How good are the experts at evaluating countries’ anti-money-laundering and combating the financing of terrorism (AML/CFT) systems? That was the central question in a new report released last week by the Center on Law and Globalization. The report takes a critical look at the IMF’s evaluations of the AML/CFT systems of 150 countries from 2004 to 2013. Although we may differ on some of the analysis and recommendations, the report provides ample food for thought and raises issues that need to be addressed and, in certain instances, corrected.
It isn’t possible here to provide a full overview of all the points raised in the report, but a few key messages stand out:
The report finds that assessors were too focused on formal compliance (“rules on the books”) and did not, in any systematic fashion, try to ascertain the real impact of a country’s entire AML/CFT regime in practice. In the words of the report, “Reliance (by assessors) was placed on the prima facie plausibility of the claim that adherence to the [international AML] standards would help reduce money laundering and the financing of terrorism.” This criticism goes to a wider point: that evaluations were conducted without a clear articulation of the objectives to be achieved by AML/CFT measures. If you don’t know what a system is meant to accomplish, how can you evaluate it?
These are valid points and they hold true, not just for IMF evaluations, but also for others (including the World Bank) who carried out assessments using the same internationally agreed methodology. However, the report fails to take due account of the considerable work that has been undertaken in recent years to address and correct those shortcomings.
Since 2010, an intensive process of revision has been underway to improve the AML/CFT standards and the assessment methodology. There has been a long and vigorous debate within the Financial Action Task Force (FATF), the global standard-setter on these issues, and between the FATF and other bodies, about the best way to remedy the system’s deficiencies to make assessment reports more useful. Both the Bank and the Fund have played a very active role in this discussion.
As a result of this process, the new standards approved in 2012, along with a new methodology approved in 2013, provide a framework to address those concerns: Countries’ AML/CFT systems are to be judged based upon an assessment of their effectiveness in addressing a country’s ML/FT risks. Are government interventions commensurate to the risks faced? For example, a country with a negligible financial sector and a high use of cash should probably not spend too much money and manpower on policing its securities sector. Conversely, a sophisticated financial center providing easily usable incorporation services should probably keep a close eye on company registration. As a participant in this process, the World Bank has been a strong proponent of this pivot toward risk and effectiveness. In our view, only such an approach can help countries make meaningful decisions regarding their priorities and their strategies.
(The author works for the Department of Budget and Management and is the Co-Lead Coordinator for the Open Data Philippines Task Force in the Philippines that organized the open data program of the government.)
The Philippines has risen from being a laggard in Asia to an emerging economy fueling growth in the region. The government’s program of transparency and anti-corruption, the bedrock of President Benigno Aquino’s leadership, has served as the nation’s springboard for reforms.
The recently-concluded state-level elections in India’s capital city-state, Delhi, yielded a remarkable outcome. The country’s newest political party, the Aam Aadmi Party (AAP), literally “Common Man” Party, formed only a year ago by civil society activists affiliated to the landmark 2010 anti-corruption movement, routed the country’s oldest political party, the Congress, which has governed the country through most of its post-Independence years. The fledgling party’s performance and subsequent formation of the state government (ironically with the backing in the state legislature of the same party it had demolished), is being hailed as the beginning of something like a peaceful democratic revolution. It has galvanized political participation in a fairly unprecedented way as hundreds of thousands of “common people” across the country have rushed to join the ranks of a political force they hope will deliver better governance. And it had sowed the seeds of fresh optimism in the possibility of an ethical and accountable governance system.
This euphoria might be somewhat premature in the absence of any track record of AAP’s performance in government. But the party’s ascent undoubtedly represents a distinct break from traditional politics and suggests a new paradigm in at least two ways. First, AAP transcends the politics of identity and sectarian interests and practices instead what has been called the “politics of citizenship.” While other political parties have emerged from the grassroots in post-independence India and gone on to become potent regional forces, they have typically had their moorings in identity politics of one sort or another – caste, religion, ethnicity – that gave them dedicated support bases. In contrast, the AAP’s primary plank is good governance. Although it has been criticized for espousing untenable populist economic policies – such as subsidized water and electricity, its economic ideology and policies are very much at a formative stage. Its largest selling point has been its promise to fight corruption and bring probity to governance. Its success has catapulted the problem of corruption center-stage as the defining issue in the upcoming national elections.
