Category Archives: Guest Commentary

Guest Post: Are Public UBO Registers a Good or a Bad Proposition? A Further Reply to Professor Stephenson

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Today’s guest post, from Martin Kenney, the Managing Partner of Martin Kenney & Co., a law firm based in the British Virgin Islands (BVI), continues an ongoing debate/discussion we’ve been hosting here at GAB on the costs and benefits of public registries of the ultimate beneficial owners (UBOs) of companies and other legal entities. That debate was prompted by the UK’s decision to mandate that the 14 British Overseas Territories create such public registries, and Mr. Kenney’s sharp criticism of that decision in a post he published on the FCPA Blog. That post prompted reactions from Rick Messick and from me. Our pushback against Mr. Kenney’s criticisms stimulated another round of elaboration on the critique of the UK’s decision, with a new post from Mr. Kenney and another from Geoff Cook (the CEO of Jersey Finance). I subsequently replied, explaining why I did not find Mr. Kenney’s or Mr. Cook’s criticisms fully persuasive. Today’s post from Mr. Kenney continues that exchange:

Public [UBO] registers are rather cheap political playing to the gallery, saying “Aren’t we wonderful to have done this?” – ignoring the fact that what we have established in the UK does not work properly….  It seems to me outrageous that the UK Government, who lack a lot in the area of anti-money laundering, should thus seek to impose on their overseas territories measures – often, where they cannot be afforded economically, that go far beyond what the UK has.

Lord Flight (Conservative), Member of the House of Lords, Speech to the House of 21 May, 2018, Debate on the Sanctions and Anti-Money Laundering Bill [HL] 

The fact that Professor Stephenson welcomes a good discussion and has opened the doors to his blog once again, means it would be impolite of me to not provide a response to his latest observations.

From the outset, I will stress that I will not seek to address every point Professor Stephenson makes. However, having addressed those below, if there are others he wishes me to respond to, I will endeavor to do so. Continue reading →

Guest Post: Just Because UBO Data Isn’t Available for Everyone to See, It Doesn’t Make It Secret

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Today’s guest post comes from Geoff Cook, CEO of Jersey Finance (a non-profit organization established to promote Jersey as an international financial center of excellence). Mr. Cook’s piece continues a debate over the UK’s recent decision to require British Overseas Territories to adopt centralized public registers with information on the ultimate beneficial owners (UBOs) of legal entities registered in those jurisdictions. The discussion of this issue at GAB was prompted by Martin Kenney’s post on the FCPA Blog, which sharply criticized the UK’s decision. GAB published two replies to Mr. Kenney’s criticisms, the first from Senior Contributor Rick Messick, and the second from Editor-in-Chief Matthew Stephenson. Earlier this week, GAB published Mr. Kenney’s response, and today Mr. Cook continues the discussion by explaining why, from the perspective particularly of a jurisdiction like Jersey, public UBO registers are unnecessary and potentially dangerous.

It is claimed that jurisdictions such as the Crown Dependencies that fail to introduce public registers of company ownership are advocating secrecy and encouraging the laundering of “dirty” money through the financial system. But the call for public registers, which serves a political agenda, is proposed in isolation, ignoring other effective measures for exchanging information that have been implemented during the last few years.

The Common Reporting Standard (CRS), for instance, has been largely ignored in the debate.  Through this OECD inspired agreement, the values of all bank accounts and investments in whatever form are exchanged automatically each year to the owner’s home tax authority. Company ownership details are included in that exchange. Jersey was an early adopter of the system in 2017 and has already swapped information with the other 50 countries that participate. More countries are joining, and will be exchanging data again in September – not a measure that fits with a secrecy agenda.

