A Ukrainian Anticorruption Court Is an Essential Step Toward the Rule of Law

Since the Maidan movement that overthrew the last Ukrainian government, Ukrainian anticorruption activists have demanded, among other reforms, the creation of a specialized anticorruption court. Many of Ukraine’s Western backers likewise consider the creation of such a court to be an essential step in addressing the country’s systemic corruption problem, and in recent months, protests have broken out on the street in support of the court. In what appears to be a major victory for the domestic and international advocates of a special anticorruption court, President Poroshenko agreed in principle to create such a court this past October—although the details will need to be worked out.

Not everyone is convinced that the creation of a specialized anticorruption court is as important as its backers think. In a thoughtful post last month, Helen articulated the skeptical view, arguing that the specialized anticorruption court will likely not live up to expectations, and that domestic and international actors are placing too much emphasis on the creation of this particular institution. But Helen both underestimates the importance of a specialized anticorruption court in the Ukrainian context, and is overly pessimistic about its prospects for effectiveness. That said, she is right to highlight how things could go awry if the creation of the specialized anticorruption court is not done right.

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No Silver Bullet: Why Ukrainian Anticorruption Activists Should Not Fixate on Creating a Specialized Anticorruption Court

Ukrainian civil society activists have been aggressively campaigning for the establishment of an independent anticorruption court (see, for example, here, here, and here), in which international donors and other partners would participate in the selection of judges. Until very recently, President Poroshenko had vigorously resisted this campaign, asserting that “all courts in the country should be anti-corruption,” and proposing instead to have an anticorruption chamber within the current court system as part of his judicial reform plan. Yet in a surprising turn of events, on October 4th President Poroshenko appeared to yield to the demand of activists and international pressure to create such a court.

Poroshenko’s flip-flop seems to be a major victory for anticorruption activists in Ukraine. Yet it might be too early to celebrate. As promising as it sounds, a specialized anticorruption court is unlikely to live up to Ukrainian activists’ expectations. In a country like Ukraine—an oligarchic democracy in which governmental power is not delineated clearly by the constitution or legal framework, the executive is not effectively checked by the judiciary, and businesses are entangled with politics—the creation of a new judicial body is unlikely to be a game-changer. Moreover, in focusing so much on the campaign to create a specialized anticorruption court, domestic and international activists may be diverting energy and resources from more important issues, such as reforming the Prosecutor General’s Office (PGO), strengthening the role of the National Anti-Corruption Bureau of Ukraine (NABU), and adopting more comprehensive political and economic reforms reduce the clout of the country’s oligarchs.

There are two main reasons that the proposed Ukrainian anticorruption court is unlikely to live up to activists’ expectations:

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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

Chasing Dirty Money: A Public Database of Ukrainian PEPs

Two weeks ago I posted Ferreting Out Kleptocrats’ Buddies: The Ukrainian Solution which described a list of Ukrainian public officials, their relatives, and close associates that a Ukrainian NGO had compiled. Banks and other financial institutions are required by national antimoney laundering laws to ask these individuals, “politically exposed persons” in antimoney laundering lingo, how they came by their money before doing business with them.  The idea is to keep money obtained through corrupt and other criminal means from polluting the financial system.  The hope is that such controls will either discourage PEPs from stealing from the public or, if not, open up one more way to catch those who have.

As Ferreting Out explained, currently the institutions subject to the antimoney laundering laws rely on PEP lists sold by large international companies, lists that often omit many names that should be on them.  Despite antimoney laundering laws in place around the globe, Ukrainian PEPs are spiriting money out of the country and into foreign financial institutions, real estate, and other investments at an alarming rate.  To help staunch the flow, the Ukrainian Anticorruption Action Center developed and published its own list of Ukrainian PEPs.  The list draws on many local sources and was compiled to complement the ones peddled by commercial vendors.

