Why Is There No Zurichgrad? Protectionism in Swiss Real Estate

Anonymous investments in foreign real estate markets have become a popular way to launder money and evade taxes. Opaque offshore structures now control a substantial share of high-end real estate in many major cities across the world. While the international sharing of financial data has made it harder to hide assets in offshore accounts, overseas property remains an easy target for illicit actors due to a lack of equivalent cross-border reporting. The city that has come to symbolize this problem is London—sometimes derisively referred to as “Londongrad” due to the extent to which Russian oligarchs own many of the city’s luxury homes.

Many might be surprised to learn that Switzerland, despite its longstanding reputation as a haven for illicit financial funds, has no major problem with money laundering in real estate. This is all the more surprising given that the Swiss property market would seem to be an exceptionally attractive target for dirty money in a number of ways. Swiss law affords extensive anonymity to individuals behind the corporate veil and does not require any licensing in the real estate sector. Furthermore, unlike many other countries, Switzerland still does not subject real estate agents, lawyers, or notaries – the key actors in property acquisition – to its anti-money laundering laws, as long as the property transaction in question does not involve a payment of more than the equivalent of about $110,000 in cash. At the same time, real estate prices in Switzerland are high and have risen dramatically in recent decades, especially in the cities and tourist areas. Illicit actors, who already roam financial centers such as Zurich, should thus have an easy time parking their assets in Swiss real estate. So why is there no “Zurichgrad”? Continue reading

Breakthrough in the Use of Artificial Intelligence to Fight Corruption

Whatever peril or promise the future of artificial intelligence holds, Brazilian, Colombian, and Italian researchers show it is a powerful tool for targeting corruption investigations.

Each year Colombia and Italy let thousands of contracts for goods, services, and public works, and each year some percentage is awarded thanks to bribery, conflict of interest, or other corrupt behavior. Each year Brazil’s central government transfers millions of dollars to the countries’ 5,500 plus municipal governments, and each year employees of some governments steal a portion.

Corruption is discovered through audits or whistleblowing, but a significant percentage goes undetected. The work done in Brazil, Colombia, and Italy shows how AI helps governments to deploy their investigative resources to boost the odds of finding a much larger percentage.

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A “Necessary Evil?” The Migrant Crisis and Corruption in the Darien Gap

The Darien Gap—the rugged, marshy isthmus straddling the rainforests of Colombia and Panama—has become a bottleneck in the flow of migrants from South America to the United States. In recent years, migrants have begun pouring across the previously impassible narrow crossing. Though human rights advocates have lamented the tremendous suffering that this dangerous path entails for migrants, relatively little attention has been paid to the reasons underlying Darien Gap’s “opening.” The nearly 400,000 migrants who have traveled from South America to the US-Mexico border this year alone would not have been able to cross the Darien Gap save for the egregious corruption of local Colombian authorities. Corruption has enabled people to escape the abuses of repressive regimes in Venezuela and elsewhere. Yet in so doing, it has created its own humanitarian disaster by facilitating a journey full of death and despair.

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Addressing the Root Causes of Municipal Corruption in U.S. Cities

Nearly a year ago, former Los Angeles City Councilman José Huizar pleaded guilty to racketeering and tax evasion, admitting that he took over $1.5 million in bribes during his tenure. As representative for the rapidly gentrifying Boyle Heights neighborhood and Downtown Los Angeles, Huizar used his office to shape urban development in line with the interests of corrupt real estate investors. Throughout his seven years as Chair of the Planning and Land Use Management Committee, he vouched for developers who paid him bribes, received kickbacks in exchange for favorable votes, and even negotiated with labor unions who threatened to block projects from which he stood to benefit financially. The U.S. Attorney for the Central District of California called the Huizar saga one of the most “wide-ranging and brazen public corruption cases” in the city’s history.

Local-level land use decisions are frequently rife with corruption, even in developed countries such as the United States. The elaborate web of regulations that govern zoning and urban planning practices, combined with relatively weak ethical standards for municipal lawmakers, encourage powerful investors to run afoul of the law. The Huizar case stands out as but one glaring example of the corruption that inhabits the world of variances, special use permits, and environmental impact reviews. Faced with mountains of paperwork and political uncertainty, real estate developers are drawn to corruption’s easy fix. Public officials such as Huizar are well-positioned to offer simple and efficient permitting in engage for generous campaign contributions and personal gifts.

