Corruption

Shaun Abrahams, the national director of public prosecutions at the National Prosecuting Authority, announced on March 16 that Zuma will face sixteen charges of corruption and money laundering. The governing African National Congress (ANC), which Zuma dominated during his years as party president and state president of South Africa, has restricted itself to affirming its confidence in the South African judicial system in its official statements. The Rand, South Africa’s currency, remained steady following the announcement. Prosecution follows nine years of legal efforts by Zuma, at the taxpayers’ expense, to get the charges set aside. They date from an arms deals in the 1990s, and the prosecuting authority set them aside in 2009 shortly before Zuma was elected state president. In 2016, the High Court reinstated the charges and Zuma lost his legal battle to overturn that ruling. Now, Abrahams says that prosecution will proceed, and that “there are reasonable prospects of a successful prosecution.” Abrahams has widely been seen as a political ally of Zuma, with critics claiming that Zuma irregularly appointed him director of public prosecutions to forestall his own prosecution. In the end, the courts sided with the critics and required current President Ramaphosa to appoint a new director within sixty days of its ruling. That time period has not yet lapsed, so Abraham remains in office. His replacement will be responsible for the prosecution of Zuma, but it is not yet clear who Ramaphosa will appoint.  That Abrahams is proceeding with prosecution shows just how far Zuma has fallen and how few allies he apparently still has within the ANC. Critics will likely question whether Abraham has made some sort of deal with the new Ramaphosa administration. Prosecution of Zuma is a double-edged sword. South African civil society widely believes that Zuma is corrupt and that he should therefore be tried. Time after time, South Africans have reaffirmed their support for the rule of law and an independent judiciary. For his part, Ramaphosa, one of the architects of South Africa’s constitution, has always been a staunch supporter of the law. Not to try Zuma would be viewed by many as evidence that the Ramaphosa administration had “sold out,” that corruption has no consequences, and that he is willing to compromise on the rule of law for political ends. On the other hand, Zuma remains popular in his native KwaZulu and among the Zulus, South Africa’s largest ethnic group. Ramaphosa has therefore sought to treat Zuma with dignity, but also cannot be seen as favoring Zuma in the impending prosecution. Furthermore, it remains to be seen whether Zuma’s trial will expose the corrupt behavior of other ANC politicians still in office and how this affects party unity. For the time being, however, most South Africans across the political spectrum are likely to support the decision to prosecute.

Laundering money by purchasing real estate in foreign countries is an old song. The wealthiest parts of London and New York are filled with expensive houses and apartments, respectively, that are apparently unoccupied by their foreign owners most of the time. Mayfair and Belgravia in London and midtown Manhattan are especially popular. In Manhattan, One57, located at 157 West 57th Street, is one of the most notorious of the supertalls, apartment houses more than one thousand feet high. It includes the most expensive apartment ever sold in New York, at a price of $100.5 million in 2014. New York law makes it easy for purchasers of expensive real estate to be anonymous, making properties in the city attractive to foreigners living in unstable countries who wish to protect or launder their assets. Kolawole Akanni Aluko, a former executive director of Atlantic Energy, was the owner of a 6,240-square foot apartment on the 79th floor of One57 that he reportedly purchased for just over $50 million. The formal owner, apparently, was a shell company that he controlled. As collateral for a mortgage, Aluko used his $80 million yacht, which he reportedly rented to rapper Jay-Z and singer Beyoncé at a rate of $900,000 per week. Subsequently, he defaulted on a mortgage of $35.3 million to a Luxembourg bank. In foreclosure, the apartment was sold at auction in 2017 for $36 million, a decline of 29 percent in the purchase price. Aluko and others are under investigation in Nigeria, the United Kingdom, and the United States for, among other things, bribing the Nigerian oil minister at the time, Diezani Alison-Madueke, for lucrative government contracts. Alison-Madueke is also under investigation. Aluko has reportedly disappeared on his yacht and is thought to be somewhere in the Caribbean. For its part, the U.S. Department of Justice has filed a civil complaint seeking the forfeiture and recovery of $144 million in assets related to the alleged bribery of Alison-Madueke by Aluko and others. Oil and gas are the property of the Nigerian state. They are exploited through joint ventures and agreements between the state and oil companies. Oil production is normally about two million barrels per day. Yet more than half of Nigeria’s population lives in poverty. Popular resentment at corruption of the magnitude alleged with respect to Aluko was an important factor in the presidential victory of Muhammadu Buhari in 2015, and drives his anti-corruption campaign. For more insight into One57, see this article by the New York Times that chronicles a reporter’s over-night stay.   

