INTERNATIONAL DEVELOPMENT COMMITTEE INQUIRY (IDC) | TACKLING CORRUPTION OVERSEAS Written evidence submitted by Transparency International Secretariat & Transparency International UK 1. Executive Summary 1.1. The UK government should take a zero tolerance approach to corruption but understand that a zero tolerance approach does not mean corruption will not take place. Uncovering corruption in aid programmes should not result in an immediate, wholesale withdrawal of aid. If corruption is being uncovered, this can be evidence of genuine efforts to expose and tackle corruption. 1.2. Corruption can undermine the effectiveness of aid. Addressing the corruption risks in its own operations and programming will hence increase the value for money of the UK's tax payer's contribution to international development. 1.3. Anti-corruption strategies must engage with partners in recipient countries from the very beginning at the needs analysis and planning stage if they are to adequately take into consideration local political and social contexts. Donors’ must have realistic and informed expectations of what is achievable when tackling the complexity and scale of corruption in a given country and be prepared to support longterm initiatives to see successful outcomes. 1.4. Taking a sectoral approach to tackling corruption can be useful especially in vulnerable sectors, where large amounts of money is at stake and where citizens stand to win or lose the most. These sectors include health, defence, extractives, the judiciary and the private sector. However there are many approaches that can be applied across sectors, for example in ensuring open and transparent procurement and contracting processes. 1.5. Accepting the link between corruption and instability should make tackling corruption a higher priority for those seeking to bring stability in fragile environments – but this requires coordinated action across multiple government departments. 1.6. It is important that the UK government take a holistic approach to tackling corruption. Country level strategies are crucial, but they need to be complemented by equally strong efforts within the UK and also at a regional and global level to tackle global systemic issues, such as cross-border corruption, money laundering and illicit financial flows. 1.7. If the UK is to be credible as a global anti-corruption leader, it must ensure its own house is in order. Action should be taken on the role of the UK as a centre for money laundering and to ensure that the UK political system is beyond reproach. Leadership and political will is necessary to drive forward a coordinated government approach to tackling corruption.
2. Introduction 2.1. Transparency International (TI) is the world’s leading non-governmental anti-corruption organisation. With more than 100 chapters worldwide, TI has extensive global expertise and understanding of corruption. The movement is supported by an International Secretariat based in Berlin. Transparency International UK (TIUK) is the UK chapter of TI. 2.2. Transparency International works with partners in government, business and civil society to stop the abuse of power, bribery and secret deals and put effective measures in place to tackle corruption. It is crucial to our mission that anti-corruption efforts be effective and well targeted and it is for this reason we welcome the IDC inquiry into tackling corruption overseas.
3. Should DFID have a zero tolerance policy towards corruption in the countries where it is working or is a more nuanced approach needed to tackle corruption over the long-term? 3.1. DfID should ensure it has a clear zero tolerance policy towards corruption. A zero tolerance approach to corruption should equally apply to British companies and NGOs operating overseas. A zero tolerance policy will reduce the incentives and space for corruption to take place but it does not mean corruption will not happen. 3.2. DfID would face severe reputational risks if found not to operate with a zero tolerance approach to corruption. The UK’s motives and credibility would be called into question and could lead to distrust, frustration and public anger. Nevertheless, zero tolerance does not dictate the response in situations when corruption is exposed, but it should be a trigger for a response of appropriate measure.
