Precached static content

Kosovan financial investigators, police, prosecutors and judges have completed the first phase of an intensive Train-the-Trainer (TTT) programme on financial investigations and asset recovery. Led by our International Centre for Asset Recovery (ICAR) training team in conjunction with UNDP and the Kosovo Judicial Academy, the five-phase TTT programme aims to result in four or five ICAR Certified Trainers while simultaneously training other local participants in the process. Following their certification, the Kosovan trainers will go on to deliver the training to their counterparts as a formal part of Kosovo’s judicial training programme.

Supporting Kosovo’s anti-corruption efforts

The five-day training workshop, which took place in Prizren, Kosovo from 16–20 May 2022, was part of the Support to Anti-Corruption Efforts in Kosovo (SAEK III) project of UNDP Kosovo. The Basel Institute is an implementing partner of the project, which seeks to reduce corruption in Kosovo by strengthening monitoring and oversight mechanisms of institutions to perform in an efficient, transparent, accountable and gender-sensitive manner. It is funded  by the Swiss Agency for Development and Cooperation (SDC) office in Kosovo and the Swedish International Development Cooperation Agency (SIDA). The TTT programme is an integral part of our efforts to sustainably enhance the capacity of investigators and prosecutors in Kosovo to successfully investigate and prosecute corruption and money laundering cases, and recover assets. It follows a February 2020 training programme on the same topic, in which the 25 participants were specifically challenged to make use of Kosovo’s recent Law of Extended Powers on Confiscation of Assets.

Why financial investigations training?

A financial investigation is an important tool in detecting money laundering, terrorist financing and other serious crimes, as well as in enabling the freezing, seizure and confiscation of the proceeds of crime. Financial investigation in complex corruption and money laundering cases requires specialist skills and techniques in intelligence gathering, prosecution strategies and asset tracing, among others. Of these techniques, one of the judges at the May 2022 training was particularly complimentary about Source and Application analysis, a method to organise and present financial evidence gathered during an investigation in a way that highlights or identifies illicit or unknown income. Putting such skills and techniques into practice requires a thorough knowledge of relevant Kosovan legislation, and a deep understanding of the legal and practical processes and procedures for recovering assets abroad. To tie these elements together, the centrepiece of the ICAR training programme is an extensive hands-on practical exercise in which the participants actually conduct a Kosovo-specific simulated investigation.

Learn more

• Find out about our ICAR training team and unique methodology, and download the current brochure in English, Spanish, French and Portuguese.
• Learn more about the Basel Institute’s cooperation with the Office of the Chief Prosecutor of Kosovo under the SAEK programme.
• For a brief introduction to Source and Application analysis, see this Quick guide to analysing a suspect’s financial affairs in a corruption case. More in-depth guidance is in the step-by-step Guide to proving illicit enrichment using financial investigation and Source and Application of Funds analysis and our self-paced eLearning course on Source and Application of Funds analysis, available in English and Ukrainian.

The Government of Bulgaria and Basel Institute on Governance have signed a Memorandum of Understanding covering long-term collaboration in the country’s efforts to combat corruption and recover stolen public funds. Through the agreement, the Basel Institute will support the Bulgarian authorities in strengthening the capacity of specialised law enforcement, judicial and other relevant officers to effectively investigate cases of corruption and related financial crime, identify and trace illicit proceeds, and recover them for the benefit of Bulgarian citizens. In addition to training and hands-on technical assistance, ICAR will work with our partners in Bulgaria to review the current anti-corruption chain, illuminate key blockages and structural deficits, and identify potential solutions. Kiril Petkov, Prime Minister of Bulgaria, and Gretta Fenner, the Basel Institute’s Managing Director, signed the agreement in the Bulgarian capital Sofia on 18 May 2022, moments after the agreement was approved by the Council of Ministers. The signing ceremony was also attended by the Minister of Justice, Mme. Nadezhda Yordanova, who will be a key partner in this programme. The Prime Minister acknowledged that the fight against corruption is a long-term endeavour, commenting: “This partnership is another step in the right direction, and we hope to deliver concrete results together.” On the same day, the Council of Ministers also approved draft amendments to the Bulgarian law on judicial powers that aim to strengthen cooperation with the European Public Prosecutor’s Office (EPPO). Emphasising that this is an important piece in the puzzle, Gretta Fenner said: “We are in this partnership for the long run. The first priority is to bring more checks and balances, more accountability, into key enforcement and judicial authorities. Then we need to make sure that citizens see, and feel, the impact of these reforms. It will be incremental changes, but we are confident that change is already happening.”

Our International Centre for Asset Recovery (ICAR) training team was in the Zimbabwean capital Harare at the end of April to deliver our flagship Financial Investigations and Asset Recovery training programme. The 23 participants in the week-long intensive workshop were mostly investigators and prosecutors from the Zimbabwe Anti-Corruption Commission (ZACC), the National Prosecuting Authority (NPA), the Financial Intelligence Unit (FIU) and the Zimbabwe Revenue Authority (ZIMRA). These four agencies are all key stakeholders in fighting corruption and money laundering in Zimbabwe. Hon. Justice L. Matanda Moyo, Chairperson of ZACC, stated in her opening remarks that the training is part of a wider multidisciplinary approach to fighting corruption in Zimbabwe. It is the result of inter-agency cooperation in which, among other topics, the stakeholder agencies identify areas of joint training needs. ICAR training programmes regularly bring officers from different agencies together for intensive, hands-on workshops such as this. This approach has proven to have clear benefits in promoting inter-agency relationships and cooperation.

Essential skills for complex investigations

The training provided the participants with the essential skills and simple but yet powerful tools to handle high-profile and complex financial investigations. As one participant commented: “The course was very informative…. a lot of grey areas in money laundering have been cleared. I am looking forward to delivering excellence after this training. The course also assisted me in dissecting and understanding the relevant sections [of our laws] on money laundering.”

Simulated investigation

The participants were immersed in a simulated corruption and money-laundering investigation during which they actively followed investigative leads, made decisions and analysed and solved problems, using the Zimbabwean legal framework. The experience also allowed them to reflect upon the challenges that such investigations entail and possible solutions to overcome them. A participant commented: “The teaching methods were excellent, the clarifications clear and the lectures insightful. I return to my organisation better equipped and more knowledgeable.”

Ongoing collaboration with international support

The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) sponsored the training, which took place under a case consultancy agreement signed between ZACC, NPA and ICAR. Under the agreement, ICAR provides (among other things) technical support and training in asset recovery, as well as expertise in obtaining evidence from other jurisdictions to assist domestic prosecutions.

Multinational companies are no strangers to problems of corruption in their supply chains, which can bring significant legal, financial and reputational risks. Especially when entering new markets, many companies find it difficult to identify credible local partners and to assess their adherence to anti-corruption regulations.

Anti-corruption Collective Action can be a means of bridging this gap and facilitating market access for both multinational companies and local suppliers or partners. Some Collective Action initiatives offer certification as a way to support their members in strengthening their anti-corruption credentials.

One such initiative is the Thai CAC, a key player in the field of Collective Action in Thailand. The Thai CAC has made remarkable progress since its establishment in 2010, and through the Collective Action initiative, has certified over a thousand companies.

With the support of Thailand’s key business associations, the certification process strengthens the private sector in its implementation of Thailand’s national strategic goal to counter corruption set by the National Anti-Corruption Commission. With the support of the Basel Institute’s Collective Action team, the Thai CAC is now seeking to engage small and medium-sized enterprises (SMEs) in its certification programmes.

What benefits do SMEs see in engaging in Collective Action and achieving certification for their anti-corruption practices?

Among the beneficiaries of the Thai CAC’s certification programme for SMEs is Felicia Design, a fine jewellery manufacturer. The company is led by Vibeke Lyssand Leirvag, Founder & Managing Director, and Domenica Piantedosi, General Manager. The following excerpts from their interview with the CAC demonstrate how their business has benefitted from the certification.

“Corruption is a disease of societies just as cancer is of people.”

According to Domenica Piantedosi, corruption in Thailand remains pervasive, which impacts all of society:

“It undermines public trust and leads to wasting resources.” 

Ms. Piantedosi also highlighted mistrust in the private sector, which can impact international business operations. For Vibeke Lyssand Leirvag, corruption is always a choice and engaging in it was never part of their companies’ values. Although most SMEs fear that they are too small to have a voice in the fight against corruption, Ms. Lyssand Leirvag is convinced that:

“If the majority has the will, a corruption system can be changed.”

She claims that refusal to engage needs to be followed by taking a stand against corruption, thus not implicitly allowing corrupt practices to happen.

Anti-corruption certification for SMEs has benefits externally…

One external advantage of Collective Action efforts like the Thai CAC certification programme lies in its capability to empower small-scale businesses and build trust in international markets.

Especially Felicia Design, with most its clients based in Scandinavia, needs to “comply with foreign laws and/or stock-exchange regulations”. The CAC certification can help small businesses set up these policies and procedures, thus reducing the risk on both sides.

Moreover, Vibeke Lyssand Leirvag and Domenica Piantedosi benefit from the use of the Thai CAC certification in their external communications. This not only conveys their respect for ethical business practices to their supply chain but also to their customers.

Through certification, SMEs are empowered to actively prevent corruption and to take a visible stance against corrupt practices. This illustrates one way that Collective Action has the power to change society.

“Any company that feels this way should join CAC because together we can change the system. […] Changes will take hold only when the majority applies these principles.”

…and internally:

Engagement with the Thai CAC helps beneficiary companies to strengthen policies and internal controls tailored to the Thai context. This ensures management and employees are trained and take ownership of corruption prevention. The Thai CAC understands the constraints of SMEs and helps them formalise and effectively communicate internal policies and controls.

Similarly, Felicia Design has profited from the CAC through strengthening its existing anti-corruption policies and training. Domenica Piantedosi states that:

“Joining CAC allowed us to reinforce the anti-corruption message to our staff through the tailored CAC training courses and ... helped our staff have a better understanding of the reasons behind some of our policies for example, the ‘no gifts policy’.”

Both management and staff benefit from this improvement of mutual understanding through more effective communication. Vibeke Lyssand Leirvag particularly stresses that it helped convey to their staff “that we practise what we preach.”

What does the future hold?

Supported by our Collective Action team with funding from the KBA-Notasys Integrity Fund, the Thai CAC is working to extend its certification scheme to engage more SMEs.

The Thai CAC approach has already been replicated in Indonesia. This model has potential for duplication in other countries which would in turn positively impact SMEs looking at engaging in international supply chains.

Learn more

• Read the original interview between the Thai CAC and Felicia Design here.
• Learn more about the benefits of local certification in this Working Paper.
• Read about the collaboration between the Thai CAC and the Basel Institute.
• Find out more about local certification initiatives in other regions on the B20 Collective Action Hub, a global resource centre for information and inspiration on anti-corruption Collective Action.
• Did you know the Basel Institute’s Collective Action team operates a free Mentoring Programme for new and established Collective Action initiatives? 
• Visit our Helpdesk to have your personal question concerning anti-corruption Collective Action answered.

Within days of Russia’s illegal invasion of Ukraine, Western governments imposed unprecedented economic sanctions against the Russian state and certain Russian oligarchs. They are now working to identify and freeze assets linked to sanctioned individuals and entities – a magnificent challenge in itself. Expectations are already skyrocketing as regards the potential of confiscating these assets, and politicians make strong statements about how they should ultimately be used. This has put a political spotlight on a debate that has long been on the agenda of asset recovery discussions: how should recovered assets be utilised? This is not only a legal but at least as much a political issue, because international treaties are not specific in this regard. The public are often cynical when faced with claims of recovered assets which are allocated to the general budget with little or no oversight. Sometimes, the speculation is that the same recovered assets have been diverted for the benefit of individuals rather than the collective good. Recognising this risk and the public expectation, countries that return or receive recovered assets have tried various schemes over the years to safeguard and maximise their use. None of these discussions has been plain sailing, also because each case of asset repatriation is very different – legally, technically and politically. In countries that we support through our International Centre for Asset Recovery, there have been some really interesting and innovative initiatives to utilise assets:

For pandemic-struck hospitals

In Kenya, as pandemic-related pressure mounted on the country’s health system, the Office of the Director of Public Prosecutions and the Ethics and Anti-Corruption Commission handed over 20 billion Kenyan shillings (approximately USD 18 million at the time) to the Ministry of Health to equip the countries’ hospitals with equipment. Formally handed over at a ceremony to which the media were invited, the money came directly from confiscated proceeds of corruption. So in this case, the recovered assets were not only put to good use in the fight against Covid-19. The action also helped to demonstrate how corruption hurts citizens, and in turn how recovering stolen assets can benefit citizens – and to right a wrong of which Kenyan citizens have been the victims.

For student bursaries

The Kenyan example triggered a great deal of interest in the region in how recovered proceeds of corruption could be tangibly and visibly utilised. Next, in February 2022, the Zambia Anti-Corruption Commission publicly handed over USD 57,000 USD and 65.3 million kwacha (approximately USD 3.6 million) of recovered funds to the Ministry of Education. Both the Minister and the President committed to utilising these funds for bursaries to enable under-privileged students to complete university education. Here, too, citizens who are the primary victims of corruption are the ones to feel the direct benefit of asset recovery.

To strengthen criminal justice institutions

Internationally recovered proceeds of corruption have been used in similarly positive ways. An interesting example comes from Peru, which in 2020 signed a tripartite agreement with Switzerland and Luxembourg in relation to around USD 26 million in repatriated assets that had been stolen through corruption under the regime of former President Fujimori. Under this agreement, these assets are now being used to strengthen the country’s criminal justice and asset recovery institutions. Peru’s proposal to use the funds in this way goes straight to the core of the problem – corruption – and will help multiply the impact of the returned funds. The agreement also contains provisions that will ensure transparency and accountability in the use of the funds.

For intensive care units and Covid-19 relief

Another interesting example is the asset-sharing agreement signed in March 2022 between Kenya and the Bailiwick of Jersey to repatriate GBP 3 million to Kenya. This was the culmination of a multi-year investigation and prosecution which led to the confiscation of funds from a Jersey-registered company, Windward Trading. It was the Windward Trading case that had originally triggered the development of the Framework for the Recovery of Funds from Crime and Corruption in Kenya (FRACCK), which was signed by the Governments of Kenya, Jersey, Switzerland and the UK in 2018. The purpose of the agreement is to streamline the repatriation of funds to Kenya and to ensure that they will be utilised in line with national development priorities. The agreement also provides for the monitoring and evaluation of the use of returned funds. In this first utilisation, under the Kenya–Jersey agreement, the recovered assets are to be used to acquire medical equipment for intensive care units and to assist families adversely affected by the pandemic. Similar to the Covid-19 use of domestically repatriated funds, citizens will be able to experience the direct impact of successful anti-corruption enforcement.

Considering the causes, consequences and victims of corruption

There are other examples where recovered assets have been used in innovative and interesting ways, and more in the pipeline. What these examples all have in common is that careful consideration was given to either the root cause of corruption (Peru) or to the harm caused by corruption and their victims (Kenya, Zambia). The international cases (Peru and Kenya) have also benefited greatly for a collaborative attitude of both requesting and requested states. The recovery of stolen assets is of course about the money. But just as much it is about what we sometimes refer to as the “soft assets”. Namely, that citizens benefit from the enforcement action and the original negative impact of corruption is at least somewhat countered. In time, the rule of law, trust in government and effective public services are restored. The above examples provide some food for thought for countries grappling with the question of how best to employ recovered proceeds of corruption and other crimes. The answers they come up with may be different, but what’s important is that all sides – including citizens – get the clear sense that something good came out of the bad.

English version here Nos complace anunciar que nuestro libro de acceso abierto, Enriquecimiento ilícito: una guía sobre las leyes que abordan los activos de procedencia inexplicable de Andrew Dornbierer, ya está disponible en español. El libro explora el rápido crecimiento de la legislación sobre enriquecimiento ilícito (activos de procedencia inexplicable) en todo el mundo y su uso para combatir la corrupción y recuperar activos obtenidos ilícitamente. Al igual que la versión original en inglés, se trata de una publicación revisada por pares que puede leerse, descargarse y compartirse libremente desde illicitenrichment.baselgovernance.org.

Abordando los activos de procedencia inexplicable en el mundo hispanohablante

Muchos países de habla hispana han redactado e introducido legislación sobre enriquecimiento ilícito para perseguir la corrupción. Esta legislación es bastante frecuente en Sudamérica y Centroamérica, donde 25 países ya han promulgado algún tipo de ley al respecto. Mientras que algunos países han tenido éxito en el uso de estas leyes –como Argentina y México–, otros parecen dubitativos en hacerlas cumplir en todos los casos. De hecho, la mayoría de estos países nunca han utilizado sus leyes. Este es un problema común en todo el mundo. ¿Por qué? Una de las razones es que no se cuenta con una cantidad significativa de comentarios y guías sobre cómo redactar, investigar, judicializar y dictar fallos en virtud de estas leyes. Esta versión en español de Enriquecimiento ilícito proporcionará una orientación muy necesaria para las agencias de orden público de habla hispana de todo el mundo. Se espera que también ofrezca conocimientos básicos para los especialistas con respecto a la investigación, el enjuiciamiento y los fallos en virtud de estas leyes.

El desafío de traducir los conceptos, las leyes y la práctica

La traducción de este libro de inglés a español estuvo a cargo de Pantoglot Ltda., líder en el sector de la traducción en Sudamérica, con sede en Bogotá, Colombia. Adicionalmente, la persona encargada de revisar la versión traducida fue Sandra Comesaña, miembro de Hengeler Mueller, bufete especializado en delitos económicos y empresariales, destacado a nivel internacional, con sede en Alemania. Comentando la experiencia, indicó: “La obra de Andrew Dornbierer y el Basel Institute sobre "Enriquecimiento Ilícito" supone una importante contribución al esfuerzo internacional de detectar, sancionar y, eventualmente, prevenir la corrupción, así como otros delitos financieros "yendo a por el dinero". La guía práctica que ofrece el libro sobre la recuperación de activos en más de 100 jurisdicciones constituye una herramienta inestimable para profesionales tanto del sector privado como del público, así como para académicos, que ahora por fin está disponible en español, facilitando el acceso a particulares e instituciones específicamente en el mercado español y latinoamericano. Hengeler Mueller agradece haber tenido la oportunidad de contribuir a la versión en español. Hengeler Mueller asesora regularmente a clientes internacionales en diversos asuntos que implican complejas cuestiones de recuperación de activos multi-jurisdiccionales, tanto en solitario como en colaboración, especialmente, con los miembros de su red Best Friends compuesta por los principales despachos independientes de Europa." El apoyo gratuito para la revisión de la traducción fue facilitado por The Academy of Financial Crime Litigators, un centro global independiente y no partidista que da forma y hace avanzar las prácticas de litigio de delitos financieros con miras al futuro.

Acerca del libro

Publicado en inglés por el Basel Institute on Governance en junio de 2021, Enriquecimiento ilícito del Senior Asset Recovery Specialist Andrew Dornbierer, presenta:

• Un amplio análisis de la jurisprudencia y casos de todo el mundo
• Cuadros, diagramas de flujo y gráficos que explican los conceptos clave
• Análisis de preguntas e impugnaciones comunes
• Contribuciones de profesionales de todo el mundo, incluido un análisis de la introducción y evolución del delito de enriquecimiento ilícito en Perú por parte del Dr. Alcides Chinchay, fiscal supremo del Ministerio Público de Perú.
• Anexo 1: una colección de leyes de 103 jurisdicciones, también en forma de base de datos en línea (en inglés)
• Anexo 2: una guía paso a paso de investigaciones financieras y análisis del estado de origen y aplicación de fondos para respaldar los casos de enriquecimiento ilícito (en inglés)

El desarrollo y la publicación de este libro sobre enriquecimiento ilícito estuvo a cargo del Basel Institute on Governance a través del International Centre for Asset Recovery, con el apoyo investigativo de la NYU School of Law.

Dónde encontrarlo

Puede encontrar la versión en línea en: illicitenrichment.baselgovernance.org. Promovemos su reutilización e intercambio bajo una licencia Creative Commons CC BY-NC-ND 4.0. El libro también está disponible para imprimirse a precio de coste en Amazon en todo el mundo.

Versión en español aquí. We are delighted to announce that our open-access book, Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth by Andrew Dornbierer is now available in Spanish. The book explores the rapid growth of illicit enrichment (unexplained wealth) legislation around the world and its use to target corruption and recover illicitly obtained assets. Like the original English version, it is a peer-reviewed publication that is freely available to read, download and share at illicitenrichment.baselgovernance.org.

Targeting unexplained wealth in the Spanish-speaking world

Many Spanish-speaking countries have drafted and introduced illicit enrichment legislation to target corruption. These laws are particularly prevalent in South and Central America, where 25 countries have already enacted some form of this type of law. While some countries have had success using these laws – such as Argentina and Mexico – other countries seem hesitant to consistently enforce these laws. Most of these countries have never actually used their laws at all. This is a common problem throughout the world. Why? One reason is that there isn’t a significant amount of commentary and guidance regarding how these laws can be drafted, investigated, prosecuted and adjudicated. Enriquecimiento ilícito: una guía sobre las leyes que abordan los activos de procedencia inexplicable will provide much-needed guidance to Spanish-speaking law enforcement agencies throughout the Americas region. It will also provide some foundational knowledge to practitioners regarding the investigation, prosecution and adjudication of these laws.

The challenge of translating concepts, laws and practice

This book was translated from English into Spanish by Pantoglot, Ltda. The translation was reviewed by Sandra Comesaña of Hengeler Mueller, a leading international corporate and white-collar law firm based in Germany. Commenting on the experience, she said: “Andrew Dornbierer's and the Basel Institutes's work on Illicit Enrichment is an important contribution to the international effort of detecting, sanctioning and eventually preventing corruption and other financial crimes by "going after the money". The book's practical guidance on asset recovery in more than 100 jurisdictions is an invaluable tool for practitioners from both the private and public sectors and academics alike that is now finally available in Spanish, facilitating ready access for individuals and institutions specifically from the Spanish and Latin American markets. Hengeler Mueller is grateful for having had the opportunity to contribute to the Spanish version. Hengeler Mueller regularly advises international clients in various matters involving complex questions of multi-jurisdictional asset recovery both on its own and together especially with the members of its Best Friends network of Europe's leading independent law firms.” The pro-bono support for the translation review was facilitated by The Academy of Financial Crime Litigators, an independent, non-partisan global centre that shapes and advances financial crime litigation practices for the future.

About the book

Published in English by the Basel Institute on Governance in June 2021, Illicit Enrichment by Senior Asset Recovery Specialist Andrew Dornbierer features:

• Extensive analysis of jurisprudence and cases from around the world
• Tables, flow charts and graphics explaining key concepts
• Discussion of common questions and challenges
• Contributions from practitioners around the world, including a discussion of the introduction and evolution of Peru’s criminal illicit enrichment offence by Dr. Alcides Chinchay, a Senior Prosecutor of the Peruvian Public Prosecutor’s Office.
• Annex 1: A collection of laws from 103 jurisdictions, also as an online database (in English)
• Annex II: A step-by-step guide to financial investigations and source and application analyses to support illicit enrichment cases (in English)

Illicit Enrichment was developed and published by the Basel Institute on Governance through its International Centre for Asset Recovery, with research support from the NYU School of Law.

Where to find it

You can find the online version in both languages at: illicitenrichment.baselgovernance.org. Re-use and re-sharing are encouraged under a Creative Commons CC BY-NC-ND 4.0 licence. The book is also available to print at cost price from Amazon worldwide.

As part of ongoing efforts to support Collective Action initiatives aimed at addressing corruption in particular markets and regions, the Basel Institute launched a Mentoring Programme in January 2022.

Following a comprehensive selection process, we are pleased to announce that six organisations have been selected as mentees in this first cohort:

• Canadian Centre of Excellence for Anti-Corruption (CCEAC)
• Southern African Anti-Corruption Network (SAACon)
• Centro de Integridade Publica (CIP) 
• Health Charities Coalition of Canada (HCCC) 
• Réseau Ivoirien des Jeunes Leaders pour l’Intégrité (RIJLI)
• Brazilian Institute of Business Law and Ethics (IBDEE)

Global interest in Collective Action approaches to combat corruption is on the rise, a fact highlighted by the variety of applications received. The final list of mentees is not only geographically diverse but are also led by various stakeholder groups, in very different sectors.

We look forward to collaborating and working with our mentees to support their Collective Action journey over the coming months and years.

The Mentoring Programme also aims to support the development of a stronger Collective Action community that enables learning and collaboration across borders, sectors and initiatives.

Learn more

Find out more about our Mentoring Programme and services offered. We also host a dedicated helpdesk for your questions on anti-corruption Collective Action.

You can also follow the Collective Action team on LinkedIn or Twitter. The Mentoring Programme is supported by the Siemens Integrity Initiative.

We are grateful to the Principality of Liechtenstein for its decision to continue and substantially increase its core contribution to our Green Corruption programme. The programme has gained significant momentum in 2021, responding to a clear need to address the “green corruption” that makes environmental crimes both possible and lucrative. In the last year, the team has provided financial investigations support in dozens of environmental crime cases in East Africa and expanded the programme to new partner countries in Africa, Latin America and Southeast Asia. New research, as part of joint projects with our Public Governance team, is illuminating the links between environmental crime and corruption. The programme’s Corrupting the Environment webinar series with the OECD covered seven virtual dialogues on critical issues of corruption, illicit trade and the environment. Liechtenstein’s core funding has been and will continue to be exceptionally welcome in funding these and other activities, such as responding with agility to the growing number of requests from our global partners for expert advice. Commenting on the decision, Ambassador Martin Frick, Director, Office for Foreign Affairs of the Principality of Liechtenstein, said: “The Basel Institute’s Green Corruption programme matches many key priorities of our Multilateral Development Cooperation, such as strengthening the rule of law, combating corruption and international crime as well as protecting the environment.” The core funding is an essential complement to more targeted project-based financing from the UK and US governments. Gretta Fenner, the Basel Institute’s Managing Director, noted: "The continued support from our inaugural core donor Liechtenstein comes as the Green Corruption programme is undergoing a period of significant growth, opening up new presences in Peru, Bolivia and Indonesia. Liechtenstein's donation allows us to ensure that the growth is sustainable." In 2022, we aim to further incubate promising programme ideas and finding innovative entry points to tackle areas rife with corruption that have tremendous environmental consequences but are commonly overlooked by traditional conservation programmes. Examples include waste trafficking, which generates USD 10–12 billion per year in illicit funds. In this context, we will conduct a rigorous scan of high-corruption risk, high-potential environmental crime typologies that our unique skill set and context knowledge might be well placed to disrupt.

The Basel Institute's Green Corruption programme has recently launched a five-year partnership with the USAID INTEGRITAS project in Indonesia.

The project is a new, USD 9.9 million USAID initiative implemented by a consortium of NGOs led by Kemitraan (Partnership for Governance Reform). Other partners include Indonesia Corruption Watch (ICW) and Transparency International Indonesia (TI-Indonesia). USAID and the Basel Institute have cooperated with the Government of Indonesia on combating corruption for over a decade.

The Basel Institute's Green Corruption programme Team Leader, Juhani Grossmann, noted:

"It is a great pleasure to be back in Indonesia, working with a "dream team" of partners to jointly tackle one of the most complex issues of our times: Environmental Corruption."

KEMITRAAN Executive Director, Laode Muhammad Syarif, said:

“We are excited about the consortium we have put together for this work, drawing upon our own experience and the work of our outstanding partners ICW and TI-I on the domestic front, combined with the international expertise of the team at the Basel Institute. We are optimistic about the changes we can achieve over the next five years by bringing our collective expertise to bear, in cooperation with key government institutions involved in corruption prevention efforts,”

The project will focus on preventing corruption in the environmental field, both in the public and private sectors, through a dual-tracked approach of systems strengthening and public engagement. It seeks to improve transparency, reduce conflicts of interest and promote accountability.

The Basel Institute's Collective Action, Public Governance and Green Corruption teams will support the consortium members, the Government of Indonesia and private and state-owned enterprises (SOEs). The scope covers improving integrity systems in government agencies and SOEs, developing targeted anti-corruption public education strategies, and supporting private-sector and multi-stakeholder Collective Action efforts in the environmental sector.

The Wolfsberg Group – an association of 13 global banks that develops frameworks and guidance to manage financial crime risks – became an independent legal entity in October 2021. Its new home is at the Basel Institute on Governance headquarters in Switzerland.

We are proud to host what continues to be a ground-breaking Collective Action against financial crime. Our role builds on our support for the Group over the last 21 years, since its first ever meeting at the historic Swiss castle, Château Wolfsberg.

The Wolfsberg Group’s new Executive Secretary, Alan Ketley, has been involved with the Group for most of his 19-year career in anti-money laundering compliance at European, US and Japanese banks. In this short interview, Alan explains how the Wolfsberg Group evolved, some important ways it has contributed to global financial crime risk management, and its members’ plans for the future.

The Wolfsberg Group is already an influential voice on the management of financial crime risks in banking – what are the benefits of becoming an independent legal entity?

The Wolfsberg Group has seen sustained and committed collaboration from the members ever since our first meeting in 2000, even without being a formal entity. Since publishing our first standard – the Wolfsberg Anti-Money Laundering (AML) Principles for Private Banking, revised most recently in 2012  – we have issued numerous principles, standards, guidance documents, questionnaires and FAQs on a wide range of topics relevant to know-your-customer (KYC), anti-money laundering (AML) and counter financing of terrorism (CFT) in the banking sector.

Until October, the Secretariat function was housed in one of its member banks (first UBS and then HSBC) and Tracy Paradise, of HSBC, provided fantastic leadership as Executive Secretary for 18 years. Yet establishing ourselves as a legal entity creates a more solid, sustainable and independent platform to consolidate our work for the future.

Our new formal independence will help us to continue to act as a credible and authoritative private-sector voice in policy circles, and to strengthen the impact of our guidance on financial crime risk management among the 30,000 or so banks that exist around the world.

Why did you decide to house your Secretariat at the Basel Institute?

The Basel Institute is a natural home for the Wolfsberg Group. The Institute’s President Mark Pieth was present at the very first meeting of banks and civil society representatives. Hans-Peter Bauer, a co-founder of the Wolfsberg Group, is a former Board member of the Basel Institute and senior advisor to the Basel AML Index and related matters.

Importantly, the Basel Institute’s Collective Action team has continued to provide invaluable support and guidance to the Group during the last 21 years, including attending our annual forum and contributing substantively to some of the earlier documents. It has been an especially close relationship in the last few months as the Institute has taken on HR, IT and Finance Department support for the Wolfsberg Group, which has two staff located at the Steinenring office.

Who is in the Group and how do you interact?

The Wolfsberg Group represents 13 global banks, as listed on our website. Those sitting around the table at our quarterly meetings are generally the heads of the banks’ financial crime compliance programmes and their deputies.

This size and seniority – 26 individuals with strong practical experience and decision-making power, plus the Secretariat – is our sweet spot right now. This is partly for practical reasons. Decisions are consensus-based, and members commit to aligning their own banks’ compliance programmes in accordance with the standards and guidance that we publish.

On a relationship level, Collective Action is all about trust and open discussion of shared problems, which you can achieve in this kind of collegial environment. Our meetings are always subject to strict competition law guidelines and do not include business staff, vendors, consultants or the press. The publications and comment letters we provide are focused on making financial crime compliance more effective and clearer, as befits an organisation of practitioners developing guidance for other practitioners and providing expert input to regulators and standard setters.

What achievements stand out over the last 21 years?

It seems incredible to say this now, with the close public and policy attention on banks and money laundering, and the billions of dollars of resources that banks spend every year on financial crime compliance programmes. But back in 2000, when the Group first met, I believe this was the first time that a group of bank representatives got together and acknowledged the benefit of collaborating to protect themselves and society from financial crime risks, rather than competing on the basis of looser compliance standards.

The Collective Action approach was also innovative back then. It has since become a globally recognised tool to address corruption challenges in and with the private sector, in large part thanks to the Basel Institute’s work in this area. But none of those at Château Wolfsberg thought of it as Collective Action – the members were purely focused on hammering out the Private Banking Principles and did not expect the collaboration to continue after the press conference in Zurich at which they were announced.

But continuing to interact in a sustained and controlled way over the next 20 years has allowed the Wolfsberg Group to shift the needle in some important matters affecting global financial crime risk management.

For example?

One example is our Trade Finance Principles, which outlines the role of financial institutions in managing processes to address financial crime risks associated with trade finance activities. The Principles also aid compliance with sanctions, embargoes and UN requirements on the non-proliferation of weapons of mass destruction. We have updated these most recently in 2019, in cooperation with the International Chamber of Commerce and Bankers Association for Finance and Trade (BAFT). Several countries reference these in their regulations.

Another is our Correspondent Banking Due Diligence Questionnaire or CBDDQ, the successor to the Wolfsberg AML Questionnaire. This interview with Financial Crime News explains the history and evolution of the questionnaire, which seeks to harmonise and increase the effectiveness of due diligence in correspondent banking relationships. After a complete update in 2016–18, and the effort and dedication of a standing committee, the questionnaire expanded from 28 to 110 questions. This expansion partly reflects the evolution of financial crime compliance since its first edition in 2004. as well expanding coverage from AML to include sanctions, anti-bribery and corruption, and other elements of a financial crime compliance programme.

The CBDDQ is now widely accepted by policy entities and banks as the de facto industry standard for reasonable (not minimum) due diligence in higher-risk correspondent banking relationships. Its accompanying guidance, FAQs, videos and other training materials provide a useful reference to banks in this area, especially smaller institutions with fewer internal compliance resources.

How else does the Wolfsberg Group contribute to financial crime risk management?

We also engage in dialogue with public-sector entities and policymakers. This includes submitting comments on behalf of the Wolfsberg Group to public consultations on changes to financial crime regulation, for example those issued by the Financial Action Task Force, the Financial Stability Board, the EU, UK and FinCEN. Our aim is to ensure that regulations on financial crime are as effective as possible and we have sought to define what “effectiveness” means. Thanks to our industry expertise, we can also identify when new policies might have unintended consequences.

As an aside, when the Wolfsberg Group first engaged in this form of policy dialogue and consultation (on the risk-based approach in 2004­–2005) it was in fact the first time that the FATF had consulted with the private sector at all.

Looking ahead, financial crimes facing the banking sector have become increasingly complex, and the space is more and more contested. There are still lots of open questions in the financial crime sphere in which the Wolfsberg Group, through our discussions and contributions, can play a highly relevant role.

What’s on the agenda now?

The agenda is set by members, so priorities depend on what we are seeing on the ground.

Some topics never go away – correspondent banking and payment transparency continue to require close attention.

The rise of new payment methods, including virtual assets, is also a hot topic, especially as regards payment service providers that are not regulated the same way as banks. This is not least because of the risk of dirty money flowing from the highly regulated banking sector to differently or unregulated new payment service providers.

Environmental, social and governance (ESG) topics are also at the forefront of attention these days. The movement of money relating to crimes like trafficking in humans, wildlife, timber, etc., has long been illegal. Many of these problems are complex and really need Collective Action to treat them at source, involving all stakeholders including governments, financial institutions, other private-sector firms and civil society.

The concept of “effectiveness” is one that Wolfsberg will continue to pursue. This includes continuing efforts to define what it means, and by giving examples of where current practices are overly focused on technical compliance rather than the outcomes. We will also continue to submit responses to competent authorities as they seek to revise their thinking, such as our response to the US financial intelligence unit (FinCEN)’s request for information on how to modernise the country’s AML/CFT regime.

Looking ahead

One question always on the agenda: “What keeps you up at night?” This question helps us keep a forward-looking approach. Criminals who engage in financial crime are smart. They read the same guidance documents and press releases. They pay attention to industry developments and have a strong incentive to evolve fast.

We believe the Wolfsberg Group, as an independent legal entity, will continue to play an important role in setting standards that help banks to address the risks of financial crime. It will also continue to provide a forum for key regulators to join the dialogue. We all need to keep up with the ongoing evolutions in the financial sector and contribute to building a harmonised, committed approach to financial crime risks.

By Gemma Aiolfi, Head of Compliance, Corporate Governance and Collective Action at the Basel Institute on Governance, and Cecilia Müller Torbrand, CEO, Maritime Anti-Corruption Network

Our joint chapter in a new book on Perspectives on Antitrust Compliance answers a common question that arises when compliance officers and company lawyers first hear about anti-corruption Collective Action: are there antitrust risks in engaging with other industry players through Collective Action?

The short answer is no. The longer answer is, as we explain in the chapter, “quite the opposite”.

Corruption distorts fair competition – through bribery, collusion, bid-rigging or other forms of manipulation and foul play. Companies with high ethical standards may struggle to compete in high-risk countries or sectors if others are willing and able to operate in the shadows. In contrast, anti-corruption Collective Action can help to level the playing field between competitors and increase standards of transparency and integrity across an industry or region.

Neither a cartel nor a class action

Our chapter first covers the scope and purpose of anti-corruption Collective Action. This is important because the term “Collective Action” itself may, ironically, trigger negative associations. One may think of class actions, collective bargaining, or collectivised and planned economies that stifle choice and competition.

Rather, the “collective” aspect of Collective Action refers to the common challenge that brings participants together as a group, and the group’s shared approach to tackling it. For example, the Maritime Anti-Corruption Network (MACN) brings companies from the shipping sector together to address, among other things, the widespread problem of bribe solicitation in ports. This is a problem that negatively impacts all companies, but which none can solve alone.

In these cases and many more, peer collaboration is important. This is because corruption is a complex global problem that needs diverse and innovative solutions. Collective Action offers a wider range of tools and approaches, including the ability to design new anti-corruption tools that take account of business realities and work in practice.