Jersey has been examined by independent standard setters such as the OECD as recently as 2017, and found to be in the top drawer for the quality of its standards and response to transparency. Jersey is one of only two jurisdictions to have the top rating so far, yet the standards attained by global organizations that truly understand the financial system are rarely quoted in the debate. Instead we are accused by detractors of obstruction and secrecy, with no regard for what is actually taking place. Continue reading →

Guest Post: The UK Order on UBO Registries in Overseas Territories–A Reply

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Earlier this month, Martin Kenney, the Managing Partner of Martin Kenney & Co. Solicitors (a specialized investigative and asset recovery practice based in the British Virgin Islands (BVI)) posted a widely-read piece on the FCPA Blog that criticized the UK Parliament’s decision to require that British Overseas Territories create public registries of the ultimate beneficial owners (UBOs) of legal entities registered in those jurisdictions. Mr. Kenney’s post provoked two critical responses here on GAB, the first from Senior Contributor Rick Messick, the second from Editor-in-Chief Matthew Stephenson. GAB is delighted that Mr. Kenney has chosen to continue the debate over this important topic by providing the following rebuttal to those criticisms:

Matthew Stephenson wrote in his recent response to my FCPA Blog, about the futility of the UK Parliament’s proposed changes to open company UBO registers in the British Overseas Territories, that: “At the very least, beneficial ownership information should be verified and kept on file so that it will be available to law enforcement in the event of an investigation.”

In my piece, I had explained: “The fact is that the BVI already has its house in order. The island’s systems now include the Beneficial Ownership Secure Search system (BOSS System). A database that is searchable, with the information being available to UK law enforcement agencies within 24 hours. In addition, the BVI has signed up to no fewer than 28 Tax Information Exchange Agreements, with countries that include the UK, USA, Canada, Germany, France, Australia, Japan, Netherlands, etc. So what part of this is secret?” Continue reading →

Guest Post: Paris Conference on the Transnationalization of Anticorruption Law–Call for Papers

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Jan Dunin-Wasowicz, Vice Chair of the Anti-Corruption Law Interest Group of the American Society of International Law (ASIL), contributes today’s post, which announces a conference that might interest GAB readers:

The ASIL Anti-Corruption Law Interest Group, Sciences Po Law School, and the Zicklin Center for Business Ethics Research of the Wharton School of the University of Pennsylvania are organizing an international symposium on the “Transnationalization of Anti-Corruption Law.” The conference will take place at Sciences Po in Paris, France, on Thursday and Friday 6-7 December 2018. The organizers are accepting paper proposals until 23 July 2018.

The purpose of the conference will be to look back at the evolution of anticorruption law as it affects cross-border business, trade, and regulation, but without taking the standpoint of a particular jurisdiction. This retrospective review will seek to explore the mechanisms that have led to the development of modern “transnational” anticorruption law and standards. The conference will also discuss current challenges and possible ways forward. It will undertake to achieve these goals through an interdisciplinary approach considering public international law and private international law methods, as well as comparative law, among other fields, while looking at the role and influence of a variety of actors. The conference will also explore the contribution of other disciplines such as economics, political science, psychology, and anthropology to understand their impact on the development of anticorruption standards and their implementation in the transnational context.

With this in mind, the conference will consider whether and how anticorruption laws and standards should synergistically lean towards transnational harmonization, unification, or remain a multitude of overlapping and possibly at times conflicting regulatory and procedural regimes. Discussing possible adjustments in transnational anticorruption norms would imply looking at the following issues, among others:

  • What prompted the process of transnationalization in the area of anticorruption?
  • What does transnationalization mean in the anticorruption context?
  • Is there a normative hierarchy in anticorruption standards?
  • How are anticorruption law, concepts, and practices transplanted?
  • What is the role of international organizations, regulators, national courts, NGOs, civil society, private actors, and international tribunals in defining anticorruption norms and standards?
  • How should anticorruption regulators cooperate?
  • What is the effectiveness and legitimacy of transnational anticorruption law?
  • Can transnational anticorruption law find a coercive authority?
  • Should there be a world anticorruption court?
  • Has the transnationalization of anticorruption law gone too far?
  • What can be learnt from other disciplines when it comes to devising or implementing anticorruption laws and policies?

Additional details on how to contribute to the conference are available here. We hope many GAB contributors and readers will participate.

Guest Post: Further Developments on French Law Regarding Anti-Bribery Prosecutions by Multiple States

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GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

The Supreme Court of France recently reversed two criminal judgments on the application of the international double jeopardy principle (or ne bis in idem, as the principle is known in Europe and elsewhere) in transnational bribery cases (and others). Taken together with some other recent developments, these developments suggest a renewed determination in France to regain leadership from US prosecutors in enforcing international bribery norms in France.

