Tag Archives: kleptocracy

Fighting Grand Corruption: Naomi Roht-Arriaza’s Indispensable Guide to Combatting Its Scourge

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The literature on grand corruption, a/k/a kleptocracy or state capture, continues to expand at an ever-increasing rate.

Investigative exposes, think tank and NGO policy papers, academic books and articles, court cases and legal commentaries, and yes, blogs like this one make it hard for full-time students of the phenomenon, let alone policymakers, journalists and activists, to stay abreast of the learning this vast outpouring of thinking is producing.  

Thanks to University of California Law Professor Naomi Roht-Arriaza‘s new book, what we know about grand corruption, what can be done to curb it, and how to make its victims whole is now available in a single, readable, useful volume.

The title – Fighting Grand Corruption: Transnational and Human Rights Approaches in Latin America and Beyond – advertises two of its most important contributions.

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Why The FATF-Based Anti-Money Laundering System Fails to Catch the Proceeds of Corruption

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Today’s Guest Post is by Robert Barrington, Professor of Anti-Corruption Practice at the Centre for the Study of Corruption, University of Sussex (UK) and formerly the Chair of Transparency International’s International Council.

In recent years, anticorruption campaigners and policymakers have directed increased effort towards improving the global Anti-Money Laundering (AML) system.

Imagine this system were operating perfectly. Would it stop kleptocracy?

Of course not, no more than AML systems stop heroin production. AML laws and regulation are not designed to stop the acts that generate dirty funds; they are designed to stop the proceeds of crime from being disguised (laundered) and thus freely circulating around the world.

The more difficult question involves monies kleptocrats steal: if the global AML system were operating perfectly, would it stop these funds – the proceeds of corruption – from circulating around the world?

Two recent reports in the UK — from the Taskforce on Business Ethics and the Legal Profession and Spotlight on Corruption — answer the question with a resounding NO: when the proceeds of corruption derive from kleptocracy, when crooks have captured the state, the UK’s AML system is not capable of addressing these funds.  To be clear, even if the current global AML system were operating perfectly, the UK would be unable to deal with the proceeds of corruption arising from state capture.

To date the research is confined to the UK context and UK law; it has yet to extend to other jurisdictions. But given what is known about the globalised nature of illicit financial flows, we might conclude that other jurisdictions are no better at this than the UK.

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So That’s Why the Kleptocracy Asset Recovery Initiative Was Abolished

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Thanks to Alexis Loeb’s March 26 Lawfare post, another Trump Administration attack on the global effort to curb corruption has been revealed. Buried in Attorney General Bondi’s February 5 Memorandum making the elimination of drug cartels and transnational criminal organizations the Justice Department’s number one priority, she reports, is an order disbanding the Department’s Kleptocracy Asset Recovery Initiative.

Loeb does a fine job of explaining what a loss its dissolution will be to the international fight against corruption, recounting its efforts to help nations around the world battle kleptocracy. Among its successes: Initiative’s lawyers forced notorious kleptocrat Nguema Obiang, Equatorial Guinea’s Vice President, to forfeit nearly $30 million in assets, and their efforts resulted in the return of millions stolen by Nigerian dictator Sani Abacha and former Uzbekistan “first daughter” Gulnara Karimova to their countries. The blockbuster was 1 Malaysia Development Berhad (1MDB). With the Initiative’s assistance, Malaysia has so far recovered $6.5 billion in stolen assets from the thieves (here). Indeed, Jeff Sessions, Trump’s first Attorney General, called the 1MDB scandal “kleptocracy at its worst,” and lauded the help the Initiative provided Malaysia’s government (here).

But Loeb leaves the big question unanswered. Why in the world would AG Bondi disband such a valuable unit? Especially since, when assets are forfeited to the U.S. government, the staff time and expenses incurred were covered.

Thanks to Washington Post reporter Peter Whoriskey’s story in today’s paper, we now have the answer.

