A torrent of corrupt money flows from developing countries

19 December 2011
 
 
Corruption is not going away!
 
Global Financial Integrity reported last week that corruption is getting worse.  Worldwide, the annual growth in illicit money flows is estimated at 14.9%.   In the face international anti-corruption arrangements and national commitments, it may be reasonable to infer that there is an entrenched acceptance of corruption by some power groups in all societies.
 
GFI note that the recent decrease in trade and restricted credit conditions took the edge off the peak outflow from developing countries.  For the 2008-9 year this was valued at USD 1.55 trillion.  However the trend is increasing in all regions.  Unsurprisingly in the period between 2000 and 2009, China, Mexico and Russia were the economies losing most to corruption. The flow of illicit capital out of Africa, which increased last year by 22.3%, is the world’s worst.  Perhaps even more concerning in the light of the leadership role often adopted by governments in the developed world is that illicit transfers in those economies are growing at 4.4% per annum. In Asia, much of the fraud reflects mispricing.  In most other places, bribery and payoffs to public officials were the sources of the illicit capital.
 
This GFI findng indicates that measures being taken everywhere are insufficient to counter corruption. The USD 8.44 trillion lost to illicit transfers over the decade since 2000 would not have been manageable without European and North American banks being extensively involved. Banking regulators in tthese  jurisdictions should also have been aware of these transactions. The unavoidable conclusion is that a corrective movement will only occur if there is more effective promotion and enforcement of integrity standards in developed countries, as well as in the economies where illicit cash flows originate.  New Zealand needs to share this commitment.  Our banking system is no less susceptible than any other to the challenges of large scale money-laundering and off shore tax evasion.
 
 
 

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December 19, 2011

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Petty corruption sparked the Arab Spring

17 December 2011
 
Mohammed Bouazizi set himself alight a year ago today.
 
The reaction set much of the Arab world alight.  The aspiration for good government, and trustworthy, public spirited leaders, found expression in rebellion. The Arab Spring ultimately brought massive change before the winter set in.
 
Whether that change will substantially improve lifestyles of the majority in Tunisia, Egypt and Libya remains uncertain.
 
States in the North Africa / Middle East region vary widely in their rating on the Transparency International Corruption Perceptions Index.  Qatar the highest placed, is 22nd on the 2011 CPI. Tunisia is 73rd, Egypt 112th and Libya 168th. These figures suggest that regime change is not, in itself, likely to deliver on expectations. Major legal and institutional reform, strengthened by substantial capacity building, will be necessary to reverse levels of corruption.
 
It was corruption that drove Bouazizi to self immolation.  In January, Time magazine reported that “…a  policewoman had confiscated his unlicensed vegetable cart and its goods. It wasn’t the first time it had happened, but it would be the last. Not satisfied with accepting the 10-dinar fine that Bouazizi tried to pay (US$7, the equivalent of a good day’s earnings), the policewoman allegedly slapped the scrawny young man, spat in his face and insulted his dead father…
 
Humiliated and dejected, Bouazizi, the breadwinner for his family of eight, went to the provincial headquarters, hoping to complain to local municipality officials, but they refused to see him. At 11:30 a.m., less than an hour after the confrontation with the policewoman and without telling his family, Bouazizi returned to the elegant double-storey white building with arched azure shutters, poured fuel over himself and set himself on fire. He did not die right away but lingered in the hospital till Jan. 4. There was so much outrage over his ordeal that even President Zine el Abidine Ben Ali, the dictator, visited Bouazizi on Dec. 28 to try to blunt the anger. But the outcry could not be suppressed and, on Jan. 14, just 10 days after Bouazizi died, Ben Ali’s 23-year rule of Tunisia was over…”
 
 

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December 17, 2011

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Hallo, ‘allo, ‘allo! No longer the bobbies of old?