President Cyril Ramaphosa’s new cabinet is a significant improvement over his predecessor's and will reassure domestic and international investors. Restoring confidence in South Africa’s government and economy is a crucial first step to achieving the higher rates of economic growth needed to reduce poverty among the black majority.  Notably, Nhlahna Nene, the erstwhile finance minister under Zuma has been reappointed to the post by Ramaphosa. Widely respected by the financial community, he was inexplicably fired by former president Jacob Zuma. Pravin Gordhan, another respected former finance minister and casualty of Zuma’s administration, has been appointed minister of public enterprises. He will be responsible for state-owned enterprises like South African Airways and the national electric company. Under Zuma, public enterprises were nests of corruption and inefficiency. Gordhan is seen as having the energy and ability to clean up the mess, and oversaw an ANC-led effort to combat corruption in Port Elizabeth. As the new minister for energy, Jeff Radebe is expected to end the Zuma administration’s ill-considered nuclear energy program. Gwede Mantashe will be in charge of mineral resources and therefore oversee the country’s mining sector, which remains a central part of South Africa’s economy. He comes out of the labor movement and served as general secretary of the National Union of Mineworkers and has a reputation as a tough but trusted negotiator. The new minister of education, Naledi Pandor, is a close ally of Ramaphosa and will have to deal with an education system whose failures are partly to blame for the high levels of black unemployment. There are holdovers in the cabinet from the Zuma administration. Most notably, Zuma’s ex-wife and his candidate to succeed him as party leader, Nkosazana Dlamini-Zuma. She is a former foreign minister, former minister of health, and former chairwoman of the African commission, but her new appointment as minister for planning and evaluation is far inferior in power and prestige. Among reformers, however, the greatest concern must be the appointment as deputy president of David Mabuza, governor of Mpumalanga. His shift of support from Dlamini-Zuma to Ramaphosa was crucial to the latter’s victory in the race for party leader. While he has a reputation for thuggery and corruption, Ramaphosa can fence Mabuza off from power and authority if he wishes to do so. The new foreign minister is Lindiwe Sisulu. Born in 1954, she is the daughter of liberation icons Walter and Albertina Sisulu. She has a PhD from York University in England and has been in the cabinet continuously since 1994. Her focus has been on domestic issues, with her byword being “poor first.” Broadly speaking, her political approach appears similar to that of the left wing of the Labour Party in the United Kingdom. It remains to be seen whether she has any interest in improving the official bilateral relationship with the United States, which is now no more than “correct” and “cordial.”  

Crispian Olver, a former senior South African government official, long-time ANC activist, and author of the new book How to Steal a City: The Battle for Nelson Mandela Bay, joins me to discuss the pervasive corruption in South Africa known as "state capture" and the state of the African National Congress. Ahead of the 2016 local elections, Crispian Olver was tasked by the ANC and the central government to clean up the municipal administration in Port Elizabeth. What he uncovered was in many ways an illustration of what has been happening elsewhere in South Africa. The intervention he orchestrated, as well as the local election campaign in which he was deeply involved, offer insights on corruption and politics in South Africa.  You can listen to the podcast here.

United States institutions have led the charge against corruption and corporate malfeasance in Mexico. But they can’t replace a working homegrown legal system. For all the strides Mexico has made in structural reforms, economic growth will remain out of reach until the nation can enforce basic legal rules. You can't blame that on Donald Trump.

