Monthly Archives: June 2020

New Podcast, Featuring Asoka Obeysekere

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview Asoka Obeysekere, the Executive Director for Transparency International’s Sri Lanka chapter (TI-SL). Our conversation covers TI-SL’s various approaches to combating corruption in Sri Lanka, including both “retail” legal aid efforts to assist individual citizens in dealing with corrupt bureaucrats, as well as efforts to secure broader legal and institutional reforms, as well as broader cultural change. On that latter subject, the interview also covers the system of corruption in Sri Lanka, how corruption has become normalized, and whether an dhow attitudes about corruption can be changed. We also discuss how TI-SL, drawing inspiration from a civil society initiative in Ukraie, has compiled its own registry of Politically Exposed Persons (PEPs) using publicly available, and how the creation of such a database can be helpful in detecting suspicious activity and exposing potential wrongdoing. The interview concludes with the advice Mr. Obeysekere would offer to other civil society leaders operating in similarly challenging environments on how they can be most effective in advancing an anticorruption agenda.

You can find this episode here. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Municipal Dissolution as a Means of Combatting Criminal Corruption

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In December of 2019, the Italian government dissolved the municipal government of the Calabrian town of Africo, replacing it with a national governmentk commission that would run the city for the next 12 to 24 months. This drastic action, decried by (former) Africo city councilor Nicola Paris as “interrupting democracy,” was authorized by a special Italian law, adopted in 1991, that permits the national government to dissolve a local government if that local government has been infiltrated by the mafia. Since 1991, 341 such dissolution decrees have been issued (though 21 were cancelled by administrative courts), with 22 issued in 2019-2020 alone. Sixty-six communities have seen their local government dissolved more than once. (Africo’s city council, for example, has now been dissolved three times.) And the practice is spreading geographically. Between 1991 and 2011, the vast majority of city council dissolutions were in the three regions under the “traditional” sphere of mafia control (Campania, Calabria, and Sicily), with only three dissolutions outside of those regions. But since 2011, the Italian government has dissolved city councils in 21 municipalities outside of that traditional sphere.

The dissolution of city councils is a serious measure, and is strictly regulated. The process begins when concrete evidence emerges of links between town councilors and organized criminal elements that could bias political decision-making or affect public security. This evidence is submitted to the Prefecture, an administrative body responsible for implementing state functions at the local level. The Prefecture appoints a three-person Committee of Inquiry. After an investigation, which usually takes roughly 3-6 months, the Committee presents its findings to the Prefect, who presents them to the Minister of Interior within 45 days. The Minister of Interior, after deliberating with the Council of Ministers, then decides whether to issue a proposal of dissolution; a dissolution is only finalized when the President of the Republic issues a decree of resolution. The issuance of such a decree is judicially reviewable by the administrative courts (and, as noted above, 21 dissolution orders have been judicially nullified). When a municipal government is dissolved, the mayor, councilors, and members of the executive committee are removed from office, and a group of three individuals, known as the Extraordinary Commission, takes over all council activities for a period of up to two years. At the end of this time, new local elections are held.

Even with all of this process, dissolution of a local government is an extreme measure, but in Italy, where deeply-entrenched organized criminal groups are able to secure their control thorough corruption of local governments, such an extreme response is warranted. Indeed, other countries struggling with similar problems might consider adopting a similar mechanism. Continue reading →

Protecting Guyana from the Natural Resource Curse

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The ethnically-divided country of Guyana is one of the smallest and poorest countries in South America. It has a population of just 782,000 people—roughly the size of North Dakota—and its income per capita is less than $5,000 per year. But while the rest of the world faces a crippling recession, Guyana’s economy is projected to grow by 53% this year, thanks to a significant offshore discovery. (The country’s projected growth had been even higher before the recent stress in oil markets.) Guyana sold its first barrel of oil this past January, and national oil output is expected to reach 750,000 barrels/day by 2025 and 1.2mm barrels/day by 2030—more than a barrel of oil per day for each of Guyana’s 782,000 citizens.

