Guest Post: Whistleblower Protection in Kosovo–An Unlikely Success Story of Civil Society Collective Action and International Support

Today’s guest post is from Nedim Hogic, a PhD candidate at the Sant’Anna School of Advanced Studies in Pisa, Italy, and Arolda Elbasani, Visiting Scholar at New York University. The research on which this post is based was sponsored by Kosovo Open Society Foundation.

In Kosovo, as in the rest of the Balkans region more generally, anticorruption initiatives and institutional solutions have typically been top-down efforts based on templates recommended by international actors and hastily approved by a circle of local political allies. Few of those international initiatives have proved successful, often because the new laws provided enough discretion for political interests to thwart effective implementation. Hence, Kosovo, like much of the rest of the Balkans, seems trapped in a continuous yet futile cycle of international-sponsored institutional- and capacity-building measures, which have not delivered.

The 2018 amendments to Kosovo’s law on the protection of whistleblowers suggests a more promising model of legislative drafting. The amended law stands out for its collaborative and open mode of drafting, involving various international, governmental, and civil society actors, a welcome contrast to the more prevalent pattern of top-down, and largely futile, approach to legal and institutional reform. Continue reading

Are Legislative Changes to US AML Rules Finally on the Way? Some Thoughts on Tomorrow’s Subcommittee Hearing

Although the United States has been a leader in the fight against global corruption in some respects—particularly in its vigorous enforcement of the Foreign Corrupt Practices Act and, at least until recently, its diplomatic efforts—there is widespread agreement in the anticorruption community that the United States has not done nearly enough to address the flow of dirty money, much of it stolen by kleptocrats and their cronies, to and through the United States. Effectively addressing this problem requires updating the US legislative framework, a task made difficult by the checks and balances built into the federal legislative process, coupled with high levels of political polarization. Yet there are reasons for cautious optimism: Thanks in part to skillful lobbying efforts by several advocacy groups, and aided in part by the Democrats taking control of the House of Representatives in the most recent mid-term elections, it looks as if there’s a real chance that the current Congress may enact at least some significant reforms.

Three of the reform bills under consideration are the subject of a hearing to be held tomorrow (Wednesday, March 13, 2019) before the House Financial Services Committee’s Subcommittee on National Security, International Development, and Monetary Policy. That hearing will consider three draft bills: (1) a draft version of the “Corporate Transparency Act” (CTA); (2) the “Kleptocracy Asset Recovery Rewards Act” (KARRA); and (3) a draft bill that currently bears the unwieldy title “To make reforms of the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” (which I’ll refer to as the Bank Secrecy Act (BSA) Amendments). The subcommittee’s memo explaining the three proposals is here, and for those who are interested, you can watch a live stream of the subcommittee hearing tomorrow at 2 pm (US East Coast time) here.

For what it’s worth, a few scattered thoughts on each of these proposals: Continue reading

Rewarding Whistleblowing to Fight Kleptocracy

Last February, Massachusetts Congressman Stephen Lynch introduced the Kleptocracy Asset Recovery Rewards Act (KARRA), which seeks to improve detection of stolen assets housed in American financial institutions by paying whistleblowers for reports that lead to the identification and seizure of these assets. The logic of paying rewards to whistleblowers is straightforward, and nicely summarized in the draft KARRA itself:

The individuals who come forward to expose foreign governmental corruption and klep­toc­ra­cy often do so at great risk to their own safety and that of their immediate family members and face retaliation from persons who exercise foreign political or governmental power. Monetary rewards and the potential award of asylum can provide a necessary incentive to expose such corruption and provide a financial means to provide for their well-being and avoid retribution.

