Tag Archives: anti-corruption agencies

Essential Reading for Enforcers: The EIB Fraud Investigation Unit and CPS Inspectorate Reports

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Enforcing the anticorruption laws is the backbone of the fight against corruption, and improving enforcement agencies’ performance is thus critical.  Two recent reports, one by the European Investment Bank’s Fraud Investigation Unit and a second by the Inspectorate of the United Kingdom’s Crown Prosecution Service, offer a wealth of data, analysis, and tips from which all enforcement agencies can profit.  Highlights from each below.

Fraud Investigations Activity Report 2018.  This latest report of the EIB’s Fraud Investigations Unit documents the Unit’s fight against fraud and corruption in projects funded by the lending arm of the European Union, the world’s largest development finance agency. Compliance and investigative personnel in other bilateral and multilateral financial institutions will find much useful data for benchmarking their performance against the EIB unit. Case studies of different fraud and corruption schemes it has uncovered will help investigators in other institutions spot similar types of wrongdoing.

Most interesting to this reader was the description of the Proactive Integrity Reviews (PIRs) the Fraud Investigation Unit conducts.  All active operations in the Bank’s portfolio are scored each year against 30 risk factors to identify corruption and fraud vulnerabilities, and a PIR conducted on two or three of the operations most at risk.  Of the 27 projects subjected to a PIR, the unit found five, almost 20 percent, where funds have been misused.

Would a similar intensive review of a small number of World Bank, Asian, Inter-American, or African Development Bank produce similar numbers?  Will the new United States International Development Finance Corporation follow the EIB’s lead and institute a similar review?

Case Progression in the Serious Fraud Office. The Serious Fraud Office is the United Kingdom’s version of an anticorruption agency, with investigators, accountants, IT specialists, and prosecutors who work in teams to investigate complex fraud and corruption cases.  Case progression is the U.K. term to describe the time it takes for a team to reach a conclusion about a case, from opening an investigation to a decision either to file a criminal charge or to drop the matter altogether. The Crown Prosecution Service Inspectorate recently examined the procedures the SFO uses to ensure cases move through the system in a timely manner.  Other anticorruption agencies wanting to improve their performance will find a wealth of useful information and practical tips. Some of the key observations:

* Recognize that in a lengthy case there will be staff turnover. Maintain a key documents folder for those joining the team so they can get up to speed quickly.

* A unit with the technical skill to decrypt and download data kept on cell phones, computers, and other electronic devices is essential.  But realize that decryption can take enormous time.  Don’t overload the unit by seizing equipment of only secondary or passing interest.

* Periodic review of the progress of each case is essential to ensure deadlines for achieving key objectives or stages in the case are set, and met, and unfruitful lines of investigation abandoned. The SFO exercises oversight in several ways.  How each one works and suggestions for improving each will be of value to any anticorruption enforcement authority.

* The average number of days from the acceptance of a case to charging has been reduced from 41 months to 38 months, or 7.5%.

Senator Warren’s Proposed Anticorruption Agency Should Be Headed By a Multi-Member Commission, Not a Single Director

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Last August, Senator Elizabeth Warren introduced a sweeping bill that, if enacted, would substantially reform the current ethics systems in place in the U.S. government. The bill includes a broad range of substantive reforms, including stricter conflict of interest rules, much stronger lobbying restrictions (such as a lifetime ban on lobbying by former members of Congress, Presidents, and agency heads), and new judicial ethics rules. But in addition to these and other changes to substantive law, the bill is striking in its call for a quite drastic institutional change: the creation and empowerment of a single anticorruption agency called the U.S. Office of Public Integrity. The proposed Office would not only consolidate the functions of the U.S. Office of Government Ethics (OGE) and the agency Inspectors General under one roof, but would also have broad investigative authority (including subpoena power), as well as the ability to impose civil and administrative penalties, and to refer criminal violations to the Department of Justice. Moreover, the Office of Public Integrity would have the responsibilities to ensure agency compliance with the Freedom of Information Act (FOIA), create and maintain a central FOIA database, and maintain a separate online database containing financial disclosures, lobbyist registrations, lobbyist disclosures of meetings and materials, and all ethics records (including recusals and waivers). A division within the Office of Public Integrity, known as the Office of the Public Advocate, would represent the “public interest” in executive branch rulemaking.