Ayobami Egunyomi is a Franklin Williams intern for Africa Policy Studies at the Council on Foreign Relations in Washington, DC. She received her BA in International Relations from Indiana University–Purdue University Indianapolis. She is a native of Nigeria. Earlier this month, the governor of Imo state, Rochas Okorocha, appointed his sister as the “Commissioner for Happiness,” a portfolio he just created, presumably to ensure his sister is able to partake in eating “the national cake” (have access to the country’s oil wealth). This move brings that vast oil wealth, as well as the country’s endemic corruption and nepotism to the obvious glare of Nigerians. More recently, the citizens also witnessed the profligacy and waste common in the Nigerian government when the vice presidential quarters allocated seventeen million naira (about forty-seven thousand dollars) to cutlery in the proposed 2018 national budget. This is one of the many inflated and outrageous items in the proposed budget. Amidst all these, about 112 million Nigerians (67 percent of the population) live below the poverty line. Elite profligacy in the face of impoverished citizens underscores the core problem facing Nigeria—corruption. Like wildfire, corruption has spread through every sector of the country and most Nigerians would unflinchingly agree that corruption begets the plethora of problems the country faces today. The menace of corruption in Nigeria is one that different government administrations have publicly recognized and tried to tackle against. The past military regimes of Nigeria claimed to overthrow the civilian government in order to curb corruption, though these governments were seen as more corrupt than the civilian governments that succeeded it. In fact, the last military head of state, General Sani Abacha, was so corrupt that even nineteen years after his death, Nigeria is still recovering millions of dollars of his loot from Swiss banks. The anti-corruption rhetoric continues to this day under the current democratic system of government in Nigeria. Under his administration, President Olusegun Obasanjo established the Economic Financial Crimes Commission (EFCC) to crackdown on corrupt politicians. Most recently, Nigeria elected its current president, Muhammadu Buhari, largely based on his promise to tackle corruption.  Unfortunately, these administrations were unable to eradicate, or even significantly curb, corruption. Consequently, the average Nigerian has come to expect that bribery and nepotism will trump meritocracy, and so they participate in it to preserve their own self-interest. Yet, when it comes to who is to blame for corruption, they still believe that they are blameless and that the only corrupt ones are the people in charge. To alleviate the high level of corruption in the country, the first step is for Nigerians to realize that no political elite, government institution, or president can effectively curb corruption alone unless the average Nigerian participates. In the words of a Nigerian friend of mine: "Nigeria is not corrupt, Nigerians are corrupt." This means that dislodging corruption’s hold over Nigeria starts with dislodging its hold on the Nigerian mentality, forcing people to revolt against the status quo and to demand better of themselves first and others second. Changes to law and institutions will come later, but it starts with people. Unless Nigerians choose to stop participating in and enabling corruption, the country will not move forward.

In 2018, nearly two out of every three Latin Americans will head to the polls to elect new leaders, and the fight against corruption will be high on their agenda. The surge to throw the bums out could be a harbinger of cleaner politics. But a revival of the region’s tradition of populism could also threaten the nascent institutions and mechanisms that are Latin America’s best hope for a more honest tomorrow. Voters are rightly enraged about corruption. Nearly every country has seen its share of high-profile scandals. In Mexico, governors have allegedly stolen land, pilfered workers’ social security contributions, received public contract kickbacks, and even replaced children’s chemotherapy medicine with water to make a buck. In Honduras, tens of millions of dollars have vanished from the social security system under the president’s watch. In Brazil a third of the congress, five former presidents, eight cabinet ministers and scores of other officials are under investigation or indictment for bribery and other crimes. Even the supposedly pristine nations of Chile and Costa Rica have been drawn into the muck: President Michelle Bachelet’s son was part of a shady real estate deal and all three branches of the Central American government were rocked by a cement import scandal. The aggregate costs of corruption for the region are staggering, leeching tens of billions of dollars each year from the Brazilian and Mexican economies, 3 and 5 percent of gross domestic product respectively. In Colombia, an estimated one out of every 10 public dollars disappears — equivalent to the entire health budget. Yet corruption’s emergence as a major political talking point is largely the result of positive regional trends. Nearly all of the nations are now democracies. The shedding of authoritarian pasts has enabled the rise of a freer press, with intrepid reporters eager to uncover misdeeds. Their investigations, in turn, have benefited from new tools, including freedom of information acts that have opened up public logs to scrutiny. In some countries, hard-fought judicial reforms are also bearing fruit, empowering more professional and autonomous judges and court officials to take down wrongdoers. Bolstering these institutional changes are societal shifts. The growth of a middle class — now a full third of the region’s population — means tens of millions of citizens are no longer just focused on day-to-day survival. And they are paying taxes that they hate to have disappear.  Yet almost daily revelations of malfeasance, combined with excruciatingly slow progress in bringing the perpetrators to justice, have led to disappointment, frustration and real anger with the political establishment. As a result, today’s batch of centrist, pragmatic and market-friendly presidents all wallow in the public opinion doldrums — only Argentina’s President Mauricio Macri breaks even on approval ratings. This rising disgust has opened the door again to populist outsiders who use corruption as their new rallying cry. In Honduras, TV personality Salvador Nasralla campaigned on human rights and corruption. In Mexico, Andres Manuel Lopez Obrador hammers his opponents as a political mafia only he can dismantle. In Brazil, though the left remains behind former president Luiz Inácio Lula da Silva despite his corruption conviction, the centrist parties have collapsed under the weight of similar charges. In Colombia, the anti-establishment sentiment is so strong that vice president German Vargas Lleras has cut ties with his party to run on his own. In past decades, Latin America’s economic populists have exploited the real gaps between the region’s have and have-nots, riding these class tensions into office. Once there, they have used their power to override central bank independence, ignore congressional budget limits, and erode other checks and balances. Their profligate spending cultivated their political base even as it led to spiraling inflation, falling investment and an inevitable economic crash, hurting their supporters more than anyone. If this populist past is any guide, today’s anti-corruption crusaders could also make things worse. By trampling legal niceties as they go after those they have identified as past aggressors (usually their political opponents), they could undercut the very slow but real progress that is being made, undermining the transparency and accountability needed to stop similar behavior in their own ranks. In this respect, the recent hurried charges brought against former Argentine president Cristina Fernandez de Kirchner and her cronies are worrisome. Pragmatic, institutionally minded leaders are the only ones equipped to address the underlying reasons for voters’ justifiable anger. What Latin American nations need are incremental improvements that strengthen institutions. What they may unfortunately get is leaders with grandiose but empty promises. View article originally published on Bloomberg.