The ne bis in idem principle limits prosecutors’ power to pursue individuals or companies already convicted or acquitted elsewhere, including in other countries. Several European countries have domestic laws endorsing this principle; in France, the prosecutor is not bound by non-French outcomes if the French prosecution is “territorial” (that is, if an element of the offense took place on French soil) but cannot prosecute a defendant already pursued elsewhere if the only French basis for prosecution would be so-called “extraterritorial” principles (such as French citizenship of the perpetrator or the victim). Separately, a number of Europe-wide treaties, the most effective of which is the Convention Implementing the Schengen Agreement (CISA), have provisions that, with some exceptions, basically mean that no one can be prosecuted twice in Europe for the same offense.

But these provisions do not apply to US prosecutors, who are by far the most aggressive and effective pursuers of cross-border crimes such as overseas bribery. US courts interpret the Double Jeopardy clause of the Fifth Amendment to mean only that a single sovereign cannot prosecute the same defendant twice for the same offense. Some have argued that the US position creates a tension with Article 4.3 of the OECD Anti-Bribery Convention, which provides that when more than one country is competent to prosecute, they must consult to “determin[e] the most appropriate jurisdiction for prosecution,” clearly contemplating that only one country prosecute a given defendant for the same acts. But for reasons I have explored elsewhere, as well as in this space here and here, US prosecutors have not followed the spirit of Article 4.3, instead acting as the “final arbiter” of outcomes around the world, not hesitating to bring actions if they deem non-US outcomes insufficient.

Two formally unrelated decisions of the Paris Court of Appeals in 2016 – the ones that the French Supreme Court just vacated – seemed to complicate matter still further: Continue reading →

Guest Post: Tackling Health Sector Corruption—Five Lessons from Afghanistan

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GAB welcomes back Mark Pyman, Senior Fellow at the London Institute for Statecraft, who previously served as Commissioner of the Afghanistan Joint Independent Anti-Corruption Monitoring and Evaluation Committee (MEC). He contributes this post together with Hussain Rezai, a researcher at MEC.

Despite the horror stories, interesting things are happening on tackling corruption in Afghanistan. Besides the progress (discussed in previous posts) on education and procurement, a major anticorruption initiative has been underway in the Afghanistan health system since June 2016. The initiative, which is another surprising (if qualified) anticorruption success story in a very difficult environment, offers five lessons for anticorruption practitioners and health ministers in other countries. Continue reading →

Guest Post: The Financial Secrecy Index Identifies the Countries Most Responsible for the Illicit Financial Flows that Facilitate Global Corruption

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Andres Knobel, an analyst at the Tax Justice Network, contributes today’s guest post:

Illicit financial flows have dreadful consequences across the world, not least because they facilitate kleptocracy and other forms of grand corruption. A crucial step toward addressing this issue is identifying those jurisdictions that are the most significant contributors to the problem, and offering specific, concrete recommendations for how they can improve. The Tax Justice Network aims to help do this through its Financial Secrecy Index (FSI), the latest edition of which was published this last January. The 2018 FSI includes a ranking of 112 countries and territories according to their global impact of their financial secrecy, measured by balancing the level of secrecy and the country’s weight in the international financial sector.

The FSI differs from standard “tax haven” lists in that it does not purport to single out a handful of jurisdictions for special opprobrium. Such lists tend to imply that only a few jurisdictions, often small countries, are responsible for all of the world’s illicit financial flows. The 2018 FSI, by contrast, covers 112 jurisdictions, and the next assessment will analyze 130. (The objective is to eventually cover all countries and territories.) Moreover, the FSI ranks countries not solely on the degree of financial secrecy that they allow, but rather on a combination of the degree of financial secrecy (the “Secrecy Score”) and the actual use of a jurisdiction’s financial services (the “Global Scale Weight”), in order to rank countries according to their overall contribution to the problem of illicit financial flows. In other words, the FSI ranking is not necessarily ranking the most secretive countries at the top; rather, the FSI identifies the biggest “problem countries”—those that have financial systems that are both secretive (even if not the most secretive) and that are large and used frequently by non-residents. According to this measure, the ten jurisdictions that make the largest contribution to global financial secrecy are (in order starting with the worst contributors): Switzerland, the United States, the Cayman Islands, Hong Kong, Singapore, Luxembourg, Germany, Taiwan, the United Arab Emirates, and Guernsey. These are the jurisdictions that bear the greatest share of responsibility for enabling global illicit financial flows, including those stemming from corruption and tax evasion, and these are therefore the jurisdictions that most urgently need to become more transparent if we are to see real progress in the fight against illicit global financial flows. While all jurisdictions should act to become transparency, starting with these ten jurisdictions would have the most significant impact in the short term.