But will this oil wealth benefit Guyana’s citizenry? Many observers worry that Guyana may fall victim to the “natural resource curse”—a paradoxical phenomenon in which resource wealth not only fails to generate sustainable economic growth but actually worsens the standard of living for most of a country’s citizens. While some manifestations of the natural resource curse are macroeconomic in nature (for example, the so-called “Dutch disease,” in which resource-driven currency appreciation stifles other tradable sectors), other versions of the resource curse involve resource wealth undermining institutions and weakening governance. Natural resource wealth, especially from point-source resources like oil, gives the political leaders who control the resource cash flows the power and opportunity to engage in various forms corruption. Not only can these leaders profit directly through kickbacks or embezzlement, but they can use resource wealth to solidify their own political power through favoritism and clientelism. In both cases, political leaders may weaken or eliminate transparency, accountability, and institutional checks that are designed to constrain their ability to improperly use resource wealth for their own personal or political benefit. These risks are greatest in countries that already have relatively poor governance and weak institutional frameworks when the resource wealth is discovered. And this corruption and institutional weakening may make ordinary citizens worse off than they were before the resource boom, even as those with connections or political power get rich.

This manifestation of the resource curse is a significant concern for Guyana, a country with political institutions that are already fragile and prone to corruption. In a winner-take-all political system with voters split along ethnic (and even geographic) lines, politicians win by favoring their base and suppressing opposition turnout. And indeed, this year’s presidential elections, conducted just two months after the country’s first oil sale, were marred by vote rigging, civil unrest, and violence. But there are also encouraging signs that the Guyanese government is taking steps to address the resource curse concern by strengthening budgetary institutions. In January 2019, the government established the Natural Resource Fund (NRF) to manage the country’s natural resource wealth. Similar to funds established in Ghana and Timor-Leste, the NRF is structured as an offshore fund that invests in liquid international securities with well-established guidelines governing fund transfers to Guyana’s Ministry of Finance. By codifying transfer rules and prohibiting fund borrowing, the NRF will compel the government—and whichever political party controls it—to save a significant portion of its oil revenue, limiting its discretionary spending abilities and curbing the corruption opportunities that arise from unencumbered financial resources.

The NRF, however, is not sufficient. While the NRF is restricted from borrowing, the Guyanese government is not. And while the NRF limits a government’s ability to withdraw more oil revenue than the NRF’s bylaws allow, the Guyana state is not forbidden from borrowing against this revenue. This loophole would allow a profligate government—especially one that intended to reward its constituents or award suspicious investment contracts—to borrow in international financial markets to fund its expenditures. Furthermore, even with the constraints imposed by NRF transfers, Guyana’s central government expenditures are projected to double from 290 billion Guyanese dollars (approximately US$1.4 billion) to 580 billion Guyanese dollars (US$2.8 billion) over the next five years. This presents ample opportunity for political leaders to leverage their power over discretionary spending to enrich and entrench themselves.

To further constrain the sort of resource-fueled discretionary spending associated with the natural resource curse, Guyana should take at least two additional steps: Continue reading →

Guest Post: Ukraine’s Recipe for Fighting Judicial Corruption—Civil Society and International Experts

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Today’s guest post is from Halyna Chyzhyk, a judicial reform expert at the Anticorruption Action Centre (ANTAC) in Kyiv, Ukraine:

Since Ukraine’s so-called Revolution of Dignity in 2013-2014, the country has substantially reformed its laws—both statutory and constitutional—on the judiciary and the status of judges. A new Supreme Court was created from scratch, the composition of Ukraine’s two judicial governance bodies—the High Qualification Commission of Judges (HQCJ) and the High Council of Justice (HCJ)—were completely changed, and several new anticorruption measures were enacted. For instance, judges are now required to submit electronic asset declarations, and failure to prove that the assets all derive from legal sources is grounds for dismissing a judge. Moreover, all judges are now obliged to pass an evaluation of their professional competence and integrity.

Despite these reforms, the judiciary remains one of the most corrupt and least trusted institutions in the country. One of the main problems is that the bodies most responsible for judicial appointment, removal, and self-governance—the HQCJ and the HCJ—do not take corruption seriously. In fact, these institutions are actively helping to protect and cover for corrupt judges, in some cases even using their authority to persecuting independent judges who try to expose judicial corruption. Consider, for example, the case of Larysa Holnyk, a judge from Poltava. In 2014, Judge Oleksandr Strukov, the head of the Poltava court, assigned Judge Holnyk a case concerning a potential conflict of interest of the Mayor of Poltava. The Mayor’s representative contacted Judge Holnyk to make an offer to settle the matter “amicably”—the clear implication was that the Mayor was offering some sort of improper inducement in exchange for making the case go away. Judge Holnyk not only refused the offer, but she reported the Mayor and his representative for attempted bribery. Since that time she has been suffering harassment from Judge Strukov, numerous court suits, and even physical attacks. However, the HCJ has refused to investigate Judge Strukov`s possible involvement in the corruption scheme, and has not punished him for persecuting Holnyk. Instead, the HCJ punished Judge Holnyk. Continue reading →

Australian Lawyers and Real Estate Agents: Kleptocrats’ Best Friends?

