New Paper: “A Proposal for a Global Database of Politically Exposed Persons”

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My former student (and former GAB contributor) Ruta Mrazauskaite and I have a new paper, in the Stanford Journal of International Law, entitled “A Proposal for a Global Database of Politically Exposed Persons.” Here’s the abstract:

As part of the global effort to combat public corruption, anti-money laundering laws require financial institutions and other entities to conduct enhanced scrutiny on so-called “politically exposed persons” (PEPs)–mainly senior government officials, along with their family members and close associates. Unfortunately, the current system for identifying PEPs–which depends entirely on a combination of self-identification, in-house checks, and external private vendors that rely on searches of publicly available source material–is both inefficient and in some cases inaccurate. We therefore propose the creation of a global PEP database, organized and overseen by an inter-governmental body. This database would be populated with data compiled by national governments, drawing primarily on the data those governments already collect pursuant to existing.financial declaration systems for public officials. A global PEP database along the lines we propose has the potential to make PEP identification more accurate and more efficient, reducing overall compliance costs and allowing compliance resources to be used more productively.

I hope readers will find the paper and the proposal to be of interest, and we welcome comments, criticisms, and further ideas about how to address the problem that our proposal is meant to ameliorate.

In Mexico, Justice Will Remain a Family Matter

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Judicial corruption in Mexico is a pervasive problem. And while high-level scandals tend to grab the headlines (see, for example, here, here, and here), much of the corruption is more pedestrian. While the causes of Mexico’s judicial corruption problem are various and complex, one persistent contributing factor is the endemic nepotism throughout the judiciary.

Of the more than 50 types of position in the judicial branch (including both judgeships and various administrative positions), only two—federal circuit and district court judgeships—use a competitive merit-based hiring process. For the rest, judges can choose whom they please, with little oversight. Moreover, once hired, these individuals have an insurmountable advantage in promotion in the judiciary, given that most job postings (and, informally, judgeships) require that the candidate have previous experience in the judicial branch. And even with respect to circuit and district judgeships, which are supposed to be filled through an open and merit-based competitive selection process run by a body called the Federal Judicial Council (CJF), in practice the CJF often creates “special” vacancies with different criteria (in effect, lower standards).

As a result of all this, nepotism in judicial hiring and promotion is pervasive, as judges are able to secure positions for friends and family. At least 51% of Mexico’s judges and magistrates are related to someone else working in the judiciary, with that number as high as 80% in some states. (To take one particularly egregious but not totally anomalous example, in one judge’s chambers, 17 employees were related to the judge.) This nepotism is not only corrupt in itself, but it also contributes to other forms of corruption. For one thing, corrupt judges can appoint those who will participate in, or at least be complicit in, corrupt practices—in some cases appointing individuals recommended by organized crime groups. But even when such deliberate wrongdoing is not the issue, untrained or unprofessional judicial bureaucrats and judges are more susceptible to corruption, and more likely to create the kinds of delays and inefficiencies in the system that both invite and obscure corrupt actions.

There hadn’t been much appetite in the Mexican Government to address the judicial nepotism problem until reform-minded President Andrés Manuel López Obrador and Chief Justice Arturo Zaldívar took office. Since February 2020, both men have been enthusiastically lobbying for a judicial reform package deemed the most ambitious since 1994. This bill, overwhelmingly passed by the Mexican Senate and Chamber of Deputies in recent months, is a behemoth, with a variety of significant structural changes to the judicial branch. Among these many reforms are several measures designed, at least in part, to address the problem of judicial nepotism: Continue reading →

Guest Post: Corruption in Covid-19 Vaccine Distribution–Early Lessons from Brazil

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Today’s guest post is from Guilherme France, a legislative assistant in the Brazilian Senate

The urgency of halting the Covid-19 pandemic, combined with the limited supply of vaccines, has increased the challenges of distributing the vaccine quickly but fairly. As others have pointed out, including on this blog, there are significant risks of corruption in the vaccine distribution process. Brazil provides a troubling illustration of this problem, with instances of corruption or other improprieties related to vaccine distribution having already sparked investigations into mayors and other local officials. For example, there have been complaints that in Manaus, a Covid-19 epicenter, relatives of a local businessman in were fraudulently appointed as employees in health clinics so that they would qualify for early vaccination. And this is but one of several cases where mayors and other local officials allegedly helped their relatives or close associates cut in the line. There have also been reported attempts to pay bribes to nurses for early vaccine access.