President Muhammadu Buhari won election in 2015 on the basis of his promise to restore security by destroying the terrorist movement Boko Haram and to reduce corruption, which many Nigerians believe to be altogether out of control. His primary instrument to fight corruption has been the Economic and Financial Crimes Commission (EFCC). It has launched high profile investigations, including into the accounts of Patience Jonathan, the former first lady. Among other measures, it has frozen some $35 million in four bank accounts she owns and seized some real estate. Patience Jonathan says the EFCC has also frozen the bank accounts of her family members, including her late mother and her siblings. In response, Patience Jonathan is accusing the EFCC of waging “psychological war” against her because of her support for her husband, former president Goodluck Jonathan. She is accusing the acting EFCC chairman, Ibrahim Magu, of seeking to destroy her family and of conducting an “unjustified witch hunt.” As for her support for the political aspirations of her husband, her media spokesman stated, “That is the standard practice in all democracies around the world. For instance, Michelle Obama campaigned vigorously for her husband’s party during their last presidential election, but we are yet to see President Donald Trump move against her.” Patience Jonathan has demanded that President Buhari rein-in Magu. She is also demanding that the EFCC unseal her bank accounts. She has filed a suit against the EFCC for violation of her “fundamental rights” and is demanding two billion naira (about $5.6 million) in compensation. There is push back against President Buhari’s anti-corruption campaign, especially among the opposition People’s Democratic Party. Some claim that Buhari is using the EFCC to go after his political enemies. In the predominately Christian parts of the country there are also murmurs that the anticorruption campaign is part of a Muslim effort against Christians. The Committee on Public Petitions in the House of Representatives has issued a warrant for the arrest of Magu because of his failure to appear before them with respect to a petition by Patience Jonathan. The Committee’s move appears to be led by southern, Christian, PDP representatives. There is a tradition in Nigeria of presidents using the EFCC and other anticorruption agencies against their political enemies. While it is true that under President Buhari, most of the high-profile investigations have been of PDP former officials in the Jonathan administration who are predominately Christian, these people were also, of course, in positions where they could loot public funds. Further, Christians dominated the Jonathan government, though the EFCC has also investigated Sambo Dasuki, Jonathan’s Muslim national security advisor, who remains under house arrest.  Patience Jonathan as first lady was flamboyant, arrogant, and widely disliked. She has yet to be convicted of a crime, however, it is curious how a person who spent most of her career in public service could accumulated an acknowledged $35 million in a poor country.    

