Category Archives: Commentary

Are Money Laundering Laws of Any Value?

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Not really.  That’s the answer Mirko Nazzari and Peter Reuter provide at the conclusion to their comprehensive review of the evidence on the impact of the global AML scheme.

Nazzari, a postdoctoral research fellow in Political Science at the Università degli Studi di Sassari, and Reuter, a Distinguished University Professor in the School of Public Policy and Department of Criminology, University of Maryland, find no evidence antimoney laundering laws have deterred the laundering of the proceeds of crime. For one reason, the U.S. and other wealthy countries, which pushed the poorer nations of the world to follow them in enacting complex, expensive AML controls, have failed to implement critical elements of the control system themselves (inclusion of lawyers and real estate professionals in the U.S. for example). Another reason: banks, especially large, multinational ones, have failed to comply (flouted?) the laws and national regulators done little to see they do.

The one redeeming factor is the help AML regimes provide law enforcement agencies when making cases against those whose crimes generate huge sums of money. The authors summarize findings from the U.S. that show that the suspicious transaction reports banks, casinos, and other institutions must file frequently support investigations of drug traffickers, human smugglers and other criminals who launder large sums, providing additional details of their activities or corroborating evidence.

The 86-page article (here) appears in the journal Crime and Justice but unfortunately behind a paywall. It is likely to be made public shortly given the importance of the article to so many around the globe. In the meantime, the abstract and a few notable highlights are below.

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Formal Review of Italy’s Compliance with OECD Antibribery Convention Requested

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In a June 5 submission to Kathleen Roussel, Chair of the OECD Working Group on Bribery, three NGOs have asked the group to find Italy has failed to prevent political interference in a case where, in the face of overwhelming evidence, Italian oil giant Eni, Shell, and accomplices were acquitted of paying a $1.1 billion bribe to acquire rights to Nigerian oil field license OPL-245 (here).

As a party to the OECD Antibribery Convention, Italy pledged that the investigation and prosecution of foreign bribery cases would not “be influenced by considerations of national economic interest. . . or the identity of the natural or legal persons involved” (article 5). In their submission, the NGOs list 60 different instances where politics, Eni’s nationality, or both compromised the case. The evidence includes:

  • Admissions by Italian officials Eni associates conspired with state officials to “pollute” the OPL 245 investigation
  • The current trial of Eni’s former chief legal counsel for his alleged role in the plot
  • The termination of the OPL 245 prosecutions on overtly political grounds
  • The disciplining and criminal conviction of the two First Instance court prosecutors on charges that an independent judicial expert has described as “questionable conjectures

The complaining NGOs are Corner House Research of the United Kingdom; Hawkmoth, a Netherlands-stichting; and Nigeria’s HEDA Resource Centre.

The Working Group on Bribery is responsible for monitoring compliance with the Convention, and the NGOs’ submission is now circulating among its members. The Convention remains a signal commitment in the global fight against corruption.The Working Group should act promptly and decisively to see Italy observes its commitment to eradicating foreign bribery – no matter the political implications or the bribe payor’s identity.

Causes and Trends of Corruption Risk in Europe

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Alina Mungiu-Pippidi and Iva Parvanova just released a report on corruption in 41 European nations, EU members plus those seeking to join the EU and those that neighbor these countries. A joint publication of Bridge//Gap and LUISS, the highlights include:

  • Non-EU states (Norway, Switzerland, UK) outperform most EU members, while Turkey and Bosnia lag furthest behind.
  • Accession countries and new member states perform well on transparency indicators, sometimes better than more developed countries.
  • Oligarchization is on the rise, especially in Turkey, Cyprus and Hungary.

Packed with useful, objective information on trends in corruption and measures to curb it, the authors find the EU still needs to more to assess the extent and nature of corruption across the 41, recommending it “integrate national-level data across Member and candidate states, enabling cross-border tracking of individuals and companies involved in corruption through unified risk indicators.” They urge implementation of a “pan-European disbarment system …to prevent chronic-offender favorite companies from accessing public contracts.” In addition, they emphasize that corruption risks in public procurement should be managed at the contracting agency level “with officials held accountable for transparency and integrity benchmarks” rather than solely relying on after the fact criminal prosecutions.