There has been similar line-cutting behavior on a grander scale, with various groups, such as prosecutors and judicial authorities, using their political influence and leverage to attempt (without success) to get priority status for receiving the vaccine, ahead of those, like health care workers and the elderly, who need it more urgently. On other occasions, the government acceded to the use of the “priority status” for vaccine distribution as a bargaining chip. In the midst of strike negotiations, it agreed to place truck drivers and other transportation workers ahead of the general population in the vaccination line.

This behavior, while reprehensible, is understandable. Given how hard Brazil has been hit by Covid-19, access to the vaccine is a life and death matter, and the temptation to cut the line, for oneself or a loved one, is just too great. This is why increased control and transparency for vaccine distribution should be a priority for governments at all levels. Continue reading →

The Emoluments Clause Cases Against Donald Trump: A Post Mortem

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Of the many credible corruption and conflict-of-interest allegations against former President Donald Trump, some of the most prominent concerned the income that the Trump Organization earned from parties with interests in influencing U.S. government policy. While the general conflict-of-interest rules that cover most federal officials do not apply to the President, a subset of the Trump Organization’s business dealings—in particular, those involving foreign governments and state governments—at least arguably violated the U.S. Constitution’s two so-called “Emoluments Clauses. (The Foreign Emoluments Clause prohibits any U.S. official from receiving gifts, titles, or “emoluments” from foreign governments, while the Domestic Emoluments Clause prohibits the President in particular from receiving any benefits other than his official salary from federal, state, or local governments.) President Trump’s alleged violations of the Emoluments Clauses triggered three separate lawsuits, filed by different parties in different federal courts, within Trump’s first six months in office. Those cases gradually wound their way through the legal system, with some defeats and some victories, mainly on threshold legal questions.

Last week, the U.S. Supreme Court brought that whole process to a halt, dismissing petitions for review in two of those pending cases as moot. (The third case had been dismissed by an appeals court, and the Supreme Court declined to review that case last fall.) Thought the Court’s terse, unsigned order included no explanation, the obvious inference is that the Court determined that the Emoluments Clause suits were moot because Donald Trump is no longer President. Importantly, the Court’s mootness order means not only that these suits won’t proceed, but also that the previous legal rulings in the cases under review are vacated, and thus have no precedential value. Legally speaking, it’s as if the cases never happened.

This did not sit well with everyone. Former head of the Office on Government Ethics Walter Shaub described the Court’s dismissal of the cases as “insane,” arguing that the cases are “not moot” because Trump “still has the money.” “When any other federal employee violates the emoluments clause,” Shaub observed, “they have to forfeit the money.” Others involved in the litigation against Trump tried to look on the bright side. The Citizens for Responsibility and Ethics in Washington (CREW), for example, issued a statement noting that the Emoluments Clause litigation “made the American people aware for four years of the pervasive corruption that came from a president … taking benefits and payments from foreign and domestic governments.”

I’ve been trying to figure out what I think about all this. I don’t have a clear, clean bottom line, but I do have a few scattered thoughts about what we might take away from the denouement of the Emoluments Clause controversy. Continue reading →

Guest Post: Guidelines for Settling Foreign Bribery Cases

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The OECD Antibribery Convention requires parties to impose “effective, proportionate, and dissuasive criminal penalties” on those found guilty of bribing an official of another nation. As GAB readers know, most prosecutions for foreign bribery end not with a trial but with a settlement (here). GAB readers also know that a vigorous debate has ensued on this blog (here and here) and elsewhere (here, here and here) as to whether these settlements have met the “effective, proportionate, and dissuasive” test. In response, and with the assistance of the private bar, the OECD has been developing guidelines to help prosecutors and defense counsel ensure that future settlements do.

 GAB is delighted to welcome this guest post by Peter Solmssen, a leader in this effort from the private bar, in which he describes where the guidelines project stands.  As General Counsel of Siemens AG, Mr. Solmssen negotiated its settlement of foreign bribery cases with, among others, the Federal Republic of German and the United States.  He now chairs the Non-trial Resolutions of Bribery Cases Subcommittee of the International Bar Association (IBA).

