Category Archives: Guest Commentary

Guest Post: The Aims and Accomplishments of the OECD Report on Corruption at the Sector Level

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Tina Søreide, Senior Researcher at the Christian Michelsen Institute and post-doctoral fellow at the University of Bergen Faculty of Law, contributes the following guest post:

Yesterday Rick posted a critique of the OECD’s recent Report, “Consequences of Corruption at the Sector Level and Implications for Economic Growth and Development.” He did not find much value in that report (and as anyone who read his post knows, that’s an understatement). I was heavily involved in the research and preparation of this report, and although criticism is always welcome, I think that many of his criticisms are unfair, and are based on a misapprehension of the report’s purposes. This rebuttal is an attempt to clarify the aims of the report and explain why, notwithstanding Rick’s criticisms, the report makes substantial progress toward achieving those aims. Continue reading →

Guest Post: Evaluations Can Reduce Corruption Costs–If You Let Them!

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Jesper Johnsøn, a Senior Adviser at the the U4 Anti-Corruption Resource Centre who leads the Centre’s “evaluation and measurement” theme, contributes the following guest post:

In development policy jargon, a “program evaluation” is a systematic and objective assessment of an ongoing or completed project or policy, including its design, implementation, and results. Very few aid agencies have incorporated corruption considerations into their standard program evaluations–despite the fact that these same agencies have focused heavily on corruption measurement (as a separate endeavor) since the mid-1990s. This is a mistake: A good evaluation should include consideration of corruption, given that program success can be threatened by waste, leakage, and outright theft of resources, and also that evaluations can be useful tools for corruption risk management, accountability, and learning about how to build better anticorruption mechanisms. Part of the explanation for the failure to integrate corruption considerations into program evaluation may be the difficulty of rigorously measuring corruption levels and impact, yet as I have argued elsewhere, this difficulty should not be used as an excuse for not evaluating anticorruption efforts systematically.

Aid organizations can and should incorporate corruption issues into their standard evaluation policies. But not all program evaluators are anticorruption experts, and so the anticorruption community needs to provide more guidance on how to integrate anticorruption analysis into program evaluation. This is one of the things we are trying to do at U4. Based on our work, and helpful discussions with other experts, here are some suggestions for how this can be achieved: Continue reading →

Guest Post: Targeted Sanctions and Corruption–Legal Obstacles to a Magnitsky Act for the EU

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Anton Moiseienko, PhD candidate at the Criminal Justice Centre, Queen Mary University of London, contributes the following guest post:

So-called targeted sanctions—imposing travel restrictions on, or freezing the assets of, a select group of people—remain in vogue as an instrument of foreign policy and as a supplement to criminal justice in many areas, such as counterterrorism, and yet targeted sanctions have not been widely used in counteracting corruption. The United States, however, is a notable exception, with its Presidential Proclamation 7750, which authorizes the US Secretary of State to issue entry bans against corrupt foreign officials (subject to a caveat that such determinations must be informed by US national interests), and the Magnitsky Act of 2012, enacted by the US Congress in response to the death of Sergei Magnitsky, a Russian lawyer-turned-whistleblower, in a Moscow prison after he reported the embezzlement of US$230 million by high-ranked law enforcement officers. Strictly speaking, the Magnitsky Act is a human rights law rather than an anticorruption law. It authorizes the US President to blacklist (1) the individuals responsible for the prosecution and death of Mr. Magnitsky, and (2) those responsible for “gross violations of internationally recognized human rights” if committed against the persons trying to expose the illegal activity of Russian officials or against human rights activists. Yet pervasive corruption is at the heart of Magnitsky’s case, as it appears that a ring of corrupt officials was complicit in his death.

The European reaction to the Magnitsky Act was ambivalent. The OSCE Parliamentary Assembly adopted a non-binding resolution in 2012 calling upon member states to deny entry to, and freeze the assets of, the individuals on the US Magnitsky List––but to little effect. In contrast, a report by the Parliamentary Assembly of the Council of Europe (CoE) deemed US-style sanctions to be “a means of last resort” and advised against them. But despite the lack of governmental action, the public debate in Europe is not over (see, for example, here and here). With EU sanctions against Russia expanding continuously, it may be time to revisit the European debate on whether the EU should draw up its own Magnitsky List, or perhaps adopt a more general policy on targeted anticorruption sanctions.

If the EU or its individual member states proceed with Magnitsky List-style sanctions, they will have to reckon with their human rights laws—including the EU Charger of Fundamental Rights and the European Convention on Human Rights. The most important potential legal difficulties are as follows: Continue reading →

Guest Post: Money Laundering and Asset Recovery in Vietnam

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Mathieu Tromme, co-founder of the Partnership for Research in International Affairs & Development (PRIAD), contributes the following guest post:

In 2012, the Financial Action Task Force (FATF) placed Vietnam into its International Cooperation Review Group (ICRG) mechanism–often referred to as FATF’s “blacklist”–due to FATF’s determination that Vietnam was not making sufficient progress in addressing deficiencies in its anti-money laundering and combating financing of terrorism (AML/CFT) regime. For Vietnam, this blacklisting was most unwelcome news. Like many other countries, Vietnam had suffered from the global economic downturn, and FATF’s blacklisting threatened its tenuous recovery. Landing on FATF’s blacklist increases a country’s risk profile, affects its credit rating, hampers international trade and investment, and impedes access to the international banking system (due to the enhanced customer due diligence which FATF requires). In response, Vietnam enacted a Money Laundering and Counter-Terrorism Law in 2012 (which took effect in early 2013). After the Asia Pacific Group made an on-site visit to verify Vietnam’s action plan, FATF once more declared Vietnam technically compliant. The country came off the FATF blacklist in February of 2014.

