Guest Post: After the Tsunami–Mexico’s Anticorruption Outlook Under Andres Manuel Lopez Obrador

Today’s guest post is from Bonnie J. Palifka, Associate Professor of Economics at Mexico’s Tecnológico de Monterrey (ITESM), and Luis A. Garcia, a partner at Villarreal-VGF specializing in corporate compliance and anticorruption matters:

The results of Mexico’s federal elections last July have been described as a “tsunami” for Andrés Manuel López Obrador (AMLO) and his National Regeneration Movement, known by its Spanish acronym “Morena.” AMLO won 53% of the popular vote and Morena swept the House and Senate, as well as a majority of the nine state governorships up for grabs and several local legislatures. This is all the more remarkable considering that Morena was founded as a civil society organization in 2011 (and registered as a political party in 2014), and was fighting for control of Mexico’s political left against AMLO’s former party, the PRD. Many are hopeful that AMLO will lead a transformation of Mexico into a modern, peaceful, fair, and prosperous society like Chile or Uruguay, while others fear that he will take the country down the route of Venezuela. That the same person can engender such different reactions is due in part to the vagueness and inconsistency of AMLO’s rhetoric throughout the campaign: sometimes he would take a highly confrontational and uncompromising attitude toward Mexico’s political and economic elite—what he termed the “mafia of power”—while at other times he would strike a more conciliatory tone. But one consistent theme in AMLO’s rhetoric—and in the analysis of the data on the reasons for Morena’s electoral triumph—was profound indignation at the blatant corruption and impunity of Mexico’s political and business elites.

Mexican voters’ frustration with corruption is understandable. Although in recent decades Mexico has undertaken a number of anticorruption measures—including, under former President Vicente Fox, a new freedom of information law, and, under current President Enrique Peña Nieto, a new National Anticorruption System (SNA), which, among other things, updates national and state laws to criminalize more acts, reduce immunities, and increase punishments—these measures have been insufficient, as reflected in Mexico’s increasingly poor showing on the Corruption Perceptions Index. AMLO identified corruption as Mexico’s most pressing problem and promised to bring about an honest and transparent regime that would be truly responsive to the country’s needs. And, in an encouraging sign, AMLO has brought in a diverse group of highly respected experts and activists, from all sides of the political spectrum, and has appeared flexible and open to dialogue. At the same time, though, he has displayed a puzzling blind spot for potential conflicts of interest, and his optimistic rhetoric has suffered from a lack of specificity, coherence, and concrete proposals. Continue reading

Getting People Off the Sanctions List: A Process that Doesn’t Support the Policy

Individually-targeted “smart sanctions”—not to be confused with country-wide sanctions, such as trade or arms embargoes—are garnering increased attention as a potentially powerful tool in the anticorruption toolkit, particularly in the United States. Such sanctions typically prohibit persons or entities on the list of those under sanction (known in the U.S. as the Specially Designated and Blocked Person (SDN) list) from accessing the sanctioning country’s financial system. They can also impose travel bans and/or prohibit third parties subject to the sanctioning country’s jurisdiction from doing business with the targeted individuals. These individually-targeted sanctions, particularly the asset freezes, are a powerful instrument, and may be an especially effective deterrent in the context of venal crimes like corruption, given that those motivated principally by greed might also be more sensitive to severe financial penalties. (According to a 2016 study by the US State Department, a sanctioned or associated company loses, on average, over half of its asset value and one-third of its employees and operating revenues.) While the United States had previously used individually-targeted asset freezes to punish individuals responsible for acts of public corruption in places like Venezuela (pursuant to Executive Order (EO) 13692), Syria (pursuant to EO 13460), and Zimbabwe (pursuant to EO 13469), the 2016 Global Magnitsky Act (GMA) has made individually-targeted asset freezes a more prominent piece of the US anticorruption arsenal. Pursuant to this Act, last December President Trump authorized sanctions against 15 individuals and 37 entities for human rights abuses and acts of grand corruption; in June, the Office of Foreign Asset Control (OFAC) added two more entities and five more individuals to the list.

