New Podcast, Featuring Monika Bauhr

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Monika Bauhr, Associate Professor of Political Science and former head of the Quality of Government Institute at the University of Gothenburg. During our conversation, Professor Bauhr discusses her research work in three key areas: (1) the impact of pro-transparency reforms (particularly the adoption of freedom of information laws) on corruption; (2) the disaggregation of the broad category “corruption” into different types of corruption (such as “need” corruption versus “greed” corruption); and (3) the relationship between gender and corruption, in particular what factors might account for the apparent correlation between greater representation of women in elected office (or the business or political elite more generally) and lower (perceived) corruption levels.

You can find this episode, along with links to previous podcast 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.

One Year After Bolsonaro’s Election, How Well Is His Administration Fighting Corruption in Brazil?

Exactly one year ago, on October 28th, 2018, Jair Bolsonaro, a right-wing congressman and former army captain, was declared the winner of Brazil’s presidential election after receiving 55.13% of the valid votes. He defeated the center-left-wing Workers’ Party (PT) candidate Fernando Haddad, ending the PT’s streak of four consecutive presidential election victories that had begun in 2002.

Brazil’s corruption problem played a major role in the election and in Bolsonaro’s victory. The Car Wash Operation had not only uncovered widespread corruption scandals during the PT administrations, but that Operation also led to the prosecution and conviction of former President Luiz Inácio “Lula” da Silva, which rendered Lula ineligible to compete in the 2018 election. Moreover, Bolsonaro centered his campaign especially on a vigorous anticorruption discourse, promising to set a new standard of public integrity and to hold corrupt companies and politicians liable for their misconduct (see here and here). To be sure, Bolsonaro did not campaign exclusively on an anticorruption platform. He also positioned himself as the defender of more conservative social values and pledged to take a hardline approach to violent crime and drug trafficking. Yet his anticorruption rhetoric undoubtedly played a key role in his victory.

Even before the election, though, some commentators expressed skepticism that Bolsonaro would undertake genuine efforts to fight corruption and strengthen the institutions needed to promote integrity, and this skeptical view has been echoed by other commentators, both inside and outside of Brazil, during Bolsonaro’s first term (see, for example, here and here).

Now, one year since Bolsonaro’s electoral victory, is a suitable time to analyze the Bolsonaro Administration’s performance so far on anticorruption related issues. Have his substantive accomplishments in this area matched his tough rhetoric?

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Guest Post: U.S. State Ethics Agencies Must Improve Both Enforcement and Transparency

Today’s guest post is from Shruti Shah, President and CEO of the Coalition for Integrity (C4I), and Alex Amico, a C4I legal fellow.

Recently, the Coalition for Integrity released a report on Enforcement of Ethics Rules by State Agencies (along with an associated index and map) which examined the performance of state-level ethics agencies across the United States. In addition to providing basic enforcement statistics, the report emphasized two aspects of these agencies’ performance. First, the report looked at how these agencies enforced the ethics laws they were charged with enforcing, to see how aggressively agencies stand up for ethical government within their legal authority. Second, the report examined how transparent the agencies were in that enforcement, and hence how accountable these agencies make themselves to the public. (The report also ranked each state and agency based on their transparency of enforcement). Both of these aspects of agency performance are crucial to creating a culture of honest government and a robust ethics enforcement regime. Some our headline findings with respect to each of these dimensions of performance were as follows: Continue reading

Incorporating Anticorruption Measures in the African Continental Free Trade Agreement (AfCFTA)

On April 2, 2019, The Gambia became the 22nd country to ratify the African Continental Free Trade Agreement (AfCFTA), which was the minimum threshold to approve the deal among the 55-member states of the African Union (AU). The AfCFTA aims to provide a single continental market for goods and services, as well as a customs union with free movement of capital and business travelers. Although the agreement will enter into force one week from tomorrow (on May 30, 2019), the negotiations for the Protocols and other important matters such as tariff schedules, rules of origin, and sector commitments are still being negotiated. However, once the treaty is fully in force, it is expected to cover a market of 1.2 billion people and combined gross domestic product of $2.5 trillion, which would make it the world’s largest free trade area since the creation of the World Trade Organization. This could be a game-changer for Africa. Indeed, the U.N. Economic Commission on Africa predicts that the AfCFTA could increase intra-African trade by as much as 52.3%, and that this percentage will double when tariff barriers are eliminated. The AfCFTA promises to provide substantial opportunities for industrialization, diversification, and high-skilled employment. And the AU’s larger goal is to utilize the AfCFTA to create a single common African market.

Yet there are a number of challenges that could thwart the effectiveness of this new treaty in promoting free trade and economic development. Corruption is one of those challenges. International indexes indicate that Sub-Saharan Africa is perceived as the most corrupt region in the world, with North Africa not much better. The current version of the treaty, however, does not address corruption directly. It should. Continue reading

A Cultural Defense to Bribery? The Solomon Islands’ Approach

Gift-giving usually has positive connotations as an expression of love, respect, friendship, gratitude, or celebration. However, when the recipient is a public official, there is always the concern that the “gift” is nothing but a thinly-veiled bribe. For this reason, countries around the world have placed restrictions on the character and value of gifts that public officials are allowed to accept. But in societies where giving gifts – including, perhaps especially, to powerful or influential figures – is an important part of the culture, treating all (sufficiently large) gifts as unlawful bribes is more than usually challenging. Indeed, a recurring question for anticorruption reformers is whether or how anti-bribery law should make allowances for local cultural norms and practices, especially those related to gift-giving. This question – often framed as one of “cultural relativism” – frequently comes up in the context of developing countries (such as Indonesia or various Pacific islands), though it is not exclusive to such countries (see, for example, discussion of this same issue in South Korea).