Interestingly, and perhaps unsurprisingly for those who follow these issues, a “heat map” of the worst offenders on the FSI looks like the inverse of the more familiar heat map showing the countries perceived to be most corrupt, according to Transparency International’s Corruption Perception Index (CPI). One way to interpret this is the following: public officials and their private-sector cronies in the world’s most corrupt countries according to the CPI (such as Yemen, Sudan, Afghanistan, Venezuela, Libya, etc.) very likely take advantage of financial secrecy to hide the proceeds of corruptions in the countries that most contribute to financial secrecy according to the FSI. Put differently, the worst CPI countries depend on jurisdictions like the FSI’s top ten in order to launder the proceeds of illicit activities.

And what should these (and other) jurisdictions do? On this question, it is important to emphasize that the FSI is not just a ranking system. The FSI report also includes in-depth discussions of all relevant loopholes and sources of information related to financial secrecy in each jurisdiction. This enables researchers, government authorities, activists, and financial institutions to obtain relevant information to be used for risk assessment, policy decisions, or to advocate for specific transparency measures. (All these details are available online, for free and in open data format.) And while every country is different, most jurisdictions would do well to implement what the Tax Justice Network refers to as the “ABC of Fiscal Transparency”:

  • Automatic exchange of bank account information with all other countries, especially developing countries, pursuant to the OECD’s Common Reporting Standard;
  • Beneficial ownership registration in a central public register for companies, partnerships, trusts and foundations (for more specific information, see Tax Justice Network publications here, here, here, and here, as well as this recent paper I published with the Inter-American Development Bank) ; and
  • Country-by-Country reporting, where all multinational companies publish this information online.

Guest Post: Afghanistan’s Radical–and So-Far-Surprisingly Successful–Public Procurement Reforms

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Today’s guest post is co-authored by frequent GAB guest contributor Mark Pyman, Senior Fellow at the London Institute for Statecraft and former Commissioner of the Afghanistan Joint Independent Anti-Corruption Monitoring and Evaluation Committee, together with Sohail Kaakar of the Afghanistan National Procurement Authority.

Afghanistan may be one of the most corrupt countries in the world, but it is also where some of the world’s most innovative anticorruption solutions are being implemented. Case in point: Afghanistan’s reforms to its public procurement system.

In Afghanistan, government procurement accounts for 19% of GDP and almost 50% of the national budget. However, procurement corruption has long been endemic, with many figures taking large cuts from almost every contract, and many contracts being little more than money-extraction schemes. But in 2015—at a critical juncture, when Afghanistan’s government was faced with unprecedented public pressure due to insecurity, recession, withdrawal of international troops—the government adopted significant reforms to its procurement system in order to curb corruption and improve government performance. (The immediate catalyst for the reform was a particularly corrupt military fuel contract, but the reforms go well beyond addressing this one incident.)

After a brief review of alternatives, the Afghan government decided on a radical reform based on a single regulatory body and a centralized procurement system. Continue reading →

Guest Post: Pakistan’s Culture of Corruption

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Zagham H. Chaudry, a student at Temple Law School, contributes today’s guest post:

Pakistan is the world’s fifth-most populous country, a regional power in a strategic location with a powerful military, and nuclear weapons. Yet Pakistan is far from reaching its full potential, and corruption is a main reason for that. Corruption in Pakistan is well-known and well-documented, and extends from the top (the Prime Minister) all the way down to the bottom (the local bazaar). Talk to random Pakistanis on the street and chances are they’ll tell you how corruption has affected them—how they couldn’t get jobs in the police or be admitted into good universities because they refused to pay bribes. Corruption has become part of the culture in Pakistan. It has become engrained in the beliefs, attitudes, and customs of the Pakistani people.

