Vietnam Enlists the Private Sector in the Fight Against Corruption

Last November Vietnam approved a new anticorruption law.  Initial reports in the English language press recounted the measures cracking down on public officials: the closing of loopholes in the conflict of interest rules, the increased information officials must provide about their personal finances, stiffer penalties for engaging in corruption, and so forth.  The recent publication of an English translation of the law reveals these early reports failed to mention a critical provision. As of July 1, all firms doing business in Vietnam, whether domestic or foreign, must:

  • determine if any employee or officer has engaged in corruption and if so promptly report him or her to the competent authority;
  • train employees on the anti-corruption laws; and
  • implement a code of business conduct that must include a rule barring conflicts of interest.

By my count (nations with anticorruption compliance laws january 2019), Vietnam is now the 25th nation to require some or all of the companies that do business in its territory to have some type of anticorruption compliance program.  Like every other anticorruption policy, requiring the private sector to join the fight against corruption is not a panacea.  But it surely is a part of the solution.

What are the rest of the world’s nations waiting for?  Do they think they can win the fight on their own?  Don’t they think the private sector has something to do with corruption?  Why aren’t they enlisting it in struggle?

Using the Unmatched Count Technique (UCT) to Elicit More Accurate Answers on Corruption Experience Surveys

With apologies to those readers who couldn’t care less about methodological issues associated with corruption experience surveys, I’m going to continue the train of thought I began in my last two posts (here and here) with further musings on that theme—in particular what survey researchers refer to as the “social desirability bias” problem (the reluctance of survey respondents to truthfully answer questions about sensitive behaviors like corruption). Last week’s post emphasized the seriousness of this concern and voiced some skepticism about whether one of the most common techniques for addressing it (so-called “indirect questioning,” in which respondents are asked not about their own behavior but about the behavior of people “like them” or “in their line of business”) actually works as well as is commonly assumed.

We professors, especially those of us who like to write blog posts, often get a bad rap for criticizing everything in sight but never offering any constructive solutions. The point is well-taken, and while I can’t promise to lay off the criticism, in today’s post I want to try to be at least a little bit constructive by calling attention to a promising alternative approach to mitigating the social desirability bias problem in corruption experience surveys: the unmatched count technique (UCT), sometimes alternatively called the “item count” or “list” method. This approach has been deployed occasionally by a few academic researchers working on corruption, but it hasn’t seemed to have been picked up by the major organizations that field large-scale corruption experience surveys, such as Transparency International’s Global Corruption Barometer (GCB), the World Bank’s Enterprise Surveys (WBES), or the various regional surveys (like AmericasBarometer or Afrobarometer). So it seemed worthwhile to try to draw more attention to the UCT. It’s by no means a perfect solution, and I’ll say a little bit more about costs and drawbacks near the end of the post. But the UCT is nonetheless worth serious consideration, both by other researchers designing their own surveys for individual research projects, and by more established organizations that regularly field surveys on corruption experience.

The way a UCT question works is roughly as follows: Continue reading

Fact-Checking the FCPA Scaremongers

In my last post, I made a disparaging in-passing reference to assertions, by some critics of the US Foreign Corrupt Practices Act (FCPA), that companies could get in FCPA trouble if they do things like buy a foreign government official a cup of coffee, take her to a reasonably-priced business meal, cover her taxi fare, etc. In my view, that’s just wrong, both because the US government would not bring such a case, and because the FCPA wouldn’t cover such isolated, modest benefits. The reason, as the DOJ/SEC FCPA Resource Guide explains, is that such benefits, without more, would not be offered “corruptly”–that is, with the wrongful intent of inducing the official to misuse her official position). I described those who suggest that the FCPA would criminalize such minor benefits as “FCPA scaremongers.”

My use of that the term “scaremonger” seems to have touched a nerve with Professor Mike Koehler–the self-described “FCPA Professor”–who had this to say in his comment my earlier post:

Scaremongering? Recent FCPA enforcement action have included allegations about flowers, cigarettes, karaoke bars, and golf in the morning and beer drinking in the evening.

I responded by asking Professor Koehler to identify the most ridiculous example of an actual FCPA settlement in which a trivial benefit was the sole basis of the enforcement action, as opposed to a small part of a larger scheme to corrupt government officials into misusing their authority. Professor Koehler answered:

The following is a factual statement: recent FCPA enforcement action have included allegations about flowers, cigarettes, karaoke bars, and golf in the morning and beer drinking in the evening.

I take the position that the DOJ/SEC include such allegations in FCPA enforcement actions for a reason and not just to practice their typing skills.