The full text of the report is at: https://leap.luiss.it/publication-research/publications/a-mungiu-pippidi-i-parvanova-upholding-intergrity-the-causes-and-trends-of-corruption-risk-in-europe-41/.

Good News about the Fight Against Corruption: International Collaboration in Malawi

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Malawi’s Platform for Investigative Journalism reports that “the man widely accused of orchestrating one of the most brazen corruption schemes in Malawi’s history is now officially in the dock” (here).

As the Continent recounts (here), British-Malawian businessman Zuneth Sattar was indicted June 2 in the United Kingdom on 18 counts of bribery. The charging documents claim that in return for a raft of state contracts he bribed numerous high-ranking Malawian officials. Named in the documents are: a previous Vice President, the late Saulos Chilima; President Lazarus Chakwera’s chief of staff, Prince Kapondamgaga; former Malawi Police Inspector General George Kainja; former Anti-Corruption Bureau (ACB) Director General and Solicitor General Reyneck Matemba; and Brigadier Dan Kuwali, a law professor and commandant at the Malawi Defence Force College.

The charges show how critical transnational cooperation can be when it comes to nailing “big fish.”  They are the result of a several year collaboration between the UK’s National Crime Agency and Malawi’s Anti-Corruption Bureau (ACB).

The case also shows that cross-border cooperation is critical not only when it comes to rooting out the facts.

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Good News from Argentina: Web of Judicial Corruption Exposed

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Judge Marcelo Bailaque, a senior federal magistrate based in Rosario, has been arrested for his role in a complex corruption scheme that allowed drug traffickers and money launders to avoid prosecution.

What makes the arrest especially good news is that Rosario, a river port on the route between cocaine-producing Peru and Bolivia and customers in Europe, has been dubbed Argentina’s first “narcocity,” with gangland violence regularly leading to the deaths of innocents (here). His arrest is a critical step in dismantling the gangs and bringing peace and prosperity to the beautiful, colonial-era city.

Although the immunity Bailaque enjoys as a federal judge may slow the criminal case, the arrest prompted the immediate opening of a disciplinary one before the governing body of the judiciary (the Consejo de la Magistratura). It is now proceeding in parallel with the criminal investigation.

Bailaque was snared as part of a larger investigation led by the Rosario office of Argentina’s Procuraduría de Criminalidad Económica y Lavado de Activos. It found that Carlos Vaudagna, a now former regional director of the tax agency operated as an informal broker between individuals under criminal investigation and key members of the judiciary. Using his position and influence, Vaudagna secured favorable treatment for the suspects in return for bribes or other benefits, intervening directly or through intermediaries to obstruct investigations, delay proceedings, and influence judicial decisions. His conduct exposed a broader structure of collusion between segments of the judiciary and organized economic crime. Judge Bailaque is charged with playing a central role in the criminal scheme, enabling or tolerating illicit practices from his position on the federal bench.

This outcome represents a crucial milestone, not only in the pursuit of accountability in this case, but in the broader fight against corruption within the judiciary. Progress would not have been possible without the collaborative efforts of multiple agencies and the strong institutional backing for prosecutorial independence in Argentina.

For Spanish readers (and Google translate users) more on the investigation follows.

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Fighting Grand Corruption: Naomi Roht-Arriaza’s Indispensable Guide to Combatting Its Scourge

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The literature on grand corruption, a/k/a kleptocracy or state capture, continues to expand at an ever-increasing rate.

Investigative exposes, think tank and NGO policy papers, academic books and articles, court cases and legal commentaries, and yes, blogs like this one make it hard for full-time students of the phenomenon, let alone policymakers, journalists and activists, to stay abreast of the learning this vast outpouring of thinking is producing.  

Thanks to University of California Law Professor Naomi Roht-Arriaza‘s new book, what we know about grand corruption, what can be done to curb it, and how to make its victims whole is now available in a single, readable, useful volume.