3.3. Uncovering corruption related to aid programmes in DfID donor countries should not result in an immediate, wholesale withdrawal of aid. If corruption is being uncovered, this can be evidence of genuine efforts to expose and tackle corruption and can actually serve as evidence that DFID partner countries have relevant checks and balances in place to uncover and punish corruption. Withdrawing aid in such cases could have a demotivating effect on the efforts of anti-corruption actors in these countries. In other cases, uncovering corruption is indicative of the systemic challenges to development that DfID is seeking to meet. People in donor countries who are governed by corrupt local or national leaders should not be punished twice by having aid removed in a wholesale manner. 3.4. A zero tolerance approach must incorporate corruption risk analyses into the planning and preparation of projects, programmes and any other support provided. It should include protecting the UK’s spending against fraud through strong monitoring, accountability and oversight, but it should also seek to develop clear strategies for tackling corruption in the host nation. 3.5. There are also mechanisms that donors and recipients can agree upon to achieve greater accountability for the use of aid. Agreements could include full budget transparency, by revenue source, sector and at all expenditure levels, anti-corruption and transparency clauses into contracts and support to improve public financial management. Information should be prepared and shared in an easily accessible format to promote citizen accountability. All these measures should not be misunderstood as rigid conditionality but rather decisive common action to ensure that the resources provided as aid have the desired positive effect. 3.6. For more information see Transparency International’s Policy Position Paper 06/2011, “Making Aid Effective: An Anti-Corruption Agenda”: http://www.transparency.org/whatwedo/publication/policy_position_6_2011_making_aid_effective_an_anti _corruption_agenda
4. How can DFID manage the risks associated with corruption and reconcile them with its value-formoney agenda? 4.1. Corruption can undermine the effectiveness of aid. Addressing the corruption risks in its own operations and programming will hence increase the value for money of the UK's tax payer's contribution to international development. 4.2. Safeguarding aid from corruption requires a multi-dimension approach. Donors should put in place internal integrity management systems, support anti-corruption efforts in recipient countries and implement mechanisms to safeguard aid. Transparency International has developed more detailed guidance, for example see Transparency International’s paper: “Donor accountability mechanisms to curb corruption in aid”: http://www.transparency.org/files/content/corruptionqas/Donor_accountability_mechanisms_to_curb_corru ption_in_aid_2014.pdf 4.3. In the long term, reducing corruption will reduce the need for donor support. Countries with high levels of corruption tend to collect less tax revenues,1 have higher public spending and larger fiscal deficits.2 Therefore, in addition to ensuring corruption does not hamper DFID's own direct operations, targeting anticorruption interventions in partner countries will ensure that these countries will increase capacity to root out corruption at the country level. In turn this can help ensure domestic and other resources will not get wasted and that for example basic services reach those who need it most. This will, in the long term, ensure that less resources need to be spend by the UK on international development. A ten per cent reduction in corruption has been found to raise productivity by 4 per cent of GDP and increase net annual capital inflows by 0.5 per cent of GDP.3 4.4. Donors’ must have realistic and informed expectations of what is achievable when tackling the complexity and scale of corruption in a given country and must be prepared to support long-term initiatives to see successful outcomes. A review of the alleged lack of success of anti-corruption commissions in five African countries surmised that “ACCs will never achieve ‘success’ until they are consistently funded at the right times, for the appropriately specified tasks, and at levels commensurate with a realistic level of performance”.4
1 Friedman, Eric, Simon Johnson, Daniel Kaufmann, and Pablo Zoido-Lobaton. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries." Journal of public economics 76, no. 3 (2000): 459-493. 2 Tanzi, Vito. "Corruption around the world: Causes, consequences, scope, and cures." Staff Papers-International Monetary Fund (1998): 559-594. 3 Lambsdorff, Johann Graf. "How corruption affects productivity." Kyklos 56, no. 4 (2003): 457-474. 4 Doig, Williams and Watt, “Measuring ‘success’ in five African Anti-Corruption Commissions” http://www.u4.no/publications/measuringsuccess-in-five-african-anti-corruption-commissions/#sthash.848j7bKE.dpuf (2005)
5. In 2013 DFID published anti-corruption strategies for all the countries it works in; how effective have these been? Do they adequately take into account the political and social context of the countries in question? 5.1. For the purposes of this inquiry, Transparency International contacted a number of chapters in DfID donor countries. It was generally felt that the 2013 anti-corruption strategies were not well known or promoted. Most chapters stated that they had not been consulted prior to the publication of the 2013 strategies. 5.2. Several TI Chapters have noted that in recent months since December 2015, they have been consulted regarding DfID’s forthcoming anti-corruption country strategies, in contrast to those published in 2013. Those that had been consulted also noted they felt more confident that the strategies would take local political and social contexts into consideration. It was also felt that DfID’s anti-corruption programming needed to establish much longer term interventions of five to ten years in length. 5.3. It is important that the UK government take a holistic approach to tackling corruption. Country level strategies are crucial, but they need to be complemented by equally strong efforts within the UK and also at a regional and global level to tackle global systemic issues, such as cross-border corruption, money laundering and illicit financial flows.
