Where Everyone Knows Everyone: The Distinct Anticorruption Challenges of Small Population Countries

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Compared to most of the rest of the world, Iceland has a strong reputation as a clean country. In the most recent version of Transparency International’s Corruption Perception Index (CPI), Iceland ranks in 14th place—quite impressive overall, though behind Iceland’s Nordic neighbors Denmark, Finland, Norway, and Sweden. Yet Iceland’s high CPI score obscures a number of incidents over the last several years, where public officials in Iceland were involved in conduct that seems to raise concerns about potential conflicts of interest. Consider a few of the most high-profile examples:

  • In 2017, Iceland’s Minister of Justice was criticized in connection with the appointment of judges to the newly-established Court of Appeals. Notably, at least three of the fifteen judges appointed had personal ties to the Minister: one was a partner at a law firm where the Justice Minister had worked prior to her appointment, another was the spouse of a partner at the same law firm, and a third was the spouse of her fellow party member and colleague in parliament (see here and here).
  • In 2019, after revelations of allegations that a major Icelandic fishing company had been involved in bribing Namibian government officials (the so-called Fishrot scandal), demonstrators called for the resignation of the Minister of Agriculture and Fisheries. The reason was his connections to the company, where he had once served as chairman of the board, and his longtime personal friendship with the company’s CEO. Indeed, the Minister said publicly that his first reaction to the scandal had been to phone his CEO friend to ask him how he was feeling (see here, here and here).
  • In 2022, the Minister of Finance found himself in hot water after it became known that his own father was among a select few allowed to bid for valuable holdings in a state-owned bank (see here and here).
  • In December 2022, the Finance Committee of the Parliament proposed adding to the government’s budget a 100 million ISK grant (approximately US$ 727,000) to a media company, whose CEO was the sister-in-law of one of the committee members. (The proposal was promptly withdrawn when this was disclosed.)

To be clear, none of these incidents necessarily involves corruption. But they all raise concerns about potential conflicts of interest, and the appearance of impropriety. And while each of these incidents arose out of its own distinct set of circumstances, there is a common underlying factor that may have contributed to all of them, and that generally poses challenges to effectively preventing corruption and regulating conflicts of interest: Iceland is very small, with a population of only 370,000 people. Although Iceland is in many ways most similar—culturally and politically—to its larger Nordic neighbors, with respect to population size and the distinct anticorruption challenges it presents, Iceland may turn out to share some common features with other small-population jurisdictions, such as Belize, the Bahamas and Vanuatu. Consider some of the ways in which fighting corruption and conflict of interest may be more challenging—or at least pose different sorts of challenges—in very small countries: Continue reading →

Guest Post: ComplianceNet Conference and Call for Papers

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Today’s guest post is from Professor Jonathan Rusch, the Director of the U.S. and International Anti-Corruption Law Program at the Washington College of Law at American University:

On June 21-23, ComplianceNet — an interdisciplinary network of scholars and researchers in multiple disciplines that disseminates and synthesizes research about compliance — will hold its 2023 Conference at American University Washington College of Law. The conference will have an anticorruption theme, but welcomes paper and panel submissions on various aspects of compliance from academic experts in law, criminology, sociology, and other fields. ComplianceNet has extended the deadline for paper and panel proposals to March 31. Registration details are available here.

New Podcast Episode, Featuring Cheri-Leigh Erasmus

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In latest episode, host Dan Hough interviews Cheri-Leigh Erasmus, Global Director of Learning at the Accountability Lab. The convresation focuses principally on the Accountability Lab’s distinctive approach to building integrity in the civil service. Ms. Erasmus offers examples of this work from around the world, and suggests some lessons and insights for engaging new audiences in anticorruption work. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

New Podcast Episode, Featuring Claudia Baez Camargo

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In latest episode, host Liz David-Barrett interviews Claudia Baez Camargo, the Head of Public Governance at the Basel Institute on Governance. In the episode, Ms. Carmago discusses her work on applying social norms theory corruption issues, using examples drawn from East Africa and Ukraine. She discusses some of the successes in altering social norms around corruption in health settings, but she also notes some of the challenges in sustaining these initiatives. She also discusses how we might use insights from behavioral science to improve anticorruption interventions. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

The Role of Anticorruption Communications in Sustaining Integrity Reforms

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Today’s Guest Post is by Corina Rebegea, governance and anti-corruption advisor with the National Democratic Institute (NDI). Corina oversees programming on transparency, anticorruption and countering kleptocracy and has previously worked on rule of law and justice reform, democratic governance and foreign policy issues, and foreign malign influence.

