FACTI Background Paper: To Curb Grand Corruption, Subject Lawyers and Other Professionals to the AML Laws

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Last March, the President of the United Nations General Assembly and the President of the United Nations Economic and Social Council formed a panel to review global rules on financial accountability, transparency and integrity (here).  The two presidents explained that the current regime countenances a massive outflow of resources from developed nations, depriving them of the resources required to meet the 2030 Agenda for Sustainable Development.  Formally known as the High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda Financing for Sustainable Development (FACTI), the panel will recommend how tax and anticorruption laws, asset recovery rules, beneficial ownership disclosure requirements, and other international norms can be changed to staunch illicit financial flows and hasten the return of corrupt monies held abroad.

The FACTI Panel’s interim report will be released for comment September 24. The report will draw on consultations with governments, civil society groups, interested organizations, and a series of background papers commissioned by the United Nations Department of Economic and Social Affairs, the panel’s Secretariat.  With Fatima Kanji of the International State Crime Initiative, this writer authored the paper on asset recovery. A post summarizing it is below.  Over the coming weeks GAB will publish posts draw drawn from the other papers. Readers who can’t wait can click here to access the full text of the papers now.  The page also includes links to FACTI’s extensive global consultations. FACTI members are listed here.

Accelerating and Streamlining

the Return of Assets Stolen by Corrupt Public Officials

Corruption is hardly a new problem. Three centuries before the Common Era the author of the Arthaśātra advised the Maurya Empire’s rulers on ways to prevent corruption, and the first statute the English Parliament enacted made bribery a crime.  What is new is the ease with which corrupt money flows out of the victim state.  For a hefty fee, corrupt officials can today readily find a lawyer, real estate agent or other professional willing to help hide the assets they have stolen offshore.

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Guest Announcement: OECD Report and Webinar on Corporate Anticorruption Compliance

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France Chain, Senior Legal Analyst at the OECD’s Anti-Corruption Division, provides the following announcement regarding next week’s OECD webinar on “What really motivates anti-corruption compliance?”, an event which coincides with the launch of the new OECD Study on Corporate Anti-Corruption Compliance Drivers, Mechanisms and Ideas for Change.

Since the OECD Anti-Bribery Convention came into force in 1999, managing the risk of bribery has been identified as one of the most challenging areas of compliance for multinational businesses. Major foreign bribery scandals have resulted in record-breaking fines, which has seen the field of compliance grow exponentially over the past ten years. The OECD Foreign Bribery Report revealed that over 40% of foreign bribery cases involved management-level employees either paying or authorizing bribes, with CEOs involved in 12% of cases. At the same time, companies have shown that they can play a key role in detecting and responding to corruption. The OECD’s 2017 report on the Detection of Foreign Bribery showed that 23% of foreign bribery cases that resulted in definitive sanctions over the last 20 years were detected via self-reporting by companies.

However, implementing an effective compliance program is no easy task, and the COVID-19 pandemic has further heightened the challenges. With companies under great financial pressure to recover, anticorruption compliance departments and systems are being put to the test as never before.

To help shed light on some of these challenges and show us the way forward, a forthcoming OECD study on Corporate Anti-Corruption Compliance Drivers, Mechanisms and Ideas for Change explores what motivates companies to adopt anticorruption compliance measures, and looks at how companies (including small and medium-sized enterprises) could further be incentivized to do so. The study also underlines some of the main challenges faced by companies looking to implement anticorruption programs and proposes potential solutions, including ways for governments, international organizations, and civil society to better support companies in their anticorruption efforts.