At the same time as this was happening in 2012, FATF issued a revised and consolidated set of 40 AML/CFT recommendations (from an original 40 + 9 “special recommendations” on terrorist financing), which ushered in a number of new standards and evaluation criteria. Of particular interest in Vietnam is Recommendation 30 on “Responsibilities of Law Enforcement and Investigative Authorities,” according to which jurisdictions are now expected to conduct pro-active parallel investigations into both the predicate offence and possible money laundering and terrorist financing offences. Moreover, under this Recommendation, jurisdictions are expected to designate a competent authority which can expeditiously identify, trace, and initiate actions to freeze and seize proceeds of crime. In Vietnam, meeting this new recommendation will be a real challenge, and might again threaten to land it on the FATF blacklist. Continue reading →

Guest Post: Zambia’s Director of Public Prosecutions Describes Efforts to Unconstitutionally Remove Him for Prosecuting former President

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Below is a February 16 letter Mutembo Nchito, Zambia’s Director of Public Prosecutions, wrote to fellow prosecutors recounting recent efforts to have him removed from office. Links have been added to some of the references cited.

Dear Colleagues,

I trust you are well. I have had an eventful 10 or so days that I feel duty bound to share with you.

As some of you may know Zambia lost its fifth President October 28, 2014. This is the President that requested me to join the public service as Director of Public Prosecutions. My mandate was to transform the Ministry of Justice’s Department of Public Prosecutions into an autonomous National Prosecution Authority. This I embarked on with a reasonable measure of success.

That said one of the main reasons I was hired was my history of anticorruption prosecution. Since 2002 I have prosecuted many cases of high profile corruption that have seen me indict two former presidents, a chief of intelligence,  a Zambia Army Commander, a Zambia Air Force commander and a commander of another defence force called the Zambia National Service. I also prosecuted a former Minister of Finance and his permanent secretaries for corruption and abuse of office among many other high profile individuals.

Except for the first president who was acquitted in very controversial circumstances most, if not all the cases I prosecuted, resulted in convictions. As you can imagine this has earned me very powerful enemies. Continue reading →

Guest Post: Why Debarment Is Different–A Reply to Professor Stephenson

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Richard Bistrong, a writer, speaker, and blogger on anti-bribery compliance issues, contributes the following guest post:

As the recent OECD Foreign Bribery Report made clear, debarment (prohibiting the defendant company or individual to engage in future government contracting) is very rarely used as a sanction in foreign bribery cases, most likely because prosecutors worry that debarment would be an excessive penalty that would often do too much collateral damage to innocent parties. I have argued that debarment can and should be used more frequently, and that the legitimate concerns about disproportionate punishment can be addressed by using various forms of “partial debarment.” In a recent post, Professor Stephenson draws attention to a number of potential shortcomings to my proposal. While I agree with some of his points, I think he understates the ways in which debarment—as distinct from fines or other monetary penalties—can have a distinctive deterrent effect on foreign bribery, and why partial debarment might therefore often be appropriate.

Let me try to clarify where Professor Stephenson and I disagree, where we may disagree, and why partial debarment is a sanction that government enforcers ought to employ more often. Continue reading →

Guest Post: Collective Action by Multinational Companies–A Recipe for Fighting Corruption in Emerging Markets

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GAB is pleased to welcome back Gönenç Gürkaynak, the managing partner and head of the Regulatory and Compliance Department at ELIG, Attorneys-at-Law (Istanbul), who contributes the following guest post:

In too many countries, particularly emerging markets, corrupt public officials and getting rich by taking bribes, and they often seem immune from domestic law enforcement due to their influence over the judiciary. In such situations, collective action by the private sector—in cooperation with civil society—may be the key to changing the rules of this corrupt game. In particular, multinational companies (MNCs) can and should act collectively to require their intermediaries (e.g., distributors, agencies, etc.) to comply with stringent anticorruption rules. Considering that MNCs working in foreign jurisdictions act mostly through intermediaries (e.g. distributors, agencies, etc.) and that, according to the recent OECD Foreign Bribery Report, three-quarters of foreign bribery cases involve intermediaries, using collective action to targeting corruption by local intermediaries can help choke off the supply of bribes that corrupt public officials are so keen to extract.