The title – Fighting Grand Corruption: Transnational and Human Rights Approaches in Latin America and Beyond – advertises two of its most important contributions.

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Trump Blares Profits, Eliciting Barely a Peep

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That was the headline on the lead story in the May 26 New York Times.

The author, the chief White House correspondent for The New York Times and one of Washington’s most respected journalists, reports the growing view that the Trump Administration’s corruption represents “the most brazen use of government office in American history.” In support he cites anticorruption guru and GAB favorite Michael Johnston who told him–

I’ve been watching and writing about corruption for 50 years, and my head is still spinning

To quote a guru on another subject (revolution — V. Lenin), the question is now: What is to Done?

Great Resource for Journalists and Anticorruption Activists

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UNISHKA Research Service, a worldwide alliance dedicated to fostering ethics and integrity in government, business, and society, is developing directories showing for each country where to find property records, business registrations, and other information on who holds what assets. The project is adding countries at a rate of 1-2 per week.

A screenshot of the first page of the Qatar directory is below.  Link to the full page here.

Belgian and Uzbek Governments Profit from Termination of DoJ’s Kleptocracy Unit

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Central Asia Due Diligence and the Uzbek Forum for Human Rights have identified the latest fallout from the Trump Administration’s destruction of American institutions devoted to fighting global corruption. The governments of Belgium and Uzbekistan have each pocketed $108 million in stolen assets that should have gone to the people of Uzbekistan.

In this just released paper, the two human rights NGOs explain how the demise of the Department of Justice’s Kleptocracy Asset Recovery Initiative allowed the two governments to ignore provisions in the UN Convention Against Corruption and the principles of the Global Forum on Asset Recovery that together bar assets stolen by a corrupt official from being kept by the government of the country where the official stashed them or returned to the official’s corrupt cronies.

Lawyers for the Initiative had designed a sophisticated process (details here) to see the $216 million in bribes to former Uzbek first daughter Gulnara Karimova found in Belgian banks DoJ would go to the UN trust fund overseeing development programs in Uzbekistan. With the Initiative’s demise, the Belgian and Uzbek governments apparently saw no reason they should not divvy up the money between them.

So thanks to the Trump Administration, Belgium, one of the world’s wealthiest countries, is now $108 million wealthier, and Uzbek’s leaders, several Gulnara’s accomplices, now have $108 million to spend keeping themselves in power. Meanwhile, the citizens of Uzbekistan, GDP per capita $3,500, scrape by.

So That’s Why the Kleptocracy Asset Recovery Initiative Was Abolished

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Thanks to Alexis Loeb’s March 26 Lawfare post, another Trump Administration attack on the global effort to curb corruption has been revealed. Buried in Attorney General Bondi’s February 5 Memorandum making the elimination of drug cartels and transnational criminal organizations the Justice Department’s number one priority, she reports, is an order disbanding the Department’s Kleptocracy Asset Recovery Initiative.

Loeb does a fine job of explaining what a loss its dissolution will be to the international fight against corruption, recounting its efforts to help nations around the world battle kleptocracy. Among its successes: Initiative’s lawyers forced notorious kleptocrat Nguema Obiang, Equatorial Guinea’s Vice President, to forfeit nearly $30 million in assets, and their efforts resulted in the return of millions stolen by Nigerian dictator Sani Abacha and former Uzbekistan “first daughter” Gulnara Karimova to their countries. The blockbuster was 1 Malaysia Development Berhad (1MDB). With the Initiative’s assistance, Malaysia has so far recovered $6.5 billion in stolen assets from the thieves (here). Indeed, Jeff Sessions, Trump’s first Attorney General, called the 1MDB scandal “kleptocracy at its worst,” and lauded the help the Initiative provided Malaysia’s government (here).

But Loeb leaves the big question unanswered. Why in the world would AG Bondi disband such a valuable unit? Especially since, when assets are forfeited to the U.S. government, the staff time and expenses incurred were covered.

Thanks to Washington Post reporter Peter Whoriskey’s story in today’s paper, we now have the answer.

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