National Digital Currencies Raise New Risks of Grand Corruption

In 2017, you may have heard of this thing called blockchain. The technology, which works by creating a decentralized, encrypted, and independently verifiable ledger of transactions distributed over a network of computer systems, has allowed innovations in the design of secure systems for recording votes, registering land ownership, and confirming digital identity. The most famous application of the blockchain, however, has been the creation of digital currencies such as Bitcoin, Ethereum, and Ripple. Many private individuals consider these currencies to be the way of the future, and the death knell of the central banker: universal, transparent, and valued according to mathematical laws rather than political preferences, cryptocurrencies—according to their proponents—will bring with them immeasurable benefits, among them making the fight against corruption easier by allowing all interested parties to “see the entirety of any transaction instantly and accurately.”

But private citizens aren’t the only ones who have heard of the blockchain: the same central bankers who are meant to be rendered irrelevant by the advent of cryptocurrencies have also taken notice. Several governments, including those of Israel, Russia, China, Estonia, Sweden, and Venezuela, have announced plans to create their own national digital currencies (NDCs) based on blockchain technology. While there are several sound economic reasons for introducing an NDC, governments frequently cite the same anticorruption benefits mentioned above.

However, there are crucial differences between NDCs and cryptocurrencies like Bitcoin. Rather than open architectures enabling full financial transparency, most NDCs currently plan to use some form of centralized ledger, giving government authorities (and only them) the ability to see and police transactions. While such centralized transparency will give honest governments a much-needed boost in the fight against corruption, it will also give oppressive and kleptocratic regimes another tool with which to steal from and oppress their populations. Continue reading

How Can We Assess the Sincerity of Anticorruption Campaigns?

The first step to solving a problem is admitting you have one. And many countries plagued by corruption did just that over the course of 2017, with Venezuela, China, Russia, Ukraine, the Philippines, Saudi Arabia, and several other nations launching (or in some cases continuing) high-profile anticorruption campaigns. Yet outside observers often have difficulty distinguishing sincere, well-intentioned anticorruption campaigns are well-intentioned from politically-motivated purges. Moreover, this dichotomy may be too simple, as many anticorruption campaigns may have mixed or complex motives. (Very often, for example, individuals targeted by an anticorruption campaign may have both engaged in misconduct and also be political opponents of the ruling faction.) Yet even though it is difficult for outsiders to assess the motives of foreign countries’ anticorruption campaigns—especially in real time—such an inquiry is often necessary, especially when outsiders must decide how aggressively to assist with things like asset freezes, extradition of fugitives, and other sorts of aid and support for anticorruption efforts.

While there is no definite set of criteria that can be used to determine the sincerity of an anticorruption campaign, it is nonetheless possible to develop a set of questions than can serve as reference points and  channel our attention to certain key issues, or “red flags,” that might help us distinguish sincere and genuine anticorruption efforts from those that are mainly political vendettas. Such questions might include the following: Continue reading

Venezuelans Out Kleptocrats’ Kids

Those cursed to live in a country where leaders are stealing the nation’s resources wholesale are rarely able to stop them.  Calling the police, complaining to the prosecutor, or appealing to the legislature is pointless: in a kleptocracy the thieves control the machinery of the state.  Speaking out is futile.  Those who do are quickly silenced — imprisoned if they not become the victim of state-sponsored assassination.

So it is particularly welcome to report that the citizens of Venezuela, the latest nation to become victim of massive, “grand” corruption by its leaders, recently hit upon a way to strike back. Even better is how they are doing it: using the social media posts of the kleptocrats’ kids. The Twitter account VVsincensura (“Venezuelans uncensored”) scours the internet collecting posts by the children of Venezuela’s kleptocrats showing them living the high life in Paris, Hong Kong, Sydney, and the like while the nation sinks ever deeper into a state of penury.  From videos of the Caracas mayor’s daughter surfing in Australia to pictures of a former state official’s offspring helicoptering around the Middle East, VVsincensura regularly, indeed sometimes hourly, tweets out evidence of how well one’s kids can vacation, dine, and tour when the government picks up the tab.  Particularly galling are photos of an ex-Minister of Health’s children sightseeing in China while the country experiences a medical emergency because it has no money to pay for basic medicines and hospital supplies.

Venezuela’s kleptocrats are yelping over the outing of their kids (example here).  More significantly, the steady stream of snapshots showing them, drink in hand, languishing by a fancy pool or on white sands beach while the mass of Venezuelans scrounge for life’s basic necessities is starting to have an impact — both in Venezuela and abroad.

