Tag Archives: Mongolia

Guest Post: State of Corruption in Mongolia and Government’s Plans to Address It

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The fight against corruption in Mongolia, a fledgling democracy wedged between Russia and China, is especially challenging. Not only must corruption fighters in government and allies in civil society contend with constant meddling in its internal politics by its powerful neighbors, but its vast resources of copper, coal, and other minerals create enormous incentives for home-grown corruption. GAB is pleased to publish this guest post on the current developments in the fight against corruption fight by Mongolian lawyer Battsengel Bayarbaatar, an expert in intellectual property law and long-time good governance, anticorruption advocate and due diligence expert.

Mongolia is currently grappling with significant corruption issues, a central concern for both the public and the government. The situation has intensified due to several high-profile corruption scandals, particularly within the mining sector, a cornerstone of Mongolia’s economy.

One of the most prominent cases is the so-called “coal theft” scandal, which erupted in late 2022. This scandal involves allegations that large quantities of coal were illegally transported to China, leading to an estimated loss of up to $12 billion for the Mongolian economy (here). High-ranking officials and influential business figures were implicated in this scheme, triggering widespread public outrage and protests. The Mongolian government responded by launching several criminal investigations and reforming laws related to strategic minerals. However, despite these efforts, enforcement remains weak, and the institutional coordination necessary to address these issues effectively is lacking.

The public’s dissatisfaction with how corruption is being handled reached a boiling point in December 2023 when massive protests broke out in Ulaanbaatar’s Sukhbaatar Square. These protests were primarily driven by youth and various civil society groups demanding transparency and accountability from the government, particularly concerning the coal theft case. The protests are reflective of broader frustrations within Mongolian society over issues such as inequality, unemployment, and environmental degradation. The government has responded to some demands, such as declassifying information related to state-owned enterprises like Erdenes Tavan Tolgoi, but many in the public remain skeptical of the government’s commitment to genuine reform.

In response to these challenges, the Mongolian government has introduced a new anti-corruption strategy, which aims to tackle corruption comprehensively by 2030.

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U.S. Justice Department Does What Mongolia’s Government Wouldn’t

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GAB readers will remember posts in late 2020 and early 2021 recounting damning evidence implicating Mongolian political kingpin S. Batbold in a massive corruption scheme (here, here, and here). Although Batbold fiercely and forcefully denied the allegations to GAB (here), the evidence that corruption during his tenure as Prime Minister netted him tens if not hundreds of millions of dollars seemed overwhelming.

So overwhelming that it prompted the Mongolian government to open a corruption investigation in Mongolia and initiate litigation in the United States to recover New York real estate press reports showed he had bought with corruption proceeds. Nothing came of either, however. Batbold runs the country’s dominant political party, the Mongolian People’s Party, and after a protégé won the June 9, 2021, presidential election, both the Mongolian and New York cases were shut down.

But the evidence did not go away. Yesterday, the U.S. Department of Justice took up what Mongolia had dropped, filing suit to seize the two New York apartments Batbold owns. As the head of the Department’s Criminal Division explained in disclosing the suit:

“Sukhbataar Batbold used his position as prime minister to award lucrative contracts to sell copper concentrates from a Mongolian state controlled mine to entities that were owned and controlled by his known associates or his son. These intermediaries, who had little to no experience in the copper trade, played no part in providing financing for the purchase of the copper concentrates or in arranging the sale or shipment of the commodities. They simply concealed the fact that Batbold and his family were violating Mongolian anti-corruption laws by benefiting from the sale of millions of dollars’ worth of Mongolian natural resources.

“The former prime minister of Mongolia abused his position as prime minister to profit from the sale of his country’s natural resources.  He and his family used the proceeds of their corrupt scheme to buy $14 million in high-end real estate in the United States.”

The Department’s Kleptocracy unit is responsible for the case, and consistent with its kleptocracy policy, the Department said it would work to see that the proceeds of whatever property of Batbold is recovered would go to the people of Mongolia, “the people harmed by these acts of corruption and abuse of office.”

Mongolians elect a new parliament June 9.  Suppose they might want to ask why it was left to the Department of Justice to do what their government should have done long ago?

