Curbing Corrpution in Papua New Guinea: What Australia Can do

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A lively discussion is underway on the Development Policy Centre‘s DevPolicy Blog about what Australia can do to help control corruption in Papua New Guinea, the largest recipient of Australian foreign assistance.   It follows a government promise that by July 2015 the government will “detail the measures we [Australia] will adopt to protect Australian Government aid funds and how [Australia] will support our partner country’s anti-corruption efforts.”  What’s made the discussion so lively, as Grant Walton and Stephen Howes explain in the initial post, is the juxtaposition of Foreign Minister Julie Bishop’s recent discussion of the government’s plans to implement the policy with PNG Prime Minister Peter O’Neill’s evasion of arrest for his alleged role in a major corruption scandal and his attempts to dismantle PNG’s anti-corruption taskforce. Continue reading →

U.S. Treasury Department Is Soliciting Comments on New Anti-Money Laundering Rule

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A quick public service announcement:

The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department is seeking public comments on a proposed rule that is intended to make it harder to hade the proceeds of corruption (or other criminal activities, like drug trafficking) in the U.S. financial system. The full text of the proposed rule is here. That proposed rule is fairly lengthy and complicated (taking up close to 20 pages in the Federal Register, in 3-column small print), but the basic gist of the rule is that it would impose new “know-your-customer” obligations on U.S. financial institutions, and in particular would require banks to identify the “beneficial owner” — the actual person (human person, not corporate person) who benefits from an account owned by an artificial legal entity.

I’m not an expert in this area, but this strikes me as a very good idea. Some supporters, though, have argued that the rule does not go far enough. Global Witness, in a useful post summarizing and discussing the proposed rule, points out some of the deficiencies of the proposed rule, including the fact that although the rule requires financial institutions verify the identify the beneficial owner of an account — that is, to attach the account to a real live human being — the rule does not require banks to independently verify that the listed beneficial owner is in fact the real beneficial owner.

The Treasury Department, following standard procedures under U.S. Administrative law, is seeking pubic comments on the rule. Comments can be submitted in hardcopy, but can also be submitted online. Just go to the regulations.gov site, and in the “search” field type FINCEN-2014-0001. That should take you to the docket, where you can view the rule, read the comments that have already been submitted online (very few so far), and submit any comments of your own.  (A direct link to the docket is here, but I included the above instructions because the direct links to dockets sometimes stop working.) The notice of the proposed rule also lists specific questions and issues that the FinCEN would like commenters to address. Among other things, FinCEN seeks comments on:

  • The proposed definitions of “beneficial owner” and “legal entity customer,” as well as the proposed exemptions (and possible additional exemptions);
  • Whether the rule should apply retroactively to existing accounts, or only to accounts established after the new rule goes into effect;
  • Whether the proposed processes for verification of beneficial owners, updating of beneficial ownership information, and ongoing monitoring of suspicious transactions are sufficiently clear and appropriate.

Comments are due by midnight on October 3rd.

Should We Use Randomized Trials for Anticorruption Education and Training?

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I recently attended two unrelated anticorruption conferences that both raised — in very different contexts — questions related to the appropriate design of education programs designed to inculcate ethical norms and prevent corruption.  In one conference, focused on corporate anti-bribery compliance, the issue had to do with the design of compliance training programs (and associated measures) designed to teach employees about their legal and ethical obligations, as well as the steps they should take to address any potential problems they come across in the course of their work.  At the other conference, focused more broadly on university education in the developing world, participants spent a considerable amount of time discussing (and sometimes advocating) the integration of anticorruption components into university courses — including courses not specifically on corruption — in order to produce a generation of students who would be more likely to resist corrupt norms and promote more ethical conduct.