Overcoming competition concerns

Our chapter gives practical advice on how to overcome concerns and avoid antitrust risks, including many examples from initiatives around the world. A few simple steps could help companies to reap the benefits of engaging in anti-corruption Collective Action while avoiding risks. Examples include:

• Members of the Collective Action can be drawn from employees who are sensitive to the risks of antitrust and competition law concerns and who are also familiar with the corruption risks. Such persons could include senior compliance officers, the general counsel or similar officers.
• Have one independent external legal advisor who is not retained by an individual company attend the first meeting, to explain the antitrust golden rules.
• Following this, a suitably qualified and independent facilitator, such as an anti-corruption expert, should be able to address antitrust risks and manage meetings appropriately.
• Develop an antitrust policy that all member companies approve according to their internal procedures. This should include matters that cannot be addressed or discussed and what to do if a sensitive issue does arise inadvertently.
• The independent facilitator should draft and disseminate meeting agendas and reading material in advance,.
• As soon as possible, transparently publish the goals of the initiative, the rules and conditions for participating, and any public outputs on a website.
• Meeting minutes can be approved by external legal counsels and stored by companies and the facilitator, in case competition authorities request to see them.
• Internal documents useful for benchmarking – such as codes of conduct or standard operating procedures – should be shared confidentially with the facilitator, who can anonymise and sanitise them to inform group discussions.
• No sharing of sensitive internal information such as prices or fees or blacklisting of third-party intermediaries.
• Hold an early brainstorming session to discuss trust-building and related topics.

Intrigued?

See more details about the chapter and a link to the publisher’s website. For more information on this topic, or other questions on anti-corruption Collective Action and compliance, feel free to reach out to the Basel Institute’s Collective Action team through our new Helpdesk service. To see the power of Collective Action in practice, explore the activities and achievements of the Maritime Anti-Corruption Network.

About Perspectives on Antitrust Compliance

Edited by Anne Riley, Andreas Stephan and Anny Tubbs, the book focuses on debates surrounding the function and design of antitrust compliance programmes. Its starting point is that increasingly, antitrust compliance is seen by companies not as a standalone topic, but as part of a suite of compliance efforts needed by companies to ensure that they comply with societal and shareholder expectations.

The book is available from Concurrences. 

The Natural Resource Governance Institute (NRGI) has launched tailored guidance on measures that companies in the oil, gas and mining sectors can adopt to reduce corruption risks when partnering with state-owned enterprises (SOEs).

Published on a user-friendly website, Anticorruption Guidance for Partners of State-Owned Enterprises also recommends measures SOEs can take to strengthen their own anti-corruption safeguards. The guidance was launched at a virtual event on 26 January 2022, at which our Head of Collective Action Gemma Aiolfi moderated a panel discussion.

In this interview, Alexandra Gillies, Advisor to the NRGI and co-author of the guidance alongside Tom Shipley, explains how and why they developed the guidance over two years of research and multi-stakeholder consultations with private companies, SOEs and civil society stakeholders, including our Collective Action team.

Her insights throw light on the NRGI’s approach of conducting extensive, multi-stakeholder consultation and trust-based discussion, which is central to many Collective Action initiatives. A similar process could help practitioners in other sectors and countries to develop guidance that both addresses pertinent corruption risks and has a good chance of being widely adopted.

Anti-corruption recommendations already exist for extractive industries and for SOEs. Why did you decide a fresh approach was needed?

Oil, gas and mining industries are crucial to many countries’ development, but the benefits to citizens continue to be lost through corruption. Despite the many valuable efforts to raise standards of integrity and implement safeguards against corruption in these sectors, something is clearly missing the mark.

And the stakes are only going to rise with the commodities boom and explosion in demand for transition minerals. Three issues stand out:

**First, interactions between international companies and SOEs in charge of oil, gas and mining resources remain a major problem area. **

This finding emerged clearly from our detailed analysis of over 100 past corruption cases across many countries. Initial conversations with compliance officers confirmed that existing measures, and the standard risk-based approach to addressing corruption risks more generally, face difficulties in the case of interactions with some SOEs. They were open to fresh ideas.

**Second, existing compliance systems often focus narrowly and inwardly on protecting companies from penalties for violating anti-bribery laws. **

Yet many forms of corruption that are the most harmful to citizens are not covered by bribery laws, such as when political elites syphon off hundreds of millions of dollars that could be public revenue. We were keen to address the risks of company activities enabling corruption by helping corrupt actors to carry out their schemes.

**Third, voluntary anti-corruption guidance needs buy-in from companies if it is to be effectively implemented across enough of the sector to make a difference. **

This means it needs to take into account how companies interact with SOEs in their operations, the risks they face, and what is feasible to implement in their anti-corruption and due diligence systems. We therefore wanted to prioritise learning from private companies and other stakeholders about what’s working and what’s not in their relationships with SOEs. This is where a Collective Action approach helped.

Who is the guidance aimed at and why?

Despite the focus of the guidance on five specific risk areas between extractive industry companies and SOEs – due diligence, high-risk agents, political exposure, safeguarding payments and joint ventures – many of the recommendations are relevant to a broad stakeholder group.

As well as producers directly involved in extracting natural resources, we proactively involved other companies in the supply chain, notably commodity traders and suppliers to oil, gas and mining companies. Although we drew on existing relationships at NRGI, we also reached out to get new companies involved in the conversation.

Within these companies, we are targeting not only compliance teams but also commercial departments and those responsible for external affairs, transparency, human rights and related issues. This is because we take a broad view of what counts as corruption and what kind of anti-corruption measures can help. In SOEs, we spoke to compliance teams or, where dedicated compliance functions do not yet exist, we engaged the leadership or the legal and procurement departments.

This mix reflects the professional backgrounds of those who took part in the workshops and consultation process.

What were their incentives to take part?

I believe there was a genuine interest among participants in getting new ideas to tackle these common problem areas. And sharing experiences with like-minded professionals who have similar concerns is not only useful and enriching, but enjoyable.

Reputation is also an important factor. As with many Collective Action initiatives, engaging in such a consultation process helps to demonstrate that the company is proactively addressing corruption risks. This is particularly strong for companies that have faced public corruption issues that have damaged their reputation in the eyes of the public, investors or potential employees.

Third, many appreciated the chance to contribute to industry guidance that might become widely accepted standards or influence other standards down the road. Companies have an interest in making it realistic and feasible.

Can you recap the process?

First we conducted a lot of background research, particularly looking into past corruption cases in the extractive sector to understand the problem we were trying to address. The analysis made clear the vulnerability of SOEs in diverse countries to corruption.

We then spent some time considering who should be involved in the conversations, including which types of company and from which countries, and getting initial ideas and feedback from colleagues.

After a few initial conversations with relevant stakeholders, we scheduled a first gathering to get feedback on the topic. Prior to the meeting, we discussed the project with many of the invited company representatives in order to provide adequate background. At that first meeting, held in December 2019, around 30 people from companies, academic institutions, NGOs, international organisations and other entities gathered to discuss new approaches to preventing corruption, with a focus on SOEs.

Drawing on the discussions, we then identified five priority areas of business interactions between companies and SOEs that represented particularly high corruption risks – and importantly, where existing measures are not proving sufficient to mitigate them. We then held interviews with stakeholders on these topics, which helped us gather frank feedback on what’s working and what’s not in each area.

Then, we organised five virtual, invitation-only workshops, one on each of the topics of focus. The workshops provided additional ideas regarding good practices and prevailing challenges, and created opportunities for companies and experts to share ideas on sensitive issues.

Next came the drafting and ongoing consultations with the workshop participants and other stakeholders, including SOE compliance teams, representatives from risk advisory consultancies, anti-corruption experts and academics, and investors. We also consulted with international banks that do business with SOEs; these can provide valuable inspiration for companies seeking to strengthen their systems for conducting customer due diligence.

Drawing on these inputs as well as additional research, we then drafted the guidance, shared it with the participants, and received a very robust set of feedback.

Were you seeking consensus?

No. Importantly, we were clear from the start that the guidance would be the product of consultation, but not consensus. As an independent organisation promoting transparency and accountability in natural resource governance, we knew we might put forward some more ambitious ideas that don’t have much support among private companies.

This is a different approach from that of the Extractive Industries Transparency Initiative (EITI), for example, which seeks consensus on its global standard. Civil society organisations sometimes also unilaterally publish recommendations.

Both approaches have merit, but we believe a middle way is appropriate in this case: the guidelines are informed by participants’ views and reflect what is realistic and feasible, but we are not asking companies to endorse or sign up to them all.

What are the prospects for widespread adoption, and how will you know?

We hope that, as a first step, some of the participating companies adopt elements of the guidance. We of course also hope to see widespread adoption by companies and SOEs in the sectors. That includes those not directly involved in the development of the guidance.

The participatory approach makes it more likely that companies and SOEs in the sectors will adopt the guidance. Many representatives were actively engaged in its development and can see the results of their contributions. Having been involved in the discussions, they can also understand why in some instances the final document doesn’t always reflect their views.

The consultation process also enabled us to build good working relationships, so we hope to get positive responses to our follow-up surveys on the impact of the guidance on policies and practices within the companies.

One difficulty with measuring the impact of the guidance is that companies rarely disclose information about their anti-corruption practices beyond high-level statements. We believe this is a missed opportunity. Many of those involved in the consultations are doing impressive work to mitigate corruption risks and strengthen their anti-corruption safeguards. They should be shouting this kind of thing from the rooftops.

What are potential obstacles?

One big barrier to adoption is the widespread concept of “risk appetite” in business, which weighs up potential financial rewards against financial and other risks, including corruption risks. If the deal is potentially very lucrative, it could tip the balance towards going ahead despite corruption risks that can harm the public interest.

Our guidance seeks to address by encouraging companies to set clear upfront rules – red lines – on what they will not tolerate in any circumstances, even if the financial rewards are huge. But changing that ingrained risk appetite approach more generally is going to take a lot more than our guidance.

What lessons did you learn and what will you take forward?

**First, a thorough stakeholder mapping is helpful to gather an influential group of stakeholders. **

In this case, we identified that we needed to reach out to more supplier companies, which have traditionally been left out of conversations around extractive sector transparency and governance. Stakeholder mapping doesn’t guarantee a perfect mix – our group leaned significantly towards North American, European and Australian companies – but successful Collective Action doesn’t require every single actor to be around the table.

**Second, building trust between participants – who may be direct competitors – goes beyond basic elements such as confidentiality and anonymity. **

We found it useful to clarify from the start that this guidance is NRGI guidance, not the result of consensus or something that companies will be asked to endorse. This helped to set expectations and gave participants the freedom and security to engage with the issues openly and in a good faith way. And that in turn encouraged more hesitant participants to do the same.

**Third, don’t be afraid to talk about sensitive issues – but to do it in an empirically grounded and evidence-based way. **

We felt empowered by our research and data on corruption in the sector. These allowed us to ask pertinent questions, push back where needed and generate real debate. Without that expertise or evidence base, you are standing on much shakier ground.

Going forward, we see great potential for more multi-stakeholder discussion and potentially building Collective Action initiatives around specific issues within the guidance. For example, requirements that companies use third-party agents in particular markets, or around how to utilise beneficial ownership information and respond to political exposure in the supply chain.

Learn more

• Visit the Anticorruption Guidance for Partners of State-Owned Enterprises website and view the launch event.
• Learn more about the work of the NRGI in promoting good governance in oil, gas minerals.

Initiatives such as International Women’s Day and the International Gender Champions Network, of which our Managing Director is a member, are helping to shift the needle towards a world free of gender-based discrimination. So are moves to mainstream gender in development programmes, including those focused on anti-corruption. These initiatives not only demand commitments and accountability on gender inclusion, but importantly trigger discussions. One such debate, to which we believe we can usefully contribute our personal experiences, is that of women in anti-corruption enforcement roles.

Gender at the Basel Institute

Our Institute has an equal male-female balance across all our headquarter-based and field operations: exactly 51 men and 51 women at the end of 2021. Many of our financial investigators and asset recovery specialists engaged in training and mentoring in our partner agencies in Africa, Latin America and Central Europe are female. They span a wide range of professional and cultural backgrounds. Our younger specialists often work hand in hand with older male law enforcement counterparts. Others were among the first women to enter traditionally male-dominated professions, such as in the police or as public prosecutors. How and why did they choose their careers? What were their experiences and barriers, as women? Should we actively encourage women to take up enforcement roles in agencies mandated to tackle corruption, or in the public prosecution service? And if so, how? Opinions on these questions differ, but the overall attitude at the Basel Institute is overwhelmingly positive and pragmatic. Below, we briefly share some of our perspectives in the hope that these help trigger similar conversations among our partners and the wider community. And we would love to hear your thoughts too, so please don’t hesitate to get in touch through social media or in any other way.

Formal and cultural barriers are breaking down…

In terms of gender diversity, the anti-corruption field is changing fast and for the better. Barriers to women entering and advancing in the field are falling away, including both formal rules and biased attitudes. Condescending comments to (often younger) women – “bring me a coffee, dear”; “don’t tell me you’re my lawyer?” – are less and less tolerated in our collective experience. The men who make such comments are dying out. This positive trend is of course not happening at an equal pace across the world, or fast enough for some. But it is happening.

… yet some prejudices still remain

The hardest barriers to change are the prejudices that remain unspoken, like the idea that women cannot deal with the long hours that could be involved in criminal prosecutions, or are not suited to the cut-and-thrust of the criminal underworld. A common unspoken fear is that a female staff member will become pregnant and leave the department short-staffed, especially in countries and organisations with outdated labour rules on parenting. Here is perhaps one area where better formal laws and state support mechanisms for maternity/paternity leave and childcare can help.

The family effect

Notwithstanding the caveats around prejudices, family does have a disproportionate effect on many women’s career choices and experiences. This includes their decisions to embark on potentially high-workload careers in enforcement. Some women miss out on taking specialised courses or new job opportunities in other countries or even other regions, either because their spouses would not support it or out of consideration for their families. Even these days, it is less commonly the case for men to miss out on such opportunities for family reasons. And mothers, especially single mothers or those without other support, may have to work much harder than their male counterparts – on far less sleep. On the positive side, strength, endurance and the ability to multi-task are often the result. These are essential skills in many anti-corruption enforcement or prosecution roles, which involve keeping many plates spinning at once.

Career choices and the female edge

All of our specialists chose their careers in enforcement or the law out of passion and conviction, and were not put off by what appeared a male-dominated world. For many, it was a dream from a young age. Others drifted in from other domains, only to realise that this was the career that matched their skills and desire for variety and satisfaction. Many feel that their natural empathy helps them better understand and gain the trust of victims and witnesses in some contexts. Fine attention to detail – dare we say this is more common among women than men? – is another useful characteristic in corruption and money laundering investigations and prosecutions. So while in some situations and professions, being female can be seen as a disadvantage, among our female staff many felt their gender gave them a special edge.

Promoting meaningful inclusion

What many women in such roles find unhelpful is to be given a false edge. Many of our female staff have held senior positions at anti-corruption agencies or prosecutorial authorities. They know very well that women are typically less well represented in the upper levels of what is often still a rigid hierarchy. Yet while measures such as quotas for women’s inclusion have a role to play in some contexts, they may risk raising doubts about whether a woman really did gain her position on merit alone. These kinds of doubts are unhelpful in promoting the respect and confidence that women in these roles deserve and need. Our own Institute’s exact gender balance is not the result of a deliberate quota, but of our approach to recruitment: we really do choose the best candidate for the position, regardless of gender or any other factor. Open and equal access to education, both general and specialist, is crucial to helping more women gain the skills and knowledge they need to participate meaningfully in senior legal or enforcement roles. In our small way, we contribute by (for example) making our eLearning courses on Basel LEARN free to all, and by paying close attention to the gender balance of beneficiaries of our training programmes.

Anti-corruption needs more women, but also more men

As to whether we should be doing more to encourage more women to enter anti-corruption professions, the answer is of course yes – but we also need to encourage more men to do the same. Investigators, prosecutors, judges, analysts, forensic accountants: all of these are on the front lines of fighting corruption. Their ranks need serious reinforcement if we are to fight back against the corruption that is undermining the attainment of just and equal societies. Societies where people of all backgrounds and genders have the opportunity to thrive.

We are delighted to have signed a case consultancy agreement with the Fiji Independent Commission Against Corruption (FICAC). The agreement enables our International Centre for Asset Recovery (ICAR) and FICAC to cooperate to strengthen the agency’s capacity to identify and recover assets obtained through corruption. FICAC is Fiji's mandated law enforcement agency to investigate and prosecute corruption, as well as educate society on understanding and reporting corruption. The agency is celebrating its 15th year. Our ICAR team will in particular provide advice on the effective implementation of Fiji’s illicit enrichment legislation. This draws on our publication last year of an open-access book Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth, which brings together cutting-edge debates and jurisprudence on illicit enrichment laws around the world.

Maximising Fiji’s potential to recover assets and fight corruption

The virtual signing ceremony was attended by FICAC’s Deputy Commissioner Rashmi Aslam and Chief Investigator Frank Tora, and by the Basel Institute’s Managing Director Gretta Fenner and Senior Asset Recovery Specialist Andrew Dornbierer. Gretta Fenner commented: “The Basel Institute is very much looking forward to working with FICAC to strengthen their capacity to trace and recover assets stolen through corruption, in particular where they have been hidden abroad. Fiji is considered an economic hub of the Pacific region, and we believe there is great potential in this new collaboration to strengthen the regional and global fight against corruption.” Rashmi Aslam said: “In Fiji, right now we are at a juncture where we are investigating more multi-jurisdictional cases with higher financial values involved. We have realised that we need support and assistance from stakeholders such as the Basel Institute and its International Centre for Asset Recovery.” Mr. Aslam stated that the Commission looks forward to maximising this newly created partnership with Basel Institute not only for its reactive functions but also for its proactive functions in areas such as policy matters. “It is an important juncture, not only for FICAC but for Fiji as well because we are one of the key stakeholders in the criminal justice system in Fiji," said Mr. Aslam. Through the partnership, the Commission aims to improve its delivery to the criminal justice system and obtain better results.

Our International Centre for Asset Recovery (ICAR) training team was in the Kenyan capital Nairobi last week, delivering a Financial Investigations and Asset Recovery training course to a multi-agency group of officers responsible for anti-corruption and asset recovery. Twenty-one officials from the Ethics and Anti-Corruption Commission (EACC), the Office of the Director of Public Prosecutions (ODPP), the Assets Recovery Agency (ARA) and the Judiciary took part in the five-day training programme, which involved working together to solve a complex simulated money laundering investigation. The training is part of a newly expanded programme to support Kenya’s multi-agency approach to fighting corruption, funded by the UK Foreign, Commonwealth and Development Office (FCDO). The programme, implemented through our new office in Nairobi, builds on and seeks to boost Kenya’s rapidly growing capabilities to investigate and prosecute corruption and recover illicit assets.

Strengthening every link in the anti-corruption chain

Both the training workshop and new programme have an important focus on inter-agency coordination in corruption and asset recovery cases. Kenya’s EACC has been a key driver behind many of Kenya’s recent asset recovery successes, and is now widely regarded as one of Africa’s most successful anti-corruption agencies. Officers have recovered around USD 118 million (at current exchange rates) since 2014–2015, with a substantial increase in the last two years. This has allowed the Government to invest over USD 17.5 million in recovered funds to finance the country’s Covid-19 response. The President was able to inform world leaders at the 2021 Special Session of the UN General Assembly Against Corruption of Kenya’s “upsurge in investigations, prosecutions and convictions for corruption”.

A fruitful collaboration through hands-on mentoring

UK support has been pivotal in the EACC’s increased ability to investigate and prosecute corruption and to recover illicit assets, including through ICAR. Our cooperation with the EACC dates back to 2005, with an expert advisor embedded at the agency since 2014. The EACC’s senior leadership recently confirmed that our hands-on mentoring has led to systemic changes and real progress in the EACC’s ability to prosecute corruption and recover the proceeds of corruption. “Financial profiling of suspects and financial investigations have been established as a permanent feature in every intelligence-gathering and investigations work plan”, they said. International cooperation has also seen a major boost, with 45 mutual legal assistance requests made to 20 jurisdictions between 2014 and 2020; evidence received has enabled important corruption cases that had stalled to recommence.

Training that brings a step change in capacity

In opening remarks Phillip Kagucia, the EACC's Deputy Director and Head of Asset Recovery, mentioned that he was: "very fortunate to go through the same training conducted by the ICAR training team in 2012. It is no coincidence that soon after that the quality of investigations improved and, within no time, we began enjoying success in asset recovery. Part of the reason we were ultimately successful as EACC was due to our ability to provide an alternative method of financial analysis (Sources and Application) after the initial method (Bank Deposits) failed to persuade the court. This case crystallised the ingredients for forfeiture of unexplained assets in Kenya and opened the way for law enforcement agencies to recover assets that are the proceeds of corruption and other crimes”. Participants commented on how the practical tests and group engagement helped their understanding, with one stating that the "following-the-leads exercise changed my mind on how I will be looking at cases." Another commended the multi-agency approach, stating that "it was a good forum to interact with other state agencies."

Looking forward

In addition to building on these successful steps forward, the new UK-funded ICAR programme in Kenya seeks to strengthen other elements in the anti-corruption and asset recovery chain that have not received a comparable level of sustained support. This includes capacity and coordination with other key agencies, including the ODPP, ARA and judiciary.

An eight-month training programme for senior leaders of Tanzania and Zanzibar's anti-corruption and economic crimes authorities concluded last week, in the presence of Minister Haroun Ali Suleiman (Zanzibar’s Minister for Constitutional and Legal Affairs) and Didier Chassot (Switzerland’s Ambassador to Tanzania). The final five-day module, which took place in person, provided a chance for the 20 participants from Tanzania’s Preventing and Combating of Corruption Bureau (PCCB) and the Zanzibar Anti-Corruption and Economic Crimes Authority (ZAECA) to demonstrate the leadership models and skills they had developed throughout the course. Delivered by our International Centre for Asset Recovery (ICAR) in partnership with AML Consulting (Global), the modular Senior Leadership Development Programme covered topics including critical thinking and decision making, transformational change, leadership styles, developing teams, leading through conflict, and improving organisational culture. Strong leadership is possibly the single most important factor in the fight against corruption and other economic crimes. As Didier Chassot, Switzerland’s Ambassador to Tanzania, commented in his closing remarks: "Supporting the fight against corruption is a priority of the Swiss Government in Tanzania, and we are therefore delighted to have supported this very valuable training, which has equipped you with critical leadership skills. Senior leaders shape organisations, drive performance, and set organisational culture, and we trust that the skills and behaviours you have learned and demonstrated during the programme will help you set standards for others to follow and deliver change." Switzerland’s Federal Department of Foreign Affairs, through the Swiss Agency for Development Cooperation (SDC) and the Embassy of Switzerland in Tanzania, has been supporting ICAR’s assistance to Tanzania’s anti-corruption authorities for more than six years. Since then, the programme has successfully built capacity to investigate and prosecute corruption and to recover stolen assets through hands-on mentoring combined with training and institutional development advice. A new agreement was signed with ZAECA in June 2021, shortly before the training commenced, and with Zanzibar’s Office of the Director of Public Prosecutions in January 2022.

Part 2 of a guest interview with Aidan Larkin, CEO of Asset Reality. Part 1 covered the scope of illicit activity involving crypto assets and why some States are recovering far more crypto assets than others, plus issues around international and public-private cooperation. Below, Aidan explains the challenges of DeFi platforms for confiscating illicit virtual assets, how and when States should convert the assets to fiat currency, and the one thing that will significantly boost States's ability to recover illicit assets in virtual form.

When illicit assets are held on DeFi platforms, (how) can they be seized and confiscated?

Decentralised finance (DeFi) platforms are a cause for concern for law enforcement and regulators alike. But they shouldn’t be a cause for panic. The fear with DeFi is that with no central entity with the power to take control of suspect assets or block their movement, there is no way for law enforcement to seize or recover them without the cooperation of the owner. But that’s not the case. The question is about gaining control of access to the asset. Take a non-fungible token (NFT), for example, which can be purchased on decentralised as well as centralised platforms. If you can identify the suspect’s wallet that controls the NFT, you can restrain it and transfer it to a wallet that you control. Crypto assets like bitcoins have no central entity or intermediary either, yet law enforcement authorities have successfully seized billions of dollars’ worth over the years. Most recently HM Revenue & Customs in the UK successfully seized NFTs in a fraud investigation – thought to be the first seizure of its kind. In fact the situation with DeFi, and the concerns it presents, is not very different to regular assets in many instances. Someone can hide a diamond under the mattress or keep illicit funds in an opaque offshore financial centre, for example. If the owner does not hand over control of the assets to the authorities, they are considered beyond reach. But powers relating to hidden assets or contempt of court have been successfully used when investigators have reason to believe, and can prove, that a suspect may be attempting to keep assets beyond reach.

Can illicit assets stay under the radar on DeFi platforms indefinitely?

In theory, it is possible for criminals to move all their money through DeFi platforms, just like it is possible to store stolen money, gold and diamonds in a private safe and live “off the grid”. But this is a risky and unappealing option even for criminals. The DeFi market is volatile and protocols may collapse without warning. They too could be victims of hacks. Criminals seek economic gain and want to hedge their bets, manage their risks and use their funds in real life. This means that at some point they need to transfer through known and regulated entities such as VASPs when they want to convert their illicit income into fiat currencies. It is at that point, when they surface, that they can be identified, seized and confiscated. Unlike any other asset category, we can remotely and anonymously monitor many crypto addresses in perpetuity. This gives law enforcement an incredible opportunity to react when funds surface.

After law enforcement has seized virtual assets, how and when should they be realised?

Virtual assets are notoriously volatile, which means their value may change significantly during the investigation and court proceedings. This is a headache for many authorities: if you sell early, you might lose out on a big increase in price. If you sell late, you may be selling a crypto asset worth less than when it was originally seized. And what about if the defendant is cleared of wrongdoing? The State could be liable to pay compensation if the defendant can demonstrate they didn’t achieve market value, for example. It is important to note, however, that a common misconception is that the State is somehow responsible for trying to maintain the value of a volatile asset in their custody. That isn’t the case, or even possible with a volatile asset. How and when to realise seized or confiscated assets depends mostly on a country’s legislation. The law usually already covers how to manage and realise volatile assets or assets that depreciate in value, like luxury cars. Some legislation, such as in the Netherlands, may support selling depreciating assets early to avoid any potential loss of value. The same legislation is used to deal with crypto effectively. Other jurisdictions may require the assets to be kept in the original State for the full duration of court proceedings. The UK offers another example of putting existing legislation to good use: in a case involving 295 bitcoins owned by a drug dealer, an order was granted to make the restraint order effective by converting the volatile crypto asset to local currency pre-confiscation. Engaging with the suspect / owner of the asset regarding their permission or consent to sell or convert the asset is another pragmatic option. This could be utilised more often, rather than waiting for the conclusion of confiscation proceedings, for example. It can help to realise the best value of the asset at an early stage and reduce the likelihood of claims for compensation later on. The decision to sell should be made on a case-by-case basis, while always acting in according with legislation and best practice.

What are the options for realising the value of confiscated virtual assets?

Public auctions are a common option to convert of crypto assets, often arranged into several lots, into fiat currency. Auctions reflect the open market value of the assets and are a tried-and-tested methodology for realising large quantities of seized assets. Authorities can vet the bidders and perform due diligence checks to  minimise the risk that they are dealing with criminals. Additionally, setting reserve prices ensures the items are not sold undervalue. A quicker option that is also utilised extensively is to use a regulated/registered virtual asset exchange to simply convert the crypto asset into the local currency. But the authorities in some jurisdictions (such as Sweden) have raised concerns at this approach due to a lack of visibility over who is buying the items from the exchanges. I think that this concern however, is becoming less and less due to countries implementing registration processes for crypto businesses that include robust anti-money laundering (AML) processes.

In countries that have banned cryptocurrencies, (how) do the authorities realise the value of confiscated assets?

Regulation is a complicating factor when it comes to realising the value of confiscated crypto assets. Some countries have banned cryptocurrencies, including large players like China and Indonesia. Chinese authorities have also shut down and seized cryptocurrency mines, which inherently have crypto assets attached. Countries that consider bans should not think they have solved the issue. Even if you ban a new category of narcotics, for example, you still need to have detection, intelligence and enforcement capabilities. The statistics are overwhelmingly clear that mainstream adoption of digital assets is inevitable – particularly as the same countries that ban crypto often explore their own digital currencies. The issue of banning and criminalising crypto also triggers an interesting, partly ethical dilemma. When illegal products like drugs or wildlife goods are confiscated, they are destroyed even if they in principle have a high market value. It would be unthinkable to auction off a hundred kilos of cocaine, for example. But what happens when the authorities seize the illegal proceeds of a fraud scam that the perpetrators are holding in crypto format? Are the authorities going to abandon their control over the assets, destroy the private keys that control the asset, and tell the victims they can’t be compensated? These difficult questions are yet to be worked out in some jurisdictions.

In your personal experience, what is the one thing that will help countries boost their crypto asset recoveries?

Capacity. We have the laws and processes; we just have to get up to speed on the practical aspects. That means things like training, capacity building and processes for investigators, prosecutors and the judiciary, and support from specialist organisations. Specialised technical tools are also essential for conducting financial investigations involving crypto assets, but they are not a panacea. We still need skilled investigators combined with real-world intelligence to help crack many of these cases. The need for capacity building extends to regulators and supervisors. You need regulation and supervision to prevent crypto crime and money laundering, not only enforcement to track down the perpetrators and recover their illicit assets. Yet many countries have yet to work out how to address the risks of crypto crime and money laundering at all. The Financial Action Task Force (FATF) reports that dozens of countries still have no capacity or tools to detect and prevent virtual assets-based money laundering. This is alarming, given the ease with which criminal crypto enterprises can be set up in overseas jurisdictions. Once operating, they can utilise technology solutions and programmatically launder hundreds of millions of dollars’ worth of digital assets in a comparatively short space of time. In summary: When it comes to crypto asset recovery, more capacity is key. If governments invest seriously in building capacity to trace and recover illicit digital assets, the amount of criminal assets they are able to recover will get significantly larger year after year. It could prove to be the turning point in ensuring modern crime does not pay.

Learn more

• View the 5th Global Conference on Criminal Finances and Cryptocurrencies landing page and post-conference Recommendations on combating virtual assets-based money laundering and crypto-enabled crime.
• View Aidan Larkin's conference presentation on Demystifying crypto asset recovery or download the slides.
• View Part 1 of this interview, which covers the scope of illicit activity involving crypto assets and why some States are recovering far more crypto assets than others, plus issues around international and public-private cooperation.

A guest interview with Aidan Larkin, CEO of Asset Reality. Aidan presented on Demystifying crypto asset recovery at the 5th Global Conference on Criminal Finances and Cryptocurrencies, a joint conference of the Basel Institute on Governance, Europol and INTERPOL on 8-9 December 2021. This interview expands on the second of seven Recommendations issued following the conference – for more countries to take advantage of their possibilities to recover virtual assets involved in crime and money laundering. Part 1 below covers the scope of illicit activity involving crypto assets and why some States are recovering far more crypto assets than others, plus issues around international and public-private cooperation. Part 2 deals with the challenges of DeFi platforms for confiscating illicit virtual assets, how and when States should convert the assets to fiat currency, and the one thing that will significantly boost States's ability to recover illicit assets in virtual form.   

How much illicit activity involves crypto assets?

Illicit cryptocurrency addresses received the equivalent of USD 14 billion in 2021, according to blockchain analysis company Chainalysis. This is a nearly 80 percent increase from the previous year. It sounds a like a frightening rise in illicit activity. In fact, it is a decrease in relation to the total value of cryptocurrency transactions in 2021, which hovers around USD 15.8 trillion. Illicit activity accounts for only 0.15 percent of those transactions. The virtual assets industry as a whole covers not only cryptocurrencies such as Bitcoin and Ethereum but other digital assets like non-fungible tokens (NFTs). All of these are exploding. This massive growth means there will inevitably be a lot more crypto-enabled crime and virtual assets-based money laundering in the coming years. And that means governments should be using all available powers to recover illicit digital assets and ensure crime doesn’t pay, even when it takes place in cyberspace. Yet only a few are taking advantage of these possibilities so far.

How many crypto assets linked to crime and money laundering are being recovered?

Some countries are recovering astonishing amounts of virtual assets. The US is in the lead, following its takedown of the Silk Road market in 2013. Its Internal Revenue Service seized USD 3.5 billion in cryptocurrencies in the last fiscal year, which is a staggering 93 percent of their total seizures. This week alone they announced a  USD 3.6 billion crypto seizure – possibly the biggest single proceeds of crime seizure of all time. The UK has announced regular seizures of cryptocurrencies in the millions of pounds. Australia, Belgium, France and other EU member states are also now regularly confiscating and auctioning off crypto assets. But some countries have not yet seized or recovered any crypto assets at all. The African continent is number 1 on the cryptocurrency adoption charts, with a rise of 1,200% between July 2020–July 2021 alone, for example. But as yet, I am not aware of any significant crypto asset seizures on the continent.

What is stopping countries from recovering illicit assets held in crypto formats?

On the legal side, nothing. Any country with basic asset recovery legislation and systems to seize, manage, recover and realise illicit assets can do this. Virtual assets are a store of value, like any other tangible asset (such as gold or art) or intangible asset (such as stocks and shares). Some confusion arises from the term “cryptocurrencies”, which implies that crypto assets are like cash held in another currency. One might assume that specific cash seizure legislation needs to be amended to cover crypto. In fact, in most countries, virtual assets including cryptocurrencies do not function like currencies but like other investments or stores of value, such as gold, art, race horses or yachts. In the context of asset seizure and recovery, they should therefore be regarded like any other such asset. Separate legislation is generally not needed. The same processes to seize, recover and manage the assets apply. It would be unusual for a country to not have legislation that allows the freezing of intangible property. So legislation isn’t the barrier. Enabling investigators with the tools and skills to track and trace crypto is key. It’s the equivalent of Customs officers not using intelligence packages and detection techniques to find illegal items. If you’re not looking, you’ll not find it.

Are there differences in international cooperation when it comes to seizing and confiscating crypto assets?

In theory, no. In practice, yes. The same systems of international cooperation – agreements, legislation, processes, informal communication networks– all apply. And so do the same weaknesses. As those involved in international asset recovery cases well know, formal channels of cooperation can be frustratingly slow and ineffective, for reasons outside officers’ control. As for asset recovery in general, informal mechanisms of international cooperation such as the Egmont Group or CARIN network are extremely helpful in obtaining information or supporting efforts to advance an investigation. On the positive side, the nature of cryptocurrency means much more can be done virtually without the need for international cooperation at all. Transactions are recorded on public blockchains accessible from anywhere in the world. Investigating officers can obtain information and evidence by analysing the blockchain from the comfort of their own office. Not everyone is aware or has the skills to do this, so we often see requests for cooperation asking for information easily available to the requesting party Officers who do not fully understand the mechanics of crypto assets may also send requests that are impossible to carry out, or “machine gun” requests for lots of data that they in fact do not need. Capacity and understanding are a problem for the requested party too. If officers who receive requests for assistance are not trained in the basics of virtual assets, they will naturally put it at the bottom of the pile. Too often we witness smaller jurisdictions that house many of the world’s largest virtual currency exchanges being bombarded with requests for assistance that could be dealt with remotely. Another factor affecting international cooperation for crypto asset recovery is the vastly increased time pressure. Virtual assets can be transacted around the world and change hands multiple times in minutes. In the context of restraining or freezing assets, this is significantly different to, say, luxury villas or even money in bank accounts, which could take several hours or days to transfer. So time is of the essence at the freezing stage, to prevent assets from disappearing or being dissipated while the investigation is underway. This is where effective public-private cooperation comes in.

How does public-private cooperation work, and is it working?

It works pretty well – in many senses, much better than in non-crypto cases. First, many of the major virtual asset service providers (VASPs), such as cryptocurrency exchanges, are being encouragingly proactive in supporting law enforcement. For example:

• Some have dedicated departments for dealing with authorities’ requests for information and cooperation.
• We have seen some VASPs restricting suspects’ access to assets upon receiving a foreign court order, rather than waiting for a local one to be issued by the domestic courts. This is similar to how banks may treat a regular bank account containing suspected illicit funds.
• VASPS may also place “soft blocks” on suspect assets, if the requesting authority can demonstrate the assets are linked to criminality. This prevents them being dissipated before official freezing orders make their way through the system.

Second, private blockchain analytics and investigation companies are an essential partner to law enforcement when it comes to analysing the blockchain for information and gathering evidence, or developing tools and infrastructure to help them enable more seizures. The takedown of the Welcome to Video child exploitation site, and multiple international arrests, which had 1.3 million Bitcoin addresses registered and received thousands of Bitcoin payments, would not have happened as effectively if it weren’t for those levels of cooperation.

Learn more

• View Part 2 of this interview, which deals with the challenges of DeFi platforms for confiscating illicit virtual assets, how and when States should convert the assets to fiat currency, and the one thing that will significantly boost States's ability to recover illicit assets in virtual form.
• View the 5th Global Conference on Criminal Finances and Cryptocurrencies landing page and post-conference Recommendations on combating virtual assets-based money laundering and crypto-enabled crime.
• View Aidan Larkin's conference presentation on Demystifying crypto asset recovery or download the slides.

What are the four biggest developments in anti-corruption Collective Action in the last years? And what are some examples of these around the world? Gemma Aiolfi spoke on these topics to delegates at a Members Meeting of Etik ve İtibar Derneği (TEİD) – the Turkish Ethics and Reputation Society. TEİD is an inspiring cross-sectoral Collective Action initiative that has been working tirelessly since 2010 to promote business ethics in Turkey. Read her speech below or view it on here on YouTube. If you have any questions about Collective Action or want more details on any of these initiatives, please don’t hesitate to get in touch with our team via our Helpdesk, a free advice service on anti-corruption Collective Action to promote fair business.

Thank you for the invitation to speak at this important milestone event for the ethics and reputation society. May I congratulate you all on the commitment and engagement you all bring to addressing integrity and corruption related challenges. I’ve been asked to talk about examples of anti-corruption Collective Action initiatives from around the world.

Before doing so I just wanted to mention four developments that are incentivising companies to engage in anti-corruption Collective Action.