Will Mongolia’s Presidential Election Put Batbold and Foreign Ownership of the Oyu Tolgoi Mine at Risk?

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U. Khürelsükh is the odds-on favorite to win Mongolia’s June 9 Presidential election after an irregular ruling by the Supreme Court denied incumbent President K. Battulga his constitutional right to run for re-election.  Initial predictions were that the election of Khürelsükh, the former Prime Minister and current chair of the Mongolian People’s Party (MPP), would end the investigation into whether corruption infected the deal Mongolia struck with foreign investors on the Oyu Tolgoi mining project, Mongolia’s ticket to economic prosperity. 

The reasoning was that any investigation would implicate former MPP Prime Minister S. Batbold and other senior MPP members.  As this blog has reported (here, here, and here), the evidence of Batbold’s corrupt dealings with the foreign investors in the project, Australian mining giant Rio Tinto and controversial U.S.-Canadian entrepreneur Robert Friedland, seems strong and Batbold’s denials unconvincing.  But the expectation was that the MPP, the lineal descendant of the Marxist-Leninist party that ran the country when it was an appendage of the Soviet Union, still observed the principle of “democratic centralism.” Or as Benjamin Franklin put the principle more colorfully when signing one the foundational documents of true democracy, “We must all hang together, or, most assuredly, we shall all hang separately.”  

The assumption that MPP members would hang together is now at risk thanks to what Khürelsükh said last week on Mongolian TV9’s interview program.

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Kleptocracy in Mongolia: Deutsche Bank As Batbold’s Enabler

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To the left is a document showing how Deutsche Bank helped Mongolian politician Sukhbaatar Batbold hide assets offshore (full-size copy here). Written by Deutsche Bank executives in Hong Kong, it asks the bank’s Guernsey Island office to “establish and manage the offshore trust structure The Quantum Lake Trust on [Batbold’s] behalf.” The authors assure their Guernsey colleagues that there no reason to be suspicious about the request:

“We are unaware of any activities in which the above client [Batbold] engages which leads us to suspect that the client is involved in money laundering.” In fact, on the day the letter was written Batbold was a Member of Parliament and between 2004 and 2006 was Cabinet Minister of Trade and Industry (here). In money laundering terms he was a “politically exposed person.” As a consequence, Deutsche Bank was required to scrutinize his past activities before creating the trust and to closely monitor all future transactions with the bank or the trust to ensure they were lawful. There is no evidence Deutsche Bank ever conducted what the money laundering law terms this “enhanced due diligence.”

Two weeks ago Batbold denied ever having “any open or hidden accounts, money, apartments or property in the offshore zone” (here), but as the letter and other documents made public last Friday show, he is at least prevaricating if not lying. He has or has had numerous accounts and properties offshore. Batbold’s representative ducked questions GAB has asked (here) about the trust and Batbold’s offshore properties, issuing a short, blanket denial reprinted below.

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Kleptocracy Strikes Mongolia? Further Reply from Batbold’s Advisor

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Faithful readers know that last December 8 GAB reported on a New York case alleging that while in office former Mongolian Prime Minister Sukhbaatar Batbold conspired with a South Korean couple to embezzle hundreds of millions of dollars from his government.  Brought by three Mongolian government agencies, the complaint seeks to prevent the sale of two New York condominiums the agencies say are registered in the couple’s name but beneficially owned by Batbold until a case in Mongolia is resolved. In that case, the three agencies plus the Metropolitan Prosecutor’s Office ask that Batbold, the Korean couple, and others compensate the government for the damages it suffered from their corrupt acts.

The December 8 post and a second one December 23 drew a considerable number of comments. About half said the charges were fabricated and half said it was about time Batbold was held accountable.  But none addressed the facts alleged. It was only on January 5 GAB received any substantive comment on the charges — in the form of a letter from Batbold advisor Batbayar Sh. He there denied Batbold had done anything wrong, asserted the Mongolian case was politically motivated, and asked that the posts be taken down. Although Batbayar claimed the two posts were riddled with errors, as GAB explained in its January 6 post reprinting his letter, he identified no inaccuracies in either the December 8 or December 23 post.

