Fixing Everything But What’s Broken: Malaysia after the 1MDB Scandal

The Malaysian 1MDB scandal sparked the largest investigation in the history of the U.S. Department of Justice Kleptocracy Asset Recovery Initiative and has revealed serious problems with Malaysia’s anticorruption infrastructure. The DOJ has filed civil forfeiture claims for $1.7 billion in assets obtained with funds diverted from 1MDB, a sovereign wealth fund ostensibly intended to promote economic development in Malaysia. The money ended up in a stunning variety of locations around the globe. Nearly $700 million found its way into the Malaysian Prime Minister’s personal bank accounts. His stepson’s production company suddenly had the funds needed to back the Hollywood movie The Wolf of Wall Street. A financier with close ties to the government bought an Australian model jewels worth $8.1 million.

Meanwhile, the Malaysian government insists there is nothing to see here. The newly-installed Malaysian Attorney General cleared Prime Minister Najib Razak of all wrongdoing and put a stop to the investigation by the independent Malaysian Anti-Corruption Commission (MACC). As an earlier post explained, the previous Attorney General, who headed an inter-agency task force investigating the 1MDB scandal, resigned under suspicious circumstances, and Najib appointed his replacement. Najib also replaced several cabinet members who had called for investigations into 1MDB. The breakdown of justice in the 1MDB scandal may seem all the more surprising to outside observers, since Malaysia had appeared to be making strides in addressing its corruption problem, and the MACC—which was founded in 2009 and modeled on Hong Kong’s Independent Commission Against Corruption—had received fairly good reviews (see here, here, and here).

In the wake of the 1MDB scandal, there have been a variety of proposals for improving Malaysia’s anticorruption efforts. Most of these proposals, especially those emanating from the government, involve a flurry of activity and the creation of new anticorruption institutions. For example, the government has recently proposed creating a new National Integrity and Good Governance Department. The Malaysian Bar has called for the establishment of an Independent Anti-Corruption Commission (IACC) to provide oversight for MACC. The MACC itself, despite its inaction on 1MDB, is ramping up other anticorruption campaigns. This all fits an unfortunate pattern in Malaysia: creating lots of new agencies or new structures, or undertaking other actions that make the government “look busy,” but that don’t actually get to the heart of the main problem: the lack of a politically independent anticorruption prosecutor.  Continue reading

Is China’s Anticorruption Crusade Reaching a Turning Point? Towards What?

In April 2014, a post on this blog claimed that the People’s Republic of China’s anticorruption campaign was reaching a turning point, and suggested that the campaign might be “significantly curtailed” in light of troubling signs of economic slowdown and strong pushback from other senior Party leaders. This prediction seemed reasonable at the time, yet more than three years later, the campaign shows no signs of winding down: Reports on senior government officials’ downfalls or corrupt fugitives’ repatriation from overseas still hit headlines on an almost daily basis. A recent development, however, does suggest that China’s anticorruption campaign might be reaching a different sort of turning point—turning from a near-exclusive emphasis on aggressive enforcement to institutional reforms that address the root causes of corruption.

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Guest Post: Anticorruption Enforcement Is the Key to Democratic Consolidation–Not the Other Way Around

GAB is delighted to welcome Cristina Nicolescu-Waggonner, visiting professor of Political Science at Pomona College and Scripps College, Claremont, to contribute the following guest post, drawn from material in her new book, No Rule of Law, No Democracy:

It is fashionable to argue that the only way to root out systemic corruption is to establish a political system characterized by genuine democratic accountability and the rule of law. Unfortunately, corruption – specifically the conflicts of interest of political and judicial leaders – does not allow for this sort of development. True, there may be democracy, but in the presence of widespread corruption it will remain in a perpetual state of unconsolidated democracy, without true rule of law. And in such weak democracies, the electoral process stimulates rather than discourages corruption: Eager to win and short on cash, politicians make deals with businesses and misappropriate public funds to finance campaigns, a vicious cycle that starts political tenure with illicit means. Different from lobbying, this illegal activity puts the breaks on rule of law reform. Corrupt politicians, afraid of retribution, do not reform or establish enforcement mechanisms: supervisory commissions, integrity agencies, anticorruption institutions, genuinely independent courts, whistleblower protection, etc. This dilemma is exemplified by the Czech Republic, which does well on various international democracy and rule-of-law indexes, but in fact is a corruption hotbed, with politicians, members of the judiciary, and business people involved in a web of misappropriation of public funds—partly for personal enrichment, but more importantly for election and re-election. The same vicious cycle is prevalent in new democracies all over the world, from Brazil to Romania to South Korea to Mexico to Tunisia: Corruption negatively affects the process of democratization and stalls it before democracy can have a chance to fight corruption.

