The Transparency International (TI) “Exporting Corruption” report is compelling reading. Published at the end of last year it highlights some of the global challenges facing the fight against cross-border corruption.
Its premise is that countries widely seen as relatively corruption free (at least within their own borders), are nevertheless culpable when it comes to enabling corruption in countries lower down the CPI. This may not be news to some Compliance professionals, but the assemblage of evidence puts everything into 20-20 perspective.
None of us needs reminding of the harm corruption causes. There has, nevertheless, been a growing awareness recently that the harm goes beyond the mere economic and social, but is also deeply political.
TI’s demonstration that the world’s richest countries, most of them wedded to democratic forms of government, are in effect exporting or facilitating corruption, has to be disturbing for any nation that cares not only about economic freedoms, but also about political freedoms. The cynicism that corruption breeds is indelibly harmful to democratic institutions. Bribing a foreign official has to be seen as a political act for all the consequences that can flow from such an activity.
Although the TI report points to a long list of challenges, its tone is without doubt optimistic. Progress has been made, and continues to be made. If there is an unstated message in the report it must be that despite the very long road we should not give up.
Its premise is illustrated using ratings founded on necessarily crude data (not least because there is so little of it). The results are inevitably impressionistic, but that does not matter provided the tables are considered with other facts.
The US, for example, is a top performer in its fight against foreign corruption, and probably rightly deserves its place at the top of the league. However, we should at the same time remember all that has happened in the past four years with the 45th President, not least attempts to suborn the Ukraine Government for political advantage back home, and strong suspicions that China aided his daughter’s businesses in order to smooth trade talks. Whilst its prosecutions of foreign corruption are exemplary, losing the moral high-ground (an essential component in any fight against dishonest business) was a serious blow to its strategy.
The US is not alone in misfiring on moral leadership. Israel, another top performer, has a Prime Minister facing corruption allegations, and all the talk around crony Covid contracts in the UK, has damaged its brand. Switzerland, historically associated with unscrupulous banking secrecy, is the only one of the four top performing countries improving its image.
A few surprises jump out from the tables, one of them being Brazil – which narrowly misses being a top performer. Had it scored another 4.5% it would have been putting countries such as Germany to shame.
Hong Kong and Singapore, two oft cited champions of economic freedom, sit way down TI’s rankings. If there are any ironies to be had, these two spawns of British colonialism were half-jokingly referred to as models for post-Brexit Britain. Perhaps acolytes of economic freedom should heed the lessons of TI’s report first.
International cooperation is an area where TI sees much room for improvement. It uses MLAs in part to illustrate its points. Whilst agreeing with TI that more cooperation is needed, it’s hard to see this happening overnight.
A particular conundrum exists in respect of MLAs, namely that target jurisdictions where corruption is rampant are the jurisdictions least likely to respond meaningfully to an MLA. One way to overcome such a challenge may be to beat domestic corruption first. If that is the solution the road is longer than anticipated.
Woeful foreign corruption enforcement numbers give another indication of how long the road is. The three years 2016, to 2019 – the very years that Lava Jato, Petrobras, Odebrecht, FIFA, One MBD, Unaoil, Airbus, and Petrofac (to name but a few), were on the front pages around the world – a mere 421 investigations were carried out (72 of them in the US). Not, you might say, a fair reflection of the real volume of cross-border corruption.
The most obvious inference from the 421 number has to be that despite an array of legislative measures (against foreign corruption) across the globe, these laws are grossly underenforced. The report points a finger at one country in particular. Another inference is that the US is bearing the brunt of the fight.
TI laments the potential for politics to hinder progress. Resources allocated to the judicial and enforcement authorities are political decisions. Without proper resources laws have no life. Decisions whether to prosecute can also become entangled in “national interests”.
Even countries like the UK are not immune. The investigation into GPT, a subsidiary of Airbus, sank into the mud of the UK’s Foreign Office, and is unlikely ever to be seen again. Brazil gets a mention too for the growing interference by the President in anti-corruption institutions. The Justice Minister in Canada resigned over political interference in the SNC Lavalin case. The examples go on. Prominent EU countries – Spain, France, Poland, and Czech Republic – are all cited for varying levels of political interference in anti-corruption efforts.
More transparency is near the top of TI’s list of recommendations. Information has to be credible, up to-date, and open to people that need to use it. TI wants to see more Beneficial Owner identity records, more statistics relating to enforcement, more publication of decisions taken by government in relation to alternatives to prosecution, more details of judicial decisions, and the publication of the names of the guilty – presumably to aid screening.
The industry TSG represents is almost certainly giving two thumbs up to the report’s transparency recommendations. We are keener than ever to do our bit in the fight against transnational corruption, and more transparency helps.
Whilst we believe the report’s goals can be achieved, we all know this is a long fight. Optimism has to be tempered with realism. Even persuading some countries to move forward at a snail’s pace on some of the recommendations would be movement in the right direction.
Link to TI’s CPI 2020 “Trouble at the Top” https://lnkd.in/g3JF989
The author leads TSG’s Advisory Services. He has spent many years in law enforcement and banking specialising in financial crime risk and compliance. TSG is a Research (including due diligence) specialist, also offering Ethics Compliance and Advisory services to its clients. TSG offers expertise in Eastern Europe, as well as East Asia.