While prosecuting corrupt officials like Huizar is necessary, addressing the root causes of this sort of corruption requires significant structural reforms. Three such reforms are particularly important: a reduction in the discretionary authority of political decision-makers in specific land use decisions, the abolition of councilmanic privilege, and the adoption of a universal municipal code of ethics for local lawmakers.

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Guest Post: Important New Developments in U.S. Anticorruption Efforts

Today’s Guest Post is from Craig R. Arndt, a Yale-trained American lawyer living in Bangkok. During a lengthy career, he advised multinational clients on a range of corruption-related matters and has represented those injured by corruption in actions to recover damages.

Buried in year-end legislation arming America’s military, Congress created two new weapons to advance the global fight against corruption. Section 5101 of the 2024 National Defense Authorization Act makes it a federal crime for a foreign public official “to corruptly demand [or] receive” a bribe from any person or entity subject to the Foreign Corrupt Practices Act. Sections 5403 and 5404 require the Secretary of State to publish an annual report ranking countries in a “three-tiered system with respect to levels of corruption in their governments.”

Both are important, if perhaps controversial, developments in the global fight against corruption.

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Engaging Local Religious Actors in Humanitarian Aid Delivery

The delivery of humanitarian aid to crisis-stricken communities is often marred by corruption, particularly in active conflict zones where organizational oversight and due diligence may seem, to aid organizations, like unaffordable luxuries. Consider, as an example, Yemen, where 4.5 million people have been displaced by a nine-year civil war between Saudi-led forces and Houthi rebels. In 2019, more than a dozen U.N. aid workers were accused of enriching themselves with WHO and UNICEF aid funding. In one case, the deputy head of WHO’s Aden branch, Omar Zein, funneled several hundred thousand dollars in aid to his personal bank account. During his tenure with the WHO, he also served as the health minister of one of the warring factions while holding a $1.3 million contract with the U.N. for his private nutritional program NGO, which did not even have a ground operation in the city it purportedly supported. And it appears these are not isolated anomalies. A 2021 report by the Sana’a Center for Strategic Studies found that aid workers in Yemen perceived corruption in the humanitarian aid sector as widespread and deeply entrenched. While civilians keep complaining about missing aid and international organizations keep reaffirming their zero-tolerance policy on corruption, there seems to be an unmitigated accountability gap between affected local communities and international aid agencies.

At the core of the aid corruption epidemic in Yemen and many other conflict zones (including Ukraine, Sudan, and Syria) is the disconnection of the organizations providing aid from the community in need. International organizations have not been able to provide sorely needed accountability and oversight of their local field offices. Additionally, there is often no direct social connection between local communities and these field offices. The intermediaries between the field offices and the local population are typically local NGOs, but these alleged “aid distribution partners” are often suspected of being established by political factions to attract international funds and channel those funds to specific regions for political and military advantage, or for personal gain. (Omar Zein’s NGO is an example.)

While there is no perfect solution to this problem, international aid organizations should consider greater strategic engagement with local religious institutions (such as mosques, temples, or churches) as an alternative to relying on international staff stationed in field offices or partnering with (often newly-created) secular NGOs in distributing and coordinating aid resources. There are a number of reasons why partnering with local religious institutions may be an effective way for international donors to increase accountability and reduce corruption in humanitarian aid delivery:

  • First, local religious institutions typically have a long history and deep roots in the community, predating the infusion of humanitarian aid. (In Yemen over 99% of the population identifies as Muslim, and mosques are not only places of worship but centers of community social life.) This history of engagement with the community in a variety of settings contributes to a relationship of trust and understanding within the community. Through working with these institutions, international organizations bring the decision-making of aid allocation (what resources and how much of it is needed) closer to the impacted community, thus improving the transparency in aid delivery.
  • Second, leaders of local religious institutions (both the clergy and the lay leaders) are themselves members of the community, and there is organic accountability rooted in their ongoing moral leadership. The personal connections these leaders have with community members make it much more difficult to evade accountability if supplies or funding go missing.
  • Third, religious institutions have a far deeper reach and access in a community than any international organization field office or local NGO. There are existing networks of relationships within a faith community, which makes it much easier for these institutions to identify people’s most pressing needs and constantly changing priorities. Even though local NGOs are also locally managed, their single functional focus on charity makes them more removed from people’s everyday lives, thus reducing the informal oversight from everyday interactions with local residents.
  • Fourth, the distribution of humanitarian aid is a good fit for the larger mission of religious leaders, as most major religious stress the importance of charity and support for those in need. Islam, for example, emphasizes the obligation of farḍ kifāyah, collective duty, with social services and welfare as key aspects of this obligation. Zakāt (charity giving intended for the poor and often collected by local mosques) is one of the five pillars of Islam, and the practice of zakāt gives mosques the capacity and expertise to manage aid funding. Though the administrative capacity to manage humanitarian funding might not apply to every faith tradition (which can be developed through cooperation with international organizations), the communal nature of religious institutions is shared across most religions in the world.