Work on international guidelines for the settlement of foreign bribery cases is accelerating. The IBA made its latest submission to the OECD Working Group on Bribery January 22. It there urged the Working Group to move quickly with its anticipated international guidelines on settling transnational bribery cases and to resolve those aspects of settlements that remain contentious. As described here, the IBA has been pushing the OECD to issue guidelines that will encourage prosecutors to cooperate internationally and programmatically to increase the use of settlements, or non-trial resolutions as they are formally referred to internationally.

Continue reading →

New Podcast Episode, Featuring Eric Kinaga

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my collaborator Nils Köbis of the Interdisciplinary Corruption Research Network, together with guest co-host Neil Sorensen of Landportal, interview Eric Kinaga,the Campaign Coordinator for the Shule Yangu Campaign Alliance in Kenya. This group uses open data initiatives to protect public schools. After explaining his own background in anticorruption and how he got involved in the Shule Yangu Alliance, Eric describes the campaign’s work, including the use of online databases to foster transparency in order to prevent land-grabbing, and how the alliance has worked to include marginalized groups in the efforts to prevent land corruption. Eric also discusses the challenges of giving media outlets the incentive to to cover the often complex land corruption issues.

You can find this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the 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.

Checked or Choked? How the Congressional Response to the Abscam Investigation Undermined the FBI’s Ability to Root Out High-Level Corruption

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On February 2nd, 1980, the FBI announced the results of a massive sting operation, codenamed “Abscam,” conducted against members of the U.S. Congress. At the time, this was the largest FBI political corruption operation ever conducted: two years in the making, involving over a hundred agents and hundreds of thousands of dollars in operating costs. The details of the operation were so outlandish they sound like they could have been lifted from a Hollywood movie. The FBI recruited an international con artist named Melvin Weinberg for “creative direction” of the operation, and then had agents pose as wealthy Arab sheiks (hence the name of the operation, a contraction of “Arab scam” or “Abdul scam”) that came a-calling to Capitol Hill to purchase favors and votes. The operation took place on Key West yachts and in Atlantic City casinos, in limousines and on chartered jets, where the “sheiks” lured politicians to glitzy affairs with offers of $50,000 for a favorable licensing deal or immigration waiver. They had astonishing success. Not only were the approached targets receptive, several actively recruited other elected officials to the bribery scheme. Congressmen were caught on tape accepting paper lunch bags stuffed with cash, paired with made-for-movie dialogue such as: “Money talks in this business,” “I’m no Boy Scout,” and “I got larceny in my blood. I’ll take [the bribe] in a goddamn minute.” Weinberg and the FBI reckoned that the sting easily might have nabbed a great deal more Congressmen if the FBI hadn’t run out of bribe money and the press hadn’t scored an early scoop. What followed was a flurry of resignations, hearings, and criminal trials. After the dust settled, six representatives and one senator had been convicted of bribery and conspiracy. Despite controversy over the ethics of the FBI’s methods, every conviction was upheld on appeal.

The fact that these convictions stuck is a reflection of the fact that although the undercover FBI agents involved in Abscam got very close to the line that separates legal deception from unlawful entrapment, the FBI had been scrupulous about staying on the right side of that line: all tapes were immediately reviewed to ensure that agents had not improperly induced wrongdoing; the cash transfers were witnessed and monitored by Justice Department attorneys; and judges signed warrants and sanctioned the FBI’s methods. Nevertheless, Congress—perhaps unsurprisingly—thought that the FBI had gone too far. At hearings before House Subcommittee on Civil and Constitutional Rights and the Senate Select Committee to Study Undercover Activities, Members of Congress aired grievances over FBI undercover procedures, and argued that while undercover investigations could be valuable, the FBI had gone too far, and had engaged in a wildly inappropriate exploratory fishing expedition.

Now, Congress’s actions may not have been purely self-serving. A few years prior to Abscam, a Senate select committee, known as the Church Committee, revealed significant FBI abuses, documented in a whopping fourteen reports that laid out intelligence agency abuses in extraordinary detail. Some suggest—controversially—that Abscam was the FBI’s retaliation against Congress for this public excoriation.

