From “Final Period” to “Business as Usual”: Why Has AMLO’s Ambitious Promise to Combat Mexican Corruption Faltered

In 2018, Andres Manuel Lopez Obrador (commonly known as AMLO) won a landslide victory in Mexico’s presidential election, and his leftist Morena Party won a large majority in Congress. AMLO and Morena campaigned on a populist platform that promised a “Fourth Transformation” of Mexico (the other three being Mexican Independence, the Liberal Reformation, and the Revolution); this Fourth Transformation would, they claimed, eliminate historic government abuse and tackle widespread government corruption. Now, more than halfway through AMLO’s six-year term, the credibility of that anticorruption rhetoric has dramatically faded. Not only has AMLO’s government failed to deliver on his promise to usher in a new era of clean government, but in many respects his administration has been moving in the wrong direction.

Understanding the ways in which AMLO’s approach to governance has undermined rather than strengthened Mexico’s fight against corruption is crucial to getting the country back on track. Four problems with the AMLO regime’s approach to anticorruption are especially significant: Continue reading

Time to Make the OECD Antibribery Convention an Antikleptocracy Convention Too

Confiscating assets acquired through corruption is a critical part of the fight against corruption. If those who would profit from corruption know they will be denied the benefit of their wrongdoing, there is no incentive to be corrupt.

As Justin explained Monday, Russia’s invasion of Ukraine has given asset confiscation a major boost. Many of Putin’s superrich backers, oligarchs or kleptocrats, became wealthy through corrupt deals, and the seizure of their mega-yachts, mansions and other properties now located outside Russian territory offer the West a way, albeit indirectly, to pressure Putin to end the aggression. Italian, German, and other Western prosecutors are thus now aggressively invoking domestic forfeiture statutes to confiscate them.

But as the Washington Post reports today, with the help of pricey lawyers and other enablers (here and here), the oligarchs have hidden their assets inside complex legal thickets of offshore companies that make confiscation hard if not impossible. In response, last Thursday President Biden asked Congress to give U.S. prosecutors new powers to cut through this underbrush (here).

The President’s initiative is welcome. But it also invites the obvious question: Why shouldn’t other Western nations follow suit?  All are united in their opposition to the war and desire to make Putin’s associates suffer consequences. Why shouldn’t every Western state ease the task their prosecutors face to the rapid seizure of oligarchs’ assets? And indeed to the seizure of any asset corruptly obtained or unlawfully possessed found in their territory?

The most straightforward way to realize this goal would be to amend the OECD Antibribery Convention.

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The Anticorruption Campaigner’s Guide to Asset Seizure

Anticorruption campaigners have long argued that Western governments should be more aggressive in freezing and seizing the assets of kleptocrats and corrupt oligarchs. While targeting illicit assets has been part of the West’s anticorruption arsenal for many years, attention to this tactic has surged in response to Russia’s invasion of Ukraine. Almost as soon as Russian troops crossed the border into Ukrainian territory, not only did Western governments impose an array of economic sanctions on Russian institutions and individuals close to the Putin regime, but also—assisted by journalists who identified dozens of properties, collectively worth billions—Western law enforcement agencies began seizing Russian oligarchs’ private jetsvacation homes, and superyachts.

Many people who are unfamiliar with this area—and even some who are—might naturally wonder about the legal basis for targeting these assets. And indeed, the law in this area has some important nuances that are not always fully appreciated in mainstream media reporting and popular commentary. Continue reading

How the U.S. Supreme Court Might Undermine Longstanding Safeguards Against Pay-to-Play Corruption

A campaign finance case currently pending before the U.S. Supreme Court, Federal Election Commission (FEC) vs. Cruz, could have serious implications for corruption in the United States. The essential facts of the case are these: Just a day before Senator Ted Cruz’s narrow victory in the 2018 Senate election, Cruz personally lent $260,000 to his campaign. Under federal campaign finance law, contributions to a candidate’s campaign that come in after the election has already occurred can be used to repay up to $250,000 in personal loans a candidate has made to their own campaigns, but no more. Therefore, Cruz’s campaign reimbursed him only $250,000, not the full $260,000. Cruz challenged the cap on reimbursing a candidate’s personal loans from post-campaign donations as an unconstitutional limit on political speech in violation of the First Amendment of the U.S. Constitution.