6. Do certain sectors require particular attention? How should success be measured? 6.1. Health and pharmaceutical sector: The UK’s 2014 ODA spend on health was £1.241 million – the largest amount of bilateral spend and 18.2% of budget allocation. Health continues to be one of the largest areas of UK ODA spend. Weak governance combined with this commitment of huge amounts of resources make the health sector particularly vulnerable to corruption. 6.2. According to Transparency International’s 2013 Global Corruption Barometer5, which surveyed over 114,000 people in 107 countries, 17% of people worldwide have said they have paid a bribe when dealing with the medical sector, and 45% believed medical and health services to be corrupt or extremely corrupt. In 17 countries, including four DFID priority countries, that figure rises to over 70%. From a lack of funds to pay hospital staff to falsified drugs in pharmacies, corruption weakens health systems and creates barriers to medicine, often effecting the most vulnerable. 6.3. Defence and security sector: A 2014 study by the Institute of Economics and Peace found that once countries reach a ‘tipping point’, a small increase in corruption can lead to a large increase in political terror, political instability, violent crime rates, violent demonstrations, organised conflict, access to small arms and light weapons, homicide rate, and level of perceived criminality.6 6.4. Corruption poses a threat to peace and security because disillusionment and distrust in government institutions often bolsters the ranks of non-state actors like organised crime groups and terrorist organisations. Anger at corruption, injustice, and normalised violence have been identified as drivers of youth flight into the arms of al-Shabab and the Taliban in Somalia, and Afghanistan.7 6.5. Corruption in the defence and security services is particularly dangerous. In the defence sector, corruption hollows out militaries and prevents them from responding to national threats. Corruption can mean soldiers operating with equipment that doesn’t work, or with no equipment at all. It can also mean defending citizens and cities with ghost armies: Mosul fell to ISIS after a regiment of 5,000 Iraqi soldiers on paper proved to number just 71 on the ground.8 6.6. Defence and security institutions consume a huge proportion of public spending. In 2014 global defence spending reached $1,776bn, the equivalent to 2.3 per cent of global gross domestic product (GDP).[6] The vast amounts of money involved, together with highly secretive (often unjustified) and centralised decision making, expose this sector to significant corruption risks. We have estimated that the financial cost of corruption in the defence sector is, at a minimum, $20bn a year. The theft of national budgets that this represents has a significant impact in terms of the missed opportunities to invest in health, education and infrastructure. 6.7. Judicial Sector: Judicial independence and the right to a fair hearing before an impartial court is a basic human right and fundamental to the rule of law, as well as a vital ingredient in a stable and economically viable country. Despite decades of judicial reform efforts, however, political and financial interference in the court room remains a resilient challenge. TI’s research in 2013 found 24% of people interacting with the judiciary worldwide paid a bribe, the second highest sector. By 2015, TI found 28% of citizens across 5 Transparency International, Global Corruption Barometer 2013, http://www.transparency.org/gcb2013 6 Institute for Economics and Peace, Peace and Corruption 2015, http://economicsandpeace.org/wp-content/uploads/2015/06/Peaceand-Corruption.pdf 7 Mercy Corps, Youth and Consequences: Unemployment, Injustice, and Violence, 2015 https://www.mercycorps.org/sites/default/files/MercyCorps_YouthConsequencesReport_2015.pdf 8 Zvi Bar’el, “Iraqis Have Bigger Worries Than ISIS,” Haaretz, August 22, 2015
Sub-Saharan Africa who had contact with a judge or court official paid a bribe – more than police and any other public sector service. Corruption undermines justice in many parts of the world. 6.8. Best practice in preventing corruption in judicial systems means helping to ensure an objective and transparent process for the appointment of judges, such as an independent judicial body that can make merit-based appointments. Protections for reasonable judicial salaries and working conditions and clear criteria for case assignments can also prevent pressure on judges to rule in favour of powerful politicians and companies, rather than according to the law. 6.9. It is also necessary to improve judicial accountability. Limited immunity should allow judges to make decisions free from fear of civil suit but should not apply to corruption or other criminal activities. Disciplinary procedures and removal processes must be clear, transparent and fair with reasons given for decisions. 6.10. Extractives sector: Approximately 680 million people live in resource rich countries but have to survive on less than $2 per day9 shows that poor governance and management of mining operations can actively undermine a country’s development. Sierra Leone produced more than 400,000 carats of diamonds in 2010, making it the world’s 10th largest producer. Despite its mineral wealth, Sierra Leone is ranked among the least developed countries in the world in the UN’s Human Development Index. 