Corruption and Transparency
By: Dr.
Sam Vaknin
Also published by United Press International
(UPI)
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Corruption
runs against the grain of meritocratic
capitalism. It skews the level playing-field; it imposes onerous and
unpredictable transaction costs; it guarantees extra returns where none should
have been had; it encourages the misallocation of economic resources; and it
subverts the proper functioning of institutions. It is, in other words, without
a single redeeming feature, a scourge.
Strangely,
this is not how it is perceived by its perpetrators: both the givers and the
recipients. They believe that corruption helps facilitate the flow and exchange
of goods and services in hopelessly clogged and dysfunctional systems and
markets (corruption and the informal
economy "get things done" and "keep people employed");
that it serves as an organizing principle where chaos reins
and institutions are in their early formative stages; that it supplements
income and thus helps the state employ qualified and skilled personnel; and
that it preserves peace and harmony by financing networks of cronyism,
nepotism, and patronage.
Bribes are
paid in order to limit choice and eliminate competition. Consequently, in
corrupt environments consumers pay less than optimal prices. The difference
between the competitive price and the new, post-corruption cost equals the
amount of bribe paid in cash or in kind. Corruption amounts to a unilateral
transfer from the consumers's pockets to the manufacturers's. In times of economic crisis, consumers
tend to shop around (in other words: they prefer price competition and
encourage it via their behavior). Producers/manufacturers tend to collude in
order to fix prices. In recessions, businesses regard consumers as enemies and
vice versa: producer-firms court consumers, but they also seek to limit their
choices by "channelling" their purchases and determining their
preferences.
I. The
Facts
In 2002,
just days before a much-awaited donor conference, the influential International
Crisis Group (ICG) recommended to place all funds pledged to Macedonia under
the oversight of a "corruption advisor" appointed by the European
Commission. The donors ignored this and other recommendations. To appease the
critics, the affable Attorney General of Macedonia charged a former Minister of
Defense with abuse of duty for allegedly having channeled
millions of DM to his relatives during the recent civil war. Macedonia has
belatedly passed an anti-money laundering law recently, but failed, yet again,
to adopt strict anti-corruption legislation.
In
Albania, the Chairman of the Albanian Socialist Party, Fatos
Nano, was accused by Albanian media of laundering $1 billion through the
Albanian government. Pavel Borodin, the former chief of Kremlin Property,
decided not appeal his money laundering conviction in a Swiss court. The Slovak
daily "Sme" described in scathing detail
the newly acquired wealth and lavish lifestyles of formerly impoverished HZDS
politicians. Some of them now reside in refurbished castles. Others have
swimming pools replete with wine bars.
Pavlo Lazarenko, a former Ukrainian prime minister,
is detained in San Francisco on money laundering charges. His defense team
accuses the US authorities of "selective prosecution".
They are
quoted by Radio Free Europe as saying:
"The impetus for
this prosecution comes from allegations made by the Kuchma regime, which itself
is corrupt and dedicated to using undemocratic and repressive methods to stifle
political opposition ... (other Ukrainian officials) including Kuchma himself
and his closest associates, have committed conduct similar to that with which Lazarenko is charged but have not been prosecuted by the
U.S. government".
The UNDP
estimated, in 1997, that, even in rich, industrialized, countries, 15% of all
firms had to pay bribes. The figure rises to 40% in Asia and 60% in Russia.
Corruption
is rife and all pervasive, though many allegations are nothing but political
mud-slinging. Luckily, in countries like Macedonia, it is confined to its
rapacious elites: its politicians, managers, university professors, medical
doctors, judges, journalists, and top bureaucrats. The police and customs are
hopelessly compromised. Yet, one rarely comes across graft and venality in
daily life. There are no false detentions (as in Russia), spurious traffic
tickets (as in Latin America), or widespread stealthy payments for public goods
and services (as in Africa).
