Monthly Archives: December 2021

Kais Saied Isn’t Fighting Corruption in Tunisia, He’s Fighting His Political Opponents

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Kais Saied, a former constitutional law professor at the University of Tunis, has been president of Tunisia since 2019. In late June 2021, Saied invoked emergency powers under the 2014 Tunisian Constitution to oust Prime Minister Hicham Mechichi, assume control over the government, shutter Parliament, and begin his rule of the country by decree—a move that some have described as a coup. Saied’s recent announcement that he will call a constitutional referendum and parliamentary elections to take place next year bodes well for a potential return to the rule of law, although in October, when he appointed a new government, he curtailed the powers of the Prime Minister—so we shouldn’t get our hopes up just yet.  

One of Saied’s stated justifications for his extraordinary consolidation of power was the need to end rampant corruption. He has asserted that Tunisia is a country ruled “by two regimes, an apparent regime, that of the institutions, and a real regime, that of the mafia,” and he has vowed not to “engage in dialogue with ‘thieves.’” Saied defended his extraordinary invocation of emergency powers by highlighting the danger to the country posed by those who “lurk at home and abroad, and from those who see their office as booty or as a means to loot public funds.” This was not a new theme for Saied. Indeed, fighting the corruption of Tunisia’s elites has long been his rallying cry. When he ran for president in 2019 as a political outsider, he ran on an anticorruption platform that proved extraordinarily popular, especially with the younger generation. (Saied garnered an incredible 90% of the vote of young Tunisians in 2019.) And so far, his consolidation of power has also enjoyed widespread popular support—though it has started to wane recently.

Will Saied in fact follow through on his pledge to use his extraordinary powers to root out corruption in Tunisia? It’s hard to know for sure, but some prominent international commentary has defended Saied’s aggressive moves partly on the grounds that he is indeed taking actions that are necessary to counter the systemic corruption of the Tunisian elite. I am more skeptical. There are several factors that suggest Saied’s emphasis on fighting corruption is little more than a disingenuous and self-serving rationalization for an unjustified power grab. Continue reading →

Anticorruption Bibliography–December 2021 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. Additionally, the bibliography is available in more user-friendly, searchable from at Global Integrity’s Anti-Corruption Corpus website.

As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

When you Fight Corruption, it Fights Back

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Nuhu Ribadu, first head of Nigeria’s premier anticorruption agency, famously made the observation that headlines this post sometime between the first and second attempt on his life. Speakers at “Anticorruption Prosecutors Under Attack, a side event at the just completed Conference of State Parties to the UN Convention Against Corruption, explained that he is not the only one whose life, career, and reputation have come under attack from those being investigated for corruption.  

Organized by the government of Norway and the Basel Institute on Governance, the event publicized cases like Nuhu’s (here) and the late Maxwell Nkole of Zambia (here), corruption fighters who fled their homeland to escape assassination. Speakers discussed more recent cases too, including the less lethal but more insidious attack against Italian prosecutors Fabio Pasquale and Sergio Spadaro. The two face trumped up criminal charges and administrative proceedings for having the audacity to prosecute two large, Western oil companies for bribing Nigerian officials (here).

Maxwell and Nuhu likely survived the attempts to silence them permanently thanks to the Corruption Hunter Network. The brainchild of Eva Joly, France’s premier anticorruption fighter and supported by the Norwegian government, the group of anticorruption investigators, prosecutors, and activists meets twice a year to provide one another moral support. It scrounged up funding for year-long “sabbaticals” for Nuhu and Maxwell in countries where their enemies dared not to touch them.

Nuhu and Maxwell’s support was ad hoc and thanks only to a handful of bureaucrats willing to read internal agency guidelines “liberally.” As the fight against corruption intensifies, we can expect more Nuhus, Maxwells, Fabios, and Sergios. Will those in the international community committed to the fight against corruption support these frontline troops?

The full video of “Anticorruption Prosecutors Under Attack” is here, the audio file here. More on the event, the speakers, and the key takeaways is on the Basel Institute’s website here.