16 December 2011

Too many English police officers show questionable ethics. The belief that for the last 25 years British Police Forces have been corruption free has taken a knock. Phone hacking by the News of the World was abetted from time to time by police officers providing telephone numbers. A report was published this week of an inquiry set up to explore the extent to which Police in England, Wales and Northern Ireland exchanged information for personal rewards.

In keeping with many inquiries into public sector standards, the finding is that there is no endemic corruption – just widespread, opportunistic abuse of office, facilitated by senior officers who have failed to establish and enforce standards. “There are significant variations between forces … in how they defined what is acceptable and what is not”.

The inquiry undertaken by HM Inspector of Constabulary looked at relations with the media, disclosure of information, hospitality, gratuities, procurement contracts and business interest. These are areas where evidence of self interest quickly erodes public trust and confidence. A third of the public questioned believe that police corruption is a problem.

The report findings are seen as a “wake up” call because of the hugely inconsistent processes across English policing. At its simplest, of the 43 Forces only 20 have written guidance on the acceptance and disclosure of gifts. Too often there is no expectation of public declaration and registration of benefits received by officers. The growing culture, that there is no harm in accepting these benefits, is a denial of research findings that gift giving engenders an unconscious motivation to reciprocate.

The similarity of this report “Without fear or favour” with the Deloittes report on the acceptance and disclosure of gifts and hospitality in the NZ Treasury is notable. “Leaders have, on the whole, failed to grasp the importance of integrity and are therefore insufficiently compelling in setting the values and standards that should apply across all aspects of policing, as well as in setting a personal example to their staff.”

　

The Police Superintendents’ Association seems to accept the solution. It lies in leadership. “The message from the public is that they expect the police service to be fair and impartial and therefore it is a matter of critical importance that the police should not only act fairly, they must also be seen to act fairly”.

That seems remarkably similar to the responsibility of all employees in the New Zealand state sector to give effect to the principles of public service; “we must be fair, impartial, responsible and trustworthy”.

The problem is a failure to give effect to the “6 trust elements”. The path to improvement is a commitment to putting those elements in place. This requires that agencies

have standards

promote those standards

integrate the standards into operations

ensure managers model the standards

ensure staff know the consequences of breaching standards

take decisive action when standards are breached.

　

　

www.policeoracle.com/news_overview.html

www.parliament.uk/documents/commons-vote-office/8-HomeOffice-HMICReport.pdf

www.treasury.govt.nz/downloads/pdfs/deloitte-gift-oct11.pdf

www.ssc.govt.nz/node/5390

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December 16, 2011

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Fair, impartial, responsible and trustworthy principles confirmed

15 December 2011

A Cabinet Circular published yesterday confirmed that the new administration will operate on the basis of the Cabinet Manual (2008) and the Agreements between the National Party and the Act, Maori and United Future parties.

Confirmation that the Cabinet Manual remains the rule book for the way government operates provides an opportunity for all who work in Government agencies to review the Chapter 3 provisions about the relationship between Ministers and officials. But more importantly, we should refresh our understanding of the behavioural obligations specified in paragraphs 3.50 – 3.75. These are the provisions specifying Integrity and Conduct across the state sector.

The Cabinet Manual is the source document for the notion of the “principles of public service”, providing meaning to those principles. Under the title of “Principles of public service” is the direction that –

“Employees in the state sector must act with a spirit of service to the community and meet high standards of integrity and conduct in everything they do. In particular, employees must be fair, impartial, responsible, and trustworthy.”

This is a “loaded” direction. It makes clear that the “spirit of service”, which has its foundation in the long title to the State Sector Act, applies to the state sector. The application is beyond the Public Service departments whose chief executives have a responsibility “to imbue staff with the spirit of service to the community”.

It makes clear that

* all agencies across the state sector are required to meet high standards of integrity and conduct

* fairness, impartiality, responsibility and trustworthiness are principles of particular importance

* the mandatory application of these principles is to employees

* that the principles apply, beyond on the job activities, to everything they do.

Agencies comprising the state sector are listed on the State Services Commission website link below.