It is
widely accepted that corruption retards growth by deterring foreign investment
and encouraging brain drain. It leads to the misallocation of economic
resources and distorts competition. It depletes the affected country's
endowments - both natural and acquired. It demolishes the tenuous trust between
citizen and state. It casts civil and government institutions in doubt,
tarnishes the entire political class, and, thus, endangers the democratic
system and the rule of law, property rights included.
This is
why both governments and business show a growing commitment to tackling it.
According to Transparency International's "Global Corruption Report
2001", corruption has been successfully contained in private banking and
the diamond trade, for instance.
Hence also
the involvement of the World Bank and the IMF in fighting corruption. Both
institutions are increasingly concerned with poverty reduction through economic
growth and development. The World Bank estimates that corruption reduces the
growth rate of an affected country by 0.5 to 1 percent annually. Graft amounts
to an increase in the marginal tax rate and has pernicious effects on inward
investment as well.
The World
Bank has appointed in 2001 a Director of Institutional Integrity - a new
department that combines the Anti-Corruption and Fraud Investigations Unit and
the Office of Business Ethics and Integrity. The Bank helps countries to fight
corruption by providing them with technical assistance, educational programs,
and lending.
Anti-corruption
projects are an integral part of every Country Assistance Strategy (CAS). The Bank
also supports international efforts to reduce corruption by sponsoring
conferences and the exchange of information. It collaborates closely with
Transparency International, for instance.
At the
request of member-governments (such as Bosnia-Herzegovina and Romania) it has
prepared detailed country corruption surveys covering both the public and the
private sectors. Together with the EBRD, it publishes a corruption survey of
3000 firms in 22 transition countries (BEEPS - Business Environment and Enterprise
Performance Survey). It has even set up a multilingual hotline for
whistleblowers.
The IMF
made corruption an integral part of its country evaluation process. It
suspended arrangements with endemically corrupt recipients of IMF financing.
Since 1997, it has introduced policies regarding misreporting, abuse of IMF
funds, monitoring the use of debt relief for poverty reduction, data
dissemination, legal and judicial reform, fiscal and monetary transparency, and
even internal governance (e.g., financial disclosure by staff members).
Yet, no
one seems to agree on a universal definition of corruption. What amounts to
venality in one culture (Sweden) is considered no more than hospitality, or an
expression of gratitude, in another (France, or Italy). Corruption is discussed
freely and forgivingly in one place - but concealed shamefully in another.
Corruption, like other crimes, is probably seriously under-reported and
under-penalized.
Moreover,
bribing officials is often the unstated policy of multinationals, foreign
investors, and expatriates. Many of them believe that it is inevitable if one
is to expedite matters or secure a beneficial outcome. Rich world governments
turn a blind eye, even where laws against such practices are extant and strict.
In his
address to the Inter-American Development Bank on March 14, 2002 President Bush
promised to "reward nations that root out corruption" within the
framework of the Millennium Challenge Account initiative. The USA has pioneered
global anti-corruption campaigns and is a signatory to the 1996 IAS
Inter-American Convention against Corruption, the Council of Europe's Criminal
Law Convention on Corruption, and the OECD's 1997 anti-bribery convention. The
USA has had a comprehensive "Foreign Corrupt Practices Act" since 1977.
The Act
applies to all American firms, to all firms - including foreign ones - traded
in an American stock exchange, and to bribery on American territory by foreign
and American firms alike. It outlaws the payment of bribes to foreign
officials, political parties, party officials, and political candidates in
foreign countries. A similar law has now been adopted by Britain.
Yet,
"The Economist" reports that the American SEC has brought only three
cases against listed companies until 1997. The US Department of Justice brought
another 30 cases. Britain has persecuted successfully only one of its officials
for overseas bribery since 1889. In the Netherlands bribery is tax deductible.
Transparency International now publishes a name and shame Bribery Payers Index
to complement its 91-country strong Corruption Perceptions Index.
Many rich
world corporations and wealthy individuals make use of off-shore havens or
"special purpose entities" to launder money, make illicit payments,
avoid or evade taxes, and conceal assets or liabilities. According to Swiss
authorities, more than $40 billion are held by Russians in its banking system
alone. The figure may be 5 to 10 times higher in the tax havens of the United
Kingdom.