Whatever Congress’s motives, in the decade following Abscam, Congress circled the wagons, pressuring the Department of Justice to implement internal reforms by way of proffering dramatic legislative packages staunchly opposed by Attorneys General. The “compromise” result was a series of restrictive guidelines for undercover and sting operations, guidelines that effectively bar the FBI from ever again conducting an operation similar to Abscam.

Continue reading →

Guest Post: Trump’s Pardons and Putin’s Palace Show Why Biden Must Tackle Corruption at Home and Abroad

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Today’s guest post is from Joe Powell, the Deputy Chief Executive Officer for the Open Government Partnership.

The corruption continued to the end. A cast of convicted fraudsters, tax dodgers, and money launderers littered President Trump’s final pardon list. One clemency went to Elliott Broidy, a former top fundraiser for Mr. Trump who had been implicated in illegal lobbying in connection with Malaysia’s multi-billion dollar 1MDB embezzlement scandal. Trump’s final official act as President, taken minutes before the official transfer of power, was to pardon the tax evading ex-husband of one his favorite Fox News hosts, Jeanine Pirro.

None of this was remotely surprising after four years in which ethics, conflict of interest, and the rule of law did not seem to apply to the executive branch of the U.S. government. Contrast this with the extraordinary act of bravery from Russian opposition leader Alexey Navalny, who despite being jailed on his return to Moscow after his near-fatal poisoning, released a viral documentary last week about the construction of President Putin’s palace on the Black Sea. The film, which within days had racked up nearly 100 million views, details the corruption, bribery, and opaque corporate structures used to fund what Navalny claims is the world’s most expensive real estate project, with an estimated price tag of at least $1.4 billion. The funds come from Putin’s oligarch friends who dominate the top positions in many of Russia’s biggest companies, and drain state resources that could improve the lives of ordinary Russians. A single gold toilet brush and toilet paper holder, purchased for one of Putin’s wineries near the palace, cost more than the average annual state pension in Russia. No wonder Putin is so desperate to silence Navalny.

What ties Trump’s pardons and Putin’s palace together is the insidious effect of corruption on democracy. Globally, corruption has been one of the main drivers of 14 years of consecutive decline in civil and political liberties around the world. This democratic recession has affected long-standing and emerging democracies alike, and has spurred street protests and civil society campaigns in many countries. Hungary is a textbook example. Prime Minister Orbán has used state funds for patronage, ensuring that only close supporters receive high value government contracts, and threatening to veto the European Union budget over any checks on his power. Throughout the world, dark money has increasingly fueled online disinformation and a decline in press freedom, which has made accountability harder to achieve.

To turn the tide on this democratic backsliding, a major global effort to combat corruption is needed. President Biden is well placed to help lead the charge. Continue reading →

Anticorruption Bibliography–January 2021 Update

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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. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

Guest Post: For Whose Benefit? Reframing Beneficial Ownership Disclosure Around User Needs

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GAB is pleased to publish this post summarizing a recent paper on beneficial ownership disclosure by Anton Moiseienko (Research Fellow) and Tom Keatinge (Director) of the London-based Centre for Financial Crime and Security Studies at the Royal United Services Institute.  In the paper, the authors examine current standards governing disclosure of beneficial ownership data, the challenges of ensuring the data’s accuracy, and the needs and interests of the data’s different users. It will be of particular interest to American policymakers given enactment of the Corporate Transparency Act.

Beneficial ownership disclosure – the collection and sharing of information on genuine (rather than formal or nominee) owners of assets – has become a central issue in the fight against corruption and other financial crimes. To whom to disclose it can be controversial, as the very public spat between the United Kingdom, and several of its Overseas Territories shows. Moreover, even countries committed to full public disclosure face challenges in ensuring implementation meets promise as continuing discussions among EU member states shows.  

Arguments over the extent of disclosure and verification can obscure an equally important issue, ensuring the ownership data meets the needs of domestic and foreign law enforcement agencies, tax authorities, regulated businesses, and the public at large. In our paper, we examine not only to whom the information should be provided and how to guarantee it is accurate but how to be sure what is collected and disclosed serves the interests of different types of users. It is based on a review of publicly available sources and over 40 interviews, including more than 25 with experts based in British Overseas Territories and Crown Dependencies, jurisdictions where the lack of information on beneficial ownership has been a major concern internationally.

Continue reading →