15th July 2020
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The curse of corruption has lived long and, fresh evidence suggests, the world is not making a great fist of tackling it.
In 2004, I reported on a World Bank internal assessment which expressed disappointment that the organisation’s fledgeling anti-corruption regime – then around eight years old – had barely impacted on levels of corruption globally.
Disappointingly, the Bank’s internal assessment declared only “modest” success in tackling the behemoth of corruption during the early stages of implementation. But hopes were high that, once further embedded in state cultures across the globe, new anti-corruption measures and practices would improve matters.
Fast forward sixteen years and I’m afraid to report that little has changed.
Some estimates put the level of foreign aid lost to corrupt officials or governments as high as 7.5% in some of the most aid-dependent states, for example.
A detailed study of Transparency International’s ‘Corruption Percent Index’ by Global Financial Integrity (GFI) this week revealed that levels of corruption have worsened or stayed the same in 69% of countries over the past 21 years – despite the billions of dollars which have poured into anti-corruption practices.
Perhaps the most disappointing finding from the Transparency International data is that anti-corruption practices have stayed broadly the same in 59% of states over twenty years, while matters are thought to be worse in 10% of states.
Those figures would be something to celebrate should most states score highly on anti-corruption measures. But the simple truth is that, as the World Bank’s earlier assessment alluded, most states do not. So a stable or consistent performance across 21 years is not something to celebrate in many of these cases.
The team at GFI also assessed 21 years’ worth of World Bank ‘Control of Corruption’ data, which is similar to Transparency International’s index. GFI found that anti-corruption scores had worsened in 19% of states and stayed the same in 65%. Meaning matters had improved in just 16% of states.
These are disappointing figures, to say the least. Tackling corruption is difficult – make no mistake about that. And, of course, there is a large volume of good anti-corruption work taking place within agencies globally. But the general lack of progress over the past quarter of a century should be cause for concern.
Commenting on the GFI study, a senior source, a former anti-corruption adviser to the World Bank, said: “It is hard to put into words my level of disappointment when I see these figures. Domestic populations, everyday people, lose out most when corruption thrives.
“There are entire teams dedicated to tackling corruption within governments the world over. There is some excellent work going on, including co-ordinated efforts across international boundaries.
“But these figures just highlight how we are often running simply to catch up with corrupt officials or regimes. Measures are still needed so that international governments and other organisations can get one step ahead and put in place effective systems to prevent corruption, rather than tackle it after the event.”
One of many areas in which it has been suggested improvements must be made is oversight of the world’s offshore financial centres (OFCs).
In February, the World Bank revealed a continued correlation between disbursements from its aid programmes globally and deposits across some of the world’s most secretive OFCs.
So one badly needed reform must surely be more significant sanctions against international banks which continue to fuel and feed illicit finance flows through OFCs.
Of course, I am well aware that ‘legitimate’ money also flows through OFCs – legitimate in the sense that the origins of the cash are not illegal, the process is not being used to launder ill-gotten gains or mask corrupt deposits. But, still too often, international banks fail to undertake appropriate due diligence on their clients, fail to check the origins of large offshore deposits and, in doing so, fail to identify genuine corruption.
It must stop. The OFC regulatory regime is still too light, despite a clampdown on OFCs in the aftermath of 9/11 – a process primarily aimed at halting the use of offshore finance to fund terrorist activities or launder terror funding. That reaction has led to tighter rules on listing the ultimate beneficial owners (UBOs) of offshore entities – including local registers – but this policy is still in its infancy and it is difficult to tell what, if any, success it will have.
The corruption data studied by GFI this week happens to coincide with the very period over which, we’re told, action has been taken against OFCs which – inadvertently or not – facilitated the movement of terror finance. Yet as the GFI analysis shows, in many cases, the supposed additional scrutiny of OFCs has still failed to prevent increases in actual or perceived levels of corruption across a significant number of states.
GFI’s study goes much further than merely calling for further action on OFCs. You can read the full analysis here. But, to summarise, the think-tank also calls for:
- Greater exchange of tax information between states
- Making trade mis-invoicing (a popular way of laundering cash) illegal
- Strengthening oversight of Free Trade Zones (vulnerable to smuggling/laundering)
- Establishing multi-agency/transnational teams to tackle illicit finance flows
- Ending impunity for those involved.
For those with some time on their hands, I recommend reading GFI’s analysis, as well as the extraordinary World Bank report from February, which revealed the correlation between some forms of aid and potentially corrupt offshore deposits.
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