Guest Post: France Continues to Modernize its Procedures for Fighting Global Corruption—and Has Some Interesting New Ideas

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Frederick Davis, a member of the New York and Paris Bars and a Lecturer in Law at Columbia Law School, contributes today’s guest post:

As recently as a few years ago, posts in this space by me and others bemoaned the striking inability of French authorities to prosecute French companies involved in global corruption. In the first fifteen years after France criminalized overseas bribery (thereby meeting its obligations under the OECD Convention on Combatting Bribery for Foreign Officials that France had signed in 1997), not a single French company had been convicted of this crime. This was attributed to the difficulty of pinning corporate criminal responsibility on corporations, as well as to limits in French criminal procedures that rendered its prosecutors unable to move as quickly, efficiently, and effectively as their U.S. counterparts. French deficiencies included the lack of both “sticks” (the credible threat of significant sanctions) and “carrots” (the ability to offer a deferred prosecution agreement (DPA) in exchange for self-disclosure and cooperation). The result: a number of iconic French companies reached negotiated outcomes with the U.S. Department of Justice (DOJ), and paid well over US$2 billion in fines and other payments to the U.S. government.

Resisting populist demands for retaliation, France instead changed its criminal procedures and enforcement institutions to address the challenge. The most notable changes include the creation of a National Financial Prosecutor’s Office with nationwide responsibility for many economic crimes, the creation of the French Anti-Corruption Agency to enforce compliance regimes, and the passage of the so-called Loi Sapin II, which increased penalties for financial crimes and introduced a French-style DPA called a Judicial Convention in the Public Interest. In addition to these reforms, France’s highest court has clarified the laws on corporate criminal responsibility, and in an unprecedented decision ruled that a parent or successor corporation remains criminally responsible for acts of an acquired entity even the acts took place prior to the acquisition.

The results of these reforms have been nothing short of remarkable: Continue reading →

AML for NFTs: How Digital Artwork Is Used to Clean Dirty Money, and How to Stop It

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The art world has gone digital, thanks in large part to the advent of so-called non-fungible tokens (NFTs). NFTs, like cryptocurrencies, use blockchain technology (a disaggregated database made up of immutable blocks of data), which makes it possible to attach a unique authenticating token—sort of like a digital signature—to a digital item, most commonly a piece of digital artwork. The primary difference between an NFT and a unit of cryptocurrency is that one NFT cannot be exchanged for another—they are, as the name implies, non-fungible. That non-fungibility enables creators of digital art to sell NFTs of their work for profit. That’s important, because unlike traditional artwork, it’s extremely easy to create perfect copies of digital artwork. But one cannot simply copy an NFT. Of course, one can copy the image itself, but the copy, though identical to the naked eye, will lack the authenticating token. Why, you might reasonably ask, would anyone pay for an NFT when they can get the original image for free? Critics have raised these and other questions, but it seems that a sufficient number of people derive pleasure from collecting the original artwork, or from supporting the artists, or from the belief that the price of NFTs will continue to rise, that trade in NFTs has become big business. An artist known as Beeple sold one NFT for $69 million. Platforms from cryptocurrency exchanges to the hundreds-years-old art auction house Sotheby’s (and potentially the movie theater chain AMC) have entered into the growing NFT market; in the third quarter of 2021, the trading volume of NFTs exceeded $10 billion.

As in other emerging high-value markets, however, NFTs present a money laundering risk. Indeed, NFTs sit at the intersection of two sectors that are already characterized by high money laundering risk: fine art and cryptocurrencies. Because of the uniquely-high money laundering risk posed by these digital assets, FinCEN should issue NFT-specific anti-money laundering (AML) compliance guidance, and Congress should extend the Bank Secrecy Act (BSA) to apply to NFT marketplaces.

Before proceeding to regulatory solutions, it’s worth elaborating on why NFTs pose a significant money laundering risk. As just noted, NFTs are particularly high risk because they combine two sectors that are already characterized by high money laundering risk, albeit for different reasons:

Continue reading →

The End of Institutional Multiplicity: A Drawback in the New Administrative Improbity Law

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Brazil’s Administrative Improbity Law is one of the cornerstones of the country’s anticorruption framework. The law imposes administrative and civil liability on public officials and political agents for illicit enrichment, damage to the treasury, and acts against the principles of public administration. Before its enactment in 1992, these forms of misconduct were only punishable under criminal law, which imposes a much more demanding evidentiary standard. The enactment of the Administrative Improbity Law thus played a valuable role in enabling the government to hold corrupt actors liable in those situations where the evidence of corruption, though strong, was not enough to establish proof beyond a reasonable doubt.

