Beneficial Ownership Registry Coming to the United States?

This may be the year the United States finally requires disclosure of who owns American corporations.  By a 43-16 vote, the House Financial Services Committee recommended on June 11 that the full House of Representatives approve legislation creating a beneficial ownership registry accessible to federal and state law enforcement agencies and presumably to foreign law enforcement authorities through a valid mutual legal assistance request.  At the same time, a bipartisan group of Senators, including two conservative Republicans who back President Trump, is proposing similar legislation in the Senate.

The American legislative process is an arduous one.  The Financial Services Committee’s proposed bill must be passed by the House of Representatives; an identical bill approved by the Senate, and President Trump must then sign it. Long-time supporters of a registry cite two reasons for optimism a bill will pass this year. One, 10 Republican members of the Financial Services Committee voted for the bill and others may support it when the House considers it, and second, the Senate bill has the support of Republican Senators close to President Trump.

Key provisions of the committee-approved bill: Continue reading

Who Owns a Bribe? And Why It Matters

A public servant who accepts a bribe can do with it as he or she pleases. Put it in a bank, sell it, give it away, or even bet it at the roulette table.  What if the bribe-taker is caught, though, and government wants to recover the bribe?  Does it matter what the bribe-taker did with it? It does, and greatly, especially for large bribes stashed in another country — precisely the cases the U.N. Convention Against Corruption addresses.

Article 57(3) of the convention requires the state where the proceeds of a bribe are discovered to return them to the state seeking them if the requesting state “reasonably establishes its prior ownership” of the bribe. If the recipient stashed the bribe in Singapore, the United Kingdom, or another common law country, the requesting state is in luck. If, on the other hand, it was squirreled away in a civil country, the requesting state is likely not so lucky.  It all depends upon the quirky national laws governing who owns the proceeds of a bribe. Continue reading

Corruption Damages: Options UNCAC Offers Mozambique to Recover “Hidden Debt” Losses

Mozambique continues to suffer from the “hidden debt” scandal, loans a U.S. indictment alleges employees of Credit Suisse, Lebanese shipbuilder Privinvest, and others foisted off on it for dodgy projects through bribery.  Damages include not only the several billion dollars that, thanks to accrued interest and penalties, the government now owes on the original loans of $2.2 billion, but the enormous harm caused by a halt in donors’ disbursements and the resulting slowdown in growth when the scandal was revealed. The whole sorry affair could cost the people of Mozambique upwards of $10 billion, a staggering sum for a country with a total GDP in 2017 of little more than $12 billion. 

Fortunately, Mozambique does not have to absorb the loss. As party to the United Nations Convention Against Corruption, the government can directly recover much if not all of it through article 53.  Article 53(a) requires the other 185 Convention parties to grant it the right to file a civil action to recover property acquired through the offences defined in the Convention.  Article 53(b) directs the other 185 to establish procedures permitting their courts “to order those who have committed offences [established in accordance with the Convention] to pay compensation or damage” to another party injured by the offence.  

Based on the allegations in the U.S. indictment, Mozambique could likely initiate or prompt proceedings to recover assets or recover damages in at least six nations, all parties to UNCAC: France, Lebanon, the Netherlands, Switzerland, the United Kingdom, and the United States. Indeed, thanks to a precedent setting decision by its highest court, Mozambique civil society might itself be able to recover damages in a French case independent of any action by the Mozambican government.  

These options were discussed at a May 14 conference sponsored by the Centro de Integridade Pública.  They are elaborated on in this follow up paper I prepared for CIP after the conference.   

Mozambique’s Hidden Debt Scandal: Noose Tightening Around Credit Suisse and Privinvest?

Mozambique has sustained enormous damage thanks to the “hidden debt” scandal.  The 2016 revelation the government had guaranteed $2.2 billion in loans for projects of little or no value led donors to freeze disbursements, slamming the brakes on the economy and leaving many stuck in poverty.

Press accounts and indictments issued in Mozambique and the United States blame the scandal on Jean Boustani, an executive with Privinest, a Middle Eastern shipbuilding firm; three now ex-employees of Swiss banking giant Credit Suisse; and Mozambican officials Boustani and the bankers allegedly bribed. Privinvest has denied involvement in the scheme as has Boustani. Credit Suisse claims the employees evaded its elaborate controls meant to keep it from becoming enmeshed in such schemes.

