Monthly Archives: June 2022

Trump’s Attempted Coup Explained

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That Donald Trump egregiously abused his power as president in the closing days of his term in office there is now no doubt. Pressuring and threatening election officials and inciting a mob to storm the U.S. Capitol make out abuses that rival if they do not exceed those of America’s most corrupt leaders.

Thanks to the testimony of former Trump officials before the House committee investigating the Capitol riot, we now know the abuses were part of the most serious crime ever attempted against the government of the United States of America and its people: a plot to install Trump as president on January 20, 2021, despite that fact he had lost the election. Trump and accomplices attempted a coup d’état that only just failed.

Americans and democracy’s friends everywhere may find it hard to accept that American democracy narrowly survived a coup d’état. Coups happen in poorer countries with weak governments, not in one of the wealthiest nations in the world with a democracy that has weathered civil war and countless violent demonstrations. But the details that have been exposed, most recently the dramatic, chilling testimony of former White House aide Cassidy Hutchinson, make it clear there is simply no other term that fits.

For those who have not followed the House committee’s work, or who may have but still resist labelling the actions of Trump and accomplices a coup, its broad outlines are described below.

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Why and How Malaysia Must Radically Reform Its Anticorruption Institutions

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Back in mid-2018, Malaysia looked like it might have finally reached a turning point in its fight against corruption, following the country’s first democratic transfer of power. The winning parties in 2018 promised significant anticorruption reforms, including swift action to respond to the 1MDB scandal that had led to the ruling government’s defeat. Unfortunately, the hoped-for clean-up of Malaysian politics has not occurred. Part of this is due to the fact that, since the 2018 elections, Malaysia has been embroiled in seemingly unending political turmoil, with two governing coalitions collapsing in fairly rapid succession as a result of shifting party alliances. But part of the problem concerns longstanding problems with Malaysia’s main anti-graft body, the Malaysian Anti-Corruption Commission (MACC).

The MACC was created by statute in 2009 as an “independent” body. But like far too many anticorruption agencies around the world, in practice the MACC suffers from a lack of genuine independence from the executive branch. This leads to the public perception, and possibly the reality, of improper political bias. (Indeed, the MACC’s lack of true independence may explain its slack response when investigative journalists and opposition politicians first raised concerns about the 1MDB fund.) Even if Malaysia’s politics stabilizes, it will not be possible for the country to make genuine progress against corruption without reforming the MACC’s structure in order to ensure that it is truly independent of the executive, and seen to be so.

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Corruption in Emergency Procurement: Lessons Learned in the Philippines

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As numerous observers have noted, in far too many countries the response to the COVID-19 pandemic has been hampered by widespread corruption, particularly in government procurement of medical supplies and other equipment (see, for example, here and here). As the pandemic finally recedes, it is useful to take stock of lessons learned and to implement reforms to emergency procurement procedures that will help mitigate these problems in future emergency situations.

One country where it is particularly important to address emergency procurement deficiencies exposed by COVID is the Philippines, which was mired in corruption scandals from the earliest days of the pandemic. Perhaps the highest profile COVID-19 procurement scandal—though hardly the only one—is the so-called Pharmally scandal. Over 2020-2021, the government of the Philippines entered into a string of multi-billion peso contracts with a company called Pharmally Pharmaceuticals, despite the fact that Pharmally is a small firm that was incorporated only in 2019 and lacked the funds, experience, and credibility to handle major government contracts. It was later revealed that Pharmally has direct ties with Chinese businessman Michael Yang, a close friend and former advisor of President Rodrigo Duterte. While direct corruption in this case has not yet been proven, the circumstances are extremely suspicious. And this is just one high-profile example of questionable COVID-related procurement deals. Speaking more generally, it is quite likely that widespread corruption contributed to the Philippines’ abysmal COVID-19 response (see, for example, here and here). Before the next crisis hits, it is essential that the Philippines learn how to better insulate its emergency procurement system from corruption risks. This is not to say that the procurement rules that apply in ordinary situations—including the usual transparency and integrity safeguards—must apply with full force during emergencies. In states of emergency, acting quickly can make the difference between life and death, and so it is reasonable to alter or relax public procurement rules to some extent, even if this raises the risks of corruption and other problems. But it is possible to design procurement systems so as to limit the ability of corrupt actors to take advantage of emergency procurement rules to enrich themselves. In the Philippines, the experience with corruption during the COVID-19 pandemic suggests the following reforms—influenced by international best practices but tailored to the Philippines’ particular context—to clean up the country’s flawed emergency procurement system:

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New Podcast Episode, Featuring Michel Sapin and Valentina Lana

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Michel Sapin, who served in several senior positions in the French government (including as Minister of Finance from 1992-1993 and again from 2014-2017), and Valentina Lana, a French lawyer, compliance consultant, and lecturer at the Sciences Po Law Faculty in Paris. Our conversation focuses principally on the major legislative reform to French anticorruption law known as the Loi Sapin II (named for M. Sapin), which was adopted in December 2016 and went into effect in 2017. We discuss the changes in the political and economic environment that led to the passage of this law–which represented a dramatic shift in the French government’s approach to transnational bribery–and the impact that the law has had during the five-plus years that it has been in effect. My guests emphasize the positive impacts that the law has had in France, how it differs from the approach taken by the US and the UK, and how France and other countries should move forward on the anticorruption fight in the years to come. 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 Interdisciplinary Corruption Research Network (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.

