Mind the Gap: The Need to be Proactive about Compliance in the Global Market

Photo Credit: https://www.dawn.com/news/1252890

August 28, the New York Department of Financial Services (DFS) – a statewide reformer and regulator of the financial sector- filed a consent order against Habib Bank Limited (HBL), the largest bank in Pakistan, for “serious [and] persistent” failures in anti-money laundering (AML) compliance procedures at the New York branch. HBL was facing fines up to USD $630 million and ultimately agreed to surrender its operating license in New York, its only US branch. Without this US branch, HBL will no longer have direct access to the US financial sector – that includes the regulatory arms. While some specifics of the HBL case are unsavory and have strong implications of intentionally malign activity, there are a couple key takeaways for global anti-corruption compliance efforts for foreign banking institutions.

Proactive risk and compliance standards are vital to a financial provider’s global reputation and international market-access. In the consent order DFS stated, “[Pakistan-based] Head Office screening, which the [NY] Branch has repeatedly relied on as an excuse for its own lax attitude regarding [anti-money laundering] safeguards, appears to be as weak as that of the Branch itself.” In essence, the New York branch used the home office in Karachi as a barometer for its own risk appetite and subsequent lax standards.  Read More...

Corruption hasn’t changed: a conversation with Frank Vogl

Joining CIPE for a podcast on Monday, October 2nd was Frank Vogl, a founding member of Transparency International and an adjunct professor at Georgetown University in Washington, DC. Frank may be best known for advocating and agitating for stronger anti-corruption laws, transparency, and sanctioning, but we were reminded of his career as a journalist, including his time covering the Lockheed scandals that led to the passage of the Foreign Corrupt Practices Act (FCPA) in 1977.

If you think a lot has changed about corruption since the passage of the FCPA, Frank will tell you plainly, that it hasn’t. The volume of bribery and illicit activity has stayed more or less the same – though it may subside a bit in some countries while flaring up simultaneously across an ocean somewhere. Civil society has been effective at establishing and urging the spread of anti-corruption principles, norms, compliance systems and laws – but the next phase, required to really make a dent in illicit behavior, is enforcement.  Read More...

The One Bribe Democracy

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Photo Credit: Avaaz

Since introducing market-based economic reforms in 1991, India has become one of the fastest-growing economies in the world; to date is the world’s most populous democracy and the sixth largest economy. In fact, according to projections, India is well poised to become the third-largest economy in the world by 2030, surpassing Japan, Germany, Britain, and France. On the surface, India’s upward trajectory appears unstoppable however, a closer look at the inner workings of the Indian economic system shows that one major obstacle stands in India’s path: systemic corruption.

According to a recent survey by Transparency International (TI), India has the highest bribery rate among the 16 Asia Pacific countries surveyed. Corruption is particularly prevalent in the Indian public sector, where nearly seven in ten people who accessed public services in India had to pay a bribe. All segments of society regardless of location, economic status, or business affiliation feel the effects of corruption.  Read More...

China’s “Fight” Against Corruption

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Photo Credit: The 7 Day Travel 

Since coming to power in November 2012, Chinese President Xi Jinping has made it his mission to further legitimize the authority of the Chinese Communist Party (CCP). In an effort to do so, Xi and his administration, have embarked on an unprecedented and far-reaching campaign against corruption. Ever since economic reforms began in 1978, political corruption in China has grown significantly, as bribery, graft and kickbacks have become the norm across the state. This increase in corruption led President Xi to vow to crackdown on “tigers” (powerful leaders) and “flies” (lowly bureaucrats) in a full-scale effort to reform the Communist Party and its image among the population.

On the surface, this anti-corruption campaign looks like a positive step towards ultimately ridding corruption from the public sector, however a more in-depth look at Xi’s ambitious initiative may reveal a different motive.

It is no secret that the Chinese public are more than frustrated with the blatant corruption that has imbedded itself into the Chinese economic system and as a result Xi’s campaign has enjoyed immense popularity.  Read More...

Public Ethics and Corruption, Discussions from Latin America

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The 21st Annual CAF Conference in Washington, DC on September 6th and 7th added a new, overdue panel to its agenda, corruption. The very first question for the panel, featuring representatives from Brazil, Argentina, Guatemala, and members of CAF (the Latin American Development Bank), was “is there more corruption in the region, or is it more visible?” Resoundingly, the answer was both. The head of CAF suggested that only recently have the citizens of the region come to understand the full scope of corruption in the public sector and few believe that what they are seeing today is anything new.

Interestingly, a panel on upcoming elections suggested the issue of corruption will be a leading influencer for the region’s electorates, more so than ideology or even peace, in the case of Colombia. Some panelists lamented that many citizens of the region are resigned to the fact that all politicians are corrupt and therefore it is not a disqualifier for office.  Read More...