In a
survey it conducted in February 2002 of 82 companies in which it invests,
"Friends, Ivory, and Sime" found that only a quarter had clear
anti-corruption management and accountability systems in place.
Tellingly
only 35 countries signed the 1997 OECD "Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions" -
including four non-OECD members: Chile, Argentina, Bulgaria, and Brazil. The
convention has been in force since February 1999 and is only one of many OECD
anti-corruption drives, among which are SIGMA (Support for Improvement in
Governance and Management in Central and Eastern European countries), ACN
(Anti-Corruption Network for Transition Economies in Europe), and FATF (the
Financial Action Task Force on Money Laundering).
Moreover,
The moral authority of those who preach against corruption in poor countries -
the officials of the IMF, the World Bank, the EU, the OECD - is strained by
their ostentatious lifestyle, conspicuous consumption, and
"pragmatic" morality.
II. What
to Do? What is Being Done?
A few
years ago, I proposed a taxonomy of corruption, venality, and graft. I
suggested this cumulative definition:
- The withholding of a service, information, or
goods that, by law, and by right, should have been provided or divulged.
- The provision of a service, information, or goods
that, by law, and by right, should not have been provided or divulged.
- That the withholding or the provision of said
service, information, or goods are in the power of the withholder or the
provider to withhold or to provide AND That the withholding or the
provision of said service, information, or goods constitute an integral
and substantial part of the authority or the function of the withholder or
the provider.
- That the service, information, or goods that are
provided or divulged are provided or divulged against a benefit or the
promise of a benefit from the recipient and as a result of the receipt of
this specific benefit or the promise to receive such benefit.
- That the service, information, or goods that are
withheld are withheld because no benefit was provided or promised by the
recipient.
There is
also what the World Bank calls "State Capture" defined thus:
"The actions of
individuals, groups, or firms, both in the public and private sectors, to
influence the formation of laws, regulations, decrees, and other government
policies to their own advantage as a result of the illicit and non-transparent
provision of private benefits to public officials."
We can
classify corrupt and venal behaviors according to
their outcomes:
- Income Supplement - Corrupt actions whose sole outcome is the
supplementing of the income of the provider without affecting the
"real world" in any manner.
- Acceleration or Facilitation Fees - Corrupt practices whose sole outcome is to
accelerate or facilitate decision making, the provision of goods and
services or the divulging of information.
- Decision Altering (State Capture) Fees - Bribes and promises of bribes
which alter decisions or affect them, or which affect the formation of
policies, laws, regulations, or decrees beneficial to the bribing entity
or person.
- Information Altering Fees - Backhanders and bribes that subvert the flow of
true and complete information within a society or an economic unit (for
instance, by selling professional diplomas, certificates, or permits).
- Reallocation Fees - Benefits paid (mainly to politicians and
political decision makers) in order to affect the allocation of economic
resources and material wealth or the rights thereto. Concessions,
licenses, permits, assets privatized, tenders awarded are all subject to
reallocation fees.
To
eradicate corruption, one must tackle both giver and taker.
History
shows that all effective programs shared these common elements:
a. The
persecution of corrupt, high-profile, public figures, multinationals, and
institutions (domestic and foreign). This demonstrates that no one is above the
law and that crime does not pay.
b. The
conditioning of international aid, credits, and investments on a monitored
reduction in corruption levels. The structural roots of corruption should be
tackled rather than merely its symptoms.
c. The
institution of incentives to avoid corruption, such as a higher pay, the
fostering of civic pride, "good behavior" bonuses, alternative income
and pension plans, and so on.
d. In
many new countries (in Asia, Africa, and Eastern Europe) the very concepts of
"private" versus "public" property are fuzzy and
impermissible behaviors are not clearly demarcated.
Massive investments in education of the public and of state officials are
required.
e. Liberalization
and deregulation of the economy. Abolition of red tape, licensing,
protectionism, capital controls, monopolies, discretionary, non-public,
procurement. Greater access to information and a public debate intended to
foster a "stakeholder society".
f. Strengthening
of institutions: the police, the customs, the courts, the government, its
agencies, the tax authorities - under time limited foreign management and
supervision.