6.11. Quality of governance is the major determinant of whether the extraction of minerals contributes to a country’s sustainable development. Both governments and industry have a critical role to play in this context. Examples of corruption or poor governance practices can be found in numerous companies, jurisdictions and institutions across the mining value chain – from opacity and lack of accountability in processes at all levels to undue influence, bribery, tax evasion and diversion of revenues. Within the mining value chain, transparency in the award of permits, licences and contracts is critical. 6.12. Poor choices made about how exploration permits and mining licences are awarded and contracts are negotiated can result in poor outcomes for society as a whole. With billions at stake in individual deals, transparent and accountable contractual agreements between governments and mining companies are a foundation for the success or failure of mining as a contributor to development. Because of its importance, this stage in the value chain is often particularly vulnerable to corruption. 6.13. Success requires that communities have access to relevant and useable information in a form that helps them understand the impact of mining on their communities as well as the financial flows of both licence payments and future royalties on outputs. 6.14. Cross-sectoral vulnerabilities: Whilst many sectors are particularly vulnerable to corruption, corruption is often a feature of those sectors because of weaknesses in governance that are common to all sectors. As an example, public procurement is at the heart of physical and social infrastructure projects, and the purchase of goods and services across all sectors. Yet, the OECD estimates that corruption drains between 20 and 25 per cent of national public procurement budgets.10 Cross-cutting measures such as ensuring transparency across the entire procurement process from needs analysis, to tendering and bidding, to projects to evaluations is crucial to ridding corruption from procurement budgets. Independent monitors by way of external experts of civil society groups should be involved throughout the process. 6.15. One way in which the UK could measure success in this regard, is in the number of donor countries that sign up to and show progressive implementation of the Open Contracting Partnership and associated data standard and the International Open Data Charter. Donor countries should be encouraged to sign up to the Open Government Partnership and build and implement strong, time-bound national action plans. 6.16. Monitoring success: At a country level, Transparency International’s Global Corruption Barometer, Transparency International’s Global Corruption Barometer, which is the largest worldwide public opinion survey on views and experiences of corruption, published in regular intervals since 2002, can track perceptions and experiences of corruption across multiple sectors, as long as the conditions for over-time comparability are in place. Please see the following publication on how the GCB can be used for monitoring governance, including the UN Sustainable Development Goals”: http://www.cmi.no/publications/publication/?4505=why-when-and-how-to-use-the-global-corruption
9 Civil 20 Position Paper on Public Sector Transparency, Integrity and Accountability, 2014, on http://www.c20.org.au/wpcontent/uploads/2014/05/C20-ACW-Public-Sector-TransparencyIntegrityAccountability-final.pdf (G20 Anti-corruption Working Group: Proposal for 2015-16 priorities) 10 OECD, “Implementing the OECD Principles for Integrity in Public Procurement”: www.oecd-ilibrary.org/governance/implementing-theoecd-principles-for-integrity-in-public-procurement/why-clean-public-procurement-matters_9789264201385-3en;jsessionid=95lfbj6h46u4a.x-oecd-live-01, 2013
7. What should the balance be between seeking to tackle corruption top down at institutional level and bottom up at the grass roots? 7.1. Corruption is often systemic, requiring a holistic and multifaceted response. The types of corruption that poor people are most likely to encounter on the ground are often embedded in systems supported by corruption. For example, a bribe paid by a patient to obtain medicine in a hospital may be stimulated by a drug shortage caused by a corrupt health ministry official selling the legitimate drug supplies on the black market. Our experience from over twenty years is that systemic and institutional corruption must be addressed so as to most improve the lives of the poor. Direct work with on the ground actions in local communities and programmes to bring about systemic change are not mutually exclusive; in an ideal strategy they will go hand in hand. 7.2. The UK government must take on the challenge of addressing corruption at the systemic and political level, despite the inherent difficulties involved in doing so. Aid should not be removed from communities that suffer from corrupt institutions. This would punish poor people twice: with corrupt government, and by taking away the funds needed for health, education and the other Sustainable Development Goals. If aid itself is perpetuating corruption, then the answer is to seek to reform institutions and deter and punish corrupt individuals, not to stop the services on which the poor depend. DFID, together with other donors, civil society, and other aid providers, should work together to tackle endemic corruption that inhibits aid being provided to where it is needed most and to work on how we evaluate this and the issue of aid dependency – where the impact of aid provision is clearly being reduced.