Center staff presented their work last weekend at the IMF-World Bank Annual Meetings.  A summary of their presentation with a link to the database follows. Continue reading

Ferreting Out Kleptocrats’ Buddies: The Ukrainian Solution Part I

Every kleptocrat needs a buddy.  Someone to serve as an intermediary between the corrupt official and the bankers, real estate agents, and others in London, New York, and elsewhere happy to profit from handling dirty money.  A kleptocrat can’t just walk into a bank or real estate office in the United Kingdom, the United States, or other preferred offshore haven with a pile of money to invest.  As a public official, the antimoney laundering (AML) laws would oblige the banker or real estate agent to ask searching questions about how the kleptocrat came into the money and the law would likely also require them to report the transaction or proposed transaction to the authorities.  A buddy, particularly one who has remained out of the public limelight, is the perfect solution.  So long as they don’t know a potential customer is close to a senior public official, the banker or real estate agent meets their obligation to ascertain the source of the would-be customer’s funds by asking a few pro forma questions.

To plug the buddy loophole, the AML laws require banks and real estate agents to determine if anyone wanting to do business with them is a “close associate” of a senior official — a “politically exposed person” in the inelegant term coined by AML specialists.  If a potential customer is a PEP, the bank or real estate agent must ask the same searching questions about the origins of the individual’s funds that they must ask of a senior official.  Recognizing that bankers and real estate agents can’t be expected to know whether a foreign national wanting to do business with them is a close associate of a senior official in 190 plus countries, AML regulators allow them to rely on one of the several PEP lists peddled by commercial firms.  So long as the potential customer doesn’t appear on whatever PEP list they use, the banker or real estate agent need not conduct a detailed inquiry (“enhanced due diligence” in AML-speak) into where their money came from.

So how well do these commercial PEP lists do at identifying kleptocrats’ buddies?  Continue reading

U.S. to Honor Corruption Fighters from Afghanistan, Angola, Guatemala, Malaysia, and Ukraine

Afghanistan NGO leader Khalil Parsa, Angolan journalist Rafael Marques de Morais, Guatemalan judge Claudia Escobar, Malaysian civil society activist Cynthia Gabriel, and Ukrainian investigative journalist Denys Bihus will share the 2017 Democracy Award for their work promoting democracy in their countries.  Bestowed annually by the National Endowment for Democracy, the U.S. democracy promotion agency, the ceremony will be held June 7 at the U.S. Capitol.  Republican House of Representatives Speaker Paul Ryan and the House Democratic Leader Nancy Pelosi will both speak.

This year’s award is significant for three reasons.  In the wake of concerns Trump Administration rhetoric has raised about America’s commitment to human rights and democracy, Speaker Ryan and Leader Pelosi’s participation is a reminder that a strong, bipartisan consensus on these basic, universal values remains deeply embedded in U.S. political culture.  Second is the recognition by the National Endowment, perhaps the world’s leading advocate of democracy, that the fight against corruption is an essential element in building a democratic state.  Finally, the award is one more sign that those fighting corruption at home are not alone, that the international community supports them and stands with them.

More on the ceremony, biographies of each recipient, and the National Endowment’s democracy promotion work here.

Guest Post: Did the London Summit Make a Difference to Open Contracting? Does Open Contracting Make a Difference for Tackling Procurement Corruption?

Gavin Hayman, Executive Director of the Open Contracting Partnership, provides today’s guest post:

Anyone remember the London Anti-Corruption Summit last May? It seems like a long, long time ago now, but it was a big deal for us when 14 countries stepped forward at the Summit to implement the Open Contracting Data Standard to open, share, and track all data and documents coming from the billions of dollars that they are spending on public contracting and procurement each year.

One year later, how well have these countries have followed through on their commitments, and how much of a difference open contracting has made in combating corruption in public procurement? After all, it is government’s number one corruption risk; it’s where money, opacity, and government discretion collide.

The news is generally positive: the Summit commitments appear to have promoted genuine progress toward more open contracting in many of those countries, and the preliminary evidence indicates that such moves help reduce procurement corruption. Continue reading