Awareness
to corruption and graft is growing - though it mostly results in lip service.
The Global Coalition for Africa adopted anti-corruption guidelines in 1999. The
otherwise opaque Asia Pacific Economic Cooperation (APEC) forum is now
championing transparency and good governance. The UN is promoting its pet
convention against corruption.
The G-8
asked its Lyon Group of senior experts on transnational crime to recommend ways
to fight corruption related to large money flows and money laundering. The USA
and the Netherlands hosted global forums on corruption - as did South Korea in
2003. The OSCE has responded with its own initiative, in collaboration with the
US Congressional Helsinki Commission.
The
south-eastern Europe Stability Pact sports its own Stability Pact
Anti-corruption Initiative (SPAI). It held its first conference in September
2001 in Croatia. More than 1200 delegates participated in the 10th
International Anti-Corruption Conference in Prague last year. The conference
was attended by the Czech prime minister, the Mexican president, and the head
of the Interpol.
The most
potent remedy against corruption is sunshine - free, accessible, and available
information disseminated and probed by an active opposition, uncompromised
press, and assertive civic organizations and NGO's. In the absence of these,
the fight against official avarice and criminality is doomed to failure. With
them, it stands a chance.
Corruption
can never be entirely eliminated - but it can be restrained and its effects
confined. The cooperation of good people with trustworthy institutions is
indispensable. Corruption can be defeated only from the inside, though with
plenty of outside help. It is a process of self-redemption and self-transformation.
It is the real transition.
III. Asset
Confiscation and Asset Forfeiture
The abuse
of asset confiscation and forfeiture statutes by governments, law enforcement agencies,
and political appointees and cronies throughout the world is well-documented.
In many developing countries and countries in transition, assets confiscated
from real and alleged criminals and tax evaders are sold in fake auctions to
party hacks, cronies, police officers, tax inspectors, and relatives of
prominent politicians at bargain basement prices.
That the
assets of suspects in grave crimes and corruption should be frozen or
"disrupted" until they are convicted or exonerated by the courts - having
exhausted their appeals - is understandable and in accordance with the Vienna
Convention. But there is no justification for the seizure and sale of property
otherwise.
In
Switzerland, financial institutions are obliged to automatically freeze suspect
transactions for a period of five days, subject to the review of an
investigative judge. In France, the Financial Intelligence Unit can freeze
funds involved in a reported suspicious transaction by administrative fiat. In
both jurisdictions, the fast track freezing of assets has proven to be a more
than adequate measure to cope with organized crime and venality.
The
presumption of innocence must fully apply and due process upheld to prevent
self-enrichment and corrupt dealings with confiscated property, including the
unethical and unseemly use of the proceeds from the sale of forfeited assets to
close gaping holes in strained state and municipal budgets.
In the
United States, according to The Civil Asset Forfeiture Reform Act of 2000 (HR
1658), the assets of suspects under investigation and of criminals convicted of
a variety of more than 400 minor and major offenses (from soliciting a
prostitute to gambling and from narcotics charges to corruption and tax
evasion) are often confiscated and forfeited ("in personam,
or value-based confiscation").
Technically
and theoretically, assets can be impounded or forfeited and disposed of even in
hitherto minor Federal civil offenses (mistakes in fulfilling Medicare or tax
return forms)
The UK's
Assets Recovery Agency (ARA) that is in charge of enforcing the Proceeds of
Crime Act 2002, had this chilling statement to make on May 24, 2007:
“We are pursuing the assets of those involved in a
wide range of crime including drug dealing, people trafficking, fraud,
extortion, smuggling, control of prostitution, counterfeiting, benefit fraud,
tax evasion and environmental crimes such as illegal dumping of waste and
illegal fishing." (!)
Drug
dealing and illegal fishing in the same sentence.