If Cruz wins—and he very well might—the result could be a substantial increase in bribery of U.S. elected officials. As many commentators have noted (see here, here and here), allowing a victorious candidate to have their loans repaid by private interests is a recipe for quid pro quo corruption. After all, this money goes into an elected official’s pocket, and the fact that the contributions are made after an election increases the likelihood that a post-election donor knows that the recipient will be in a position to do him official favors. But the risks that this case poses to anticorruption law go beyond the particular activity at issue in the case itself. There is a very real risk that the Supreme Court will use this case to further limit the sorts of interests that can justify campaign finance restrictions of any sort, thereby jeopardizing seemingly well-established and recognized limitations on political spending that have long been justified on the grounds that they prevent corruption and its appearance.

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Argentinian Judicial Reform: A Wolf in Sheep’s Clothing

On February 1, 2022, several thousand demonstrators marched on the streets of Buenos Aires to demand judicial reforms. The march was supported by Kirchnerist groups (so-called because of their support for former Presidents Néstor Kirchner and Cristina Fernández de Kirchner) and by President Alberto Fernández, a Kirchner ally who has been pushing for judicial reforms since his inauguration in 2019. Frustrations with Argentinian courts, however, transcend partisan divides. Polls indicate that about 70% of Argentinian adults believe the judiciary is corrupt, which is not very surprising given the recent string of high-profile judicial corruption scandals. Just last year, Judge Walter Bento was indicted and charged with running a large-scale corruption network. Likewise, in 2019, Judge Raúl Reynoso was sentenced to 13 years in prison for bribery and narcotrafficking. Judge Carlos Soto Dávila was similarly indicted in 2019 for accepting bribes in drug trafficking cases. Not only is there extensive evidence of judicial corruption, the Argentinian judiciary seems entirely ineffective at holding Argentina’s notoriously corrupt political class accountable: appallingly, only 1% of all corruption cases in Argentina ever result in an actual sentence.

In light of the Argentinian judiciary’s clear corruption and legitimacy problems, judicial reform seems like a step in the right direction. However, President Fernández’s plans for transforming Argentina’s judiciary, which he rearticulated this March, may actually worsen corruption rather than rectify it.

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How the U.S. Should Tackle Money Laundering in the Real Estate Sector

It is no secret that foreign kleptocrats and other crooks like to stash their illicit cash in U.S. real estate (see here, here, here and here).  A recent report from Global Financial Integrity (GFI) found that more than US$2.3 billion were laundered through U.S. real estate in the last five years, and half of the reported cases of real estate money laundering (REML) involved so-called politically exposed persons (mainly current or former government officials or their close relatives and associates). The large majority of these cases used a trust, shell company, or other legal entity to attempt to mask the true owner of the property.

Shockingly, the U.S. remains the only G7 country that does not impose anti-money laundering (AML) laws and regulations on real estate professionals. But there are encouraging signs that the U.S. is finally poised to make progress on this issue. With the backing of the Biden Administration, the U.S. Treasury Department’s Financial Criminal Enforcement Network (FinCEN) has published an advance notice of proposed rulemaking (ANPRM) that proposes a number of measures and floats different options for tightening AML controls in the real estate sector. The U.S. is thus approaching a critical juncture: the question no longer seems to be whether Treasury will take more aggressive and comprehensive action to address REML; the question is how it will do so. And on that crucial question, I offer three recommendations for what Treasury should—and should not—do when it finalizes its new REML rules:

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Some Things Are More Important Than Money: The Nature of Bribery and the U.S. College Admissions Scandal

For the last two months, it’s been difficult for me to think or post about anything other than Russia’s war against Ukraine—and how this crisis might relate, directly or indirectly, to issues of corruption. But for today, I’m going to write about something a bit closer to (my) home, and substantially lower-stakes: the U.S. college admissions scandal, often known as the “Varsity Blues” scandal, after the code name that U.S. prosecutors assigned to the investigation. A quick refresher: a number of affluent parents arranged for their children to be picked by colleges coaches as athletic recruits, even though these teenagers were not in fact gifted athletes, and in some cases did not even play the sports for which they were recruited; this virtually guaranteed that the children would be admitted to the colleges in question, because those colleges had the practice of giving the coaches substantial discretion in choosing a certain number of recruits each year. (There were other aspects of the fraud, including in some cases cheating on the admissions tests, but the fake athletic recruiting gambit was the heart of the scheme.) The coaches participated in this fraudulent activity because the parents bribed them, via the middleman at the center of the scandal (and the purported “charitable foundations” that he controlled). In some cases, the parents paid monetary bribes directly to the coaches. But in some cases, the parents also—or in addition—made substantial donations to the university’s athletic program or the individual team, in exchange for the coach falsely asserting that their child should be recruited as an athlete.

