Category Archives: Commentary

How to Reform Brazil’s Freedom of Information Regime

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Ten years ago, Brazil enacted its Access to Information Law, which implements the constitutional guarantee of the right to information. Under the law, certain government data must be proactively disclosed, and other information must be provided upon the request of a member of the public, without the requester needing to show any special reason or justification. This law was supplemented with the enactment, last March, of the Digital Government Law, which streamlines the procedures for information requests, clarifies the government’s obligations to provide information in an open format that fulfills completeness, quality, and integrity requirements, and includes a non-exhaustive list of data that must be disclosed.

These laws, like other freedom of information laws, are intended to make government more responsive and accountable and to help fight corruption by making it easier for citizens, journalists, advocacy groups, and prosecutors to scrutinize and analyze government information for evidence of suspicious activity. But while the laws are very detailed about the rules for disclosing information upon request, the law’s provisions on proactive disclosure are not sufficiently specific or effective. And proactive disclosure is quite important. After all, while the right to request information is helpful to those who want to investigate a specific event, the proactive disclosure of data—for example, with respect to public expenditure, public procurement processes, and public contracts—may raise “red flags” that can spur more in-depth investigations.

There are three deficiencies in particular that should be remedied, so that Brazil’s freedom of information laws can be effective in ensuring the sorts of proactive information disclosure that can foster transparency and detect or deter corruption:

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Chinese NPAs Target the Wrong Firms

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Settlement agreements, such as non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs), have come to play a central role in resolving corporate criminal cases, including bribery cases. These settlement mechanisms are thought to improve overall enforcement by encouraging companies to voluntarily disclose wrongdoing and cooperate with investigators, in order to avoid the reputational and economic harm that would come with a criminal prosecution. The United States pioneered the use of NPAs and DPAs, but variants on these mechanisms have been adopted by many other countries as well (see here, here, and here).

The People’s Republic of China has also begun to explore a version of this mechanism. After some initial pilot programs at the local level, in June 2021 the Supreme People’s Procuratorate Office, together with eight other top authorities, promulgated Guiding Opinions on Establishing a Mechanism for Third-party Monitoring and Evaluation of Corporate Compliance Programs for Trial Implementation (or, more succinctly, the “Non-Prosecution for Compliance” mechanism). This mechanism, which can be used to resolve bribery cases as well as cases involving other types of corporate crime, resembles the NPA mechanism used in the United States: If a company accused of criminal violations admits wrongdoing, cooperates with the government’s investigation, agrees to pay certain fines, implements a compliance program that satisfies the requirements of the procuratorate office, and is overseen by a third-party monitor for up to one year, then prosecutors will agree not to prosecute the company, thus sparing the company not only the risk of criminal conviction but also the costs associated with defending against a criminal prosecution.

But there’s a big difference between the U.S. NPA system and the Chinese version: The U.S. (and other countries, like the U.K.) have used NPAs and DPAs to settle major cases against giant firms. In China so far, prosecutors (in the ten provinces and municipalities that piloted the NPA system) have only concluded NPAs with small and medium enterprises (SMEs), and have done so only when the offenses involved were minor crimes (those for which the responsible persons may be sentenced to less than three years in prison, the lowest permissible punishment for most crimes). This enforcement approach gets things exactly backwards: While the availability of NPAs can be very helpful in combating corruption and other crime in large companies—by giving those companies stronger incentives to disclose and cooperate, and by inducing them to enhance their compliance systems—offering NPAs to SMEs adds little value and is costly to the government. Rather than offering NPAs only to SMEs, as seems to have been the approach of Chinese prosecutors thus far, it would be better if SMEs were deemed ineligible for NPAs.

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Kais Saied Isn’t Fighting Corruption in Tunisia, He’s Fighting His Political Opponents

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Kais Saied, a former constitutional law professor at the University of Tunis, has been president of Tunisia since 2019. In late June 2021, Saied invoked emergency powers under the 2014 Tunisian Constitution to oust Prime Minister Hicham Mechichi, assume control over the government, shutter Parliament, and begin his rule of the country by decree—a move that some have described as a coup. Saied’s recent announcement that he will call a constitutional referendum and parliamentary elections to take place next year bodes well for a potential return to the rule of law, although in October, when he appointed a new government, he curtailed the powers of the Prime Minister—so we shouldn’t get our hopes up just yet.  

