Monthly Archives: January 2024

Moneyball: The Financial Entanglement Threatening the Integrity of Spanish Football

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The Spanish Professional Football League (La Liga) is the most popular and profitable sports league in Spain. (In the 2022-2023 season, La Liga had a record-setting revenue of 1.99 billion euros and more than 11 million spectators.) But the league has been beset by a string of corruption allegations. In an especially prominent recent case, one of La Liga’s most well-known teams, FC Barcelona, confirmed that between 2001 and 2018, the club had paid a total of 7.3 million euros to a consulting company owned by Jose Maria Enriquez Negreira, who during that time was the vice president of the Technical Committee of Referees (CTA) of the Royal Spanish Football Federation (RFEF), the national governing body of all football-related activities, including La Liga. Though FC Barcelona acknowledged the payments, the club insisted that the payments were solely for lawful consulting services unrelated to refereeing decisions. FC Barcelona further noted that such consulting arrangements are standard practice among La Liga clubs. (Indeed, a former police commissioner accused Real Madrid CF of paying Negreira as well.)

While the allegations against FC Barcelona are still under investigation, many outside observers would likely conclude that, even if there was no direct quid pro quo, this is a textbook case of a serious conflict of interest. The problem, though, is that it does not appear that there are any rules—under Spanish law, the RFEF Disciplinary Code, or the league’s own regulations—against such conflicts: Continue reading →

New Podcast Episode, Featuring Sankhitha Gunaratne

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, host Liz David-Barrett interviews Sankhitha Gunaratne, Deputy Executive Director of Transparency International Sri Lanka. Ms. Gunaratne emphasizes how the recent economic crisis in Sri Lanka has laid bare the extent to which kleptocratic actors have captured key pillars of the state, and she provides more detail on the methods that these actors have used to effectuate their state capture, including the suppression of accountability institutions and militarization of key government positions.Ms. Gunaratne then outlines the strategies TI Sri Lanka has employed to respond to this challenge, including the use of strategic litigation and leveraging the influence of international financial institutions. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

Guest Post: How the Azerbaijani Government Corrupts Western Democracies with “Caviar Diplomacy”

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Today’s guest post is from Aram Simonyan, a Calouste Gulbenkian Foundation Scholar at the University of Sussex.

Artsakh, or Nagorno-Karabakh, is an autonomous region primarily populated by ethnic Armenians. (That the region is part of Azerbaijan rather than Armenia is due to a 1921 decision by the USSR central government.) In 2020 Azerbaijan, with outspoken support from Turkey, gained power over notable territory in Nagorno-Karabakh. Then, in December 2022, the Azerbaijani government closed the Lachin corridor (the only land route between Nagornon-Karabakh and Armenia), thereby cutting off 120,000 ethnic Christian Armenians in the contested enclave from the outside world—and from food, medicine, and other primary goods. And in September 2023 Azerbaijani military, with the apparent support of the Turkish president, forces swept into towns and villages, killing, shelling, and bombing civilians—evoking trauma of the Armenian Genocide among the population.

Yet the reaction from the West has been shockingly muted. It’s hard to ignore the striking contrast between the round-the-clock media coverage of the Gaza conflict and the scarcity of news on Nagorno-Karabakh even when Azerbaijan was bombing Armenian hospitals, schools and beheading people. Critics have also pointed out how European institutions and Western companies have continued to do business as usual with Azerbaijan, notwithstanding its aggression.

Part of the justification for this may be that Azerbaijan helps meet the EU’s need for natural gas. (In July 2022, European Commission President Ursula von der Leyen referred to Aliyev as a “trustworthy partner” for gas supply to the EU, though since Azerbaijan imports gas from Russia, it’s not at all clear why the EU wanted to involve the Azerbaijani government in the supply chain.) But another reason is that Azerbaijan has made use of what critics have dubbed “caviar diplomacy”: the use of strategic bribery (direct and indirect) to corrupt and curry favor with Western governments and institutions. Continue reading →

Why Is There No Zurichgrad? Protectionism in Swiss Real Estate

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Anonymous investments in foreign real estate markets have become a popular way to launder money and evade taxes. Opaque offshore structures now control a substantial share of high-end real estate in many major cities across the world. While the international sharing of financial data has made it harder to hide assets in offshore accounts, overseas property remains an easy target for illicit actors due to a lack of equivalent cross-border reporting. The city that has come to symbolize this problem is London—sometimes derisively referred to as “Londongrad” due to the extent to which Russian oligarchs own many of the city’s luxury homes.

Many might be surprised to learn that Switzerland, despite its longstanding reputation as a haven for illicit financial funds, has no major problem with money laundering in real estate. This is all the more surprising given that the Swiss property market would seem to be an exceptionally attractive target for dirty money in a number of ways. Swiss law affords extensive anonymity to individuals behind the corporate veil and does not require any licensing in the real estate sector. Furthermore, unlike many other countries, Switzerland still does not subject real estate agents, lawyers, or notaries – the key actors in property acquisition – to its anti-money laundering laws, as long as the property transaction in question does not involve a payment of more than the equivalent of about $110,000 in cash. At the same time, real estate prices in Switzerland are high and have risen dramatically in recent decades, especially in the cities and tourist areas. Illicit actors, who already roam financial centers such as Zurich, should thus have an easy time parking their assets in Swiss real estate. So why is there no “Zurichgrad”? Continue reading →

Breakthrough in the Use of Artificial Intelligence to Fight Corruption

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Whatever peril or promise the future of artificial intelligence holds, Brazilian, Colombian, and Italian researchers show it is a powerful tool for targeting corruption investigations.

