWO.

But both bargain hunters and dodgy real estate owners might best hold off ringing an estate agent until considering another recent directive aimed at curbing criminal money flows into real estate markets. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 is likely to crimp quick sale plans.  It is also very likely to ensure that any quick sale effort produces instead even quicker service of an UWO. Continue reading

What, Besides Creating a New Court, Could the International Community Do To Fight Grand Corruption? A Partial List

Last week, Richard Goldstone and Robert Rotberg posted a response to Professor Alex Whiting’s critique of the proposal to create an International Anti-Corruption Court (IACC). Early in their response, Goldstone and Rotberg–both advocates for an IACC–remarked, a bit snarkily, that “[n]otably absent from [Professor Whiting’s] post is a description of what the other effective responses to combating grand corruption might be.”

That struck me as a bit of a cheap shot. Professor Whiting’s post offered a careful, thoughtful argument based on his experience and knowledge of the International Criminal Court (ICC) and similar tribunals, and not every such critical commentary on a given proposal must include a full-blown discussion of alternatives. Still, Goldstone and Rotberg’s implicit challenge to IACC skeptics to articulate alternative responses to grand corruption is worth taking seriously, for two reasons:

  • First, this seems to be a common rhetorical gambit by advocates for an IACC, or for other radical measures that critics deem impractical: Rather than answering and attempting to refute the critics’ specific objections directly, the move is to say, “Well, but this is a huge problem, and there’s no other way to solve it, so poking holes in this proposal is really just an excuse for inaction. This may seem like a long shot, but it’s the only option on the table.”
  • Second, and more charitably to those who make this point, grand corruption is indeed an enormous problem that needs to be addressed. And so even though not every critical commentary on a particular proposal needs to include a full-blown discussion of alternatives, those of us who (like me) are skeptical of deus-ex-machina-style responses to the grand corruption problem ought to make a more concerted effort to lay out an alternative vision for what can be done.

In this post I want to (briefly and incompletely) take up the implicit challenge posed by Goldstone and Rotbert (and, in other writings, by other IACC proponents). If the international community is serious about fighting corruption, what else could it do, besides creating a new international court and compelling all countries to join it and submit to its jurisdiction? When people like Professor Whiting (and I) suggest that lavishing time and attention on the IACC proposal might be a distraction from other, more effective approaches, what do we have in mind? What else could international civil society mobilize behind, besides something like an IACC, to address the problem of grand corruption?

Here are a few items on that agenda: Continue reading

Giuliani’s Inappropriate Letter to Romania’s President Will Harm Anticorruption Efforts

Romania has long been considered one of the most corrupt countries in the European Union, but in recent years it has been making a concerted effort to bolster its fight against graft. Since 2013, Romania’s National Anticorruption Directorate (DNA), with the support of the ruling political parties, has been convicting roughly 1,000 people on corruption-related charges each year. However, once these anticorruption efforts began ensnaring high-level politicians—including Liviu Dragnea, the head of the biggest party in the Romanian Parliament—the government began to criticize the DNA’s work as biased, overzealous, and unfair. This conflict has been escalating, most dramatically in late 2017, when hundreds of thousands of Romanians took to the streets to protest an overnight decree that pardoned those serving sentences of five years or less for corruption-related crimes, and also decriminalized government officials’ corruption offenses involving less than $47,000 (raised to $240,000 in a later draft bill). The protests led to violent clashes with the police, who used tear gas and water cannons to disperse the crowds.

Adding to the turmoil, Rudolph Giuliani, former Mayor of New York City and current personal attorney of U.S. President Trump, recently wrote a letter to Romanian president Klaus Iohannis, condemning the overreach of the DNA and supporting the government’s efforts to curtail the DNA’s enforcement of anticorruption laws. Giuliani was paid to write the letter by the Freeh Group, a private American firm whose overseas clients include a Romanian businessman convicted for fraud last year, and another Romanian businessman currently under investigation by the DNA for bribery. Giuliani’s letter raises two distinct corruption-related problems. Continue reading