Argentinian Judicial Reform: A Wolf in Sheep’s Clothing

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On February 1, 2022, several thousand demonstrators marched on the streets of Buenos Aires to demand judicial reforms. The march was supported by Kirchnerist groups (so-called because of their support for former Presidents Néstor Kirchner and Cristina Fernández de Kirchner) and by President Alberto Fernández, a Kirchner ally who has been pushing for judicial reforms since his inauguration in 2019. Frustrations with Argentinian courts, however, transcend partisan divides. Polls indicate that about 70% of Argentinian adults believe the judiciary is corrupt, which is not very surprising given the recent string of high-profile judicial corruption scandals. Just last year, Judge Walter Bento was indicted and charged with running a large-scale corruption network. Likewise, in 2019, Judge Raúl Reynoso was sentenced to 13 years in prison for bribery and narcotrafficking. Judge Carlos Soto Dávila was similarly indicted in 2019 for accepting bribes in drug trafficking cases. Not only is there extensive evidence of judicial corruption, the Argentinian judiciary seems entirely ineffective at holding Argentina’s notoriously corrupt political class accountable: appallingly, only 1% of all corruption cases in Argentina ever result in an actual sentence.

In light of the Argentinian judiciary’s clear corruption and legitimacy problems, judicial reform seems like a step in the right direction. However, President Fernández’s plans for transforming Argentina’s judiciary, which he rearticulated this March, may actually worsen corruption rather than rectify it.

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How the U.S. Should Tackle Money Laundering in the Real Estate Sector

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It is no secret that foreign kleptocrats and other crooks like to stash their illicit cash in U.S. real estate (see here, here, here and here).  A recent report from Global Financial Integrity (GFI) found that more than US$2.3 billion were laundered through U.S. real estate in the last five years, and half of the reported cases of real estate money laundering (REML) involved so-called politically exposed persons (mainly current or former government officials or their close relatives and associates). The large majority of these cases used a trust, shell company, or other legal entity to attempt to mask the true owner of the property.

Shockingly, the U.S. remains the only G7 country that does not impose anti-money laundering (AML) laws and regulations on real estate professionals. But there are encouraging signs that the U.S. is finally poised to make progress on this issue. With the backing of the Biden Administration, the U.S. Treasury Department’s Financial Criminal Enforcement Network (FinCEN) has published an advance notice of proposed rulemaking (ANPRM) that proposes a number of measures and floats different options for tightening AML controls in the real estate sector. The U.S. is thus approaching a critical juncture: the question no longer seems to be whether Treasury will take more aggressive and comprehensive action to address REML; the question is how it will do so. And on that crucial question, I offer three recommendations for what Treasury should—and should not—do when it finalizes its new REML rules:

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Guest Announcement: Invitation to Join the Symposium on Supranational Responses to Corruption

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Today’s guest post is from Alexandra Manea, Legal Counsel at the World Bank’s Office of Suspension and Debarment, and Jamieson Smith, the World Bank’s Chief Suspension and Debarment Officer.

Across the world, states play a fundamental role in shaping and enforcing the global anticorruption framework and agenda. But what happens when a state is unable to effectively counter corruption within its borders for various reasons? Are there supranational anticorruption mechanisms and remedies that could supplement the state’s response?

Experience shows that over the past two decades both public and private actors have developed supranational tools to tackle the “demand” and “supply” sides of corruption. A few examples include the sanctions systems of certain multilateral development banks, including the World Bank Group, which endeavor to protect development-intended funds from corruption by blacklisting corrupt contractors; the recently established European Public Prosecutor Office, designed to protect the European Union’s finances against corruption by prosecuting corrupt behaviors across EU member states; the exclusion mechanism of the Norwegian Government Pension Fund, the largest sovereign wealth fund with investments in over 9000 companies worldwide, that may divest from companies that engaged in corruption; and international corporations that have implemented robust integrity compliance programs across their affiliates at nationals levels.

To study these and other examples and to devise new opportunities for supranational remedies against corruption, a call for papers was launched last year, and was also published on this blog. We received hundreds of paper proposals from academics and practitioners from across numerous sectors and regions. The selected papers make up a rich agenda for our upcoming symposium, bringing together scholars and professionals from the private sector, international organizations, government, and civil society.  With this background, on behalf of the World Bank’s Office of Suspension and Debarment, the OECD’s Anti-Corruption Division, and the American Society of International Law’s Anti-Corruption Law Interest Group, we would like to invite all GAB followers to join the symposium on Supranational Responses to Corruption, on April 28-29, 2022. The event will be held in a hybrid format with about 30 presenters on site in Vienna, Austria, and hopefully with many of you attending online.