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Government officials who steal “vast quantities” of their citizens’ money need help hiding the loot.  The first generation of kleptocrats — the Ferdinand Marcoses, Mobutu Sese Sekos, and Sani Abachas of the world – showed that the preferred way is to retain someone to surreptitiously move the money into a safe haven abroad and then invest it in assets that cannot be traced back to them.  The anticorruption community calls these accomplices to grand corruption “enablers,” for they enable corrupt officials to hide their money.

The international community has begun cracking down on this professional class of crooks.  The primary means has been through making them subject to domestic anti-money laws.  Just as the laws of virtually all countries require banks and other financial institutions to take particular care (“enhanced due diligence”) before accepting as a customer current or former senior government officials or their family members or close associates and to report any suspicious transaction these “politically exposed persons” conduct, the Financial Action Task Force recommendations 22, 23, and 28 require the same from lawyers, accountants, real estate agents and others with the professional skills required to hide stolen assets. FATF has no power to compel countries to transpose these recommendations into domestic law.  It relies instead on the peer pressure generated by regular, highly publicized reports on individual nation’s compliance with them.

That system has now ground to a halt. According to the Financial Review, the reason is fierce opposition from Australian lawyers and real estate agents to what a FATF review of Australian compliance with the anti-money laundering recommendations would reveal. For 13 years the two have blocked the extension of the Australian anti-money laundering rules to their activities; last November a scheduled FATF review was about to finally call them out.  It was then suddenly cancelled. The only explanation given was that FATF had decided “to temporarily pause the start of all scheduled follow-up assessments pending the outcomes of the strategic review of FATF currently underway.”  Although FATF acknowledged discussing the review at its February 2020 meeting, no details about what the review would cover or when it would be completed was provided.  In the meantime, professions in the United States, Canada, and other nations (here, here, and here) who oppose extending anti-money laundering rules to their activities can breathe easier.  So can kleptocrats wanting to tap their expertise in hiding money.

New Blog on Police Corruption and Accountability

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These past several weeks, protests in the United States and around the world have brought much-needed scrutiny to the problem of police misconduct. While the main focus of attention has rightly been on issues related to systemic racism and police violence, rather than police corruption (narrowly defined), concerns about police misconduct relate to important themes that the anticorruption community has long emphasized. Indeed, as I discussed in my post a couple weeks back, there are intriguing and troubling similarities in the organizational-cultural characteristics associated with corrupt firms and abusive police departments. And perhaps some of the lessons learned from institutional reform strategies designed to combat corruption can help inform approaches to reforming law enforcement agencies more generally.

I’m not the right person to lead that conversation, since I lack the relevant expertise, but I’m happy to announce a new addition to the blogosphere that will focus on these issues. The CurbingCorruption project (which I’ve mentioned earlier), which already featured a section on fighting corruption in the law enforcement sector, has launched a new blog called Trusted Policing. According to the official description:

Achieving Trusted Policing requires changes to laws and to police institutional practices to stop corruption, brutality, racism and harassment. It requires leadership of change not only from protesters but also from those in positions of responsibility – the police themselves, elected officials, public officials, whether in government, law enforcement agencies – and those who analyse and live the problems – academics, not-for-profit organisations, grass-roots reformers, police committees. The purpose of this blog is to contribute to one small part of this massive improvement challenge: to serve as a source and a repository for good experience and constructive proposals for police improvement from around the world.

The blog is brand new and only has a handful of posts so far, but those posts are quite interesting, and I think this may be a useful forum for those interesting in engaging in dialogue at the intersection of anticorruption reform and policing reform more generally.

Fighting Corruption in U.S. Civil Asset Forfeiture Requires State-by-State Reforms

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Civil asset forfeiture is a judicial process through which law enforcement officials seize assets belonging to a person suspected of a crime. To be subject to forfeit, the assets in question must be either the proceeds of crime or were used to further that criminal activity, but in many jurisdictions, civil asset forfeiture does not require a criminal conviction, or even the formal filing of criminal charges, and the typical legal threshold is probable cause that the seized property is connected to criminal activity, rather than the “beyond a reasonable doubt” standard generally required for a criminal conviction.