The latest paper in the Corruption Brief series from the Civil Society, Markets, and Democracy program at the Council on Foreign Relations was published this month. In the brief, Dr. Jodi Vittori, senior policy advisor at Global Witness, addresses the myriad problems posed by anonymous shell companies – corporate entities with few or no employees and no substantive business, which offer a convenient way to privately move money through the international financial system. Such companies, she argues, offer a vehicle for illicit financial flows from corruption, narcotrafficking, and terrorism – and many of them are based in the United States. Vittori calls on policymakers to pass legislation to disclose ownership information for all companies, increase federal contract transparency, and boost other business and government transparency mechanisms at home and abroad. Doing so, she concludes, will restrict a critical tool for corrupt financial flows around the world. You can read the full report here.

Brazil is in a confusing place, with unprecedented voter dissatisfaction but no clear path out of crisis. Markets cheered last week when Congress voted 51 percent to 45 percent not to permit President Temer’s trial on corruption charges. But it was a pyrrhic victory, coming only because of a large number of expensive concessions to deputies, which raised the price of all future votes. The economic reforms that Temer promised as a way to justify his presidency seem as far away as ever, and the government is virtually guaranteed to miss its already unambitious fiscal goals for the year. Meanwhile, outgoing prosecutor general Rodrigo Janot has been hinting that he could file further charges against Temer before departing office in late September, suggesting that there is no end in sight for the political drama that has been consuming Brasília. Even as Temer faces these headwinds, however, the situation is no better for the Workers’ Party (PT) standard-bearer, former President Lula. Sympathetic noises coming out of the appeals court suggest that trial court judge Sérgio Moro’s conviction of Lula will in all likelihood be upheld when Lula’s appeal goes to judgement next year. Under the terms of the Clean Slate Law, conviction by the appeals court means that Lula will be ineligible to run for the presidency; even if by some miracle he were to survive, another five corruption investigations are pending against him. In Brazil this month, nobody has been able to give me a convincing explanation of what all this means for the 2018 election. Many Brazilians seem to be holding out hope for an outsider who will be able to change politics as usual. But given the ban imposed by the Supreme Court on corporate campaign contributions in the 2018 campaign, political parties—with their access to massive public funding, on the order of more than $1 billion—may be more important than ever, limiting the likelihood that a true outsider can emerge (a partial exception is João Doria, the São Paulo mayor, a relative newcomer on the political scene who has a slim but seemingly growing chance of capturing the Brazilian Social Democratic Party’s (PSDB) presidential nomination, and later, its public campaign funds). Even an outsider, though, would have a hard time meeting Brazilians’ demands. Polls show that Brazilians believe that the dire economic situation and corruption are the two leading problems facing the country. Yet a quick look at two recent votes in Congress show that representatives will have great difficulty simultaneously delivering on both the anticorruption reforms and the economic reforms that Brazilians are demanding.  As the table below illustrates, in recent votes on the two issues, deputies in favor of labor reform tended to support Temer against the rule of law, while deputies who had voted against labor reform tended to be more anti-Temer. Although the PT voted as a bloc against Temer, the congressional divide on Temer’s trial was not only a Temer vs. PT dynamic: indeed, given that 40 percent of legislators are under judicial investigation, many deputies who voted against Temer were hoping to burnish their imperfect anti-corruption credentials, while even parties within the Temer coalition, such as the PSDB, split down the middle. In sum, although Brazilians seem eager to see change, there is no cohesive coalition in Congress in favor of both rule of law reforms and economic reforms. Nor are there signs that a strong consensus has emerged among the public that would lead to the election of such a Congress next year. Brazilians are too tired to go into the streets to demand change, as they did between 2013 and 2016. But they may also be passive and uncertain because there is little agreement on which reforms would be most effective, and there are few leaders who have been able to offer credible solutions on the best path forward out of Brazil’s combined economic and rule of law malaise.