I again asked for an example. Professor Koehler’s response was to send, not the name of any individual case, but rather the links to the DOJ and SEC sites with all enforcement documents, suggesting that I could go through them myself to find “numerous examples of inconsequential things of value” included in the government allegations. He also referred to “several speeches” by SEC enforcement chief Andrew Ceresney (I actually think it’s one speech, given by Mr. Ceresney in November 2015) that supposedly acknowledged the government’s sweeping view of FCPA-prohibited conduct.

Having tried unsuccessfully to get Professor Koehler to point me to a specific example, I did a bit of digging on my own to see if I could find out if it’s really true that the DOJ and/or SEC have brought FCPA enforcement actions in cases that involve nothing more than “flowers, cigarettes, karaoke bars, and golf in the morning and beer drinking in the evening.” What I found makes me even more confident that I was fully justified in my use of the term “FCPA Scaremongers,” with Professor Koehler as perhaps the FCPA Scaremonger-in-Chief. Here are the cases to which I’m fairly sure Professor Koehler was referring: Continue reading

Fighting Environmental Corruption in the Mekong River Basin: More Firepower Needed

The forests, wildlife, plants, and vegetation of the Mekong River Basin are under sustained assault.  Not from some virulent new fungus or mutant virus.  No, the attacker is a man-made pathogen: the inability of the region’s governments to curb the rampant corruption eating away at the legal structure that protects the basin’s ecosystem.  Officials of basin governments are being paid to condone logging in conservation zones, to issue export permits for protected flora and fauna, and to otherwise flaunt laws meant to prevent an environmental catastrophe.  No other ecosystem is under such deadly assault, and unless the trend is arrested, the World Wildlife Fund predicts that within 20 years the region, twice the size of California and rivaled only by the Amazon for biological diversity, could lose more than a third of its remaining forests along with the exotic plants and wildlife that inhabit them.

The six governments of the region – Cambodia, China, Lao PDR, Myanmar, Thailand, and Vietnam – have declared war on environmental corruption and have begun counterattacking.  Environmental protection laws are being tweaked, and investigators and prosecutors trained to detect and prosecute environmental crime.  But important though these steps are, in the face of impending ecological disaster more firepower is needed.  Here are four ways to step up the fight: Continue reading

Guest Post: Money Laundering and Asset Recovery in Vietnam

Mathieu Tromme, co-founder of the Partnership for Research in International Affairs & Development (PRIAD), contributes the following guest post:

In 2012, the Financial Action Task Force (FATF) placed Vietnam into its International Cooperation Review Group (ICRG) mechanism–often referred to as FATF’s “blacklist”–due to FATF’s determination that Vietnam was not making sufficient progress in addressing deficiencies in its anti-money laundering and combating financing of terrorism (AML/CFT) regime. For Vietnam, this blacklisting was most unwelcome news. Like many other countries, Vietnam had suffered from the global economic downturn, and FATF’s blacklisting threatened its tenuous recovery. Landing on FATF’s blacklist increases a country’s risk profile, affects its credit rating, hampers international trade and investment, and impedes access to the international banking system (due to the enhanced customer due diligence which FATF requires). In response, Vietnam enacted a Money Laundering and Counter-Terrorism Law in 2012 (which took effect in early 2013). After the Asia Pacific Group made an on-site visit to verify Vietnam’s action plan, FATF once more declared Vietnam technically compliant. The country came off the FATF blacklist in February of 2014.

At the same time as this was happening in 2012, FATF issued a revised and consolidated set of 40 AML/CFT recommendations (from an original 40 + 9 “special recommendations” on terrorist financing), which ushered in a number of new standards and evaluation criteria. Of particular interest in Vietnam is Recommendation 30 on “Responsibilities of Law Enforcement and Investigative Authorities,” according to which jurisdictions are now expected to conduct pro-active parallel investigations into both the predicate offence and possible money laundering and terrorist financing offences. Moreover, under this Recommendation, jurisdictions are expected to designate a competent authority which can expeditiously identify, trace, and initiate actions to freeze and seize proceeds of crime. In Vietnam, meeting this new recommendation will be a real challenge, and might again threaten to land it on the FATF blacklist. Continue reading

The Scandal of Corruption in Development Aid

For all the effort development agencies invest to help developing states combat corruption, recent reports of corruption in Japanese and Norwegian development aid projects along with an earlier paper on corruption in World Bank projects remind that the development community does little to attack corruption in the one area where it has the most control: the projects it funds. Continue reading