Paying whistleblowers for information is a sound economic idea.  But in light of the cogent explanation for these rewards, the original draft of the KARRA legislation doesn’t go nearly far enough. Indeed, this original proposal provides much weaker incentives and protections for whistleblowers than several other existing US whistleblower rewards programs. It is unlikely that this bill has a real chance of being enacted in the current Congress, but if its introduction this year is a harbinger of a more sustained effort to enact legislation of this kind—and I hope it is—then I also hope that the next time around KARRA supporters will introduce a more ambitious bill, one that provides much higher potential rewards, fewer limitations on which whistleblowers are eligible for rewards, and more robust anti-retaliation protections.

There are many ways to design a whistleblowing program, as demonstrated by the spectrum of existing programs that use whistleblowing to tackle fraud in other domains. We can examine the effectiveness of the proposed legislation through comparison to existing whistleblowing programs:

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Guest Post: We Need To Talk About Donors

GAB is delighted to welcome back Mark Pyman, Senior Fellow at the London Institute for Statecraft, who also served as Commissioner of the Afghanistan Joint Independent Anti-Corruption Monitoring and Evaluation Committee until November 27, 2017.

When it comes to fighting corruption and promoting accountable government, donors provide funds, expertise, and support, often over many years. They face many difficult challenges, and we all sympathize with the hard issues they have to contend with. Yet at the same time we have to forthrightly acknowledge that, for all their good intentions, when it comes to corruption, international donors easily become part of the problem. Donors, researchers, politicians and grantees have all been too silent on this.

Let me illustrate this with problems at one large, well-intentioned donor program in Afghanistan, the Comprehensive Agriculture and Rural Development Facility (CARD-F) Program. This Program, funded by the UK’s Department for International Development (DFID) and Denmark’s aid agency DANIDA to the tune of $120 million over two phases, was established to increase rural employment, incomes, and business opportunities through the design and implementation of projects, such as infrastructure work (such as building irrigation canals), provision of grants to producers and processors, establishment of greenhouses and poultry farms, and training for farmers.

Between March and October 2017, the Afghanistan Independent Anti-Corruption Monitoring and Evaluation Committee (MEC) made an inquiry into corruption concerns at CARD-F, based on allegations from five whistleblowers. MEC is the premier anti-corruption entity in Afghanistan, set up by Presidential decree in 2010, led by a Committee of six (three eminent Afghans and three international experts), and with an Afghan Secretariat of some 25 professional staff. It is funded by international donors. MEC found plenty of malpractice, including nepotism and cronyism in the Management Unit; multiple irregularities in the awarding of grants and procurement contracts; poor monitoring provided by expensive UK companies (that, to be blunt, were not doing their job); and international (UK) contractors with a built-in incentive to use up more of the available budget for their own “technical assistance.” MEC found that only 33% of CARD-F funds in the first phase reached the intended end users, instead of the planned 60% (the other 40% planned to going on technical assistance and administration; eventually 67%). Moreover, not one of the five separate whistleblowers whose concerns were passed to MEC felt protected enough to complain through the CARD-F program, nor through DFID or DANIDA. At least two of these whistleblowers were fired, and others felt they had to leave.

At the same time the donors vigorously opposed MEC’s plan to do the inquiry, suggesting that MEC surely had other more important priority topics to examine, and that MEC shouldn’t be concerned because the donors had already done an audit (which was not shared with MEC) in response to a previous whistleblower. Not-so-subtle pressure was applied: MEC’s own core funding, which comes partly from DFID and DANIDA, would need to be “reviewed” if MEC persisted. Ultimately, MEC had to request the President of Afghanistan to intercede, before DFID Afghanistan offered its support to MEC’s inquiry.

Any organization doing or sponsoring work in a tough environment like Afghanistan can expect to have corruption issues. But trying to hide the problem, and then to bully it away? As an anticorruption professional who has seen DFID do good work elsewhere in the world, and indeed in Afghanistan, I was really shaken. Less naïve than me, the Afghans are well aware that such internationally sanctioned malpractice is taking place, and they too see this as evidence of dishonesty and hypocrisy.