The corrupt (often wealthy and often politicians) in Pakistan have used their political influence to manipulate the laws, policies, and rules of procedure of the country to sustain their power, status, and wealth, causing serious and extensive harm to Pakistani society which has mostly gone unpunished. This sort of corruption eats away at state institutions like termites eat wood. Additionally, according to Transparency International, there is a “[strong] connection between corruption and inequality, which feed off each other to create a vicious circle between corruption, unequal distribution of power in society, and unequal distribution of wealth.” One has to look no further than the lifestyle of the corrupt ruling class in Pakistan as compared to the rest of the country to see the connection between corruption and inequality. The corrupt live in expensive bungalows in gated communities, drive fancy cars, have dozens of servants and security, and live luxurious lives—while four out of ten Pakistanis continue to live in poverty.

In a society where so few have so much and so many have so little, and where politically-motivated hiring, patronage, and nepotism reign supreme, you end up with a situation where becoming part of the corrupt system seems to be the only way out of poverty for millions of disadvantaged and deprived people. And in this way, subcultures of corruption begin to take root in the lower levels of society which all conform to the overall culture of corruption on the highest levels (e.g. federal and provincial governments). Consider the following stylized example, which despite its simplicity accurately captures how business often gets done in Pakistan: Continue reading →

Guest Post: How District Attorneys Can Avoid Conflicts of Interest in Campaign Fundraising

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Jennifer Rodgers, Executive Director of the Columbia University Law School’s Center for the Advancement of Public Integrity (CAPI), and Izaak Bruce, CAPI Research Fellow, contribute the following guest post:

Last fall, New York County District Attorney Cyrus Vance received quite a bit of negative press for his handling of potential cases involving some high-profile potential defendants. In one case, Vance declined to bring sexual assault charges in 2015 against Harvey Weinstein despite a detailed victim account. In another case, back in 2012, Vance ultimately decided not to criminally charge members of the Trump family for making false and misleading statements to promote one of their real estate ventures, again despite what on the surface appeared to be credible evidence of wrongdoing. Of course, prosecutors have to make difficult judgment calls all the time about what cases to bring, often based on information that outsiders do not have access to and/or are not in a good position to judge. But what made these cases so troublesome to many was the suggestion or insinuation of improper influence. The New York County DA is an elected position, and in both the Weinstein case and the Trump case, the attorneys who successfully convinced Vance not to bring charges also made hefty donations to Vance’s reelection campaign.

Vance and his supporters insist that there was no impropriety, let alone a quid pro quo, and rightly point out that DAs raise substantial campaign contributions from many attorneys. But the reports were nonetheless deeply troubling, not least because these incidents evince a more general problem. In a couple of cases, DAs have been convicted for accepting campaign contributions as bribes in exchange for favorable defendant outcomes; much more common, however, is the appearance of impropriety caused by campaign donations from individuals involved in cases before the district attorney’s office; these are problematic even if no underlying crime is proved. And of course there is always the possibility of unconscious bias when a DA makes decisions about criminal cases that involve a campaign donor, even if the DA believes his or her decision making is unaffected. Yet despite these obvious problems, there are very few legal limits on donations by individuals to district attorneys, either in New York or elsewhere. In New York, for example, campaign contributors can give a DA candidate up to the maximum amount (almost $50,000 in New York County) with no regard for whether those contributions might lead to a conflict of interest or an unconscious bias on the part of the district attorney. And there is virtually no guidance for DAs on how to handle these potential or apparent conflict-of interest issues.

To help address this problem, my organization, the Center for the Advancement of Public Integrity (CAPI) at Columbia Law School, recently released a report on DA fundraising practices. DA Vance, to his credit, specifically requested this review, which included an examination of his own campaign fundraising practices. In conducting its review, CAPI considered the donation acceptance policies of DA Vance’s campaign, and analyzed contributions to his campaigns over his three election cycles, paying particular attention to contributions from attorneys. CAPI conducted research into applicable laws, regulations, and guidance for DAs, and lawyers generally, in this area, and interviewed numerous stakeholders on the topic, including DAs, election regulators, good governance groups, and legal ethics experts, to learn from their experiences and solicit their views. After conducting this review, the report offered seven recommendations for DAs to follow to avoid actual and potential conflicts of interest and biases. While these recommendations are geared to DAs in New York, they are instructive for elected prosecutors all over the United States: Continue reading →