The
British firm Bentley-Jennison, who provide Forensic Accounting Services, add:
"In some cases the defendants will
even have their assets seized at the start of an investigation, before any
charges have been considered. In many cases the authorities will assume that
all of the assets held by the defendant are illegally obtained as he has a
“criminal lifestyle”. It is then down to the defendant to prove otherwise. If
the defendant is judged to have a criminal lifestyle then it will be assumed
that physical assets, such as properties and motor vehicles, have been acquired
through the use of criminal funds and it will be necessary to present evidence
to contradict this.
The defendant’s bank
accounts will also be scanned for evidence of spending and any expenditure on
unidentified assets (and in some cases identified assets) is also likely to be
included as alleged criminal benefit. This often leads to the inclusion of sums
from legitimate sources and double counting both of which need to be
eliminated."
Under the
influence of the post-September 11 United States and the FATF (Financial Action
Task Force on Money Laundering), Canada, Australia, the United Kingdom, Greece,
South Korea, and Russia have similar asset recovery and money laundering laws
in place.
International
treaties (for instance, the 1959 European Convention on Mutual Legal Assistance
in Criminal Matters, the 1990 Convention of the Council of Europe on
Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (ETS
141), and The U.N. Convention against Corruption 2003- UNCAC) and European
Union Directives (e.g., 2001/97/EC) allow the seizure and confiscation of the
assets and "unexplained wealth" of criminals and suspects globally,
even if their alleged or proven crime does not constitute an offense where they
own property or have bank accounts.
This
abrogation of the principle of dual criminality sometimes leads to serious
violations of human and civil rights. Hitler could have used it to ask the United
Kingdom's Assets Recovery Agency (ARA) to confiscate the property of refugee
Jews who committed "crimes" by infringing on the infamous Nuremberg
race laws.
Only
offshore tax havens, such as Andorra, Antigua, Aruba, the British Virgin
Islands, Guernsey, Monaco, the Netherlands Antilles, Samoa, St. Vincent, the US
Virgin Islands, and Vanuatu still resist the pressure to join in the efforts to
trace and seize suspects' assets and bank accounts in the absence of a
conviction or even charges.
Even
worse, unlike in other criminal proceedings, the burden of proof is on the
defendant who has to demonstrate that the source of the funds used to purchase
the confiscated or forfeited assets is legal. When the defendant fails to
furnish such evidence conclusively and convincingly, or if he has left the
United States or had died, the assets are sold at an auction and the proceeds
usually revert to various law enforcement agencies, to the government's budget,
or to good social causes and programs. This is the case in many countries,
including United Kingdom, United States, Germany, France, Hong Kong, Italy,
Denmark, Belgium, Austria, Greece, Ireland, New Zealand, Singapore and
Switzerland.
According
to a brief written by Jack Smith, Mark Pieth, and Guillermo Jorge at the Basel
Institute on Governance, International Centre for Asset Recovery:
"Article
54(1)(c) of the UNCAC recommends that states parties establish non-criminal
systems of confiscation, which have several advantages for recovery actions:
the standard of evidence is lower (“preponderance of the evidence” rather than
“beyond a reasonable doubt”); they are not subject to some of the more
restrictive traditional safeguards of international cooperation such as the
offense for which the defendant is accused has to be a crime in the receiving
state (dual criminality); and it opens more formal avenues for negotiation and
settlements. This is already the practice in some jurisdictions such as the US,
Ireland, the UK, Italy, Colombia, Slovenia, and South Africa, as well as some
Australian and Canadian States."
In most
countries, including the United Kingdom, the United States, Austria, Germany,
Indonesia, Macedonia, and Ireland, assets can be impounded, confiscated,
frozen, forfeited, and even sold prior to and without any criminal
conviction.
In
Australia, Austria, Ireland, Hong-Kong, New Zealand, Singapore, United Kingdom,
South Africa, United States and the Netherlands alleged and suspected
criminals, their family members, friends, employees, and partners can be stripped
of their assets even for crimes they have committed in other countries and even
if they have merely made use of revenues obtained from illicit activities (this
is called "in rem, or property-based confiscation"). This often gives
rise to cases of double jeopardy.