Notably, although there seemed to be wide consensus in both discussions that education is important, there was much less of a clear sense of what sorts of education or training programs are most likely to be effective, and how much of an impact one can expect such programs to have. That’s understandable, of course: In this context, as in many others, the messiness of reality makes it very difficult to figure out what works, and to isolate the impact of any one intervention. But perhaps some forms of anticorruption education (in both the corporate training and academic contexts) may be suitable for randomized controlled trials (RCTs). Let me use this post to make a tentative case for expanded use of RCTs in this context. Continue reading →

Linking Anticorruption to Human Rights Accountability

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Corruption and human rights are closely related. Vulnerable groups–including the poor, minorities, women, children, and people with disabilities–are most likely to suffer the effects of corruption, which can compromise their access to basic services, health, and education. Anticorruption efforts can threaten human rights—whistleblowers, journalists, and other anticorruption defenders are often at risk of retaliation in the form of imprisonment, threats, violence, or death.  And countries where corruption is pervasive consistently demonstrate less commitment to the protection of human rights: Of the 15 countries with the lowest scores on Transparency International’s Corruption Perceptions Index of 2013, seven have the worst Freedom House ratings for political rights and civil liberties.

Continue reading →

Multiple Errors in Quantitative Data Analysis, from Site Specializing in Quantitative Data Analysis

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Like many people out there, I’m both a huge fan of Nate Silver–and the rigorous quantitative approach to election forecasting that he popularized–and at the same time quite disappointed in his FiveThirtyEight website, where the posts (especially those not by Silver himself) often seem to be slapdash efforts by people who have a smattering of statistical knowledge but don’t really know much about the topics they’re writing about. A depressing recent example, germane to this blog, is a post from last week entitled “It Only Seems Like Politics Is More Corrupt.” I normally wouldn’t bother to comment on something so slight here (especially because the post appears to have been written by an intern, and I generally try to avoid beating up on people who are just starting out), but many of the errors in analysis are both sufficiently elementary, and sufficiently common in discussions of corruption trends in other contexts (and by people with much more experience and therefore less of an excuse), that it’s worth taking a moment to explain what’s wrong.

A quick summary: The author cites recent U.S. Gallup poll data showing that the percentage of Americans who believe that “corruption is widespread” throughout the government in the United States has increased from about 60% in 2006 to a little over 75% in 2013. However, the author argues, the data doesn’t support the idea that corruption in the U.S. has actually worsened. To support that claim, she points to two other data sources:

  1. U.S. Department of Justice statistics from 1992-2012 show that the number of cases prosecuted by the DOJ’s Public Integrity Section (as well as the number of convictions and number of cases awaiting trial) appears to have declined, or at least hasn’t increased.
  2. The U.S. score on the Transparency International Corruption Perception Index (CPI) hasn’t changed very much between 1995 and 2013 (although there’s concededly a slight downward trend).

Do these two data sources disprove the idea that corruption in the U.S. has worsened over the last eight years, or more generally that the U.S. public’s perception of corruption is inaccurate?  In a word, no. There are so many elementary conceptual and statistical errors in this analysis, it’s difficult to know where to begin, but let me take a shot at cataloguing the most egregious problems: Continue reading →

Are Less Corrupt Countries More Faithful Enforcers of the OECD Anti-Bribery Convention?

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The failure of many signatories to the OECD Anti-Bribery Convention to enforce their new laws against the bribery of foreign public officials has been widely noted, including on this blog. There is no single factor that explains this lack of enforcement across the 30 or so countries (out of 41 total signatories) that have not yet seriously begun enforcing their anti-bribery laws. However, there is a fair amount of descriptive evidence about the extent to which signatories actually do so: Transparency International (TI) has, for the last nine years, released annual reports on progress, which provide a good deal of information on this level.

Continue reading →

If It Looks Corrupt, It Is Corrupt

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In combatting corruption, how much conduct should be prohibited? This lively issue, implicated in the U.S. Supreme Court’s recent controversial decision in McCutcheon, is relevant to those drafting reform legislation worldwide. There are two different starting points for analysis. The first approach (call it the traditional view) aims to eliminate only “actual” corrupt behavior: the FCPA, for example, requires that to violate its anti-bribery provision, an act must be done “corruptly.” The second method bans acts that create the appearance of corruption: in the United States, for example, this standard governs the behavior of federal employees and federal judges (except the Justices of the Supreme Court).

