The sword of Financial Action Task Force (FATF) is continuing to hang over the head of Pakistan, not because Islamabad has not been bending backwards to comply with all the conditions of the Task Force but because the open house of corruption in developed countries like the US and Europe continues to refuse to close shop.
Estimates of the cost of corruption to the global economy range from $1 trillion to $2.6 trillion annually, much of it coming from the developing world. If even a fraction of that money were caught and kept in its country of origin each year by anti-corruption efforts, it would far outstrip development assistance spending, which in 2018 hit almost $166 billion worldwide.
The United States is one of the last remaining advanced economies that continues to allow for the creation of anonymous shell companies, the likes of which have enabled human trafficking, terrorism, and sanctions evasion. At present, more stringent identity checks are required to obtain a library card than to open a shell company in every US state.
In other words, if only a small part of the corrupt resources is stopped from going from the poor countries to the rich, the rich won’t have to shell out even a single penny to assist the poor countries always on the verge of keeling over.
The more developed a country, the more corrupt it is. In fact, many of today’s rich countries have become rich by robbing the poor white rather than working for it. And there are many which have abundant of wealth of their own, but still continue to steal from the poor.
One such is the US, the richest of them all, the most advanced in every way; and the leader for many years at the top of a unipolar world.
According to Cailey Griffin and Amy Mackinnon (Corruption in US at Worst Levels in Almost a Decade, published in Foreign Policy dated Jan 28, 2021), corruption in the United States is apparently at its worst in almost a decade. Transparency International attributes the drop to declining trust in democratic institutions and poor oversight of pandemic-related financial aid.
In the annual Corruption Perceptions Index (CPI), the United States fell to a low of 67 out of a maximum possible score of 100, down from a high of 76 in 2015. By its nature, corruption is difficult to document, so the index relies on a variety of different sources to measure the level of perceived public sector corruption. The lower the score, the worse the corruption. Two-thirds of the 180 countries and territories included in the 2020 index scored below 50, with an average of 43.
Scott Greytak, the advocacy director for the US office of Transparency International, cited a broader “decay” in US political institutions as a major contributor to the country’s declining rating. Gretyak noted that public confidence in US elections has been undercut by disinformation and record-setting amounts of untraceable money in elections — especially in 2020, when twice as much was spent compared with 2016.
“Second, and increasingly important, are these series of really bombshell exposés by media outlets that are demonstrating how much dirty money is flowing into the United States’ financial system,” he said, referencing a joint investigation published by BuzzFeed News and the International Consortium of Investigative Journalists last year that revealed how major banks had knowingly allowed trillions of dollars of suspect financial transactions to go ahead, enabling drug kingpins, kleptocrats, and terrorists to move corrupt cash around the world.
The 2020 index also revealed how global corruption has hamstrung countries’ abilities to protect public health and their economies during the pandemic. In the United States, there have been repeated reports of loans issued under the Payment Protection Program, intended to support small businesses, flowing to not-so-small businesses: Among the beneficiaries are defense contractors, the international fast food chain Shake Shack, and the Los Angeles Lakers.
“Covid-19 is not just a health and economic crisis. It’s a corruption crisis. And one that we’re currently failing to manage,” said Delia Ferreira Rubio, the chair of Transparency International. “The past year has tested governments like no other in memory, and those with higher levels of corruption have been less able to meet the challenge. But even those at the top of the CPI must urgently address their role in perpetuating corruption at home and abroad.”
Healthcare systems and drug procurement have long been vulnerable to corruption. The report found that the more corrupt a country or territory was, the less money was spent on health care, regardless of levels of economic development. “While corruption differs in scale and scope across regions, it proved to be a universal obstacle to effectively combatting COVID-19,” the report notes.
Since 2012, the earliest point of comparison under the index’s current methodology, half of the countries and territories on the index have remained stagnant, registering little to no improvement in efforts to combat corruption.
Another side-effect of the pandemic is that authoritarian governments have seized on it as an excuse to silence critics, curtail civil liberties, and increase surveillance. The report found that high levels of corruption closely correlated with a reliance on undemocratic methods to control the pandemic. The Philippines, which scored 34 out of 100, saw one of the longest and strictest lockdowns early on in the pandemic, as President Rodrigo Duterte warned the police would “shoot … dead” people who violated the restrictions.
According to Amy Mackinnon (Biden Expected to Put the World’s Kleptocrats on Notice, published in Foreign Policy on December 3, 2020), Joe Biden is expected to make a crackdown on illicit finance both at home in the United States and abroad a centerpiece of his administration, a move that could have profound implications for anti-corruption efforts around the globe.
Biden, who as vice president spearheaded the Obama administration’s fight against corruption and kleptocracy, has repeatedly vowed to make it a focus as president. Two years ago, Biden and his former advisor Michael Carpenter warned in Politico about the threat posed by foreign money of unknown origins to the integrity of U.S. elections. He echoed those concerns in a Foreign Affairs essay this spring.
“I will lead efforts internationally to bring transparency to the global financial system, go after illicit tax havens, seize stolen assets, and make it more difficult for leaders who steal from their people to hide behind anonymous front companies,” he wrote. And Biden’s pick for national security advisor, Jake Sullivan, told Politico that one of his chief goals was to “rally our allies to combat corruption and kleptocracy, and to hold systems of authoritarian capitalism accountable for greater transparency and participation in a rules-based system.”
Legislation that would create a beneficial ownership register — which would make it much harder to register anonymous shell companies in the United States — has been included in the National Defense Authorization Act, alongside a slate of other anti-corruption legislation.
“You have the national security community as interested in these issues as the anti-poverty community,” said Gary Kalman, the Director of Transparency International US.
“You would literally change the economics of global poverty,” Kalman said.
Sullivan’s emphasis on working alongside allies is likely to find a ready reception, especially in other major banking and economic hubs. “The UK is absolutely desperate to start working more closely with the US on this,” said Nate Sibley, a research fellow for the Hudson Institute’s Kleptocracy Initiative. “That’s the two major global financial centers.”
Biden has also outlined his intention to make international commitments to combat corruption a core tenet of the global summit of democracies that he pledged to host during his first year in office.
“This needs to be injected, mainstreamed if you will, into all of our multilateral engagements,” Carpenter said.
Biden’s expected focus on fighting financial opacity and corruption is a carry-over from his previous stint as vice president, when he was even more aggressive than President Barack Obama, according to Kalman.
Biden oversaw US policy toward Ukraine as the country charted a rocky but ambitious path of reforms in the wake of the 2014 revolution, and he leaned heavily on the country’s then-President Petro Poroshenko to clean up corruption. Biden went as far as threatening to withhold $1 billion in US aid to persuade the Ukrainians to oust the country’s notoriously corrupt prosecutor general Viktor Shokin. (That effort, which had broad support from the US government, the European Union, and the International Monetary Fund, was later used against Biden by Republicans during the 2020 presidential campaign.)
In Central America, Biden spearheaded a $750 million aid package intended to address the root causes of refugee and migrant flows, making much of the funds contingent on anti-corruption efforts, and he leaned on the former president of Guatemala to extend the work of a pioneering UN-backed anti-corruption commission.
Copyright Business Recorder, 2021