One of Saied’s stated justifications for his extraordinary consolidation of power was the need to end rampant corruption. He has asserted that Tunisia is a country ruled “by two regimes, an apparent regime, that of the institutions, and a real regime, that of the mafia,” and he has vowed not to “engage in dialogue with ‘thieves.’” Saied defended his extraordinary invocation of emergency powers by highlighting the danger to the country posed by those who “lurk at home and abroad, and from those who see their office as booty or as a means to loot public funds.” This was not a new theme for Saied. Indeed, fighting the corruption of Tunisia’s elites has long been his rallying cry. When he ran for president in 2019 as a political outsider, he ran on an anticorruption platform that proved extraordinarily popular, especially with the younger generation. (Saied garnered an incredible 90% of the vote of young Tunisians in 2019.) And so far, his consolidation of power has also enjoyed widespread popular support—though it has started to wane recently.

Will Saied in fact follow through on his pledge to use his extraordinary powers to root out corruption in Tunisia? It’s hard to know for sure, but some prominent international commentary has defended Saied’s aggressive moves partly on the grounds that he is indeed taking actions that are necessary to counter the systemic corruption of the Tunisian elite. I am more skeptical. There are several factors that suggest Saied’s emphasis on fighting corruption is little more than a disingenuous and self-serving rationalization for an unjustified power grab. Continue reading →

AML for NFTs: How Digital Artwork Is Used to Clean Dirty Money, and How to Stop It

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The art world has gone digital, thanks in large part to the advent of so-called non-fungible tokens (NFTs). NFTs, like cryptocurrencies, use blockchain technology (a disaggregated database made up of immutable blocks of data), which makes it possible to attach a unique authenticating token—sort of like a digital signature—to a digital item, most commonly a piece of digital artwork. The primary difference between an NFT and a unit of cryptocurrency is that one NFT cannot be exchanged for another—they are, as the name implies, non-fungible. That non-fungibility enables creators of digital art to sell NFTs of their work for profit. That’s important, because unlike traditional artwork, it’s extremely easy to create perfect copies of digital artwork. But one cannot simply copy an NFT. Of course, one can copy the image itself, but the copy, though identical to the naked eye, will lack the authenticating token. Why, you might reasonably ask, would anyone pay for an NFT when they can get the original image for free? Critics have raised these and other questions, but it seems that a sufficient number of people derive pleasure from collecting the original artwork, or from supporting the artists, or from the belief that the price of NFTs will continue to rise, that trade in NFTs has become big business. An artist known as Beeple sold one NFT for $69 million. Platforms from cryptocurrency exchanges to the hundreds-years-old art auction house Sotheby’s (and potentially the movie theater chain AMC) have entered into the growing NFT market; in the third quarter of 2021, the trading volume of NFTs exceeded $10 billion.

As in other emerging high-value markets, however, NFTs present a money laundering risk. Indeed, NFTs sit at the intersection of two sectors that are already characterized by high money laundering risk: fine art and cryptocurrencies. Because of the uniquely-high money laundering risk posed by these digital assets, FinCEN should issue NFT-specific anti-money laundering (AML) compliance guidance, and Congress should extend the Bank Secrecy Act (BSA) to apply to NFT marketplaces.

Before proceeding to regulatory solutions, it’s worth elaborating on why NFTs pose a significant money laundering risk. As just noted, NFTs are particularly high risk because they combine two sectors that are already characterized by high money laundering risk, albeit for different reasons:

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The End of Institutional Multiplicity: A Drawback in the New Administrative Improbity Law

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Brazil’s Administrative Improbity Law is one of the cornerstones of the country’s anticorruption framework. The law imposes administrative and civil liability on public officials and political agents for illicit enrichment, damage to the treasury, and acts against the principles of public administration. Before its enactment in 1992, these forms of misconduct were only punishable under criminal law, which imposes a much more demanding evidentiary standard. The enactment of the Administrative Improbity Law thus played a valuable role in enabling the government to hold corrupt actors liable in those situations where the evidence of corruption, though strong, was not enough to establish proof beyond a reasonable doubt.