Cleaning up Corruption in Lebanon’s Central Bank

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Riad Salameh, the governor of Lebanon’s Central Bank (the Banque du Liban, or BdL), was once hailed as a “financial wizard” for his stewardship of the Lebanese banking system. But a flurry of recent investigations, led mainly by French and Swiss prosecutors, have implicated Salameh in a variety of corruption schemes. These investigations found, among other things, that Salameh illicitly moved over $300 million of public funds from the BdL into his brother’s company, Forry Associates, between 2002 and 2015 and that Salameh laundered millions in Europe through luxury real-estate purchases. And in March 2022, after Swiss prosecutors asked Lebanese authorities to carry out a separate investigation into embezzlement and money laundering by Salameh and his associates, a Lebanese district court judge charged Salameh and his brother with illegal enrichment and money laundering.

Though Salameh denies all allegations, many Lebanese citizens consider the accusations against him unsurprising. Indeed, if anything is surprising about the case against Salameh, it’s that he is being prosecuted in Lebanese courts. Government elites in Lebanon—including the BdL’s leaders—have long benefited from a culture of impunity. It is encouraging to see Lebanese prosecutors and courts taking steps to hold corrupt actors at the BdL accountable. But cleaning up the BdL, and ensuring that in the future cases like Salameh’s are detected early or prevented altogether, will also require more structural reforms to address the institutional and regulatory problems at the BdL that have enabled such corrupt practices. Three reforms to the BdL are especially important:

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The U.S. Supreme Court Has an Appearance Problem: What FEC v. Cruz Got Wrong

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According to the U.S. Supreme Court, campaign contributions are a form of political “speech” and are therefore protected by the First Amendment of the U.S. Constitution. As a result, the government may restrict such contributions only if doing so serves a compelling state interest. Currently, the only interests that the Court has recognized as sufficiently compelling to justify restrictions on political spending are preventing corruption or the appearance of corruption.

Though sometimes presented as a single interest, the prevention of actual corruption and the prevention of the appearance of corruption are not the same. The reason the government has an interest in preventing actual corruption is obvious. The Court has explained the related but distinct interest in preventing the appearance of corruption by appealing to the importance of maintaining public confidence in the electoral process. If a certain campaign finance activity creates the appearance of corruption, then ordinary citizens may start to view their political participation as futile, and may lose faith in the integrity of elections. Because Congress has an interest in preventing this erosion of public trust, the government can regulate campaign finance activities that the public perceives as corrupt, even when those activities are not associated with actual corruption.

At least that’s what the Court has said. In practice, however, the Court has often failed to apply the appearance of corruption standard in a way that serves these objectives. This is nowhere clearer than in the Court’s recent decision in Federal Election Commission (FEC) v. Cruz. The case concerned a federal law that prohibited a candidate from using post-election campaign donations to repay more than $250,000 of personal loans that the candidate made to his or her campaign prior to the election. The government justified this law partly on the grounds that it prevented the appearance of corruption. After all, when a candidate uses donations to repay personal loans, the donor’s contributions go straight into the candidate’s pockets; the public could easily view such payments as fostering corruption. In support of this argument, the government pointed to a public opinion poll in which 81% of respondents thought it was “likely” or “very likely” that donors who make post-election contributions expect a “political favor” in return. Additionally, the government cited an academic study that found—on the basis of over three decades of empirical evidence—that politicians with campaign debts are “significantly more likely” than debt-free politicians to switch their votes after receiving contributions from special interests.

This evidence, on its face, would seem to support the government’s claim that the limit on using post-election donations to repay a candidate’s large personal loans furthers its compelling interest in preventing the appearance of corruption. However, the Court’s majority opinion dismissed the government’s appearance-based argument in a brief passage with relatively little sustained analysis, apparently treating the flaws in the government’s arguments as self-evident. The Court’s dismissive attitude to the government’s evidence in this case indicates a worrisome approach to the appearance-of-corruption issue more generally.

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Hard Truths/Sound Advice: UNDP’s Strategic Programming for Anti-Corruption Agencies

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The United Nations Development Programme’s mission is to help poor countries become wealthy. As evidence that corruption is a, if not the, major obstacle blocking the way, the agency has devoted a growing share of its budget to finding ways combat it. Not all its investments have met with success — as its underpaid staff and consultants (compared to other international agencies) would be the first to admit.

One clear success is a little heralded guidance note for anticorruption agencies in Southeast Asia UNDP released in May. The region is beset with corruption problems large and small, and in response governments have established anticorruption agencies.  But TI’s Corruption Perception Index, the World Governance Indicators, and other cross-national measure of corruption have registered little or no improvement in country scores since the agencies came into existence, and disillusionment has taken hold as policymakers and citizens across the region now sharply question the agencies’ worth.  