Our Top Ten Blog Posts by readership in 2013
This post was originally published on February 21, 2013
There is a silent struggle going regarding how you do governance reforms in development. It is between the prevailing tendency and a small but growing band of practitioners saying things need to be done differently. The prevailing tendency is the packaging of experts-devised best practice packages that we take from country to country…model anti-corruption laws, model designs for the civil service, procurement systems, and financial management systems and so on. Our highly trained experts are invested in their solutions, and the modern global system has a growing array of policy networks on every issue under the sun, and they amass and disseminate norms of ideal practice. So, donors and their experts move from one country to another, offering money, loans, and these packages. So, how are things working out? Not very well is the answer. To use an Americanism; we are not getting stuff done that much when it comes to governance reforms, whatever the sector. Isn’t it high time we changed our ways?
In the next few weeks, we will be running our Top Ten Blog Posts by readership in 2013
Originally published on May 22, 2013
I attended a panel + booklaunch on the theme of ‘Citizens Against Corruption’ at the ODI last week. After all the recent agonizing and self-doubt of the results debate (‘really, do we know anything about the impact of our work? How can we be sure?’), it was refreshing to be carried away on a wave of conviction and passion. The author of the book, Pierre Landell-Mills is in no doubt – citizen action can have a massive impact in countering corruption and improving the lives of poor people, almost irrespective of the political context.
The book captures the experience of the Partnership for Transparency Fund, set up by Pierre in 2000. It summarizes experiences from 200 case studies in 53 countries. This has included everything from using boy scouts to stop the ‘disappearance’ of textbooks in the Philippines to introducing a new code of ethics for Mongolia’s judiciary. The PTF’s model of change is really interesting. In terms of the project itself:
- Entirely demand led: it waits for civil society organizations (CSOs) to come up with proposals, and funds about one in five
- $25k + an expert: the typical project consists of a small grant, and a volunteer expert, usually a retiree from aid agencies or governments, North and South. According to Pierre ‘the clue to PTF’s success has been marrying high quality expertise with the energy and guts of young activists’. (I’ve now added ‘Grey Wonks’ to my ‘Grey Panthers’ rant on why the aid world is so bad at making the most of older people).
- The PTF is tapping into a zeitgeist of shifting global norms on corruption, epitomised by the UN Convention Against Corruption (2003). The idea that ‘they work for us’ seems to be gaining ground.
- The PTF prefers cooperation to conflict – better to work with champions within the state (and there nearly always are some, if you can find them), than just to lob rocks from the sidelines (although some rock-lobbing may also be required).
- It also prefers action and avoids funding ‘awareness-raising’, ‘capacity building’ and other ‘conference-building measures.’
So what works? On the basis of the case studies (chapters on India, Mongolia, Uganda and the Philippines), and his vast experience of governance and corruption work, Pierre sets out a ‘stylized programme’ for the kinds of CSO-led initiatives that deliver the goods:
This summer, I made a project visit to a government clinic in northern Sierra Leone. It is a clinic pretty much in name only, being constructed as 1-bedroom living quarters for a teacher and subsequently converted into a health facility. The nurse took me on a tour, pointing out the problems: a broken scale to weigh infants, no waiting room for early stages of labor, animals grazing and
|Two members of the Black and White club join an arm-wrestling competition with the slogan 'Arm-wrestling to blow away corruption' at a youth event in Hanoi in November 2012 to promote fair education environment.|
I often hear that corruption is everywhere and nothing can be done about it. I used to believe it. I still hear people saying the work on anticorruption is a waste of time. I disregard these cynical statements now. Who made me change my attitude? The youth.
I started being inspired several years ago when a group of young women from the Vietnamese NGO Live and Learn (L&L) developed the idea of ‘a sustainable and transparent society in the hands of youth’. As clear as the idea tells, these young women wanted to engage more with youth, educate them about sustainable and transparent development and how young people can become catalysts for change and for a less corruption-prone country. The idea was among winning initiatives of the Vietnam Innovation Day (VID) 2009 More Transparency and Accountability, Less Corruption, which was co-organized by the World Bank and the Government Inspectorate.