Batbayar has now sent a second letter. It again denies Batbold has done anything wrong and, unlike the earlier letter, adds some facts to back up the denial. The text of this second letter along with GAB’s comments on the points it raises follows.

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Kleptocracy Strikes Mongolia? A Batbold Advisor Replies

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GAB’s December 8 “Kleptocracy Strikes Mongolia? The Batbold Case” prompted dozens of reader comments. The post recounts a recently filed New York civil case where it is alleged that, while he was Prime Minister, Sukhbaatar Batbold worked with a South Korean couple to embezzle hundreds of millions of dollars which went in part to buy real estate in New York and elsewhere registered in the couple’s name. Although the couple appears to have no experience in international commodity markets, they bought large quantities of ore from Mongolian state-owned or controlled mines during Batbold time in office on questionable terms. Batbold’s children now live in or use properties registered to the couple.

Dozens of readers commented on the post, roughly half claiming the charges were fabricated and half saying it was past time to hold Batbold accountable. No one addressed the substance of the allegations however, and hence in a follow up post December 23 readers were invited to do so. To date the one response has been a letter from a Batbold advisor asking GAB to delete the two posts. GAB Editor-in-Chief Matthew Stephenson wrote in reply that while GAB does not remove a post because someone believes it unfair, GAB will correct it if it is inaccurate.

The advisor’s letter contains a blanket denial of wrongdoing by Batbold and a claim the case is politically motivated. It points to no inaccuracies, however. It does note that subsequent to the first post’s appearance the government of Mongolia voluntarily discontinued the case against Batbold.  The letter implies this was because the court exonerated him. That is not correct. The court has not ruled on any of Mongolia’s allegations. Likely Mongolia decided to discontinue its case against Batbold for technical reasons having to do with his claim that as a public official he is immune from all court action. In any event, the South Korean couple remain parties.The letter is below. 

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Kleptocracy Strikes Mongolia? The Batbold Case Part II — UPDATE

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There is little doubt GAB’s Mongolian readers feel strongly about their former Prime Minister and possible 2021 presidential candidate Batbold Sukhbaatar. A December 8 post summarizing Offshore Alert’s December 7 revelations of charges he masterminded a massive corruption scheme sparked an avalanche of comments.  By contrast an earlier post recounting charges his likely rival, the current president, was corruption and had abused of power to control judicial appointments drew nary a word.

Comments on the Batbold case split roughly 50-50.  Half claimed the charges were fabricated with several seeing unnamed “foreign interests” behind them, and half believed every word of the government’s case and hoped Batbold would soon be brought to justice. Unfortunately for GAB readers neither from Mongolia nor schooled in developments there, none of the commentary offered any facts in support of their passionately asserted views.  Indeed, the only fact about the case that has appeared since the Offshore Alert article, at least in the English language press, is a story in today’s Times of London.

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Kleptocracy Strikes Mongolia? The Batbold Case

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Offshore Alert yesterday revealed the Mongolian government has charged former Prime Minister Batbold Sukhbaatar with receiving hundreds of millions of dollars from kickbacks and fraudulent and illegal transactions in deals involving the nation’s two largest mines. The case against the former prime minister, senior member of the ruling Mongolian People’s Party, and the party’s likely 2021 presidential candidate, is spelled out in a November 23 filing in a New York court.  The New York case together with similar ones in Hong Kong and London seeks a freeze on assets Batbold holds until the main case, brought in Mongolia, is decided.  There plaintiffs — the agency responsible for overseeing Mongolia’s natural resources and the state-owned companies that operate the two mines – ask that agreements between the two operating companies and shell companies they say Batbold secretly owns be invalidated and Batbold and accomplices disgorge all profits made on secret deals and as well as pay damages. The total could run into the hundreds of millions if not billions of dollars.  

Documents submitted in the New York case paint a picture familiar to students of kleptocracy.  With assistance from lawyers, accountants, and other enablers, Batbold allegedly established some 100 shell companies in at least ten countries to conceal his actions and hide his wealth.  Two things make the case worthy of careful study by all seeking to end the massive theft of a nation’s assets by its rulers:

i) the political will the governing party has shown in pursuing one of its own, and

ii) the quantum of information on an alleged kleptocrat’s wrongdoing that can be gleaned from a painstaking search of the public record.