Confronting Corruption in Asia’s New Democracies

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This blog was originally posted on CIPE’s Development Blog

Corruption is detrimental to countries’ economies because it leads to reduced productivity, high unemployment, and poverty. In addition to the economic cost, corruption corrodes democracies by weakening citizens’ confidence in their governments. This distrust and disenfranchisement can drive people to join extremist groups. “In conflict-affected areas, especially where Al-Qaeda or the Islamic State are trying to set up shop, economic grievances make it much easier to recruit local nationals into their fight,” commented Jennifer Anderson, CIPE’s senior program officer for South Asia. “Not only is corruption debilitating democracy in Afghanistan, it’s also leading to recruitment. Right now in Afghanistan, the Taliban has either control or influence over 40 percent of the country.”

Anderson spoke in a CIPE panel discussion in July that examined the issue of corruption in Asia, with a focus on Afghanistan and Cambodia. Other panelists included experts from CIPE’s Asia Department; the Hudson Institute; and SILAKA, a Cambodian nonprofit organization.  Read More...

Self-Deception – The ethical bleach that removes the willingness to speak up 

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Photo Credit: ahslifeofpi5 via Wikispaces

Originally posted on the “Ethic Intelligence” blog, Wendy Addison, Founder and CEO of SpeakOut SpeakUp Ltd, discusses the process of self-deception as it relates to corporate compliance and ethics. According to Addison, self-deception is the ethical bleach that removes the willingness to speak up.The “should self” behaves according to ethical principles and in line with our idealized self, whereas the “want self” is characterized by self-interest and relative disregard for ethical considerations. These two selves are in conflict with one another and distract people away from their intrinsic values. The question for employers becomes how can compliance-training programs be designed to empower employees to act on their “should self” instincts?

Wendy lived through an eleven-year battle against corporate corruption in a case known as South Africa’s Enron, the biggest corporate disaster in South Africa’s history. Since securing justice she has maximised her experience through the study of social psychology and the neuroscience of decision-making at Stanford University in addition to being accredited to train for Social FitnessTM, a course developed over 25 years at Stanford by Professor Emeritus Philip Zimbardo and Dr Lynne Henderson, Ph.D.  Read More...

A Common Approach to Mitigate Corruption, Environmental and Labor Risks in Global Supply Chains

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Photo Credit: Wikipedia

The challenge of improving ethical standards in global supply chains begins with the complexity of today’s commodity networks. Richard Locke, responsible for supply chain management in such leading firms as Nike, Cola-Cola and HP, indicates current challenges come from two major shifts from supply chains in the past: changes in the geography of global manufacturing – from advanced industrial states to developing countries, and in the organization of production – which includes thousands of independent suppliers typically located in emerging markets.

This shift has important implications for achieving international ethical standards. There is a lack of visibility of second- and third-tier suppliers and gaps in accessing real-time information on supply chain activities, disparate local regulations that may not integrate well with industry requirements, and the inherent unforeseen risks of being a small business. Simultaneously, legal and regulatory developments as well as consumer pressure across the global North are pushing multi-national corporations (MNCs) and their third-party providers to have measures in place that comply with global anti-corruption norms, and environmental and labor standards.  Read More...

The Private Sector’s Real Experiences Help Measure Corruption

Opinion Ilustracion de Francina Cortes

After two decades of global anti-corruption efforts, it is quite clear that deterring and tackling corruption is a key challenge for any country. Throughout, scholars and practitioners of corruption have broadly agreed on a working definition of corruption – the misuse of public office for private gain. Scholars and practitioners have also agreed on its nature and prevalence, as well as on the dramatic economic, political and social costs it imposes in both the public and private sectors. Yet, the measurement of corruption itself remains a major challenge. Corruption is said to be an unobservable phenomenon due to its informal and hidden nature, and often has diverse meanings in different cultural and historical contexts.

How accurate and reliable are existing – and commonly used – measures of corruption?

Since the 1990s, anti-corruption research has widely used perception-based corruption measures. Transparency International’s Corruption Perception Index (CPI) and the World Bank Governance Indicators (WGI) are surely the most well-known indices based on surveyed respondents’ perceptions, attitudes, and opinions towards corruption.  Read More...

INL Supports Global Anti-Corruption Efforts

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Photo Credit: Bureau of International Narcotics and Law Enforcement (INL)

CIPE Director of Multiregional Programs Anna Kompanek conducted the interview on June 29th at the Washington, D.C. office of the Bureau of International Narcotics and Law Enforcement (INL) division at the United States Department of State

Can you introduce yourself and state your role at the Bureau of International Narcotics and Law Enforcement (INL) division at the United States Department of State?

RL: I’m Robert Leventhal, Deputy Director of the Office of Anti-Crime Programs. I oversee teams working on issues such as anti-corruption, wildlife trafficking, international crime, as well as a global series of international law enforcement academies.

MT: My name is Marianne Toussaint, I am the Anti-Corruption Team Lead. I manage the team dedicated to anti-corruption affairs; it includes five team members and we focus on global and regional multilateral and foreign assistance programming and policy relating to anti-corruption.

Can you offer some examples of how INL works in the global anti-corruption space?  Read More...