Summary of Third Annual AML Research Conference. Announcement of Fourth

Posted on by
3

Thanks to Jason Sharman of Cambridge University and dodging shopping fame, those who didn’t attend last January’s conference “Empirical Approaches to Anti-Money Laundering and Financial Crime” are in luck. He has produced an excellent summary of the papers presented at this, the now third annual AML conference jointly sponsored by the Bahamas Central Bank and the Inter-American Development Bank.  

There are dozens if not hundreds of other AML conferences held each year. At these, bankers and their lawyers, accountants, and consultants flyspeck the latest rules, court decisions, and other matters germane to complying with AML laws and regulations. As well they should, for as AML Penalties chronicles in their weekly bulletin, fines for violations are beginning to creep upwards. Conference attendees are also constantly on watch for cheaper ways to meet their legal obligations; AML compliance costs for all financial institutions are currently estimated to exceed $200 billion per year.

Like the first two conferences, last January’s had a much different agenda than those devoted to compliance. Rather than asking “what are the rules” and “how can we comply,” it asked more fundamental ones: “Are the current anti-money laundering rules worth cost?” “Are they keeping dirty money out of the system?” “Are there more cost-effective ways of doing so?”

It is now clear that Russian oligarchs have had little trouble evading the current AML regime. Might this suggest the sponsors of the Bahamas conference are on to something? That the questions they are posing deserve at least as much attention as those discussed at the many compliance conferences?

Next year’s conference will be held January 19 and 20 in Nassau. The announcement is here.

A Spirited Discussion of the Proposal To Create an International Anticorruption Court

Posted on by
1

As longtime readers of this blog are likely aware, over the years I’ve had the opportunity to participate in debates over the proposal to create an International Anti-Corruption Court (IACC), modeled on but separate from the International Criminal Court. Though sympathetic to the motives behind this proposal, I have been consistently skeptical (see, for example, here and here). Despite skepticism from me and others, dogged and effective advocacy by IACC proponents have convinced some governments to formally embrace the idea. Perhaps most notably, in Canada both the Liberal and Conservative parties have endorsed the idea, and Canada’s Foreign Minister has been formally instructed by the Prime Minister to work with international partners to help establish an IACC.

Inspired by these developments, the Anti-Corruption Law Program at the University of British Columbia’s Allard School of Law held an online webinar two weeks ago on the proposal to create an IACC. I was invited to be a part of this conversation, along with three distinguished co-panelists: Juanita Olaya Garcia (a lawyer and member of the International Expert Panel for the Open Government Partnership), Peter MacKay (former Canadian Minister of Justice in the cabinet of Conservative Prime Minister Stephen Harper), and Allan Rock (former Canadian Minister of Justice in the cabinet of Liberal Prime Minister Jean Chrétien). Although we had quite diverse perspectives–with Mr. MacKay and Mr. Rock advocating for the IACC, and Ms. Garcia and I sounding more skeptical notes–the conversation, ably moderated by Roy Cullen, was, in my humble opinion, respectful and constructive, and I hope readers interested in this debate will find the discussion helpful in clarifying some of the important questions and issues that this provocative proposal raises..

Those who are interested can find a recording of the webinar here. (There are some introductory remarks at the beginning; for those who want to skip right to the substantive debate, that begins at about the 6:10 mark.)

The U.S. Could Learn from the U.K. in the Virgin Islands

Posted on by
4

Corruption is a perennial problem in the Caribbean. Although many of the Caribbean islands are independent, many others are held by former colonial powers, including the United States and the United Kingdom, which respectively control adjacent island groups known as the U.S. Virgin Islands (USVI) and the British Virgin Islands (BVI). Encouragingly, over the last six years, the UK has undertaken significant efforts to crack down on corruption in the BVI. Disappointingly, the US has yet to follow suit. The US government—and, once appointed, the new US Attorney for the USVI—should follow the UK’s lead and make anticorruption a top priority.