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Guest Post: Model Open Government Partnership Commitments for Fighting Kleptocracy

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Today’s guest post is from Jodi Vittori, Professor of Practice at Georgetown University:

This past January, I authored a report, co-sponsored by the Open Government Partnership (OGP) and the National Democratic Institute, entitled “Committing to Combat Kleptocracy: A Guide for Open Government Partnership Members.” The report explains how various kleptocrats and their “enablers” move illicit assets from the country where they were stolen to the locations where they will be stored and enjoyed. The report also discusses how kleptocracy undermines not only the countries where the assets were stolen, but also the transit or destination points for kleptocratic money, people, and other resources.  While it might seem like an infusion of money, assets, and rich people into a given country might be a benefit for that country (putting aside the moral issues), it turns out that these inflows have real drawbacks for the host state, contributing to governance backsliding, facilitating real estate manipulation and industrial asset stripping, exacerbating migration challenges, and undermining national security. The role of Russia’s kleptocracy in election interference in the West, as well as the corruption associated with China’s Belt and Road Initiative, have helped put the role kleptocratic inflows play in receiving states in the spotlight.

The OGP’s open government principles—to which all OGP member governments commit—are a set of norms that, if honored and implemented, will help countries fight back against inflows of kleptocratic assets. At the most basic level, the OGP stresses the importance of making relevant, usable, and timely information on governments available to citizens and civil society to hold their governments accountable. This helps ensure that public resources are managed transparently, fairly, and equitably. The report develops this further by outlining a series of model OGP commitments for consideration by governments and citizen activists, including the following: Continue reading →

Making Corruption a National Security Issue: How Will it Change Enforcement Dynamics?

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Today’s Guest post is by Nedim Hogic. Nedim advises clients in the private and public sector on environmental, social, and governance issues. Author of many articles on corruption, international law, and the rule of law and development, he is currently writing a book on judicial anti-corruption campaigns.

Since becoming an important policy goal in the 1990s, global anticorruption efforts have gone through three phases. In the first, anti-corruption policies were considered important for economic development, driven by the belief that successful anticorruption programs would make global borrowing and spending and financial aid more efficient. In the second, spanning the first two decades of this century, it was central to the protection of the rule of law and democracy.

The current phase, and particularly that part denominated “kleptocracy,” is animated by the threat it poses to global security. The Biden Administration’s national security strategy, which followed its memorandum calling the fight against corruption a core U.S. security interest, is not the first American or indeed international document to suggest corruption is a national security threat. But it is the first to state the premise clearly and straightforwardly, thus marking a sharp change in thinking about transnational corruption. Indeed, in my view the change is significant enough to be labelled a paradigm shift.

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USAID’s New Dekleptification Guide

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The U.S. Agency for International Development has just published a draft of what it calls a Dekleptification Guide. “Dekleptification,” the authors explain, is the process by which citizens kick kleptocrats out of power and ensure they stay out. The guide discusses a range of projects the agency could fund to support anti-kleptocrat movements, consolidate post-kleptocratic, democratic orders, and prevent kleptocrats from returning to office.

The agency seeks comments on the feasibility and appropriateness of the projects suggested, whether there are others it has overlooked, and generally whether its analysis and approach to dekleptification meshes with experience to date.  

USAID is one of the largest and most influential providers of foreign assistance — thanks not only to the size of its programs but to the quality of analysis that underpins them. The guide will almost surely have an impact far beyond coining a term to organize thinking about how to end kleptocracy. Members of the anticorruption community should therefore take up the agency’s request for comments.

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Time to Make the OECD Antibribery Convention an Antikleptocracy Convention Too

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Confiscating assets acquired through corruption is a critical part of the fight against corruption. If those who would profit from corruption know they will be denied the benefit of their wrongdoing, there is no incentive to be corrupt.

As Justin explained Monday, Russia’s invasion of Ukraine has given asset confiscation a major boost. Many of Putin’s superrich backers, oligarchs or kleptocrats, became wealthy through corrupt deals, and the seizure of their mega-yachts, mansions and other properties now located outside Russian territory offer the West a way, albeit indirectly, to pressure Putin to end the aggression. Italian, German, and other Western prosecutors are thus now aggressively invoking domestic forfeiture statutes to confiscate them.