　

www.dpmc.govt.nz/cabinet/circulars/co11/10

www.cabinetmanual.cabinetoffice.govt.nz/3

http://ssc.govt.nz/state_sector_organisations

http://ssc.govt.nz/integrityandconduct

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December 15, 2011

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Would you trust a politician?

14 December 2011

Over the last few years bankers have been scorned in public opinion. Once a respected profession, they took a place near the bottom of the list of occupations having public respect and confidence frequently held by politicians. In Britain it would seem that journalists may earn that slot this year as the phone hacking scandal continues to contaminate some elements of the media.

But in the United States politicians continue to be the occupation for which most people show distrust. “Sixty-four percent of Americans rate the honesty and ethical standards of members of Congress as ‘low’ or ‘very low’ tying the record ‘low / very low’ rating”  Gallup has measured for any profession historically. Gallup has asked Americans to rate the honesty and ethics of numerous professions since 1976, including annually since 1990.”

Not surprisingly in the poll conducted at the end of November in which Americans rated honesty and ethical standards, nurses, pharmacists, and doctors scored best of the 21 professions tested. At the other end of the spectrum, members of Congress, lobbyists, car salespeople, and telemarketers.were seen as the least honest and ethical. In 2001, 22% rated the honesty and ethics of politicians as very low or low; it is now 64%. They view lobbyists just as poorly.  “Nurses consistently top the list, having done so each year since they were first included in 1999.”

Survey results in New Zealand are similar. Although the Readers Digest ‘trusted occupations’ survey year on year shows that greatest confidence is placed in firefighters, more scientific studies all have nurses, doctors, police officers and teachers in the top positions, in a largely unchanging order.

The UMR Mood of the Nation survey last year ranked 15 occupation. Nurses were top with a rating of 8.6, Public Servants were 8th with 6.2 and politicians at 14th on 4.7. This year’s UMR results should be published later this month. There is unlikely to be much of a change.

Declining voter participation in general elections may reflect this low level of confidence in politicians. However the World Values Survey last conducted in New Zealand 2005 rated confidence in political parties at 25% , not substantially different from findings in comparable surveys in 1985 and 1998.

www.gallup.com/poll/151460/Record-Rate-Honesty-Ethics-Members-Congress-Low.aspx

www.readersdigest.co.nz/most-trusted-professions-2010

www.shore.ac.nz/projects/Public_Life_Values.pdf

https://integritytalkingpoints.com/2010/12/24/125/

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December 14, 2011

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New UK civil service theology as “GOD” retires!

13 December 2011 
 

A LSE blog entry last week by Prof Colin Talbot explores the changing leadership structure of the British civil service. Sir Gus O’Donnell, who has always shown an interest in the sharp end of government, frequently visiting “front offices”, is being succeeded in office by three people. Referred to often by his initials, GOD is being replaced by a trinity of officials.

The Head of the Civil Service role is being structured more around policy and less around making things work. That contrasts with O’Donnell who is renowned for a drive to put “policy into action”. He has been an enthusiast for enthusing others. The “4 Ps” was his mantra –“pride , passion, pace and professionalism”. That expression was replicated in guidance issued by the State Services Commissioner to explain the meaning of the standard that “we must work to the best of our abilities”. But O’Donnell’s propensity to engage with the operational parts of the the civil service has not been replicated in New Zealand by State Services Commissioners who traditionally have a strategy focus.

State Services Commissioners “do” policy. They don’t do implementation – and none recently has any depth of experience in “actually running things”. The key to ‘mplementation is getting the policy right in the first place. The blog writer reflects the Henry Minzberg view that there is no such thing as bad implementation, just bad strategy. You can’t make good policy without knowing thoroughly what the implementation issues are going to be, and for that you need strong input from people with experience of actually doing it. That seems to be something being recognised in SSC Performance Improvement Framework reviews of agencies.