In the months since OFAC released the first tranche of GMA names, there has been extensive discussion about how civil society organizations (CSOs) can add more names to the Global Magnitsky list. Former Deputy Assistant Secretary of State Rob Berschinski, for example, is spearheading efforts through Human Rights First to coordinate CSOs endeavouring to submit names for consideration, while the Helsinki Commission organized a special “how-to” event for CSOs to help them be more effective in lobbying to add names to the list.

Yet for all this attention on how to get names on to the GMA list, little ink has been spilled addressing the question of how sanctioned individuals might get off that list. It’s not surprising that CSOs would not devote their scarce resources to getting individuals who have engaged in acts of grand corruption off of a sanctions list. Yet the de-listing issue is important—even in contexts where it’s unlikely that a name would be added to the list erroneously. The main reason has to do with incentives. As the US Treasury Department acknowledges, the “ultimate goal with sanctions is not to punish, but to bring about a positive change in behavior of illicit actors.” And it is the prospect of getting off the sanctions list that can encourage bad actors to change their behavior and/or to cooperate with the US government investigations into wrongdoing. Continue reading

Integrity Pacts: A Contractual Approach to Facilitate Civic Monitoring of Public Procurement

Public procurement is one of the highest risk areas for corruption. A public project contaminated with corruption is a recipe for disaster: ordinary citizens suffer from substandard facilities and services; competitive companies lose out when the bidding is rigged; and government money vanishes without making a difference. To rein in procurement corruption in, improving transparency and civic monitoring is vital. That’s why an “integrity pact” (IP)—a legally-binding contractual provision that commits all parties to comply with anticorruption best practices from the time the tender is designed to the completion of the project—can be such a useful tool.

An IP is more than a demonstration of commitment to avoid corruption practices on the part of its signatories. An IP contains obligations for bidders and government authorities, among other things, to refrain from offering or accepting bribes and to disclose all contract expenses and commissions; the IP also sets out sanctions for non-compliance, such as termination of the contract, liability for damages, or debarment from future public contracts. Perhaps most importantly, an IP creates a monitoring process where an Independent External Monitor—which can be an individual, a civil society organization, or a group with combined expertise and technical support—independently scrutinizes the deal for any anomaly or violation of the IP, and ensures proper implementation of the contract and the satisfaction of all stakeholders’ obligations. To execute these functions, the monitor is entrusted to examine government tender documents, bidders’ proposals, and evaluator’ assessment reports of the bids, to visit construction sites and contractor offices, and to facilitate exchange with the local communities and public hearings.

IPs have previously been used in public procurement projects in many countries, including Romania, Bulgaria, the Czech Republic, Slovenia, Portugal, Hungary, Latvia, Poland, Greece, Italy, India, and many others. It’s notable that many of the states that have embraced IPs are countries where governments have a long track record of corruption and abuse of power. IPs have at least three roles to play to help facilitate transparency and civic monitoring so as to safeguard the competitiveness and fairness of the procurement process:

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“We Have to Reclaim Our City”: Lessons From the “Eye People”

Last year, a 22-year-old Afghan woman went to a local government office to get documentation to travel abroad. She was promptly turned away because she was not accompanied by her father or husband, and because she refused to pay the official a small bribe to overlook this detail. As recently as a few years ago, she may have paid the bribe. But things had changed. Defiantly, she confronted the official and proclaimed: “I will go to the eye people.”