As part of the project idea, L&L would help connect and create a network of student and youth groups (Green Generation network, volunteer clubs, youth organizations, Be Change Agents, etc.) in Hanoi. These groups would be more informed of development issues such as sustainable development, corruption, and their responsibilities, and eventually would act together to build a corruption-free society. The journey was not without difficulties. During the first six months of the project, L&L was not able to get into many universities to talk with students about transparency nor integrity, let alone corruption. Even if universities were open to the idea, not many students showed interest. Some events attracted only 8 young people.
There is much to be discouraged by in Transparency International’s recently-released 2013 Global Corruption Barometer, the biennial global survey that gauges popular perceptions about the extent of corruption in public life. More than half of 114,000 people in 107 countries polled for the 2013 survey believe that corruption has increased over the last couple of years. And 27 per cent of the respondents reported having paid a bribe when accessing public services and institutions, an increase from the 10 per cent that reported similar incidents in the 2009, 2007, and 2005 surveys.
The intransigence of the challenge might not be news to international agencies, but it is certainly a cause for introspection. For a few decades now, aid agencies (including the Bank following the 1997 Cancer of Corruption speech by then President Wolfensohn), have aimed to help stem corruption through regulatory tools such as codes of conduct, access to information laws, standards for procurement and public financial management, conflict of interest and asset disclosure regulations, and by establishing oversight institutions such as anti-corruption agencies, audit institutions, and parliamentary oversight committees. More recently, in response to a recognition that such technical fixes are only half a solution, the “demand side” of governance has received much attention, and there are several examples of successful programs, as chronicled, for instance, by retired Bank staffer, Pierre Landell-Mills, in a recent compendium.
Last week, Transparency International published its 2013 Corruption Barometer, which reports the findings of a survey of 114,000 people in 107 countries on their interactions with corruption, the institutions and sectors they see as most corrupt, and their perceptions on whether they have a role in combating corruption. The report captures a number of trends, including the view that corruption is worsening across many sectors; it also calls for governments to strengthen their accountability platforms and enhance standards for procurement and public financial management.
This year’s survey found that 27% of people report having paid a bribe in the past year, nearly the same percentage as in the 2010/2011 report (26%). This indicates that more than a quarter of people surveyed have been touched by bribery.
There was a follow-up question: If the respondent did pay a bribe, what was the reason? The answer given most often, with 40% of responses, was “to speed things up.” This high rate of bribes for speed of service, to me, suggests a troubling complicity: The person paying the bribe may feel entitled to more rapid service at the expense of others.
“Ghaas Katne Khurkera, aayo joban hurkera…” (A Nepali folk song)
It would be an injustice to my childhood if I said that this song wasn’t a part of my growing up. Even before I knew the title of the TV drama, I knew this song by heart. I, along with my friends, would happily play and sing along to it. This was a famous song from a tele-series played by Nepal’s most celebrated comedians Madan Krishna Shrestha and Hari Bansha Acharya. Like this song, Madan Krishna and Hari Bansha, endearingly abbreviated as “MaHa” has been a household name to most Nepalis, either in Nepal or residing abroad.
They have, however, been different from other Nepali comedians- their comedy stand-ups or dramas have heavy dose of social morals in their highly creative and hilarious skits. After a break of two years, they are now back on TV with one such creation that infuses issues of social accountability with comedy. The tele-drama is titled “Aan” - A Nepali expression for opening mouth – metaphor for eating/misusing government resources.
“The subject is very dry. This is not like soap operas where the characters have highly dramatic lives. We have to heavily rely on artists’ performances as it should be technically sound to fetch audience attention,” says Hari Bansha Acharya, the producer and the actor for “Aan”. “We have previously worked on anti-corruption but this is the first time we are reflecting the real scenario at the village, district and national level. This is a virgin topic for TV and we hope we will be able to bring the kind of result that we are anticipating.”