Typically,
the defendant is notified of the impending forfeiture or confiscation of his or
her assets and has recourse to a hearing within the relevant law enforcement
agency and also to the courts. If he or she can prove "substantial
harm" to life and business, the property may be released to be used,
though ownership is rarely restored.
When the
process of asset confiscation or asset forfeiture is initiated, banking secrecy
is automatically lifted and the government indemnifies the banks for any damage
they may suffer for disclosing confidential information about their clients'
accounts.
In many
countries from South Korea to Greece, lawyer-client privilege is largely
waived. The same requirements of monitoring of clients' activities and reporting
to the authorities apply to credit and financial institutions, venture capital
firms, tax advisers, accountants, and notaries.
Elsewhere,
there are some other worrying developments:
In
Bulgaria, the assets of tax evaders have recently begun to be confiscated and
turned over to the National Revenue Agency and the State Receivables Collection
Agency. Property is confiscated even when the tax assessment is disputed in the
courts. The Agency cannot, however, confiscate single-dwelling houses, bank accounts up to 250 leva
of one member of the family, salary or pension up to 250 leva a month, social
care, and alimony, support money or allowances.
Venezuela
has recently reformed its Organic Tax Code to allow for:
" (P)re-judgment
enforcement measures (to) include closure of premises for up to ten days and
confiscation of merchandise. These measures will be applied in addition to the
attachment or sequestration of personal property and the prohibition against
alienation or encumbrance of realty. During closure of premises, the employer
must continue to pay workers, thereby avoiding an appeal for constitutional
protection."
Finally,
in many states in the United States, "community responsibility" statutes
require of owners of legal businesses to "abate crime" by openly
fighting it themselves. If they fail to tackle the criminals in their neighborhood, the police can seize and sell their property,
including their apartments and cars. The proceeds from such sales accrue to the
local municipality.
In
New-York City, the police confiscated a restaurant because one of its regular
patrons was an alleged drug dealer. In Alabama, police seized the home of a
senior citizen because her yard was used, without her consent, for drug
dealing. In Maryland, the police confiscated a family's home and converted it
into a retreat for its officers, having mailed one of the occupants a package
of marijuana.
Note:
The Psychology of Corruption
Politicians
are a self-selecting group: attention-seeking narcissists and
power-hungry psychopaths
tend to gravitate to politics. There is corruption in politics because corrupt
people choose politics as a vocation (see "Dishonesty and Selection into
Public Service", an NBER paper written by Rema Hanna and Shing-Yi Wang
in 2013.)
Most
politicians bend the laws of the land and steal money or solicit bribes because
they need the funds to support networks of patronage. Others do it in order to
reward their nearest and dearest or to maintain a lavish lifestyle when their
political lives are over.
But these
mundane reasons fail to explain why some officeholders go on a rampage and
binge on endless quantities of lucre. All rationales crumble in the face of a
Mobutu Sese Seko or a Saddam Hussein or a Ferdinand Marcos who absconded with
billions of US dollars from the coffers of Zaire, Iraq, and the Philippines,
respectively.
These
inconceivable dollops of hard cash and valuables often remain stashed and
untouched, moldering in bank accounts and safes in
Western banks. They serve no purpose, either political or economic. But they do
fulfill a psychological need. These hoards are not
the megalomaniacal equivalents of savings accounts. Rather they are of the
nature of compulsive collections.
Erstwhile
president of Sierra Leone, Momoh, amassed hundreds of video players and other
consumer goods in vast rooms in his mansion. As electricity supply was
intermittent at best, his was a curious choice. He used to sit among these
relics of his cupidity, fondling and counting them insatiably.
While
Momoh relished things with shiny buttons, people like Sese Seko, Hussein, and
Marcos drooled over money. The ever-heightening mountains of greenbacks in
their vaults soothed them, filled them with confidence, regulated their sense
of self-worth, and served as a love substitute. The balances in their bulging
bank accounts were of no practical import or intent. They merely catered to
their psychopathology.