The “eye people” she invoked are three activists—Lima Ahmad, Kabir Mokamel, and Omaid Sharifi—who in 2014 founded a grass-roots anticorruption movement in Afghanistan called ArtLords. ArtLords (whose name is a deliberate play on the “warlords” and “drug lords” that too often define Afghanistan’s image) seeks to raise awareness about corruption and other social issues (including women’s rights and domestic terrorism) by empowering youth to “have a say in how we run the government” and giving them the courage and a forum to speak out on these issues. ArtLords’ founders began their work by organizing small group discussions to better understand young people’s concerns. Unsurprisingly, corruption was the most frequently mentioned. The founders sought a way to publicize these concerns and provide an outlet for discussions to shape the national dialogue. To do this, ArtLords creates public art projects, in which artists trace beautiful, powerful designs on blast walls (concrete barriers constructed to protect buildings and people from terrorist-related explosions) across Afghanistan. To date ArtLords has painted more than 400 murals in almost half of Afghanistan’s 34 provinces; the most famous is a piercing set of feminine, hazel eyes glaring onto the front entrance of the National Directorate of Security in Kabul (which is why the group is known to some as “the eye people”).

Through these projects, the group has inspired a generation of younger Afghans. As Faisal Imran, a student in Afghanistan, noted as he painted a mural on a blast-wall, “this art has a message of hope.” It is this message that has driven young girls to draw murals with the words “I can’t go to school because of your corruption. I can see you.” Moreover, beyond providing an outlet and educational opportunity for the youth of Afghanistan, ArtLords has achieved concrete success by both naming and shaming corrupt officials and naming and family good civil servants, working with the national government to drive change, and inspiring grass-roots social movements, including a recent campaign to challenge warlords and corrupt government officials who drive around Afghanistan with black tinted windows and no license plates. Additionally, one of the founders of ArtLords, Lima Ahmad, was invited to serve as the Director of Monitoring and Evaluations in the Office of the President of Afghanistan, a position from which she advocated for anticorruption and other social reform. In fact, over the past year, the group and its founders have been invited by government officials to speak at conferences and engage in substantive policy decisions.

I recently had the opportunity to interview Ms. Ahmad about her experience, and about what lessons that experience might hold for other civil society groups focused on combating corruption. Our conversation highlighted several important messages for other civil society groups seeking to use similar artistic tools—whether art, music, dance, or others—to combat corruption and promote broader social reform.

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Guest Post: More on the Hazards of Public Beneficial Ownership Registries–What Stephenson and Others Miss

Today’s guest post, from Geoff Cook (the CEO of Jersey Finance), continues an ongoing debate an exchange we’ve been hosting here at GAB regarding the desirability of public (as opposed to confidential) registries of the ultimate beneficial owners (UBOs) of companies and other legal entities. This exchange was prompted by a piece that Martin Kenney, a lawyer specializing in asset recovery in the British Virgin Islands, published on the FCPA Blog, which criticized the UK’s decision to mandate that the 14 British Overseas Territories create public UBO registries. Mr. Kenney’s post prompted reactions from Rick Messick and from me. Our critical reactions stimulated another round of elaboration on the critique of the UK’s decision, with a new post from Mr. Kenney and another from Mr. Cook. I subsequently replied, explaining why I did not find Mr. Kenney’s or Mr. Cook’s criticisms fully persuasive. Mr. Kenney responded to that post earlier this month, and in today’s post Mr. Cook contributes his critical reactions to my response: Continue reading

Ukraine’s Cynical Efforts to Mandate Public Asset Disclosures for Anticorruption Advocates Must Be Stopped

In 2016, under pressure from anticorruption organizations, Ukraine’s parliament passed the “On Prevention of Corruption” law, which required high-level government officials and other civil servants to disclose their income and assets in a public online database. A year later, however, the parliament—in what seems to have been an act of retaliation—adopted an amendment to that law, and required all individuals who “carry out activities related to the prevention and counteraction of corruption” to also declare their assets by April 1, 2018, or face potential penalties (including fines or imprisonment of up to two years). The amendment, in other words, imposes on anticorruption advocates the same financial disclosure requirements that many of these advocates had insisted on imposing on Ukrainian public officials.