So, what can we do? Continue reading

When Should We Put Anticorruption Agencies in the Constitution?

To fight corruption more effectively, many countries have created specialized government institutions that focus primarily on corruption issues. Most common are specialized anticorruption agencies (ACAs) with investigative and/or prosecutorial functions, although some countries have also created specialized anticorruption courts, special coordinating bodies, or other entities. This trend has generated a great deal of debate, both about whether to create such specialized bodies at all and about how they should be designed (for example, whether ACAs should combine prosecutorial and investigative power). Absent from much of this debate, however, is a discussion of the means countries should use to create these specialized bodies—in particular, whether these specialized anticorruption bodies should be enshrined in the nation’s constitution, or should be created by ordinary law.

Anticorruption bodies vary quite a bit on the extent to which they are constitutionalized. Most existing ACAs and other anticorruption institutions—including many considered highly successful—are not mandated by the constitution. For example, Indonesia’s anticorruption agency (the KPK) and its anticorruption courts (the Tipikor courts) were created by ordinary legislation, as was Belgium’s anticorruption investigation body and Spain’s anticorruption prosecutor’s office. However, in other countries specialized anticorruption bodies are explicitly established (or required) by the constitution. For example, the Philippines’ anticorruption court, the Sandiganbayan, is enshrined in that country’s 1987 constitution. Indeed, the trend (if one can be discerned) seems to be in the direction of constitutionalization. Tunisia’s new constitution, adopted in 2014, includes a specialized anticorruption investigation body. Egypt’s 2014 constitution similarly includes a specialized anticorruption prosecutor. Mexico’s 2015 amendments constitutionalized three types of anticorruption agencies (investigative, prosecutorial, and judicial), as well as a coordinating body.

But should these agencies be constitutionalized? And if so, when? Continue reading

Don’t Blunt the Spearhead: Why the Proposed Revision of Indonesia’s KPK Law is a Bad Idea

Indonesia’s Corruption Eradication Commission (Komisi Pemberantasan Korupsi, or “KPK”) was established in the hope that an independent anti-graft agency would effectively and fearlessly combat endemic corruption in Indonesia. True to its purposes, the KPK, in collaboration with other actors, has become one of Indonesia’s few anticorruption success stories. Since its establishment in 2003, the KPK has successfully charged 82 legislators in the parliament for corruption—a remarkable achievement in a country that has been known for the impunity of its political elite. After the appointment of its newest team of commissioners in 2015, the KPK has furthered its success in catching corrupt public officials, one of which was again a member of Indonesia’s House of Representatives (Dewan Perwakilan Rakyat, or “DPR”). It is safe to say that the KPK can indeed be deemed the “spearhead” of Indonesia’s corruption eradication efforts.

Yet, as an Indonesian proverb has it, “The taller the tree stands, the stronger the wind blows”: Attempts to weaken the KPK have grown in direct proportion to the agency’s success in bringing cases against powerful individuals and institutions. One example of this is the ongoing “Gecko v. Crocodile” struggle between the KPK (the small “gecko” with limited resources and young age) and the Indonesian National Police Force (the fierce “crocodile” with abundant power and resources), in which every time the KPK brings corruption charges against members of the Police Force, their members retaliate with criminal charges or harassment against members of the KPK. More recently, and more troublingly, members of the national parliament are now also trying to do what they can to undermine the KPK: Six out of the ten member parties in the DPR have proposed a revision of the current KPK Law–despite protests from the remaining political parties, NGOs, academics, and even the general public. Those opposed to this amendment argue (correctly) that there is no article in the revision that would increase the performance of the KPK, but instead all of the proposed revisions would undermine the KPK’s power and independence. Despite being packaged as a set of procedural improvements, the revision seeks to render KPK impotent – a strategy both subtler and likely more effective than the ham-handed tactics of the police in the “Gecko v. Crocodile” conflict.