In addition to its broad powers, the proposed Office of Public Integrity is notable for its distinctive leadership structure. The bill proposes that the office be headed by a single Director, appointed for a renewable five-year term. The Director would have “for-cause” removal protection, meaning that the President could only remove the Director for good cause, defined as “inefficiency, neglect of duty, or malfeasance in office.” The Office would therefore be an “independent agency,” which is a term typically (at least in the U.S.) referring to an agency whose leaders have this sort of for-cause removal protection. But most U.S. independent agencies are headed by a multi-member commission, rather than a single director. (This is true, for example, for the National Labor Relations Board and the Federal Communications Commission.) The commissioners at such agencies typically serve staggered terms and make decisions by majority vote. It’s rare for an independent agency in the U.S. federal government to be headed by a single director rather than by a commission. (The most notable exception is the Consumer Financial Protection Bureau—perhaps not coincidentally an agency based on a proposal by Senator Warren.)

While there is much to be said in favor of Senator Warren’s proposed Office of Public Integrity, this leadership structure is a mistake. While it makes sense for an agency devoted to enforcing ethics rules and fighting corruption to be independent from the President, it would be better for such an agency to be governed by a multi-member commission rather than a single director.

There are three reasons for this:

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Lessons from Moldova’s “Theft of the Century”

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One year ago today, on April 20th, 2017, a Moldovan businessman named Veaceslav Platon was sentenced to 18 years in prison. His crime? Helping to steal a billion dollars. Between 2012 and 2014, businessmen and politicians siphoned off money from Moldova’s three largest banks in a crime now known as the “Theft of the Century.” While corruption is endemic in many parts of Eastern Europe, the theft in Moldova was spectacular in its size and in the severity of its consequences.

This theft was an economic, social, and political catastrophe for Moldova. The amount of money that disappeared was similar to the amount implicated in the 1MDB scandal in Malaysia–but Malaysia’s GPD is 2.3 times the size of Moldova’s. The Moldovan government’s secret bailout of the banks cost $870 million, one-eighth of Moldova’s GDP. As a result of the theft, three of Moldova’s main banks went bankrupt and were liquidated; more banks are still under the supervision of the National Bank of Moldova, and there is persistent instability in the financial sector. And then there’s the human cost. For example, the misuse of money in the State Health Insurance Company’s accounts led to a medicine shortage in 2014-2015. During street demonstrations that ensued after the theft became public, two dozen people were injured. The political fallout from the theft has also been substantial: Confidence in the government was shattered, as every government branch and every major political party seemed implicated. Furthermore, because the party seen as most heavily involved in the theft was a pro-EU party, Moldovan support for joining the EU plummeted. Pro-Russian sympathizers capitalized on the public reaction, and the pro-Kremlin Igor Dodon was elected president in 2016. Dodon has talked about joining the Russia-controlled Eurasian Economic Union, halted participation in NATO exercises, and opposes the opening of a NATO office in Chisinau, Moldova’s capitol.

The investigation into the theft has dragged. More than 40 people have been implicated, and more prosecutions are supposedly in the pipeline, but only a few people have been convicted so far. With Moldova’s 2018 elections looming, now is a good time to look back at the fallout and lessons from the Theft of the Century.

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Dispatches from the UNCAC Conference of States Parties, Part 1: Revisiting the Jakarta Principles of Anti-Corruption Agencies

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Last month, the UN Convention Against Corruption (UNCAC) Conference of States Parties (COSP) was held in Vienna, Austria. In addition to the formal meetings of government representatives, the COSP also featured a number of panels, speeches, and other side events, at which leading experts discussed and debated a range of anticorruption topics. GAB is delighted that Northwestern Pritzker School of Law Professor Juliet Sorensen and her student Kobby Lartey, who attended the COSP, have offered to share highlights of some of the most interesting sessions in a series of guest posts. Today’s post is the first in that series.