The role split in Britain is seen as a way of getting operational skill into top management. The Cabinet Secretary task goes to a long time policy adviser. The leadership role as ‘Head of the Civil Service’ goes to a hands on manager who will continue “in his day job” as Head of the Department for Communities and Local Government. Another operationally focused officer, currently heading the Cabinet Office Efficiency and Reform group, will be Head of the Cabinet Office.

Talbot observes that the UK political class is increasingly characterised by people who only have policy experience and have never run anything. Moves to balance this by appointing very senior civil servants with real managerial experience has been glacially slow.

The default ethos in Britain is that “it is policy that really matters.” That may not be the same here, where Ministerial disapproval of policy adviser-numbers suggests that Key administrations are not so keen on policy.

　

www.guardian.co.uk/politics/2011/dec/04/gus-odonnell-civil-service-career

http://blogs.lse.ac.uk/politicsandpolicy/2011/12/08/god-replacement/

www.ssc.govt.nz/node/1914

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December 13, 2011

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Apparently corruption never sleeps

 

12 December 2011

The symbiosis between fraudsters and the anti corruption movement was very evident in last week’s news from around the world. Enforcement agencies seem to have been “saving up” high profile cases to capture media attention.

Last Thursday was designated by the United Nations as International Anti Corruption Day, but the week began and ended with events of almost sublime paradox. It started with much of the world’s media fascinated by the story of two Indian peasant farmers letting loose sacks-full of snakes in a tax office. The farmers were responding to extortionate conduct of local officials who were demanding bribes before making land records available. In juxtaposition, the Indian bureaucracy is reported to be syphoning up to 1.26% of the GDP each year, or approximately $18.2 billion.

The week ended with upwards of 100,000 Moscovites demonstrating in ager at the extent of fraud in parliamentary elections. Mid week the findings of an economic study were that between 2000 and 2009 an estimated $500 billion was illicitly transferred out of Russia – the economies of only two other countries have last more in this way, to fraud.

In Britain, a lobbying firm was “caught out” boasting of how countries and national leaders with serious integrity problems could use its services to bury bad news stories and influence public opinion. And this week the Police have indicated that up to 800 people had their phones hacked at some stage by reporters from News of the World.

In Australia, the Victorian Government has announced it will get legislation in place by mid 2012 to establish the long awaited Independent Body Against Corruption, with jurisdiction over anyone paid from public money, including politicians, judges and officials. In New South Wales the former deputy of the NSW Crime Commission convicted of corruption has been sentenced to 22 years. And in Queensland, the finance manager for the State’s Health department has gone missing with $16 million of that agency’s assets.

Most prominent of reported events in the United states was the sentencing of former Governor Blagojevich to 14 years imprisonment, with the judge commenting that “the abuse of the office of governor is more damaging than the abuse of any other office, except the president’s.”

But politicians of all colours seem combined in their opposition to giving steam to the STOCK Bill – Stop Trading Congressional Knowledge Act – championed by numerous good-government organisations. The House Committee considering the matter last week was not responsive to a law that would outlaw congressional self-dealing and impose greater transparency on the actions of politicians.

In China the boss of the Beijing Airport, convicted of fraud, has been sentenced to 12 years in prison. In Vietnam,new police regulations prohibit police officers having more than $5 on them, as part of anti bribery measures.

Not to be left out, New Zealand had two high profile cases also, with charges relating to the alleged $1.7 billion fraud on South Canterbury Finance, and a court ordering the fraudster convicted of a $103 million ponzi scheme remain in custody until sentence later this month.

An interesting week!

And that is just picking the high profile reports. All of which supports the need for countries to commit fully to anti corruption convention obligations, and to the Open Government declaration which requires its member states … “to implement the highest standards of professional integrity throughout their administration ….(including) robust anti corruption policies, mechanisms and practice

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December 11, 2011

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One year on…..

Twelve months and 252 posts ago, Integrity Talking Points migrated to this page from its earlier location at  www.ssc.govt.nz/blog/category/304.