Strategic Programming for Anti-Corruption Agencies: Regional Guidance Note for ASEAN makes it clear that the problem starts at the top. That agency leaders have let others set the terms for judging their agency’s success. Echoing advice to criminal justice agencies by the closest student of bureaucracy since Weber, the report explains that until anticorruption agencies define success in realistic, measurable, achievable objectives that will make a difference in citizens’ lives, their standing will not improve and continued support will remain at risk.

Along the way the UNDP report doesn’t gloss over the challenges agencies face while offering sound advice on how to overcome them.  Some especially important hard truths and good examples of sound advice –

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Bribe to Survive: Sextortion and LGBTQ Discrimination

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In February 2019, a gay man from Krasnodar, Russia named Stanislav arranged to go on a date with a young man he had met on a dating app. When he arrived at their agreed-upon location, however, the young man was nowhere to be seen. Instead, Stanislav was greeted by police officers, who later beat him and threatened him with criminal prosecution unless he paid a bribe. Just a year earlier, another man, Fedor, similarly found himself on a “fake date” with a man he had met on the same dating app, which ended with him being forced to pay police a US$2,500 bribe after also being beaten and threatened with prison. In both cases, Russian prosecutors refused to carry out any investigations of extortion or police misconduct.

It isn’t just in Russia that police have begun turning to online dating sites and other forms of technology to entrap their victims. By arbitrarily seizing cell phones or creating profiles to set up “fake dates,” law enforcement officers around the world (including in Lebanon, Azerbaijan, Egypt, and Moldova, just to name a few places) have been able to obtain screenshots and photographs to blackmail LGBTQ people into paying them bribes. Not only are victims coerced into paying these bribes to end their torture and humiliation, but they also do it in response to threats of having their arrests publicized on national television, or revealed to their family and employers. In this way, laws criminalizing homosexual activity are imposed not only, or even primarily, to enforce moral ideologies, but rather to expand opportunities for the corrupt extraction of money from vulnerable communities.

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The U.K. Must Legislate to Combat Money Laundering in Its Universities

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Parents from developing countries have long sought to provide their children with a world-class university education in wealthy Western countries, such as the US and the UK. There is nothing inherently wrong with this—indeed, universities ought to take pride in their ability to provide an elite education to talented young people from around the world. There is, however, a dark side. In 2021, media reports revealed that nearly fifty UK universities had accepted upwards of £52 million in direct cash payments for tuition and fees from students hailing from countries known to be “high risk” for money laundering—most notably the West African countries of Ghana and Nigeria. A Carnegie Endowment Report on this topic observed that although “[t]he overwhelming majority of West African students in the United Kingdom pose little or no corruption risk, … many West African [politically exposed persons (PEPs)] appear to be using unexplained wealth to pay for UK school and university fees.” Indeed, many of West Africa’s nouveau riche made their money through illicit channels, and they may view an elite UK education for their children as a way to launder their reputations as well as their wealth. As Matthew Page, the author of the Carnegie Report, explained, any university that accepts tuition and fee payments in cash—especially from PEPs in countries with high corruption risk—is essentially “putting out a welcome mat for the world’s kleptocrats and money launderers.”

Although most UK universities acknowledge that they have basic anti-money laundering (AML) responsibilities under Sections 327 and 329 of the 2002 Proceeds of Crime Act, universities are not clearly covered as “regulated entities” under the UK’s Money Laundering Regulations. And while some universities have responded to recent high-profile scandals and government warnings by adding basic AML provisions to their fee-collection and admissions policies, this is not the sort of problem that is likely to be solved through unilateral action on the part of universities. The incentives to turn a blind eye to the provenance of tuition and fees from international students—which many UK universities have come to rely on as a revenue stream—are simply too strong. (It’s worth noting here that international students typically pay more than three times the fees paid by students from the UK or the European Union, and many UK universities encourage advance cash payments by offering international students discounts of 20-30% if they can pay their fees in advance.) Solving this problem will therefore require the UK to amend its AML legislation to address the particular vulnerabilities in the university sector. Three such reforms would be particularly prudent: Continue reading →

For Goodness Sakes, Buy this Man a Cup of Coffee!

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If you don’t know whom this post’s headline is talking about, you don’t know who Ray Todd is.  And if you don’t know who Ray Todd is, you don’t know about the eponymously named raytodd.blog.  And if you don’t know about the blog, you don’t know about what I think is the single best aggregator of news and information on corruption, money laundering, economic sanctions, and related topics. 

From a blurb flagging FATF’s recent evaluation of Albania’s money laundering regime to a note on GAB contributor Frederick Davis’ important new Columbia Journal of Transnational Law article “Judicial Review of Deferred Prosecution Agreements: A Comparative Study,” to a link to an English language summary of the just released 2021 annual report of the French Anticorruption Agency, you are missing out. On a lot. Ray’s blog is indispensable source of news for those in the anticorruption community.

All he asks in return is that readers occasionally make a small contribution.  Enough to buy him a coffee. Given the blog’s value added, he deserves much more.  But hey readers, how about starting by financing his morning java?