The collective action strategy suggested here is designed for settings in which many MNCs, as well as large local companies, work with a limited number of local intermediaries that provide assistance in dealing with a sector or government agency prone to corruption; the approach is most effective when other potential intermediaries might be able to compete with the more established intermediaries if given the opportunity. In such a setting, the collective action approach—perhaps initiated by the MNCs, perhaps facilitated by some third party like a civil society organization—could work as follows: Continue reading →

Guest Post: Fighting Corporate Corruption in Thailand, Part Two — Private Initiatives

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Karin Zarifi, an independent consultant to the Securities and Exchange Commission Thailand, contributes the following post (the second in a two-part series on combating corporate corruption among Thai public companies):

In my last post, I discussed how the Thai Securities and Exchange Commission (SEC) was undertaking innovative measures, in conjunction with private sector initiatives, to fight corruption and encourage good corporate governance in Thai public companies. One of the SEC’s most important partners in its efforts is the Stock Exchange of Thailand (SET), on which approximately 600 companies are listed. The SET and the SEC have been promoting their own and each other’s initiatives, as well as those of private sector organizations like the Thai Institute of Directors (IOD) and the Thaipat Institute, in ways that are encouraging, and seem to be helping Thailand to become a corporate sustainability leader among Association of Southeast Asian Nations (ASEAN) member countries.

The role of the SET in fighting corruption cannot be overlooked. Stock exchanges are uniquely positioned to use their listing and disclosure requirements to encourage sustainable practices, including anticorruption, by listed companies and allow consideration by investors. The role of stock exchanges in wealthy countries — most notably the New York Stock Exchange — in imposing ethics and disclosure requirements on listed companies is already well-known. The SET’s recent initiatives demonstrate that stock exchanges in developing countries can also play this role. Although a stock exchange’s anticorruption initiatives cannot substitute for appropriate action by government regulators, they are a vital complement to government efforts to prohibit bribery and corruption. Continue reading →

Guest Post: Fighting Corporate Corruption in Thailand, Part One — Securities Regulation

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Karin Zarifi, an independent consultant to the Securities and Exchange Commission Thailand, contributes the following post (the first in a two-part series on combating corporate corruption among Thai public companies):

In Thailand, despite increased focus on anticorruption, corporate governance and Corporate Social Responsibility (CSR) improvements in the private sector (see, e.g., here and here), the Thai business community does not seem convinced that anticorruption is in its interest, at least short-term. Only last April, companies listed on the Stock Exchange of Thailand (SET) were telling the Thai Securities and Exchange Commission (SEC) that they were unwilling to stay away from paying “tea money” (that is, bribes), for fear of losing out to competitors. Yet the last nine months have seen considerable progress on this front.

Some of the progress has been driven by private sector initiatives, including initiatives spearheaded by the SET. I will discuss these in my next post. But much of the progress has been driven by the Thai SEC. As Jeena Kim pointed out in a recent post on this blog (in the context of South Korea) securities regulators are well-positioned — and often better-positioned than public prosecutors — to take effective action against corporate corruption. But whereas Ms. Kim highlighted the Korean securities regulator’s ability to enforce South Korea’s foreign anti-bribery laws, the Thai example illustrates how securities regulators can encourage the development of a culture of compliance, good corporate governance, and corporate social responsibility more generally, using tools beyond simply enforcing the securities laws. Continue reading →

Guest Post: Fighting Corruption in Anti-Deforestation Programs — The Case of REDD+

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Aled Williams, Senior Advisor at the U4 Anti-Corruption Resource Centre, contributes the following guest post:

The protection of tropical forests is a hot topic, particularly in light of the pressing threat of global climate change. The 2014 UN Climate Summit saw a range of national and subnational governments, along with numerous business and civil society organizations, endorsed the New York Declaration on Forests, which set a timeline for cutting natural forest loss in half (by 2020) and ending it completely (by 2030). A major goal of the declaration is to agree at the upcoming UN Climate Change Conference in Paris is to reduce deforestation and forest degradation as part of a post-2020 global climate agreement. And financial contributions are now stacking up, with more than USD 9.6 billion pledged by 22 countries to the UN’s Green Climate Fund.

Securing a global climate agreement that includes tropical deforestation would no doubt be a historic achievement. But once world leaders return from Paris next year, the proof of the pudding will lie in national implementation. They may well wish to consider what can be learned from recent schemes for Reducing Emissions from Deforestation and Forest Degradation (known as REDD+), to date largely funded by the Norwegian government through bilateral arrangements with major deforesters like Indonesia and Brazil, but also channeled through multilateral agencies. It turns out that even when donors have pledged substantial amounts of money, spending that money effectively can be challenging. A major part of that challenge relates to the difficult political-economy of forest sector reform in developing countries, where corruption in its various guises can be a core feature. Indeed, despite being described as a potential game-changer for addressing tropical deforestation, REDD+ financing also risks increasing corruption and related problems like land grabbing.

These challenges are not new and indeed were well-known among Norwegian aid practitioners as REDD+ pilots began some four years ago. But the U4 Anti-Corruption Resource Centre has just completed a three year research project–based on case studies of REDD+ pilots in the DRC, Indonesia, Kenya, the Philippines, and Tanzania–that sheds some new light on the issues. The report’s empirical findings suggest three main lessons: Continue reading →