That last, rather unusual aspect of the scheme—that the payments sometimes went to the university’s athletic program, rather than into the coach’s pocket—gives rise to a question that some of the Varsity Blues defendants have been urging in court: Can a payment count as a bribe (in the legal or moral sense) if it goes to the university? Obviously, this is not an issue in those cases where the prosecution has proven that money or other things of value were offered directly to the coach. But what about those cases that involve donations to the university’s teams or athletic program? Some of the Varsity Blues defendants insist that these donations cannot be bribes—even if we stipulate that the purpose of the donation was to induce the coach to falsely claim that an applicant should be recruited as an athlete, and that the coach did so as part of an explicit quid pro quo. The reason, proponents of this argument insist, is that if the purported “victim” of the alleged bribery (here the university) is also the recipient of the payment, then the payment cannot not a bribe.

This is wrong. Indeed, it is nonsense, and that fact that at least some judges have been entertaining this as a serious objection to some of the Varsity Blues charges reveals a deep conceptual confusion about the nature of bribery and why it is wrongful. Continue reading

The Anti-Anticorruption Origins of the American Revolution

The story of the American Revolutionary War is one that many of our readers – certainly our American readers – know well. According to the conventional narrative, at least as conveyed in U.S. high schools, the British crown’s unfair taxes, punitive laws, and general disregard for the Thirteen Colonies led to protest, massacre, and revolution. There is, however, another perspective from which the story could be told, in which the British were not engaged in arbitrarily denying colonial rights, but were instead embarking an on anticorruption crackdown that went horribly awry.

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How the Corporate Transparency Act Can Shine Light on Dark Money in U.S. Elections

Last year, in an effort to prevent the abuse of anonymous companies by malign actors, the U.S. Congress passed the Corporate Transparency Act (CTA). The CTA requires certain legal entities, like corporations and limited liability companies (LLCs), to provide information about their beneficial owners—that is, the people who actually own or control the entity—in order to make it more difficult to operate anonymous shell companies for criminal purposes. Pursuant to the CTA, beneficial ownership information must be submitted to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and maintained in a centralized database.

Much of the fight for beneficial ownership transparency was spearheaded by anticorruption advocates, who emphasized the ways in which foreign kleptocrats and other corrupt officials use anonymous companies to hide their stolen wealth. But the CTA’s beneficial ownership transparency measures will be helpful in fighting another kind of corruption, one closer to home: the corrupting influence that so-called dark money—spending by undisclosed donors to influence election outcomes—has on the integrity of U.S. elections and American political sovereignty.

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Fighting Corruption in the Water Sector: Comments Please

A mark of progress in the fight against corruption is the growing attention corruption fighters are paying to its nuts and bolts.  A bribe is a bribe: whether paid to rig a bid on a public works contract or duck sanctions for polluting a stream. And laws against bribery and appeals to those in both sectors to refrain from taking a bribe have their place.

But a strategy for preventing bribery in public works contracts, the water sector, or indeed any sector of the economy demands more. Where in the sector is bribery most common? Why do some public servants take them while others refuse? What are the economic incentives public servants and their private sector counterparts face? What social norms operate in the background? What’s the legal regime governing sector operations? In short, what makes the sector tick? 

Only when corruption fighters understand a sector can they devise means for preventing corruption in it and identify indicators (“red flags”) for when it may be present. Teaming an expert corruption fighter with an authority on the sector is the obvious approach, and that is exactly what the U.K.’s CurbingCorruption has done on producing 15 sector-level studies of corruption — from agriculture to education to health to local government to shipping and telecommunications.

A 16th, on corruption in water, is now in progress. The project team comprises Mark Pyman, co-founder of CurbingCorruption, and Laura Jean Palmer Moloney, a hydro-geographer, expert in coastal resources management now with Visual Teaching Technologies. Mark and Laura Jean are soliciting comments on a briefing paper listing what they believe are the key corruption issues across the range of issues in the water sector. Readers can leave a comment below or to write them directly: jean@visualteachingtechnologies.com and mark.pyman@curbingcorruption.com