The main objective of the symposium is to study and reflect upon current and prospective anti-corruption efforts that transcend national boundaries or governments. The symposium will take stock of the current supranational anti-corruption mechanisms and standards, assess how to facilitate a multilateral understanding of these efforts, and discuss whether, to what extent, and how supranational anti-corruption institutions can move towards creating regional and/or transnational anti-corruption ecosystems that can effectively combat corruption irrespective of the actions, or lack thereof, of a specific state.

This symposium has been organized with the support of multiple organizations and professionals and we would like to thank them all for their valuable efforts in making this event possible. The International Anti-Corruption Academy, the World Economic Forum – Partnering Against Corruption Initiative, the Austrian Federal Ministry for European and International Affairs, and the OPEC Fund for International Development (event host in Vienna) provided important support.  Special thanks to GAB’s very own Matthew Stephenson, who generously helped us from the early stages through today, with sharpening the symposium’s focus, tailoring the agenda, and giving us the opportunity to invite GAB’s specialized audience to the symposium.

The full agenda is available here. You can register for April 28 here and for April 29 here. We hope to have many of you join the discussions!

Some Things Are More Important Than Money: The Nature of Bribery and the U.S. College Admissions Scandal

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For the last two months, it’s been difficult for me to think or post about anything other than Russia’s war against Ukraine—and how this crisis might relate, directly or indirectly, to issues of corruption. But for today, I’m going to write about something a bit closer to (my) home, and substantially lower-stakes: the U.S. college admissions scandal, often known as the “Varsity Blues” scandal, after the code name that U.S. prosecutors assigned to the investigation. A quick refresher: a number of affluent parents arranged for their children to be picked by colleges coaches as athletic recruits, even though these teenagers were not in fact gifted athletes, and in some cases did not even play the sports for which they were recruited; this virtually guaranteed that the children would be admitted to the colleges in question, because those colleges had the practice of giving the coaches substantial discretion in choosing a certain number of recruits each year. (There were other aspects of the fraud, including in some cases cheating on the admissions tests, but the fake athletic recruiting gambit was the heart of the scheme.) The coaches participated in this fraudulent activity because the parents bribed them, via the middleman at the center of the scandal (and the purported “charitable foundations” that he controlled). In some cases, the parents paid monetary bribes directly to the coaches. But in some cases, the parents also—or in addition—made substantial donations to the university’s athletic program or the individual team, in exchange for the coach falsely asserting that their child should be recruited as an athlete.

That last, rather unusual aspect of the scheme—that the payments sometimes went to the university’s athletic program, rather than into the coach’s pocket—gives rise to a question that some of the Varsity Blues defendants have been urging in court: Can a payment count as a bribe (in the legal or moral sense) if it goes to the university? Obviously, this is not an issue in those cases where the prosecution has proven that money or other things of value were offered directly to the coach. But what about those cases that involve donations to the university’s teams or athletic program? Some of the Varsity Blues defendants insist that these donations cannot be bribes—even if we stipulate that the purpose of the donation was to induce the coach to falsely claim that an applicant should be recruited as an athlete, and that the coach did so as part of an explicit quid pro quo. The reason, proponents of this argument insist, is that if the purported “victim” of the alleged bribery (here the university) is also the recipient of the payment, then the payment cannot not a bribe.

This is wrong. Indeed, it is nonsense, and that fact that at least some judges have been entertaining this as a serious objection to some of the Varsity Blues charges reveals a deep conceptual confusion about the nature of bribery and why it is wrongful. Continue reading →

The Anti-Anticorruption Origins of the American Revolution

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The story of the American Revolutionary War is one that many of our readers – certainly our American readers – know well. According to the conventional narrative, at least as conveyed in U.S. high schools, the British crown’s unfair taxes, punitive laws, and general disregard for the Thirteen Colonies led to protest, massacre, and revolution. There is, however, another perspective from which the story could be told, in which the British were not engaged in arbitrarily denying colonial rights, but were instead embarking an on anticorruption crackdown that went horribly awry.