1 Revised OECD Recommendation includes Collective Action for the first time

The first is the revised OECD Recommendation published by the member countries of the Anti-Bribery Convention at the end of 2021. Among the new measures to reinforce efforts to prevent, detect and investigate foreign bribery, Collective Action is included for the first time.  Member countries have to:

consider fostering, facilitating, engaging, or participating in anti-bribery collective action initiatives with private and public sector representatives, as well as civil society organisations, aiming to address foreign bribery and bribe solicitation.

This Recommendation will be part of the country monitoring process that the 44 member countries of the OECD Convention undergo on an ongoing basis. Quite simply, this means that governments will be asked to explain what they have done to foster, facilitate, engage or participate in Collective Action. So there is an international standard that is now encouraging the public and private sectors to get active and participate in Collective Action.

2 Collective Action becomes a key part of ESG and non-financial reporting

Second, there is rapidly growing interest in corporate non-financial reporting, where companies explain how they address environmental, social and governance (ESG) issues.

The largest organisation that publishes such information is the Global Reporting Initiative or GRI. GRI’s reporting standard on anti-corruption asks companies to describe whether they participate in Collective Action to combat corruption, including:

• the company’s strategy for its Collective Action activities;
• a list of the initiatives in which the organisation participates;
• a description of the main commitments of these initiatives.

3 Companies find synergies in human rights and anti-corruption

Third, there’s an increasing recognition in the convergences or overlaps between how companies are addressing human rights and corruption.

These topics have much in common and are linked, but they also have important differences: Using Collective Action to share knowledge and experiences is a practical approach that some companies are already using given the new laws on human rights in order to keep up with these new developments.

4 Governments explore ways to engage with the private sector through Collective Action

Fourth, the Network of Corruption Prevention Authorities (NCPA) brings together government organisations from all over the world, many of which are responsible for drafting their national anti-corruption strategies.

These strategies call on the private sector to prevent corruption. These authorities are now exchanging on their experiences and different ideas on how to engage with the private sector, including through Collective Action.

Those are some of the developments in mainstreaming Collective Action. Let’s now take a look at some of the inspiring examples of Collective Action for companies.

Collective Action in action – examples from around the world

Measuring the effectiveness of anti-corruption compliance

A question often asked by investors and boards is: How can you measure whether an anti-corruption compliance programme is really effective?

This was a question posed by the one of the world’s largest investors – the Norwegian Sovereign Wealth fund manager – to a group of pharmaceutical companies. Together, they formed a Collective Action initiative to agree on key performance indicators to identify what an effective anti-bribery and corruption programme means in practice. The output was a set of indicators for companies to report on publicly.

So far, two companies from the eight that participated in the Collective Action have published information about the quantitative and qualitative indicators of the effectiveness of their anti-corruption compliance programmes. This is probably the start of a discussion to identify more indicators of what is effective.

This initiative is an example of how Collective Action can break new ground. It was the first to be inspired by an investor, and also to address a new area that is useful to companies. It may inspire other industry sectors to develop improvements to these basic indicators.

Transforming beneficial ownership transparency in extractives industries

The second example is the joint project of two major global Collective Action initiatives. Open Ownership and the Extractive Industries Transparency Initiative (EITI) are partnering to develop and deliver a new global programme called Opening Extractives.

Opening Extractives aims to stimulate a real transformation in beneficial ownership transparency in the extractives industry. This will involve governments, companies and civil society publicly revealing the ultimate beneficial owners of their supply chain companies, and partners of the companies that engage in mineral and mining industries.

This Collective Action could be a game changer in a sector that has long been associated with corruption risks, including kleptocracy and state capture.

It's an exciting development because it brings together two well established collective action initiatives to tackle a really complex and political issue. We’ll have to see how it develops.

Sharing compliance expertise between private firms and state-owned enterprises

Compliance without Borders is a mentoring programme between state-owned enterprises and the private sector that was developed by the B20 and the OECD.

It has been piloted in the last few months, and could be a great way for state-owned enterprises to benefit from experienced compliance officers in the private sector sharing their experience and expertise for free.

At the same time, the private-sector compliance officers learn about the challenges of having to implement a compliance programme in a state-owned organisation.

Developing industry-tailored anti-corruption guidance for high-risk industries

The Natural Resource Governance Institute (NRGI) is a non-profit organisation that seeks to improve countries’ governance of their natural resources, with a focus on the oil and gas industry.

Over a two-year period, the NRGI conducted a detailed desk review and analysis of corruption cases involving state-owned enterprises and their oil and gas corporate partners. They identified recurrent corruption issues and reviewed existing best practices in corruption prevention.

Then they brought together, in a series of consultations, 15 of the largest oil companies plus state-owned enterprises and civil society stakeholders. The aim was to develop a new and tailored set of guidance that recommends measures that companies in the oil, gas and mining sectors should adopt to reduce corruption risks when partnering with state-owned enterprises.

The Guidance also recommends measures SOEs can take to strengthen their anticorruption safeguards.

The Collective Action entailed interviews with over 110 individuals and 50 companies from NGOs, companies, financial institutions, universities and a core group of 18 companies through closed-door workshops.

The guidance breaks new ground for three reasons:

• It focuses on the business interactions between companies and state-owned enterprises – not on everything. For example, it does not cover gifts and entertainment because there’s already lots of guidance on that topic.
• It mixes basic and ambitious measures. Some can be implemented already, while others will take longer.
• It prioritises the public interest in the producing countries, rather than the company’s interest which is often the focus of compliance guidance. This means higher disclosure levels even if the entities are not legally obliged to do so, and stopping serious forms of corruption like kleptocracy where possible.

This guidance could provide inspiration to other countries. There are SOEs everywhere in the world and many present similar risks to this industry sector. So the Collective Action methodology that the NRGI used could be applied in other sectors, other countries and to other corruption-related challenges.

Why is international cooperation in asset recovery cases based on illicit enrichment/unexplained wealth laws a particularly challenging issue? This is a question we have received from many corners of the world following our publication last year of an open-access book on Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth. In this annexed contribution to the book, Jonathan Spicer explains why international cooperation in illicit enrichment cases can come up against barriers – and asks whether there is scope for reform. Jonathan is Senior Asset Recovery Specialist at the Basel Institute’s International Centre for Asset Recovery. He worked closely with the book’s author, Andrew Dornbierer, during the book’s development and editing. Illicit Enrichment is freely available to read and download at illicitenrichment.org. A Spanish version of the book is available here: Enriquecimiento ilícito: Una guía sobre las leyes que abordan los activos de procedencia inexplicable.

Why international cooperation is needed

Criminal activity is not confined to national borders and illicit enrichment investigations will often have an international element. Investigators may seek information or evidence from other jurisdictions which relates to the suspected criminal activity that has led to the illicit enrichment or that relates to the possession, concealment or use of illicit assets. For example, a public official may be suspected of using a foreign corporate structure to hold illicit funds in bank accounts in another jurisdiction. In order to progress the investigation (and potentially freeze the funds), prosecutors will need to use mutual legal assistance (MLA) to obtain evidence from the respective jurisdictions where the foreign company is registered and where the bank account is located. Alternatively, it may be known that the child of a public official attends a renowned (and expensive) fee-paying school overseas. Investigators would be seeking information not only on the amount of fees that have been paid, but also on the source and manner of the payments. The school may voluntarily provide the information on the payment of the fees, but if it does not a court order will be necessary. Accordingly, insofar as this information is not publicly available, assistance will be required from the authorities in the jurisdictions where intelligence or evidence is held. Whether that jurisdiction is able to assist will usually depend upon its domestic law and also whether it has either illicit enrichment as an offence or civil procedure.

Formal and informal cooperation channels

International cooperation exists at both informal and formal levels. Informal international cooperation is usually seen as cooperation at a law enforcement level or as police-to-police assistance. Often this will amount to intelligence sharing (for example between financial intelligence units) or it may involve assistance which can be provided without the need for coercive measures (such as obtaining the voluntary assistance of the school in the example above). As these enquiries may be made at an early stage where the investigation is not limited to illicit enrichment but also looking at underlying criminality, there are likely to be fewer difficulties in obtaining assistance. Formal means of international cooperation, known as MLA, is where a state requests another state to apply its laws to obtain evidence for use in the proceedings being brought by the requesting state. This cooperation usually requires the use of coercive measures by the requested state, for example searches of properties, interviewing of witnesses or production of documents. This formal means of cooperation is usually based on multilateral treaties, bilateral treaties or other forms of state to state agreements. In terms of illicit enrichment proceedings, MLA may be required to obtain evidence during the investigation stage, for example bank statements, or may be required to freeze assets or to enforce a final order for confiscation.

Dual criminality – an obstacle to international cooperation

Under the dual criminality principle, States will only provide MLA in criminal matters if the offence being investigated in the requesting State is also an offence in the State being asked to provide assistance. The application of this principle by States which do not recognise an offence of illicit enrichment can often be an obstacle to international cooperation in illicit enrichment investigations. The promotion of the criminalisation of illicit enrichment as a measure to tackle corruption is seen within UNCAC (Article 20) as well as other regional treaties such as IACAC (Article IX) or AUCPCC (Article 8). However the introduction of illicit enrichment offences is not compulsory under these conventions. Under UNCAC and the AUCPCC, non-mandatory language permits States to decide themselves whether to implement illicit enrichment laws, while under the IACAC, States may also refrain from introducing an illicit enrichment offence if they deem that it will contravene existing constitutional rights.

Providing assistance despite a lack of dual criminality

While the IACAC and AUCPCC do not address the issue of dual criminality directly, they both have almost identical provisions on assistance to be provided in illicit enrichment investigations, by States Parties that do not introduce illicit enrichment offences. Under IACAC at Article IX paragraph 3: Any State Party that has not established illicit enrichment as an offense shall, insofar as its laws permit, provide assistance and cooperation with respect to this offense as provided in this Convention. The United States of America posted a reservation on its signing of the IACAC, where it stated that it understood it was not obligated to introduce an offence of illicit enrichment, as this would be inconsistent with the United States constitution and fundamental legal principles due to the burden of proof being placed on the defendant. However, the U.S. does make clear that as far as it is permitted by domestic law, it does intend to assist and cooperate with other States Parties investigating illicit enrichment. The provisions of UNCAC emphasise the need for cooperation and address dual criminality directly. Article 43(1) mandates State Parties to cooperate in criminal matters in accordance with Article 44 to 50 of the Convention, before addressing dual criminality in Article 43(2): In matters of international cooperation, whenever dual criminality is considered a requirement, it shall be deemed fulfilled irrespective of whether the laws of the requested State Party place the offence within the same category of offence or denominate the offence by the same terminology as the requesting State Party, if the conduct underlying the offence for which assistance is sought is a criminal offence under the laws of both States Parties. Thus, States Parties receiving MLA requests cannot refuse on the basis of the name of the offence or the category under which it is deemed to fall, but must look at the actual conduct which constitutes the offence and consider whether this would amount to an offence under the domestic law. However, illicit enrichment offences, and particularly those that include a shifting of the burden of proof on to the defendant, do not compare easily with other types of offending. Nonetheless, Article 46, which addresses MLA, requires State Parties to “afford one another the widest measure of mutual legal assistance in investigations, prosecutions and judicial proceedings in relation to the offences covered by [the] Convention”. Finally, Article 46 (9) of UNCAC makes further provision on MLA and dual criminality: (a) A requested State Party, in responding to a request for assistance pursuant to this article in the absence of dual criminality, shall take into account the purposes of this Convention, as set forth in article 1; (b) States Parties may decline to render assistance pursuant to this article on the ground of absence of dual criminality. However, a requested State Party shall, where consistent with the basic concepts of its legal system, render assistance that does not involve coercive action. Such assistance may be refused when requests involve matters of a de minimis nature or matters for which the cooperation or assistance sought is available under other provisions of this Convention; (c) Each State Party may consider adopting such measures as may be necessary to enable it to provide a wider scope of assistance pursuant to this article in the absence of dual criminality. It can be said, therefore, that the framers of the Convention sought to encourage the provision of assistance by States Parties which had not criminalised offences under the Convention (including illicit enrichment) to those States Parties which have. Requested States need to consider the purposes of the Convention under Article 1 and to consider whether it is possible to provide assistance falling short of coercive measures under their domestic law.

Pragmatic solutions to practical challenges

Despite these provisions, the lack of dual criminality may still prevent jurisdictions from using coercive measures to provide assistance in illicit enrichment investigations / prosecutions. Where this is the case, requesting States may be able to obtain help by outlining the suspected criminal behaviour which is thought to have led to the illicit enrichment. When this behaviour is considered by the requested State, it may consider that it is possible to provide support in the obtaining of evidence using coercive measures. In this respect, requesting States should consider providing a wide explanation of the facts revealed by the investigation and the activities of the suspects, as this will potentially provide grounds for the requested State to assist.

Caveat: the specialty principle

There is a caveat that should be highlighted here, which is the rule of specialty. This is that the evidence which is obtained by the requested State should only be used for the investigation or proceedings stated in the request. Therefore, it would not be permitted to apply for evidence on the basis of a corruption investigation and then use it in a hitherto unmentioned prosecution for illicit enrichment. Permission has to be sought from the State which provided the evidence.

Scope for reform?

One of the reasons for the adoption by States of a criminal offence of illicit enrichment is due to the difficulties in investigating the underlying criminality, especially in cases of corruption. However, an offence of illicit enrichment has not been widely adopted in those States where the assets may be held or through which they have been laundered. Notwithstanding this, many of those States encourage the adoption of procedures which tackle corruption and may have some alternative form of addressing illicit wealth, for example non-conviction based forfeiture procedures (incorporating unexplained wealth investigative orders such as the United Kingdom). This does not seem to be enough to overcome the issue of dual criminality for some jurisdictions. The question arises whether further steps should be taken internationally to promote a limited exception to the rule on dual criminality, which would apply to MLA requests to obtain evidence in illicit enrichment cases.

The Basel Institute has launched a Collective Action Helpdesk, a free advice service on Collective Action approaches to fight corruption and promote fair business. Through the Helpdesk, our team provides free, practical and independent advice on how to work collaboratively across stakeholder groups to address shared corruption challenges and promote fair and responsible business.

Free and open to all

The Helpdesk is open to anyone who is engaged in, or interested in, anti-corruption Collective Action or a similar multi-stakeholder approach to fight corruption and promote fair business. Funded by the Siemens Integrity Initiative, the Helpdesk builds on the informal advice and guidance that our team has been providing to anti-corruption professionals from civil society, the private sector and government over the last decade. We often receive similar questions, for example about how to finance Collective Action initiatives, how to measure the impact of anti-corruption initiatives, and tools to increase integrity and transparency in public procurement.  We will publish anonymised and generalised answers to these and other common queries on the Helpdesk landing page.

Resources, guidance and mentoring

The Helpdesk is located on the B20 Collective Action Hub, a global resource centre on anti-corruption Collective Action. The B20 Hub also includes a database of multi-stakeholder initiatives around the world, relevant publications, plus practical resources on Collective Action approaches to address procurement-related corruption, ease supply chain due diligence, connect human rights and anti-corruption compliance, and more. The Helpdesk joins our Mentoring Programme. Launched in October 2021, the programme offers hands-on, long-term guidance and technical assistance to civil society / non-profit organisations that work with the private sector and other stakeholders on tackling corruption.

Ask anything

What do you want to ask about Collective Action and other multi-stakeholder approaches to improve business integrity? Visit the Helpdesk now.

A brand new eLearning course on our free Basel LEARN platform introduces the rich possibilities of open-source intelligence for investigations. The course starts with the seizure of the fishing boat FV Malaga, suspected of involvement in illegal fishing and marine species trafficking. It’s your job to seek information and evidence to build the case – using only open sources available on websites and open databases, social media and online forums. On the way, you’ll also take a trip into the so-called dark web and the Bitcoin blockchain. How can open sources help you you find out who is behind the secretive organisation “Mossaman Commodities”? Are there databases and trackers that can show you where the fishing boat has been sailing? What can you learn by analysing Instagram images – and how do you go back in time on the internet?

Unlock the possibilities of OSINT – safely

The self-paced course reveals how vital OSINT is to investigations into corruption, money laundering and other serious crimes. By exploiting all possible sources on the regular web, deep web and dark web, it is possible to gather a huge amount of information and evidence with only a laptop, a well-organised collection plan and some smart thinking. You’ll learn practical ways to search for information without blowing your cover. This includes recommended browsers and search engine settings, plus apps and add-ons to increase your privacy and efficiency. At the end of the course, you’ll prepare your OSINT report on the illegal fishing case. Hit send, and you can download your personal certificate of completion issued by our International Centre for Asset Recovery (ICAR).

Who is the course for?

The online OSINT course is aimed at any investigators, prosecutors, analysts or professionals seeking to exploit the full possibilities of open-source information. It is self-paced, so you can start, stop and repeat at any time – easy to fit around a busy work schedule. As with our other eLearning courses, law enforcement agencies may wish to make the course a standard element in their officers’ onboarding or professional development. Wildlife management agencies may find the focus on investigating illegal fishing and marine species trafficking particularly useful. The new OSINT course was developed by our eLearning team in collaboration with subject matter experts from ICAR and our Green Corruption programme, with primary funding from PMI Impact. We are grateful to the Governments of Jersey, Liechtenstein, Norway, Switzerland and the UK for funding Basel LEARN with its growing suite of eLearning courses as part of their ongoing support to ICAR. Sign up for free and build your skills in OSINT investigation!

We are pleased to have entered into a new partnership with the Anti-Corruption Committee of the Republic of Armenia, covering assistance with investigating and recovering assets acquired through corruption and other related crimes.   Under the Memorandum of Understanding (MoU), which was signed on 18 January 2022, our International Centre for Asset Recovery (ICAR) specialists will provide ongoing advice, technical assistance and training to the recently established Anti-Corruption Committee.   The aim of the agreement is to strengthen the institution’s capacity to identify and recover illicit assets linked to corruption, other financial crimes or other forms of criminal activity, including those hidden in foreign jurisdictions.    Sasun Khachatryan, Chairman of the Anti-Corruption Committee, signed the agreement alongside other members of the agency’s leadership during a two-day visit by senior asset recovery specialists from ICAR to the Armenian capital Yerevan. Thanking ICAR for the practical launch of the programme, he expressed confidence that the MoU would provide an effective basis for closer cooperation.   Gretta Fenner, the Basel Institute’s Managing Director, congratulated Sasun Khachatryan on his appointment as Chairman of the Anti-Corruption Committee and looked forward to commencing support in line with the agreement.   See additional photos and the press release of the Anti-Corruption Committee of the Republic of Armenia on the institution’s official Facebook page.

We are delighted to have signed a Memorandum of Understanding with the Office of the Director of Public Prosecutions (ODPP) in Zanzibar. This new partnership builds on our existing engagement of our International Centre for Asset Recovery (ICAR) with the Zanzibar Anti-Corruption and Economic Crimes Authority (ZAECA). Under the agreement, ICAR will support Zanzibar’s ODPP to investigate and prosecute criminal cases of corruption and economic crimes, and recover criminal proceeds. This includes assistance with international cooperation to obtain intelligence and evidence from abroad.   Our Tanzania-based ICAR team will work closely with officers though a combination of training and case-based mentoring. The partnership is funded by the Swiss Agency for Development and Cooperation (SDC) as part of the second phase of a programme whose goal is to strengthen Tanzania’s asset recovery value chain.  The Zanzibar authorities are strongly engaged in efforts to fight corruption and recover the proceeds of crime. Salma Ali Hassan, Director of Public Prosecutions in Zanzibar, and Mohammed K Hassan, Principle State Attorney, Research and Advisory Unit, ODPP, signed the agreement on 4 January 2022 at a small ceremony on the main island. Seif Shaaban, Permanent Secretary of Zanzibar’s Ministry of Constitutional and Legal Affairs, was also present. The agreement takes the number of active partnership agreements between the Basel Institute and government anti-corruption agencies to more than 20, spread across Sub-Saharan Africa, Latin America and Eastern Europe.

We are delighted to have been invited to participate in the B20 Indonesia Integrity and Compliance Task Force as Network Partner and Co-Chair.

Gemma Aiolfi, Head of Compliance and Collective Action, will serve as Co-Chair together with Deputy Co-Chair Scarlet Wannenwetsch, Collective Action Specialist in our Collective Action team. They join other leading voices in the international integrity and compliance policy arena, including representatives from Novartis, Refinitiv, Trinity Business School, BRF Global, the China Machinery Industry Federation and Grupo Bimbo.

Gemma Aiolfi expressed her thanks to the B20 Secretariat and Taskforce Chair for the invitation, commenting:

“The leadership and collaborative dialogue that the B20 embodies are more essential than ever in this time of global transformation. Corruption risks, climate change, human rights, the pandemic, cybercrime– all these and more are transforming business and business risks in unprecedented ways. Multi-stakeholder collaboration including through Collective Action is key to addressing many of these challenges. We look forward to bringing our expertise in Collective Action, integrity and anti-corruption compliance to support the B20 process in shaping an impactful and business-oriented response.”

About the Taskforce and Collective Action

The Integrity and Compliance Taskforce is once again a core element of the B20 process under the 2022 Indonesian Presidency. The Basel Institute has been strongly engaged in the B20 process for the last 11 years, including as Network Partner for the B20’s Integrity and Compliance Taskforce in Saudi Arabia (2020) and Italy (2021).

The B20 has long embraced the value of Collective Action as a practical, flexible tool for engaging the private sector in the fight against corruption. Collective Action was placed at the top of the B20 Saudi Arabia Integrity and Compliance Policy Paper, for example, which recommended that:

"the G20 should engage with the private sector to implement or improve national anti-corruption plans, and to adopt new Collective Action initiatives.”

The 2021 B20 Italy Integrity & Compliance Policy Paper integrated Collective Action as a tool for collaborative approaches to corruption risks throughout almost all the recommendations developed by the Taskforce.

In 2013, we launched the B20 Collective Action Hub following a mandate from the B20 Russia. This online resource centre, which is supported by the Siemens Integrity Initiative, offers a range of anti-corruption publications and tools, plus a database of anti-corruption Collective Action initiatives and projects around the world.

The B20 Hub contains a specific section on B20 and anti-corruption, as well as research and analysis aimed at helping increase the effectiveness of B20 recommendations on integrity and compliance.

Looking forward

We look forward to constructive discussions with the B20 Indonesia Integrity and Compliance Task Force members under the leadership of the Chair, Haryanto T. Budiman of PT Bank Central Asia, Deputy Chair, Paolo Kartadjoemena of PT Bank Negara Indonesia, and Policy Manager, Amelia Susanto of PT Bank Central Asia.

Keep up to date with developments by following #B20Indonesia as well as our Collective Action team on Twitter (@FightBribery) and LinkedIn (Collective Action at the Basel Institute).

Our team supports companies and other stakeholders who wish to explore potential opportunities for Collective Action in their sector or region, including through a free mentoring programme and helpdesk.

Key takeaways and perspectives on how to “step up global action for business integrity” from the 9th Conference of the States Parties (CoSP 9) to the United Nations Convention against Corruption at Sharm El Sheikh, Egypt.

The United Nations Office on Drugs and Crime (UNODC), in collaboration with Siemens AG, organised a side event at this year’s Conference of the States Parties to discuss recent trends, challenges and shared experiences on how to strengthen integrity in global business practices.

Held on Tuesday 14 December, the event brought together representatives from a mix of ministries, international organisations, businesses and – moderated by our Managing Director – non-state actors. By gathering together such a diverse group of stakeholders, the event itself illustrated the concept of Collective Action.

Multi-stakeholder approaches to business integrity through Collective Action is something that Siemens AG has been promoting for many years, including through its funding of organisations such as UNODC, our own Collective Action team and many courageous civil society and business organisations around the world.

The benefit of this joined up, collective approach was stressed by all panelists. Opening the event in a pre-recorded video statement, Dr. Andreas C. Hoffmann, General Counsel and Head of Legal and Compliance at Siemens, together with his colleagues Annette Kraus (Chief Compliance Officer) and Sabine Zindera (Head of Collective Action & External Affairs), highlighted the importance of building sustainable Collective Action networks to enable fair market conditions.

This is a message that Siemens lives up to not only by funding projects projects across the globe through the Siemens Integrity Initiative, but also by including Collective Action as a prevention tool in its compliance system.

Mr El-Bagoury, CEO of Siemens Egypt, shared examples of how the company lives up to this in its day-to-day work. It consists of a combination of tangible Collective Action tools – in Egypt in the form of an Integrity Pact between Siemens and its respective business partners – and significant investment in building the capacity of the workforce, partners and intermediaries. Originally developed for a large infrastructure project to build the third-largest powerplant in the world, the model is now being replicated for a big mobility project in Egypt.

Other panelists also highlighted the importance of education and training, within companies but also across society as a whole, in order to significantly shift the business environment towards a culture of integrity. This concept is at the heart of the work presented by UNODC which, over the past years and with support from Siemens, has reached over 7,000 students worldwide. The UNODC programme also makes an important contribution to mainstreaming integrity across all types of businesses, with its Collective Action project providing tailored support and training to small and medium-sized businesses.

This need to reach out to all types of businesses was strongly supported by H.E. Mr. Wagner de Campos Rosário, Minister of the Office of the Comptroller General, Brazil. Sharing some of the lessons learned by the Brazilian government from the Lava Jato/Odebrecht case, he underscored the importance of regulating state-owned enterprises (SOEs) similarly to the rules applicable to privately owned enterprises. He also emphasised the need to invest in the development of SOE compliance systems, as SOEs form an integral part of the business environment in many countries.

The value of constantly reviewing and, if needed, amending the applicable regulatory framework was supported by the representatives from the Egyptian Ministry for Electricity and Renewable Energy. As part of Egypt’s desire to open up the country’s energy sector while also ensuring transparency and fair competition, significant efforts were made to strategically amend and develop relevant laws, reduce red tape by establishing e-platforms, and set up accountability mechanisms.

Ms. Shirazi, Head of Legal at construction company Orascom, the first Egyptian multinational corporation, agreed that a clear regulatory framework is important. This is because when the rules are clear, companies like Orascom can focus on embracing business integrity and compliance as an asset and not a cost. When openly declared and unequivocally supported from the top, ethics and integrity are a protective shield for companies, even in high-risk sectors. These “soft factors” are extremely important, and should also include harnessing business integrity as a currency to build trust with other stakeholders.

Pedro Gomez Pensado, the Head of the World Economic Forum’s (WEF)’s Partnering against Corruption Initiative (PACI), confirmed that he observed similar trends in the WEF community as previous panelists have noted. In particular, he stressed the increased emphasis of the next generation on integrity and broader environmental, social and governance (ESG) topics. Gomez Pensado expects this to have a significant impact on the labour market of tomorrow, where a company’s commitment to integrity is increasingly seen as a decisive factor in employment decisions taken by young entrants to the labour force.

This momentum is likely to be bolstered by a growing recognition that ESG is about more than “just” the environment. Indeed. strong ESG momentum will inevitably shift its emphasis on establishing a culture of integrity as a foundation for all other ESG requirements. New technologies such as artificial intelligence and blockchain bring new opportunities but also potential ethical risks. Companies and governments should get ahead of this development.

Overall, panelists agreed that business integrity was a fast-developing concept, and that rapid progress has been made in recent years.

To wrap up, the panel moderator Gretta Fenner, Managing Director of the Basel Institute on Governance, noted that the discussion was almost a recipe for how business integrity can and will work: through a joined-up effort tackling corruption at every level and from every angle, bringing together culture and laws, spanning the smallest and largest enterprises, uniting competitiveness and integrity, and building on awareness, understanding and trust. Or, in two words: Collective Action.

Find out more about Collective Action for business integrity on the B20 Collective Action Hub.

The 5th Arbitration and Crime Workshop is set to take place in hybrid format on 7 May 2022 at the University of Basel, Switzerland. The focus will be on US President Biden's anti-corruption initiative and recent challenges in the area of arbitration and crime. Organised by the Arbitration and Crime Competence Centre, which is led by Professor Mark Pieth and Dr Kathrin Betz, the annual event brings together leading arbitrators, lawyers, academics and other experts from around the world. The Toolkit for Arbitrators, available in English, French and Russian, emerged from the 2019 meeting to guide arbitrators who suspect, or are confronted with, alleged corruption or money laundering in relation to the underlying dispute. The draft agenda for the 2022 workshop currently includes:

• US President Joe Biden's initiative against corruption: The emerging new paradigm of bribery as a security issue (Chair: Krista Nadakavukaren Schefer, Swiss Institute of Comparative Law).
• Arbitration in sports: How does sports arbitration deal with illegality? How can sanctions enacted by an arbitral tribunal interact with national procedures? (Chair: Nicola Bonucci, Paul Hastings LLP).
• Ratification: What amounts to ratification of a tainted contract? Who can ratify and in what timeframe? What are the limits of ratification? (Chair: Lord Peter Goldsmith QC, Debevoise & Plimpton LLP).
• Protection of third parties: Who is a third party that deserves protection? What happens to workers, subcontractors, financial operators who are involved in a project tainted by corruption? (Chair: Juan Fernández-Armesto, Armesto & Asociados).
• Maritime arbitration: How does it protect human rights? (Chair: Nadia Darwazeh, Clyde & Co)

The panel speakers include many well-known names in financial crime litigation and arbitration. For the latest agenda and speakers, see the Arbitration and Crime Competence Centre website. We are delighted to co-host the event again this year with support from The International Academy of Financial Crime Litigators, several of whose Fellows are participating in workshop panels. It will kick off with an informal pre-workshop dinner on 6 May at Restaurant Krafft in Basel for those attending in person.

Registration – in person or virtually

Attendance is free of charge both in person and virtually, but please note that physical spaces are limited due to foreseeable Covid-19 restrictions. You will require a Covid-19 certificate valid in Switzerland and will need to adhere to the health measures in place at the time, including those imposed by the University of Basel. Please sign up quickly as the organisers offer physical places on a first-come, first-served basis. For full details and the email for in-person registration, please see the latest agenda on the Arbitration and Crime Competence Centre website. Virtual participants will be able to join by Zoom for the workshop on 7 May. Click here to register.

What can we learn from studying corrupt informal networks linking the public and private sectors? A lot – including how to build stronger multi-stakeholder partnerships against corruption through Collective Action.

Our latest Policy Brief draws on the Basel Institute's recent research in East Africa into how informal networks link private and public sector actors to pursue common illicit goals, such as gaining an unfair business advantage or decreasing taxes owed. Held together by corruption, the networks are highly resilient and effective. Collective Action initiatives also typically create networks of private and public sector actors, but the goals here are positive and transparent. They may include raising standards of integrity and fair business in a specific industry sector or geographical area.

Understanding how corrupt networks function – and the problems they solve for the actors involved – could help Collective Action practitioners increase the effectiveness and resilience of their initiatives.

Key takeaways

The Policy Brief distils lessons for anti-corruption practitioners seeking to engage with the private sector through Collective Action, covering:

• solving problems as a way to create stronger incentives to engage
• offering transparent alternatives to those who feel they have little choice but to engage in corruption
• recruiting strategically to get the right people around the table
• building trust while maintaining credibility
• establishing effective reporting or whistleblowing mechanisms

The publication also explains why anti-corruption initiatives that focus purely on adding formal controls to high-risk processes, like audits and sanctions, can backfire. Initiatives that include monitoring project implementation and outcomes may be a smarter choice.

And the good news is that although informal networks can be resilient and effective, there may well be windows of opportunity to break them up. Examples include if a new government comes to power on an anti-corruption ticket or where there is strong pressure from citizens to increase transparency and accountability. 

About the research

The publication is a collaboration between the Basel Institute's Public Governance and Collective Action teams, with the support of Lucy Koechlin, Senior Lecturer at the University of Basel.

The field research underpinning the Policy Brief was conducted under the Global Integrity Anti-Corruption Evidence (GI-ACE) Programme, funded with UK Aid from the British people. Although the original field research took place in Tanzania and Uganda, the findings will be of relevance to Collective Action practitioners and others seeking to address corruption all over the world.

Download Policy Brief 8: It takes a network to defeat a network – What Collective Action practitioners can learn from research into corrupt networks

The 5th Global Conference on Criminal Finances and Cryptocurrencies on 7-8 December 2021, co-organised by the Basel Institute on Governance, INTERPOL and Europol, saw several thousand participants from the public and private sectors gathering to exchange knowledge on virtual assets-based money laundering and related risks in the crypto sphere. Overall, fast and cooperative action by governments, law enforcement, regulators and the private sector is essential to tackle the risks and keep this dynamic industry safe for all. Virtual assets-based money laundering and other crypto-enabled crimes are threats not only to users and financial markets, but also to the dynamism and innovation of the sector itself. Protecting citizens and the global economy from the risks of abuse of cryptocurrencies and other virtual assets is a task that requires concerted and sustained effort by governments, law enforcement, regulators and the private sector. This positive sentiment was at the heart of the 5th Global Conference on Criminal Finances and Cryptocurrencies, held virtually on 7–8 December 2021. A joint initiative of the Basel Institute on Governance, INTERPOL and Europol, the Conference saw several thousand participants tuning in to learn about the latest trends, strategies and tactics in tackling crimes and threats involving virtual assets.

Sharing knowledge and building bridges

Around 2,000 cryptocurrency and anti-money laundering experts from the public and private sectors, policy institutions and academia attended the first day of the conference, which saw a series of presentations on emerging themes and topics in the virtual assets sector. These include the fast-evolving fields of decentralised finance and non-fungible tokens (NFTs), regulatory developments affecting anti-money laundering compliance, crypto-enabled fraud and the possibilities that governments have to recover illicit assets even if they are virtual. On the second day of the conference, which was restricted to members of law enforcement bodies and related public authorities, speakers shared their experiences of investigating cryptocurrency-enabled crime and money laundering cases with over 1,500 participants. This kind of knowledge-sharing between the public and private sectors, as well as between law enforcement representatives in different countries and institutions, is crucial in global efforts to protect the virtual assets industry from malicious actors. It also helps to foster the multidisciplinary approach that is essential to tackling virtual assets-based money laundering and related crimes, by bringing together expertise in technology, financial investigation and asset recovery. The annual conferences help to create a network of practitioners and professionals who can collectively establish best practices and provide assistance and recommendations in this fast-evolving field.

Forthcoming Recommendations on combating virtual assets-based money laundering and crypto-enabled crime

A set of Recommendations will be issued jointly by the Basel Institute on Governance, INTERPOL and Europol in the days following the Conference. They will set out several approaches that all stakeholders should consider taking to address emerging risks and keep the industry safe for all, covering:* International cooperation

• Virtual asset recovery
• Public-private cooperation
• Harmonised regulation and its effective implementation
• Investigative techniques and technologies
• Capacity building
• Multidisciplinary approach, including through specialised law enforcement units When taken in the spirit of open collaboration, such approaches will help all stakeholders to address emerging areas of concern raised during the conference, from DeFi to dark net marketplaces.

About the conference

The annual conference is organised by the Working Group on Criminal Finances and Cryptocurrencies, a tripartite initiative of the Basel Institute on Governance, INTERPOL and Europol that dates back to 2014 and was formally established in 2016. The three institutions take turns to host the conference each year. This year’s conference was hosted by the Basel Institute on Governance. Next year, Europol will be organising the event. Information about previous events, as well as relevant publications and learning opportunities, is available at: baselgovernance.org/5crc. For links to photos and videos from Day 1 of the Conference, please check baselgovernance.org/5crc in the days following the conference and follow the co-organisers on social media. Media enquiries: monica.guy@baselgovernance.org

A guest blog by Bernard O’Donnell, Head of Fraud Investigations at the European Investment Bank (EIB), and Sabine Zindera, Vice President, Legal and Compliance at Siemens AG and head of the Siemens Integrity Initiative.

When companies are sanctioned for wrongdoing, is there a way to turn the punitive sanction into a positive force – not only for those wronged, but for wider business integrity around the world?

There is. Exhibit number 1 is a settlement agreement signed in 2013 between the EIB and Siemens AG that addresses alleged past violations of the EIB Anti-Fraud Policy (see the EIB and Siemens press releases).

As part of the settlement, Siemens committed to provide funds totalling EUR 13.64 million to organisations that support projects or other initiatives that promote good governance and the fight against corruption. It was agreed that the money would be disbursed under the umbrella of the Siemens Integrity Initiative, a USD 100 million funding mechanism established following a separate agreement that Siemens had reached with the World Bank in 2009.

Nearly a decade on, the EIB has seen the very positive progress that Siemens has made in not only taking appropriate action to remediate past cases of corruption, but also in funding a host of impactful integrity projects around the world. The company is clearly taking an active role in improving the broader situation and has pushed the anti-corruption agenda forward on a local and global level, notably by fostering Collective Action against corruption.

Supporting the rise of Collective Action for fair and sustainable business

“Collective Action” in general refers to action taken together by a group of like-minded and/or interested parties to try to achieve a common objective. In this case, Siemens committed to fostering the use of Collective Action to promote greater integrity, to level the playing field and to mitigate business risks.

Back then, Collective Action was an innovative idea. Now, it is rapidly becoming part of mainstream anti-corruption compliance practice, as companies, governments and civil society representatives see the benefits of working together to overcome hurdles to clean business.

In total, the Siemens Integrity Initiative has supported 85 projects in over 50 countries across the three Funding Rounds and so-called Golden Stretch Round, and increased its committed funding to nearly USD 120 million. All projects are detailed in the Initiative’s annual reports, which tell a powerful story about the growing maturity and reach of Collective Action.

Commenting on the Golden Stretch round, of which the Basel Institute is one of the eight organisations selected for additional funding, Sabine Zindera said:

“In selecting the projects to be supported, we placed particular emphasis on how the sustainability of their activities and results can be ensured beyond 2024, and on how our partners will inspire, support and engage local non-governmental organisations and the public and private sectors through their longstanding networks and institutional standing. We are pleased to again support diverse projects in order to promote fair competition and fight corruption with a portfolio balanced by region and topic.”

The EIB sees the value of Collective Action to combat corruption and agrees that the results are now clear: the projects have been positive for both EIB and Siemens in terms of resolving the past issues relating to the settlement. Globally, they have also had a significant impact in terms of governance and cleaner business.