Within in Venezuela VVsincensura has stripped the last shred of legitimacy from the thieves ruling the country.  Their claim to power is that they speak for Venezuela’s poor.  But as more and more pictures of their kids in private jets, on luxurious beaches, or in five star restaurants circulate, that claim has become a dark national joke.  It has also pumped new life to Venezuela’s beleaguered domestic opposition.  The only thing now keeping the kleptocrats in power is the security forces, and one has to ask how many pictures of generals’ sons and daughters living it up in Madrid, Buenos Aires, and Sao Paulo will it take before front-line soldiers begin deserting en masse.

Outside Venezuela the vulgar display of wealth by kids of kleptocrats has become so revolting that it has begun to spark action. At this writing some 30,000 Australians have signed a petition demanding that their government revoke the student visa of Lucía Rodríguez, daughter of Caracas’ mayor and niece of the Foreign Minister.  Rodríguez, ostensibly a student at a pricey Sydney University (tuition $18,000), is shown riding the waves off a Sydney beach in one VVSincensura post and enjoying a lifestyle far removed from that of an ordinary student in others. In the meantime, her father earns less than a $1,000 a year as mayor while preaching the virtues of an austere life to his constituents.

The Australian government should heed its citizens’ plea and send Rodríguez home, and that civil society in other nations hosting the kids of Venezuela’s kleptocrats should file similar petitions.  Denying kleptocrats the ability to send their kids abroad would remove one incentive for them to rob their nation blind.  More importantly, perhaps if the kids are penned up in Venezuela they will begin to realize just how hard life is for the great majority and how much responsibility their parents bear for making it so. Who knows, a few uncomfortable conversations around the family dinner table might prompt some of the thieves to go straight? For if a parent craves anything, it is their child’s love and respect.

While a single Twitter account might seem a feeble weapon to fight kleptocracy, VVSincensura shows that this is not so.  That when aimed at the right target, it can be a powerful weapon for combatting grand corruption. The ostentatious, revolting display of wealth by kleptocrats’ kids VVSincensura features reveals in a dramatic way the evil of grand corruption.  It is a tactic deserves widespread emulation — by citizens of other kleptocracies and anticorruption activists everywhere.

The OAS Did Not Do Enough to Intervene in Nicaragua’s Corrupt Election

Last Sunday, Nicaraguan president Daniel Ortega won his third term in office, alongside his running mate—who also happens to be his wife—Rosario Murillo. For months, critics have been calling out the Nicaraguan election as a classic example of a corrupt, rigged election. The voting system was entirely controlled by Ortega’s party. The husband-wife ticket ran unopposed, and not for lack of actual opposition within the country. Indeed, over the summer, the Ortega-influenced Supreme Court blocked an opposition candidate from running against the incumbent. Though there were protests within the country expressing disapproval of Ortega’s increasingly authoritarian regime, it is difficult to say how much opposition there was to the election because the reported number of votes cast was surely inflated by the Ortega administration.

This hardly came as a surprise, as this type of one-sided election is nothing new in Nicaragua. What might be more of a surprise is the apparent lack of outrage, or even concern, by the international community, particularly the Organization of American States (OAS), the regional body that is tasked with, among many other goals, promoting democracy in Latin America. In mid-October, the OAS published a press release that noted the OAS was going to enter into a “dialogue” with the government of Nicaragua concerning the country’s electoral process. There were no further details in the press release, and the “constructive exchange” between the organization and Ortega’s government did not seem to go anywhere. The press release didn’t even explicitly say that Nicaragua’s election was corrupt or undemocratic. The OAS did send election observers to Nicaragua, but OAS election observation missions these days are mostly a formality—the OAS sends observers to nearly every Latin American election, and these missions are notoriously ineffective, ranging from 20 to 100 observers and lasting only 20 days on average. In the case of Nicaragua’s election, the observers were present for just three days.

Even though the OAS has only limited power, it is nonetheless capable of delivering strong, symbolic messages in the face of corrupt, anti-democratic institutions. The OAS has a long history of issuing reports, especially those that highlight human rights abuses, and the OAS has condemned subversion of the democratic process in other countries, such as Venezuela. Even if purely symbolic, a pronouncement condemning the Nicaraguan election would demonstrate that the regional coalition denounces corrupt practices, and such symbolism could help support internal protestors or critics who might otherwise feel alone. Yet the OAS failed to do so, choosing instead to issue a half-hearted, ambiguous press release . Why?

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A Tale of Two Regions: Anticorruption Trends in Southeast Asia and Latin America

OK, “best of times” and “worst of times” would be a gross exaggeration. But still, when I consider recent developments in the fight against corruption in Latin American and Southeast Asia, it seems that these two regions are moving in quite different directions. And the directions are a bit surprising, at least to me.