Moments of democratic opening can be a critical time for anticorruption reforms. In many instances, corruption triggered regime change. In a just released paper for the National Democratic Institute, I examine how to shape a reform message when a sudden shift to democracy opens a window of opportunity.

The paper confirms the important and obvious but often overlooked point that how we talk about corruption plays an important role in democratic transitions. An anticorruption communication campaign can thus inform policy priorities, help mobilize and sustain public opinion, and manage expectations. All are crucial for creating the conditions that make systemic change possible – and durable.

During times of political change, dedicating time to communications, as well as having the right expertise and tools, can be a daunting task. Especially as competing priorities must be addressed in a short period of time. Campaigns can also backfire, as the research summarized in the paper. The campaign can focus too much on the problem, leading to resignation, apathy or even nudging citizens to engage in corruption. Understanding how to effectively communicate anticorruption priorities, reforms and timelines is essential, particularly as there is a risk that forces opposing the democratic opening will retain enough power to derail integrity reforms and cause the window to close.

While more experimentation, research and analysis are needed, the lessons the paper offers are meant to inform the design of campaigns to build public support for integrity reforms, trust, and durable anticorruption outcomes. 

New Podcast Episode, Featuring Cecilia Müller Torbrand

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In latest episode, host Liz David-Barrett interviews Cecilia Müller Torbrand, the CEO of the Maritime Anti-Corruption Network (MACN), a network of shipping businesses that has been working to address corruption risks in the maritime industry. Ms. Müller Torbrand explains how MACN has succeeded in framing its messaging around trade and commerce to engage government and the private sector in anticorruption work, and she also discusses how MACN has compiled extensive data on corruption incidents and risks in the sector, and how the organization uses that data to push for change. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

The Hidden System of Legal Kickbacks Shaping the U.S. Prescription Drug Market

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In the United States, as in most other countries, it is illegal for pharmaceutical companies to bribe doctors or hospitals to prescribe their products. Those who get caught engaging in this sort of corruption can suffer severe penalties. For example, in 2020, the pharmaceutical giant Novartis agreed to pay the U.S. government almost $700 million to settle a case involving allegations that the company had violated the federal Anti-Kickback statute by offering “cash payments, recreational outings, lavish meals, and expensive alcohol” to doctors to induce them to prescribe Novartis drugs. Yet when pharmaceutical companies offer financial inducements worth billions of dollars to Pharmacy Benefit Managers (PBMs)—not the meager thousands spent on doctors—to promote use of their drugs, the conduct is entirely legal.

What, you may ask, are PBMs? Good question. Most laypeople outside the health care field are unfamiliar with PBMs, and may not even know they exist. But PBM’s play a crucial, if underappreciated and extremely complex role in determining prescription drug prices and insurance coverage decisions. Simplifying somewhat, PBMs’ primary function is to manage insurance companies’ prescription drug plans, a role that includes, among other things, negotiating with drug companies to determine which drugs insurance will cover, and which will be favored. Given that just three PBMs control over 80% of the prescription drug market, PBMs can have an enormous effect on pharmaceutical sales, as drugs that lack insurance coverage are significantly less attractive to consumers than those with coverage. Additionally, PBMs also reimburse pharmacies on behalf of insurance providers for the costs of filling beneficiaries’ prescriptions.