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Presidential Power Grab: Corruption and Democratic Backsliding in Mongolia

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Mongolian democracy is in trouble. On March 26, President Khaltmaa Battulga proposed emergency legislation that would grant the presidency unprecedented powers to dismiss members of the judiciary, the prosecutor general, and the head of the state anticorruption agency (the Independent Authority Against Corruption, or IAAC). One day later, parliament approved this legislation by a vote of 34-6 (with 36 members of parliament either absent or abstaining), despite the fact that President Battulga hails from the Democratic Party (DP) while the rival Mongolian People’s Party (MPP) controls parliament. Technically the law doesn’t grant the dismissal powers directly to the president, but rather to a three-member National Security Council (NSC) composed of the president, prime minister, and speaker of parliament, and an oversight body called the Judicial General Council. But President Battulga dominates the NSC and personally appoints the members of the Judicial General Council, giving him effective authority to remove Mongolia’s judges and chief law enforcement officials at will. Sure enough, promptly after the law was passed, Battulga dismissed the head of the IAAC, the Chief Justice of the Supreme Court, and the prosecutor general.

This new legislation, a crippling blow to Mongolian democracy, has its origins in corruption, and corruption is likely to be its effect. President Battulga induced parliament to grant him such extraordinary powers by claiming that he alone can really take on Mongolia’s severe corruption problem. In his statement to parliament introducing the new legislation, Battulga alleged that the country’s law enforcement leaders were “part of a conspiracy system” that “fabricat[ed] criminal cases with a political agenda” while covering up others. The president pointed to Mongolia’s numerous unresolved corruption scandals to argue that the institutions of justice were “serving the officials who nominated and appointed them” rather than the public, and he argued that reducing the independence of the judiciary, the prosecutorial apparatus, and the IAAC would make those institutions more responsive to the popular will to fight corruption.

President Battulga is correct when he asserts that Mongolia has a corruption problem of serious, perhaps epidemic, proportions. Mongolians regularly list corruption as one of the country’s biggest issues (second only to unemployment in a 2018 survey) and political institutions such as parliament and political parties as among the most corrupt entities. The past few years have been especially scandal-plagued. During the 2017 presidential campaign, all three candidates faced accusations of corruption; most egregiously, the MPP candidate—who, until January 2019, served as speaker of the Mongolian parliament—was caught on video discussing a plan to sell government offices in a $25 million bribery scheme. Further, late in 2018, journalists discovered that numerous politically-connected Mongolians, including somewhere from 23 to 49 of the 75 sitting members of parliament, had been treating a government program designed to provide funding for small- and medium-sized enterprises (SMEs) as a personal piggy bank, taking out over a million dollars in low-cost loans. Beyond these scandals, Mongolia’s poor enforcement record compounds its corruption problem. For example, in 2015, only 7% of cases investigated by the IAAC resulted in convictions, and in 2018 public approval of the IAAC reached an all-time low.

But is there any reason to believe that President Battulga is right that giving him greater personal control over law enforcement and the judiciary will lead to less corruption? All the evidence points to no:

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Citizens Against Corruption: Report from the Front Line

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Pierre Landell Mills, a long-time and tireless advocate for putting governance at the center of development and a founder and board member of The Partnership for Transparency,  contributes the following guest post:

Everyone professes to hate corruption, but until recently few citizens believed they could stop it. Too often citizens accepted corruption, assuming it was a permanent societal disability to be borne with resignation. But people are increasingly intolerant of being squeezed for bribes and are ever more incensed at predatory officials growing fat on extortion and crooked deals. They want to do something about it.

And they are.  From the Philippines to Azerbaijan to Latvia to India to Mongolia and everywhere in between groups of courageous and dedicated citizens are taking direct action to root out corruption. Citizens Against Corruption: Report from the Front Line recounts the heroic struggle of local civil society organizations in more than 50 countries across four continents supported by The Partnership for Transparency Fund.  Among the examples the book details —   Continue reading →