If you’d asked me two years ago (say, in the summer of 2014) which of these two regions provoked more optimism, I would have said Southeast Asia. After all, Southeast Asia was home to two jurisdictions with “model” anticorruption agencies (ACAs)—Singapore and Hong Kong—and other countries in the regions, including Malaysia and especially Indonesia, had established their own ACAs, which had developed good reputations for independence and effectiveness. Thailand and the Philippines were more of a mixed bag, with revelations of severe high-level corruption scandals (the rice pledging fiasco in Thailand and the pork barrel scam in the Philippines), but there were signs of progress in both of those countries too. More controversially, in Thailand the 2014 military coup was welcomed by many in the anticorruption community, who thought that the military would clean up the systemic corruption associated with the populist administrations of Thaksin Shinawatra and his successor (and sister) Yingluck Shinawatra—and then turn power back over to the civilian government, as the military had done in the past. And in the Philippines, public outrage at the brazenness of the pork barrel scam, stoked by social media, and public support for the Philippines’ increasingly aggressive ACA (the Office of the Ombudsman), was cause for hope that public opinion was finally turning more decisively against the pervasive mix of patronage and corruption that had long afflicted Philippine democracy. True, the region was still home to some of the countries were corruption remained pervasive and signs of progress were scant (such as Vietnam, Laos, Cambodia, and Myanmar), but overall, the region-wide story seemed fairly positive—especially compared to Latin America where, aside from the usual bright spots (Chile, Uruguay, and to a somewhat lesser extent Costa Rica), there seemed to be precious little for anticorruption advocates to celebrate.

But now, in the summer of 2016, things look quite a bit different. In Southeast Asia, the optimism I felt two years ago has turned to worry bordering on despair, while in Latin America, things are actually starting to look up, at least in some countries. I don’t want to over-generalize: Every country’s situation is unique, and too complicated to reduce to a simple better/worse assessment. I’m also well aware that “regional trends” are often artificial constructs with limited usefulness for serious analysis. But still, I thought it might be worthwhile to step back and compare these two regions, and explain why I’m so depressed about Southeast Asia and so cautiously optimistic about Latin America at the moment.

I’ll start with the sources of my Southeast Asian pessimism, highlighting the jurisdictions that have me most worried: Continue reading

Close But No CICIGar… Yet: Replicating Guatemala’s Anticorruption Success

Guatemala’s international commission against impunity (known by its Spanish acronym, CICIG) played a pivotal role in answering widespread public demand this year for accountability for corruption in the government. CICIG’s investigations led to the resignations and arrests of top government officials—including the former president and vice president—following their involvement in a large-scale customs scandal. CICIG’s perceived success has let to calls in other countries for adopting (or adapting) the CICIG model elsewhere. For example, public outcry in Honduras over a healthcare scandal culminated in a proposal for a Honduran version of CICIG, to be led by the Organization of American States and formally titled the “Support Mission Against Corruption and Impunity in Honduras.” (Like CICIG, this body will also be known by its acronym in Spanish, MACCIH). There have also been calls to replicate CICIG in El Salvador (which thus far have led only to the continuation of a USAID-sponsored anticorruption initiative rather than creation of a full-fledged CICIG clone), most recently, in Venezuela.

These other governments, however, are resisting calls for full-fledged CICIG clones, and the existing or proposed institutions, like MACCIH in Honduras or the USAID initiative in El Salvador–have been met with skepticism. For example, many Honduran critics point to MACCIH’s limited mission as evidence of its limited effect. Indeed, many suspect that the Honduran government agreed to MACCIH precisely because its work is likely to be duplicative and ineffective, mainly focused on study and recommending improvements; the call for further study is seen, probably accurately, as a delaying tactic until the next election rather than a practical step forward. Anticorruption activists in Honduras have therefore introduced a bill that rejects MACCIH, calling it a governmental ploy to placate demand and avoid accountability, and requests a more CICIG-like body in its place.

To a certain extent, this skepticism is justified: both MACCIH and the Salvadoran USAID initiative are watered-down substitutes for CICIG at best. Nonetheless, the outlook may not be as bleak as it seems. CICIG may seem exemplary now, especially in comparison to MACCIH and the USAID initiative, but it was not always perceived this way. Many of the preconditions for CICIG’s recent success developed with its work over time. This is a cause for some optimism regarding the prospects for the “CICIG-lite” initiatives in El Salvador and Honduras, despite their limited mandate and powers. Nonetheless, certain structural problems–mainly related to funding and independence–are more worrisome. Continue reading