In Praise of Anti-Corruption Day

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STARVERTICA December 9th is the UN's official anti-corruption day, and in order to celebrate, PSD blog has been working with the World Bank's Stolen Asset Recovery Initiative (StAR), a partnership between the United Nations Office on Drugs and Crime and the World Bank. It is driven by four guiding principles:

  1. StAR encourages and supports the ratification, domestication and implementation of the UN Convention Against Corruption, which provides the legal framework for international collaboration in the return of stolen assets that are the proceeds of corruption 
  2. StAR is focused on international asset recovery, targeting financial centers in developed countries
  3. Asset recovery is a demand driven, country-led activity
  4. StAR provides assistance in the technical dimensions of asset recovery

I sat down with Jean Pesme, Manager of the World Bank's Finance and Private Sector Development Financial Market Integrity unit - which is a key contributor to the StAR initiative -  to discuss the initiative in further detail:

PSD: What sets StAR apart from other anti-corruption programs? What role will the private sector play?

JP: Two things in particular set StAR apart. First, it looks at the global dimensions of corruption, focusing on transnational cooperation. Global corruption is a two-way process, often between rich and poor countries. Stolen money frequently finds its way to international financial centers. All too often, benign neglect in the West facilitates corruption in developing countries.

Second, on the operational side, StAR is enforcement focused. It encourages prosecution, legal assistance and civil action in order to recover stolen assets. FPD has taken the lead by focusing on the money-laundering angle.

StAR does not shy away from addressing concrete cases, while also focusing on broader advocacy. When it comes to enforcement it looks outside the box on an international level, working with international law enforcement agencies such as Interpol.

Up until the early 1990s, anti-corruption efforts were entirely focused on prosecuting corrupt individuals. Now, part of the focus has been shifted to going after the money. Prosecuting corruption is complex – going after the money is complementary, and in addition provides evidence that also serves in prosecuting the persons.

Financial institutions have a key role to play in preventing the dissimulation of stolen assets, and in asset recovery – preventing abuse, detecting the laundering of proceeds of bribery, producing evidence for criminal cases in "following the money". Other intermediaries and gatekeepers (lawyers, accountants, notaries, real estate agents) can also be abused in the dissimulation of proceeds of corruption. They can play a key contribution in protecting the real economy and the financial sector. 

The key role of the private sector is first and foremost to say "no" to corruption, to organize itself on a voluntary basis (see UN Global Compact, or Wolfsberg Principles) to tackle corruption, and to continue to press for a level playing field.

PSD: What role can developed countries play in helping StAR achieve its goals?

JP: There are three main groups whose combined efforts are necessary. Regulators and supervisors, law enforcement agencies, and customers. Consumers need to incentivize banks not to hide corrupt money. If a bank's reputation becomes caught up with corruption, that can have a significant impact on the trust of its customers. Think of the example of Riggs Bank, whose reputation suffered following the revelation of its role in laundering Pinochet’s fortune.

PSD: How important is it that StAR goes after the money, rather than simply seeking to prosecute corrupt individuals?

JP: First, StAR in itself does not go after the money or prosecute. It helps the parties at stake to go after the money. It is very important, because corruption is about greed. One needs to do both, prosecute and put in jail, and go after the money. Relatives of convicted corrupt officials can still benefit from looted assets. This needs to change.

PSD: How will StAR affect private sector development?

JP: To tackle corruption, one needs to work on two sides – prevention and enforcement. The more action you take on enforcement, the more incentives you have for better prevention. StAR focuses on building capacity on the public sector and enabling asset recovery cases. As progress is made on these aspects, more attention is also paid to effective implementation of regulatory requirements. This is where the private sector has a key role to play.

In addition, these efforts benefit the private sector by raising the stakes in the fight against corruption, by holding public officials accountable – and also by facilitating going after the bribers (which should contribute to an improved competitive environment, better rule of law, less discretion in decision-making, and setting a level playing field).

Some of StAR policy development and advocacy work can be directly useful to the private sector – and in particular the financial sector. For instance, the work on Politically Exposed Persons (PEPs) aims at facilitating the implementation by the financial sector of the enhanced due diligences on PEPs by providing practical guidance and identifying best practices.

I would not single out the specific impact of StAR on SMEs – hopefully, what we do will benefit the private sector as a whole, including SMEs. SMEs are also confronted with corruption in many countries – it is not uniquely related to big international companies. In addition, international instruments such as the OECD anti-bribery Convention primarily target international business transactions. It is also important that countries put in place anti-corruption measures for domestic business – as foreseen in the UN convention against Corruption, for instance. StAR promotes the effective implementation of these requirements, and the set-up of sound anti-corruption legal regimes (and enforcement action), thus also benefitting local business, of all sizes.

PSD: How can the PSD readership get involved in the process?

JP: Consumers can and must get involved by holding their financial institutions accountable. The financial sector is at the forefront of the fight against money laundering. All members of civil society must apply pressure in order to stop corruption and the flow of dirty money into developed economies.

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