These
politicos were not only crooks but also kleptomaniacs. They could no more stop
thieving than Hitler could stop murdering. Venality was an integral part of
their psychological makeup.
Kleptomania
is about acting out. It is a compensatory act. Politics is a drab, uninspiring,
unintelligent, and, often humiliating business. It is also risky and rather
arbitrary. It involves enormous stress and unceasing conflict. Politicians with
mental health disorders
(for instance, narcissists
or psychopaths)
react by decompensation. They rob the state and coerce businessmen to grease
their palms because it makes them feel better, it helps them to repress their
mounting fears and frustrations, and to restore their psychodynamic
equilibrium. These politicians and bureaucrats "let off steam" by
looting.
Kleptomaniacs
fail to resist or control the impulse to steal, even if they have no use for
the booty. According to the Diagnostic and
Statistical Manual IV-TR (2000), the bible of psychiatry, kleptomaniacs
feel "pleasure, gratification, or relief when committing the theft."
The good book proceeds to say that " ... (T)he individual may hoard the
stolen objects ...".
As most
kleptomaniac politicians are also psychopaths,
they rarely feel remorse or fear the consequences of their misdeeds. But this
only makes them more culpable and dangerous.
Transparency International’s Corruption
Perceptions Index
Like many
other an NGO (non-governmental
organization) Berlin-based Transparency International (TI) is mainly
preoccupied with perpetuating itself and its raison d’etre.
This it accomplishes by making three highly questionable claims: (1) that its
main product, the Corruption Perceptions Index (CPI) is a reliable proxy for
actual corruption; (2) that corruption cannot be measured in any other reliable
way or method; and (3) that corruption is always wrong and undesirable,
regardless of circumstances.
Here I
will deal with the first claim. I have dealt with the other two elsewhere.
The CPI,
as its name makes abundantly clear, is not about corruption per se, but about
the perception of corruption in various countries and by a variety of economic
agents. Alas, as human history repeatedly demonstrates, perceptions and reality
are often bitterly divorced. This is because perceptions are relative; easily
manipulable; subjective; and culture-bound.
Start with
relative: as corruption decreases in one place, it automatically appears
elevated by comparison elsewhere. The CPI, therefore, provides merely a
relative ranking of countries which teaches us close to nothing about venal
happenings on the ground. Moreover: it is easy to manipulate perceptions with
clever public relations campaigns and spin doctoring. An example in case is
Macedonia: corruption there is as all-pervasive as pernicious as ever – but the
government’s trumpeted self-imputed “successes” in fighting it have reversed
the country’s erstwhile tarnished image. Now, the CPI outlandishly lumps Macedonia
together with Latvia, Hungary, and the Czech Republic, three members of the
European Union whose corruption is dimensions away from the malversations of
Macedonia’s criminalized kleptocracies.
The
ever-shifting methodology of the CPI makes a multi-annual analysis of its data
all but impossible. Corruption is a fluid concept: practices once considered
criminal are often legalized and conduct deemed inappropriate in one culture or
society is expected and socially-condoned in another.
The CPI
relies on interviews with businessmen and analysts carried out by TI’s local
chapters. There are two problems here. The first: the quality of TI’s personnel
and volunteers varies widely. Consider Macedonia’s: TI’s local affiliate
disintegrated in an acrimonious and internecine squabble involving charges and
counter-charges of fraud and worse. The country now has two rival organizations
proudly boasting the name Transparency International (though TI itself
recognizes only one of them). The second problem is that in small countries
such as Macedonia and even Israel the business community and public
intellectuals are dependent on the regime: they are in bed with power and
potential power and maintain an incestuous relationship with ruling and
opposition parties alike. This colours their input and judgement, to put it
mildly. In many cases, the contributors to the compilation of the CPI are the
very purveyors of the corrupt acts which they are supposed to report
impartially.
Brussels
Morning: Russia and Its Allies Abuse the Interpol, Extradition: A Possible Way
Out
The proposal by the UK and Ukraine to suspend
Russia or even expel it from Interpol was met with opposition by east and west
alike and for good reason: Russia is critical in the fight against
transnational crime.