One country that has recently faced the challenge of regulating cultural gift-giving to and by public officials is the Solomon Islands – a small state in the Pacific Ocean consisting of over nine hundred islands, a population of about 600,000, and a rich and fascinating history. For years, the Solomon Islands has been dealing with pervasive corruption at all levels of government, most notably in natural resources management, which has had disastrous ramifications for the country’s economic development (see here, here, and here). Like other Pacific islands, the Solomon Islands is home to a practice of traditional gift-giving to and by public officials, which in many other jurisdictions could be viewed as legally problematic. According to a local custom (as explained in an official government document), public officials, as members of their community, are “expected to contribute to community events such as weddings, funerals, feasts or church gatherings” and are “obligated to reciprocate with gifts if and when they visit communities and are presented with gifts.”

In July 2018, as part of a comprehensive national anticorruption scheme, the Solomon Islands’ Parliament enacted the much anticipated Anti-Corruption Act (ACA). The ACA is especially notable, and unusual, in its approach towards customary gifts and bribery. Instead of capping the monetary value or limiting the type of gifts which public officials are allowed to accept, the ACA introduced a new cultural defense to the offence of bribery of public officials. According to this defense, a public official who accepts or solicits something of value, as well as the individual who offers or gives it, is not guilty of bribery if the defendants can prove that their respective acts were conducted: (1) “in accordance with custom,” (2) “openly, in the course of a traditional exchange of gifts,” and (3) “for the benefit of a community or group of people and not for an individual.” According to Prime Minister Rick Houenipwela, the ACA’s cultural defense is required as part of the government’s obligation “to respect our customs and traditional cultures” as “a multi-ethnic post conflict country.” However, the cultural defense has been criticized by many, including the Parliament’s Bills and Legislation Committee (see here and here) and Transparency Solomon Islands, which referred to this defense as “a good example of bad law.”

In this post, I do not attempt to answer the question whether the Solomon Islands’ customary gift giving should be criminalized. I do wish to argue, however, that even if we assume that local gift-giving customs are worth protecting, the ACA’s cultural defense to bribery in its current form is highly susceptible to misuse and may undermine the government’s anticorruption efforts. Both the Solomon Islands and other jurisdictions that might be considering a similar cultural defense should take heed of four significant problems with the defense as currently written: Continue reading

Transparentizing the Commodity Trading Sector: Why Trading Companies Must be Subject to Mandatory Payments Disclosure

Commodity trading companies (CTCs) mainly operate as middlemen in a business model called “transit trade,” where CTCs administer the delivery chain for primary economic products (energy, metals, agriculture, etc.) from the extraction site to the ultimate buyers. Though CTCs rarely have physical possession of these commodities, the CTCs are the ones that typically build connections with foreign officials and politicians, pre-finance extraction activities by indebted governments (often through loans pledged on future commodity deliveries), and sell raw materials across the globe. Because of CTCs’ frequent interaction with foreign governments and state-owned enterprises, their complex structure, and the opacity of the commodities market, the corruption risks—particularly in the markets for “hard” commodities like oil, gas, or minerals—are especially large, as a few recent cases have highlighted (see, for example, here, here, and here). Politically exposed persons (PEPs) also take advantages of the opacity in commodity trading to launder illicit proceeds derived from corruption.

Yet in stark contrast to the focus on the corrupt activities of those companies engaged directly in extractive activities, as well as by the ultimate purchasers “upstream,” corruption by CTCs has not received much attention. This oversight should be corrected, in part by covering CTCs under the “Publish What You Pay” (PWYP) laws of their home countries—laws that usually only mandate payment disclosures relating to exploration, extraction, and processing, and that often explicitly exclude payments related to “commodity trading-related activities.” This exclusion is a mistake, as there are at least two good reasons to apply PWYP rules to CTCs: Continue reading

Proposed US Legislation Can Solve the Art World’s Money Laundering Problem

The plan was simple: a wealthy client wishing to launder the proceeds of a stock manipulation scheme could do so through a Picasso painting. His accomplice would be Matthew Green, the owner of a prominent London art gallery and son of one of London’s most powerful art dealers. The client would purchase the painting using the illegal proceeds, own the painting for some time to avoid suspicion, and then sell the painting back to Green, who would transfer the original payment back to the client through a US bank—to “clean the money.” It was completely foolproof, except that the client turned out to be an undercover FBI agent.

Why a painting to launder the money? Because the art business is impenetrable by outsiders: it’s a world limited to highbrow art connoisseurs, dealers, and wealthy collectors, where the prices are whatever they want them to be. Here, $9.2 million, although the painting failed to sell at a much lower price estimate years before. And as the defendants in the Green case explained to their client, the art business is “the only market that is unregulated” by the government. It seems that the players in the art world make up their own rules, unchecked by any authority, making this elusive quality of the business the perfect “hotbed” for corrupt activity.

In May 2018—possibly in response to the February 2018 indictment in this case—legislation was introduced in US Congress to tackle the money-laundering problem in the art business (previously described on this blog). The Illicit Art and Antiquities Trafficking Prevention Act (Act) would cover art and antiquities dealers under the Bank Secrecy Act (BSA), which requires financial institutions and other regulated businesses to establish anti-money laundering programs, keep records of cash purchases, and report suspicious activity and transactions exceeding $10,000 to government regulators. This legislation has, perhaps unsurprisingly, been vigorously opposed by the art industry. But the objections to the proposal do not withstand scrutiny:

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