The official launch of this study will take place on September 23 (one week from tomorrow), with a webinar panel discussion on What really motivates anti-corruption compliance?” to take place on September 23 from 15:00 to 16:30 Central European Time (9:00 am to 10:30 am U.S. East Coast time). You can register for the webinar here. The panel will bring together:

  • Axel Threlfall, Editor-at-large, Thomson Reuters (moderator)
  • Anna Hallberg, Minister of Foreign Trade and Nordic Affairs of Sweden (opening remarks)
  • Jeffrey Schlagenhauf, OECD Deputy Secretary-General (opening remarks)
  • France Chain, Senior Legal Analyst, OECD Anti-Corruption Division (presentation of key findings from the Study)
  • Alma Balcázar, Co-founder and Principal of GR Compliance SAS and Member of the International Council of Transparency International
  • Andrew Gentin, Assistant Chief, Fraud Section, Criminal Division, United States Department of Justice
  • Corinne Lagache, Chair, Business at OECDAnti-Corruption Committee, and Senior Vice President, Group Compliance Officer, Safran
  • Caroline Lindgren, Head of Legal and Local Compliance Officer of Sweco Sverige AB

Those attending the webinar will be able to submit questions through the chat during the live discussion on Zoom. The session will be recorded and subsequently posted on the OECD Anti-corruption and Integrity website.

President Theodore Roosevelt on the Importance of Fighting Corruption

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Last week, I posted some information about a new working paper that I jointly authored with Justice Mariano-Florentino Cuellar on anticorruption reform in the United States over the 1865-1941 period. Although one of our main arguments in that paper is that the process of anticorruption reform in the United States was long, slow, and involved many different actors at all levels (in contrast to the image of the “big bang” reform driven by a single powerful figure, like a Lee Kwan Yew or a Mikheil Saakashvili), there were indeed some periods, and some leaders, who were especially important to the anticorruption fight. One of those leaders was undoubtedly President Theodore Roosevelt. President Roosevelt was a complicated figure with complicated legacy, but with respect to anticorruption, he was a significant leader of the reform movement. Since today (September 14) is the 119th anniversary of President Roosevelt’s assumption of the presidency, I thought I’d use the occasion to share some of my favorite remarks of his on the subject of corruption The specific context of these remarks, which came in a December 1903 address to Congress, concerned his administration’s efforts to secure the extradition of bribe-taking officials who had fled the country, but President Roosevelt’s sweeping rhetoric sounds like it could have come from a modern anticorruption reformer in a particularly fiery mood:

There can be no crime more serious than bribery. Other offenses violate one law while corruption strikes at the foundation of all law. Under our form of Government all authority is vested in the people and by them delegated to those who represent them in official capacity. There can be no offense heavier than that of him in whom such a sacred trust has been reposed, who sells it for his own gain and enrichment; and no less heavy is the offense of the bribe giver. He is worse than the thief, for the thief robs the individual, while the corrupt official plunders an entire city or State. He is as wicked as the murderer, for the murderer may only take one life against the law, while the corrupt official and the man who corrupts the official alike aim at the assassination of the commonwealth itself. Government of the people, by the people, for the people will perish from the face of the earth if bribery is tolerated. The givers and takers of bribes stand on an evil pre-eminence of infamy. The exposure and punishment of public corruption is an honor to a nation, not a disgrace. The shame lies in toleration, not in correction…. If we fail to do all that in us lies to stamp out corruption we can not escape our share of responsibility for the guilt. The first requisite of successful self-government is unflinching enforcement of the law and the cutting out of corruption.

New Podcast, Featuring Michael Hershman

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After a brief summer hiatus, I’m happy to announce that a new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my collaborators Nils Köbis and Christopher Starke interview Michael Hershman. Mr. Hershman, one of the co-founders of Transparency International (TI), has had a long and distinguished career on issues related to transparency and anticorruption, including work with the U.S. Senate Watergate Committee, the U.S. Agency for International Development, and, more recently, the Independent Governance Committee for FIFA. In the interview, Nils and Christopher talk with Mr. Hershman about his background, the founding of TI, the relationship between corruption and populism, and issues related to corruption and sports, among other topics.

You can find this episode here. 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 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.