The strategic cooperation with local faith actors in the delivery of humanitarian aid is not a new idea. In September 2023, for example, USAID published a policy paper on strategic religious engagement in humanitarian assistance and development, which built on a 2004 USAID Rule for Participation by Religious Organizations in receiving USAID funding. in 2017, Oxfam also published a research paper identifying the need to engage with local faith actors in providing humanitarian aid. Among the many advantages of such engagement, working with local religious bodies has the potential to address the lack of accountability that breeds corruption in aid delivery. This is not to say that religious institutions are immune to corruption, or that this approach could work everywhere. But in countries like Yemen, where religion plays such a significant part in the local community’s social life, and where there are reasons to distrust many of the secular NGOs that purport to assist with aid delivery, a focus on partnerships with faith groups may be a promising way to ameliorate the corruption crisis in humanitarian aid.

Desperate Times, Desperate Measures: Why Sierra Leone Is Right to Give Anticorruption Enforcers Broad Powers

Enforcement of the criminal law, though not sufficient to combat corruption, is an important element of an effective anticorruption strategy. Too often, corruption has low risks and high returns; it is the job of anticorruption laws, and law enforcers, to reverse that, so that corruption becomes a high-risk, low-return enterprise. Over the last several years, Sierra Leone—which has historically been perceived as one of the most corrupt countries in the world—has taken this dictum seriously. The country’s aggressive anticorruption crackdown—spearheaded by the Anti-Corruption Commission (ACC), which I lead—is already showing results. Some of the important features of Sierra Leone’s anticorruption enforcement regime are as follows:

  • Convictions for serious corruption offenses carry a minimum prison term of five years, as well as a hefty fine.
  • The ACC has the power to enter any business premises without a warrant, may conduct searches and collect evidence without a warrant, and may arrest and detain persons suspected of committing a corrupt act without a warrant. Properties alleged to be the subject matter of corruption investigation can be confiscated and kept for up to six months without a court order.
  • The ACC works with informants and undercover agents, who can sometimes be deployed to participate in illicit activity to gather evidence and build a case.
  • The ACC employs a team of specially-trained elite officers called the “Scorpion Squad,” which can conduct “militarized” raids to arrest persons engaged in brazen acts of corruption.
  • Suspects accused of economic crimes, including corruption, may be detained without bail for up to ten days.
  • Following traditional English law, Sierra Leone’s evidence law permits the use in court even of illegally-obtained evidence, so long as it is relevant. (That is, there is no “fruit of the poisonous tree” doctrine.)

The ACC has taken full advantage of its authority and legal powers to change Sierra Leone’s fortunes in the fight against corruption. Indeed, the aggressive enforcement strategy is. But some observers might be uncomfortable with some of the features of Sierra Leone’s anticorruption framework sketched above. Do these harsh laws, broad enforcement powers, and permissive evidentiary rules threaten human rights or due process values? Continue reading

Corporate Transparency Is the Next Step in Switzerland’s Fight Against Corruption

In response to abuses of the corporate form by corrupt actors and other criminals, an increasing number of countries have been requiring companies and other legal entities to provide information on their “beneficial owners” (that is, the real human beings who own or control the entity) and compiling that information in centralized registries. Additionally, more governments are also requiring professionals in designated high-risk areas (not just finance) to verify the identity of clients behind the corporate veil and the risks of doing business with them.

