February 19 – 20 Conference on Human Rights and Corruption

GAB readers know of the close relationship between corruption and human rights (here).  They know too that how to use that relationship to both combat corruption and advance human rights is still in the initial stages of debate (here and here).

To move the discussion forward, the Geneva Centre for Civil and Political Rights is holding a conference February 19 – 20 titled “Anti-Corruption Strategies for UN Human Rights Treaty Bodies” (Flyer).  Members of the anticorruption community and those who work for or with the bodies responsible for seeing states comply with their human rights treatu obligations will gather to examine how the two groups can work together to advance shared goals. A special focus will be corruption victims and asset recovery.  Details on the conference are here.

Beneficial Ownership Disclosure by Multilateral Development Banks

Joseph Kraus at The ONE Campaign recently summarized for GAB readers  measures governments are taking to require companies registered in their territory to reveal the natural person or persons who own and control them, their beneficial owners.  A parallel effort has begun to persuade the international development banks – the World Bank, the African Development Bank, the Asian Development Bank, the Inter-American Development Bank, and the European Bank for Reconstruction and Development – to reveal the beneficial owners of the companies “their monies” (read taxpayer monies) fund.  In May 2017, the U.S. Congress ordered the Secretary of the U.S. Treasury to see that each bank: –

“collects, verifies, and publishes, to the maximum extent practicable, beneficial ownership information … for any corporation or limited liability company, other than a publicly listed company, that receives funds from [it].”  Division J, section 2079(f) of the  Consolidated Appropriations Act, 2017.

As the U.S. is a significant funder of each bank, an American serves on the board of each.  In the 2017 law, Congress directed the Treasury Secretary, to whom the American board members answer, “to instruct” each to urge its bank to comply with Congress’ wish on beneficial ownership.  It also required the Secretary to report on how the successful the American board member had been in persuading the other board members and the management of their bank to gather and reveal beneficial ownership information.

The Secretary’s report contains several surprises on which banks took the U.S. effort on beneficial ownership seriously and which ones blew it off.  With the banks that ignored the U.S. effort, it leaves unanswered an interesting question: What if anything did board members representing other countries committed to the disclosure of beneficial ownership do to push the issue?

Continue reading

Learning from Defeat: The Menendez Case

Last Friday, the Department of Justice asked for another chance to try U.S. Senator Robert Menendez on corruption charges, requesting that the court “set the case for retrial at the earliest possible date.”  The first trial resulted in a mistrial.  Ten of the 12 jurors held out for acquittal, saying prosecutors had produced no “smoking gun.”  Yet the prosecution did indeed have a smoking gun – irrefutable proof the Senator broke the law – which it did in fact show the jury.

Prosecutors can learn much about trying corruption cases from the failure to convict Menendez the first time.  Not, as one commentator claims, that America’s anticorruption laws are so flawed only the most flagrant violators need fear them.  The lessons have nothing to do with America’s anticorruption laws, which are hardly in bad shape. Nor its system of 12 citizens determining the facts in a criminal case.  Continue reading

Assessing Corruption Assessments: TI’s National Integrity System

Paul Heywood and Elizabeth Johnson raise important questions in a recent journal article about Transparency International’s corruption assessment methodology; it deserves close attention by consumers and producers of any type of corruption assessment.  The purpose of a corruption assessment is to determine where a country is falling short in the fight against corruption and what more it needs to do.  It is the backbone of any national anticorruption policy, providing both a roadmap for reform and a gauge for measuring progress, and with a wrong map or inaccurate gauge, the chances the policy will curb corruption are slight.

TI calls its corruption assessment method the National Integrity System (NIS).  One of the more than 500 different corruption assessment methodologies (or “tools” in anticorruption jargon) now in use, it is among the oldest and most widely used.  Since 2001, it has been an input into anticorruption policy in over 100 countries.  Heywood and Johnson find it has four weaknesses  – Continue reading

Corruption Risk Assessments: Am I Missing Something?

Surely one of most salutary developments to result from the intense focus on corruption over the past two decades is the growing use of corruption risk assessments by public and private entities alike.  Risk assessments were first employed in the 17th century to assess the likelihood a steam engine would explode and refined over the years to address risks as varied as the meltdown of a nuclear reactor or climate change.  A corruption risk assessment estimates the chances a government agency or private corporation will experience one or more types of corruption.  Just as assessing the risks of an engine explosion or reactor melt-down is an indispensable prerequisite for designing measures to mitigate if not eliminate these risks, a corruption risk assessment provides the critical information public and private sector decisionmakers need to design practicable corruption prevention programs.