Continue reading →

Anticorruption Bibliography–March 2022 Update

Posted on by
Reply
An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. Additionally, the bibliography is available in more user-friendly, searchable form at Global Integrity’s Anti-Corruption Corpus website. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

New Podcast Episode, Featuring Igor Logvinenko

Posted on by
2
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 are going to try as best as we can to feature 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, I had the opportunity to speak to Igor Logvinenko, Associate Professor at Occidental College and author of Global Finance, Local Control: Corruption and Wealth in Contemporary Russia. In the first part of our conversation, Igor discusses Russia’s Russia’s historical corruption and current financial integration into world business, and we then turn to the impact of the current sanctions on Russia–including government sanctions on Russia and Russian companies, actions by private companies, and the use of targeted individual sanctions and asset seizures. In addition to discussing these issues in the context of the current war, Igor also discusses more broadly the role of Western financial systems, international financial integration, and the possibility for locally-driven structural changes to fight grand corruption. 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.

Tackling Corruption While Preserving Judicial Independence: Lessons from India’s Supreme Court 

Posted on by
6

In India, Justices of the Supreme Court and judges of India’s 25 regional High Courts are appointed through a process known as the Collegium System. Although the Constitution vests the appointment power in the President of India, the President may only appoint a Supreme Court or High Court nominee recommended by a body called the Collegium, which consists of the Chief Justice, the four other senior-most Supreme Court Justices, and, in the case of High Court nominees, the senior-most judge on the High Court of the prospective appointee.

This system, which developed over the 1980s and 1990s as part of a decades-long tug-of-war between the branches of government, is controversial. Some critics have argued that the Collegium, which operates largely as a black box, leads to the selection of judges based on cronyism and quid pro quos, regardless of a nominee’s merit or scruples. Notably, critics contend, the Collegium System allows for the appointment of corrupt judges because the secrecy of the Collegium’s deliberations prevents accusations of impropriety against those nominees from becoming public. In buttressing this claim, critics point to instances of High Court judges who have been credibly accused of corruption, including one who was formally charged at the end of last year for taking a bribe in exchange for a favorable verdict. Critics also contend that the Collegium System exacerbates judicial corruption through another, more indirect channel: The Collegium’s slow pace has left hundreds of High Court seats vacant, which exacerbates the Indian court system’s extreme case backlog. That backlog, in turn, encourages petty bribery, as many frustrated litigants would prefer to bribe a judge or court official to jump the line or get a case dismissed rather than wait years for a final resolution. Even former Chief Justice V.N. Khare acknowledged that bribes for bail are rampant in the lower courts given the delays litigants may face down the line.

In response to these concerns, the Indian Parliament, led by Prime Minister Narendra Modi, voted overwhelmingly in 2014 to amend the Indian Constitution to replace the Collegium with a National Judicial Appointments Commission (NJAC) composed of representatives from all three branches. But before the law could go into effect, the Supreme Court ruled it an unconstitutional threat to judicial independence. While calls for reform temporarily abated, just last December a member of Modi’s cabinet expressed support for reintroducing the NJAC amendment to replace the Collegium System.

Any such attempt, however, would be misguided. Anti-Collegium reforms like the NJAC would undermine India’s hard-won judicial independence, and the corruption problem these reforms would purport to solve has been greatly exaggerated.

Continue reading →

Corruption, Sanctions, and the War in Ukraine: A Short Interview in Harvard Law Today

Posted on by
Reply

My home institution’s in-house publication, Harvard Law Today, recently interviewed me on some of the topics we’ve been covering on this blog (see, for example, here, here, here, here, and here) and on the KickBack podcast (here and here) related to Russia’s attack on Ukraine. As I tried to emphasize in the interview itself, I am very far from an expert in many of the specific issues at the intersection of corruption and the Russia-Ukraine war, but I tried to pull together succinctly some of what I’d learned from conversations with actual expert over the last couple of weeks. For those who are interested, you can find the interview here.

Why Has Ukrainian Military Corruption Been a Non-Story in the Current Conflict?

Posted on by
6

In my post two days ago, I noted that one reason that the Russian army’s progress in Ukraine has been slower than expected—notwithstanding Russia’s overwhelming numerical superiority—may be the corruption that has been rampant in the Russian military and defense sector for years. (See, for example, here, here, and here.) While I don’t want to attach too much importance to this factor, it does seem at least plausible to me that widespread corruption has undermined Russian military effectiveness, particularly with respect to things like supplies, maintenance, and equipment quality, and possibly also with respect to training and the competence of the leadership.