In short, PBMs, which stand in between many of the transactions in the pharmaceutical supply chain, play a major role determining the prices paid by insurers, pharmacies, and patients for prescription drugs. And although kickbacks to doctors, hospitals, insurance companies, and other actors in the system are strictly prohibited, drug companies can and do take advantage PBMs’ complex payment structures to discreetly offer financial inducements in order to gain PBMs’ favor during insurance coverage determinations. There are two main ways in which this de facto bribery occurs: Continue reading →

FinCEN’s Beneficial Ownership Proposal: Invitation to Evasion

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GAB welcomes this guest post by Gary Kalman, Executive Director of Transparency International U.S.

The Financial Crimes Enforcement Network (“FinCEN”), the bureau charged with implementing our nation’s anti-money laundering laws, is underfunded. They do not have enough staff and significant staff turnover has left the bureau with less institutional knowledge and memory. On top of this, the agency has an Acting rather than permanent Director, undercutting its leaders’ ability to set a clear vision and direction for the bureau.

None of that, however, can explain the agency’s remarkable lapse in judgement in publishing  this proposal to collect beneficial ownership information from U.S. companies.

Let me explain.

Continue reading →

Nearly 20 Years in Legal Limbo: Egypt’s Illicit Gains Framework

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Criminal laws against “illicit enrichment” or “unexplained wealth” are among the more potent tools in the anticorruption toolbox. Though details vary across countries, typically an illicit enrichment law criminalizes a public official’s failure to provide a legitimate explanation for their possession of assets in excess of their lawful sources of income. The advantage, from an anticorruption perspective, of criminalizing illicit enrichment is the alleviation of the burden on the prosecution to gather evidence sufficient to prove bribery or embezzlement, which can often be difficult or impossible. Corruption can be inferred, the logic goes, from the government official’s possession of unusual and unexplained wealth. A further advantage is the law’s ability to capture instances of “influence peddling,” where a public official’s conduct might not have violated the specific laws on bribery and embezzlement, but still involves exploitation of authority to obtain gratuitous favors or preferential treatment that may show up in the form of unexplained wealth. 

Illicit enrichment laws, however, have proved controversial because they seem to shift the burden of proof from the prosecution to the defendant, thus violating the bedrock principle of the presumption of innocence. Many experts disagree with this criticism, and constitutional courts in many countries have rejected it. However, some governments, and some constitutional courts, continue to maintain that illicit enrichment laws are incompatible with constitutional guarantees related to the presumption of innocence.

Reasonable people can disagree about whether illicit enrichment laws in any given country are constitutional, but one would think that the issue would be settled one way or the other. In Egypt, however, this constitutional controversy has led to a bizarre legal limbo that has persisted for nearly two decades. Continue reading →

Why We Should be Afraid – Very Afraid – of Corruption in the Reconstruction of Ukraine

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Today’s Guest Post is from Donald Bowser. Don has worked on governance and anticorruption programs for over two decades for various donor organizations. In July he founded Support to Ukrainian Recovery Initiative, an NGO focused on implementing early recovery and stabilization projects in formerly occupied communities across Ukraine.

In “Why We Shouldn’t Be Overly Concerned About Corruption in the Reconstruction of Ukraine,” her January 9 post on GAB, Catherine Katz makes three points to back up her claim:

  1. First, the baseline level of corruption in pre-invasion Ukraine was likely overstated.
  2. Second, not only do measures like the CPI tend to overstate the baseline level of corruption in Ukraine, but they do not adequately reflect the significant strides Ukraine has made with its more recent anticorruption efforts, including several that have taken place since Russia’s February 2022 invasion.
  3. Third, backsliding on Ukraine’s recent anticorruption progress is unlikely—and further progress is expected—given Ukraine’s long-term interest in joining the EU and continuing need to receive support from the international community.

Like Katz, I hope the war ends in a Ukrainian victory soon and that the international community commits the resources required to help Ukraine repair the damage Russia has wreaked on the country’s infrastructure. But as the title of my post asserts, I sharply disagree with her about the spectre of corruption during reconstruction. Indeed, I think the international community should be very afraid of how it might compromise reconstruction and should begin immediately to take measures to combat it.  

Continue reading →