Settlements that make sense

Siemens was the first company to set up such a fund as part of a settlement with a multilateral development bank (MDB). Since then, EIB has signed similar settlement agreements with companies including Volkswagen and, more recently, JSC Nenskra Hydro and Hyundai Engineering & Construction Co.

Although such settlement agreements are not always appropriate, in some cases there may be suitable possibilities to include a sanction that requires the company to make additional efforts and commitments that are not purely monetary.

Proactive coordination to combat private-sector corruption

This constructive approach to settlements chimes with the proactive coordination that exists between MDBs in relation to corruption and fraud.

The six MDBs, including the World Bank and EIB, all share common definitions of fraud and corruption thanks to the 2006 Uniform Framework for Preventing and Combating Fraud and Corruption. The Framework also introduced guidelines and principles to conduct investigations.

The MDBs also have consistent policies on sanctioning those found to have engaged in such wrongdoing, including the Cross-Debarment Agreement signed in 2010 by the MDBs with the exception of EIB. This enables participating MDBs to mutually recognise certain sanctions imposed by any of the signatory institutions against firms and individuals found to have engaged in prohibited practices.

The bottom line

The mid-term review of the Siemens Integrity Initiative (see page 90 onwards in the 2017 Annual Report) concluded that there is “strong evidence” that the Siemens Integrity Initiative-funded Collective Action projects have “achieved their intended short-term results” and made “significant contributions to change within their respective contexts”.

It is “the passionate and committed work of Integrity Partners and the Siemens Munich Project Office that has helped promote, enhance the visibility of, and contribute to learning on Collective Action, including demonstrating to the private sector that there is a business case for investing in Collective Action”, it continued. In so doing, said the report, “the Integrity Initiative has made valuable contributions to the global fight against corruption”.

The story is not over yet, and we are all looking forward to seeing the fruits of anti-corruption Collective Action blossom and mature over the coming years. Explore the B20 Collective Action Hub, developed and maintained by the Basel Institute on Governance, for more on Collective Action and ways to get involved.

About the authors

Bernard O’Donnell is Head of Fraud Investigations at the European Investment Bank (EIB). In his current position, Bernie oversees investigations into allegations of fraud, corruption and other prohibited conduct affecting EIB Group financed projects and activities in collaboration with national law enforcement and prosecution offices, along with the investigation offices of other international financial Institutions and the European Public Prosecutor’s Office and OLAF.

Sabine Zindera is Vice President, Legal and Compliance at Siemens AG and head of the Siemens Integrity Initiative. In this role she leads Siemens´ global Collective Action activities, helping to build alliances against corruption to foster clean business and to support fair market conditions. As part of this, she also manages Siemens' relationships with international and non-governmental organisations around the world.

Anti-corruption prosecutors are under attack everywhere. They are threatened, exposed to undue influence or hindered by abusive defence strategies. At a special event at the Conference of the States Parties to the UN Convention Against Corruption (UNCAC), a panel of international experts will discuss measures that different stakeholders must take to protect prosecutors, and by extension protect the Convention. The event, Anti-corruption prosecutors under attack, was organised by the Basel Institute on Governance and Norway on behalf of the Corruption Hunter Network. Due to recent travel restrictions, the special event was held virtually and was open to all.

Video and key takeaways

• Watch the full video of the #CoSP9 side event "Anti-corruption prosecutors under attack" on YouTube.
• Listen to the audio file (.mp3)

The event explores how lawfare – law used as a weapon – is targeting anti-corruption prosecutors and undermining their vital role in the fight against corruption. The panel gave examples of how defence lawyers use strategies like bribery, intimidation and filing baseless claims to distract and exhaust prosecutors. Prosecutors have even been driven into exile. It is bad enough that these dirty tricks delay, derail or otherwise manipulate criminal proceedings in corruption trials. In some cases they have weakened entire criminal justice systems, undermining democracy and the rule of law. In this lawfare, there is a huge "inequality of arms" between the lawyers of rich defendants (rich because they have stolen) and under-resourced, over-stretched public prosecution services. And while we give defendants due process, there appear to be no effective legal or other means to protect investigators and prosecutors – including physically. The Corruption Hunter Network, International Association of Prosecutors and others are at the forefront of efforts to protect and support prosecutors from attack. But more protection – including domestic laws and regional or international redress mechanisms – is urgently needed.

Speaker line-up and registration

Gretta Fenner, Managing Director of the Basel Institute on Governance, moderated a panel of experts from across the globe:

• Gary Balch, General Counsel, International Association of Prosecutors
• Greysa Barrientos Núñez, Senior Public Prosecutor, Costa Rica
• Hermione Cronje, Head, Investigating Directorate, National Prosecuting Authority, Pretoria, South Africa
• Simon Taylor, Director and Co-Founder, Global Witness

Norwegian State Secretary Astrid Bergmål of the Ministry of Justice and Public Security made opening remarks.

Why is this important?

Anti-corruption prosecutors are increasingly under attack in a large number and wide variety of countries. Examples include:

• Prosecutors are directly or indirectly threatened.
• Powerful politicians and businessmen try to exert undue influence on them for political or economic considerations.
• Defence lawyers seek to hinder the due and efficient course of justice with questionable legal tactics, for example the infamous Stalingrad tactic.

 

This situation poses a serious threat to the effectiveness of anti-corruption instruments such as UNCAC, and global efforts to reduce and eradicate corruption. Prosecutors play a key role in ensuring that anti-corruption laws can unfold their full potential as a deterrent and a sanction for corruption. Their abuse severely undermines the ability of States Parties to the UNCAC to effectively comply with their international obligations. This includes Article 30 UNCAC on prosecution, adjudication and sanctions, as well as the 2021 UNGASS political declaration. Ultimately, attacks on the independence of anti-corruption prosecutors, and their ability to do their jobs professionally, are a direct attack on the livelihood and security of citizens who suffer from corruption on a daily basis.   By hearing first-hand accounts of prosecutors, the session aims to raise awareness of this serious threat to the effectiveness of UNCAC. It seeks to mobilise ideas, resources and willingness to protect prosecutors better and stop this attack on the fight against corruption, the rule of law and UNCAC.  Watch the event on YouTube or download the audio file. See all CoSP 9 special events organised or supported by the Basel Institute on Governance

Environmental crime is lucrative, with its profits easily realised via financial crime and corruption. What is being done to trace illicit financial flows that facilitate environmental crime? And what about the illegally obtained profits derived from it? On Friday 17 December, the Basel Institute's Green Corruption team organised a special event at the 9th Conference of the States Parties to the UN Convention Against Corruption (CoSP 9) to discuss this crucial barrier to attaining the Sustainable Development Goals (SDGs). Panelists from government and civil society explored current efforts and remaining gaps in following the money to attack environmental crime. The discussion covered perspectives from national law enforcement and from conservation.

Video and key takeaways

• Watch the full video of the CoSP 9 side event: Environmental corruption as a roadblock to reaching the SDGs
• Listen to the audio file

The panellists explored how our understanding of corruption’s impact on the environment and biodiversity is broadening. This is partly thanks to greater dialogue between anti-corruption practitioners and those working in conservation and natural resource management – conversations that need to continue. Tackling green corruption is not only about strengthening enforcement against environmental crime fuelled by bribes and collusion. It can involve strengthening accountability and participation in decision-making, for example, so that communities benefit equitably from the sustainable exploitation of natural resources and their conservation. It’s also about addressing larger systemic issues, like poor beneficial ownership transparency of companies that exploit natural resources, and how illicit financial flows linked to environmental crime and corruption are able to enter the international financial system.  Public-private collusion is rampant in natural resource management. How can governments implement radical and effective environmental protection when their ministers and high-ranking officials run the companies that exploit natural resources? Grand corruption underlies much industrial-scale environmental degradation, such as the granting of permits to exploit protected land and forests. Bribes can be paid by multinational companies through small suppliers based overseas. This turns such cases into transnational affairs that are almost impossible for investigators to follow without fast and proactive international cooperation. Environmental crime and related corruption not only damage the environment and biodiversity. They also tangibly reduce government revenues that could be collected from, for example, sustainable and legal natural resource exploitation (fishing, logging, mining…) and fees for the safe disposal of hazardous waste. This harms citizens directly, as does the destruction of the natural resources on which they rely for food and livelihoods. It is not a trade-off between the environment and economic development, as some think: economies suffer long-lasting effects from environmental degradation.  Yet trade-offs and choices are inevitable. In this, leadership and political will are sorely needed. Leaders may be under pressure from powerful interests, but they need to live up to their commitments to citizens – and citizens need to play their part in holding leaders to account.  Corruption – like climate change – is a complex, transnational issue that risks destroying our very existence. Both need to be elevated to the very top of the agenda.  Green corruption demands a multifaceted, multi-stakeholder and transnational response, making use of all available tools:

• “Follow the money” approaches to investigate environmental crime and corruption and recover illicit assets; this is still uncommon among environmental agencies, and needs not only capacity building but adjustments to institutional setups.
• Inter-agency collaboration between government agencies responsible for environmental matters, law enforcement, corruption prevention, tax, customs, and others; joint taskforces help pool resources and responsibilities and ensure a harmonised response. 
• International cooperation is key to tackle crimes that cross borders, especially in tracing illicit financial flows and recovering illicit assets generated by environmental crime and corruption.
• Corruption prevention approaches, such as corruption risk assessments and strengthening internal controls, have huge potential to be built into natural resource and conservation programming yet are currently rarely applied.
• Collective Action can help to mobilise the private sector to raise standards of governance in natural resource sectors, bring the incentives of public and private-sector actors into alignment with the needs of citizens.

 

Speaker line-up and registration

Gretta Fenner, Managing Director of the Basel Institute on Governance, will moderate the discussion between panellists from different parts of the world:

• Elizabeth Hart, Chief of Party, Targeting Natural Resource Corruption project, WWF USA
• Laode Syarif, Executive Director, Kemitraan and Former Commissioner, Corruption Eradication Commission of the Republic of Indonesia
• Juhani Grossmann, Team Leader, Green Corruption programme, Basel Institute on Governance
• Agnes Nabwire, Assistant Commissioner, Tax Investigations, Uganda Revenue Authority

Why is the topic important for UNCAC?

Corruption directly threatens the achievement of SDG 16.4 (reduce illicit financial flows) and SDG 16.5 (reduce corruption and bribery). It affects the poorest most strongly, undermining 1.4 (no poverty). Corruption, money laundering and related financial crimes and governance failures also impact environment-related SDGs by:

• enabling criminals to fund operations and also hide, launder and enjoy the profits of their crimes;
• undermining law enforcement efforts against environmental crimes, and the sustainable governance of natural resources;
• mutating low-scale poaching, artisanal mining and subsistence logging into global criminal enterprises with industrial-scale detrimental impacts on the environment; 
• perverting regulations put in place to preserve the environment;
• weakening and diverting government policies developed to ensure environmental rehabilitation and equitable access to natural resources;
• allowing the operation of illegal mines, the trafficking of toxic waste and ozone-depleting substances, illegal and unsustainable trading in flora and fauna, and other environmentally destructive activities.

The panel highlighted the important role corruption plays in facilitating environmental crime and the tools that the UNCAC provides to address this challenge. The panellists outlined the varying approaches of their home States in addressing environmental corruption, and identify remaining gaps. The discussion explored promising anti-corruption tools for an environmental context and draw insights and lessons learned from transnational environmental corruption cases and related international cooperation.

• See all CoSP 9 special events organised or supported by the Basel Institute on Governance.
• See the programme of all CoSP special events on the UNODC website.

The Organisation for Economic Co-Operation and Development (OECD) has recommended the use of Collective Action to address corruption in its long-anticipated revised Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions ("2021 Anti-Bribery Recommendation").

This is a positive step in efforts to bring together the public and private sectors, civil society and other stakeholders in the fight against bribery. It is the first time that Collective Action has been explicitly and formally recommended in a key international standard addressing bribery. The endorsement builds on increasing global attention to the need for Collective Action and multi-stakeholder collaboration to address complex challenges from corruption and climate change to human rights.

Why is the endorsement significant?

First, in holding governments accountable. The Anti-Bribery Recommendation is one of the legal instruments included in the rigorous peer review mechanism for parties to the OECD Anti-Bribery Convention have to undergo.

Future monitoring reports will thus enable the private sector and civil society to identify what efforts countries are making to encourage Collective Action approaches to combat bribery.

Second, for inspiration and guidance. Many non-member countries look to the OECD anti-bribery instruments for inspiration and best practices. Alerting these countries to Collective Action is likely to lead to more demand and support for these types of collaborative multi-stakeholder efforts to prevent and combat bribery.

This includes more governments endorsing this concept in National Anti-Corruption Strategies, as countries such as the UK, Malawi and others have already done.

Third, by advancing the OECD’s existing Collective Action support. The revision gives a formal boost to the OECD Secretariat’s long-standing engagement and support for Collective Action tools, such as the High Level Reporting Mechanism (HLRM).

Developed by the OECD together with the Basel Institute and Transparency International, the HLRM is a unique tool that targets corruption prevention in high-value public procurement processes. It can thus play a critical role in countries’ efforts to revitalise their economies during and in post-pandemic times. It can also help improve foreign investment and trust in government.

Fourth, by helping to address risks faced by companies that operate internationally and are confronted by demands for bribes from foreign public officials.

Collective Action offers a variety of innovative and tried-and-tested tools not only to help companies address their own risks, but also to encourage constructive engagement between the public and private sectors on bribery prevention.

What does the revised Recommendation say about Collective Action?

Adopted on 26 November 2021, the revised Recommendation aims to address challenges, good practices and cross-cutting issues that have emerged in the global anti-corruption landscape since 2009. It updates the 2009 revised Recommendation, which in turn updated the 1997 Revised Recommendation of the Council on Bribery in International Business Transactions.

The revisions cover a wide range of topics, including Collective Action in three areas:

• Awareness-raising in the private sector for the purpose of preventing and detecting foreign bribery. The document states that, among other things, each member country should take concrete and meaningful steps to do this “…through collective action and partnerships between the private and public sector in awareness-raising activities."
• Addressing the demand side of bribery. Member countries should “consider fostering, facilitating, engaging, or participating in anti-bribery collective action initiatives with private and public sector representatives, as well as civil society organisations, aiming to address foreign bribery and bribe solicitation.” This opens up a wide range of possibilities for member countries to engage in and support Collective Action. For governments that are unsure of how to initiate engagement with the private sector, it provides a good starting point for the discussion.
• The document also recognises the crucial role that business organisations and professional associations can play in helping companies to implement measures to prevent and detect foreign bribery. It recommends that such organisations consider "promoting Collective Action" where appropriate, as part of wider efforts to provide advice on resisting extortion and solicitation.

Learn more

• View and download the 2021 Anti-Bribery Recommendation
• The Basel Institute's Collective Action team provided input to the revision process of the 2021 Anti-Bribery Recommendation as part of the Public Consultation. Excerpts of our submission are included in Annex III of our 2020 paper on Mainstreaming Collective Action.
• Explore the B20 Collective Action Hub, a global resource centre on anti-corruption Collective Action developed by the Basel Institute on Governance

Anti-corruption investigators and prosecutors from Kenya, Sierra Leone and Zambia joined experts from our International Centre for Asset Recovery on 16–18 November to share experiences of non-conviction based forfeiture (NCBF) laws in their countries. NCBF laws allow courts to confiscate assets of a criminal nature, even where no conviction has been obtained in relation to criminal conduct. They are a powerful complement to other asset recovery mechanisms, especially in cases where a criminal conviction is not possible because the suspect is dead, has fled justice or is immune from prosecution. Despite the promise and the success of countries in applying NCBF laws, including for example Kenya's use of its civil illicit enrichment law, such mechanisms are not yet widespread or effectively used in many countries.

Key insights

Over the 2.5-day workshop at the Ocean Beach Resort in Malindi, Kenya, the participants shared positive experiences, challenges and case studies from their own contexts. These included:

• NCBF laws extend the possibilities to recover illicit assets – including, for example, in cases where it is not possible to prove criminal activity beyond reasonable doubt.
• An increased focus on financial investigations and asset tracing will help law enforcement identify more cases with the potential for asset recovery, and make it more likely that NBCF will be used in cases where convictions are not possible.
• Using visual methods to convey complex cases will increase their chances of success in court, as will engaging with the judiciary to help develop understanding of NCBF mechanisms. The creation of specialised courts may also be useful.
• Public support for NCBF laws is crucial, which requires community outreach and the use of recovered funds in a visibly beneficial way.
• Clear and effective systems for asset management can maximise the value of assets throughout proceedings, and reduce liability for the state if the application for forfeiture fails.

The value of exchange

As well as learning from one another and from experts of our International Centre for Asset Recovery (ICAR), which organised the workshop, the participants built valuable relationships that will support future collaboration on NCBF cases and lawmaking. Participants agreed that this sort of coordination was vital and can lead to higher amounts being recovered. One participant commented: "We have learned a lot from each other, from how the different laws work and for example how one jurisdiction manages recovered assets with a dedicated asset management unit. Thanks to this exchange of information, we will be able to enhance our possibilities to recover illicit assets through non-conviction based means, in the civil courts." Another emphasised that: "We believe that non-conviction based forfeiture laws are a really significant way to fight corruption. There is the deterrent factor, which is huge. It also deprives the person from benefiting from the proceeds of crime. Recovering assets in this way helps to make corruption not just expensive – through fines and sanctions – but also unprofitable, because we get back the money that was stolen."

About the workshop

The regional workshop is part of an ambitious project to help increase the capacity of countries in Latin America and Sub-Saharan Africa to recover stolen assets through effective, appropriate NCBF legislation. Ten partner countries are involved in the two-year project, which is funded by the Bureau of International Narcotics and Law Enforcement Affairs (INL) of the US Department of State. 13 practitioners attended the workshop, from Kenya's Ethics and Anti-Corruption Commission, the Sierra Leone Anti-Corruption Commission and the Zambian Anti-Corruption Commission.

Learn more

• Our free eLearning courses offer the chance to learn and practise many of the skills that participants noted were crucial to successful application of NCBF laws. The self-paced courses cover topics such as financial analysis, asset tracing, and creating visual graphs of cases and flows of money. Visit Basel LEARN.
• To help increase understanding of illicit enrichment / unexplained wealth mechanisms for asset recovery, we recently developed and published an open-access book Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth. Andrew Dornbierer, Asset Recovery Specialist and author of the book, was also present at the workshop.
• Asset management is an integral part of the asset recovery process. This blog post covers asset management in brief, with a focus on international norms.

Peter Maurer, President of the International Committee of the Red Cross (ICRC) since 2012, is set to take over as President of the Board of the Basel Institute on Governance when he steps down as ICRC President in September 2022. He succeeds the Basel Institute’s founder and President, Professor Mark Pieth. Since establishing the Basel Institute in 2003 as an Associated Institute of the University of Basel, Mark Pieth has overseen the organisation’s steady development into a leading player in efforts to combat corruption and raise standards of governance around the world. Based in Basel, Switzerland, the Basel Institute counts 90+ staff working across Southern and East Africa, Latin America, Eastern Europe and Central and South Asia. It remains committed to working with the public and private sectors to promote anti-corruption and good governance, together with an extensive network of partners at the highest national and international levels. Peter Maurer commented: “Throughout my diplomatic career and during my time at the ICRC, a driving priority has been to alleviate the suffering of women, men and children caught up in terrible human disasters around the world. Now, with the Basel Institute, I want to focus on tackling the causes of much of this human suffering – corruption and poor governance. I am delighted to take over from Mark Pieth, a leading expert and pioneer in the fight against corruption, and look forward to helping the Basel Institute reach higher and wider in the global governance arena. Together, we can have even more impact among those people most affected by corruption, as well as those most strongly committed to fighting it.” Mark Pieth emphasised the value of Peter Maurer’s deep experience and reputation in international diplomacy and humanitarian action, saying: “If there is one thing I have learned in over 30 years of holding the powerful to account, it is that corruption is not just a technical topic. It affects the whole of humanity and profoundly hurts people, especially the most vulnerable. I have also learned that not everyone likes to hear the anti-corruption message. That is precisely why we need to keep talking about it and amplify the voices of those who are willing to talk about it, from the streets to the media to the highest political and economic fora. Peter’s profile and experience makes him an ideal successor to help in elevating and spreading the message, and getting global leaders to live up to their commitments.” Peter Maurer will join six other distinguished members of the Basel Institute’s Foundation Board, which is responsible for guiding the overall strategy of the Basel Institute. Born in Thun, Switzerland, Peter Maurer holds a doctorate in history and international law from the University of Bern and has held various positions in the Swiss diplomatic service, including as Ambassador and Permanent Representative to the United Nations in New York and Secretary of State. He became ICRC’s President in July 2012.

Media enquiries

Download a PDF of the news release. For media enquiries at the Basel Institute on Governance, please contact monica.guy@baselgovernance.org Peter Maurer is not available for media interviews at this time.

Oscar Solórzano, Head of Latin America at the Basel Institute on Governance and Senior Asset Recovery Specialist at our International Centre for Asset Recovery, interviewed Dr Hamilton Castro Trigoso, Provincial Prosecutor of the First Provisional Provincial Prosecutor's Office for Extinción de dominio in Lima, on his experiences in investigating and enforcing asset confiscation judgements abroad. The case that Hamilton Castro came to talk about is not just any case. It is a final decision that the prosecutor has just obtained in the Peruvian judicial system that recovers part of the assets of a General who collaborated with the criminal organisation led by Vladimiro Montesinos. Montesinos was the Head of Intelligence under the corrupt government of Alberto Fujimori and widely acknowledged as the former President’s right-hand man. The General fled the country and died before justice was able to catch him. But it is catching up with his assets and helping ensure they cannot now be enjoyed by his surviving relatives. Insightful viewers will be able to see and understand the emotion of the prosecutor, who maintains that his job is not only to recover illicit money but also to contribute to restoring the meaning of the word justice in Peru.  You can watch the video in Spanish with English subtitles here or read the answers below in English translation.

1 – Solórzano: Dr. Castro, what does the confiscation of the Malca account mean for Peru? What does the judgement – after 20 years – signify for the country's fight against corruption?

Castro: The Malca Villanueva case is of utmost importance for Peru for more than one reason. First, because of who the man was. General Malca Villanueva was a prominent member of Alberto Fujimori's government, serving as Minister of the Interior and then Minister of Defence. Afterwards, he was rewarded when he retired from the Ministry of Defense – from the Army – by being made Ambassador of Peru in Mexico. He carried out this diplomatic role for around two years, despite having no experience whatsoever. Second, this case carries a message of non-impunity regarding the recovery of illicit assets, even when part of them are held in accounts abroad. An important point about this case is that the criminal justice system in Peru was never able to apprehend General Malca Villanueva, nor his family. He died in 2015 in a resort in Brazil called Santa Catalina. So this judgement is extremely important. It sends a message that justice may take time, but it arrives nonetheless.

2 – It has been nearly three years since the Extinción de dominio law entered into force in Peru. How well is this non-conviction based forfeiture mechanism working in the country?

I am optimistic about the implementation of Legislative Decree No. 1373, which is the law that introduces the mechanism of Extinción de dominio in Peru. The results in these two and a half years have been highly positive. The Specialised Prosecutors' Offices at the national level have achieved a large number of sentences in various cases. Some of these are extremely important, such as the case of Malca Villanueva, which show that the mechanism of Extinción de dominio is a well-crafted criminal policy tool targeting the assets of criminals. This has been quite well understood by our practitioners and has allowed definitive judgements to be obtained. Compared to the time it takes to prove the criminal responsibility of accused individuals in traditional criminal proceedings, and to confiscate their assets, Extinción de dominio is much faster. So, as I said, I am very optimistic about the implementation of this new law. Of course there is a long way to go. There are challenges we have to overcome and many tasks we still have to do [for instance in relation to mutual legal assistance]. We understand, however, that the rules are versatile. We cannot not rule out the possibility that at some point the Extinción de dominio law could be reformed in some aspects. Not just to make the law more effective in terms of prosecuting assets, but also about improving the provisions aimed at protecting the fundamental rights of affected persons.   At the practical level, the subsystem suffers the shortcomings of any other prosecutorial body in Peru. But in general terms, both the Judicial Branch and the Public Prosecutor's Office have been able to put in place a specialised subsystem of prosecutors and judges. Their number may increase in the future depending on the workload.

3 - What do you think are the challenges that this tool faces at the international level? What can be done to improve its global application?

The good success we have had over the last six years in recovering illicit assets abroad, especially in the Fujimori and Montesinos complex of cases, is linked to more than one factor. It was certainly not easy, and the successes are the result of the efforts of a large number of individuals and institutions, both in the requested and requesting States. We went knocking on the door of several countries with a new and unknown tool for them. It has taken us several years and a lot of effort to get recognition for our decisions of Extinción de dominio. By doing so, we have learned the difficulties associated with international judicial cooperation in criminal matters. One of these problems is the speed with which foreign evidence is obtained from abroad. For that, we have set up in Peru a swift system of legal procedures that include the transfer of evidence from criminal proceedings to Extinción de dominio. This has made it possible to save a lot of time, because the criminal proceedings had already gathered abundant evidence in the Malca Villanueva case. This even includes reviews of bank statements and financial information from other countries that were used in Extinción de dominio proceedings. The correct interpretation of the principle of speciality in this case has allowed us to use bank information from countries such as Switzerland, Panama or other financial centre in which the accounts that we are trying to recover are located. The modern, correct and lawful interpretation of this principle has allowed us to understand that it is not violated if the information obtained through international judicial cooperation is transferred from criminal proceedings to Extinción de dominio as these proceedings are criminal policy tools conceived to target criminal assets. There have been other success factors in recent years, but these first two are fundamental. I must also mention strategic alliances such as with the Basel Institute on Governance, which has allowed us to better understand the nature of these tools and of international judicial cooperation, and to establish proper and efficient contacts with authorities of other countries. This in turn has allowed us to use other mechanisms, such as spontaneous cooperation or informal information-sharing with the authorities of other countries. Within this framework of mutual cooperation, we have been able to move faster and obtain good results in recovering illicit funds deposited in accounts in financial centres such as Switzerland, Luxembourg, Andorra and others. Finally, it seems to me that these best practices have already had a good result and should be applied in the case of Malca Villanueva's Mexican bank account. The judgement we have obtained in Peru is not sufficient; through the mechanisms of international judicial cooperation, it will have to be transferred to Mexico for execution. All the experience that we have acquired in these years and in other cases will be useful to recover the USD 1.5 million or so stashed in Malca's account in Mexico.

4 – What is the key message that prosecutors in other countries should take into account when seeking to recover assets held in foreign jurisdictions?

Legal practitioners, prosecutors and judges in any jurisdiction need to understand that recovering such assets goes beyond what the domestic jurisdiction can do alone. It is extremely important to establish partnerships with institutions that allow us to gain a better understanding of the tools of international judicial cooperation. This enables the requesting State to adjust to international standards and the standards of the requested State. The point is that judgements in these cases should not remain purely ornamental and domestic, but be duly executed in financial centres like Switzerland, Luxembourg or Andorra. These countries have a different legal system and in some cases respond to different legal traditions than Latin American countries. So it is important to establish direct contact with the authorities of those countries in order to understand their standards and ensure that our request for mutual legal assistance is duly executed there.

More

• See the Malca Villanueva news story.
• Our technical and policy assistance in Peru, and this interview, are supported by the core donors of the International Centre for Asset Recovery as well as the Swiss State Secretariat for Economic Affairs (SECO) Cooperation in Peru through the multi-year Subnational Strengthening Public Finance Management programme.

Watch the video

In the first such case in the Americas, Peru has issued a judgement ordering the non-conviction based confiscation of over USD 1.5 million in assets frozen in Mexico. The achievement adds to Peru’s substantial experience and jurisprudence involving its 2019 law of Extinción de dominio. The non-conviction based forfeiture (NCBF) law allows assets of illicit origin to be confiscated in a judicial procedure, even if a criminal conviction is not possible. The case is one of several that our International Centre for Asset Recovery (ICAR) team in Latin America is supporting through technical assistance and capacity building. It involves money stolen by former Army General Victor Manuel Malca Villanueva during the corrupt government of Alberto Fujimori from 1990–2000. Malca Villanueva made a series of cash deposits to his account at the Mexican-based Banco Bital while serving there as Ambassador of Peru, which the bank flagged as suspicious and reported to the authorities. Malca Villanueva died in 2015 at a Brazilian seaside resort, but his wife and children remain beneficiaries of the bank account.

Surging ahead in the use of NCBF mechanisms for asset recovery

That Peru has been able to issue this judgement (available here) is a significant achievement in itself. Many countries in Latin America, and indeed in the world, either do not possess such legislation or do not make effective use of it, despite its endorsement in international anti-corruption treaties and standards. It is an achievement based on Peru’s decision to implement the law strategically through a system of courts, tribunals and capacity building. ICAR has provided support to this effort and continues to contribute to it. It is also a testimony to the perseverance and commitment of individuals in the Peruvian government and justice system. These include in particular prosecutors Milagros Pereda, Coordinator of the Specialised Prosecutor for Extinción de Dominio in Lima, and Dr Hamilton Castro.

Sharing experiences and knowledge to foster international cooperation

Providing insights into the case is part of Peru’s ongoing efforts to share knowledge and lessons learned as widely as possible, in order to help other jurisdictions seeking to draft or implement NCBF laws as well as foster international cooperation. In an interview with our Head of Latin America Oscar Solórzano, Dr Castro explains the significance of the Malca case, takes stock of how the law is working in Peru after nearly three years, and gives his perspective on the challenges and opportunities for international cooperation in NCBF cases. At the Basel Institute and through ICAR, we continuously support the efforts of practitioners in Peru and other countries to share experiences with non-conviction based forms of asset forfeiture. Current initiatives in this regard include:

• our Asset Recovery Knowledge Community in Latin America
• our support to the development of a 1,100-page Compendium of Jurisprudence on Extinción de Dominio
• our participation in the review of UNODC’s Model Law on Extinción de Dominio
• our observer member status in the Asset Recovery Network of GAFILAT, the regional body of the Financial Action Task Force.

We hope that Peru’s success, and its foundations, will inspire other jurisdictions to develop, implement and make good use of NCBF laws to recover stolen assets. These illicit funds would otherwise remain frozen in faraway bank accounts or, worse, in the hands of the corrupt former public officials and their relatives and co-conspirators. We also hope the increased understanding of the principles behind NCBF laws such as Extinción de dominio – and the safeguards they should and do contain – will encourage requested States to live up to their commitments to provide victim States such as Peru with the widest level of cooperation possible. This applies both during the proceedings and in the execution of NCBF orders. We look forward to supporting this precedent-setting case, and hope to see the safe return of the stolen money to the people of Peru. Our technical and policy assistance in Peru, and this interview, are supported by the core donors of the International Centre for Asset Recovery as well as the Swiss State Secretariat for Economic Affairs (SECO) Cooperation in Peru through the multi-year Subnational Strengthening Public Finance Management programme. In addition, we are implementing a separate project of the US Department of State Bureau of International Narcotics and Law Enforcement Affairs (INL), which aims to explore the potential for innovation in asset recovery through NCBF mechanisms in Latin America, Sub-Saharan Africa and Lusophone countries.

Bila watu hufiki popote. “Without people or connections you won’t reach anywhere,” said a Tanzanian businessman participating in our recently completed research project on informal networks and corruption. His words encapsulate something we see time and again in our research on corruption: that bribery is far more than just a brute monetary transaction. Often more important, and far less studied, are the informal social networks that connect private individuals and public officials.

Exploring informal networks and corruption

Our two-year research project, part of the UK Aid-funded Global Integrity Anti-Corruption Evidence Programme (GI-ACE), builds on our previous extensive research project on informal governance across seven countries. The evidence from this project highlighted that corruption is usually not the result of individual “rotten apples” acting in isolation to abuse their entrusted power for private gain. Rather, corrupt behaviour takes place according to unwritten rules and through informal social networks that connect the public and private sectors.   It is becoming increasingly clear that anti-corruption practitioners need to pay more attention to networks, not only individuals. But a lot of questions still remained to be answered.

• Are distinct types of informal networks associated with particular types of corruption?
• How, why and by whom are these networks built?
• What roles and functions do different individuals have within the networks?
• What unwritten expectations, understandings and norms govern such networks?
• What are the implications for anti-corruption practice?

Case studies: snapshots of corruption from a network lens

With my colleague at the Basel Institute, Senior Research Fellow Jacopo Costa, and Lucy Koechlin, Senior Lecturer at the University of Basel, we set about answering these questions with the help our local researchers Danstan Mukono and Robert Lugolobi in Tanzania and Uganda. What emerged were 10 short case studies (six from Tanzania and four from Uganda) that illustrate ways in which citizens and business people invest significant efforts in building informal social networks to overcome shortcomings in public service delivery and to access business opportunities. The case studies give life to the research report, which show how monetary bribes and associated benefits are essential to developing informal networks, especially in societies with strong norms around reciprocity and gift-giving. In turn, these networks enable and perpetuate corruption in public service delivery. Importantly, informal networks may go beyond simply friends and acquaintances. In many cases, citizens and business people must use “brokers” – individuals with existing strong connections with relevant public officials – to act as door-openers.

How do informal networks help to “get things done”?

The stories we heard illustrate how informal networks help citizens and business people to gain benefits in three main areas:

1 - Ease access to public services

At a basic level, this can mean someone using personal connections to skip red tape or speed up a service to which they are officially entitled but may otherwise be delayed. As one research participant said, for example: “For those who don’t have ‘jamaa’ (a social connection) and sometimes ability to provide money, it takes time to get a business license.” Highly bureaucratic procedures such as land transactions are especially vulnerable to this type of behaviour. At a more pernicious level, social networks can help users to obtain services they are not entitled to, or manipulate processes to their advantage. Examples include obtaining a driver’s licence despite not having the right documents, and influencing land valuations to minimise tax.

2 - Secure business opportunities with government

The case studies illustrate that informal networks play a vital role in facilitating fraud and corruption in public procurement. Business people with the right connections need only pay the requested “fee” to be awarded a public tender, said one participant, referring to a bribe or kickback. Informal networks can also facilitate privileged access to information about tenders. To build those connections, said participants in both countries, business people may secretly collect information on public officials’ tastes and habits, or develop sophisticated strategies to cultivate links with them.

3 – Help businesses run smoothly

Informal networks help entrepreneurs to leapfrog the many bureaucratic hurdles they face when establishing and running businesses. As one of the Tanzanian case studies shows, numerous informal connections have to be established with various public agencies (and the officials that work there) to get the business off the ground. These connections then form the basis for a network that will allow the business to run smoothly going forward. Complex networks can be built to solve seemingly simple problems. Another Tanzanian case study illustrates how a transport company owner built a “bribery network” involving drivers, conductors, traffic police, bus agents and the transportation regulatory authority. The network ensures that the company’s vehicles can provide a faster and more reliable service compared to competitors by avoiding roadblocks and speeding fines.

What else does the research show?

The research report also details, using examples from the case studies:

• The six functional roles that different individuals play in informal networks – from the “seekers” (citizens seeking connections to public officials) to the “doers” – those who have the ability to “make things happen”.
• How entry to these informal networks is controlled to make them exclusive for insiders.
• Social dimensions, including how people invest time and effort in developing their networks and cultivating trust.

The case studies offer a wealth of qualitative information and evidence on informal networks, corruption and the links between them.

So, what does this mean?

In our analysis, we emphasise that anti-corruption practitioners should consider how to save the positive aspects of these informal networks (which, in effect, act as efficient mutual support mechanisms in challenging contexts) while eliminating their negative effects. Understanding how these informal networks work can help to understand, and target, the motivations of those who engage in bribery and other illicit practices. Addressing the hurdles that individuals experience while accessing public services and competing in public tenders should be a central element of an informed anti-corruption approach. Otherwise, the case studies show how adding formal control mechanisms to prevent corruption (for example in competitive public bidding processes) can actually generate more corruption than would have occurred otherwise – if only because of the fact that more people need to be bribed to obtain the desired result. The evidence from this research can also point the way to alternative approaches to tackling corruption in such contexts. These include harnessing social norms (the topic of our second GI-ACE project) and/or introducing efficient ways to resolve business-related disputes between the public and private sectors, such as Ukraine’s Business Ombudsman Council.

As world leaders gather this week at COP26 to negotiate their climate change commitments, we ask – will they include a credible commitment to fight corruption? Because if there is one thing that will scupper efforts to address the climate crisis, it is corruption. Yet corruption is strangely missing from the conversation. Here are some things that deserve to be talked about louder.

Stealing money from climate and clean energy projects

At a basic level, renewable energy and climate mitigation or adaptation projects are as vulnerable to embezzlement and fraud as any other major public investment. Indeed clean energy is a lucrative business for criminals. When a Sicilian renewable energy entrepreneur was jailed in 2018 for a corrupt scheme involving securing windfarm permits, EUR 1.3 billion in illicit funds were confiscated plus assets including 43 companies, 98 properties and fleets of cars and boats. Did you pay extra to offset your carbon footprint last year? Carbon offsetting programmes and nature-based climate mitigation solutions, like the REDD+ forest conservation scheme and similar internationally funded projects, are a really important part of our global response to climate change. But they are also vulnerable to corruption. They can even fuel it, by channelling cash into contexts with weak governance and few controls. Corrupt elites have a lot of practice in capturing foreign aid. So when there is a lack of transparency and accountability in the allocation and tracking of climate funding – not to mention allegations of financial mismanagement – corrupt officials find it even easier to game the system. And at an even bigger scale are the corruption risks in emissions trading schemes, important to achieving net zero, but only effective when they are free from corruption.