As Latin America reflects on its current wave of anticorruption successes—including the arrest of former Guatemalan president, Odebrecht prosecutions in Peru, and the ongoing Lava Jato cleanup in Brazil—it may be both sobering and heartening to consider the history of past anticorruption successes around the world. First, the sobering lesson. Even when things go well, other countries’ experiences suggest that an overall shift in the degree of corruption can take decades. Perhaps the best known example is the United States, where a series of disconnected local and national accountability efforts during the Progressive Era took place—including regulation of the trusts, elimination of patronage hiring in the civil service, and restrictions on corporate campaign contributions.[i] But although many of the reforms took place in the late nineteenth century, they only coalesced into a significant shift in the overall level of corruption in the U.S. between the 1920s and the New Deal. Summarizing a complex history, Glaeser and Goldin use press coverage of corruption to demonstrate an arc-like pattern: corruption rose steadily from 1815 to 1850, but began falling after 1870, reaching a stable lower-corruption equilibrium by the 1930s, where it remained until the 1970s (when the authors ceased data collection). Similarly, Bo Rothstein’s work on Sweden suggests that the process of significantly lessening the degree of corruption in that country was decades-long.[ii] While the slow pace of these changes may be discouraging for Latin American publics frustrated by the damage and unfairness inflicted by persistent political graft and crony capitalism, it may be somewhat heartening to think that even small victories in the short term can trigger enormous development gains, by changing norms, removing dirty players from the political game, and most importantly, by consolidating public support for the continuation of the reform process. As Brazil’s outgoing prosecutor general Rodrigo Janot noted in Washington this week, there is no putting the genie back in the bottle: no matter where Brazil’s Lava Jato investigation goes, the public has shown that it will no longer tolerate the old cronyism between oligopolies and politicians. Furthermore, the pace at which anticorruption gains accumulate may be faster in the twenty-first century than it could be in the nineteenth and twentieth. Countries as diverse as Georgia and Rwanda have made remarkable gains on most measures of corruption in the space of the past two decades. They have done so by drawing on a large set of international best practices, simultaneously improving transparency, oversight, institutional effectiveness and the likelihood of sanction. Latin American democracies that are already implementing such anticorruption strategies may also be able to benefit from vibrant political competition, which lessens oligarchic politics and increases the practical autonomy of courts and prosecutors, and a vibrant press, which has proven essential to uncovering wrongdoing and mobilizing civil society. Finally, the international anticorruption framework is much stronger than ever before—the record-breaking Odebrecht settlement with Swiss, Brazilian, and U.S. officials being only the latest example—which enhances global support for reformers while increasing the likely international penalties against potential bribe-takers. So although the path to improvement will be a long one, it may be possible for Latin American reformers to move more quickly than was possible in the not-so-distant past. That alone is grounds for optimism, although a healthy dose of realism is also needed in the face of widespread pushback from the guardians of the status quo.   [i] Glaeser, Edward L., and Claudia D. Goldin. Corruption and Reform: Lessons from America's Economic History. Chicago: University of Chicago Press, 2006. Hofstadter, Richard. The Age of Reform: From Bryan to F.D.R. 1966 ed. New York: Alfred A. Knopf, 1955, p.3. [ii] Rothstein, Bo. "Anti-Corruption: The Indirect 'Big Bang' Approach." Review of International Political Economy 18, no. 2 (2011): 228-50

Muhammadu Buhari’s 2015 presidential victory owed much to the perception among Nigerians that the preceding Jonathan administration and the governing People’s Democratic Party (PDP) presided over a kleptocracy. That perception was correct, and more details continue to emerge. The latest, reported by the United States Department of Justice (DOJ), involves former petroleum minister Diezani Alison-Madueke.  On July 14, the Justice Department announced that it had filed a civil complaint seeking the forfeiture and recovery of some $144 million, the proceeds of Nigerian corruption and allegedly laundered in and through the United States. The complaint states that, from 2011 to 2015, two Nigerian businessmen, Kolawole Akanni Aluko and Olajide Omokore, conspired to bribe the petroleum minister in return for her help in securing oil contracts for their shell companies. The resulting proceeds were then used to buy assets in the United States, including a $50 million apartment at 157 West 57th Street in New York, and an $80 million yacht. The complaint also refers to the purchase of similar real estate in London. It states that the businessmen provided Alison-Madueke with a luxurious lifestyle, but it does not make clear who owns the assets purchased with the laundered funds. In its civil forfeiture complaint, the Justice Department is alleging that the money and property involved are the proceeds of a crime. However, these allegations must be proven in a U.S. court of law, and that has not yet happened The U.S. DOJ brought the case under the Kleptocracy Asset Recovery Initiative. In cooperation with federal law enforcement agencies and often with U.S. Attorneys’ Offices, the Department of Justice seeks the forfeiture of the proceeds of foreign official corruption, and to return those assets to the benefit of the people harmed by acts of corruption. The Nigerian government has long urged foreign governments to be proactive in recovering stolen assets laundered abroad. Two recent Council on Foreign Relations publications address U.S. policy toward African kleptocracy: How the Trump Administration Can help Combat Kleptocracy in Africa and Improving U.S. Anti-corruption Policy in Nigeria.  