Still, Russian diffusion requests are now first
scrutinized by Interpol’s HQ in Lyon, a procedure normally reserved only for
Red Notices.
Russia and its allies, like Kazakhstan, are
notorious for abusing Interpol and, more generally, international law
enforcement cooperation and treaties. They leverage these goodwill instruments
to snag dissidents on the run, settle scores with adversaries, or send a
chilling signal to would be opponents and critics. Family members are also
targeted, no one is exempt or spared.
Russia and its ilk are not loth to fabricate
“evidence”, replete with faked documents and false witnesses (e.g., the Peevski “murder” case in an extradition request filed with
Bulgaria in 2014).
The invasion of Ukraine and the assassination
attempt of Alexei Navalny, the prominent Russian opposition figure, cast
Russia’s growing thuggishness and rampant lawlessness
in stark relief. The murderous kleptocracy that took over the state is hellbent
on egregiously misusing the country’s access to the international system of
crimefighting.
Extraditing to Russia anyone who has voiced
anti-Kremlin and pro-peace opinions amounts to sending them back into a hellish
system of certain torture and, possibly, worse.
In a slew of recent cases in various EU
countries and in the UK, extradition was denied citing the following reasons:
1.
Significant
ongoing problem with the independence of the judiciary – both lawyers and
judges - in Russia (as per the report by the UN Special Rapporteur);
2.
Abysmal
conditions of detention in the Russian Federation;
3.
Recurrent
and systemic breaches of articles 3,5,6, and 13 of the European Convention of
Human Right (ECHR), article 22 of the UN Convention Against Torture, and
article 3(2) of the European Convention on Extradition: degrading and inhumane
treatment in Russian detention centres and prisons
and the likely denial of a fair trial;
4.
Russia
does not respect warranties and guarantees that it provides regarding the
rights of extradees and refuses to allow independent
monitoring of its adherence to such assurances;
5.
Russia
ignores rulings by the European Court of Human Rights and is no longer a member
of the Council of Europe, having been effectively expelled in March 2022, following its aggression against
Ukraine.
6.
Russia
announced its intention to denounce the European Convention of Human Rights and
to reintroduce the death penalty.
Russia’s botched transition to “capitalism”
helped enrich and empower Russian criminals. They formed networks throughout
the industrialized, developed West, including in the USA, EU, and UK. Interpol,
Europol, and extraditions are foundational tools in the never-ending fight
against transnational crime. It is a crying shame that Russia and its allies have
tainted these instruments to the point of rendering them dysfunctional.
One possible solution would be the creation of
a specialized ad hoc and ad interim body at least for the duration of the war
in Ukraine. This institution will comprise representatives from Russia and from
the West.
The remit of such an organ would be to review
Russian cases before they are transformed into diffusion requests, red notices,
or extradition requests.
The seal of approval of such a committee is
likely to facilitate the apprehension of real criminals by providing courts
outside the Russian Federation with an opinion that is unbiased regarding the
merits of cases: prima facie evidence as well as compliance with international
treaties (such as the ECHR).
Russia, on its part, should consent to
international monitoring of its detention facilities, judicial processes, and
police procedures. This is the only way to make sure that it keeps it word when
it vows to abstain from political prosecutions, inhumane and degrading treatment,
and torture.
In due time, hopefully, Russia could
reintegrate with the international community and the European family. But,
until that time comes, we cannot and should not suspend the war on crime.
Also Read:
The Greatest Savings
Crisis in History
The Typology of
Financial Scandals
(Case Studies: The Savings and Loans Crisis,
Crash of 1929, British Real Estate)
The Shadowy World of
International Finance
Hawala,
or the Bank that Never Was
Money
Laundering in a Changed World
Bully
at Work - Interview with Tim Field
The
Economics of Conspiracy Theories
Fimaco Wouldn't Die - Russia's Missing Billions
Treasure
Island Revisited - Maritime Piracy
Organ Trafficking in Eastern
Europe
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