How We Did It: the U.S. Congress’ Exposure of the Grand Scale of Global Corruption

 Over the past two decades the U.S. Senate Permanent Subcommittee on Investigations has laid bare how Gabonese President Omar Bongo, Chilean dictator Augusto Pinochet, Equatorial Guinean President Teodoro Obiang, and a gaggle of friends and relatives of the leaders of Mexico, Pakistan, Nigeria, Angola, Saudi Arabia, and other countries conspired with large, prestigious banks to hide the enormous sums they stole from their nation’s citizens.  Financial Exposure, the new book by subcommittee investigator and later staff director Elise Bean, recounts how Democrats and Republicans united not only to document egregious cases of grand corruption but to enact legislation making banks’ complicity in future cases a crime.

Americans depressed by the rancorous polarization now gripping Congress will find her book a welcome reminder that Democrats and Republicans can work together to advance the public interest.  Scandals involving money laundering by banks in other nations, most recently Denmark’s Danske Bank and Latvian bank ABLV, should prompt non-Americans to send their parliamentarians a copy of Ms Bean’s book.  Below Ms. Bean offers a few morsels from the book to whet readers’ appetites.    

There isn’t room here to recount all the subcommittee’s anti-corruption investigations, but a few examples will illustrate what they showed and what results they produced.

Citibank Private Bank.  Corruption was the subject of a key investigation by the subcommittee in 1999, which was led by then subcommittee chair Republican Senator Susan Collins of Maine. Rumors were flying then that the United States had become the preferred banker for corrupt foreign officials around the world. Working with Democratic Senator Carl Levin of Michigan (my boss), the subcommittee elected to zero in on so-called “private banks,” banking units that opened accounts only for wealthy individuals with at least $1 million in deposits.

The inquiry ended up detailing four accountholders at Citibank Private Bank: Raul Salinas, brother to the then president of Mexico; Omar Bongo, then president of Gabon; Asif Ali Zardari, then known for his marriage to Benazir Bhutto, former prime minister of Pakistan; and the sons of Sani Abacha, recently deceased president of Nigeria.  Senate hearings exposed how Citibank had not only accepted tens of millions of suspect dollars from the accountholders, but also created offshore shell companies to hide their identities, helped them secretly move millions of dollars around the globe, and continued servicing them even after learning of corruption allegations. Continue reading

The Giving Trees: Fighting Corruption in the Timber Industry with Technology

The 3-hour drive from the port city of Douala, Cameroon to the capital, Yaoundé, is unsettling–and not just because drivers hurtle down the road, careening around blind curves into oncoming traffic. What is more worrying is that the oncoming traffic is comprised largely of huge lorries on their way to the shipyards transporting some of the biggest trees I’ve ever seen. After passing 10-15 trucks on my first trip, I started to wonder where the trees were coming from and how they could possibly be arriving in such a steady stream. Perhaps this large-scale lumber harvesting is not by itself all that unusual. But the facts that Cameroon ranks 144/177 on Transparency International’s Corruption Perception Index, and that nearly two-thirds of these round logs leave the country destined for China–the world’s largest importer of illegally-sourced timber–raise red flags.

Indeed, illegal logging in southern Cameroon and the rest of the Congo Basin is a serious problem, contributing to the destruction of 2.5% of the world’s second largest rainforest over a single decade. Studies show that in two of Cameroon’s nearest neighbors, Gabon and the Democratic Republic of Congo (DRC), illicit logging could account for as much as 70% of the timber market. In fact, the entire greenbelt envelops countries where corruption is rife – India, China, Brazil, Peru, Indonesia, Ethiopia, DRC, Nigeria – and the links between corruption and over-logging have been widely studied by the likes of TI, U4, UNODC, and the World Bank.

Current efforts to address poor governance of the timber industry are admirable but insufficient. The EU FLEGT Action Plan and the US Lacey Act regulate trade in wood and ban the importation of illegally sourced goods. Under the FLEGT Plan, Cameroon and the EU agreed to a licensing scheme to promote proper forest management. But no such regulation exists in China, a market that has boomed over the past 15 years largely in response to American demand for manufactured wood products. Furthermore, as the US Environmental Investigation Agency has shown in the Peruvian market, transparent trade depends on formal paperwork – export permits, certificates of origin, etc. – that are easily forged and exchanged on the black market. As a result, the same study points out, American importers often remain culpable, despite regulations.

We need a coordinated global response that can be effective independent of manipulable documents. What might this answer look like? A major component might well be the deployment of new technologies and scientific techniques to verify the origin of timber and timber products. Continue reading