This past October, the Brazilian government enacted significant amendments to the Administrative Improbity Law. Some of these changes were welcome, particularly those that clarified vague provisions and attempted to speed up the process. (Brazilian courts have taken on average six years to adjudicate administrative improbity claims.) But another change is much less welcome: The amendments to the law reduced the number of institutions that can file a suit for violations of the law. Under the original version of the law, a suit could be initiated either by the Public Prosecution Office (an autonomous body) or by the government entity that was harmed by the corrupt act (the federal Attorney General’s Office in the case of acts that harm the national government, and the state or municipal authorities in the case of acts that harmed subnational government entities). This arrangement is a form of what Brazilian scholars typically refer to as institutional multiplicity—an arrangement where multiple institutions have overlapping authority to enforce legal provisions. Institutional multiplicity is a key feature of Brazil’s anticorruption framework. The new version of the Administrative Improbity Law scraps this multiplicity, at least in this context, by giving the Public Prosecution Office the exclusive right to file administrative improbity suits.

This is a mistake.

Continue reading →

Guest Post: What Should Brazil’s Next President Do To Get the Anticorruption Agenda Back on Track?

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Today’s guest post is from Marcelo Malheiros Cerqueira, a Brazilian federal prosecutor and a member of the GAECO/MPF (Special Action Group for Combating Organized Crime) in the state of Minas Gerais, Brazil.

Since 2019, Brazil´s anticorruption efforts have been disrupted and derailed. Institutions in charge of fighting corruption are being constantly weakened or attacked. Tools that have been central to Brazilian prosecutors’ anticorruption investigations, such as plea bargains and leniency agreements, are being dismantled by new legislation, and the Congress has not moved forward on proposals that would enhance the fight against corruption (see here and here). The judiciary, mainly by its Supreme Court, has have nullified convictions, or sometimes entire investigations, in major corruption cases, and in so doing has weakened the anticorruption system (see some examples here, here and also here). And despite the fact that anticorruption was a central theme of the 2018 presidential campaign, the government has been questioned for lending its support to pushback against the anticorruption agenda and politicizing formerly non-partisan bodies like the Federal Police.

While the backlash against Brazil’s anticorruption efforts is a three-branch problem, Brazilian voters have an opportunity to address at least one aspect of the problem next year, when they go to the polls to select Brazil’s next president.

This brings us to the question: What should the next Brazilian president do, whoever he or she may be? To put this question another way, when voters and civil society organizations are assessing the future presidential candidates’ anticorruption platforms, what sorts of policies and proposals should they look for? While the issue is obviously quite complicated, here are four initial proposals, from the simplest to the most difficult to implement:

  • First, the president needs to demonstrate a commitment to integrity as a core values of the administration—and must do so not simply through rhetoric, but by taking practical action such as refusing to appoint individuals implicated in corruption cases to senior government positions and pushing for the adoption of integrity measures at lower levels of the bureaucratic hierarchy. Doing so will not only help ensure integrity in the Federal government, but will also set a positive example for state governors and mayors, and help foster a culture of integrity more broadly in the society.
  • Second, the president should respect and empower the institutions of the anticorruption system, avoiding any risk of their political capture. This requires that the appointment of directors for bodies such as the Financial Activity Control Council (COAF), the Federal Police, and the Comptroller General of the Union (CGU) be guided by non-partisan technical criteria, instead of making appointments on the basis of political alignment or personal relationships. Likewise, the next president should restore the longstanding tradition of choosing the Prosecutor General of the Republic (PGR) from the list of three candidates previously voted by the members of the Federal Prosecution Office. This model is ideal for guaranteeing the autonomy of the PGR, which, in turn, is essential for the criminal investigation and prosecution of higher-ranking political agents (including the president) for possible acts of corruption.
  • Third, the president must commit to working to enact legislative and constitutional reforms that decrease impunity for acts of corruption, such as the proposed constitutional amendments to allow incarceration of defendants after the first affirmation of a conviction in an appeal´s court (rather than allowing convicted defendants to remain at liberty until all possible appeals are exhausted) and end to the “privileged forum” rule that says high-level public officials can only be tried in higher courts. On the other hand, the president must also oppose—and if necessary veto—any attempt by the Congress to inhibit the action of anticorruption bodies or to weaken existing anticorruption tools (as unfortunately occurred recently with respect to amendments to Brazil’s Administrative Misconduct Act).
  • Fourth, the most difficult anticorruption challenge facing Brazil’s next president will be reforming the Brazilian electoral system, which is a root cause of the grand corruption that recent investigations have exposed. Any attempt to change the electoral system will face strong opposition by influential politicians, whose power relies in rules that ensure expensive campaigns and unequal distribution of the public electoral fund. Thus, the president must spearhead the attempt to reform the political system—but should probably only do so when he or she has sufficient high public approval, probably after the implementation of the other three proposals mentioned above.