8. What works and what is not working as well and why? 8.1. As a caveat to any discussion about what is working well and what is not, addressing corruption always requires a country-specific approach, taking into account the general political and social context of the relevant country, particularly its political economy (i.e. an analysis of who benefits from corruption and who doesn’t). In many countries receiving UK aid, addressing corruption means putting the basic rules and institutions in place, such as civil liberties, including freedom of the media, a functioning government, the rule of law and absence of violent conflicts. Where these fundamentals are in place, more specific anticorruption approaches, such as access to information, citizen-based accountability and oversight mechanisms (including the media) as well as an independent horizontal accountability institutions (e.g audit institutions, judiciary, ombudsman) are key to curbing corruption. These reforms need to be led by broad-based domestic coalitions of actors/organisations who have a genuine interest in changing the corrupt status quo. Without their leadership, any of these reforms are likely to fall short of their expectations. 8.2. Ordinary people bear the costs of corruption and yet often do not have the ability to challenge the underlying imbalance of power. It is for this reason that Transparency International established Advocacy and Legal Advice Centres (ALACs) to provide free and confidential legal advice to witnesses and victims of corruption and ALACS are arguably a solution that has worked well in many settings. In environments where the equality and rights of people are frequently ignored and abused, providing access to justice and accountability is rare, relevant and innovative. ALACs have now been established in 60 countries worldwide now and to date, more than 200,000 people have contacted TI chapters for information and support in case resolution. 8.3. This approach requires comparatively modest funding, it makes a real difference to individuals who seek support and to societies that suffer from corruption. It saves lives, dignity, and in many cases millions of pounds. 8.3.1.TI India intervened in a case where a woman who worked in a local maternal health clinic was repeatedly asked for a bribe in order to secure renewed funding for the centre. The woman refused, and was later subjected to a penalty payment and the threat of losing her job for the months the clinic had not been signed for. The chapter convened a “social audit” – providing a platform for all involved individuals to make their case. The funds were subsequently released and all punitive actions against the employee removed. 8.3.2. Transparency International Zimbabwe helped secure justice for a nine year old rape victim and her family when her attacker repeatedly eluded trial by paying off police and investigative units. The chapter took on the case themselves after the family were unable to secure justice over six months. They raised it with the police internal investigations department and Investigations confirmed that the alleged attacker had paid off the police, prosecutor and magistrate in exchange for being discharged in secret. Transparency International Zimbabwe and the police investigations unit escalated the case to the Ministry of Justice, Legal and Parliamentary Affairs. Despite further attempts by the attacker to bribe the presiding magistrate – the attacker was brought to justice. 8.3.3. Sometimes the impact is felt on a country-wide scale – The Palestinian ALAC was alerted to a case where more than 6,000 civil servants were using government cars at a cost of over US$18 million in
fuel and maintenance costs. Many vehicles were being used illegitimately. Following TI’s advocacy, a ban was introduced on private-use, saving over US$7 million annually to the budget. 8.4. Local interventions alone are not however sufficient to tackle corruption. Corruption is increasingly a global problem, with corrupt individuals using the international financial system and secrecy provided by multiple jurisdictions to hide, transfer and enjoy ill-gotten gains. The UK must therefore look at its role in accepting corrupt money into its banks, services and property market, and must support and strengthen international anti-corruption approaches and mechanisms, such as the UN Convention against Corruption or OECD Working Group on Bribery in International Business Transactions.