Weakening laws, skewing incentives, undermining investment

Beyond the usual theft of funds, corruption in climate finance is known to “negatively impact climate change interventions, undermining mitigation efforts to reduce emissions and decreasing the quality of adaptation infrastructure”, according to this U4 Brief on Corruption and Climate Finance. Bribery, kickbacks, conflicts of interest and other forms of corruption can among other things:

• Weaken environmental regulations, for example with the result that consumers are sold illegally logged wood, eat fish from a global catch that is alleged to be up to 50 percent illegal, unregulated and unreported, and drive electric vehicles packed with minerals from a mining sector plagued by corruption and other abuses.
• Negatively influence project choices by skewing decision-makers’ incentives towards building unnecessary infrastructure or opting for large and non-renewable energy projects that offer greater possibilities for nepotism and bribes.
• Enable industry lobbies to have undue influence on government policies, which may explain some countries’ reluctance to move away from fossil fuels and even to attempt to water down the findings of scientific reports.

 

If the above factors weren’t enough to stymie investment in sensible and well-governed climate mitigation and adaptation projects, there’s another: numerous studies such as this one by the EBRD show that “corruption imposes additional costs on investors and increases uncertainty surrounding future costs and revenues”. And we stand now at a point in history in which effective climate-related investment is an essential driver for slowing down and stopping climate change.

Destroying trust, hindering humanitarian action

Whatever happens at COP26 and beyond, we can expect climate change to deliver us more frequent humanitarian disasters in the form of floods, droughts, heatwaves and the resulting mass migration. Yet when disaster strikes, corruption and its co-conspirators – lack of transparency and accountability – hinder humanitarian action. And it’s not just about cash and emergencies, of course, but about the corrupt informal networks and collusion that stifle progress towards the sustainable development goals (SDGs) and destroy social trust.

Can real commitments to fight corruption contribute to climate change goals?

Yes, they can and they must. First, for the money. If corruption deprives countries of funds desperately needed to address climate change and achieve the SDGs, then there is an obvious solution. The World Economic Forum estimated in 2019 that “Corruption, bribery, theft and tax evasion, and other illicit financial flows cost developing countries $1.26 trillion per year.” That is more than 10 times the USD 100 billion that rich countries promised to send annually to help developing countries address climate change under the 2015 Paris Agreement (that promise was broken, but that is a different story). It is more than double even the UN’s highest estimate of annual investment needed for climate adaptation in developing countries, which ranges from USD 140 to 500 billion per year. You could do any number of sums with any number of estimates – the results give the same clear message. Stop corruption, Minister, and there’s your budget for the ambitious climate change strategy that your people and the planet need. With change to spare. Second, fighting corruption is not only about the money. It’s about creating just, safe societies where citizens can trust politicians and institutions to act in their interest. In our work at the Basel Institute, we see that this vision can be very real. We see how anti-corruption and asset recovery efforts can not only mobilise significant funding for sustainable development, but also, as we show in our Working Paper on Recovering Assets in Support of the SDGs “strengthen some of its key foundations of sustainable development, such as the rule of law and strong, transparent and accountable institutions”. Precisely the level of governance that is needed to bring everyone on board in tackling climate change, domestically and internationally.

Corruption affects the whole of humanity and our future world

Corruption is not a standalone topic to be dealt with at corruption-focused conferences or only by government anti-corruption agencies, corporate compliance departments and civil society organisations with an anti-corruption mission. Corruption affects the whole of humanity and profoundly hurts people, especially the most vulnerable, directly and indirectly through its negative impact on climate change. Green corruption destroys our environment, our wildlife and biodiversity, and the natural resources we depend upon for our lives and livelihoods, at a time they most need protection. So as the politicians debate their climate commitments at COP26 this week, perhaps those who really care about the planet and its people can bring corruption into the conversation.

Our Collective Action team has launched a Mentoring Programme to support civil society / non-profit organisations that work with the private sector and other stakeholders on tackling corruption.

Through the Mentoring Programme, eligible organisations can gain tailored advice, support and technical assistance from our team's experts in anti-corruption compliance and Collective Action – all for free. Our aim is to support organisations engaged in anti-corruption Collective Action in building a strong, sustainable and successful initiative.

The Mentoring Programme is funded by the Siemens Integrity Initiative. A limited number of spaces are available, so please apply as soon as possible or by 31 January 2022 at the latest.

Find out more, check your eligibility and apply via a simple web form on the Mentoring Programme web page of our B20 Collective Action Hub.

The so-called “tuna bond” corruption scandal in Mozambique has drawn international attention. Twenty people are facing corruption and money laundering charges in the country. Swiss bank Credit Suisse has agreed to pay USD 475 million in fines and write off USD 200 million in debt owed by Mozambique as part of a series of settlements with regulators in the US, UK and Switzerland for its role in the affair. Daniel Hofer of Swiss broadcaster SRF spoke to our Managing Director Gretta Fenner about the scandal on 20 October, shortly after the news of the Credit Suisse settlements was released. See the interview transcript in German on the SRF website or (our own) English translation below: Mozambique’s Attorney General’s Office has declared war on corruption and sought help from Switzerland, from the Basel Institute on Governance. The non-governmental organisation advises authorities worldwide on how to take action against bribery and financial crime. According to Managing Director Greta Fenner, the scandal surrounding the Credit Suisse loans has not only had economic consequences for Mozambique.

SRF News: To whom did the Credit Suisse money ultimately go?

Greta Fenner: The money went to very different parties. USD 200 million were lost in bank fees. Three former Credit Suisse employees have admitted to accepting bribes. It is assumed that a number of politicians and officials in Mozambique also took bribes. The party that has probably profited most from this scandal and the illegally obtained funds is the company Privinvest. This is a shipbuilding company owned by a French-Lebanese billionaire who orchestrated this whole scenario.

What did this company do with the rest of the money?

We don’t have a full picture of this yet. An international audit report has shown that at least half a billion dollars is completely unaccounted for. And I have already mentioned the bank fees and the bribes. Some money was indeed used to buy ships and other things related to the investment project.  However, the ships were never used and are rotting away in Mozambique’s ports. Also, they were not bought at normal prices but at hugely inflated prices.

This was a devastating affair for Mozambique. What are the consequences for the economy?

The promised benefits for Mozambique were not realised at all. There was no added value. Instead, a huge mountain of debt was created. A recent report calculated that the cost so far is about USD 11 billion. This is equivalent to the country's entire gross domestic product of 2016. The economic consequences will cost many people their lives, or already have. The same report has also found that over two million people have been pushed into poverty – and that’s in a situation where the country is already struggling with the coronavirus crisis, with catastrophic natural disasters and with terrorism. It is important to understand that these scandals are of course at first sight about money, but more importantly they cost many people their lives. And very sadly, nobody is ever held accountable for these lives.

So there have been no consequences for the political leaders so far?

In Mozambique, there are currently criminal proceedings against 20 suspects. They are accused of various crimes: money laundering, taking bribes, abuse of office, etc. The case is still ongoing. What’s interesting is that these are completely public and are permanently broadcast on radio and television. People on the street are constantly talking about it. That is positive. One can hope that this publicity will lead to a reasonably clean trial. But there are also those that raise doubts as to whether all those responsible are actually in the dock. That will probably never be conclusively clarified.

Background: Credit Suisse and the Mozambique case

In 2013, Credit Suisse organised USD 1 billion in loans for two Mozambican state-owned companies. The money was intended to buy ships for the coastguard and for tuna fishing. But part of the money flowed into private pockets. Money was laundered and bank employees, public officials and politicians took bribes. The deals were done through the British subsidiary of Credit Suisse, bypassing the head office in Zurich. This should no longer be possible in the future, as the Swiss Financial Market Supervisory Authority (FINMA) has demanded that henceforward, the group's top management must check transactions like these itself. For the time being, Credit Suisse must also disclose all new credit transactions with economically weak countries. The British financial supervisory authority and the US judiciary also had their sights set on Credit Suisse because of Mozambique. In a settlement, Credit Suisse has now accepted to pay a fine of USD 475 million. In addition, it must write off debts owed by the country to the tune of USD 200 million.

An upcoming series of online workshops titled The Trouble with the State: Boundaries and Networks in Africa will question the centrality of the concept of the "state" in the social sciences. In African contexts, the Eurocentric ideal of the "state" does not generally reflect realities on the ground. Perhaps instead we should be paying more attention to transnational social spaces, boundaries and networks? What would that mean for development and peace building efforts?

About the workshops

The half-day workshops on 25 October, 2 November and 9 November 2021 are funded by EUCOR - The European Campus, an alliance of five universities in Germany, France and Switzerland. They workshops seek to advance fresh analytical perspectives and methodological reflection, making the link with real experiences and case studies, and give researchers the opportunity to exchange constructive feedback on ongoing research projects.  Claudia Baez Camargo, our Head of Public Governance, is helping to organise the workshops as part of her role as Governance Lead for the University of Basel's Centre for African Studies, where she is also on the Steering Committee. She will co-host the Basel event on 9 November alongside representatives of the Centre for African Studies, the University of Bayreuth and Sciences Po Bordeaux.

Open to all - register now

The workshops will take place on Zoom and will be of particular interest to students and researchers in the fields of political science, sociology, history, African studies, anthropology, international relations, and peace and conflict studies. As an Associated Institute of the University of Basel, we are happy to be supporting the series and its contribution to bringing academic insights to governance-related technical assistance work, and vice versa. We believe this type of academic exchange is crucial in order to inform interventions aimed at improving the lives of people in African countries.  We hope to see you there – register directly (for free) on the links below or visit the Centre for African Studies website for fuller descriptions and speaker lists.

• Session 1: Consolidated or undermined statehood? The transnationalisation of state legitimacy. 25 October 2021, 09:15-12:45 CET. Register
• Session 2: Contested migration governance and borders. 2 November 2021, 09:15-12:45 CET. Register
• Session 3: The trouble with the nation-state. Knowledge production and policy implications in a transnational world. 9 November 2021, 09:15-12:45 CET. Register

Registration is now open for the 5th Global Conference on Criminal Finances and Cryptocurrencies on 7–8 December 2021. The virtual conference explores trends, strategies and tactics in tackling crimes involving virtual assets. A joint initiative of the Basel Institute on Governance, INTERPOL and Europol, the annual event now draws hundreds of experts and interested parties from around the world. Through presentations, discussions and case studies, the conference participants seek to illuminate how criminals can abuse the virtual asset ecosystem and develop recommendations on what law enforcement, regulators and the private sector can do about it. Attendance is free but pre-registration is required. Please note that day 2 (8 December) is restricted to law enforcement and related public authorities; attendance is subject to confirmation by the organising committee.

Agenda and registration

7 December, 12:00–15:30 GMT

Open to all, this day is dedicated to contrasting perspectives on virtual assets, regulation and compliance from the public and private sectors, media and regulatory bodies. Topics include:

• the challenges posed by decentralised finance for identifying and tracing suspicious cryptocurrency transactions;
• what media investigations reveal about how criminals launder the proceeds of crime using cryptocurrencies;
• changing scenarios of compliance with AML regulations relating to VASPs.

The agenda and speaker names will be published in November. Register for day 1

8 December, 12:00–15:30 GMT

Limited to law enforcement and related public authorities (judicial authorities, Financial Intelligence Units, anti-money laundering supervisors, etc.) the second day is an opportunity to explore the changing modi operandi of criminals abusing the cryptocurrency ecosystem to hide and launder money, and how law enforcement can fight back. The agenda will be released to participants shortly before the conference. Apply to attend day 2

More

Download the conference poster. View the latest updates and more information about this and previous events, and browse related resources on cryptocurrencies and financial crime, at: baselgovernance.org/5CrC

The Metals Technology Initiative (MTI), an anti-corruption Collective Action initiative of four leading firms in the metals technology industry, has launched a website to make its guidance on Gifts and Hospitality and on Third-Party Due Diligence freely accessible to all.

MTI is an anti-corruption and fair competition Collective Action initiative that brings together the four leading firms in the metals technology industry: Danieli (headquartered in Italy), SMS group (headquartered in Germany), Primetals Technologies (headquartered in the UK) and Tenova (headquartered in Italy).

The guidance documents address the specific compliance risks faced by companies working globally in the metals technology sector.

Co-developed by the Initiative’s member companies during meetings facilitated by the Basel Institute’s Collective Action team, the guidance documents are designed to help strengthen and set best practices on these critical topics for anti-corruption compliance. They are designed to be practical and user-friendly, with relevant case scenarios to help users consider how the guidance might apply in practice.

MTI member companies have committed to follow the guidance in their own companies. Other firms operating in the metals technology industry, or in other industry sectors facing similar compliance risks, are very welcome to adopt the guidance for their own anti-corruption compliance programmes.

The Metals Technology Initiative and its key principles

MTI is an anti-corruption Collective Action initiative for the metals technology industry, which was formalised in 2014. Senior compliance managers from the four member companies meet three times per year to exchange best practices and knowledge in anti-corruption compliance and fair competition. The meetings are convened and facilitated by the Collective Action team at the Basel Institute on Governance, which also serves as the initiative’s Secretariat.

The guidance documents align with and extend the five key principles agreed in the member companies’ Memorandum of Understanding:

• Commitment to acting with integrity in business practices
• Developing and implementing an anti-corruption compliance programme
• Fair competition
• Addressing key risks
• Sharing best practices

Learn more

• View the MTI website and its guidance on gifts and hospitality and third-party due diligence.
• Learn more about Collective Action for business integrity and fair competition on the B20 Collective Action Hub, the global resource centre on Collective Action operated by the Basel Institute on Governance.

Why do so many jurisdictions score so poorly for the effectiveness of their anti-money laundering systems? What's the biggest problem - prevention or enforcement? Answer from our Basel AML Index 2021 report: Ineffective systems are the general rule, but jurisdictions consistently score worse for prevention than for enforcement. Excerpt:

Last year in our 2020 Basel AML Index we lamented jurisdictions’ consistently poor results in terms of the effectiveness of their anti-money laundering and counter financing of terrorism (AML/CFT) systems. It is all too common for jurisdictions to have laws and institutions in place that are largely compliant with FATF Recommendations yet ineffective in practice.

The Wolfsberg Group, a Collective Action initiative of 13 global banks that develops frameworks and guidance on financial crime risks, reinforced our concerns in a June 2021 statement on Demonstrating Effectiveness:

“[L]argely in response to supervisory expectations, AML/CFT risk assessments are focused on technical compliance with requirements rather than the effectiveness of the [financial institution’s] efforts to prevent and detect financial crime”.

Data on the effectiveness of AML/CFT systems is drawn from Financial Action Task Force (FATF) Mutual Evaluation Reports. The FATF uses 11 “Immediate Outcomes” (IOs) to assess the effectiveness of AML/CFT systems according to its 40 Recommendations.

The 11 IOs and the assessment methodology are detailed on the FATF website.

Is there any sign of improvement in the figures for 2021?

Not really. Based on the latest FATF data, the average score for effectiveness across all assessed jurisdictions is only 30%. That is two times lower than the average score for technical compliance with FATF Recommendations, which stands at 64%.

Weak spots vary between jurisdictions, but overall they are as shown in the chart below:

Weakest spots in the effectiveness of AML/CFT measures globally

Are jurisdictions doing better at prevention or enforcement?

Ideally, AML/CFT systems need to be particularly effective at preventing money laundering from occurring. Enforcement remains of course important, and it must be effective. But relying too heavily on catching the criminals post factum presents an unreasonable risk and also means that some damage invariably will remain.

So we should be asking if jurisdictions doing enough on the prevention side, or if they are too heavily focused on enforcement. To explore this question, we divided FATF data on effectiveness criteria (IOs, see chart above) into two categories:

FATF indicators on the effectiveness of AML/CFT systems*

Prevention	Enforcement
IO1: Risk, policy and coordination	IO7: Money laundering investigation and prosecution
IO3: Supervision	IO8: Confiscation
IO4: Preventive measures	IO9: Terrorist financing investigation and prosecution
IO5: Legal persons and arrangements	IO6: Financial intelligence (mainly enforcement)
IO10: Terrorist financing preventive measures (mainly prevention)

Note that IO2 is not included as it refers to elements of both prevention and enforcement, while IO11 is not relevant to the topic.

Based on an analysis of 112 jurisdictions assessed with the FATF's latest (fourth-round) methodology by 15 July 2021, the data shows that jurisdictions are less effective at preventing ML/TF than at enforcing AML/CFT measures. And this is in a context where performance for enforcement is unsatisfactory already.

• Globally, average effectiveness for prevention was 27%, compared to 31% for enforcement.
• Nineteen jurisdictions (17%) scored zero for the effectiveness of their preventive measures, compared to 12 jurisdictions (11%) for enforcement.
• Nine jurisdictions demonstrated zero effectiveness in both prevention and enforcement criteria. These are: Cape Verde, Democratic Republic of the Congo, Haiti, Mali, Mauritania, Mozambique, Pakistan, Uganda and Vanuatu.
• The UK and Spain are the only jurisdictions assessed so far to achieve scores of 67% or above for both prevention and effectiveness criteria.

A regional perspective shows some variation, but the same overall story: When it comes to money laundering, jurisdictions seem to be more effective at enforcement than prevention.

Region	Prevention average	Enforcement average
East Asia and Pacific	26%	32%
Eastern Europe and Central Asia	37%	38%
Latin America and Caribbean	25%	26%
Middle East and Northern Africa	32%	40%
North America	53%	56%
South Asia	7%	13%
Sub-Saharan Africa	5%	8%
Western Europe and EU	37%	43%

That being said, it is a well known fact that measuring effectiveness in prevention is considerably more difficult than measuring effectiveness at enforcement, for which data and statistics are often available from law enforcement and judicial actions.

So what?

These findings should ring an alarm bell for policy makers. Jurisdictions should invest more resources in the prevention of ML/TF, because a fire contained is always better than an arsonist caught when the house has burnt down. Although of course, the arsonists must also be caught and punished.

We are far from arguing that such an increase of resources for prevention should come at the detriment of enforcement. On the contrary, both sides clearly need a serious boost, except perhaps the boost for prevention needs to be even more serious than that for enforcement.

More from the Basel AML Index

• Find out about the Basel AML Index, view the latest Public ranking and find out whether your organisation is eligible for a free Expert Edition account at our brand new website: index.baselgovernance.org.
• See the Basel AML Index 2021 press release.

The Basel Institute's Green Corruption programme has commenced two new grants funded by the UK Department for Environment, Food & Rural Affairs (DEFRA) under the IWT Challenge Fund 7th Round. The programmes focus on empowering wildlife, investigative and prosecution agencies in Uganda, Peru and Bolivia to augment their efforts to combat environmental crime by tracing, seizing and recovering the ill-gotten financial assets of environmental criminals. The funding will allow the deployment of five long-term advisors who will work with their peers in host agencies to develop cases, supported by our global network. Managing Director Gretta Fenner noted that: "The follow-the-money approach to combat environmental crime is still new in many countries. With the two DEFRA-funded programmes, we will be able to strengthen our teams in East Africa and Latin America and work with more partner agencies who have really understood the power of this approach to fight crime and protect the environment. This program of work is not about making commitments or declarations, but about hands-on work to push back against organised environmental crime, take them to court and take their money away.” The Green Corruption programme at the Basel Institute is a multi-disciplinary programme targeting environmental degradation through an anti-corruption and governance approach. The two programmes are:

Holding Uganda-based transnational wildlife criminals accountable by empowering financial investigations

The project will help Uganda’s wildlife enforcement bodies leapfrog the hurdles to catching and convicting transnational wildlife traffickers by:* scaling up financial investigations at the Natural Resource Conservation Network (NRCN) and its partners Uganda Wildlife Authority (UWA) and Uganda Revenue Authority (URA);

• upgrading financial network analysis skills, including open-source intelligence, mobile payments and cryptocurrencies;
• advancing illegal wildlife trade (IWT) cases by building prosecutorial skills to argue financial aspects in court;
• facilitating information flows to/from transport and financial firms.

Disrupting the financing of Andean IWT networks through asset recovery

This project aims to disrupt IWT networks in Bolivia and Peru by embedding financial investigation and asset recovery into IWT enforcement practice, building on the successful application of asset recovery techniques to combat organised crime and corruption in Latin America. Activities will include:

• the mentoring of environmental crime prosecutors in Peru and Bolivia to use a follow-the-money approach;
• galvanising peer-based training for specialised prosecutors and investigators;
• facilitating cross-border and public-private information flows to disrupt transnational environmental criminals.

A model law on non-conviction based forfeiture (NCBF), drafted 10 years ago by UNODC to support countries in Latin America in their efforts to recover stolen assets, will be updated following four days of intense discussions among practitioners and asset recovery experts from across the continent. Specialists from our International Centre for Asset Recovery (ICAR) team in Latin America were among those contributing to the discussions of the NCBF Model Law (Ley Modelo de Extinción de Dominio). Extinción de Dominio is the dominant form of NCBF mechanism in Latin America, including in Peru, where ICAR is assisting the authorities in rolling out a national system for NCBF and has seen some encouraging successes.

A model for NCBF laws across Latin America

Central to the participatory review process of the NCBF Model Law, the meetings sought to illuminate its contribution to efforts to recover stolen assets in countries that have implemented such an NCBF mechanism. Speakers highlighted that the Model Law has served as a reference document for many countries in drafting NCBF legislation that fits their domestic legal systems and contexts. These laws have since helped to recover assets arising from organised crime and corruption. The discussions also highlighted good practices and aspects that require updating in line with the fast-evolving field of asset recovery, such as how to recover assets held in the form of cryptocurrencies, and evolutions in international judicial cooperation. Other key points included issues the possibility of extending international instruments, such as the Inter-American Convention on Mutual Assistance in Criminal Matters, to specifically include forms of NBCF. Participants called for more guidance on developing suitable mechanisms to manage seized and confiscated assets, as well as on procedural aspects specific to this type of law. These are areas in which countries that are further ahead in the implementation of Extinción de Dominio mechanisms can usefully take the lead.

Sharing on-the-ground experiences with NCBF laws

Oscar Solórzano, the Basel Institute’s Head of Latin America and Senior Asset Recovery Specialist, presented some practical case studies that demonstrate the challenges of international judicial cooperation in asset recovery. On the other hand, he pointed to encouraging experiences of such international cooperation from Peru, which has succeeded in recovering assets from abroad using its 2019 Extinción de Domino law (see case links below). Oscar also remarked positively on the progress made by some European jurisdictions in recognising the validity of this model of NCBF legislation. Dennis Cheng, Senior Asset Recovery Specialist, moderated a panel reflecting on the significant advances made in Latin America in respect of NCBF over the last 10 years and participated in the closing session.

Promoting innovation in asset recovery

Participants in the four-day meeting included prosecutors, judges, academics and policymakers from Argentina, Bolivia, Brazil, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay and Peru. Many of these are leading voices in the asset recovery field who are also involved in the Asset Recovery Knowledge Community established by ICAR earlier this year. It is hoped that the reflections and knowledge products emerging from the Asset Recovery Knowledge Community will support the legal foundations of the NCBF Model Law as it is revised over the coming months, as well as its application in practice.

Learn more

• See the UNODC press release: UNODC conmemora los diez años de la Ley de Modelo de Extinción de Dominio.
• Encouraging cases based on Peru’s 2019 Extinción de Dominio law include the Ibárcena case involving a deceased Navy General, the Russian arms dealer case, the military aircraft case of Moshe Rothschild Chassin, and the recent terrorist financing case of The Nun (La Monja). A comprehensive description of all cases can be found in the 1,100-page Compendium of Jurisprudence on Extinción de Dominio published in July by Peru’s Procuraduría General del Estado.

In 2020, the Basel Institute on Governance with the support of the Siemens Integrity Initiative launched a series of roundtable discussions that brought companies together to analyse the potential nexus between corporate efforts to protect human rights and prevent corruption.

While bribery has been a prohibited practice under the laws of a majority of countries for over 20 years, and in many places corporate criminal liability for corruption has also been introduced, the corporate responsibility to protect human rights has largely been addressed through soft law instruments up until recently. As we mark the 10th anniversary of the UN Guiding Principles on Business and Human Rights, this situation however is changing.

From soft law towards mandatory regulations

On the one hand, there are strong regulatory expectations on companies to implement effective compliance programmes to address bribery laws.

On the other hand, the pressure on companies to take action around the topic of human rights is increasing as, similar to the field of bribery 20 years ago, the regulatory landscape is shifting away from soft law towards mandatory human rights due diligence regulations.

As companies in almost all industry sectors continue to be challenged when it comes to addressing the jigsaw of varying international and national standards, this presents opportunities for companies to meet the expectations of stakeholders on an increasingly level regulatory playing field.

Exploring a collaborative approach through Collective Action

Drawing on our long experience in anti-corruption Collective Action, we reached out to private-sector partners to gather their views on the potential of exploring synergies between anti-corruption compliance and the business human rights agenda to address this challenge.

A collaborative approach has also been recommended by the 2020 guide Connecting the anti-corruption and human rights agendas: A guide for business and employers’ organisations by Business at OECD (BIAC) and the International Organisation of Employers (IOE).

More than 50 companies responded to our outreach on the synergies between business human rights and anti-corruption. We met with each company on a bilateral basis at first, in order to understand the interest of each company for this specific topic, and also to assess the level of maturity of each company’s approach to addressing human rights and anti-corruption topics.

Based on the sectors, but also common interests and challenges identified by each company, we then divided the 50 companies into five groups which met twice over a period of six months.

The aim of the roundtable discussions was to identify opportunities to leverage anti-corruption best practices which could potentially support human rights and synergies between the two efforts, and also the limits.

Challenges in connecting the business and human rights and the anti-corruption agendas

Most companies noted the presence of internal silos between compliance functions that are responsible for anti-corruption on the one hand, and the sustainability/corporate social responsibility (CSR) functions that have traditionally managed the topic of human rights. Breaking down these silos and fostering constructive exchanges was one of the first recommendations resulting from this consultation.

Several other challenges emerged during both the bilateral calls and the roundtable discussions:

Fast-changing stakeholder expectations

Companies confirmed the above-described marked increase in focus on business human rights from regulators, but also noted the rapidly growing interest from other key stakeholders, including clients, public lenders and investors.

They pointed out that a particular challenge was the speed at which the expectations of these stakeholders are shifting, something that was reported to be particularly noticeable in certain European countries and North America.

Differing levels of maturity and understanding

Given the relatively recent uptake in human rights discussions both at the international and local levels, the maturity of companies with regards to their understanding and integration of the human rights agenda into their risk mitigation strategies and compliance management systems varies widely.

Heavily regulated industries and industries that have faced high-profile human rights-related scandals in recent years are, in general, more likely to have undertaken efforts to understand business human rights-related topics within their sector. It is interesting to note that these same sectors also appear to have the strongest understanding of corruption prevention.

Assessing human rights risks

Human rights risk is seen as a challenge for a great majority of companies. This mainly arises from the divide between risk to business, in the traditional compliance interpretation of risk assessment, and risk to people in the human rights interpretation of a risk assessment.

The limited in-house expertise on human rights was also noted as a challenge in order to identify salient human rights risks across the supply chain.

Bridging the silos of compliance and sustainability

The definition of a governance structure which adequately takes into account human rights is an ongoing challenge which takes several forms. A siloed approach that integrates human rights in the CSR or sustainability function seems to prevail. This is largely for historical reasons relating to the debates around standalone reporting on CSR topics and more recently environmental, social and governance (ESG) reports.

Many companies noted that this typically leads to limited (or non-existent) exchanges of information between the anti-corruption compliance functions and the guardians of CSR.

Some companies nowadays do have a dedicated human rights function. However also in these set-ups, internal buy-in (and coordination with other relevant functions, such as anti-corruption compliance) is perceived as a major obstacle.

In other companies, ownership of the human rights risk is unclear and does not have board attention, let alone any form of oversight.

Implementing policies – a need for tone from the top

On the upside, most companies have already defined – or are in the process of finalising – policies on human rights, either as a standalone statement or integrated into a broader policy document. Where companies have had such policies for some time, they are also engaged in reviewing these to ensure alignment with new legal and regulatory developments.

However, a common thread is that there is a lack of support from the top leadership of the companies for substantiating the implementation of such policies with appropriate procedures and processes. This in turn affects access to resources.

Supporting the supply chain

Some companies also noted a more general lack of understanding from suppliers and third parties as to what human rights questionnaires and requirements would mean in practice for their business relationship. The use of contractual agreements mentioning human rights was seen as a first step, but companies noted challenges in going further down the supply chain and having a greater positive impact.

In order to overcome this, some companies focus on outreach and on capacity building: they help their contractors produce policies, develop whistleblowing mechanisms and roll out training programmes.

A complementary approach that acknowledges specificities

While a majority of participating companies identified potential synergies between the human rights agenda and anti-corruption compliance, it was also generally acknowledged that human rights and corruption are two distinct topics. In other words, they should not (and cannot) be completely merged. Rather, they need to be seen as an overarching compliance and risk topic and thus embedded into risk management processes, but also treated discretely when necessary.

Subject matter expertise can help enhance and leverage current practices, with an emphasis on coordination of such expertise when looking at due diligence with a corruption and human rights lens.

Taking the next steps together: Collective Action

Collaborative approaches to the joint agendas of human rights and anti-corruption could also lead to self-regulation within these dual agendas in certain industry sectors. As mentioned in a September 2021 paper issued by the IOE, BIAC and Business Europe:

“Business and their representative organisations must be part of the solution and not perceived as the problem and must be fully involved in the development of normative and non-normative processes. Peer-learning and the exchange of experience are key to support each other in the implementation of the UN Guiding Principles.”

This opens a window of opportunity for Collective Action between industry players, peer companies and other stakeholders. The aim is to level the playing field with meaningful and coherent anti-corruption and human rights approaches that will support transparency, ethical decision making and engaged leadership. Pushing the human rights and anti-corruption agenda forward in any business requires a strong corporate culture focusing on integrity.

The roundtable members will be invited to take the discussions to the next level through a second round of bilateral meetings as well as targeted roundtable discussions. We will also conduct further research on the nexus between human rights and corruption, engaging multiple stakeholders throughout the process and in the development of an analysis report.

As countries improve their capacity to recover assets derived from criminal activity, they are faced with a challenge: how should these assets be managed while the judicial process is underway? In brief: An integral part of the asset recovery process is the power to take interim precautionary measures to prevent assets being hidden, spent or sold by the suspects before the final order for confiscation is made by the court. This could involve a court or prosecutor ordering that assets be seized or frozen, placed in the custody of others to manage them, or left with the owner under strict conditions. Assets such as money in bank accounts can be frozen without the need for active management. Physical or moveable assets – houses, cars, yachts, etc. – often require more active intervention. These assets may require storage or regular maintenance to keep them in good condition and over the course of a criminal court process this can incur significant costs. Other assets may depreciate during the period of seizure and others may perish or degrade over time. In order for countries to meet the challenge of managing suspected illicit assets, it is necessary to have regard to international obligations and take account of guidance and best practice advice from international organisations. They then need to apply these lessons within their particular domestic context. Jonathan Spicer, Senior Asset Recovery Specialist at our International Centre for Asset Recovery (ICAR) addressed this topic at a meeting of the Global Forum on Illicit Financial Flows and Sustainable Development on 21–22 September. The Global Forum is an initiative of the German Federal Ministry for Economic Cooperation and Development (BMZ) and the Norwegian Foreign Ministry, organised by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).

Studying international norms in asset management

Speaking to representatives of European and Latin American asset management institutions, other international experts and civil society representatives, Jonathan outlined the key findings of a recent study on International Norms in Asset Management. This study, a collaboration between ICAR and GIZ, analysed relevant international standards and guidance on best practice in asset management and considered what international legal obligations apply. The final report will incorporate an analysis of the legal and institutional setup and policies for asset management in five selected countries and assess capabilities as set against the established benchmarks. This will help identify legal, institutional and capacity gaps in these countries and recommend areas for improvement.

Guidance on asset management, but no cut-and-paste model

There is no set model for the managing of assets in criminal or non-conviction based forfeiture cases. The implementation of a system for asset management will be determined by each State according to their own law. Differences between countries may arise due to:

• legal traditions;
• the capacity for recovering criminal assets;
• the scale and nature of assets being recovered;
• the resources available to manage seized assets.

Yet countries do have obligations under international treaties, including the 2003 United Nations Convention against Corruption (UNCAC), the 2005 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime, and 2014 Directive on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union. Guidelines also exist, such as the 2004 G8 Best Practice Principles on Tracing, Freezing and Confiscation of Assets, and the 2012 FATF Best Practices on Confiscation. Two key pieces of guidance are currently under review: the 2019 Revised Draft Non-Binding Guidelines on the Management of Frozen, Seized and Confiscated assets (Conference of the States Parties to the UNCAC), and the Effective Management And Disposal of Seized and Confiscated Assets (UNODC).

Proposing international principles for asset management

From these treaties and guidance, Jonathan explained, it is possible to derive a set of key international principles for asset management. Though still under discussion, these principles include the need for appropriate legislation, a clear asset management framework with defined roles and responsibilities between agencies as well as the engagement of skilled practitioners to manage assets. Of particular importance is the need for pre-planning prior to the seizure of assets and the need to be able to dispose of assets prior to final confiscation to realise the full value of assets and minimise costs. Asset management powers should be exercised transparently. This can be achieved by utilising IT systems to register and track seized assets through to final disposal, policies for efficient management and regular audits. A key theme in the discussion is how to dispose of assets after the final order: can the asset be re-used for social purposes or can the funds realised from the sale of assets be re-purposed to crime-fighting initiatives, for example? In this way, public confidence in criminal asset recovery will be increased as criminals will be seen as not being able to retain the profit from their crimes.

To explore what is holding back progress in combating money laundering and terrorist financing (ML/TF) around the world, the 2021 Basel AML Index report examined data on money laundering vulnerabilities beyond the financial sector. Banks and other financial institutions bear the brunt of anti-money laundering AML/CFT supervision and attention, but perhaps we're missing weaknesses elsewhere?

In brief, the Basel AML Index reveals that lawyers, accountants, real estate agents, casinos, precious metal dealers,​​​​​​ and other so-called designated non-financial businesses and professions (DNFBPs) are significantly less protected against ML/TF risks than financial institutions. They also do less to contribute to anti-money laundering and counter financing of terrorism (AML/CFT) efforts. They should be considered a serious vulnerability in most jurisdictions’ AML/CFT framework. 

We believe more supervision is urgently needed to close that gap. Extract from the full report:

Growing attention to non-financial entities exposed to ML / TF risks

A significant issue highlighted by the Basel AML Index data analysis is the generally weak application of AML/CFT preventive measures by non-financial entities – so-called designated non-financial businesses and professions (DNFBPs). A related weakness lies in their supervision.

What are DNFBPs?

DNFBPs are non-financial entities or individuals with a particular exposure to ML/TF risks due to the nature of their business. According to the FATF definition, DNFBPs include casinos; real estate agents; dealers in precious metals and precious stones; lawyers, notaries, other independent legal professionals and accountants; and trust and company service providers (TCSPs). In an effort to support the various DNFBPs in applying a risk-based approach to AML/CFT, the FATF has issued sector-specific guidance documents for legal professionals, TCSPs, casinos and accounting professions.

In what way are DNFBPs exposed to ML/TF risks?

Traditionally, national AML / CFT policies, standards and financial supervisory bodies have focused more on financial institutions than DNFBPs. However, the latter are important players in financial and economic sectors and have clear exposure to ML/TF risks arising from tax evasion, corruption and bribery, fraud schemes, insider trading or other crimes.

To take a simple example, money launderers can buy and sell properties or precious metals to help obscure the illicit origins of their money, as one “layer” in the laundering scheme. Using corporate vehicles allows them to disguise the true ownership and control of the funds and assets – especially where beneficial ownership registers do not exist or are poorly implemented.

Moreover, there is increasing concern among regulators that some lawyers, accountants and TCSPs are advising and assisting criminal clients with hiding and laundering illicit funds, or that an accountant is used as an intermediary to avoid scrutiny from the financial institution.

Several structural factors emerge from the data that make DNFBPs particularly vulnerable to ML / TF risks, including the top three:

• A limited understanding of ML/TF risks and AML/CFT obligations
• Poor implementation of AML/CFT measures
• Weak monitoring and supervision

These are substantial problems that will need addressing to prevent DNFBPs acting as a dangerous loophole in AML/CFT systems.

Customer due diligence and AML / CFT

Customer due diligence (CDD) – knowing the identity of your customers and verifying that they really are who they say they are – is an essential aspect of identifying potential ML/TF risks. The relevant FATF Recommendations are R.10 on customer due diligence and R.22 on customer due diligence by DNFPBs. Effectiveness is measured through Immediate Outcome (IO) 4 on a risk-based approach to ML/FT prevention and reporting of suspicious transactions.

What are the requirements for customer due diligence?

CDD obligations apply to financial institutions and DNFBPs alike, for example when establishing a new business relationship, when they carry out certain transactions, and where there are doubts about previously obtained customer identification data or a direct suspicion of ML/TF. The measures cover various aspects including:

• identifying and verifying the customer;
• identifying and verifying the beneficial owner;
• understanding the purpose and intended nature of the business relationship;
• conducting ongoing due diligence and/or scrutinising transactions for consistency with the apparent customer profile.

CDD is also an important aspect of a risk-based approach to AML/CFT: where a risk assessment reveals a high risk of ML / TF, enhanced CDD should be applied to gather more information about the customer, the sources of the funds, the nature of the business relationship and the purpose of the transaction. Additional monitoring can then be applied where needed.

According to an analysis of FATF data relating to the relevant indicators (see above), DNFBPs have a much lower level of technical compliance with CDD requirements than financial institutions:

• 12 jurisdictions out of the 112 evaluated are rated as non-compliant in R.22 (CDD for DNFBPs). This compares with just 2 jurisdictions that are rated as non-compliant in R.10 (CDD for financial institutions).
• At the other end of the scale, only 8 jurisdictions are fully compliant with R.22, compared to 17 jurisdictions that are fully compliant with R.10.

This means that lawyers, accountants, casinos, precious metal dealers, real estate agents and other DNFBPs are significantly less protected against ML/TF risks and do less to contribute to AML/CFT efforts. They should be considered a serious vulnerability in most jurisdictions’ AML/CFT framework.

Does that mean they require greater attention and support from supervisory authorities?

Regulation and supervision of DNFBPs

In last year’s report, the Basel AML Index provided a deep dive into the quality of AML / CFT supervision. We found that supervision was generally a very weak spot in countries’ AML / CFT regime, and supervision of DNFBPs in particular.