Thanks to a surprise development Monday, Privinvest and Credit Suisse may find it harder to continue ducking responsibility for the corrupt, fraudulent scheme and the massive harm it inflicted on Mozambique.  Continue reading

In Memoriam: Dimitri Vlassis (1959 – 2019)

The international fight against corruption lost one of its most steadfast and determined warriors with the passing in early April of Dimitri Vlassis, Chief of the Corruption and Economic Crime Branch of UNODC’s Division of Treaty Affairs.  Many in governments, international organizations, and civil society who, over the last two decades, enlisted in the fight against corruption will immediately recognize the loss. They will have fought in the trenches with Dimitri at some point during these years in the long-struggle to draft, ratify, and implement the UN Convention Against Corruption.  For recent recruits, who had yet to meet or hear of him, it is sufficient to say that he served as Secretary of the Ad Hoc Committee on the Negotiation of a Convention Against Corruption during the last, critical phase of the negotiations and was, at his passing, Secretary of the Conference of the States Parties to the Convention.

UNCAC represents the collective efforts of many of the world’s citizens, and a monument to their efforts would credit hundreds if not thousands.  But surely at or near the top Dimitri’s name would feature prominently. The true measure of his contribution to global welfare, however, is the continuing difference UNCAC is making to the lives of people everywhere.  For this we can all say, as UNODC Yuri Fedotov did in his note of condolence, “Thank you, Dimitri.”

I know all those in the global anticorruption community will join in expressing their condolences to Dimitri’s widow and two children.  With permission, Director Fedotov’s condolence note is below. Continue reading

Guest Post: Memo to the U.S. — Central America Needs More Anticorruption and Rule of Law Support, Not Less

The Trump Administration recently decided to terminate foreign assistance to Guatemala, Honduras, and El Salvador and to abandon America’ long-standing support for the United Nations/Guatemalan commission fighting corruption in Guatemala. In today’s guest post, retired U.S. Ambassador Stephen G. McFarland explains that corrupt officials and drug lords in the region are conspiring to “capture” these nations’ governments. Their citizens are already fleeing the countries in droves. How much greater will the pressures to migrate be if a coalition of corrupt politicians and narco-trafficantes takes over one of their governments? On national interest as well as humanitarian grounds, the ambassador argues that the United States should not only restore, but increase, support for anticorruption and rule of law programs.  

The April 17 arrest of Guatemalan presidential candidate Mario Estrada and accomplice Juan Pablo Gonzalez on drug trafficking charges has major implications for U.S. policy towards Guatemala and Central America’s “Northern Triangle.”  The U.S. Department of Justice (USDOJ) asserts that in January 2019, Estrada allegedly attempted to obtain Sinaloa cartel support for the assassination of rival presidential candidates in Guatemala’s upcoming June 2019 general elections and for financing his election campaign. In return, he allegedly promised that, if elected, he would give the cartel free reign to use Guatemalan ports and airports to traffic cocaine to the U.S.

If the USDOJ’s allegations are true: Continue reading

Mozambicans To Credit Suisse: Make Good on Crooked Debt

Credit Suisse’s complicity in the $2.4 billion corruptly lent to the Mozambican government dampened festivities at its April 26 annual shareholders’ meeting.  While shareholders celebrated receipt of a fat dividend, a representative from Mozambique reminded them that some of this money comes at the expense of the citizens of Mozambique – 28 million persons, most desperately poor, saddled with repaying loans foisted off on their government through corruption.  Three senior Credit Suisse employees have been indicted for their role in the scheme, one Credit Suisse management (rewarded with a hefty pay hike at the meeting) claims cleverly circumvented its controls preventing unlawful deals.

The statement to shareholders, delivered by a representative of the civil society organization Fórum de Monitoria do Orçamento (FMO, budget monitoring forum in English), asks Credit Suisse to support restorative justice to atone for its role in the Mozambican debt crisis.  To this end, Credit Suisse is asked to: i) accept accountability for its actions in the debt issue;  ii) commit to return to Mozambique all proceeds from the Mozambican Illegal debt scandal; iii) collaborate with authorities to ensure that all responsible parties are held accountable for their roles in the scandal; iv) write off outstanding debt arising out of debt crisis; and v) help ensure the people of Mozambique do not have to make good on debts they had no part in incurring and which did nothing to benefit them.

Full text below; video here (at 2:18:50 –  2:28).

Continue reading