Each year Colombia and Italy let thousands of contracts for goods, services, and public works, and each year some percentage is awarded thanks to bribery, conflict of interest, or other corrupt behavior. Each year Brazil’s central government transfers millions of dollars to the countries’ 5,500 plus municipal governments, and each year employees of some governments steal a portion.

Corruption is discovered through audits or whistleblowing, but a significant percentage goes undetected. The work done in Brazil, Colombia, and Italy shows how AI helps governments to deploy their investigative resources to boost the odds of finding a much larger percentage.

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Upcoming Symposium on Integrity in Climate Finance: Call for Contributions

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This coming May 9-10, the World Bank, Green Climate Fund, and Transparency International, together with several other partners, are jointly hosting a Symposium on Supranational Responses to Corruption: Integrity in Climate Finance and Action. The event will take place in London. The symposium theme is a timely one. At the most recent Global Conference of State Parties to the UN Framework Convention on Climate Change, states and financial institutions committed to record-breaking financing for climate solutions across sectors, and established the structure of the long-awaited Loss & Damage Fund to help developing countries. But corruption and fraud remain significant risks to public and private investments across developed and developing countries, and this means that the vast mounts of money that will be needed to address global climate change may be exposed to substantial integrity risks.

The conference organizers have recently published a call for contributions, and they are encouraging practitioners and scholars from all relevant areas (finance, law, economics, technology, sociology, etc.) and sectors (government, private sector, academia, financial community, non-profit, international organizations, etc.) to submit proposals. The organizers particularly encourage proposals that take an interdisciplinary or cross-sectoral approach.

Proposed contributions should be submitted to IntegritySymposium@worldbank.org by February 4, 2024–two weeks from today.

We hope that many of you will consider submitting proposals and join our efforts to support a creative, efficient, and coordinated evolution of integrity policies to tackle the specific challenges arising from climate finance and action, helping ensure that the deployed resources are going where they are sorely needed.

 

 

 

A “Necessary Evil?” The Migrant Crisis and Corruption in the Darien Gap

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The Darien Gap—the rugged, marshy isthmus straddling the rainforests of Colombia and Panama—has become a bottleneck in the flow of migrants from South America to the United States. In recent years, migrants have begun pouring across the previously impassible narrow crossing. Though human rights advocates have lamented the tremendous suffering that this dangerous path entails for migrants, relatively little attention has been paid to the reasons underlying Darien Gap’s “opening.” The nearly 400,000 migrants who have traveled from South America to the US-Mexico border this year alone would not have been able to cross the Darien Gap save for the egregious corruption of local Colombian authorities. Corruption has enabled people to escape the abuses of repressive regimes in Venezuela and elsewhere. Yet in so doing, it has created its own humanitarian disaster by facilitating a journey full of death and despair.

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New Podcast Episode, Featuring Daniel Freund

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, host Dan Hough interviews welcomes back to the podcast Daniel Freund, a Member of the European Parliament and former Head of Advocacy for European Union Integrity at Transparency International. The interview focuses on different dimensions to the EU’s fight against corruption, beginning with a discussion of the struggle to protect EU institutions from undue influence, a problem illustrated by the “Qatargate” lobbying scandal. The conversation also explores the challenges of building institutional resilience to corruption within potential accession countries as well as EU member states themselves–most notably the question of how the EU should be responding to autocratic regimes like Viktor Orbán’s government in Hungary. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

Addressing the Root Causes of Municipal Corruption in U.S. Cities

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Nearly a year ago, former Los Angeles City Councilman José Huizar pleaded guilty to racketeering and tax evasion, admitting that he took over $1.5 million in bribes during his tenure. As representative for the rapidly gentrifying Boyle Heights neighborhood and Downtown Los Angeles, Huizar used his office to shape urban development in line with the interests of corrupt real estate investors. Throughout his seven years as Chair of the Planning and Land Use Management Committee, he vouched for developers who paid him bribes, received kickbacks in exchange for favorable votes, and even negotiated with labor unions who threatened to block projects from which he stood to benefit financially. The U.S. Attorney for the Central District of California called the Huizar saga one of the most “wide-ranging and brazen public corruption cases” in the city’s history.

Local-level land use decisions are frequently rife with corruption, even in developed countries such as the United States. The elaborate web of regulations that govern zoning and urban planning practices, combined with relatively weak ethical standards for municipal lawmakers, encourage powerful investors to run afoul of the law. The Huizar case stands out as but one glaring example of the corruption that inhabits the world of variances, special use permits, and environmental impact reviews. Faced with mountains of paperwork and political uncertainty, real estate developers are drawn to corruption’s easy fix. Public officials such as Huizar are well-positioned to offer simple and efficient permitting in engage for generous campaign contributions and personal gifts.

While prosecuting corrupt officials like Huizar is necessary, addressing the root causes of this sort of corruption requires significant structural reforms. Three such reforms are particularly important: a reduction in the discretionary authority of political decision-makers in specific land use decisions, the abolition of councilmanic privilege, and the adoption of a universal municipal code of ethics for local lawmakers.

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Guest Post: Important New Developments in U.S. Anticorruption Efforts

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Today’s Guest Post is from Craig R. Arndt, a Yale-trained American lawyer living in Bangkok. During a lengthy career, he advised multinational clients on a range of corruption-related matters and has represented those injured by corruption in actions to recover damages.

Buried in year-end legislation arming America’s military, Congress created two new weapons to advance the global fight against corruption. Section 5101 of the 2024 National Defense Authorization Act makes it a federal crime for a foreign public official “to corruptly demand [or] receive” a bribe from any person or entity subject to the Foreign Corrupt Practices Act. Sections 5403 and 5404 require the Secretary of State to publish an annual report ranking countries in a “three-tiered system with respect to levels of corruption in their governments.”

Both are important, if perhaps controversial, developments in the global fight against corruption.

Continue reading →