9. Corruption and poor governance can be a key cause of instability in fragile states. Is the UK Government appropriately prioritising and managing anti-corruption strategies in these settings? What are the challenges in practice and what could it be doing better? 9.1. Accepting the link between corruption and instability should make tackling corruption a much higher priority for those seeking to bring stability in fragile environments – but this requires coordinated action across government departments. This should include the following: 9.1.1. Stronger action to contain those whose motives and behaviours are suspect: A better understanding of corrupt networks is needed alongside strong political signalling. In corrupt environments the focus should be kept firmly on the interests of people, not those in power. Providing visible development aid is a way of demonstrating this, but doing so while appearing to support a corrupt, repressive leader threatens the legitimacy of efforts. 9.1.2. Shifting incentive structures for corrupt individuals. Corrupt actions are frequently rationalised as cultural or as “the way thing are done”. The UK must deny safe haven to the assets of corrupt individuals and prevent access to our education system, markets, and lifestyle. This would be major step in shifting the incentives away from engrained corrupt activity. 9.1.3. Increase the focus on security sector governance in fragile states. Fragile states are naturally priority targets for international support, but have the weakest institutional capacity for absorbing assistance. Often the approach is too centred on “train and equip”, which can do more harm than good if defence sector is highly predatory. We should explicitly recognise and analyse the risk of corruption in the design and delivery of all security assistance programs – recognising that both knowledge and equipment can be diverted. 9.1.4. Increasing transparency of assistance. International spending on peacekeeping, stabilisation, and security assistance, is not consistently reported. The lack of scrutiny and information about international programmes increases the chances that the diversion of funds towards extremist groups or obstructive forces goes undetected and unpunished. In Afghanistan, significant international funding ended up indirectly supporting warlords and insurgents. TI has produced some suggested best practice guidance on the specific issue of security assistance which should be considered if more development assistance is to be spent by other government departments. 9.1.5. Particular emphasis should be place on the development of oversight mechanisms. In any state where corruption is a major issue, a strong focus on building the capability of oversight institutions such as parliamentary committees, an Office of the Auditor General and a civil society able to exercise effective oversight of the funding and activities of institutions is vital. 9.1.6. Tackling corrupt outflows: Huge sums of money are siphoned out of countries with endemic levels of corruption each year. Key enablers such as banks, accountants, lawyers, real estate agents, must be required to undertake enhanced due diligence of foreign PEPs, and be sanctioned for not doing so. 9.1.7. Recognising that corrupt governments are not our allies. Many of those to whom many European governments instinctively turn are far from friendly forces in the fight against terrorism. Corrupt governments that are not responsive to the demands of their population are the architects of future security crises. 9.2. Nigeria Case study: In Nigeria, corruption in the defence and security sector goes a long way in explaining the army’s struggle to effectively push back the Boko Haram insurgency. Recent procurement scandals have revealed that millions of dollars’ worth of military equipment meant for soldiers in the North East of the country have ended up in the hands of senior defence officials.11 TI’s 2015 Government Defence Anti-Corruption Index has also alerted to the very high risk of corruption in the Nigerian defence and security sector, highlighting key institutional weaknesses. While the UK is rightly making the fight against corruption and good governance a priority in Nigeria, it should focus more of its efforts on addressing corruption in the defence sector to ensure a rapid return to peace and stability.
11 Daily Trust, “Arms purchase: EFCC arrests Yugada, others”, December 1 2015, http://www.dailytrust.com.ng/news/general/armspurchase-efcc-arrests-yuguda-others/122064.html
9.3. Naturally there is a need to address fragile states as a priority. However, funding should not be removed from transitional states. They may be on the path to recovery and a removal of assistance could facilitate a return to fragility.