Following the Money: October 21 Conference on Making Finance More Transparent

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The Norwegian Branch of Publish What You Pay is bringing together a terrific group of investigative journalists, whistleblowers, bankers, government officials, and academics to discuss how to lift the veil of secrecy often surrounding illicit financial transactions. Those speaking at the free, online conference October 21 include –

* Bradley C. Birkenfeld, the individual who exposed how UBS helped ultra-wealthy Americans commit billions in tax fraud

* Jóhannes Stefánsson and Ingi Freyr Vilhjálmson. Stefánsson blew the whistle on the bribes the Icelandic company Samherji paid Namibian officials to corner the market on the country’s fishing quota while Vilhjálmson’s reporting exposed the role of Norway’s DNB bank in disguising the bribes

* William Bourdon, French avocat who has done so much to force French prosecutors, judges, and politicians to address corruption in France and abroad

* Simon Bendtsen, Danish editor and journalist with Berlingske Tidende who with colleagues exposed the Danske Bank money laundering scandal

* Linda Larsson Kakuli and Axel Gordh Humlesjö, members of the investigative team at Swedish national public television broadcaster SVT who revealed the Swedbank money laundering scandal

Information on the other speakers and how to register is here.

New Working Paper on Anticorruption Reform in U.S. History

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Endemic public corruption in developing and transition countries often seems intractable. Yet most countries that are currently perceived as having relatively high levels of public integrity–places like Sweden, Denmark, the United Kingdom, and the United States–were, at an earlier point in their history, afflicted with pervasive corruption similar to what one finds throughout the developing world today. Considering the history these countries may therefore make a valuable contribution to modern debates about anticorruption reform—not so much by providing simple lessons about what policies to adopt, but by offering a broader sense of how the complex process of anticorruption reform unfolds over time, and by calling into question certain widely-held beliefs about this process.

A couple years back, after attending a fascinating presentation by Mariano-Florentino Cuellar (a Justice of the California Supreme Court who somehow manages to continue to hold down his former day job as a professor at Stanford Law School), I became particularly interested in the history of my own country, the United States, in the late nineteenth and early twentieth century. The challenges facing anticorruption reformers in the United States during this period bear a striking resemblance to the challenges facing reformers in modern-day democracies in the developing world. Indeed, the United States is a particularly interesting case study because, in contrast to most of the other Western democracies that are currently perceived as having low corruption, the United States established political democracy well before it embarked on significant “good government” reforms.

Justice Cuellar graciously agreed to collaborate with me, and we finally have a draft paper entitled “Taming Systemic Corruption: The American Experience and its Implications for Contemporary Debates.” The draft now available on SSRN here, and is also available as part of the University of Gothenburg Quality of Government (QoG) Institute’s working paper series. Our article, which focuses principally on the period between 1865 and 1941, does not purport to reach firm conclusions about the reasons that the U.S. struggle against systemic corruption ultimately succeeded—let alone to draw facile “lessons” about “what works.” But we do find that the U.S. experience calls into question a number of commonly-held views about the struggle against corruption in modern developing countries: Continue reading →

OECD September 23 Webinar Corporate Anticorruption Compliance Programs

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By my count the laws of 25 nations either require or create strong incentives for firms doing business in their country to have an anticorruption compliance program.  Making it against company policy for employees or agents to participate in any corrupt act with sanctions ranging from demotion to termination is a no-brainer. Corporate employees, consultants, and agents are always on the paying side of a bribery offense and often facilitate conflicts of interest and other corrupt and unethical acts.  There is no reason why countries fighting corruption should not enlist the private sector in the fight.

Even when national law doesn’t require a compliance program, it makes sense for many reasons — legal, reputational, managerial — for companies to have one. The OECD has been a leader in persuading businesses large and small of the benefits of compliance programs and with the World Bank and the UNODC issued an invaluable guide to creating one.  Its latest effort to persuade businesses why they should establish a compliance program, the OECD examines why so many companies have established one even when not required to do so, how the programs work, and what companies’ experience with them has been. The study, “Corporate Anti-Corruption Compliance Drivers, Mechanisms, and Ideas for Change,” will be discussed at a September 23 webinar 15:00 Paris time. Registration will open shortly.  Details are here.