Reviewing 2021 data on jurisdictions’ performance in FATF R.28, which sets standards for the regulation and supervision of DNFBPs, reveals that far too little has changed:

• Compliance with R.28 remains very low at 45% on average.
• 15 jurisdictions still score a radical 0% for compliance with R.28.
• Only 8 jurisdictions are fully compliant with R.28.

These figures illustrate that supervision remains one of the weakest fields in AML / CFT prevention. A 3% improvement across the board is far from the quantum shift that we would need to see.

When regulators continue to pressure financial institutions (and hopefully increasingly also DNFBPs) to do better – pressure that indeed needs to be maintained – it needs to be matched with significantly more efforts to supervise these institutions. Or else, it is highly likely that the pressure will fall short of delivering real results.

More from the Basel AML Index

• Find out about the Basel AML Index, view the latest Public ranking and find out whether your organisation is eligible for a free Expert Edition account at our brand new website: index.baselgovernance.org.
• See the Basel AML Index 2021 press release.

Peru’s non-conviction based confiscation law is a crucial element in the country’s asset recovery toolkit, emphasised the country’s Special General Public Prosecutor, Dr. Daniel Soria Luján, following a three-day training course for 32 Peruvian prosecutors. The virtual training was focused on Extinción de dominio, the country's non-conviction based confiscation law, whose implementation the Basel Institute is supporting through technical assistance and capacity building. As Dr Soria Luján and Oscar Solórzano, our Head of Latin America, pointed out in the closing ceremony on 16 September, Extincíon de dominio has been key to unlocking asset recovery cases that have been stuck for years. A high-profile example is the case of Nelly Evans ("The Nun") involving around USD 1 million in funds intended for terrorist financing that had been frozen for 30 years in a Swiss bank account. Experts from our International Centre for Asset Recovery (ICAR) developed and delivered the training under the framework of the Subnational Public Finance Management Strengthening Programme (Programa GFP Subnacional). The Programme is funded by the Swiss State Secretariat for Economic Affairs (SECO) and implemented by the Basel Institute through a local team of over 30 public finance management and training specialists. Similar training will be delivered to a second set of prosecutors specialised in financial crimes, including public prosecutors at the regional and local levels, in November.

About the Special Public Prosecutor’s Office

The Special Public Prosecutor’s Office (Procuraduría General del Estado del Perú) was established in 2019 as an independent authority within the Ministry of Justice and Human Rights. In collaboration with the Attorney General’s Office, it is responsible for advancing prosecutions of offences where the Peruvian State is the victim, including corruption, money laundering and environmental crimes. In July 2020, we signed a framework agreement with the Procuraduría General del Estado covering technical assistance in international asset recovery cases and capacity building, as well as support for cases based on the Extinción de dominio law. View the official Government of Peru press release (in Spanish): Procuraduría General del Estado y Basel Institute on Governance brindan capacitación sobre extinción de dominio a procuradurías públicas

Emerging economies have long struggled with the question of how to combine economic development with sustainable use of natural resources. How does corruption factor into this combination? Our recent survey of Indonesians’ attitudes to corruption, environmental degradation and the economy reveals what we call the Green Corruption paradox: Conflicting, and arguably mutually exclusive, views on all three topics can co-exist. Despite seeing the presence of and being deeply concerned about corruption and environmental degradation, people tend to focus on livelihoods when times are hard. People also, according to the survey data, favour economic structures that appear to channel the benefits of natural resource utilisation more directly to citizens. In Indonesia, this means rejecting private companies – particularly foreign-owned – in favour of state-owned enterprises (SOEs) and people’s cooperatives. Given that the governance structures of both remain weak, as evidenced in part by numerous corruption cases involving SOEs, this “trust credit” creates tremendous expectations of SOEs’ future behaviour. This can only be ensured through the systematic mitigation of corruption risks in these vast, crucial and proliferating institutions. This requires bold leadership that has historically been provided by the Corruption Eradication Commission (KPK). Unfortunately, our survey shows a steady and significant decline of trust in the KPK, losing 20 points (from 90% to 70%) in the last five years, with the lion’s share of the loss occurring since late 2019.

Fears, beliefs and contradictions – what the survey revealed

Together with Lembaga Survei Indonesia (LSI), the leading Indonesian pollster, we ran a national public opinion survey conducted via telephone in July 2021 covering 2,580 respondents. In-depth face-to-face interviews also took place with 30 private-sector representatives working in various natural resource sectors. According to the survey data, Indonesians harbour great reservations about corruption levels generally. The share of the public that says corruption has increased over the last two years is at its second highest level (60%) in the five years that LSI has been measuring this question. The survey also revealed serious concerns about high levels of corruption in the natural resource sector specifically, and about worsening environmental degradation. Yet despite this, two thirds of respondents say they believe that some profitable industries based on Indonesia’s rich natural resources, including plantations for palm oil and rubber, are not harmful to the environment. Moreover, even when environmental degradation is clearly the result of natural resource exploitation, a majority believes that this is acceptable because of the economic benefits that it brings. This attitude may be exacerbated by the depressed economic situation: a full two-thirds of the participants see the current state of the economy as bad or very bad. Despite this pessimistic assessment of both the economy and overall corruption levels, trust in government remains high. A full three quarters of participants believe the government can be trusted to be a steward of the environment. The same percentage say the government is doing its best to balance economic growth and environmental degradation. This trust in government, including in agencies in charge of natural resource management, cohabitates uncomfortably with citizens’ assessment of the level of corruption in these sectors. When asked about a wide array of activities to utilise natural resources, respondents who had an opinion were between two and three times more likely to say that corruption is widespread or very widespread. Clearly, citizens are not naïve about the governance risks that natural resource exploitation brings with it. So, the public generally is concerned about corruption and environmental degradation. People also have strong concerns about worsening corruption in the country overall and high levels of corruption in natural resource exploitation in particular. One would think that these concerns would make natural resource sectors highly unattractive. Yet this is not the case. Based on our analysis of the survey data, we believe the economic benefits of natural resource exploitation are what lead respondents to suspend their otherwise highly sceptical attitude when it comes to the harmfulness of some environmental practices. This uncomfortable acceptance of natural resource exploitation is further emphasised when a majority of the respondents say that where environmental degradation occurs, it is outweighed by the economic benefits the exploitation brings.

Resource nationalism is alive and well

Concerns about corruption and the environment, one might suppose, could lead to a welcoming of foreign investors with their environmental, social and governance (ESG)-friendly ratings and compliance systems. This would be a mistake, however, as according to the survey the Indonesian public is highly critical of any involvement of foreign companies – or even any foreign investment – in the natural resource field. The share of respondents that support curbs on foreign investment in environmental exploitation is between four and seven times higher (depending on the sector) than those who do not desire such curbs. This is despite the significant economic hardship the country is experiencing. This severe dislike of foreign companies is not because they are perceived as more corrupt or more polluting. Rather, the top three reasons are all variations of resource nationalism: foreign companies don’t have Indonesian interests at heart, Indonesia should not compromise its independence, and the expectation that state revenue will be greater without foreign companies.

Economic benefits of natural resource exploitation should flow to citizens

Who, then, should be managing Indonesia’s natural resources? Clearly not Indonesian companies, as the public is overwhelmingly critical of them too. In no sector do more than 14% of respondents support private companies exploiting natural resources. The answers, according to respondents, are people’s cooperatives and SOEs. Cooperatives are at least twice as popular as private companies (mining) and up to four times more popular (fishing). A majority of respondents also strongly endorsed SOEs and claimed they can be trusted to manage natural resources for the benefit of the people. Both preferences appear to rest on the belief that natural resources are a public good that should be used to directly improve people’s economic conditions. Private companies that are profit-driven are not seen as sufficiently concerned about this.

Recommendations

Albeit extensive, this is a single survey at an unusual time in history and we should be wary of drawing strong conclusions. Nevertheless, we believe the results point to some clear takeaways that can inform Indonesian policy and the interventions of donors and civil society organisations concerned with conservation, anti-corruption and sustainable development.* Rebuild trust in the KPK as Indonesia’s principal anti-corruption institution. Recent legal, administrative and political measures that have undermined trust in the KPK need to be urgently reversed to restore the agency’s moral authority and ability to lead the highly complex fight against environmental corruption.

• Only interventions that address economic, governance and environmental concerns together stand a chance to succeed. The close connection between economic, governance and environmental concerns means that any efforts at conservation must address all three of these points. This heightens the complexity of government reforms and donor programmes in any of these areas. Yet it is essential: working in isolation will only lead to efforts being undermined.
• Foreign investors need to grow thick skin. Resource nationalism is a significant obstacle to both foreign investment in the natural resource sector and foreign-supported and -implemented conservation programmes. Foreign actors in the natural resource field need to ensure their systems are sufficiently robust to withstand certain public and likely political criticism.
• Strengthen SOE governance. The strong preference of the public for SOEs in the management of natural resources places a tremendous responsibility on both the government and the SOEs themselves. Numerous corruption scandals and conflicts of interest are evidence that this public trust is on credit and must still be earned through tough political decisions, inspired reforms, methodical implementation and diligent monitoring.
• Support cooperatives in enhancing their governance. Strengthening the governance systems of cooperatives is likely more diffuse and painstaking than undertaking the same exercise in SOEs. However, it should not be neglected considering the environmental, economic and political importance of sectors in which cooperatives are strongly present, such as fishing.

Learn more

• Download the paper. The report was made possible with the generous support of the American people through the USAID CEGAH programme.
• Find out more about the Basel Institute’s Green Corruption programme.

A guest blog by Elisabeth Danon, Legal Analyst, OECD Anti-Corruption Division.

How can governments in South East Europe partner with the vibrant business sector and civil society to help combat corruption?

OECD experts and practitioners shared some novel ideas on this question at a two-day webinar on Collective Action – Building Alliances Against Corruption in South East Europe on 16 and 17 September.

The event convened the Collective Action community in South East Europe to take stock of the advancement of the project Fair Market Conditions for Competitiveness in the Adriatic Region. This project is being conducted under the umbrella of the OECD South East Europe Regional Programme and is supported by the Siemens Integrity Initiative.

Improving business integrity in Serbia, Bosnia and Herzegovina, and Croatia

The three-year business integrity project aims to promote a level playing field and fair market conditions in Serbia, Bosnia and Herzegovina, and Croatia. All three countries have significant potential for strong and sustainable economic development, but are hampered by relatively high levels of perceived corruption.

Ambitioning to be a multi-stakeholder initiative, the project gathers government officials, business representatives, civil society and academia to address country-specific drawbacks by applying international standards. It aims to: 

• raise awareness about OECD standards and good practices of anti-corruption, integrity and fair competition for competitiveness with governments, business and civil society;
• build capacity and foster the implementation of concrete OECD recommendations with regard to the transparency and efficiency of anti-corruption and competition authorities; and
• promote the latest knowledge on international standards and practices in the area of anti-corruption and integrity for competitiveness in academic curricula.

The September webinar, which was part of a series of events organised in the context of the project, consisted of a plenary roundtable on Instruments and Global Lessons for Implementing Collective Action, and three country-specific roundtables on Putting Collective Action Into Practice – Factors of Success.

Policy practitioners and experts from OECD countries shared practical experiences in implementing policy reforms to strengthen fair competition and combat corruption across the economy and society.

Among the OECD-supported instruments presented as a way to create a fair and competitive playing field was the High Level Reporting Mechanism (HLRM).

How HLRMs can provide early and pragmatic resolutions to integrity issues

The HLRM, jointly developed by the OECD and the Basel Institute of Governance, is a reporting mechanism created to effectively address complaints of bribery solicitation and related practices that involve public officials.

Upon receipt of a complaint, the HLRM triggers a process of rapid analysis and pragmatic response on the part of a government. Examples of different contexts can include:

• public procurement
• the issuance of commercial licenses
• tax refunds
• the release of goods by customs authorities.

The goal is to restore the status quo before a reported problem escalates further and to allow interactions between public and private stakeholders to proceed smoothly.

The HLRM can be customised according to the needs and reality of different countries – an essential feature of any Collective Action initiative. Representatives of the public sector, business, civil society and other stakeholders participate in its design and implementation.

The HLRM anticipates a whole-of-a-society approach to tackling corruption and enhancing public integrity as described in the 2017 OECD Recommendation of the Council on Public Integrity. By providing a tool to companies facing solicitation of bribes, the HLRM can also contribute to the fight against foreign bribery, driven at the global level by the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

To date, customised models of the HLRM have been deployed in Colombia and Argentina. During the roundtables, experts from the OECD and the Basel Institute on Governance provided insights on those existing models, and how the mechanism could be replicated in Serbia, Bosnia Herzegovina and Croatia, based on the priorities and specifies of each country.

By supporting Collective Action and implementing a HLRM, governments would be demonstrating their real commitment to the joint fight against corruption and their leadership in efforts to create a fair and clean business environment for all.

Our recently released Basel AML Index 2021 highlights how slow and ineffective implementation of beneficial ownership registries continues to provide safe havens for dirty money.

We argue that this is damaging for individual jurisdictions, but more importantly undermines all global efforts to combat money laundering and terrorist financing (ML/TF). Excerpt from the full report:

Beneficial ownership and resilience to ML/TF threats

Beneficial ownership transparency is directly related to the effectiveness of a jurisdiction’s AML systems and the essential role of these systems in preventing, detecting, prosecuting and sanctioning financial crimes. It is therefore crucial to a jurisdiction’s resilience against ML/TF threats.

Both public authorities (law enforcement, Financial Intelligence Units) and private actors (financial institutions and Designated Non-Financial Businesses and Professions, or DNFBPs) are responsible for maintaining this resilience.

For public authorities, low transparency of beneficial ownership and anonymity of some legal arrangements hamper ML/TF investigations and attempts to trace and freeze illicit assets.

This is because of the very nature of money laundering, which is to disguise the criminal origins of money and take a number of actions to introduce it into the financial system and make it appear legal. Criminals often use complex “layers” of legal corporate structures spanning multiple jurisdictions to hide the illicit origin of their money.

If such layering activities remain undetected, the money is more easily integrated into the financial system. It then becomes much more difficult for law enforcement authorities to identify and prosecute the crimes and to recover whatever is left of the money.

This is especially the case where the trail of the money passes through multiple jurisdictions with very different methods for recording and sharing beneficial ownership information.

This problem of opaque beneficial ownership arrangements also applies to terrorist financing crimes, where criminals aim not only to stay undetected but to circumvent sanctions lists.

For the private sector, the information contained in beneficial ownership registers is also essential to effective AML / CFT compliance processes.

Financial institutions and DNFBPs effectively play a gate-keeping role to prevent illicit money from entering the financial system. Without proper access to reliable information on beneficial ownership, private actors have a limited ability to understand who is behind the legal entities and legal arrangements – i.e. a limited ability to fulfil their customer due diligence requirements.

They are therefore not able to perform their role of preventing financial crimes and of protecting their own businesses to their full capacity.

The financial institutions and DNFBPs themselves also suffer as a result of a jurisdiction’s dysfunctional or nonexistent beneficial ownership transparency: poor AML compliance increases their exposure to legal, reputational and financial (fines) risks.

Beneficial ownership transparency has risen up the global agenda

The Financial Action Task Force (FATF) published the first international standards on beneficial ownership transparency in 2003. 190 jurisdictions committed to implementing legal requirements for:

• financial institutions and other gatekeepers to collect and verify information on the ownership of legal persons and arrangements;
• measures to ensure that this information is available competent authorities.

The standards were revised in 2014 to provide more clarity, close loopholes and better distinguish between basic ownership information (about the immediate legal owners of a company or trust) and beneficial ownership information (about the persons who ultimately own or control it). In 2019, FATF published best practices on beneficial ownership for legal persons.

There is now widespread consensus that beneficial ownership registers are needed not only to combat ML/TF but also tax evasion and other forms of financial crime, to assist in tracing and recovering stolen assets, and – especially for publicly available registers – for their deterrent effect.

This concern has been picked up by a multitude of policy and advocacy bodies from all sectors. The G20, B20 and C20, the OECD and its Global Forum on Transparency and Exchange of Information for Tax Purposes, the Extractive Industries Transparency Initiative (EITI), the Open Government Partnership through its Beneficial Ownership Leadership Group, and Transparency International are just a few of those calling actively for the establishment of effective beneficial ownership registers globally.

Open Ownership, an NGO, has developed Principles for Effective Beneficial Ownership Disclosure, which provide a framework for implementing beneficial ownership reforms and assessing the adequacy of existing measures.

Far from being a purely technical issue, beneficial ownership is also increasingly a public demand following scandals such as the Panama and Paradise Papers. These have revealed how anonymous shell companies have been misused (and in many cases intentionally set up for that purpose) to assist criminals and professional money launderers in hiding the proceeds of corruption and other crimes.

Implementation and effectiveness of beneficial ownership registers

Despite the fact that the importance of beneficial ownership transparency is increasingly recognised, implementation remains uneven and more clarity and granularity are necessary. To gain a greater understanding of the main weaknesses, and perhaps draw first conclusions of the underlying reasons, we examined what the FATF data reveals on this question.

For this, we looked at the following FATF Recommendations and effectiveness indicators (IO5) for beneficial ownership:

FATF indicators on beneficial ownership

Technical compliance	Effectiveness
R.24: Transparency and beneficial ownership of legal persons. Jurisdictions should take measures to prevent the misuse of legal persons for money laundering or terrorist financing.	IO5: Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments.
R.25: Transparency and beneficial ownership of legal arrangements. Jurisdictions should take measures to prevent the misuse of legal arrangements for money laundering or terrorist financing.

The data covers 112 jurisdictions assessed under the FATF’s fourth-round methodology. Note that data collection ended in July 2021. The data do not reflect the recent changes with regard to beneficial ownership in the US and Canada, as these jurisdictions have not undergone an FATF evaluation since the changes came into effect.

The analysis reveals poor performance across the board.

• Technical compliance with R.24 and R.25 across all 112 assessed jurisdictions lies at only 47% on average.
• Almost half of the jurisdictions (44%) score zero for the effectiveness of their beneficial ownership transparency measures under IO5 – 49 jurisdictions out of the 112 assessed.
• No jurisdiction has an effective system, where IO5 is achieved to a very large extent.
• Only 11 jurisdictions out of the 112 score 66% for effectiveness. A further 52 jurisdictions demonstrate just 33% effectiveness.
• The average effectiveness score across all assessed jurisdictions is only 22%.

As explained above and emphasised repeatedly by the FATF, this lack of effective collection and verification of information on the beneficial owner of a corporate vehicle hinders the efforts of law enforcement and financial institutions to prevent or investigate abuse of the financial system.

What will happen if the FATF strengthens requirements on beneficial ownership transparency?

The data also seem to indicate that the non-binding nature of the FATF Recommendations on beneficial ownership leaves a great deal of flexibility in the way that jurisdictions implement them in their national legislation. Is this the reason for the uneven and tardy implementation?

The FATF has conducted a public consultation this year on possible amendments to R.24 on the transparency and beneficial ownership of legal persons, the outcomes of which are pending at the time of writing this report. It is hoped that this process will shed more light on the causes of the current weakness of existing beneficial ownership frameworks and the lack of such frameworks in far too many jurisdictions still.

Based on our analysis of jurisdictions in the Basel AML Index, we predict that average performance will decrease if the FATF strengthens its requirements under R.24.

Beneficial ownership transparency in the EU

The case of the European Union illustrates that implementing effective beneficial ownership registers remains challenging even in a region with substantial resources at its disposal, a relatively low risk of ML/TF (see regional profile, page 27) and, importantly when comparing to the global standard, very clearly defined mandatory rules.

These rules for EU Member States are set out in the so-called EU AML Directives (AMLD).

• The 4th AMLD signed in 2015 required Member States to ensure that the beneficial owners of legal persons and some trusts should be known and registered with an authority.
• The 5th AMLD required that beneficial ownership registers for companies and legal persons should be publicly accessible, and that beneficial ownership information on trusts should be accessible to competent authorities, financial institutions and designated non-financial business and professions (DNFBPs), as well as anyone who can demonstrate a legitimate interest. By January 2020, Member States were supposed to have transposed the 5th AMLD into domestic law.

Although the 5AMLD set out the necessary framework for establishing transparent beneficial ownership across EU jurisdictions, there remain gaps in implementation of these standards in national legislation as well as weaknesses in supervision at the EU level.

As pointed out by Transparency International, three jurisdictions (Italy, Hungary, Lithuania) still have not established any form of beneficial ownership register. A further six (Cyprus, Czech Republic, Finland, Greece, Romania and Spain) have failed to make their registers public, as required in the 5AMLD. Others restrict access in different ways.

So the problem seems to be going further than “just” the question of how specific the rules are. In July 2021 the EU presented what it calls an “ambitious package of legislative proposals” to strengthen and harmonise AML / CFT rules across Member States, including beneficial ownership transparency requirements. It can be hoped that with this, combined with the ongoing revisions of relevant FATF standards, at least the high-risk countries will start understanding the critical role of beneficial ownership registers in both ML/TF prevention and enforcement, and act on it.

Are compliant systems more effective?

Actually, no. Interestingly, the data reveals no strong correlation between technical compliance and effectiveness.

• Only nine jurisdictions demonstrate a high performance (above 50%) in both technical compliance and effectiveness ratings: Armenia, Bermuda, Cuba, Cook Islands, Italy, Israel, Macao, Spain and the UK.
• Some jurisdictions, such as Latvia and Iceland, score highly on technical compliance criteria (67% and 83% respectively) but zero in terms of effectiveness.

The US and Canada are among those jurisdictions that have been – at least until now – let down by their ineffective beneficial ownership transparency measures. Both fall into the medium-risk category in the Basel AML Index: Canada is rated at 4.67 and the US at 4.60 out of a maximum ML/TF risk score of 10.

However, both jurisdictions suffer from beneficial ownership transparency systems rated by the most recent FATF evaluation as 0% effective.

What can we learn from analysing FATF data on beneficial ownership?

The analysis shows, among other things, that:

• There is still an unacceptably poor level of compliance in establishing beneficial ownership registers (or other mechanisms), even when this is required not only by FATF standards but by law. In some jurisdictions, this is a major aspect letting down their otherwise acceptable performance in AML/CFT.
• The majority of beneficial ownership registers that do exist are either mostly or completely ineffective at doing even the minimum that they are supposed to do – provide reliable information to the competent authorities on the ultimate beneficial owners of companies or trusts incorporated in the jurisdiction.

Increasing the transparency of information on beneficial ownership is both an obvious and an essential measure to improve the general level of AML/CFT compliance and to help prevent or investigate ML/TF offences.

This applies both domestically (since no jurisdiction has a fully functioning beneficial ownership system) and internationally (due to the cross-border nature of financial crimes).

Strong government action to improve beneficial ownership transparency will support not only the competent authorities responsible for investigating and prosecuting financial crimes, but also financial institutions and other reporting entities with their customer due diligence obligations.

Further reading on beneficial ownership and money laundering

• Position Paper on Beneficial Ownership Transparency (2021) by the Global Coalition to Fight Financial Crime
• Quick Guide to Offshore Structures and Beneficial Ownership (2020) by Phyllis Atkinson, Head of Training ICAR at the Basel Institute on Governance
• Principles for Effective Beneficial Ownership Disclosure (2021) by Open Ownership
• Beneficial Ownership Registers: Progress to Date (2020) by the U4 Anti-Corruption Helpdesk
• Best Practices on Beneficial Ownership for Legal Persons (2019) by the FATF

More from the Basel AML Index

• Find out about the Basel AML Index, view the latest Public ranking and find out whether your organisation is eligible for a free Expert Edition account at our brand new website: index.baselgovernance.org.
• See the Basel AML Index 2021 press release.

The Basel AML Index 10th Edition explore four aspects hindering the global fight against money laundering and terrorist financing (ML/TF). The first element crunched Financial Action Task Force (FATF) data on how jurisdictions are responding to money laundering threats related to virtual assets. The answer: not well at all. Excerpt from the full report:

The use of virtual assets such as cryptocurrencies is exploding – for legitimate as well as illicit purposes.

In January 2021, there were an estimated 106 million cryptocurrency users globally. Data on how any of these may be using cryptocurrencies for criminal purposes, including to launder stolen money, is however scarce. According to a 2021 report by blockchain analysis firm Chainalysis, of the estimated USD 21.4 billion in cryptocurrency transactions in 2019, criminal activity represented around 2.1 percent (USD 450 million).

Cryptocurrencies have unique characteristics, many of which are very positive, including for example the potential to improve financial inclusion. Yet their borderless nature and existence outside the formal financial system also make them a tempting option for criminals to conceal proceeds of corruption and other crimes, evade tax or fund terrorism.

Mitigating ML / TF threats from virtual assets – FATF Recommendation 15

In 2018, in an effort to motivate jurisdictions to take action to prevent virtual assets becoming a threat to global financial stability, the FATF revised its Recommendation 15 on virtual assets and virtual asset service providers (VASPs). Finalised amendments, an Interpretive Note and accompanying Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers followed in 2019.

In essence, the revised Recommendation requires among other things:

• Jurisdiction must apply a risk-based approach to AML / CFT risks associated with virtual assets.
• VASPs should be licensed/registered, and subject to adequate regulation and supervision.
• VASPS must conduct customer due diligence on one-off transactions over USD/ EUR 1,000, and submit suspicious activity reports where needed.
• VASPs should obtain information about the originator and beneficiary of transfers and make it available to competent authorities (the so-called "travel rule").

The FATF defines the term “virtual asset” as any “digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes”. This does not include digital representations of fiat currencies or other financial assets included elsewhere in its Recommendations.

VASPs include natural or legal persons that offer services such as exchanging between virtual assets and fiat currencies, exchanging between different forms of virtual assets, transferring virtual assets, safekeeping or administering virtual assets, or providing other financial services relating to virtual assets.

How are jurisdictions doing at mitigating their risks of money laundering using virtual assets?

In July 2020 and July 2021, the FATF issued the first and second reports on the results of 12-month reviews on the revised standard.

It is still early days, as the final version of the revised Recommendation 15 was only issued in June 2019. However, initial signs are not encouraging.

• Of the 27 jurisdictions assessed or reassessed for technical compliance with the new R.15 from June 2020 to June 2021, 19 downgraded their scores. Five jurisdictions retained the same scores and only three managed to improve.
• The average compliance score for R.15 across all jurisdictions assessed with the latest (fourth-round) FATF methodology decreased from 70% to 60%.
• Of the 10 jurisdictions assessed with Mutual Evaluation Reports, none was rated as being compliant. Two jurisdictions were non-compliant (score of 0), 5 were partially compliant (score of 1 out of 3) and 3 were largely compliant (score of 2 out of 3).

Is there a risk of “regulator shopping” in the virtual assets sector?

Yes. The consequences of individual failings by jurisdictions in implementing effective AML / CFT requirements on VASPs could be serious.

The reason is simple and visible in regular money laundering schemes too: criminals wishing to abuse virtual assets for illicit purposes can simply switch from jurisdictions with a strong regulatory framework to one in which regulations are weak and not enforced. This risk is exacerbated by the hyper-global nature of virtual assets.

A lack of coordinated and concerted global action may therefore result in some jurisdictions becoming safe havens for illicit activity using virtual assets.

This challenge has been recognised by the European Commission’s June 2021 package of proposals to tackle ML / TF, which includes an ambitious plan to harmonise AML / CFT legislation in relation to VASPs across all EU jurisdictions. This is a positive move, but without similar efforts among other jurisdictions and regional bodies, it is likely that the illicit activity will simply move to locations with fewer or no controls.

What are the biggest issues to fix, and how can jurisdictions with upcoming FATF assessments obtain a better evaluation?

The FATF’s second review of trends with regard to the implementation of the revised R.15 indicated progress in certain areas, including with respect to transposing the new requirements into domestic legislation, submitting suspicious activity reports and establishing supervisory regimes.

Significant gaps however remain, in particular in the following areas:

• Weak implementation of the “travel rule”, meaning that information on the originators and beneficiaries of cryptocurrency transactions is not being obtained or made available to competent authorities.
• Sluggish action by jurisdictions in implementing AML / CFT obligations in the virtual assets sector, with infrequent examinations or sanctioning.
• Generally, a lack of knowledge and expertise among supervisory/regulatory bodies in the field of virtual assets, reducing their ability to oversee and guide VASPs.

What data is available to assess ML / TF risks relating to virtual assets?

The new and fast-evolving nature of the virtual assets sector means that reliable data relevant to evaluating money laundering risks is not widely available.

Regular market data on virtual assets, such as the use of cryptocurrencies and the location of cryptocurrency mining centres, are largely collected and analysed by blockchain analytic companies such as Chainalysis, CipherTrace, Coinfirm, Elliptic, Merkle Science, Scorechain, TRM Labs.2

However, the differences in methodologies, analytical techniques and tools, along with the proprietary nature of the data, mean that comparability is difficult. The data also tend to focus on a select few cryptocurrencies only and are therefore not sufficiently comprehensive for this purpose.

A prerequisite for evaluating risks of ML / TF relating to virtual assets is understanding geographical trends in their use and regulation.

• Chainalysis issued a helpful analysis of such geographic trends in September 2020, although it does not provide data on the risk of misuse of cryptocurrencies.
• Statistica published a list of jurisdictions with the highest cryptocurrency use per capita in March 2021. There is however no evidence as yet that a lack of regulation or intensive usage of virtual currencies in a population correlates with an increased risk of ML / TF using virtual assets.

We therefore suggest that the FATF assessment of jurisdictions’ compliance with R.15 remains the most reliable source of data on ML / TF risks relating to virtual assets. It also has the virtue of enabling comparisons across jurisdictions and measurement of progress over time.

Learn more

• See the Basel AML Index 2021 press release.
• Visit our brand new Basel AML Index website at: index.baselgovernance.org.
• On 7-8 December, the Basel Institute is hosting the 5th annual Global Conference on Criminal Finances and Cryptocurrencies in collaboration with INTERPOL and Europol. Sign up to be notified when registration opens.
• Federico Paesano's quick guide to cryptocurrencies and money laundering investigations offers a short overview of how cryptocurrencies can be used to facilitate serious crimes or launder stolen money, and what law enforcement can do about it.

Speaking at a B20-G20 dialogue on 13 September, the Basel Institute’s Managing Director Gretta Fenner called on G20 Member States to commit to and support the implementation of a multi-stakeholder approach to promoting integrity in procurement.

In concrete terms, she said, this means adopting proven Collective Action tools such as Integrity Pacts and High Level Reporting Mechanisms. in public tenders.

The event, focused on “How to promote sustainable governance, increase transparency, fight corruption to enhance fair competition”, was organised by the B20 Italy Integrity and Compliance Task Force, of which the Basel Institute on Governance is proud to be a Network Partner.

The aim was to raise awareness on the role that integrity and compliance can play to help achieve – even after the pandemic crisis – a more sustainable and inclusive global economy. The dialogues bring leading B20 and G20 representatives together to foster mutual understanding and coordinate on key policy recommendations.

The panel on which Gretta spoke dealt with the Task Force’s policy recommendation 1.3 to “foster integrity and transparency through the procurement cycle”. Maria Fernanda Garza, CEO of Orestia, and Michele Crisostomo, Chair of ENEL, also spoke on the topic, following a keynote speech by Antonio Matonti, Task Force Manager.

You can view the full event recording on YouTube (Gretta Fenner speaks at minute 53:30), or skip straight to her words below. Meanwhile, if you wish to find out more about how the B20 process works and its track record on anti-corruption and integrity topics:

• See our new online information centre on the B20 and anti-corruption, created with the support of the Siemens Integrity Initiative.
• Our recent paper also analyses how B20 recommendations have been taken up by the G20, and what might make the process more effective.
• In the run-up to this event, a group of B20 Integrity & Compliance Task Force members with a long-standing engagement and strong commitment to the B20's impact and success put together some ideas and suggestions to support G20 and B20 presidencies on issues related to B20 governance and G20-B20 engagement.

Enhancing integrity in the procurement cycle – the High Level Reporting Mechanism

“Thank you to the Italian B20 presidency, and in particular the Integrity & Compliance Task Force, for facilitating this important B20-G20 Dialogue. Thank you also for the excellent and constructive leadership throughout the 2021 B20 Italy cycle.

Providing a platform for active engagement and exchange between the B20 Integrity & Compliance Task Force and their G20 counterparts is especially important this year with the new G20 Anti-Corruption Action Plan being developed. The Action Plan will guide the G20 anti-corruption work over the next three years.

Providing an opportunity to further align approaches and exchange ideas can be particularly impactful for topics such as public procurement, where interactions between companies and public officials are inevitable.

Every new corruption scandal that hits the headlines and involves a big publicly financed project demonstrates that integrity and transparency make a lot of sense from a business perspective. Investors are increasingly asking for companies to demonstrate not only a vague commitment but an actual track record of compliance.

At least those investors that companies want to have – those that are striving for long-term success which adds to the companies’ bottom lines, to shareholder profit and to the public good. Ignoring corruption – let alone actively tolerating it or engaging in corruption – is simply no longer tolerated. It’s very bad business.

Every one of these scandals also demonstrates that transparent and responsible conduct in procurement is not a one-way street. It requires the business community and governments to come together and collectively address anti-competitive and corrupt behaviour. Companies have long understood this, and the continued work of B20 member companies and organisations in the field of integrity and transparency illustrates that.

That’s why the B20 calls on the G20, as it has done in many previous cycles, to commit to and support the implementation of a multistakeholder approach to promoting integrity in procurement. It’s a two-way street, and that’s why Collective Action is not only the right thing to do, it is unavoidable. Over the years, the B20 has continuously advocated for G20 member countries to establish tools of that nature, such as Integrity Pacts and/or High Level Reporting Mechanisms.

It has also advocated for governments to engage in existing initiatives that facilitate transparency and oversight for public projects, for example CoST – the Infrastructure Transparency Initiative or the Open Contracting Partnership.

This is not just about integrity and transparency. It is critical in order to bolster competitiveness and ensure that public funds are invested in a sound manner that yield the intended results. Another such tool that the B20 have long advocated for, and for which we hope to gain a lot more uptake by G20 Member States, is the High Level Reporting Mechanism.

The HLRM, as we call it, is an innovative procurement integrity tool that was co-developed by the OECD, Transparency International and the Basel Institute on Governance. It allows for early detection and eradication of anti-competitive and corrupt behaviour throughout the tendering and award phase of public projects. The HLRM is built on three main pillars:

• Setting up a secure and easily accessible communication channel through which the stakeholders can raise alerts about potential bribery situations. To ensure there is trust in the mechanism, it is designed through a collaborative process with contribution from the public sector, business and civil society.
• Providing a rapid and timely response through a designated independent panel of experts that quickly analyses the alert and gathers all necessary information. Through open discussion and mediation with all relevant actors, the issue is resolved with minimal loss of time and money. This allows the project to continue smoothly, with enhanced levels of trust between public and private stakeholders. 
• The mechanism needs to be supported by the highest level of government to ensure that the findings of the independent panel and resulting resolution can be followed up appropriately.

The methodology of the HLRM is kept simple and is designed to be tailored to the context of each country and project. This allows the HLRM to be flexible in finding practicable and collaborative solutions that are tailored to the county or project context.

We have seen some mention and general support for these types of anti-corruption initiatives at the G20 level. But we sincerely hope that the G20 will consider a much more explicit inclusion of such mechanisms in the G20 Anti-Corruption Action Plan. We also hope we will see the inclusion of concrete activities that include the private sector to strengthen integrity and transparency in procurement in the G20 Anti-Corruption Working Group country implementation plans.

Ensuring transparency and integrity throughout the procurement cycle requires commitment from both sides. We believe the B20 and G20 are uniquely positioned to facilitate a more impactful engagement by leveraging and translating the vast knowledge and experiences that both the business community and the G20 Member States bring to the table into action and impact on the ground.

We hope, and we trust, the call by B20 companies and organisations is heard by G20 Member States and that we can work closely together over the coming years to make these calls and commitments reality.

– Gretta Fenner, Basel Institute on Governance

Released today, the 10th annual edition of the Basel AML Index raises grave questions about whether jurisdictions are serious about tackling their money laundering and terrorist financing (ML/TF) risks, and what is holding them back. The Basel AML Index is an independent annual ranking that assesses ML/TF threats around the world and the capacity of jurisdictions’ anti-money laundering and counter financing of terrorism (AML/CFT) measures to address their specific risks. The average global money laundering risk score increased from 5.22 to 5.3 out of 10, as assessed across all 110 jurisdictions in the 2021 Public Edition of the Basel AML Index. Even among jurisdictions whose risk scores improved this year, none managed to improve by even one point out of 10. Half of improvements were 0.3 of a point or less. What is holding jurisdictions back from effectively tackling their ML/TF risks and avoiding being the weak spot in regional and international financial systems? This year’s Basel AML Index report looks at four areas of AML/CFT policy that urgently need more attention.

1 – A strong response to threats from virtual assets

The use of virtual assets such as cryptocurrencies is exploding – for legitimate as well as illicit purposes. This year’s Basel AML Index report analyses data from the Financial Action Task Force (FATF) on how jurisdictions are responding to ML/TF threats related to virtual assets. The answer: not well at all. Most jurisdictions assessed or re-assessed in the last year have worsened their scores for technical compliance with FATF Recommendation 15 on virtual assets and virtual asset service providers. Average compliance levels have dropped by 10 percentage points globally. Read the report to find out why.

2 – Effective prevention, not just enforcement

Previous editions of the Basel AML Index have lamented that many jurisdictions have AML/CFT systems that are mostly compliant with FATF technical recommendations but are ineffective in practice. This year’s report looks at the distinction between compliance with technical recommendations vs effective implementation. Does the problem prevail for both prevention and enforcement? The analysis reveals that:

• once again, jurisdictions score rather badly for effective implementation across the board;
• the discrepancy between technical compliance and effective implementation is even worse in relation to prevention.

These findings should ring an alarm bell for policy makers. Jurisdictions should invest more resources in the prevention of ML/TF, without reducing resources for enforcement.