This past October, the Brazilian government enacted significant amendments to the Administrative Improbity Law. Some of these changes were welcome, particularly those that clarified vague provisions and attempted to speed up the process. (Brazilian courts have taken on average six years to adjudicate administrative improbity claims.) But another change is much less welcome: The amendments to the law reduced the number of institutions that can file a suit for violations of the law. Under the original version of the law, a suit could be initiated either by the Public Prosecution Office (an autonomous body) or by the government entity that was harmed by the corrupt act (the federal Attorney General’s Office in the case of acts that harm the national government, and the state or municipal authorities in the case of acts that harmed subnational government entities). This arrangement is a form of what Brazilian scholars typically refer to as institutional multiplicity—an arrangement where multiple institutions have overlapping authority to enforce legal provisions. Institutional multiplicity is a key feature of Brazil’s anticorruption framework. The new version of the Administrative Improbity Law scraps this multiplicity, at least in this context, by giving the Public Prosecution Office the exclusive right to file administrative improbity suits.

This is a mistake.

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Eliminating Barriers to Compensating Corruption Victims  

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StAR yesterday held six panels on asset recovery issues as part of the meeting of the Conference of State Parties to UNCAC. I participated in the one on compensating corruption victims along with Costa Rican prosecutor Greysa Barrientos, Kate McMahon, Chair the International Bar Association’s Anticorruption Asset Recovery Subcommittee Kate McMahon, and Juanita Olaya Garcia of the UNCAC Coalition.

Panel moderators Yara Esquivel of StAR and Felipe Falconi from UNODC asked that I discuss what avenues of relief were available to corruption victims, the main challenges they face in recovering damages, and what reforms are needed to overcome those challenges. My remarks follow.   

Avenues of relief. Corruption victims generally have two options for obtaining compensation – as an adjunct to a criminal prosecution of the perpetrators by the state or by bringing a private civil suit against them.

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Lessons from the U.S. College Admissions Scandal: Why Universities Need to Embrace Anticorruption Measures

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In 2019, a college admissions corruption scandal made headlines in the United States and around the world. Richard Singer, who masterminded the scheme, promised wealthy parents that he could get their children coveted places at Stanford, Yale, USC, and other selective colleges through what he called the “side door.” Rather than donate $45 or $50 million to gain an edge in admissions, parents would pay Singer and his foundation to bribe college coaches to recruit the students as college athletes—even though many of the students had never competed in the sport for which they were allegedly being recruited. U.S. federal prosecutors, in the so-called “Varsity Blues” investigation, uncovered this scheme and indicted more than fifty people (parents, coaches, and others). Many of the defendants pled guilty. This past October, in the first Varsity Blues case to go to trial, a jury found hedge fund magnate John Wilson and former casino executive Gamal Abdelaziz guilty of conspiracy, wire fraud, and mail fraud. More trials are likely coming, and more convictions are likely.

Beyond the sensational headlines—which often focused on the wealthy parents, several of whom are celebrities—what broader lessons can we draw from the scandal? When it first broke, many commentators attacked the broader culture of entitlement and privilege in which wealthy parents secure unfair—but in most cases entirely legal—advantages for their children through legacy preferences and favoritism toward big donors. Other commentators drew attention to the hypercompetitive, win-at-all-cost culture fostered by the U.S. college admissions system. Critics pointed to a culture that leads not only to criminal bribery of the sort revealed in the Varsity Blues investigation, but also to less visible forms of dishonesty like college admissions “consultants” who draft essays for pay and students who cheat on college admissions tests, sometimes with the support or complicity of adults.

Those critiques of the U.S. college admissions culture are apt, but there’s another important lesson that emerges from the scandal, one that has received less attention: The scandal highlighted the extent to which universities have failed to address seemingly obvious corruption risks, and failed to implement effective controls for identifying applicants who were bribing their way onto campus. Compared to other large institutions, universities are behind when it comes to establishing effective anticorruption controls.

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Civil Society to the CoSP: Corruption Victims Are Entitled to Compensation

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The Council of State Parties to the United Nations Convention Against Corruption, the governments of the now 188 nations that have ratified the Convention, meets this week to review its implementation.  

When it comes to prosecuting bribery, embezzlement, and other corruption crimes, progress has been made. The UN Office of Drugs and Crime reports that “[i]n a considerable number of countries, legislative amendments and structural reforms have produced coherent and largely harmonized criminalization regimes, tangible results in terms of enforcement capabilities and action.”

But the Convention’s “enforcement capabilities and action” extend beyond criminal prosecution.  Article 35 requires state parties to ensure those injured “as a result of an act of corruption” can enforce a claim for damages against the perpetrators.