Tracking Corruption and Conflicts of Interest in the Trump Administration–September 2020 Update

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Back in May 2017, this blog started the project of tracking and cataloguing credible allegations that President Trump, and his family members and close associates, have been corruptly, and possibly illegally, leveraging the power of the presidency to enrich themselves. The newest update is now available here.

As previously noted, while we try to include only those allegations that appear credible, many of the allegations that we discuss are speculative and/or contested. We also do not attempt a full analysis of the laws and regulations that may or may not have been broken if the allegations are true. (For an overview of some of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct, see here.)

Lebanon Disaster Update: An Excellent and Disturbing OCCRP Report Sheds New Light on the Backstory of the Deadly Explosion

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A couple of weeks ago, I did a short post in reaction to the deadly warehouse explosion in Beirut, which killed at least 182 people, wounded thousands, and left hundreds of thousands homeless. My post wasn’t really about the Lebanon blast per se—especially because the causes of the explosion, and the role that corruption may have played, were unclear—but rather discussed more generally the direct and indirect ways that widespread corruption can increase the risk of deadly accidents. But I continue to wonder whether, with respect to the Beirut tragedy, it will turn out that corruption (rather than “mere” incompetence) will have been a contributing cause.

We still don’t have all the answers—particularly with respect to the decision-making process within Lebanon itself—but thanks to excellent investigative reporting by an international team of journalists with the Organized Crime and Corruption Reporting Project (OCCRP), we now have a great deal more information about the shadowy and highly suspicious backstory of the abandoned ship that brought the ammonium nitrate to Beirut in the first place. I don’t think I can do the report justice, but I highly recommend that everyone read it—it’s available here. And to give you a sense of what’s in it, I’ll just quote the main findings summarized at the beginning of the report: Continue reading →

“The Cyprus Papers”: Al Jazeera Report Sheds New Light on Golden Passport Programs

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Last year, we had a series of posts on so-called “golden visa” and “golden passport” programs—systems in which countries allow foreign nationals to obtain permanent residence (in the case of golden visa programs) or even citizenship (in the case of golden passport programs) in exchange for a sufficiently large investment in the country, or in some cases for a straight-up cash payment to the government. (See here, here, here, and here.) These programs raise three corruption-related concerns:

  • First, in the eyes of some critics, the programs are themselves a form of (legalized) corruption, enabling individuals to use money to purchase something (permanent residence or citizenship) that should not be for sale.
  • Second, even if we adopt a narrower understanding of corruption, golden visa and golden passport programs may make it easier for corrupt officials and their cronies (as well as other wealthy criminals) to find safe havens for themselves and their money.
  • Third, while several countries have rules designed to deal with the preceding problem, these rules can generate considerable corruption in the programs themselves, as individuals who are ineligible for golden visas or passports can bribe or otherwise corrupt those administering the system to skirt the rules.

Data on the extent of these or other problems, though, is a bit thin, in part because information on the operation of golden passport and golden visa programs—especially with regard to the individuals who take advantage of these programs—is generally not publicly available. But those interested in this topic—and concerned about the corruption risks or other problems associated with these programs—might be interested in a recent report from Al Jazeera, dubbed “The Cyprus Papers,” which analyzed leaked documents on the operation of Cyprus’s “golden passport” program between 2017 and 2019. (Golden passport programs in Cyprus and Malta have attracted particular concern because those two countries are EU members, thus making citizens of these countries EU citizens as well.)

Al Jazeera provides a user-friendly interactive webpage for exploring the results of its analysis of these leaked documents, and I recommend that those interested in this subject check it out. A few highlights: Continue reading →