This short list obviously does not encompass all the possible measures that can be taken by the next president against corruption. It would be helpful to know what GAB readers think about these suggestions, as well as what other proposals they might suggest.

One last word. Political leaders can do a lot to help the anticorruption agenda. But that does not mean that societies depend exclusively on them. Good education, transparency, popular control, high standards of morality and many other factors are crucial to the success of the fight against corruption. Therefore, although the central question posed here brings the opportunity to debate the role of the president, civil society also needs to take care of its role.

Eliminating Barriers to Compensating Corruption Victims  

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StAR yesterday held six panels on asset recovery issues as part of the meeting of the Conference of State Parties to UNCAC. I participated in the one on compensating corruption victims along with Costa Rican prosecutor Greysa Barrientos, Kate McMahon, Chair the International Bar Association’s Anticorruption Asset Recovery Subcommittee Kate McMahon, and Juanita Olaya Garcia of the UNCAC Coalition.

Panel moderators Yara Esquivel of StAR and Felipe Falconi from UNODC asked that I discuss what avenues of relief were available to corruption victims, the main challenges they face in recovering damages, and what reforms are needed to overcome those challenges. My remarks follow.   

Avenues of relief. Corruption victims generally have two options for obtaining compensation – as an adjunct to a criminal prosecution of the perpetrators by the state or by bringing a private civil suit against them.

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New Podcast Episode, Featuring Casey Michel

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview the American journalist Casey Michel about his new book, American Kleptocracy: How the U.S. Created the Greatest Money Laundering Scheme in History. In our conversation, Casey and I touch on a variety of topics raised by his provocative book, including the dynamics that led to the U.S. and U.S. entities playing such a substantial role in facilitating illicit financial flows (including the nature of American federalism, the broad exceptions to the coverage of U.S. anti-money laundering laws, and the role of U.S.-based “enablers” of illicit finance), the challenges of regulating lawyers and law firms, the role and responsibilities of universities in light of concerns about “reputation laundering” by kleptocrats and others, the impact of the Trump and Biden Administrations in this area, and the challenges of generating and maintaining bipartisan/nonpartisan support for fighting kleptocracy. 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.

Lessons from the U.S. College Admissions Scandal: Why Universities Need to Embrace Anticorruption Measures

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In 2019, a college admissions corruption scandal made headlines in the United States and around the world. Richard Singer, who masterminded the scheme, promised wealthy parents that he could get their children coveted places at Stanford, Yale, USC, and other selective colleges through what he called the “side door.” Rather than donate $45 or $50 million to gain an edge in admissions, parents would pay Singer and his foundation to bribe college coaches to recruit the students as college athletes—even though many of the students had never competed in the sport for which they were allegedly being recruited. U.S. federal prosecutors, in the so-called “Varsity Blues” investigation, uncovered this scheme and indicted more than fifty people (parents, coaches, and others). Many of the defendants pled guilty. This past October, in the first Varsity Blues case to go to trial, a jury found hedge fund magnate John Wilson and former casino executive Gamal Abdelaziz guilty of conspiracy, wire fraud, and mail fraud. More trials are likely coming, and more convictions are likely.

Beyond the sensational headlines—which often focused on the wealthy parents, several of whom are celebrities—what broader lessons can we draw from the scandal? When it first broke, many commentators attacked the broader culture of entitlement and privilege in which wealthy parents secure unfair—but in most cases entirely legal—advantages for their children through legacy preferences and favoritism toward big donors. Other commentators drew attention to the hypercompetitive, win-at-all-cost culture fostered by the U.S. college admissions system. Critics pointed to a culture that leads not only to criminal bribery of the sort revealed in the Varsity Blues investigation, but also to less visible forms of dishonesty like college admissions “consultants” who draft essays for pay and students who cheat on college admissions tests, sometimes with the support or complicity of adults.

Those critiques of the U.S. college admissions culture are apt, but there’s another important lesson that emerges from the scandal, one that has received less attention: The scandal highlighted the extent to which universities have failed to address seemingly obvious corruption risks, and failed to implement effective controls for identifying applicants who were bribing their way onto campus. Compared to other large institutions, universities are behind when it comes to establishing effective anticorruption controls.

Continue reading →