But if we think that widespread defense sector corruption has played a non-trivial role in Russia’s under-performance on the battlefield in the current war, this naturally invites a question: Why haven’t we also seen reports suggesting that Ukrainian defense sector corruption has hampered the effectiveness of the Ukrainian defense against Russia’s invasion? After all, while corruption has long been recognized as a serious problem in the Russian military, many commentators—including many Ukrainian analysts—have been saying for years that the Ukrainian military also suffers from serious corruption problems, and that those problems threaten to undermine Ukrainian military effectiveness (see, for example, here, here, and here). And yet the news out of Ukraine suggests that the Ukrainian armed forces are fighting quite effectively, without reports of equipment or operational problems that might plausibly be due to corruption.

Why is this? I have no idea—so this is going to be one of those posts where I raise a question rather than trying to argue for what I think is the most likely answer. I may try to do more research and address this in a future post, but for now let me throw out three hypotheses. I would welcome comments from readers who know more about this topic as to which of these seem most plausible, or whether there might be another explanation that I have overlooked: Continue reading →

The Maldives: No Safe Haven for Oligarchs’ Yachts

Posted on by
3

Contrary to recent reports (here, here), Russian oligarchs’ yachts harbored in the Maldives are by no means safe from confiscation. As a party to the United Nations Convention Against Corruption (UNCAC), the Maldives has made bribery, embezzlement, and money laundering crimes under its domestic law (here).  Pursuant to article 46, it pledges “to afford [other UNCAC parties] the widest measure of legal assistance in investigations, prosecutions and judicial proceedings” to enforce their laws against bribery, embezzlement, and money laundering.

These provisions put the oligarchs’ yachts at risk of confiscation in two ways. 

One, Maldivian authorities could initiate an action under the domestic antimoney laundering law. Given the evidence on the public record, there is certainly reason (what American law terms “probable cause”) to believe that the yachts were acquired with the proceeds of a crime, likely embezzlement from the Russian state. (Remember, there need not be a conviction for embezzlement in Russia or elsewhere to launch the related prosecution for money laundering.) The yachts’ presence in the Maldives appears to be more than sufficient grounds for its courts to assert jurisdiction under article 13 of the penal code and therefore to issue a “freeze” order which would prevent the yachts from pulling anchor until a final decision on a seizure action issued.

Alternatively, Maldivian courts have the power under UNCAC and domestic law to issue a freeze order at the request of another UNCAC party.  A country where one was built, for example, could open a case to see whether the shipbuilder was paid with the proceeds of a crime, a money laundering offense, and request that the Maldives prevent the yacht from leaving until its case were concluded. 

Some say will say that whatever the law, the Maldives is a small island nation without the guts to stand up to Russia.  Not so. During the UN General Assembly debate on the resolution denouncing Russian aggression, the government not only backed the resolution but its ambassador left no doubts where its stood: “The Maldives has always taken a principled stand on violations of the territorial integrity of a sovereign country, [a] position based on a bedrock belief in the equality of all States and unconditional respect for the principles of the United Nations Charter.”

Others will be claim that confiscating the oligarchs’ yachts is not possible legally for ownership is obscured by layer upon layer of shell of corporations headquartered in countries.  But those layers can be stripped away by the determined efforts of police and prosecutors, a determination surely stiffened by magnitudes given the yacht owners’ complicity in the appalling events daily unfolding in Ukraine.

Hooray for Corruption (in the Russian Military)

Posted on by
16

As I write this, the tragic unjustified conflict in Ukraine drags on, with anguishing reports of civilian casualties and needless destruction mixed with encouraging news of the valor of the Ukrainian armed forces and the resolve of the Ukrainian people and their leaders. I won’t pretend to have any idea what will happen. I’m just hoping that outnumbered the Ukrainian resistance can hold out long enough for the political and economic pressure to have some effect—if not in changing the Russian leadership’s policy, then at least in undermining its capacity to wage war or maintain a long-term occupation.

In trying to slow the Russian army’s advance and deny Russia control of major cities and other strategic targets, the Ukrainian military may have the help of an unexpected ally: corruption. The corruption, that is, of the Russian military and defense sector. Without taking anything away from the skill and bravery of the Ukrainian armed forces, many analysts have noted that the invading Russian force appears to have been hampered by cheap and poorly maintained equipment, shortages of fuel, rations, and other supplies, and deficiencies in training and coordination. And some of these analysts have suggested that while no one factor can explain Russia’s poor showing in the field (so far), pervasive corruption in the Russian defense sector may be an important contributing cause (see, for example, here, here, and here). Continue reading →