Yearly Archives: 2020

Guest Post: Why the U.S. Congress Should Pass the CROOK Act

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Today’s guest post is from Abigail Bellows, a nonresident fellow at the Carnegie Endowment for International Peace and an independent governance consultant. Ms. Bellows previously served in the U.S. Department of State, where she created and led the anticorruption portfolio in the Office of the Under Secretary for Civilian Security, Democracy, and Human Rights.

In countries long plagued by pervasive corruption, a wave of global protests is disrupting the political order. These protests, typically triggered by a corruption scandal, produce a brief upswing in political will and may result in the ouster of the current government. In fact, 10% of countries of countries around the world have experienced corruption-fueled political change over the last five years. These settings present historic opportunities to produce genuine, lasting reform. But to succeed, reformers must take advantage of political momentum before public interest dissipates or opponents regroup. During these windows of opportunity, U.S. support can play a valuable role, both because of the symbolic power of U.S. support and because of the scale and rigor of the technical assistance that the U.S. can provide. Yet all too often, the U.S. government is unable to respond sufficiently and quickly to support reformist governments during these crucial windows of opportunity. One of the main reasons is that the current U.S. anticorruption budget is too small ($115 million annually), too geographically rigid, and insufficiently flexible (given that programming is typically planned and budgeted two years in advance).

New legislation pending in the U.S. Congress—Countering Russian and Other Overseas Kleptocracy (CROOK) Act—would help address these problems. The House version of the CROOK Act, which was introduced on July 18, 2019 by Representative Bill Keating (D-MA) and Representative Brian Fitzpatrick (R-PA), with support from the U.S. Helsinki Commission, passed the House Foreign Affairs Committee on December 18. The companion Senate bill was introduced on December 11 by Senator Roger Wicker (R-MS) and Senator Ben Cardin (D-MD) and is awaiting review by the Senate Foreign Relations Committee. While the CROOK Act contains many measures that would strengthen U.S. anticorruption efforts, its centerpiece is the creation of an “Anti-Corruption Action Fund.” Continue reading →

India’s New Electoral Bond Scheme Won’t Reduce Electoral Corruption. It Will Make the Problem Worse.

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Indian elections have long been celebrated as a festival of democracy—in part for their sheer and increasing scale, with over 900 million voters and thousands of political parties registered. Election expenditures have also been on the rise. India’s last national elections were the most expensive elections ever held anywhere in the world, with an estimated expenditure of Rs. 55,000 crores ($7.74 billion)—much of which was financed through private donations. In India as elsewhere, all this private money in politics raises concerns about corruption, both legal and illegal. This problem is exacerbated by a lack of transparency.

Under the rules as they existed until two years ago, individuals and domestic for-profit companies could contribute to political parties via cash, check, or demand drafts. Political parties are required to file an annual income statement, listing both sources of income and expenditures, with the Election Commission, a constitutional oversight body. These statements are publicly accessible under India’s Right to Information law. However, contributions below Rs. 20,000 ($280) could be anonymous, and political parties traditionally exploited this loophole to avoid disclosure of donors. The total share of income from unknown sources has been steadily increasing for all six major political parties, and in the last returns filed for 2017-18, income from unknown sources was over half (51.38%) of these parties’ collective income.

Over the past two years, there have been several reforms to campaign finance. The most significant reform has been the replacement of cash donations with a new mechanism for political donations, so-called “electoral bonds.” Under this system, the threshold for anonymous cash donations was reduced by a factor of ten, but private parties can now make anonymous donations via a bond with the State Bank of India (a public sector bank) in fixed denominations ranging from Rs. 1,000 ($15) to Rs. 1 crore ($1.5 million), during allotted windows. These donations remain anonymous not only to the general public, but also to the recipient political party.

The stated objective of these reforms is to target the practice of money laundering in campaign finance and increase transparency. In a previous post on this blog, written shortly after the new scheme was introduced, Abhinav Sekhri argued with cautious optimism that this tool, though imperfect, was indeed a step in the right direction. I disagree. In fact, the electoral bond system has decreased transparency and increased the potential for corruption, for several reasons: Continue reading →

Requiring Public Contractors To Have Anticorruption Compliance Programs May Sound Like a Good Idea—But Not When Government Capacity Is Lacking

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Five years ago, in a thought-provoking post, Rick Messick proposed that developing states should demand that firms doing business with them have an anticorruption compliance program. At the time Rick wrote his post, he wasn’t aware of any developing state that had imposed any such requirement. A couple of years later, some Brazilian subnational jurisdictions, such as the state of Rio de Janeiro and the Federal District, adopted legislation in this spirit, requiring that companies awarded a public contract, or participating in a public-private partnership, above a certain value must establish an anticorruption compliance program. These initiatives seem to be of a piece with a broader trend in Brazilian anticorruption law, which has sought in various ways to create stronger incentives for companies to adopt effective compliance programs. (For example, Brazil’s 2013 Clean Company Act holds companies strictly liable for corrupt conduct, but companies that have a so-called “integrity program” may get a penalty reduction.)