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How the Corporate Transparency Act Can Shine Light on Dark Money in U.S. Elections

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Last year, in an effort to prevent the abuse of anonymous companies by malign actors, the U.S. Congress passed the Corporate Transparency Act (CTA). The CTA requires certain legal entities, like corporations and limited liability companies (LLCs), to provide information about their beneficial owners—that is, the people who actually own or control the entity—in order to make it more difficult to operate anonymous shell companies for criminal purposes. Pursuant to the CTA, beneficial ownership information must be submitted to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and maintained in a centralized database.

Much of the fight for beneficial ownership transparency was spearheaded by anticorruption advocates, who emphasized the ways in which foreign kleptocrats and other corrupt officials use anonymous companies to hide their stolen wealth. But the CTA’s beneficial ownership transparency measures will be helpful in fighting another kind of corruption, one closer to home: the corrupting influence that so-called dark money—spending by undisclosed donors to influence election outcomes—has on the integrity of U.S. elections and American political sovereignty.

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Guest Post: France’s Anticorruption Turnaround–and the Path Forward

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Today’s guest post is from Valentina Lana, a lawyer and lecturer at Sciences Po, and Michel Sapin, who served in multiple senior positions in the French government, including as Minister of Finance from 2014-2017 and Minister of the Economy in 2016-2017, and who was the principal author of the Loi Sapin II, the French anticorruption law.

Since the OECD Anti-Bribery Convention entered into force back in 1999, France has been a member, and as such France committed to adopt and enforce an effective legal framework to detect, punish, and deter transnational bribery. Yet in October 2012, when the OECD’s Working Group on Bribery released its Phase 3 report on France’s compliance with its obligations under the Convention, France received very poor marks. The report emphasized the Working Group’s “serious concern[]” about the paucity of enforcement proceedings addressing foreign bribery by French entities, expressed its disappointment in France’s failure to address key legal obstacles to holding companies liable for foreign bribery, and the insufficient penalties. In short, while France had laws on the books that supposedly criminalized foreign bribery, in practice France was doing very little to make those laws meaningful in practice.

The highly critical Phase 3 report served as a wake-up call for French policymakers. But it was not only this very public and embarrassing OECD criticism that prompted France to act. French companies that issued securities in the United States also found themselves targeted by the U.S. Department of Justice for alleged violations of the U.S. Foreign Corrupt Practices Act (FCPA). Many French firms and government officials bristled at what seemed like the intrusive and extraterritorial prosecutions by the U.S. government. But in high-level conversations between leading figures from the two countries, the U.S. representatives made clear their position that they were pursuing these cases, even though France might seem to have a greater interest, because France couldn’t or wouldn’t prosecute foreign bribery cases involving French companies vigorously and effectively. “We are doing your job,” was the basic position of the U.S. representatives.

There was also pressure for reform from the French business community. This at first seems counterintuitive, given that companies are generally reluctant to accept more stringent regulations. But business operators in France perceived that France needed to promote a more transparent, corruption-averse environment, in order to increase the attractiveness of France for investors and shake off France’s bad reputation as an unfair business environment where bribes would count more than skills, experience, and competence. Though one might think that French firms would care only about domestic corruption, in fact many business leaders embraced the idea that taking a stronger stand against foreign bribery—and embracing legal reforms that would elevate France to the level of countries like the US or the UK, at the forefront of the fight against transnational corruption—would help improve France’s reputation and overall business environment.

These factors contributed to an environment that enabled reformers, particularly those in the French Ministry of the Economy, to act. In 2016, the French parliament adopted a crucial set of reforms contained in a law known as the la loi Sapin II (the Sapin II Act). This broad law covers more than just the fight against corruption; it contains a range of provisions intended to improve France’s attractiveness to local and foreign investors through greater transparency and modernization of economic life. But several of the Act’s most important reforms were motivated by, and targeted toward—the fight against corruption, including transnational corruption, a fact acknowledged symbolically by the date of the Act’s adoption: December 9th, UN International Anti-Corruption Day.

Among the Sapin II Act’s key measures, three can be considered as essential to driving France’s progress on anticorruption: Continue reading →

Fighting Corruption in the Water Sector: Comments Please

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A mark of progress in the fight against corruption is the growing attention corruption fighters are paying to its nuts and bolts.  A bribe is a bribe: whether paid to rig a bid on a public works contract or duck sanctions for polluting a stream. And laws against bribery and appeals to those in both sectors to refrain from taking a bribe have their place.