In the international context, civil asset forfeiture is an integral component in the battle against corruption. Empowering law enforcement agencies to seize ill-gotten gains, without the need to first secure a criminal conviction, is one of the most effective methods of punishing corrupt actors and depriving them of the proceeds of their crimes. But civil asset forfeiture is not limited to seizing the proceeds of grand corruption, and in the United States, the civil asset forfeiture system, particularly at the state and local level, has itself has become a significant vector for corruption, albeit on a much smaller scale, with local officials taking advantage of lax oversight to use seized funds for their own personal benefit. For example, in March 2020, the Michigan State Attorney General’s Office brought charges against Macomb County Prosecutor Eric Smith, alleging that Smith and other county officials had misused forfeiture funds for things like personal home improvements (including a security system for Smith’s house and garden benches for several other employee’s homes), parties at country clubs, and campaign expenditures. Smith is far from the only public official accused of corruption relating to forfeiture funds. To take just a few other examples: State revenue investigators in Georgia used millions in forfeited assets to purchase travel and trinkets like engraved firearms; police officers in Hunt County, Texas awarded themselves personal bonuses of up to $26,000 from forfeiture accounts; and the District Attorney in Lancaster County, Pennsylvania leased a new personal car with forfeiture funds.

To be clear, there are concerns about the civil asset forfeiture system in the United States that run much deeper than the misappropriation of funds. Critics have vigorously attacked both the legal underpinnings of the civil forfeiture system as it currently exists in the U.S., as well the system’s implementation. But for the purposes of this post I want to bracket those larger issues to focus on the question of why the civil forfeiture systems at the state and local level in the United States pose especially high risks of corrupt misappropriation, and what might be done about this (assuming that the civil forfeiture system is here to stay, at least in the short term).

Continue reading →

“NGOs with Foreign Support”: A New Draft Law Threatens Ukraine’s Anticorruption NGOs

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In May, Ukrainian Member of Parliament Oleksandr Dubinsky, a controversial member of the Servant of the People Party (Ukraine’s ruling party, headed by President Volodymyr Zelensky), registered a draft law that would label certain civil society organizations as “foreign agents.” More specifically, this legislation—which resembles Russia’s 2012 “foreign agent” law—would:

  • Oblige NGOs receiving at least 50% of their financial support from foreign entities to include the term “foreign support” in their organization’s name, and to include in any materials published by the NGO a disclaimer stating that the materials are published by an organization that functions with foreign support;
  • Initiate the creation of a central register of such NGOs, requiring the Ministry of Justice to publicize a list of these NGOs on its official website and to publish annual reports of foreign-funded NGO activity in Ukraine;
  • Require the management of these NGOs to undergo annual polygraph interviews in order to review whether or not these individuals have committed treason; and
  • Prohibit any individuals in NGO management positions from working in the civil service or holding membership on supervisory boards or in the leadership of state enterprises for five years after working in a foreign-funded NGO.

While Dubinsky’s proposed legislation poses a serious threat to all NGOs that receive foreign funding (except for a few categories that the draft law specifically exempts, such as NGOs that work in the sphere of culture, arts, science, prevention and health of citizens, social protection, social support for the disabled, and environmental protection), this legislation would have a particularly adverse impact on the work of anticorruption NGOs.

Continue reading →

Anticorruption Bibliography–June 2020 Update

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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.

Review of Søreide and Makinwa “Negotiated Settlements in Bribery Cases: A Principled Approach”

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The resolution of foreign bribery cases through some type of out-of-court agreement has spread from the United States to other OECD nations.  The latest figures show that close to 80 percent of foreign bribery prosecutions by OECD nations have been settled short of a full trial on the merits.  Settlements free prosecutors to pursue additional violations, but there is the ever-present risk the defendant will get off too easy, that the settlement terms will not deter the defendant or others from continuing to bribe officials of a foreign government.

The OECD’s Working Group on Bribery in International Business Transactions is now developing standards to ensure that settlements will provide the “effective, proportionate, and dissuasive criminal penalties” the OECD Antibribery Convention mandates. As it proceeds, it will find Negotiated Settlements in Bribery Cases: A Principled Approach, a new volume from Elgar edited by anticorruption scholars Tina Søreide and Abiola Makinwa, an invaluable guide.  In 12 chapters, the cross-disciplinary, multinational group of experts the editors assembled review the use of settlements in the United States, the experience of other nations and the World Bank with settlements, ways to judge whether a settlement serves the public interest, and recommendations for gauging whether a particular settlement passes the public interest test. Continue reading →