Nonetheless, despite the importance of corporate compliance policies as a component of any effective anticorruption strategy (see here and here), demanding that contractors to establish such programs as a condition of doing business with Brazilian government entities is unlikely to achieve the intended goals.

Continue reading →

Anticorruption Bibliography–January 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.

Will an IMF Loan End Equatorial Guinea’s Grand Corruption? Part I

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Long scorned as a nearly perfect kleptocracy where corruption is unparalleled in its brazenness, Equatorial Guinea announced last November it would end the rampant corruption that has earned it such contempt, issuing a policy note saying it is “firmly committed” to measures to “enhance governance and transparency, [and] reduce corruption.” The note issued not from a newly-installed, reformist government but from the same one that has bled the country dry for three decades. The commitment to honest government is the price the International Monetary Fund is demanding in return for a loan to pull the economy out of a deep, prolonged recession largely caused by the ruling elite’s wholesale looting of the nation’s patrimony.

The Equatorial Guinea loan is not the first time the IMF has conditioned a bailout on anticorruption reforms. In 2015, in return for a four-year $17.5 billion loan, Ukraine was required to overhaul the institutions that investigate, prosecute, and adjudicate corruption cases, prohibit government employees from receiving large gifts, and compel senior officials to disclose their assets. The European Union, other international organizations and governments, and Ukrainian civil society all helped formulate these conditions, and all pressed the government to comply with them. Thanks to this concerted pressure, it is; and while Ukraine today is hardly corruption free, it is making steady progress in bringing corruption to heel.

Equatorial Guinea’s promises to the IMF appear in a policy paper titled “Good Governance and Anticorruption Action Plan” (Spanish version; English version). It there pledges not only to enact a slew of new anticorruption laws but to enforce them as well. But unlike Ukraine, Equatorial Guinea has no powerful neighbors demanding it comply with these promises, no strong, independent civil society organizations lobbying for them, and no vibrant, free press following its progress in realizing them.  Like most corrupt countries, it is run by a thuggish, repressive regime that locks up its opponents, or worse, and cares nothing for its standing in the international community or its citizen’s well-being.  The chances the government will honor the IMF loan covenants are thus much lower than they were in Ukraine. Close observers of the country expect the government will enact measures that look good on paper but are never enforced.  And then claim it has done what it promised. Continue reading →

New Podcast, Featuring Charles Davidson

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Charles Davidson, currently the publisher of the American Interest magazine, and previously the co-founder of Global Financial Integrity and the Hudson Institute’s Kleptocracy Initiative. We discuss a variety of topics, including financial integrity, beneficial ownership transparency, and kleptocracy–including the threat that kleptocratic wealth from authoritarian states poses to liberal democracies, the use of targeted sanctions against individual corrupt actors, and concerns about how kleptocrats use Western institutions not only to launder their money, but also to launder their reputations.

You can find this episode, along with links to previous podcast episodes, at the following locations:

[NOTE: This episode begins with some introductory housekeeping material about future directions for the KickBack podcast. If you want to jump straight to the interview, it begins at 3:07.]

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.

The Mafia Capitale Trials Show Italian Municipalities’ Continued Vulnerability to Corruption by Organized Criminal Groups

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Over five years ago, in November of 2014, Rome’s mayor, Ignazio Marino, blew the whistle on a massive corruption scheme in the city’s administration. Marino had become particularly suspicious of Salvatore Buzzi, the leftwing leader of a cooperative that controlled, among other things, the city’s recycling, trash disposal, and street cleaning services. Buzzi had been imprisoned in the 1980s for homicide, but was supposedly a thoroughly reformed champion of progressive causes. In fact, he was the right-hand man of Massimo Carminati, a former member of a neofascist terrorist group. Using collusion, exchange of favors, extortion, and intimidation, Carminati and Buzzi diverted hundreds of millions of euros intended for the improvement of Rome’s infrastructure to private bank accounts. And if this wasn’t enough, the group even skimmed resources from housing projects designed to shelter refugees, with Buzzi famously caught on a telephone intercept saying “Do you have any idea how much I earn on these immigrants? They’re more profitable than drugs.”