But a strategy for preventing bribery in public works contracts, the water sector, or indeed any sector of the economy demands more. Where in the sector is bribery most common? Why do some public servants take them while others refuse? What are the economic incentives public servants and their private sector counterparts face? What social norms operate in the background? What’s the legal regime governing sector operations? In short, what makes the sector tick? 

Only when corruption fighters understand a sector can they devise means for preventing corruption in it and identify indicators (“red flags”) for when it may be present. Teaming an expert corruption fighter with an authority on the sector is the obvious approach, and that is exactly what the U.K.’s CurbingCorruption has done on producing 15 sector-level studies of corruption — from agriculture to education to health to local government to shipping and telecommunications.

A 16th, on corruption in water, is now in progress. The project team comprises Mark Pyman, co-founder of CurbingCorruption, and Laura Jean Palmer Moloney, a hydro-geographer, expert in coastal resources management now with Visual Teaching Technologies. Mark and Laura Jean are soliciting comments on a briefing paper listing what they believe are the key corruption issues across the range of issues in the water sector. Readers can leave a comment below or to write them directly: jean@visualteachingtechnologies.com and mark.pyman@curbingcorruption.com

New Podcast, Featuring Anastasia Kirilenko

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A new episode of KickBack: The Global Anticorruption Podcast is now available. During the ongoing emergency in Ukraine, as Russia’s unprovoked military aggression throws the region and the world into crisis, my colleagues at the Interdisciplinary Corruption Research Network (ICRN) and I featuring on KickBack experts who can shed greater light on how issues related to corruption relate to the ongoing crisis. And rather than keeping to our usual schedule of releasing new episodes every two weeks, we will release new episodes as soon as they are available. In the new episode, my ICRN colleague Christopher Starke interviews Anastasia Kirilenko, an investigative journalist and the co-producer of Putin and the Mafia, a documentary about Vladimir Putin’s connections with organized crime. In their conversation, Christopher and Anastasia discuss the themes of this documentary, and also discuss the role of media and civil society in Russia, the role of oligarchs in Russian politics, and what the international anticorruption community could do to more effectively promote change within Russia. You can also find both this episode and an archive of prior episodes at the following locations: KickBack is a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). If you like it, please subscribe/follow, and tell all your friends. And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

The Assad Family’s (Anti)Corruption Playbook: Patronage and Pruning

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The Syrian civil war is an unfathomable and ongoing tragedy. In addition to the direct destruction and loss of life, the war has plunged Syria’s already troubled economy into an even  deeper crisis. A shocking 90% of the Syrian population lives in extreme poverty, and roughly 60% of the country does not have adequate food. Since 2010, the economy has contracted by 60%, while inflation has increased by over 300% and the value of the Syrian lira has depreciated by over 700%. Yet President Bashar al-Assad and his loyal networks of regime insiders and elite businessmen continues to profit, thanks in large part to rampant corruption. Assad and his friends have diverted tens of millions in humanitarian aid, forced families of detainees to pay bribes to visit them or win their release, and pocketed and re-sold rationed wheat on black markets. Most recently, the Syrian regime and its business partners have turned the country into a narcostate. In a damning investigation released at the end of 2021, the New York Times found that the Fourth Armored Division of the Syrian Army—commanded by Assad’s younger brother, Maher al-Assad—is behind the production and distribution of the amphetamine captagon.

This story sounds depressingly familiar: In all too many countries, a tiny elite of privileged insiders gets rich from corrupt practices, while ordinary people suffer extreme deprivation. But in Syria there is a twist: In the last two years, the Assad regime has also been carrying out a ruthless anticorruption campaign, one that has targeted some of his own loyalists. For example, in 2020 Assad went after his cousin and close friend Rami Makhlouf, a once-untouchable business tycoon who at one point was estimated to control 60% of the Syrian economy. More recently, Assad detained and seized the assets of five loyal executives at Syria’s second-largest cellphone company.

This seems like a paradox: Assad’s anticorruption campaign is unfolding alongside his circle’s ongoing abuses of power. But in fact this is true to form. Starting during the reign of Bashar al-Assad’s father, Hafez Al-Assad (henceforth Hafez), the Assad regime has followed a pattern of “patronage and pruning” to manage the inherent tension between, on the one hand, cultivating elite support by allowing loyal elites to exploit public power for private gain, and, on the other hand, preventing public discontent with corruption from getting so out of hand that it threatens the regime’s stability and authority. Continue reading →