My position is that anticorruption law should adopt appearance-based rules that prohibit behavior and relationships giving rise to a (reasonable) appearance of corruption. Under traditional thinking, these laws might be deemed too over-inclusive. However, this post highlights two crucial insights missing from the traditional calculus:

(1) The appearance of corruption creates a real harm to society, independent of the harm from “actual” corrupt behavior; and

(2) Recent empirical work shows that maintaining appearances is important: a decline in the public’s trust in government brings forth an array of nasty behavior from citizens.

Continue reading →

More on Compliance Certification–A Response to TRACE International

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In a recent post, which built directly on a report from Transparency International USA, I raised some questions about the value of the compliance program “certifications” that certain private firms offer to provide.  (In a follow-up post, I also expressed even greater skepticism about current efforts to generate an International Organization for Standards (ISO) anti-bribery compliance program standard.) I won’t repeat everything in the original post here, but to summarize quickly: I expressed concern that “certifying” a compliance program (as distinct from reviewing and assessing it) could prove counterproductive because (1) the certification would not (or should not) be treated as significant by government enforcers or third parties, and (2) the certification might lead companies either to do too little or too much.

TRACE, one of the leading firms that offers compliance certification services (and also, through a separate but affiliated nonprofit, provides anti-bribery compliance support to member companies), has provided a thoughtful, thorough, and enlightening response to my post on the TRACE blog. The TRACE post takes issue with my criticisms, and also uses my post as an opportunity to “address head-on some common assumptions and misunderstandings that … surround anti-bribery certifications.”

I highly recommend that readers interested in this debate — which TI-USA deserves credit for kicking off — read TRACE’s post; I won’t try to summarize it here.  Let me say a few words about where I think we actually agree, then highlight what I think are the most significant points of disagreement, and then highlight one particularly intriguing aspect of the TRACE post that may deserve more extensive consideration. Continue reading →

The Perry Indictment: Not So Farfetched

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Texas Governor Rick Perry was indicted August 15 for engaging in what most Americans think of as politics as usual — or at least usual as practiced in Texas.  Perry was charged with abuse of office and coercing a public servant because he threatened to veto funding for an anticorruption unit attached to the Travis County District Attorney’s office unless DA Rosemary Lehmberg resigned.  Lehmberg, a Democrat, had been convicted of drunk driving and a video of her inebriated while in police custody had gone viral.  As Perry explained in vetoing the legislation after she refused to step down, he could not “in good conscience support continued State funding for an office . . . at a time when the person charged with ultimate responsibility of that unit has lost the public’s confidence.”

While Democrats saw a darker motive in Perry’s threat, the chance to replace a Democrat who had been a thorn in Republicans side, few think his threat was illegal.  The Washington Post and New York Times editorial pages, neither enthusiastic backers of Perry’s firebrand Texas conservatism, both sharply questioned the indictment as did President Obama’s former top political adviser David Axelrod.  Veto threats are part of the everyday give-and-take between governors and state legislatures and between Presidents and the Congress.  Indeed, as recently as the 2013 confrontation over the shutdown of the federal government President Obama used the threat of a veto to get his way with the  Republican Congress.  How can that be illegal?   And if it wasn’t, why is Perry’s?

But before politicians write the Perry indictment off as farfetched, they best consult a lawyer.  Continue reading →

UNODC’s Academic Anticorruption Initiative (ACAD)

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The good folks over at the UN Office of Drugs and Crime (UNODC), along with Professor Nikos Passas at Northeastern University, launched an “Anti-Corruption Academic Initiative” (ACAD) about three years ago. (I was fortunate enough to be able to attend ACAD’s most recent meeting last November in Panama, as well as a conference on teaching anticorruption courses last week in Vienna.) The initiative is still a work in progress, but UNODC has created a useful webpage for ACAD as part of the TRACK system, with links to an assortment of papers on different topics (a bit haphazard, but nonetheless useful). One of the things that came out of the Panama meeting was the need for those of us who teach, or hope to teach, courses on corruption and anticorruption in university settings to exchange syllabi and other course materials; the ACAD website may eventually become a repository for such materials. I recommend checking out their website. In addition, the TRACK website also includes a “legal library” with a list of (and links to!) anticorruption laws from many different countries.  A very useful resource.