But as the Washington Post reports today, with the help of pricey lawyers and other enablers (here and here), the oligarchs have hidden their assets inside complex legal thickets of offshore companies that make confiscation hard if not impossible. In response, last Thursday President Biden asked Congress to give U.S. prosecutors new powers to cut through this underbrush (here).

The President’s initiative is welcome. But it also invites the obvious question: Why shouldn’t other Western nations follow suit?  All are united in their opposition to the war and desire to make Putin’s associates suffer consequences. Why shouldn’t every Western state ease the task their prosecutors face to the rapid seizure of oligarchs’ assets? And indeed to the seizure of any asset corruptly obtained or unlawfully possessed found in their territory?

The most straightforward way to realize this goal would be to amend the OECD Antibribery Convention.

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The Unfulfilled Promise of the UK’s Anticorruption Innovations

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When it comes to the fight against global corruption, the United Kingdom presents a paradox. On the one hand, the UK has long enjoyed a reputation as relatively “clean.” The country gets good marks on Transparency International’s Corruption Perception Index, and the Financial Action Task Force considers the UK a world leader in preventing money laundering. Yet, at the same time, the UK—and London in particular—is well-known as a popular laundromat for dirty money and a haven for kleptocrats.

It would be tempting to say that the UK cares about suppressing corruption at home but is indifferent (or worse) to how its nationals and its policies affect corruption abroad. But that is too simple, because in some respects the UK has been an innovator in the fight against transnational bribery and illicit wealth, and has often taken the lead in enacting new and more powerful anticorruption and anti-money laundering tools. Over the past dozen years, three such innovations are especially notable: the 2010 UK Bribery Act (UKBA), the 2016 legislation mandating a public registry of the beneficial owners of all private companies registered in the UK, and the 2017 Criminal Finances Act authorizing unexplained wealth orders (UWOs)—court orders that require the owners of UK assets to prove that the funds used to purchase those assets came from legitimate sources, with the assets frozen and eventually seized if the owner is unable to do so.

Yet the paradox continues: While the UK received well-deserved praise for enacting these measures, in practice all three have been far less effective than proponents hoped. The reasons for these failures are different, but they share common threads. Continue reading →

A Brief Note on Russia’s War Against Ukraine

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Russia’s invasion of Ukraine (or, more accurately, the dramatic escalation and expansion of the invasion that Russia already started eight years ago) is horrifying. As I type this, Russian forces are moving against Kyiv, and Ukrainian defense forces and reservists are preparing to defend their capital city against overwhelming odds, while the Ukrainian army elsewhere in the country is doing its best to resist Russian advances from all directions. I have nothing useful to say about this terrible situation. I am not a military analyst, an expert in geopolitics, or even terribly knowledgeable about aspects of this crisis closer to my own areas of expertise (such as questions regarding the efficacy of sanctions the West is imposing, or could impose). I’m just a professor, not terribly well known outside my fairly narrow areas of academic specialization, who runs a blog about anticorruption. But this morning, I can’t really think of anything else to write about.

Maybe at some point I’ll be able to collect and organize my thoughts and say something coherent about how this war relates to the global fight against corruption. There most certainly is a connection–probably several connections–even though corruption/anticorruption is only one part of the story. For now, let me just share scattered thoughts and reactions: Continue reading →

New Podcast Episode, Featuring Casey Michel

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview the American journalist Casey Michel about his new book, American Kleptocracy: How the U.S. Created the Greatest Money Laundering Scheme in History. In our conversation, Casey and I touch on a variety of topics raised by his provocative book, including the dynamics that led to the U.S. and U.S. entities playing such a substantial role in facilitating illicit financial flows (including the nature of American federalism, the broad exceptions to the coverage of U.S. anti-money laundering laws, and the role of U.S.-based “enablers” of illicit finance), the challenges of regulating lawyers and law firms, the role and responsibilities of universities in light of concerns about “reputation laundering” by kleptocrats and others, the impact of the Trump and Biden Administrations in this area, and the challenges of generating and maintaining bipartisan/nonpartisan support for fighting kleptocracy. 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.