The proposed law includes four main points of revision that proponents claim will improve the KPK’s performance. In fact, all four pose threats to the KPK’s independence and effectiveness:

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A “Paradigm Shift” in Mexican Anticorruption Law?

Problems of corruption and graft are not new in Mexico. Recently, the Mexican elite political class has been implicated in a series of real estate scandals that reached all the way to President Peña Nieto. Most notably, President Nieto and his wife have been accused of impropriety in their purchase of a 7 million dollar mansion—dubbed by the press “la Casa Blanca” (“the White House”)—from a wealthy government contractor. While not directly related, Nieto’s presidency has also been rocked by protests surrounding the disappearance and presumed death of 43 students in Guerrero. Local officials appear to have been involved in the disappearances, and the official investigation is widely viewed to have been botched.

But in the midst of all this (and arguably because it), Mexico managed to pass one of the most sweeping anticorruption reforms in recent memory. In April and May of last year, the Mexican legislature passed and the state legislatures approved reforms to 14 articles of the Mexican Constitution. Conceived of and spurred on by Mexican civil society groups, these reforms bolstered existing anticorruption institutions and created whole new ones.

The reaction to these reforms has ranged from excitement and enthusiasm, to cautious optimism, to cynical dismissal. (President Nieto, for his part, has hailed them as a “paradigm shift” in the Mexican fight against corruption.) These changes to Mexico’s constitution are only the first step in the country’s much needed systemic reform. Their success will depend substantially on secondary enabling laws to be enacted sometime before June 2016. But it’s worth stopping now to analyze what these reforms get right, and what they fail to address.

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Should Anticorruption Agencies Have the Power to Prosecute?

One of the main reasons policymakers cite for establishing a standalone, independent anticorruption agency is the need to strengthen the enforcement of their nation’s laws against bribery, conflict of interest, and other corruption crimes.  In the past 25 year some 150 countries have created a specialized, independent agency to fight corruption (De Jaegere 2011), and virtually all have been given the lead responsibility for investigating criminal violations of the anticorruption laws.  But while a broad international consensus exists on the value of creating a new agency with investigative powers, opinion remains sharply divided on whether these agencies should also have the power to prosecute the crimes it uncovers.  As this is written, Indonesian lawmakers are considering legislation to strip its Corruption Eradication Commission (KPK) of the power to prosecute while a bill before the Kenyan parliament would grant its Ethics and Anticorruption Commission (EACC) the power to prosecute the cases it investigates.

No matter the country, debate about whether a single agency should have the power to both investigate and prosecute corruption cases inevitably comes down to a small set of conflicting claims.  Those who oppose giving a single agency both powers raise an argument at the center of the older debate about the relative responsibilities of police and prosecutors — investigator bias.  In the words of a British Royal Commission that studied the relationship between English police and prosecutors, an investigator “without any improper motive . . . may be inclined to shut his mind to other evidence telling against the guilt of the suspect or to overestimate the strength of the evidence he has assembled.” That is, once an investigator hones in on a suspect, confirmation bias sets in, and he or she will interpret all evidence as supporting the suspect’s guilt.  Putting the decision about whether to prosecute a case in an agency wholly separate from the one that investigates provides a strong check against such bias, reducing the chances that the innocent will be put to a trial or weak cases brought to court.

The investigator bias argument has a long and distinguished pedigree, and a 2011 survey of the powers of 50 anticorruption agencies by World Bank economist Francesca Recanatini found that it often carries the day.  Only half of the 50 agencies she surveyed have both investigative and prosecutions powers.  But as the contemporary debates in Indonesia and Kenya suggest, proponents of combing investigation and prosecution in a single agency have a very powerful counter argument in their corner.  Continue reading