UK POLICY 10. How important is UK domestic anti-corruption policy and practice to international efforts to curb its effects? 10.1. If the UK is to be credible as a global anti-corruption leader, it must ensure its own house is in order first. Action should be taken to ensure that the UK political system is above reproach, and on the role of the UK as a centre for money laundering. Due to its role as a global financial centre, its connection to offshore havens, and the loopholes in the anti-money laundering (AML) system, it is unsurprising that the UK is a destination for corrupt assets. The UK helps facilitate global corruption by providing a safe place to hide stolen funds. The National Crime Agency estimates £100bn a year of illicit funds are laundered in the UK. The loopholes in the UK anti-money laundering and asset recovery regime must be fixed. 10.2. The UK should ensure it is not exporting corrupt practices, for example through UK businesses paying bribes oversees. Any corruption scandal involving British companies operating abroad undermines the UK government’s rhetoric and action on corruption. All relevant government departments should demonstrate unambiguous support for the UK Bribery Act and its effective enforcement. 10.3. A Transparency International poll revealed that 59% of the public believe that the UK Government is largely or entirely run by a few big entities acting in their own interests.12 Many recent lobbying and ‘revolving door’ scandals have fallen within the rules, demonstrating that the current regulatory regime is inadequate. The UK needs to stem the steady stream of corruption scandals emerging from its political institutions by closing the loopholes that open the door to corruption.
11. Is there a coherent ‘One HMG’ strategy to combating the effects of corruption on developing countries, and what should DFID’s role be within this? What are the challenges in practice? 11.1. There is currently no 'One HMG' strategy on corruption. Any such strategy in relation to developing countries would need to cover both corruption within those countries and the related role that global financial centres play, such as the City of London and the UK's Overseas Territories and Crown Dependencies. TI welcomed the Government’s Anti-Corruption Plan launched in December 2014, which represented an important step forward. Likewise, corruption is references in the ODA Strategy and the SDSR, which are positive developments. However, there is no over-arching strategy for the UK’s approach to corruption, which means that there is no discernible long-term vision or goal to which the Plans are contributing or view of what a ‘one HMG’ approach to corruption should look like. 11.2. There are two areas of specific weakness in coordination. First, the role of Anti-Corruption Champion, which is meant to coordinate cross-Whitehall approaches, has itself been weakened by a downgrading of the position to non-Cabinet level, and long gaps in appointments between champions. On the positive side, the Cabinet Office now has a Joint Anti-Corruption Unit to facilitate coordination. 11.3. Secondly, and most significantly, there are around a dozen departments now responsible for ODA and they do not take a coordinated approach to corruption. For example, the MoD is willing to support and entrench highly corrupt regimes with arms exports, whereas DFID promotes values such as transparency and a strong civil society which are designed to reduce corruption. Likewise, BIS has periodically signalled its interest in watering down the effectiveness of the Bribery Act, whereas the MoJ and DFID have defended the need to prevent British companies undermining the economies of developing countries through bribing government officials. Finally, HMT and FCO have until recently been noticeably less active on prioritising the role of the UK itself and the Overseas Territories in combatting money laundering, whereas the PM and DFID publicly advocate stronger approaches to AML and asset recovery. 11.4. TI believes that the Government should consider creating an over-arching strategy that would improve coordination between departments and should have a substantial beneficial effect on addressing corruption in developing countries.
12 Transparency International, Global Corruption Barometer 2013, http://www.transparency.org/gcb2013/country/?country=united_kingdom
12. What more should the UK Government be doing on issues such as beneficial ownership, tax havens, illicit flows and the arms trade to limit the effects of corruption on developing countries? 12.1. The UK is a safe haven or port of transfer for corrupt money, stolen from around the world, and steps must be taken to end that role. The Government should make changes to ensure a more robust anti-money laundering system, a swift and effective asset recovery regime, and extended beneficial ownership disclosure. 12.2. The UK has taken a lead in creating public registries of beneficial ownership in the UK. As a next step, the Government should ensure that all companies that seek to own UK property or obtain contracts to provide public services, first disclose who controls and benefits from their business decisions. 12.3. Secrecy and corruption in the UK’s Overseas Territories and Crown Dependencies make a significant contribution to the UK’s role as a safe haven for corrupt funds. The secrecy offered by the offshore company structure enables corrupt individuals to hide the source of their funds and use them to buy property, luxury goods and education in the UK. Public registries of beneficial ownership are necessary for real accountability. 12.4. Where defence institutions are highly vulnerable to corruption, there is a strong national security case for the UK to focus on governance issues in applying export licensing criteria. This is not only due to the high risk of diversion in such cases. The export of military capability to a corrupt environment is an export to country without a strong foundation for state legitimacy, and therefore an export into an inherently unstable environment.