Here little progress has been made.  The UNODC, Transparency International, academics (here and here), and this writer have all found that few corruption victims have recovered damages. 

The UNCAC Coalition, a global network of over 350 civil society organizations in 100 plus countries, urges the CoSP to address this gap in implementation.  In a formal submission, the coalition offers a series of recommendations to see that victims, either individually or through a class or representative action, can recover full compensation for the harm caused by corruption. It’s timely and important submission is here.

Italy: Safe Haven for Bribe Payers?

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That a nation with the third-largest economy in the European Union and the eighth-largest in the world would be countenancing bribery in today’s world seems beyond the pale. Yet an analysis of recent case law and record of convictions shows just that.  Done by the Italian NGO ReCommon and submitted on a confidential basis to the OECD’s Working Group on Bribery, it concludes that it is “nigh on impossible to obtain a conviction in Italy for international corruption.”  

The group’s conclusion rests not only on Italy’s dismal record of convictions of Italian companies and nationals for bribing foreign public officials, but decisions in three recent cases. All raise a virtually insurmountable hurdle to a conviction for bribery. In any case. No matter whether the bribe-taker is an official of a foreign government or of the Italian government. In all three, courts have ruled that to prove bribery, the prosecution must show there was an express agreement to bribe.

In today’s world, just how many businesses send a letter to an official saying “I will pay you X in return for your providing the company Y”? As an American Supreme Court justice observed some 40 years ago, were the law to impose such a requirement, it could be easily frustrated “by knowing winks and nods.” Yet an express agreement to bribe is exactly what Italian judges now demand to convict bribe-takers and payors. Why has the Italian judiciary, historically one of the most renowned in the civil law world, decided to frustrate the prosecution of bribery cases?

Italy’s compliance with the OECD Antibribery Convention will shortly be reviewed by peer nations. It simply cannot be found in compliance so long as its courts require an express agreement to bribe to find defendants guilty. The OECD reviewers should follow ReCommon’s analysis, which in the public interest is revealed here, and condemn the recent turn in Italian law making the nation a safe haven for bribery.

Anticorruption in Qatar: Policy or Politics?

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Earlier this year, Qatar’s Minister of Finance, Ali Shareef Al Emadi, was arrested on corruption charges. This news came as a veritable bombshell to those who follow the Arab Gulf region. For one thing, Al Emadi is a prominent figure, who was not only the sitting finance minister, but who had previously occupied an impressive list of leadership positions in well-known Qatari institutions, including a board position on the country’s $300 billion sovereign wealth fund, chairman of the board of Qatar Airways, and chairman of the board of Qatar National Bank, the largest lender in the Middle East. Another surprising thing about Al Emadi’s arrest is just how public—and unusually publicized—the arrest was. This contrasts strikingly with how Qatar and other countries in the region typically deal with suspected corruption of high-level officials. In such cases, the investigation is usually kept private and, if the allegations appear to have substance, they are usually resolved through a resignation. In Al Emadi’s case, by contrast, a state-run news agency made a public announcement of the arrest and investigation, and he was removed from his post. 

It has been over six months since Al Emadi’s arrest, and the situation remains shrouded in mystery. Al Emadi has said nothing, and the only statement from the Qatari government came two days after the arrest. (That statement, by the Minister of Foreign Affairs, consisted mainly of the assertions that “no one is above the law” and the “investigation is ongoing.”) This has left news organizations and researchers to speculate about the unusual circumstances of Al Emadi’s arrest (see here, here, here, and here). One possible interpretation, advanced in a Brookings Institution piece published shortly after the arrest, is that Qatar’s unusual action in the Al Emadi case—publicly announcing the arrest of a high-profile figure in a country (and region) where such officials are virtually never prosecuted for corruption—may signal a real shift in Qatar’s policy, one that may be part of a genuine push for better, more honest governance. A former economist at Qatar’s central bank expressed a similarly optimistic interpretation, asserting that the arrest “sends a powerful message to all Qataris about the government’s newfound eagerness to fight corruption.” 

This is of course possible, but we shouldn’t get our hopes up. Al Emadi’s arrest, and the unusual publicity it received, may have less to do with a real shift in the Qatari government’s approach to fighting corruption, and more to do with political calculations.

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