Though the war in Ukraine continues to rage, scholars and policymakers around the world have already begun to look ahead to what it will take to help rebuild the country—a project that the Ukrainian government estimates will cost upwards of $750 billion, and which will likely entail substantial international assistance from a broad coalition of countries. Any project of this magnitude—one that involves large government contracts for construction, supplies, and other services—raises concerns about corruption. Indeed, concerns about the potential for widespread corruption in the reconstruction of Ukraine have already been voiced on this blog and elsewhere (see, for example, here, and here). But while this concern should be taken seriously, it should not be exaggerated. There are at least three reasons why the potential for corruption in the Ukrainian reconstruction process, while real, may not be nearly as severe as some of the current pessimistic commentary suggests:
The recently-concluded FIFA World Cup in Qatar has served as yet another reminder of the corruption that seems to accompany the awarding of hosting rights for major international sporting events. According to the U.S. Department of Justice (DOJ), in 2010 representatives of Qatar bribed three South American FIFA officials to win the run-off vote against the United States to host the 2022 World Cup. And this came after two members of the FIFA selection committee had already been barred from voting after they had been caught agreeing to sell their votes. This was not an isolated incident. The DOJ also alleged that Russia bribed FIFA officials to host the 2018 World Cup, and indeed more than half of those FIFA officials involved in the 2018 and 2022 host country votes—including FIFA’s then-president Sepp Blatter—have been accused of improper behavior. Nor has this sort of behavior been limited to FIFA. The International Olympic Committee (IOC) has had numerous similar scandals. The IOC has launched an investigation into nine members who were bribed to vote for granting Brazil the hosting rights for the 2016 Olympic Games; Sérgio Cabral, the former governor of Rio de Janeiro, admitted to paying $2 million to the former president of the International Amateur Athletic Federation (IAAF) to buy votes to select Rio as the 2016 Olympic host city, and the head of Brazil’s Olympic committee, Carols Nuzman, was sentenced to over 30 years in prison as a result. And when Russia secured the 2014 Winter Olympics bid, it did so with the assistance of the then-vice president of the Olympic Council of Asia, Gafur Rakhimov, an organized crime leader and heroin kingpin.
Why is the process of selecting host cities and countries for major international sporting events so constantly captured by bribery and corruption? There are several inter-related reasons for this ongoing problem:
In a rare moment of bipartisanship, the U.S. Congress is on the cusp of adopting a significant piece of anticorruption legislation: the ENABLERS Act. The ENABLERS Act is targeted at closing loopholes in the American financial services system that have allowed corrupt foreign actors to use “gatekeeper” entities like law firms, trusts, payment processors, and accounting firms to launder billions of dollars through offshore accounts. The proposed legislation, which has been attached to the FY2023 National Defense Authorization Act (NDAA), would expand the definition of “financial institution” in the current Bank Secrecy Act (BSA) to cover more gatekeeper entities like those mentioned above, and would require these financial services-adjacent entities to institute anti-money laundering (AML) systems, comply with Know Your Client (KYC) regulations, and file suspicious activity reports (SARs) with the Treasury Department.
The ENABLERS Act, discussed previously on this blog, has received widespread support in both the House and Senate, but some influential interest groups remain opposed. Notably, the American Bar Association (ABA) has objected to the inclusion of law firms among the entities that the ENABLERS Act would subject to the BSA’s AML rules. The ABA’s chief objections are that the ENABLERS Act—especially the requirement that law firms would be required to file SARs—would undercut attorney-client confidentiality and the right to effective counsel and would inappropriately interfere with state judicial regulation of the legal profession.
While the ABA is correct in emphasizing the fundamental principle that everyone is entitled to legal representation, and that lawyers have duties of confidentiality, loyalty, and zealous advocacy to their clients, the ABA’s objections to the ENABLERS Act are overstated. Upon closer inspection, the ENABLERS Act does not ask lawyers to do more than the ethical regime that governs the legal profession already requires or permits.