Though specialized anticorruption agencies (ACAs) are dismissed by some as redundant or ineffective, last month’s COSP panel on “Revisiting the Jakarta Principles: Strengthening Anti-Corruption Agencies’ Independence and Effectiveness” made a strong case for ACA’s importance to the fight against corruption. (The Jakarta Principles are drawn from a 2012 statement drafted by anticorruption practitioners and experts from around the world; these broad, aspirational principles help anticorruption to protect themselves, and to offer inspiration for their work.) The panel, which included ACA commissioners from Indonesia, France, Romania, and Burkina Faso, as well as representatives from Transparency International, the UNODC, and UNDP, the panel highlighted the diverse struggles and successes of member states’ ACAs. Continue reading →

Guest Post: Time to Go Beyond Anti-Corruption Agencies in Sub-Saharan Africa

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Njoya Tikum, United Nations Development Programme Regional Anti-Corruption Advisor for Africa and Yale University World Fellow, contributes the following guest post:

To achieve the aspiration for an inclusive and sustainable human development in Africa, as articulated in the Africa Union’s (AU) Agenda 2063 and reiterated in the Common Africa position on post 2015, African countries must reconsider their approach to the fight against corruption. In the last 15 years, the international community of anticorruption practitioners and advocates have induced African countries to establish anticorruption laws and bodies. With few exceptions, almost every African country—sometimes of their own volition and at times under immense pressure from international financial institutions—has embarked on wide-ranging reforms aimed at strengthening state accountability and eradicating corruption. However, these interventions have not resulted in any noticeable decline in corruption in most parts of Africa. Indeed, multiple indexes such as Transparency International’s Corruption Perception Index (CPI), the Mo Ibrahim Foundation’s Governance in Africa Report, and the Afrobarometer, indicate that corruption has been on the steady rise in Africa. The critical question, then, is why the legion of interventions aimed at combating corruption have not yielded positive outcomes.

With monumental trust deficit between the state and citizens in Africa, relying on Anti-Corruption Agencies (ACAs) to fight corruption can only yield limited results. For many countries, the establishment of an ACA was just another box to tick in order to get the next round of development assistance; the agencies themselves are mere window dressing, often suffering from institutional weaknesses and a lack of sufficient human and material resources. In several African countries, for example, ACA funding is tied to presidential benevolence instead of allocation through a transparent national budgetary processes. They are staffed by people with no technical expertise, sometimes including retired public servants who have no real zeal to rock the boat. In these countries, the modus operandi is to fight corruption in areas earmarked by the ruling political regime. In some countries, leaders have used the ACAs to further witch-hunts against political opponents.

How does Africa navigate itself out of this quagmire? To win the battle against corruption, Africa must move beyond offices and notepads to pragmatism and action, exploring new and innovative solutions:

  • To begin with, anticorruption strategies must be comprehensive, and must include governance innovations such as open data, transparency and accountability in business, procurement, construction, etc. As part of this comprehensive approach, resources from the national budget must directly be allocated for anticorruption capacity building as part of national development plans (NDPs). As with other parts of NDPs, annual and biannual benchmarks and targets must be established to track the progress of anticorruption initiatives.
  • In addition, African governments can and should make use of new information and communication technologies (ICTs) and citizen social accountability tools. For instance, a number of web based applications have been developed to report instances of corruption in real time, providing an opportunity for cheap, affordable solutions to citizens and quick responses/actions by anti-corruption agencies and integrity institutions. See, for example, the Huduma, Ushahidi in Kenya and Frontline SMS campaigns on drug stock outs in the region.
  • Civil society organisations (CSOs) must play an increased role as the true watchdogs of the people. Given these responsibilities, and the need for CSOs to be autonomous and sensitive to local needs, it is unfortunate that almost 90% of anticorruption CSOs in Sub-Saharan Africa are funded by international donor agencies. The funding strategy must be adjusted, with national governments and other non-state actors taking up more responsibility for supporting anticorruption CSO activities.
  • Speaking of the international community, development partners must switch from playing a hypocritical role where they condemn corruption in the public sector in Africa but do little to stop corruption by private sector groups from their countries. They must embrace a new form of partnership where the private sector, including banks and transnational companies, are held to the same standards as public institutions.