13. How might it use its influence to encourage coherent international action? 13.1. The UK government should be congratulated for seeking to place corruption on global leaders’ agendas by hosting the Anti-Corruption Summit in May 2016. The Summit deliverables should be ambitious, concrete and time-bound. A plan for the implementation and the monitoring the implementation of deliverables should be adopted at the time of the Summit. 13.2. The UK must continue to ensure that corruption becomes more visible in existing global policy platforms. The UK should seek to ensure the G20 adopts a new Anti-Corruption Action Plan at the 2016 Summit in China with strong, time-bound deliverables. The UK should however also ensure that corruption is not kept siloed within the mandate of the Anti-Corruption Working group, but should champion it at Finance Ministers’ level and within the main deliverables of the G20 on strong, sustainable and balanced growth. The UK’s leadership within the Open Government Partnership is also welcome as is its role in the new OGP Anti-Corruption Working Group. 13.3. The UK must see the links between its domestic and global anti-corruption work as part of delivering on Goal 16 of the Sustainable Development Goals. Appropriate resources (both financial and human) must be made available for this. Transparency International would welcome the UK’s support on ensuring strong provisions to track progress (domestic and international) on the SDGs. To deliver on the goals, timely shareable and comparable information will be key as well as the selection of the right, most appropriate indicators. 13.4. The UK Government can promote tackling corruption overseas on development and climate finance by ensuring that strong accountability mechanisms are built into development and climate aid packages including support for national institution building including anti-corruption commissions, ombudsman and other legal bodies mandated to review and resolve corruption complaints. The UK could also support the role of civil society in formulating sustainable development and climate change adaptation and mitigation actions plans as well as in monitoring their implementation and results. Finally, the UK could ensure budget transparency and the transparency of climate and development aid flows to enable third party oversight and enable accountability mechanisms to function as needed. 13.5. Global coordination of anti-corruption efforts and ensuring effective monitoring of international standards needs to be improved. The UK could take a leading role in that area, for example by ensuring more coordination and exchange between UNCAC, OECD Convention and other intergovernmental standard-setting bodies, the UN human rights bodies, the SDG processes and with the “openness” agenda, such as with the Open Government Partnership, the Open Contracting Partnership and the open data movement. 13.6. The UK should be commended for its active enforcement of the OECD Convention. Given its experience in this field and the country’s weight in international anti-corruption efforts the UK should encourage stronger enforcement in those OECD Convention countries that have not successfully concluded any foreign bribery prosecution since joining the Convention and offer them technical assistance. The UK should offer mutual legal assistance and proactively transmit information to support investigating and prosecuting money-laundering where the predicate offence is foreign bribery and the UK authorities have
access to relevant information. Finally, the UK should seek to convince the remaining G20 non signatory countries China, India, Indonesia and Saudi Arabia to join the Convention.
14. About Transparency International 14.1. Transparency International (TI) is the world’s leading non-governmental anti-corruption organisation. With more than 100 chapters worldwide, TI has extensive global expertise and understanding of corruption. 14.2. Transparency International UK (TI-UK) is the UK chapter of TI. We raise awareness about corruption; advocate legal and regulatory reform at national and international levels; design practical tools for institutions, individuals and companies wishing to combat corruption; and act as a leading centre of anticorruption expertise in the UK.
Contact Maggie Murphy Senior Global Advocacy Manager, Transparency International mmurphy@transparency.org, T: + 44 (0)20 3096 7698 Rachel Davies Senior Advocacy Manager, Transparency International UK rachel.davies@transparency.org.uk, T: + 44 (0)20 3096 7697