3 - Beneficial ownership transparency

Beneficial ownership transparency is directly related to the effectiveness of a jurisdiction’s AML systems and the essential role of these systems in preventing, detecting, prosecuting and sanctioning financial crimes. The Basel AML Index report analyses the implementation of beneficial ownership registers around the world. It shows how slow and ineffective implementation of beneficial ownership transparency measures continues to provide safe havens for dirty money. This is damaging for individual jurisdictions, but more importantly undermines all global efforts to combat money laundering.

4 – Addressing ML/TF vulnerabilities beyond the financial sector

The final issue highlighted by the Basel AML Index data analysis is the generally weak application of AML/CFT preventive measures by lawyers, accountants, real estate agents and other designated non-financial businesses and professions non-financial entities (DNFBPs). This means that there is a significant risk that such businesses and professions remain open to abuse by criminals and corrupt individuals wishing to launder their money. Moreover, there is increasing concern among regulators that:

• some DNFBPs are advising and assisting criminal clients with hiding and laundering illicit funds;
• as some high-profile cases have shown, accountants are used as intermediaries to avoid scrutiny.

At a minimum, more supervision over DNFBPs is urgently needed. Certain jurisdictions should also tighten their regulatory framework – and ensure that it is effectively enforced – over selected groups of DNFBPs in line with their risk exposure.

Regional deep dives

For a second year, the report offers profiles of money laundering risks in different regions. Our regional infographics show how jurisdictions score in relation to each other – and in too many cases let their neighbours down.  Policymakers should analyse their respective jurisdictions’ risks and make plans for serious reform. No jurisdiction is doing well. We call on all jurisdictions to step up their game.

See the report and website

• For a full results, analysis and interactive comparison tables, plus the opportunity to demo or subscribe to the Expert Edition, see our new Basel AML Index website: index.baselgovernance.org
• Download the press release
• Download the 2021 report (PDF)

The Financial Action Task Force (FATF)’s regional body in Latin America, GAFILAT, has welcomed our International Centre for Asset Recovery (ICAR) to join its Asset Recovery Network (Red de Recuperación de Activos del GAFILAT, or RRAG) as an observer member. We are honoured to contribute our experience to the Network’s growing efforts and achievements in building the capacity of members to identify, investigate and recover the proceeds of crime. We will be joining representatives from the 17 GAFILAT member countries, in addition to Andorra, Spain, Italy, El Salvador, France and Europol. Founded in 2006, ICAR has been active in Latin America since 2014. We hold numerous inter-institutional cooperation agreements with key counterparts in our partner countries in the region. These include prosecutorial and judicial authorities, financial intelligence units, comptroller generals, and others. Working closely with these partners, we have assisted in the recovery of tens of millions of dollars deposited decades ago in Switzerland and Luxembourg. Among some of the most prominent corruption cases are those concerning the regime of former President Alberto Fujimori in Peru, as well as the infamous Odebrecht corruption scheme. Based at our Lima office or embedded in partner institutions, our Latin America-based team currently has a large portfolio of asset recovery cases, particularly in Peru and Ecuador. Some of these cases are creating important legal precedents and opening up channels for international cooperation, such as a recent application of Peru’s non-conviction based confiscation law in an historical terrorist financing case or the recovery of assets from the son of a deceased Navy General who had corruptly acquired them during his time in office. We hope the lessons we have learned over the years – and the ideas our collaborations have triggered – will be of value to RRAG and its membership as we work jointly to expand the capacity of Latin American countries to recover funds stolen from the public purse and stashed abroad.

Learn more

• Learn more about the Asset Recovery Network of the Financial Action Task Force of Latin America (RRAG) in this three-page brochure (in Spanish) and in the Network's 10th Anniversary summary document in English and Spanish
• View GAFILAT’s introductory video on RRAG in Spanish
• As a separate initiative, ICAR has also established a Knowledge Community in Latin America to promote the adoption and application of non-conviction based forfeiture (NCBF) mechanisms to recover stolen assets. The Knowledge Community brings together 53 leading asset recovery practitioners from the region and had its first knowledge dissemination session in July. Activities of the Knowledge Community are funded by the US Department of State Bureau of International Narcotics and Law Enforcement Affairs.
• The Basel AML Index, which assesses money laundering risks around the world, is developed and maintained by ICAR. Published on 13 September, the 10th annual edition analyses FATF data to reveal interesting trends in money laundering and terrorist financing, including issues around beneficial ownership and virtual assets. See the press release, our new Basel AML Index web platform and an infographic on money laundering risks in Latin America.

The use of virtual assets such as cryptocurrencies has expanded hugely around the world. Thousands of new users are added each day, and more individuals now use cryptocurrencies than trade on stock exchanges. Yet, as with all emerging technologies, there are risks that cryptocurrencies can be used for illegal activity such as money laundering and terrorist financing. As the Financial Action Task Force has stressed and as we explain in our updated quick guide to cryptocurrencies and money laundering, all financial sector actors and regulators need to better understand how cryptocurrencies work and how can they be abused by criminals. This is one reason why the African Development Bank (AfDB) recently requested our training team to deliver an intensive online training course on Cryptocurrencies and Anti-Money Laundering to key francophone staff and internal investigators.

About the workshop

The 30 participants included investigators, prosecutors and investigating judges from 16 francophone African countries, as well as a team from the Bank’s Office of Integrity and Anti-Corruption (PIAC). The four-day workshop combined foundation-building lectures with a simulated money laundering investigation involving cryptocurrencies. “It was wonderfully supervised, instructive, enriching and demystifying,”  said one participant. Another echoed a common sentiment in saying that: “Before this training I only knew Bitcoin by name, I had no notion of how it worked…[nor] the traceability of transactions. But thanks to your very educational method, even though I am not yet an expert, I admit that there is a lot that I now know about cryptocurrencies in general and Bitcoin in particular.” A particular debate arose around Mutual Legal Assistance and how it applies to the tracing and seizure of virtual assets held through a foreign crypto exchange. Focus was also placed on offshore structures that are often misused by criminals seeking to conceal or launder the proceeds of their illicit activities. Like the topic of virtual assets itself, the answers to these questions are only just emerging.

More and open course on cryptocurrencies and AML compliance

The above workshop was delivered by our International Centre for Asset Recovery (ICAR) training team in the context of the Basel Institute’s existing partnership agreement with the AfDB. In an effort to help stakeholders from all sectors and regions improve their understanding of cryptocurrencies, and their skills at tracing suspect transactions through the blockchain, the training team also offers a course open to registration by individuals, institutions or companies from the public and private sectors. The next available places are on 22-25 November 2021. Learn more about our Cryptocurrencies and AML Compliance Training.

The Presidency of the G20 rotates each year between member countries, as does the leadership of the B20 – the G20’s voice of business.

The key issue of tackling corruption is picked up almost every year, but not always in the same way or using the same format. This can make it challenging to find historical information including past anti-corruption commitments and related recommendations.

With this in mind, the B20 Collective Action Hub has just launched a new information resource on the B20 and anti-corruption that will evolve over the coming months and years.

The aim is to support the transition between B20 presidencies, and to ensure that the ongoing work on integrity and anti-corruption issues that spans multiple years is easily accessible to everyone.

About the B20 and anti-corruption resource

Located on our B20 Collective Action Hub, the information resource is designed to help all those involved in the B20 process, year after year, to:

• Easily understand how the B20 process works, through a set of Frequently Asked Questions
• Quickly view how the B20 has dealt with topics of anti-corruption, compliance, business integrity and Collective Action in the past, including relevant commitments
• Compare B20 recommendations on anti-corruption and Collective Action with G20 leaders’ statements
• Download previous B20 policy papers, G20 leaders’ communiqués and Action Plans of the G20 Anti-Corruption Working Group
• Read up on the B20, G20 and anti-corruption with a shortlist of recommended reading.

It covers all B20 Presidencies from South Korea in 2010 to Saudi Arabia in 2020.

Our support for the B20 on anti-corruption

In the current B20 process, led by Italy, the Basel Institute is once again a Network Partner participating in meetings of the Integrity and Compliance Taskforce.

Our Managing Director Gretta Fenner will speak at the first B20-G20 Dialogue on 13 September, which focuses on “How to promote sustainable governance, increase transparency, fight corruption to enhance fair competition”. As part of a panel on Responsible Conduct through the Procurement Cycle, she will explain the value of Collective Action approaches to procurement integrity, such as High Level Reporting Mechanisms and Integrity Pacts.

Achieving continuity

The Siemens Integrity Initiative has supported the Basel Institute’s work with the B20 over many years and is generously providing funding for this new resource. The support dates back as far as 2013, when the B20 Russia mandated the Basel Institute to develop the B20 Collective Action Hub in order to provide guidance, inspiration and information on anti-corruption Collective Action.

As it develops, we hope the new online B20 and anti-corruption resource will support the continuity and effectiveness of each new B20 cycle, giving stakeholders the information they need to understand past cycles and extract lessons learned.

Feedback is very welcome, including through our dedicated Collective Action channels on Twitter (@FightBribery) and LinkedIn (Collective Action at the Basel Institute).

View the new resource on the B20 and anti-corruption

See summary report released in December 2021: Boosting Co-operation in Asset Recovery: Exploring the Potential of Private Sector Engagement and Public-Private Collaboration How can law enforcement agencies, financial intelligence units and private financial institutions such as banks work better together to identify, freeze and confiscate criminal assets? What opportunities and challenges are there for public-private collaboration for asset recovery, and what can we learn from emerging models such as financial information-sharing partnerships? These questions were central to the 11th Lausanne Seminar held on 2–3 September 2021, a forum for sharing knowledge, best practices and hands-on experience involving the recovery of illicit assets. The Lausanne Seminars are an initiative of the Swiss Federal Department of Foreign Affairs - Directorate of International Law, organised jointly with the Basel Institute’s International Centre for Asset Recovery (ICAR) and the Stolen Asset Recovery Initiative (StAR) of the World Bank and UNODC. This year’s event also benefited from the support of RUSI’s Future of Financial Intelligence Sharing research programme. Held virtually, the invitation-only event gathered 150+ international asset recovery practitioners (prosecutors, investigators, judges) and policy makers, plus prominent individuals from the private sector who are leading efforts to improve public-private collaboration for financial information sharing.

Public-private partnerships against financial crime

In recent years, cooperation between public authorities and private financial institutions has grown in many advanced jurisdictions. Mechanisms such as the UK’s Joint Money Laundering Intelligence Taskforce (JMLIT) and the US’s FinCEN Exchange have proven highly beneficial in the fight against financial crime and other types of serious organised crime.

• At the tactical level, benefits include the efficient sharing of information to enhance ongoing investigations, plus increases in the quality and quantity of suspicious transaction reports.
• At a strategic level, members of the partnership can combine their complementary expertise, information and capacity to develop more accurate typologies or red flags for financial crime, as well as improved financial indicators for regulatory reporting.

Research by the Royal United Services Institute (RUSI) has identified 20 such national-level partnerships so far, accounting for 41 percent of the world’s GDP and 20 of the top 30 global financial centres. These exist alongside transnational information-sharing partnerships such as the Global Coalition to Fight Financial Crime and the United for Wildlife Financial Taskforce, which facilitates financial information-sharing in cases of illegal wildlife trade. This is a very positive development, but a range of challenges exist. This include the often voluntary nature of the mechanisms, restricted membership and in some cases a lack of sufficient resources, as well as complex questions related to data privacy for example. This is in addition to the fact that still a lot more jurisdictions would need to endorse and implement such mechanisms for the effect of this concept on fighting financial crime and recovering stolen assets to reach its full potential. The Basel Institute’s ICAR is among those promoting the introduction and widest possible use of such public-private partnerships to support the detection, freezing, tracing and confiscation of stolen assets. As the Managing Director of the Basel Institute, Gretta Fenner, said during her opening remarks: “This topic is still very new for many in the asset recovery community. But we hope that the dialogue started in Lausanne can contribute for public-private information sharing becoming a standing agenda item in global asset recovery discussion.” In that sense, it is hoped that the compilation of insights that will be published following the seminar will help to drive public-private cooperation into mainstream asset recovery policy and practice.

More

• See the Swiss Government press release:
  • English: How the Lausanne Seminar helps boosting public-private collaboration in asset recovery.
  • German: Wie das Lausanne-Seminar dazu beiträgt, die Zusammenarbeit zwischen dem öffentlichen und dem privaten Sektor im Bereich Asset Recovery zu stärken.
• See summary report: Boosting Co-operation in Asset Recovery: Exploring the Potential of Private Sector Engagement and Public-Private Collaboration
• The 2014 Lausanne Seminar resulted in the publication of Guidelines for the Efficient Recovery of Stolen Assets, a set of international good practices intended to enhance the effectiveness and efficiency of requesting and requested states in the asset recovery process. An accompanying step-by-step guide to the asset recovery process was finalised in 2017 and is available under the same link in English, Spanish and French.

Published today, our Annual Report celebrates the achievements of our teams and partners around the world that we are most proud of in 2020. It also reveals some of the hurdles we were challenged to overcome together. There are many of both, and a lot more stories and highlights in between.  This year's report offers deep dives into some of our key focus areas.

• Our International Centre for Asset Recovery explains why we are supporting the use of non-conviction based forfeiture mechanisms to recover stolen assets, why our training team has launched a new open course on cryptocurrencies and AML compliance, and how Mozambique established a new Asset Recovery Office with our support.
• Meanwhile, our Public Governance team reveals why networks, not just individuals, are crucial to understanding and countering corruption.
• The report sets out the new strategy we have launched to address Green Corruption – the corruption and other financial crimes that drive environmental degradation. The popularity of our Corrupting the Environment webinar series, which we are offering together with the OECD, has demonstrated the breadth and depth of interest in this field. 
• In the contributions from our Compliance and Collective Action teams on their work with the private sector, we explore how state-owned enterprises can address their corruption and antitrust risks. We also illustrate efforts to create guidance on reporting on the effectiveness of anti-corruption compliance programmes, with the example of a Collective Action initiative between healthcare companies.
• In Peru, our 30+ Public Finance Management specialists are breaking new ground with their innovative training approach, using social media and peer-to-peer learning.
• We also look at what the Basel AML Index revealed about money laundering trends in 2020, the role of virtual training beyond the pandemic thanks to our new Basel LEARN virtual learning platform, and how lockdown opened up fresh opportunities to maximise the potential of open-source intelligence, including through our Basel Open Intelligence search tool.

Throughout the Annual Report, it is clear that our achievements depend greatly on the efforts of our partners and donors. And so this is also a chance for us to thank them warmly and to demonstrate some of the impact we are having together on the fight against corruption around the world. Please flick through and stop to read, to think and to send us your ideas and insights – by email, over social media or in any other way.

Foreword

"We must revive the global social contract to fight the pandemic of corruption" begins the foreword by Gretta Fenner, Managing Director, and Mark Pieth, President of the Board. They continue: While medical research has been quick to develop protection against Covid-19, another pandemic continues to rampage humankind and our attempts at stopping it continue to fall short. We are talking about the widespread disease of corruption, which has become deeply rooted in our societies, and which plagues our communities, their social cohesion and economic wellbeing. It leaps effortlessly between public officials and businesses regardless of political colour, nationality or sector, helped by professional middlemen and rule-free blind spots where dirty money can go on holiday. This has never been more apparent than when the two pandemics met. Initial research seems to indicate that corruption levels rose to even higher levels during the pandemic. It might also be that seeing its deadly consequences from closer quarters made it more visible. What is certain is that more people are seeing through the corruption fog. Political protests and toppled governments around the world show that more people are upset about it, and that is a good development. Those of us who work in the light can only fight a threat that is seen. The ophthalmologists in this case are the many individuals, the journalists, civil society activists, researchers and law enforcement officials who, courageously and often at great risk, are standing up to corruption and dragging it into the daylight. This is a tremendous help for our work, and we hope that our effort helps them. But many of these anti-corruption heroes still fight a lonely battle. What’s more, they are faced with the overwhelming resources and power of the grand transnational corrupt networks that, collectively, stifle sustainable development and undermine the economic and social wellbeing of our societies. To amplify the work of the many courageous people and organisations, nation states, global enterprises and governance bodies should be coming together. But instead, what we see and what is of major concern is an increasing breakdown of global solidarity and a return of increasingly divisive and at best nationalistic domestic and global politics. So we urge politicians and business leaders to revitalise the global social contract – which is competently guided by the Sustainable Development Goals – by showing true and courageous leadership that disregards geographical, social, economic or other borders. But before we are misinterpreted: We are not waiting for another global leaders’ declaration; there are plenty of those. We are waiting for these key stakeholders to really do what they preach. And in doing so, to ask more of themselves and of each other than ever before. This means not just meeting but going beyond the requirements of international treaties and standards. Those who risk their lives to fight corruption, and those who lose their lives because of corruption, every day, in every corner of the world, deserve at least that. So, as we rightly celebrate the healthcare workers and other providers of essential services that are helping their fellow citizens get through the Covid-19 pandemic, let us also celebrate – and actively support – those individuals who resist, stand up and fight against corruption. We have done our best to do just that throughout last year, and we will continue on this mission, hopefully with more backing from true leadership, for the good of everyone in this world. Download our Annual Report 2020

This case study examines a 2021 unexplained wealth (illicit enrichment) case in Kenya involving a former Chief Accountant at the Treasury, Patrick Ochieno Abachi. The case is related to Kenya’s so-called Anglo Leasing scandal, in which 18 high-value government security contracts were allegedly awarded to fictitious companies in the early 2000s. It illustrates one set of circumstances in which civil unexplained wealth (or civil illicit enrichment) legislation can be an extremely useful tool to target assets stolen through corruption. The series of judgments has provided some valuable insights into Kenya’s law targeting unexplained assets, specifically:

• its key features and how they are applied;
• the evidentiary importance of asset declaration forms;
• how to prove assets are “unexplained” through financial analysis of a suspect’s income and assets; and
• common legal challenges to illicit enrichment.

Phillip Kagucia, Assistant Director at Kenya’s Ethics and Anti-Corruption Commission (EACC), which is leading the case, spoke to Andrew Dornbierer, Asset Recovery Specialist and author of the recent open-access book Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth. Chapter 5 of book contains a contribution by Kagucia on Kenya’s law and its application. The Basel Institute’s International Centre for Asset Recovery (ICAR) has been supporting the EACC with case mentoring and capacity building since 2013.

About the case: the accumulation of unexplained assets through corrupt procurement contracts

Patrick Ochieno Abachi was a Chief Accountant at the Kenyan Treasury at the time of the Anglo Leasing scandal, which involved a suite of government procurement contracts allegedly being awarded at inflated values to phantom companies. Abachi is not among the 20 former politicians and businesspeople charged with criminal offences in relation to the scandal. Yet in March 2021, the High Court of Kenya found that Abachi had used his position as Chief Accountant to acquire unexplained assets around the time the Anglo Leasing contracts were awarded, in accordance with Art. 55 of Kenya’s Anti-Corruption and Economic Crimes Act 2003 (ACECA). Abachi’s sudden increase in wealth during this time could not be justified by reference to his lawful income as a public servant, which was below USD 1,000 a month. The court ordered the confiscation of several bank accounts, KES 1.9 million (USD 17,000) in cash, five luxury vehicles, five properties and nine plots of land from Abachi. Some of these were registered in the names of Abachi’s wife, children and companies associated with him.  Although Abachi applied for a stay pending appeal, claiming he would suffer losses if the State were to forfeit the assets, the High Court quashed the application in July 2021 because there was no demonstrable loss in respect of assets the same court had declared to be unexplained. Further appeal opportunities exist, but there is a definite chance that the case will finally be determined in favour of the EACC. The properties and vehicles would then be liquidated and the money ultimately forfeited to the public treasury.

Legal strategy: Why target unexplained assets through civil action?

Kenya’s ACECA provision targeting "unexplained assets" is a form of qualified civil illicit enrichment law, meaning that proceedings under this provision take place in civil courts rather than criminal courts. This is useful in cases where a criminal conviction for corruption or abuse of office is not possible, but where there is still strong evidence that the public official has inexplicably accumulated an amount of wealth that cannot be justified by reference to their legal income. After examining the facts in Abachi’s case, the EACC deemed it would be difficult to obtain the direct evidence of specific corrupt behaviour that is necessary to bring a criminal case. On the other hand, there was clear evidence that Abachi had amassed a large amount of unexplained wealth during the period in which the corruption scheme took place, and Kenya’s ACECA provisions still provided the EACC with an avenue to target these assets. The characteristics of the case also meant that there was a strong chance of success in an unexplained assets claim. Specifically, there was:  

• A clear time period for the investigation (2002 to 2007 – the time during which the fictitious Anglo Leasing contracts were approved and payments were made);
• A reasonable suspicion of corruption or economic crime (due to Abachi’s role as Chief Accountant at the Treasury responsible for making or overseeing payments, including the alleged illicit payments to the phantom companies);
• Assets whose value were provably disproportionate to the official’s known sources of income during that period (which they significantly were, given his modest salary and the amounts declared on his asset declaration form); and
• No clear satisfactory explanation for the disproportionate assets (as Abachi was not able to provide this during the investigation)

How the EACC established that Abachi’s assets were "unexplained"

The investigators performed detailed financial analysis to demonstrate that Abachi’s assets were vastly disproportionate to his legal sources of income during the period from 2002 to 2007. During the period, the EACC was able to establish that Abachi was making regular significant deposits to bank accounts and had acquired properties worth around KES 80 million (USD 736,000), despite his modest salary and lack of pre-existing wealth. A key piece of evidence was the biennial Declaration of Income, Assets and Liabilities that Kenyan officials must submit when they enter public service. This document is generally quite important in such actions. It can be used to establish the suspect’s declared wealth at the start of the period under investigation, and provides a good foundation for analysis. Additionally, for obvious reasons, corrupt officials will often deliberately avoid declaring stolen money on this form – and proof that certain assets were undeclared can also add weight to arguments that they were not acquired legitimately.

Challenges, delays and appeals

While the action to date has been successful (pending appeal), the process has been a long one – or as Judge Mumbi Ngugi noted in her March 2021 decision itself: “This matter has had a rather long sojourn in our courts." The unexplained assets law in Kenya is still in its early days of development, however, so these delays were somewhat expected. One reason for an initial delay was a lack of clarity regarding the court process itself. Due to the presence of land among the assets, the case was first referred to the court’s specialist land division, where it struggled to proceed. Following the establishment of a specialised Anti-Corruption and Economic Crimes division of the High Court, the case was transferred accordingly and made progress. A second reason for the length of proceedings to date has been the significant number of legal challenges made to the law – or in the words of the Judge Ngugi, since the original summons was issued, “a series of suits, petitions and applications have derailed the hearing”. This, too, was not wholly unexpected – as mentioned above, the law is still somewhat in its infancy in Kenya and a number of legal questions regarding it still need to be considered.

Beneficial ownership: what about assets under another’s name?

A particular challenge for the EACC in the Abachi case related to beneficial ownership, since many of the assets were registered in the names of his wife, children or companies that he controlled. These parties were listed as defendants in the court judgement, which is possible in Kenya because the illicit enrichment law applies to any legal or natural person. (In other jurisdictions, it sometimes applies narrowly to public officials.) Evidence from the EACC’s financial investigation showed clearly the flows of money, proving that the assets were bought with money that came into Abachi’s possession and that he was in fact their beneficial owner. The fact that these parties did not make any significant effort to defend their ownership of the relevant properties also somewhat convinced the judge that it was Abachi himself who was the true owner. Beneficial ownership is fairly new territory in Kenya, setting a precedent that persons accused of illicit enrichment will no longer be able to hide their assets behind companies, relatives or friends. Assets that have been illicitly obtained remain illicit, no matter how many transactions or transfers of ownership they undergo.

The road ahead for illicit enrichment legislation in Kenya

Although the law was introduced in 2003 in Kenya, it was first applied only in 2008 in a successful case against Stanley Mombo Amuti, former head of Kenya’s Port’s Authority (with this case only finalised in 2020). Since then, the EACC has seen a 100 percent success rate in the five subsequent cases, with an estimated USD 6.4 million in funds recovered in total. Many more cases are under investigation currently or going through the courts. It is hoped that cases will be resolved more speedily as prosecutors and judges at the Anti-Corruption and Economic Crimes division of the High Court become more familiar with the law, and as investigators gain skills in obtaining evidence of illicit enrichment through financial investigation and techniques such as Source and Application analysis. The slow start-up phase of Kenya’s law is common among jurisdictions that have illicit enrichment legislation of one form or another, since it is a relatively novel area of law. Yet as Kenya’s EACC (and corrupt politicians and officials) are discovering, it is a powerful tool in the country’s fight against corruption. Plus, alongside its strong civil forfeiture mechanism, it can also play a key role in the recovery of criminal proceeds.

Learn more

To learn more about illicit enrichment and how different jurisdictions are introducing laws targeting unexplained wealth, see:

• Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth by Andrew Dornbierer. The book is freely available online to view or download at illicitenrichment.baselgovernance.org, along with a database of laws.
• For a brief introduction, see our quick guide to illicit enrichment, also available in French, Spanish and Portuguese.

Source and Application of Funds analysis is a method for investigators and prosecutors to calculate and obtain evidence of unexplained assets in cases such as the one described in this study. See:

• Quick guide to analysing a suspect’s financial affairs in a corruption case by the ICAR training team
• Technical guidance for investigators and prosecutors: Proving illicit enrichment using financial investigation and Source and Application of Funds analysis (Annex II of Illicit Enrichment)
• A free eLearning course on Source and Application analysis on the Basel LEARN virtual learning platform.

The Covid-19 pandemic has brought issues of ethics and business integrity in the healthcare sector into the public spotlight. Citizens everywhere are demanding well-governed, transparent healthcare systems and industries – not only to address the health consequences of the pandemic but as a backbone of resilient and sustainable economic growth.

Health outcomes are better when government, industry, and civil society work together well. The fast development and roll-out of Covid-19 vaccines, as well as the provision of personal protective equipment (PPE) and emergency care, are in large part thanks to collaboration. This collaboration has been broad and intense, taking place between life sciences, medical technology and healthcare provider companies both among themselves and with regulatory authorities and governments towards a clear common goal.

So is now the right moment to strengthen Collective Action for integrity in health?

This is a question that Gemma Aiolfi, the Basel Institute’s Head of Compliance and Collective Action, will explore at the upcoming Americas Health Ethics Virtual Forum.

About the Forum

The Americas Health Ethics Virtual Forum on 17–18 August will bring together hundreds of government, industry and civil society stakeholders from across the Americas.

Over two days of major announcements, presentations and panels, the Forum will showcase advances in ethics and business integrity, transparency and good governance in health since the 8th Summit of the Americas hosted by Peru in 2018.

It aims to catalyse progress in preparation for the upcoming 9th Summit of the Americas to be hosted by the United States. Broadcast live in English, Spanish and Portuguese, the Forum will feature speeches by government ministers, industry leaders and experts. It is free and open to public registration via the event website.

The Basel Institute on Governance is pleased to support the event as Forum Partner alongside the Inter-American Development Bank, International Federation of Pharmaceutical Manufacturers and Associations (IFPMA), and more than a dozen other leading organisations concerned with fostering integrity in health.

Spotlight on Consensus Frameworks for Ethical Collaboration

Speaking at 8:45 EDT (14:45 CET) on Wednesday 18 August, Gemma Aiolfi will share insights on the role of Collective Action in bringing together all stakeholders of the healthcare “ecosystem” to foster common goals of integrity and transparency.

A special focus of her presentation is Consensus Frameworks for Ethical Collaboration. First launched in 2014, these are mechanisms for national health stakeholders to discuss and align on ethical practices and to build mutual capacity.

Tailored to the specific needs and contexts of the implementing country, Consensus Frameworks may be championed by government agencies, the private sector, health professionals and/or patient and consumer organisations.  The Brazilian Consensus Framework for Ethical Collaboration will be launched at the Forum the previous day, in a session led by Brazil's Minister of Health. It is the ninth country in the world to formalise a Consensus Framework. Australia, Canada, Chile, China, Japan, Peru, the Philippines and Vietnam all have formal Frameworks at various stages of maturity.

One lesson from countries’ experiences so far is the importance of clear governance structures, a prerequisite for all successful Collective Action initiatives.

Speaking alongside Gemma Aiolfi, Héctor Valle Mesto, Executive President of the Mexican Foundation for Health (Funsalud) will share observations on the importance of Collective Action initiatives and the opportunity to launch a Mexican Consensus Framework for Ethical Collaboration.

More

• Find out more about the Forum in English, Spanish and Portuguese and register for free: Americas Health Ethics Virtual Forum. 
• See a quick overview of Collective Action initiatives in the healthcare sector in: Pandemic highlights the potential of Collective Action for integrity in healthcare, a guest blog by Andrew Blasi and Katherine Nunner of Crowell & Moring International.
• Learn about a Collective Action initiative in 2020 led by Norges Bank Investment Management to co-develop a set of indicators for healthcare companies to consider using to report on the effectiveness of their anti-corruption efforts to external stakeholders.
• Find out more about anti-corruption Collective Action on the B20 Collective Action Hub, a resource and guidance centre hosted by the Basel Institute since 2013.

Much has been said about palm oil and its impact on the environment. Major international debates are taking place about the issue, and numerous studies have highlighted the governance weaknesses associated with large-scale plantations. To gain a better insight into what the Indonesian public thinks about this issue and others relevant to corruption, governance and natural resources, the Basel Institute on Governance and Lembaga Survei Indonesia (LSI), the leading Indonesian pollster, jointly conducted polls and interviews during July 2021. A virtual event on 18 August will present the study’s findings. The questions were designed to study the Indonesian public’s sentiments on various questions of corruption, the environment and management of the country’s rich natural resources. For example:

• How pervasive is corruption in palm oil plantations?
• Who do fisherfolk want managing the fish stock?
• Are foreign companies considered more or less corrupt than Indonesian firms engaged in natural resource extraction?
• How compliant are mining firms with environmental regulations and how dependent are they on close relations with government officials?

Some answers confirm common perceptions of how corruption might undermine natural resource management and contribute to environmental degradation. Others are more surprising, and may cause both policymakers and practitioners in conservation and anti-corruption – including in Indonesia – to re-examine their approaches. Please join our open webinar discussion on 18 August at 16:00 CET (10:00 EST) to be the first to find out. As well as the chance to ask questions of our Green Corruption team and pollsters, the event offers perspectives of Indonesian experts in government and anti-corruption. The event is part of our Corrupting the Environment webinar series co-hosted by our Greeen Corruption team and the OECD.

A newly published Compendium of Jurisprudence on Extinción de Dominio will enable Peruvian judges, prosecutors and other law enforcement actors to assess progress and legal precedents in the implementation of Peru’s 2019 law on non-conviction based confiscation (Extinción de dominio). The 1,100-page document compiles all judgments relating to the Extinción de dominio law issued by the judicial authorities in 2019 and 2020. The compendium is a collaboration between Peru’s Procuraduría General del Estado (Special State Attorney General) and the Basel Institute on Governance, with the support of our Swiss-funded Subnational PFM Strengthening Programme and our International Centre for Asset Recovery (ICAR) team in Lima. The jurisprudence reveals that Peru has already recovered around PEN 163 million (approximately USD 41 million) using this legal mechanism. This makes Peru a leader in Latin America in the use of such non-conviction based confiscation mechanisms. It is also the first country to have enforced these type of laws in international financial centres. Much of this experience will be invaluable to lawmakers and practitioners in other countries that are considering introducing similar laws.

Opening up asset recovery possibilities for Peru

Extinción de dominio is a law that allows Peru to recover money and other misappropriated assets without the need for a criminal conviction. As such, it is particularly valuable in recovering the proceeds of grand corruption schemes, where the perpetrators may have died, fled the jurisdiction or otherwise be immune from prosecution. Among the legal precedents set so far, a notable point is the high potential of this law in the context of international asset recovery. In December 2020, for example, Switzerland, Luxembourg and Peru signed a tripartite agreement to return approximately USD 26 million in assets that had been confiscated by Peru under the Extinción de dominio law.

High-level launch event

The compendium was launched at a high-level virtual event on 15 July 2021. The event was attended by the Minister of Justice and Human Rights Eduardo Vega Luna, the Swiss Ambassador in Peru Markus Alexander Antonietti, the Special State Prosecutor General Daniel Soria Luján, and representatives of the Basel Institute and Ministry of Justice and Human Rights. Speaking at the event, the Basel Institute’s Head of Latin America, Oscar Solórzano, said: “Non-conviction based confiscation mechanisms are increasingly being recognised as an important complement to traditional criminal confiscation, fines, civil reparations, disgorgements and other tools against economic crime. In this context, Extinción de dominio is a criminal policy tool that must be integrated into the national legal framework. It needs to occupy the place that the Peruvian legislator has assigned to it, respecting clear principles of proportionality and due process.” Sergio Jimenez, leader of the asset recovery component of the PFM Programme, spoke about the application of the tool in the context of recent cases. Minister Vega Luna praised the compendium, calling it: “A great support in the fight against the criminality that is proving so damaging to Peru and to the world.”

More

• View and download the Compendio de Jurisprudencia de Extinción de Dominio.
• See the Twitter announcement issued by the Ministry of Justice and Human Rights (in Spanish).
• Download the speech of Oscar Solórzano (in Spanish): La política criminal moderna y el rol de la recuperación de activos.
• See how Peru recovered USD 8.5 million in proceeds from a corrupt arms deal from a Swiss bank account held by businessman Moshe Rothschild Chassin.
• Read a detailed case study of how extinción de dominio has enabled the confiscation of USD 1 million in assets intended for terrorist financing – The Nun: Confiscating assets of the Shining Path terrorist organisation (also available in Spanish).

A new sector-wide integrity programme seeks to transform and harmonise standards of ethics and compliance across all Moscow City Transport organisations.

Alexandr Rusetskiy, a Deputy General Director in the Moscow Directorate of Transport Services, together with Ilsur Akhmetshin of the Compliance-Elements partnership, explain the motivation, approach and challenges in this effort to bring state-of-the-art anti-corruption practices to the sector and beyond.

Briefly, what is the Sectoral Ethics & Compliance Program for Moscow City Transport Organisations?

It is a new compliance programme designed to help Moscow City Transport organisations and their business partners improve and harmonise anti-corruption compliance and business ethics.

It contains 11 focus areas in line with Russian and international guidance and laws on anti-corruption compliance. These include crucial topics such as leadership, risk assessments, codes of conduct, third-party due diligence and communications.

See the programme and its English translation, which also lists all the international and national texts on which the programme is based.

Who is it for?

The programme is designed to be applicable to all private and state-owned companies in the Moscow Transport industry, which employs around 35,000 people.

The companies range from very large organisations like the Moscow Metro to smaller companies like the Moscow Directorate of Transport Services, which is the first organisation to be piloting the programme before it is rolled out across the sector.

However, the principles are universal and the programme could be adapted for use in any industry sector in Russia, as well as in countries with similar legal frameworks and business cultures.

What is special about the programme?

It is the first time that a sector-wide integrity programme has been developed in Russia. Generally, companies are left to develop their own anti-corruption compliance programmes separately, if they develop one at all.

When companies work on ethical issues separately, it takes many more resources – financial and human. Company leaders and compliance officers can’t learn from one another. It is also more difficult to measure the effectiveness of anti-corruption measures.

This means that many companies have a compliance programme on paper, but it is not up to international standards and is poorly implemented in practice. This is a problem not only in Russia but also in many other countries.

By adopting the universal rules and principles contained in this sectoral programme, companies will find it more straightforward to develop strong anti-corruption compliance measures and make sure they are implemented in practice. Regulators will also be better able to evaluate implementation. Greater harmony and transparency will benefit the reputation of the sector and minimise risks of corruption scandals.

The programme is also unique in responding specifically to the situation of state-owned enterprises, which make up a large proportion of Moscow Transport companies.

How do you start on such an ambitious programme to enhance ethical standards in this challenging context?

We started with a pilot project in the Moscow Directorate of Transport Services. We are part way through an action plan to implement the various aspects, including a reporting hotline and a training curriculum for new and existing compliance officers and the company leadership.

After Alexander reported on the initial achievements to Moscow Government colleagues, it was decided to roll the programme out to other companies in the sector. It is important to demonstrate solid results and to get buy-in. Many company leaders who were initially surprised at these new “rules” are now keen to implement the programme themselves.

It also takes a lot of hard work and talking to people to explain what the ethics and compliance programme is about and what benefits it brings.

Talking to whom?

With the companies themselves, with government partners and with members of civil society and academia. Both of us are deeply involved in Russian compliance networks and business associations, which offer a rich forum for sharing experiences and widening perspectives. Among these forums, we would like to mention the Russian Business Ethics Network, which is part of the European Business Ethics Network, and the Moscow Chamber of Commerce and Industry, in which we lead the Compliance and Ethics Committee and a Working Group.

It is also important to exchange with academics and students engaged in compliance, as these are influential in shaping the future of ethical business in our country. So we have been holding events at Russia’s leading business and finance academies.

In this way, we both benefit from and contribute to collective discussions around anti-corruption compliance in Russia. Personal relationships and networks are crucial to communicating and demonstrating the benefits of a sectoral programme on ethics and compliance.

We hope that in time, as the programme rolls out, compliance officers and company leaders will be able to exchange knowledge and experience on ethical issues in the framework of a more formal Collective Action initiative. That way, as the programme extends across the sector and beyond, everyone will be helping to raise standards of business integrity and spread a culture of ethics and compliance in their domains.

For more information, download the Compliance Programme or contact Ilsur or Alexandr using the details below.