Imposing this disclosure requirement on anticorruption advocates was rationalized as promoting transparency, since foreign money often supports anti-graft work in Ukraine. Some have claimed that anticorruption activists are themselves corrupt and work with anticorruption organizations to enrich themselves. More generally, the amendment seems to be motivated by an impulse toward retaliation (or a version of fairness): The message seems to be, “If you people think these requirements are appropriate for us, then you should be willing to put up with them too.”

But anticorruption workers do not hold public office and are not supported by taxpayer money, and there is no good reason to subject them to the same demanding disclosure standards that are entirely appropriate for public servants. This obvious distinction is further reason to believe that this amendment is yet another measure in line with previous government efforts to discredit anticorruption activists. Imposing the disclosure requirement has been roundly criticized both domestically and internationally, with activist organizations also arguing that the amendment violates Ukraine’s Constitution (particularly rights to freedom of speech, association, and employment). Even Ukrainian President Petro Poroshenko has called the bill a “mistake,” and in July 2017 he submitted to parliament two draft laws that eliminate the asset disclosure obligation for individual anticorruption activists—but place even more stringent reporting requirements on anticorruption organizations. These draft laws drew further criticism, and as the April 1, 2018 asset disclosure deadline approached and passed, Ukraine’s parliament has refused to consider any changes to the law.

Leaving in place the requirement that those who help fight corruption must make the same kind of public asset disclosures as government officials will sabotage and chill anticorruption work. It is vital that domestic activists and the international community keep up the pressure on Ukraine to eliminate this requirement altogether, and to do so soon in order to remove the cloud of uncertainty that has fallen over all anticorruption advocacy since the April 1 deadline passed. The disclosure requirement as it stands threatens to undermine the fight against corruption in Ukraine in at least three ways: Continue reading

Getting the Right People on the Global Magnitsky Sanctions List: A How-To Guide for Civil Society

Last December, pursuant to the 2016 Global Magnitsky Act, President Trump issued Executive Order 13818, which declared that “the prevalence and severity of human rights abuse and corruption that have their source, in whole or in substantial part, outside the United States … threaten the stability of international political and economic systems,” and authorized the Treasury Secretary to impose sanctions against (among other possible targets) a current or former government official “who is responsible for or complicit in, or has directly or indirectly engaged in: (1) corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption related to government contracts or the extraction of natural resources, or bribery; or (2) the transfer or the facilitation of the transfer of the proceeds of corruption.” Pursuant to this Executive Order, the Treasury Department imposed powerful economic sanctions against 37 entities and 15 individuals, including Chechen warlord Ramzan Kadyrov, Israeli billionaire Dan Gertler, and Artem Chaika, the son of Russia’s Prosecutor General.

This was big news, for a couple of reasons. Most obviously, Trump doesn’t exactly have a reputation as a “human rights guy,” let alone a Russia hawk. Given that the 2016 Global Magnitsky Act (unlike its predecessor, the 2009 Magnitsky Act) enables but does not require the imposition of sanctions, it was far from inevitable that the Trump Administration would make use of it. Perhaps just as newsworthy was where the specific names on the list came from: nearly half of those names were provided to the Administration by civil society organizations (CSOs) or by Congress (and in the latter case, it was likely CSO efforts that brought individual names to the attention of Congressional staffers).

The Global Magnitsky Act and EO 13818, then, seem to create promising opportunities for anticorruption CSOs to impose consequences on kleptocrats and their cronies. Because the process is so new, it’s not yet clear how it will develop, yet it is nevertheless useful to draw lessons from the first round of Global Magnitsky sanctions for how CSOs can be maximally effective in using this new tool. The Committee on Security and Cooperation in Europe (also known as the Helsinki Commission) hosted a workshop in early March 2018 to discuss this issue. I was fortunate enough to attend this gathering, and in this post I’ve attempted to distill a handful of key lessons that the participants discussion identified. I’ve framed the lessons as a “how-to” guide addressed to members of a hypothetical anticorruption CSO: that would like to take advantage of this powerful tool.

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