In sum, these Roman criminal groups, which are popularly known as Mondo di Mezzo (the World Between) or Mafia Capitale (Capital Mafia), had thoroughly infiltrated Rome’s municipal government. Indeed, their connections reached the upper echelons of Roman government, including former mayor Gianni Alemanno, who was ultimately convicted of corruption and illicit funding. Buzzi and Carminati, along with more than 40 other individuals, were ultimately brought to trial over these crimes. Prosecutors under magistrate Giuseppe Pignatone pushed for this organization to be recognized as a mafia—which is important, because under Italian law, there is a special, and especially severe, set of criminal laws reserved for mafia members and mafia-type associations. This past October, however, the Italian Court of Cassation ruled that the Mondo di Mezzo did not qualify, legally, as a mafia-type association (associazione di tipo mafioso).

This ruling has been controversial, and indeed much of the attention that Mondo di Mezzo has received has been based on the “mafia” element of this case. But whether or not Mondo di Mezzo is a mafia, this case has revealed the Italian capital’s vulnerability to corruption by organized criminal networks. In the words of Pignatone, the mafia is not Rome’s first problem. Instead, the most serious issues “are the crimes against the public administration and the economy. It is corruption, auction disruptions, bankruptcies, multimillion-dollar frauds. Mafia Capitale is just a piece of a much larger and more complicated mosaic.” And Mondo di Mezzo demonstrates that Italy must take concrete action to reduce the vulnerability of municipal governments to infiltration by criminal groups. Continue reading →

Tracking Corruption and Conflicts of Interest in the Trump Administration–January 2020 Update

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As many regular readers of this blog are aware, since May 2017 we’ve been tracking and cataloguing credible allegations that President Trump, and his family members and close associates, have been corruptly, and possibly illegally, leveraging the power of the presidency to enrich themselves. The newest update is now available here.

A previously noted, while we try to include only those allegations that appear credible, many of the allegations that we discuss are speculative and/or contested. We also do not attempt a full analysis of the laws and regulations that may or may not have been broken if the allegations are true. (For an overview of some of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct, see here.)

Possible Reforms to Australia’s Approach to Corporate Criminal Liability: “Failure to Prevent”, Strict Liability, or Something Else?

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Many of the most significant bribery offenses, both domestically and internationally, involve corporations. When, and under what conditions, should the corporation itself—as opposed to, or in addition to, the individual employees involved in the wrongdoing—be held criminally liable? The attribution of criminal liability is sometimes thought to be conceptually or philosophically problematic: As Baron Thurlow LC once observed, a corporation has “no soul to be damned and no body to be kicked.” Yet it is clear that corporations can do wrong, and the prospect, and extent, of corporate criminal liability can have significant impacts on corporate behavior. Various legal systems have developed different approaches, but in some jurisdictions there has been considerable dissatisfaction with the status quo, and agitation for reform.

Australia is one such jurisdiction. In response to concerns about the Australian legal system’s approach to corporate criminal liability (an issue that is important in, but not limited to, the corruption context), last April the Commonwealth Attorney General of Australia, Christian Porter, announced that the Australian Law Reform Commission (ALRC)—the Australian Federal Government’s highly influential law reform agency—would conduct an inquiry into this issue. The Terms of Reference required the ALRC to review, among other things, the policy rationale behind Australia’s current framework for imposing criminal liability on corporations, as well as the availability of alternate mechanisms for attributing corporate criminal liability. This past November, the ALRC released a 279-page Discussion Paper that thoroughly canvasses potential approaches to reforming Australia’s corporate criminal liability regime; the ALRC is currently receiving comments on that paper, which are due at the end of this month (January 31, 2020), and after considering these submissions, the ALRC will release its final report by April 30, 2020.

The ALRC paper covers many issues, but perhaps the most fundamental concerns the basic rules for attributing criminal responsibility to the corporation. The ALRC, and the Australian government, faces a choice among several plausible alternatives: Continue reading →

New Podcast–An End-of-Year Review Featuring Nils Köbis and Christopher Starke

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Happy (slightly belated) New Year! As our regular readers may have noticed, GAB has been on vacation for the past couple of weeks (partly because of the holidays, partly because your editor-in-chief has been away), but we’re back, and new content will be appearing imminently.

Partly because of our long hiatus, I neglected to post that a couple of weeks ago my ICRN collaborators Nils Köbis and Christopher Starke released a special year-end episode of KickBack: The Global Anticorruption Podcast; in this podcast, Nils and Christopher which recap some of the highlights of our 2019 podcast episodes, highlighting interesting insights, lessons, and thoughts regarding the future of anticorruption research and practice (as well as some reflections on our experiences with our foray into podcasting).

You can find this episode, along with links to previous podcast 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.