A plethora of guides explaining how to conduct a corruption risk assessment are posted on the internet (examples for the public sector here and here; for the private sector here, here, and here).  All recite the standard method for assessing risks of any kind found in text books and government reports.  First, all conceivable forms of corruption to which the organization, the activity, the sector, or the project might be exposed is catalogued.  Second, an estimate of how likely it is that each of the possible forms of corruption will occur is prepared and third an estimate of the harm that will result if each occurs is developed.  The fourth step combines the chances of occurrence with the probability of its impact to produce a list of risks by priority.

The critical steps are the second and third.  If the estimate of where bribery is likely occur or its impact if it does occur is wrong, prevention efforts will not be properly targeted. That happened to the U.K. insurance firm Aon Limited.  Thinking bribery was more likely to occur in its U.K. operations than those overseas, it put the bulk of its enforcement efforts into preventing bribery in the U.K.  Because, as the U.K. financial regulator found, it “failed properly to assess … the higher risks presented by some of the countries in which [its overseas] divisions operated,” it thus spent little time overseeing its non-U.K. agents.  That mistake was costly.  When it was revealed that many non-U.K. agents had paid bribes, the U.K. Financial Services Authority, the U.S. Department of Justice, and Securities Exchange Commission all brought enforcement actions.

Given the importance of accurate estimates of bribery risk and impact to developing a corruption risk assessment, one would expect “how to” guides to explain ways to improve the accuracy of the estimates.  Especially since risk assessments in other areas do. Continue reading

Best Wishes for the New Year

As the year ends I want to thank the 86, 826 individuals from 209 jurisdictions who visited GAB this year.  A special thanks to those who offered comments or clarified my often-feeble efforts to alert readers to new developments or alternative approaches to fighting the common enemy.

See you in 2018.

Settling Prosecutions for Corruption: Developing Nations’ Issues

The OECD Antibribery Convention requires its 43 state parties to levy “effective, proportionate and dissuasive criminal penalties” on individuals or corporations who have bribed a foreign official. Since the convention took effect February 15, 1999, through June 1, 2014, when data was last compiled, the OECD Secretariat reports that more than two-thirds of all prosecutions have ended in a pre-trial settlement. Settlements are permitted under the convention, but they must still impose “effective, proportionate and dissuasive” sanctions on the settling defendant.

Developing nations, the World Bank/UNODC’s StAR Program, and civil society groups say many of these settlements have let corporate bribe payers off too easy.  They also say that, where a case involved bribery of a developing country official, settlement has made it harder for the developing state to collect the fine and other monies due from the bribe payer under its laws.

The OECD is considering issuing a guide on settlement terms.  To help its drafters ensure they appreciate developing nations’ concerns, Norway’s Agency for Development Cooperation asked I write a paper on settlements and developing nations. Last week I posted a draft that focused on settlement strategy.  Thanks to several very helpful comments and discussions, the final paper covers much different ground.  Among the points it makes:

  • Fears that OECD settlements will bar prosecution for the same acts in developing nations seem to be misplaced given current law, but concerns a settlement could compromise a developing state’s ability to recover — i) profits the defendant realized from corrupting its officials or ii) sufficient funds to compensate citizens injured by the corruption — are genuine.
  • Developing states with weak criminal justice systems face a dilemma when weighing whether to settle or try their own cases for corruption.  As last week’s post explained, a weak judicial system means a tough settlement is out of reach, for the system’s very weakness tells defendants if they go to trial they will prevail — or equivalently, be able to delay resolution for decades.  If a government loses a string of corruption cases, it risks encouraging more corruption as those tempted to commit acts of corruption see they are very likely to get off scot-free.

When, as in the case of transnational bribery, two sovereigns both have the legal right to try the perpetrators, tension is inevitable.  The paper offers several recommendations for if not eliminating the tension at least managing it. What in international law would be termed advancing principles of comity.  Click on Settlements of Criminal Corruption Cases — Developing States’ Issues to download the paper.  Comments earnestly solicited.  Many, many thanks to those who commented on last week’s version.