The huge disconnect between donors’ generally good intentions on the one hand and the, frankly, perverse bureaucratic politics that drives donor agencies is a known problem. Most donors know what is going on in their programs, but feel driven to cover themselves with expensive and often ineffective technical veils – fiduciary risk assessments; supply chain mapping, due diligence, layers of oversight – to protect themselves from charges of lax supervision.

An honest conversation about this is surely overdue. Here are ideas on four of the key topics to start the discussion: Continue reading

Planning and Zoning Board Corruption: Finding the Missing Whistleblowers

My last post looked at the constant, pernicious corruption and conflict of interest in local land use planning decisions in the United States. Despite shocking stories and a handful of high-profile investigations and prosecutions (see, for example, here and here), little comprehensive work has been done to address the potential for corruption in planning and zoning decisions, even when warning signs abound. Instead, most instances of corruption in land use planning decisions remain undetected, perhaps because the seemingly small stakes make it unlikely that external investigators will scrutinize these decisions too closely.

Yet potential whistleblowers surely see or suspect bribery, conflicted dealings, or other malfeasance in land use planning. Reforms should make it easier for those individuals to come forward, as well as make it more likely that their reports will lead to action. Ideally, these measures would recognize the particular characteristics of land use decisions, such as the challenges posed by the large numbers of local officials involved in planning and zoning. Here are a few suggestions for how to encourage simpler, more consistent reporting:

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Nigeria’s Whistleblowing Policy: A Good Start, But Not Enough

On December 21, 2016, Nigeria’s Federal Ministry of Finance approved a whistleblowing program as part of the Nigerian government’s continued efforts to fight corruption. Key features of the program include the launch of an online portal for submission of tips and the establishment of a reward for “information that directly leads to the voluntary return of stolen or concealed public funds or assets” (the reward is 2.5 to 5% of the amount recovered, with the percentage decreasing as the amounts recovered increases). As over $176 million in stolen funds was recovered within the first two months of the program, the whistleblowing policy appears to be an overnight success story. Nevertheless, although stolen funds are indeed being recovered, the existing policy does not do enough to offset the risks that whistleblowers face when they come forward with information, and this deficiency may limit the long-term effectiveness of the program. In particular, there are three aspects of the program that the government ought to reform in order to encourage individuals to assume the risks associated with becoming a whistleblower, and consequently to ensure the policy’s continued success. Continue reading

Guest Post: Catalyzing Anticorruption Efforts in the Pharmaceutical Sector–Collaboration Is Key

Michael Petkov, Programme Officer for Transparency International’s Pharmaceuticals & Healthcare Programme, contributes the following guest post:

It will come as no surprise to readers of this blog that the pharmaceutical sector has extensive corruption risks: the sector is extremely complex, with multiple actors, high-value products, large-volume contracts, and a high degree of information asymmetry. But despite these well-known risk factors many actors in the pharma sector are failing to produce and enforce adequate anticorruption policies. Key decision-makers in the pharma sector frequently do not perceive corruption as an important issue and often do not display a genuine commitment to anticorruption efforts.

A recent paper published by Transparency International and the Leslie Dan Faculty of Pharmacy at the University of Toronto identifies several overarching challenges that are hampering efforts to minimize corruption in the pharma sector, and posits key areas for action including the importance of harnessing technology to minimize corruption vulnerabilities and of increasing the monitoring, enforcement, and sanctions of actors. Because of the complexity of the sector, collaboration is essential to making progress on all of these fronts. After all, a key difficulty for tackling corruption in the pharmaceutical sector is the fact that the medicine chain stretches across national borders. It is encouraging that governments came together at the London Anti-Corruption Summit and recognized the need for national institutions to share relevant information with their peers in other countries. Similarly, multi-stakeholder initiatives such as the European Healthcare Fraud and Corruption Network are excellent opportunities for all types of actors to come together, share information, and collaborate with others to take action.

There are two other ways in which greater collaboration is critical for making progress on the fight against corruption in the pharma sector: Continue reading