Local Businesses can Bolster Moldova’s Anti-Corruption Efforts

Photo Credit: CIPE

In 2014, Moldova suffered a massive corruption scandal involving dubious loans that led to the disappearance of $1 billion, or 12% of the country’s GDP, from its banking system. The scandal forced the central bank to issue $870 million in emergency loans to the three implicated banks in order to prevent economic collapse. Prominent politicians and business people were involved. The scandal ignited popular anger and triggered street protests. While it may be difficult to see a silver lining in this bleak turn of events, one positive outcome may be this: the scandal of this magnitude was a wake-up call for Moldovans to build better safeguards against future abuses and renew commitment to address corruption at all levels.

Although Moldova has adopted laws to align its anti-money laundering legislation with the European Union rules, other major reforms must still take place at the national level. Importantly, though, efforts to combat corruption must extend beyond the public sector and involve building integrity mechanisms in the private sector as well.  Read More...

Saudi Arabia Anti-Corruption Crackdown: How will it Affect the Country’s Future?



Photo Credit: Outernationalist

On November 4, 2017, Saudi Arabia launched an anti-corruption campaign aimed to tackle the various corruption problems throughout the Kingdom. King Salman bin Abdulaziz issued a royal order to establish the anti-corruption committee and appointed Crown Prince Mohammed bin Salman as the leader of the initiative.

It appears that the goal of this crackdown is to eradicate corruption at all levels of government, and so far it has demonstrated considerable momentum. Since the issuance, 208 individuals have been called in for questioning, and seven of them have been released without charge. According to a list obtained by CNN, 17 prominent figures have been arrested; including Prince Alwaleed bin Talal, the billionaire businessman of Kingdom Holding, the formal head of the royal court Khaled Al-Tuwaijri, Saudi media mogul Waleed Al-Ibrahim, and Prince Turki bin Nasser. Three ministers were removed from their positions, and 10 former ministers were detained.  Read More...

Canada Outlaws Facilitation Payments

Photo Credit: Four Season Canuck

On October 31, 2017, the Government of Canada amended its anti-corruption law to explicitly bar facilitation payments. This move is part of an ongoing effort by Canadian authorities to tighten its anti-corruption regulations.

The aggressive move to improve both Canada’s legal regime and its enforcement of anti-corruption stems from several significant developments in 2011. In March of that year, Canada was shamed by the Organization for Economic Cooperation and Development (OECD), which criticized Canada for its relatively weak framework and limited enforcement actions in combatting foreign corruption. In October of that year, the Government of Quebec appointed the “Charbonneau Commission”, which uncovered significant governance lapses and corruption in the contracting of public works in the province.

Since that time, tolerance for corruption in Canada and for improper dealings by Canadian firms abroad have steadily diminished. The Corruption of Foreign Public Officials Act (CFPOA), which was passed in 1999, bars bribery of foreign public officials when the act occurs wholly or partially in Canada.  Read More...

Paradise Papers Show Need to Close Beneficial Owner Loopholes



Photo Credit: ICIJ

The Paradise Papers are the result of another impressive investigation of thousands of leaked documents from the Bahamian law firm, Appleby. The extent of offshore holdings is likely to bring about scrutiny on corporate excesses as well as additional pressure on governments to reign in tax haven jurisdictions and lax incorporation laws. Only a few days after the Paradise Papers were released, Transparency International put out a report, Hiding in Plain Sight which exposes hundreds of companies established in the U.K. for the purpose of helping launder corrupt and kleptocratic spoils. Interestingly, the United Kingdom and perhaps more surprisingly the Ukraine, have been applauded for their efforts to increase transparency around beneficial ownership. Transparency of corporate ownership structures is the common missing ingredient in understanding who ultimately holds the purse strings. This leak demonstrates that law firms rather than law enforcement, government or the public know quite a bit about illicit capital flows and at times abet these financial crimes that undermine public confidence in rule of law while exacerbating economic inequality.  Read More...

“Bribe, Swindle, or Steal”: After You Pay a Bribe Review


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Photo Credit: Momentum 

In May of 2017, TRACE launched the podcast “Bribe, Swindle or Steal”, hosted by TRACE President Alexandra Wrage. The podcast features interviews with professionals and luminaries in the field of financial crime including bribery, fraud, money-laundering, insider-training and sanctions. Tailored towards compliance professionals, “Bribe, Swindle or Steal” seeks to educate and entertain listeners on issues relating to corruption and compliance.

The episode “After You Pay a Bribe…” details former Unaoil executive Lindsey Mitchell’s account of being at the center of a bribery scandal involving the Monaco-based oil company. Unaoil wanted Mitchell, who had been working for the company since 2009, to win favor with Gaddafi regime officials so that their multinational clients could gain access to Libya’s oil. One evening in August 2009, Mitchell was called to a late-night meeting with a National Oil Company (NOC) official, who claimed that they could help Unaoil’s clients succeed in Libya in exchange for a bribe, which was between $10,000-$20,000.  Read More...

Working Together to Fight against Corruption


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Photo Credit: IMF (http://www.worldbank.org/en/programs/youth)

The International Monetary Fund (IMF) emphasized the importance of tackling corruption through its #fightcorruption seminar during the Annual Meeting on Sunday, October 15th. The discussion, led by Sean Hagan, the General Counsel at the IMF, highlighted that combating corruption is a vital component for sustaining economic stability, promoting inclusive growth, and maintaining security in society as well as certainty in the market.

The seminar addressed the diverse impact of corruption through the lens of the IMF and touched on lessons learned from effective efforts to combat illicit behavior.

Corruption is both a moral and an economic problem – in many countries, corruption is a major barrier to poverty reduction. Because corruption infiltrates every sector, it creates macro- and microeconomic ripples that manifest as everything from slow growth of gross domestic product (GDP) to a lack of capital or market access for small and medium-sized enterprises (SMEs).  Read More...

Can financial integrity be profitable?


Photo Credit: Chase Kindberg (via Flickr)

The latest, in a series of reports on misconduct in the banking sector produced by Quinlan & Associates estimates that as of 2009, banks have lost roughly $850 billion in profits due to subprime mortgage write-downs, rogue trading practices, failures in anti-money laundering, countering terrorist financing compliance (AML/CFT), and other high risk or unlawful behavior. Quinlan & Associates suggest the amount of misconduct related fines for the largest banks is not likely to subside but rather continue to increase from $324 to $400 billion by 2020.

None of this comes as a surprise considering the media coverage of BNP Paribas and HSBC’s involvement in international money laundering schemes and the WellsFargo false account scandal. It is somewhat curious that the growth in misconduct related losses run parallel to an increase in compliance and control investments – which have doubled since 2009, amounting to approximately $173 billion.  Read More...

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...