“Corruption Proofing” Statutes and Regulations: The Next Big Thing in Anticorruption Strategy?

So-called “corruption proofing” is an ex ante preventive measure that entails review of the form and substance of legal acts (principally statutes or regulations) in order to minimize the risk of future corruption. It is a relatively new strategy in the anticorruption toolkit. As of 2015, 13 countries had enacted some form of corruption proofing: Armenia, Albania, Azerbaijan, Kazakhstan, South Korea, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan.

While there is some divergence between each country’s specific practices, generally a corruption proofing system requires that draft and/or existing legal acts (statutes and regulations) are subjected to a review process by a designated institution (or institutions), which are tasked with identifying corruptogenic factors”—aspects of those laws that might create risks of future corruption. Examples of corruptogenic factors that corruption proofing systems have identified include unclear definitions of the rights and duties of public officials; broad discretionary power; over-broad freedom to enact by-laws and other subsidiary legislation; linguistic ambiguity; inadequate sanctions; lack of (or conflicting) regulatory and administrative procedures; and disproportionate burdens on citizens to exercise their rights. The reviewing institution then makes recommendations for changes to the law that would mitigate those risks. The governmental body from which the legal acts originate (the parliament, in the case of statutes) is obligated to consider these recommendations but is not required to implement them, though in some systems the governmental body must state its reasons for rejecting the reviewing institution’s recommendations. Another common practice is that the proofing agency’s recommendations (and, if applicable, the explanations for why they were disregarded) are circulated as an annex to the draft law being debated in the legislature and are also published online, thus providing both lawmakers and citizens with more information about the potential corruptogenic factors associated with the law. Continue reading

Lessons from Moldova’s “Theft of the Century”

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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Getting Serious (and Technical) About Procurement Corruption: The Transparent Public Procurement Rating Project

For corruption fighters, public procurement is notable for two reasons. One, it is damnably complex. Two, it is often permeated with corrupt deals.  The latter makes it a critical target of anticorruption policy, the former a tough nut to crack. The thicket of laws, regulations, standard bidding documents, and practices that govern procurement means civil society groups advocating counter corruption measures are often at sea.  Lacking expertise on this bewildering set of rules, they can do little more than campaign in general terms for reform, urging steps like “greater transparency” or “tougher penalties” for corrupt activities.

But as anyone knows who has tried to persuade a government of uncertain will and commitment to adopt effective anticorruption policies, the devil is in the details.  Unless one has mastered the details of public procurement, a government can do all sorts of things to “improve transparency” or “crack down on procurement scofflaws” that are nothing but public relations gambits. So it is a pleasure to report that civil society organizations in Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine have joined to form the Transparent Public Procurement Rating Project, which provides a way for staff to master the details of the public procurement and to thus be able to present detailed proposals for rooting corruption out of their nation’s public procurement systems.    Continue reading