International Anti Corruption Day seems to be a good day for an anniversary.  It also has auspicious adjacent dates.  Yesterday the Open Government Partnership celebrated in Brazil as a further 41 countries joined the eight foundation members. And tomorrow, Human Rights Day, is the 63rd anniversary of the Universal Declaration of Human Rights.

www.un.org/en/events/humanrightsday/2011/ Declaration of Human Rights.

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December 9, 2011

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International Anti Corruption Day

9 December 2011
Today is International Anti Corruption Day.
The results of numerous surveys suggest that there is an undiminished need to maintain public awareness of the causes and consequences of corruption. Awareness is a prophylatic in the same way as sunshine is a disinfectant.  That need for awareness may be as great in New Zealand as elsewhere.
The announcement this week by the Serious Fraud Office of arrests in the largest ever New Zealand fraud case, reportedly involving more than 1.7 billion suggests that opportunism is as likely to afflict enterprise in New Zealand as elsewhere. This confirms the Transparency International Global Corruption Barometer finding earlier this year,that 4% of New Zealanders said they had paid a bribe in the previous 12 months – higher than UK at 1% and Australia at 2%.
PricewaterhouseCoopers economic crime survey references to the New Zealand market echo the findings in the Auditor General’s Public Sector Fraud survey and both the Ernst and Young and the KPMG 2011 fraud barometers. The outcome is reflected in the list of convicted fraudsters published on the Verify website
The ‘good news” of course from the New Zealand perspective is that the Corruption Perceptions Index increased the rating given to the New Zealand public sector, which remains in the top slot. There appears to be a difference also in the nature of corruption in New Zealand and in many other OECD countries.
The 2011 BRIBEline report shows a fraud pattern with many consistencies across jurisdictions (USA, Brazil, Mexico, Ukraine, Russia,India and China.) More than half of bribes are made by people associated with government, more than half recur year on year, and nearly 20% of bribes are offered more than 100 times annually.  Three quarters of bribes are for cash, and nearly half are extortionate. Although in the US about half of bribes are for less than $5,000, 25% are for more than $50,000, a much greater percentagee than elsewhere.
An interesting publication recognising International Anti Corruption Day is on the Australian High Commission website.  This links to a DFAT compilation of Australian measures – largely offshore commitments – against corruption.  And following from yesterday’s blog there is no reference to any Australian interest in the Open Government Declaration or this week’s gathering in Brasilia.

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December 9, 2011

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Open Government Partnership gets momentum in Brazil

8 December 2011
The States-members of the Open Government Partnership are meeting this week in Brasilia.  The purpose is to reinforce OGP processes and expectations, and to share draft plans to give effect to the underpinning Open Government Declaration.
The Open Government Partnership is built around concrete commitments by governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen government. As a break from governance arrangements in most international organisations, the OGP is coordinated by a steering committee of governments and groups from civil society.
The OGP got off the ground with United Nations support on 20 September 2011.  There were 8 founding governments behind the Open Government Declaration (Brazil, Indonesia, Mexico, Norway, Philippines, South Africa, United Kingdom, United States). They announced their “action plans” to implement the Declaration, and welcomed the commitment of 39 States to join the Partnership. There are now 42 States developing the commitments that will cement their involvement in the Partnership.
The Brasilia meeting is the opportunity for these new States-members to publicly declare their action plans.  These plans share a number of common features.
 Commitments are structured around:
improving public services,
increasing public integrity,
more effectively managing public resources,
creating safer communities, and
increasing corporate accountability.
Surprisingly for an international agreement that not only requires States to commit to explicit “good government” practices, but to equally explicit action plans, neither Australia nor New Zealand have indicated a willingness to become parties. This contrasts with the domestic assurances of both governments that open government principles are a priority for them.
One report is that in response to an Official Information Act request the Ministry of Foreign Affairs and Trade indicated that New Zealand was considering participating in the OGP but that the Minister had been preoccupied with the Rugby World Cup when the initiative was launched!

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December 8, 2011

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