Switzerland is lagging well behind this global movement towards more corporate transparency. Although Switzerland has done a lot recently to shake off its historic reputation as a haven for illicit funds, Swiss law still makes it too easy for bad actors to hide behind corporate constructs. Switzerland currently only requires a fraction of its domestic corporations to keep internal lists of their largest shareholders. Even this limited information – which focuses on legal ownership only and therefore does not necessarily reflect actual control over a company – need not to be verified, and the information can be difficult for Swiss authorities to access. Just this past year, Switzerland adopted rules requiring Swiss professionals who manage corporate cash flows, such as bankers and asset managers, to verify the identity of clients behind corporate constructs, but other professionals can continue to do business without any such obligations.

But this might be about to change.

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Brazil’s Car Wash Operation May Be Over, But Its Legacy Will Endure 

Brazil’s Lava Jato (“Car Wash”) Operation, launched in 2014, exposed one of the largest corruption schemes ever, resulting in the conviction of over 361 people for corruption, money-laundering, procurement fraud, and other crimes. Those convicted included prominent members of the Brazilian business and political elite, including the current President, Luiz Inacio Lula da Silva (known as Lula). Over the last few years, however, the Car Wash Operation has unraveled, with several of its most important achievements reversed. In 2019 a Brazilian hacker publicized text messages allegedly exchanged between Sergio Moro, the presiding judge in many of the Car Wash cases (including Lula’s), and the Car Wash prosecutors, prompting allegations of bias. The specialized Car Wash prosecutorial task force was disbanded in February 2021, and the Brazilian Supreme Court annulled Lula’s conviction on procedural grounds in April 2021, paving the way for his re-election to a third presidential term in October 2022. Most recently, as I discussed in a post here, the Brazilian Supreme Court held that key evidence obtained by Car Wash prosecutors in a settlement agreement with one of the companies at the heart of the scandal was inadmissible due to procedural irregularities, potentially rendering dozens of additional convictions subject to reversal.

So, was it all for nothing? I don’t think so. True, some of the operation’s most important successes are vanishing. But Car Wash helped strengthen Brazil’s legal and institutional framework for anticorruption and has helped pave the way for the country to embrace a more transparent, honest, and efficient system. More specifically, Car Wash has left a positive legacy with respect to the Brazilian approach to (1) corruption prevention; (2) corruption investigations; and (3) the resolution of corruption cases. Continue reading

Shifting Goalposts: How FIFA Has Failed In Its Transparency Reforms

FIFA, the body that oversees world football (soccer), has a long history of corruption well-documented on this blog, particularly during the tenure of former president Sepp Blatter (see, for example, herehereherehereherehereherehere, and here). A series of groundbreaking indictments of numerous FIFA officials for wire fraud, racketeering, and money laundering by United States prosecutors, starting from 2015, led to multiple convictions, and revealed the widespread bribery involved in the awarding of 2010 World Cup hosting rights to South Africa. This scandal led to Blatter’s resignation in June 2015. (Blatter was later fined millions of dollars and banned from any involvement in FIFA activities for more than ten years by the organization’s Ethics Committee.) There have also been frequent allegations that Russian and Qatari officials allegedly bribed some FIFA executives and voters to win hosting rights to the 2018 and 2022 FIFA World Cups, though United States Attorneys probing FIFA have not elected to bring charges in relation to those allegations.

After Blatter’s resignation, FIFA pledged to clean up its act. In early 2016, Gianni Infantino was elected FIFA President. Infantino had campaigned on promises to crack down on corruption in the organization, and he pledged greater transparency in his first post-victory remarks. Shortly after assuming office, Infantino took steps to hire a chief compliance officer, publicly disclose the compensation of executive management, and bring FIFA’s accounting and auditing in line with industry best practices. But how has Infantino fared in increasing transparency when it comes to picking the host of the World Cup? 

Not very well. True, FIFA and Infantino widely touted the rigor of the process used to pick the United States, Canada, and Mexico as joint hosts for the 2026 Cup: an extensive consultation process introduced new standards for bidders, bids were subject to a years-long review window, new “technical requirements” for sustainable event management and environmental protection were created, and voting rights were expanded to FIFA’s entire 211-member body in place of being vested solely in FIFA’s executive committee. But the rather bizarre series of events this past October—culminating in FIFA picking the hosts of the 2030 and 2034 World Cups in a span of less than a month, with the winning bidder uncontested in both cases—demonstrates that the organization’s leadership has engineered rather ingenious methods of subverting nearly all of these reforms. Continue reading