Last year was momentous for the breadth and depth of corruption revealed globally. Among the many remarkable events of 2016, the massive Panama Papers release, the multinational Odebrecht settlement, and Global Witness’ Undercover in New York investigations were all remarkable for pointing out the depth and breadth of international corrupt networks, and the degree to which they pass through a variety of jurisdictions, including—most notably—the United States. If 2016 was the year of bombastic revelations, 2017 seems to have brought growing consensus about how to fight transnational corruption, especially grand corruption and kleptocracy.  Kate Bateman and Charles Davidson recently expressed the emerging consensus about reforms that the United States might undertake, including:  Limit anonymous “shell” companies, which hide the identities of true beneficial owners and permit corrupt actors to “move and hide assets, launder money, and evade law enforcement”; Halt anonymous ownership of real estate in the United States, which has too often turned a blind eye to the kleptocrats in our midst; Tighten the enforcement of the Foreign Agents Registration Act; Use emerging bipartisan congressional support for anticorruption efforts to invest in greater U.S. government capacity to tackle international corruption by the Justice, Treasury, and State Departments; The first two recommendations, particularly, seem to be generating widespread support—including in Congress. One anonymous author was so expectant of change as to pen a book entitled “Offshore Apocalypse,” predicting the end of the offshore banking business. But this seems far too optimistic. The Trump Organization is reported to be doing more business than ever with shell companies, raising questions about the administration’s willingness to clamp down. Congress is not exactly a well-oiled legislating machine, so adding one more project to the dauntingly crammed legislative agenda may be a non-starter. Further, when it does act, Congress seems to be moving backward on anticorruption: one of legislators’ few achievements this year was to roll back the Cardin-Lugar provisions in section 1504 of the Dodd-Frank Act, which had required U.S. oil and gas companies to disclose payments to foreign governments. And of course, certain U.S. states rival Panama in the opaqueness of corporate disclosure requirements, suggesting that their representatives may not sign on to transparency-enhancing legislation. There are practical problems, meanwhile, with limiting shell companies and anonymous ownership, including the simple fact that even legitimately named owners are often hard to link to the political actors and prominent business leaders that may be a source of their wealth. If a beneficial owner is a relative of a major political figure but has a different surname, establishing key links across layers of international jurisdictions and legal entities that are purposely created to obfuscate the proceeds of corruption will still be a daunting task. This is particularly the case because there is so much illicit money sloshing around the world: the law firm at the heart of the Panama Papers, Mossack Fonseca, alone was responsible for creating 214,000 offshore accounts, a huge haystack for investigators to dig through. What is to be done? As an innovative recent paper by Mike Donaldson[1] points out, the ethical rules for lawyers do too little to prohibit U.S. lawyers from helping their clients to break the laws of foreign jurisdictions. In part because lawyers are trained to believe that everyone deserves legal advice and in part because the rules are not focused on what may happen outside the jurisdiction where a lawyer practices, there is not clear guidance—for example in the American Bar Association’s Model Rules of Professional Conduct—that would unambiguously prohibit American lawyers from assisting a client in a breach of foreign law. In addition, these Rules suggest that if a lawyer only reasonably believes (and doesn’t know for certain) that a client is breaking the law, she is entitled to continue acting on their behalf. And ABA Rules don’t explicitly require lawyers to ask enough questions in suspicious circumstances, such as the embarrassing scenes in the Global Witness videos when only one of thirteen New York lawyers immediately refused to help the supposed representative of a dubious foreign government official bring highly suspect money into the U.S. Donaldson offers a number of commonsense solutions for tightening the existing ethical rules of the legal profession to make it harder for lawyers to help suspicious transactions – or to phrase it another way, to help honest lawyers push back against pressure to take on bad business. There is, of course, a reasonable case to be made that we can’t expect U.S. lawyers to know the applicable laws of all global jurisdictions. But in a world in which offshoring and shell companies increasingly look ethically indefensible, perhaps a combination of greater awareness of the costs of international corruption, increasing harmonization of international anticorruption law, and tighter ethical standards for lawyers can contribute to moderating corruption’s terrible human costs. [1] Donaldson, Mike. “Lawyers and the Panama Papers: How Ethical Rules Contribute to the Problem and Might Provide a Solution,” Law and Business Review of the Americas, 22:4 (Fall 2016), 363-382.