About

Ilsur Akhmetshin is a president of the Russian Business Ethics Network which is a member of European Business Ethics Network and a managing partner of the Moscow based Compliance Elements consulting. Since the mid 1990s, Ilsur has worked as a senior expert and head of the legal, ethics and compliance in Russian projects and branches of the EBRD, Intesa, ABB, Schneider Electric and others. In 2014, he initiated and headed a Compliance Committee in the Association of European Business in Russia.Working in 2016-2020 as a Compliance and Ethics vice-president for VimpelCom, a VEON Group company and one of the national telecom leaders, he implemented a compliance programme prescribed by the Deferred Prosecution Agreement with US authorities. Now, Ilsur provides consulting services related to the corporate compliance and ethics for state-owned and private companies. ia@compliance-elements.ru

Alexandr Rusetskiy is a deputy general director of the Moscow Directorate of Transport Services and a member of Russian Business Ethics Network and Association of Lawyers of Russia. Since 2007, Alexandr has worked in the General Prosecutor’s office of Russian Federation, since 2015 was a head of the anticorruption department and a member of Russian permanent governmental delegation in UN Convention Against Corruption conferences and working groups. Now, Alexandr implements international standards of anticorruption compliance in Moscow transport organisations. rusetsky@bk.ru.

Behaviour change interventions aimed at reducing the social acceptability of wildlife trafficking are an important part of efforts to prevent wildlife crime. But how can practitioners craft messages that will be effective in changing attitudes and behaviours? Our latest policy brief aims to support policymakers and practitioners seeking to improve conservation outcomes through behaviour change interventions. Based on field work and community engagement in Uganda, it summarises lessons learned about how to develop and frame effective messages in the context of counter-wildlife trafficking interventions. The research was funded by PMI Impact as part of a wider project on stopping corruption from fuelling illegal wildlife trade between East Africa and Southeast Asia.

Audience, content, framing

The findings reveal that a key first step is to narrowly identify the right target audience. While a general public awareness campaign may have its merits, it may be more effective to focus on those identified as most vulnerable to participating in wildlife trafficking, namely young men, those that live around wildlife trafficking hotspots and those involved in trade. Second, it appears most promising to formulate messages that challenge narrow utilitarian perceptions of wildlife by highlighting the hidden costs of trafficking and its negative impact on the economy and the environment. Messages that focus on legal risks should showcase successes in detection and sanctions, especially in a context in which impunity is perceived to be high. Other messages that seek to challenge the overvalued benefits of engaging in wildlife trafficking in relation to wealth and social status should be carefully nuanced to avoid rejection. Third, how we frame such messages is equally important. The research suggests that appealing to social identity and highlighting personal consequences are the most promising frames to adopt. Overall, practitioners are advised to develop and test messages and approaches that are personal and precise.

Learn more

• Read Policy Brief 7: Reducing the social acceptability of wildlife trafficking through behaviour change interventions.
• Find out more about the work of our Public Governance team on corruption, social norms and behaviours.
• Learn about our Green Corruption programme, which applies anti-corruption approaches to address the causes of environmental degradation.

The sixth event in the Corrupting the Environment webinar series discussed waste trafficking, a topic that receives little attention despite generating significant criminal proceeds (estimates suggest up to USD 12 billion per year). In addition to the financial costs, waste trafficking has enormous impacts for the environment, including from pollution or degradation, and inhibits development by fuelling corruption and poverty in some countries.   Co-hosted on July 1 by the OECD and the Basel Institute’s Green Corruption team, the event featured speakers from the Financial Action Task Force (FATF) and the Indonesian Ministry of Environment and Forestry, plus two international experts on environmental enforcement and corruption. A particular focus was the FATF report on Money Laundering in Environmental Crime issued a few days prior to the event, which covers waste trafficking alongside illegal mining and logging.  Watch the full recording on YouTube or read the summary below.

Skewed incentives drive waste trafficking

Waste typically has a negative value – it costs businesses money to treat it in a way  that is safe and does not harm the environment. Costs include treatment, technology and labour costs in line with national laws and environmental regulations. There is therefore an incentive for companies wishing to avoid these costs to export the waste to other countries with less strict environmental standards, or to illegally dump and dispose of such waste. Many such companies are in developed countries and include licensed waste management firms. Common destinations depending on the type of waste are Southeast Asia, Eastern Europe and West Africa. This trade becomes illegal when it violates the Basel Convention on controlling transboundary movements of hazardous wastes and their disposal, or the rules and regulations of both exporting and importing counties. Examples are when importing countries receive waste they have not consented to, or when the waste shipment  is contaminated with hazardous materials. All exports of hazardous waste from OECD countries to other parts of the world are prohibited under the Basel Convention’s Ban Amendment.

Extracting value from waste

As well as cutting costs, companies also generate criminal proceeds by illegally selling or trading waste as second-hand goods, or burning it to generate energy. According to the FATF report, the profit generated from illicit waste amounts to USD 10–12 billion annually, which puts profits  on a par with other major crime areas such as human trafficking. Due in part to the significant profits, organised crime groups in some countries have entered and sought to take advantage of this criminal market.

A high-profit, low-risk crime

Waste trafficking is still a high-profit and low-risk crime. Detection, investigations and prosecutions are rare, and penalties are low. Unscrupulous companies wishing to take advantage of what is in effect a “self-certification” process may bribe public officials that issue waste management permits, or co-opt the relevant inspectors, customs agents and port officials into the trafficking scheme. Law enforcement officers may also lack the specialist knowledge and technical capacity to differentiate legal from illegal waste shipments.  From a wider enforcement point of view, it was stressed that it is both urgent and critical for environmental law enforcement officers to gain greater knowledge of money laundering and increase their technical capacity in asset tracing. In the case of Indonesia, the Indonesian Constitutional Court on 29 June 2021 decided to give authority to specialist environmental enforcement officers to enforce money laundering offences related to environmental crimes.

As simple as just changing a number

A common technique mentioned by the panellists is falsifying documents to, for example, mis-classify waste as recycling or second-hand goods, or classify hazardous waste as non-hazardous. It can be as simple as changing the waste code from the European Waste Catalogue (commonly known as CER code), falsifying the destination, or under-/over-invoicing the shipment. The fact that criminals – individuals or organised crime networks – often operate legitimate waste management companies makes it easy to hide the criminal origins of their funds. Those who engage in both legal and illegal waste trade can easily mix the payment across the two business lines. These same companies also misuse the trade sector to conceal movement of value and proceeds across borders. This includes by under- and over-invoicing for shipments, among other techniques. The panellists offered some hope, though. Compared to other environmental crimes such as illegal logging, where criminals make use of complex corporate structures and offshore financial centres to launder their proceeds, those engaged in waste trafficking appear to use less sophisticated techniques. So in theory, there is a lot of scope to detect, investigate and prosecute waste criminals to clean up the industry.

Follow the money to find those who aren’t getting their hands dirty?

A follow-the-money approach to waste crime – i.e. systematically applying financial investigation techniques to trace illicit financial flows to reveal the kingpins behind criminal operation– has huge potential to support current enforcement efforts. The tools, capacity and awareness to investigate financial crimes related to waste trafficking, including corruption, are however lacking. This is no surprise, given that several previous webinars in the Corrupting the Environment series have found that environmental crimes generally are distressingly low on the priority list of law enforcement and financial intelligence units in most countries. In the judicial process, prosecutors have until recently been hampered by the lack of a clear methodology to calculate the cost of harms caused by illegal waste shipments. A new methodology developed by the European Union’s WasteForce project aims to help remedy this gap by proposing a framework to generate information on the health risks and environmental damage caused by individual waste transports and to give those harms a monetary value. The argument to apply a follow-the-money approach to waste crime is even more compelling in light of the Covid-19 pandemic, which posed significant challenges for physical inspections and law enforcement operations.

Preventing waste crime starts with a proper risk assessment…

The panellists emphasised the need for stronger prevention measures to complement the existing enforcement efforts. The FATF has found that less than half of the countries that participated in their study had considered the laundering threats from waste trafficking within their national risk assessments. Risk assessment is particularly important because it informs the allocation of resources and the priorities of government agencies, including law enforcement and financial intelligence units. The FATF report lists several risk indicators as a starting point for government and private sector actors to consider their risk exposure from waste trafficking.

…and requires cross-sector collaboration

More intensive collaboration and multi-stakeholder dialogue between environmental crime experts, customs and financial investigators is another key recommendation arising from the webinar. This means both strategic and tactical information-sharing and the formation of dedicated taskforces or communication channels. Building a complete picture of the waste industry and criminal threats will also require inputs from across the public and private sectors, such as legitimate waste management companies or industry associations, law enforcement agencies and financial institutions. This includes dialogue on the key criminal loopholes and what suspicious financial flows relating to illegal waste trade might look like. Environmental agencies need greater capacity to “follow the money”, either through building in-house expertise or working in joint investigation teams with financial investigation and asset recovery experts. This would help them apply this powerful approach to all environmental crimes, not only waste trafficking. Finally, as ever, preventing crimes that are facilitated by corruption and money laundering – like waste crimes and so many other crimes that harm the environment and human health – needs governments to have effective anti-money laundering systems in place. Implementing the FATF Recommendations, including those on beneficial ownership registries, is an important place to start.

With thanks to our panel

• Ailsa Hart, Policy Analyst, Financial Action Task Force (FATF)
• Nancy Isarin, Environmental Enforcement Expert
• Yazid Nurhuda, Director for Criminal Law Enforcement, Ministry of Environment and Forestry of the Republic of Indonesia
• Dr Antonio Pergolizzi, Environmental Analyst, Visiting Professor at the University of Camerino and Author of Emergenza green corruption: Come la corruzione divora l'ambiente
• Juhani Grossmann, Team Leader - Green Corruption programme, Basel Institute on Governance (moderator)

More:

• The full recording is here on YouTube.
• See an interview with Dr Antonio Pergolizzi on the characteristics of waste trafficking in Italy and how to address the crime.
• Register now for our next event on first-hand insights into what Indonesians think about environmental corruption on 18 August 2021.
• Learn more about the Corrupting the environment webinar series and see previous summaries and video recordings.

Claims that Switzerland is “paternalistic” in its approach to returning stolen assets to their rightful countries are simplistic, argues Senior Asset Recovery Specialist Oscar Solórzano in this opinion article for Swiss news and information platform Swissinfo. The article is available on the Swissinfo site in German and Spanish. Switzerland is sometimes criticised for having a “paternalistic” approach to international asset restitution, as discussed in a recent article by Sibilla Bondolfi. This criticism relies on a simplistic and misleading story of how “typical” international asset recovery works. It goes like this: An unscrupulous politician in a developing country steals money from the public coffers and stashes it in an international financial centre. There are mansions, yachts, bank accounts, luxury cars and other caprices. At some point, the financial centre decides to return what is left. Several emblematic cases, including those of Marcos (Philippines), Abacha (Nigeria) and Fujimori (Peru), display some of these features. But life and the law are more complicated.

There is no "normal" way to return stolen assets

First, asset restitution is a fast-evolving field with significant variation over time and geography. While the return of stolen assets is a fundamental principle under the United Nations Convention Against Corruption (UNCAC), it sets only a few ground rules. For example, it provides for states to voluntarily conclude agreements, on a case-by-case basis, for the final disposal of confiscated assets. It thus leaves considerably discretion to the concerned states to agree on the terms of the restitution. In this context, asking what a "normal" asset restitution process looks like is akin to asking what "normal" clothes look like. UNCAC nevertheless establishes two key criteria that from a legal standpoint have an impact on the asset return processes.

• Firstly, it differentiates between situations in which the final confiscation order is issued by the judicial system of the victim state and situations in which the recipient state, i.e. the state where the assets were found, waives the need of a final confiscation order to return the illicit assets.
• Secondly, it differentiates whether the assets to be returned are the proceeds of embezzlement or other forms of corruption. If the proceeds were embezzled public money, the victim state has an absolute right to restitution. For any other offence, restitution will depend on the capacity of the victim state to unravel the facts of the case, which is often challenging for international corruption and money laundering schemes.

A collaborative process, not a unilateral return

The second important feature of asset return is that victim states of corruption can and should be valid and proactive counterparts through cooperation and dialogue. Asset restitution is not simply about a powerful financial centre giving back money to a victim state. Rather, I see it as a collaborative process in which all states involved must show great maturity in order to achieve a common goal: restorative justice. However, not all victim states have the capacity (yet) to play their part in the restitution process in full. In such situations, legislation in place in Switzerland allows it to return illicit funds in some scenarios without any need for a confiscation order in the victim state. This legislation is considered to be highly innovative and a sign of great willingness on the part of Switzerland to recover and return stolen assets.

From "victim" states to proactive partners

That being said, many victim states have significantly improved their capacity to recover illicit assets in recent years. By applying their own laws and processes, they are now more frequently able to issue final confiscation orders, which they then seek to enforce through international judicial cooperation in order to have the money returned. This is the scenario in the international asset recovery cases in which I have been involved between Peru and various financial centres, including Switzerland. The ability of victim states such as Peru to investigate, prosecute and execute judgements in complex corruption and money laundering cases is a clear testimony of progress in the country’s judicial system. It is precisely what is needed to turn the "victim" into a proactive partner and empowers it to take a stronger role in determining how the returned funds will be used.

Dialogue is worth the extra time

This is a very positive development. But of course, a dialogue is always more complex than a “monologue” and usually takes more time too. The increased complexity – often resulting in the process needing more time – is however easily offset by the great potential inherent in this form of dialogue for advancing asset recovery and cooperation. It enables the states to understand each others' priorities, resolve legal loopholes and reconcile their interests. This was very much understood and wanted by Peru in the restitution process described in the above-mentioned article. In fact, Peru early on took the first step to request a dialogue with Switzerland to discuss modalities for the return of the stolen assets when it became clear that confiscation was possible. This form of dialogue is also key to mitigate the political risks that restitution may entail. After all, the ups and downs of politics are common in many victim states, and in recent times Peru is no exception.

Asset return in practice: a tripartite agreement

The third aspect is how this looks in practice. The recent tripartite agreement on asset restitution between Peru, Switzerland and Luxembourg has drawn attention and, in the above-mentioned article, some unhelpful sneers about corruption in Peru's justice system and how Switzerland is "planting saplings" in Peru to clear its guilt. This is unfortunate because the tripartite agreement, which covers nearly USD 28 million from a complex of cases relating to Fujimori, is a good illustration of close cooperation between states, in a collaborative spirit, aimed at combining various political interests and achieving the common goal of justice. The returned assets are not being spent on saplings but on further strengthening the national asset recovery system and criminal prosecution in Peru.

A positive precedent for asset restitution

Did Switzerland (or Luxembourg) impose this on Peru and thus is behaving in a neo-colonial way? No, really not. The proposal to use the funds for this purpose was made by the Peruvian counterparts, and notably the prosecuting and judicial authorities. They know best where the country is weak and where the money can be put to good use. That is what the returned funds will go towards, used and administered by Peruvian authorities. In my opinion, this restitution agreement is a powerful symbol in many ways and should be considered an example for others to follow. Using the money to strengthen the victim state’s asset recovery system is an expression of recognition of the considerable efforts and progress already made by Peruvian investigators, prosecutors and judges, who bravely tackle complex cases involving high-level criminals despite challenging conditions and scarce resources. By investing the returned money into these institutions, the money further serves to multiply the impact of the return, as we expect the reinforced institutions to continue and scale up their asset recovery efforts.

The value of asset recovery goes far beyond the money

It is also a powerful reminder that asset recovery is not only about returning money, but it is about healing historical wounds, restoring credibility to justice institutions and building a stronger future with less corruption. Because indeed, USD 28 million compared to the Peruvian GDP is only a tiny sapling in a large forest. Given that, what better than to plant it somewhere it can thrive and be seen to bear fruit.

What does the web of connections look like that underlies grand corruption and money laundering schemes and the abuse of offshore financial centres? Who are the people involved, how do they interact and what do they do? And what insights can we draw by looking at complex corruption and money laundering schemes from the perspective of social networks, rather than solely individuals? These questions are at the heart of a new analysis of the so-called Lava Jato or Odebrecht scandal that has engulfed Latin America. In Working Paper 36: Revealing the networks behind corruption and money laundering schemes, we have applied a combination of social network analysis and network ethnography to a specific nexus within this complex of cases: former Peruvian President Alejandro Toledo and the network that enabled him to launder bribes obtained from the construction giant Odebrecht through offshore jurisdictions.

What do the results show?

First, it shows how the illicit scheme worked, step by step, and the functions of the different individuals and clusters of individuals involved. The scheme was highly sophisticated both technologically and financially, involving complex illicit exchanges across borders and within the murky space of offshore financial infrastuctures. The interaction between the “business” pillar (Odebrecht’s leadership and representatives) and the “political” pillar (senior public officials and other politically exposed persons) was smooth and efficient, facilitated by a web of service providers and revolving around companies, offshore corporate vehicles and bank accounts. It was this “social-financial complex” of individuals and structures that enabled the beneficiaries to disconnect themselves from the corrupt acts and money laundering – not just the technical and legal loopholes that exist in offshore financial centres or even the weaknesses of international cooperation on crime and corruption. Second, the research illuminates the social norms and informal governance practices that regulated the scheme. The inner circles of the key players on both the business and the political sides acted as the first line of defence. This is common in corruption schemes and made possible by the level of proximity, trust and reciprocity between a business leader and their subordinates, or between a politically exposed person and their circle of relatives, colleagues and friends. The second line of defence is the set of knowledge, skills and social capital that service providers and financial intermediaries bring to the table. Through their services, these actors design the complex financial infrastructure that allows the illicit proceeds of corruption to be laundered through multiple layers and tangled chains until it is nearly impossible to be traced. These service providers and intermediaries, together with the financial infrastructure they design, form a multi-layered ecosystem that works efficiently thanks to a strong informal governance system.

• Strategic decisions on inputs, outputs and rules are centralised among the core political and business actors.
• Operations are decentralised and spread out among lower-level business managers or employees and among the political actors’ sprawling networks, who in turn employ service providers and financial intermediaries to carry out the work.

This mix between centralisation and decentralisation results in an efficient, effective and resilient way to govern such a large, cross-border, multi-layered and complex social-financial structure – and most importantly, to keep it hidden for so long.

Shifting the focus from individuals to networks

The research results add a further illustration to the growing recognition that corruption is a form of collective, social behaviour that slips easily across borders and involves highly sophisticated financial strategies and transactions. The clear implication is that narrow approaches to corruption, from a national perspective and focused on individuals and their self-interested behaviours, provide an incomplete picture at best. Shifting the focus from individuals to networks through techniques such as social network analysis and network ethnography can offer valuable insights to inform anti-corruption policies, law enforcement strategies and the academic theories that underpin these.

• For law enforcement, this analysis illustrates how SNA and network ethnography techniques can be applied to identify key individuals and clusters, the spaces in which they operate and the criminal strategies they employ. This approach has the potential to make major investigations and prosecutions more efficient, more targeted and more likely to succeed, as it opens up new pathways and tools to break into the case and gain the information hidden within the network.
• For policy, the research provides further insight into some of the legislative weaknesses that allow offshore financial centres to be abused, as well as the consequence of these weaknesses for global efforts to combat corruption and other crime. Shining a light on the illicit nexus that exists between corruption and money laundering may help policymakers to close those gaps.
• For the academic debate, the research adds fresh empirical evidence to the study of the relation between grand corruption and money laundering. It explores key analytical and theoretical concepts that are as yet under-explored in this field, and provides a starting point for future research to illuminate these.

Widening perspectives

All of us who wish to find more effective ways to combat corruption and money laundering should be open to new ways to analyse corruption schemes, understand their workings and to follow the money as it flows around the world. The value of the “network” perspective is something that our wider Public Governance research demonstrates time and again in very different contexts. Learn more about the research, training and technical assistance activities of our Public Governance team and about how our International Centre for Asset Recovery helps build the capacity of partner countries to trace illicit financial flows and recover money stolen through corruption. View and download Working Paper 36: Revealing the networks behind corruption and money laundering schemes: an analysis of the Toledo–Odebrecht case using social network analysis and network ethnography.

The Siemens Integrity Initiative is boosting the Basel Institute’s capacity to promote anti-corruption Collective Action with an additional USD 3.5 million in funding under its “Golden Stretch” round.

This funding complements an existing USD 2.86 million project of our Collective Action team under the Siemens Integrity Initiative, with both projects due to end in 2024. We are delighted to be one of eight organisations to receive the additional funding, which will help us expand our support to more practitioners, governments and companies worldwide.

Why the Golden Stretch?

Collective Action has emerged as a powerful way to bring together diverse stakeholders from the public and private sectors and civil society to ensure clean business and fair competition. As a recent study by our Collective Action team shows, the concept is now endorsed by numerous governments, international organisations and standard-setters, as well as practised by businesses and civil society representatives worldwide who recognise the benefits of this collaborative approach to fighting corruption.

The successful expansion of Collective Action is in no small part down to the work of the Siemens Integrity Initiative, which has supported 85 Collective Action projects across more than 50 countries with three funding rounds and the Golden Stretch Round since 2009. The total funding commitment has increased from $100 million to nearly $120 million.  

The Golden Stretch will help to ensure that the achievements are sustained and the concept of Collective Action continues to grow and spread.

A growing community

The Basel Institute, which was founded in 2003 partly with the aim of promoting Collective Action against corruption, has been part of the Siemens Integrity Initiative community since the first funding round.

Among many other achievements, the funding has enabled us to develop the B20 Collective Action Hub, a global go-to centre for resources and guidance on anti-corruption Collective Action, as well as build a strong community of practitioners through a series of international conferences and workshops.

The adoption by several governments of the High Level Reporting Mechanism, a novel clean procurement mechanism developed and jointly promoted by the Basel Institute and the OECD with Siemens Integrity Initiative support, is another key achievement under our collaboration so far.

A current series of roundtables exploring synergies in human rights and anti-corruption compliance is seeing widespread resonance in the private sector, demonstrating the power of Collective Action to drive responsible and sustainable business beyond anti-corruption.

What to look out for at the Basel Institute

The new project will leverage our broad experience to mentor and support current and upcoming Collective Action leaders, as well as showcase the wide applicability of Collective Action to anti-corruption and related sustainable development goals. The B20 Collective Action Hub will be enhanced with online courses and a virtual help desk.

We will also multiply our strategic efforts to mainstream Collective Action, helping to embed the practice as a global compliance norm. We have already made significant inroads in this strategy under the current Siemens Integrity Initiative project, with strong endorsements of Collective Action issued by the B20 Saudi Arabia in 2020 and in the Political Declaration of the Special Session of the UN General Assembly against Corruption (UNGASS 2021).

Look out for announcements of our forthcoming conference in 2022 – and more – by following our Collective Action team on Twitter (@FightBribery) and LinkedIn.

Learn more

• See the official press release issued by Siemens AG on 7 July 2021.
• Browse the B20 Collective Action Hub for inspiration and evidence on anti-corruption Collective Action.

Money laundering risks evolve fast, as do the tools and data available to assess them. That is why the Basel AML Index – the Basel Institute’s flagship index of money laundering risks around the world – updates its methodology every year, following an in-depth review with a group of experts from diverse backgrounds. This year’s Basel AML Index will see two methodological changes when the annual Public Edition is released in August. The current methodology and indicators are described here.

Media freedom data from the World Press Freedom Index

First, we are switching our data source on media freedom, an indicator that appears in the category “Political and legal risks”. Until now, we have used the Freedom and the Media report published by Freedom House. From the 10th edition in 2021 onwards, we will use the World Press Freedom Index published by Reporters Without Borders. This is because it offers more regular updates and a more granular assessment, ranging from 1 to 100. As the indicator makes up less than 1 percent of a country’s overall score, this will not have a significant impact or affect comparability with previous editions.

Improving comparability through clearer use of FATF data

Second, we are changing our approach to data from the Financial Action Task Force (FATF) in order to improve comparability between countries in the Public Edition of the Index. Data from FATF Mutual Evaluation Reports (MERs) make up 35 percent of a country’s risk score in the Basel AML Index. They are the largest single factor influencing the overall ranking and appear in the category of “Quality of anti-money laundering and counter-financing of terrorism (AML/CFT) framework”. MERs conducted under the FATF’s fourth-round methodology, launched in 2013, are a primary source for assessing the quality of a country’s legal and institutional AML/CFT framework both in theory and in practice. However, some countries still have MERs based on the FATF’s third-round (pre-2013) methodology. Not only are these reports seriously outdated, but they assess only technical compliance with FATF Recommendations and not the effectiveness of AML/CFT systems in reality. As we noted in our 2020 Public Edition release, it is disappointingly common for countries to score highly on technical compliance but poorly – or even zero – in terms of effectiveness. (In other words, countries may have state-of-the-art AML/CFT systems that don’t in fact work.) This poor performance in effectiveness typically causes countries to drop down the Basel AML Index rankings as they undergo FATF fourth-round evaluations, affecting comparability between countries. For this year only, the Public Edition ranking of the Basel AML Index will therefore include 106 countries that have fourth-round FATF evaluations and also meet the other minimum data requirements. Countries with older evaluations that otherwise meet minimum data requirements will be listed separately. In total, the Public Edition is expected to cover around 130 countries this year. The Expert Edition coverage will remain the same at 203 countries.

How will the Expert Edition be affected?

The Expert Edition of the Basel AML Index provides a comprehensive list of money laundering risk scores – both overall and for each of the 16 indicators that make up the Index – for 203 countries. It is updated regularly throughout the year and will not be affected by the approach to FATF data described above. Expert Edition subscribers will however see new information about UK sanctions and Australian sanctions at the country level appearing in the interactive dashboard and downloadable Basel AML Index dataset. This information will join the other sanction regimes and related lists that appear in the Basel AML Index Expert Edition, namely the US Treasury Department Office of Foreign Assets Control (OFAC), UN Security Council, EU restrictive measures, EU list of non-cooperative jurisdictions for tax purposes, EU high-risk third-countries, FATF “grey list” and FATF “black” list. A country’s appearance on any of these lists does not have an impact on the overall score but is highlighted in the Basel AML Index Expert Edition for informational purposes. Whilst it is not expected that the UK and Australian sanctions list deviate significantly from the EU or UN sanctions list, they were decided to be included due to the importance of their financial centres.

Expert Edition: do you have access?

The Basel AML Index Expert Edition is soon upgrading to a brand new dashboard with enhanced data visualisation and filtering possibilities. Watch this space. Subscription to the Basel AML Index Expert Edition or Expert Edition Plus (which contains an extra written and quantitative analysis of FATF data) is free for all public or supervisory institutions, international organisations, non-profit organisations and academic institutions. Private companies can subscribe at very reasonable rates. See more information on the Expert Edition.

Twenty-five practitioners from 12 countries gathered online on 29 June for the first virtual meeting of the new Knowledge Community on Asset Recovery in Latin America. An initiative of the Basel Institute’s International Centre for Asset Recovery, the regional Knowledge Community provides a collaborative space for interaction between leading practitioners in the field of asset recovery and international judicial cooperation in criminal matters. The purpose is to develop a critical mass of knowledge on asset recovery, with an emphasis on non-conviction based confiscation, and to disseminate this knowledge among both members and the wider asset recovery community. Ultimately, the knowledge should help countries to improve their capacity to recover stolen assets by introducing novel legal tools into their legislative systems and implementing them more effectively.

Lessons learned from international cooperation over the “Nun” case

At this inaugural session, practitioners discussed a case study illustrating how Peru had applied its non-conviction based forfeiture legislation, extinción de dominio, to achieve a confiscation order for assets intended to fund the Shining Path terrorist organisation. Oscar Solórzano, Senior Asset Recovery Specialist and the Basel Institute's Head of Latin America as well as the case study’s author, explained the challenges of obtaining mutual legal assistance and how they were overcome in this precedent-setting case. The detailed case study is available here:

• Case study: The Nun – Confiscating assets of the Shining Path terrorist organisation
• Estudio de caso: La monja – Decomisando los activos de la organización terrorista Sendero Luminoso

Setting the foundations for future events

The session also saw the presentation of the Knowledge Community Steering Committee members, plus an overview of the Community’s plans for the rest of 2021.

How investigators and prosecutors can use Source and Application of Funds analysis to inform corruption and money laundering investigations and prosecutions and to generate evidence for use in court. A quick guide by the Training team of the International Centre for Asset Recovery.

If it looks and smells like corruption…

“How could he afford that car on his salary?” “Where did she get the money to buy those expensive clothes?” “How is that public official able to stay in a luxury beachside property when he only earns enough for a small house in the suburbs?” These simple questions are often the starting point for investigations into suspected corruption, including under laws targeting unexplained wealth. Answering them, and proving in court that the money has been obtained illicitly and should therefore be subject to recovery, is a lot trickier.

… that’s still not enough for a court

Corruption is a particularly difficult crime to investigate and prove beyond reasonable doubt. Why? Because it usually takes place behind closed doors between two or more willing parties who are unlikely to report the matter to the police or cooperate in an investigation. These days, technologies such as digital transfers, mobile money and cryptocurrencies make it far easier for illicitly obtained money to change hands. Stolen funds disappear across borders and into secret accounts in a click. Many corrupt officials seeking to launder money also hire unscrupulous corporate service providers, accountants and lawyers. These professionals help them to create complex financial structures in offshore jurisdictions to conceal the true ownership of their assets, as explained in our quick guide to offshore structures and beneficial ownership. These factors combine to thwart the attempts of investigators to follow the trail of the money.

Caught red-handed? Not often

The increasing sophistication of criminals means it is rare to find direct evidence of corruption or other financial crimes, such as an eyewitness, a video or audio recording, or a bank transfer from a company to a public official who can be proved to have performed a particular corrupt action in return. Moreover, even such evidence is not conclusive. Witness accounts may be flawed, and documents, videos and audio recordings are nowadays easily forged. This is why it is vital for anti-corruption officers to be able to build financial profiles of individuals suspected of corruption and money laundering. Systematically calculating the amount of money that a suspect has accumulated and spent during a particular period, compared to their legal and known income, is a powerful means to demonstrate, or provide corroborative evidence in respect of, their illicit activity even in the absence of a smoking gun.

Source and Application: a common-sense calculation

One particularly effective tool for building such a financial profile of a suspect is the Source and Application analysis. It is a simple formula to calculate the difference between two figures over a specific period of time selected by the investigator and based on allegations or suspicions of corrupt activity: For example: If a suspect can be shown to have spent or accumulated $500,000 in 2020 but only had $250,000 legally available to her during this time according to official records and other relevant evidence, she has enjoyed $250,000 of unexplained income. This amount may or may not be the proceeds of corruption, but unless she can explain the source of the additional money it is strong circumstantial evidence of illicit behaviour. This financial evidence can be used in court to support a traditional corruption, fraud or money laundering case in a criminal context. In countries with illicit enrichment laws, it can also be used as direct evidence and as a basis for recovering the unexplained wealth. (For more on illicit enrichment, see our open-access book and its Annex II guidance on Source and Application of Funds analysis at illicitenrichment.baselgovernance.org.)

Gathering the information – a valuable exercise in itself

In addition to generating crucial financial evidence of illicit activity, the process of conducting a Source and Application analysis is a useful investigative tool. This is because it offers a systematic framework for investigators to gather all documentary and other relevant evidence that relates to the suspect’s use of funds vs the funds legally available to him or her during a specific period of interest. The Source and Application computation sheet in itself is not evidence per se but merely a method to organise and present financial evidence gathered during the investigation in a way that highlights or identifies illicit or unknown income. Examples of legal sources of income are salary payments, declared income from property rentals or company shareholdings, sales of assets, inheritances or loans. This category also includes the suspect’s bank balances at the start of the period, since the money contained in these accounts was available for him or her to spend. In terms of applications, investigators will use bank or mobile money statements, invoices and other documents to gather information about the suspect’s use of funds during that period. This includes, for example, purchasing assets, paying property rentals or bills, repaying loans, employing staff or taking holidays. It also includes the suspect’s bank balances at the end of the selected period, as this reflects money he had not yet spent but still had available to spend. Other applications may involve the purchase of crypto assets which can be kept in a self-custody wallet or with a third party such as a cryptocurrency exchange. All of these documents and other relevant evidence can contain vital clues that assist in tracing illicit flows of money and reveal further suspects in the individual’s corrupt network.

No silver bullet, but a useful tool

There are challenges to using the Source and Application analysis, of course. One arises in countries with large informal and cash-based economies, which makes it harder to obtain documents and records to prove either the source or the application of a suspect’s funds. Good old-fashioned detective work can help to overcome this, such as surveillance, speaking to neighbours and knowing the market prices of goods that a person claims to have sold. Furthermore, this tool is not meant to be used in each and every corruption case but rather when it appears that the suspect is enjoying a lifestyle that is not commensurate with his/her legal and known income. Another difficulty is finding hidden assets, bank accounts, mobile money accounts or cryptocurrency wallets, especially when the suspect refuses to cooperate or the information is held abroad or protected by banking secrecy laws. Our quick guide to fundamental skills in tracing assets gives investigators some tips on uncovering new leads, again through good old-fashioned detective work. Meanwhile our guide to international cooperation explains how investigators may obtain such information from foreign jurisdictions, and our quick guide to cryptocurrencies and money laundering reveals how it is possible for law enforcement to “follow the virtual money”. In court, it may be that magistrates and judges are unaware of this method or unwilling to accept the final computation as financial evidence. We do believe, though, that it is much simpler to explain a Source and Application calculation than alternative methods of financial profiling such as Net Worth analysis, as explored in our free eLearning course on Source and Application of Funds analysis. There is no silver bullet or magic tool to calculate illicit funds in a corruption case and generate rock solid financial evidence of wrongdoing. But the analysis is often a crucial piece in a complex puzzle that can prove, or corroborate evidence of, the possession of illicit assets and point to related criminal activity. In our experience conducting training programmes around the world, we see time and again how the Source and Application analysis resonates with investigators and prosecutors as both a useful tool in investigating corruption and money laundering cases and generating evidence of these crimes for use in court. Download this quick guide as a PDF. See all quick guides on our Basel LEARN virtual platform, many in multiple languages.

At a Basel Institute-hosted webinar on illicit enrichment on 30 June 2021, practitioners from Uganda, Kenya and Mauritius agreed that illicit enrichment laws have significant potential to help their countries – and others – target corruption and recover stolen assets. But, they say, significant hurdles still need to be overcome, especially in transnational cases. In a nutshell, illicit enrichment laws or unexplained wealth laws allow investigators and prosecutors to recover assets that have clearly not come from lawful sources without having to prove the specific criminal action that gave rise to these proceeds. As such, they are particularly useful to target corruption offences, where it is often difficult to point to an obvious victim or to a specific criminal act. So why aren’t they being used more often and more widely? Read on.

About the event

The panel discussion sought to explore what we can learn from countries that have introduced these types of laws around the world, what States should consider when introducing illicit enrichment legislation, and how to overcome challenges to its effective application. The event was also an opportunity to introduce a new open-access book on Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth written by Andrew Dornbierer and published by the Basel Institute in June 2021. Andrew Dornbierer spoke on the panel alongside:

• Phillip G. Kagucia, Assistant Director, Ethics and Anti-Corruption Commission, Kenya
• Paul Keyton and Preeya Raghoonundun, Director and Assistant Director, Integrity Reporting Service Agency, Mauritius
• Tom Walugembe, Asset Recovery Specialist, Basel Institute on Governance

Jonathan Spicer, Senior Asset Recovery Specialist at the Basel Institute on Governance, moderated the event. The virtual event welcomed 140 live attendees. You can view it on YouTube here or listen to the audio recording.

Introducing illicit enrichment

Andrew Dornbierer began by outlining how illicit enrichment can be defined at a broad level as referring to a situation in which: “someone has enjoyed an amount of wealth that is not justified by reference to their lawful income.” He explained that an illicit enrichment law is one that targets this situation, and will empower a court to sanction someone for illicit enrichment without needing to see proof of any underlying or separate crime that gave rise to the enrichment. Andrew further explained that laws targeting illicit enrichment can be in both criminal formats (i.e. in the form of a criminal offence) or civil formats (i.e. as an application process for a civil order for compensation).

Significant variety across jurisdictions

Tom Walugembe, Phillip G. Kagucia, and Preeya Raghoonundun explained the unique formats of the illicit enrichment laws in Uganda, Kenya and Mauritius respectively. While Uganda has implemented a criminal offence for illicit enrichment, contained in the primary anti-corruption law, Kenya and Mauritius have both enacted civil-procedure based laws. Civil actions under Kenya’s law are also outlined in the country’s primary anti-corruption act, but instead take the form of a civil order that can be made by courts to confiscate “unexplained assets”. In Mauritius, the civil action can be applied more broadly outside of an anti-corruption context. However, before the court action can be launched by the Integrity Reporting Service Agency, it must first receive approval from an independent board that assesses the strength of a potential case.

Successes and overcoming hurdles

The experts explained that while each of the countries has achieved some success in the enforcement of illicit enrichment laws, practitioners still face many hurdles in their efforts. For instance in Uganda, capacities regarding financial investigation abilities have hindered the strengths of certain cases. Meanwhile in Kenya, some misunderstandings regarding how the law should be investigated and applied have led to significant delays in the court – though these misunderstandings have been somewhat clarified as court cases have progressed. In Mauritius, Paul Keyton explained that the ability of respondents to take advantage of procedural loopholes, without consequences, can add severe delays to proceedings.

Legal challenges to illicit enrichment

To provide some further insight into the common legal challenges that illicit enrichment laws often face, Andrew Dornbierer discussed arguments that illicit enrichment laws contravene the presumption of innocence principle. This is a basis for many challenges around the world. He explained that while most courts admit that these laws run contrary to this principle, the prevailing view around the world is that this principle is not absolute in nature, and that illicit enrichment laws qualify as an acceptable deviation from this principle for a number of reasons. Tom Walugembe provided further insight on other legal arguments that often arise, specifically that illicit enrichment laws violate property rights as well as the principle against retroactive application, and explained how Ugandan courts have rejected both of these contentions.

How does illicit enrichment work across borders?

Attendees raised many interesting questions, especially regarding difficulties in freezing assets or obtaining evidence from abroad in the context of illicit enrichment cases. In response, Tom Walugembe noted that as many countries in Europe do not have illicit enrichment laws, there are likely to be issues regarding dual criminality that will affect efforts to obtain mutual legal assistance from these countries. Paul Keyton explained that in Mauritius, value-based provisions in the law may still facilitate asset recovery when it is impossible to confiscate goods from foreign states due to a reluctance in that country to cooperate. 

Learn more

• See Andrew Dornbierer’s quick guide to illicit enrichment, also available in French, Spanish and Portuguese.

• Learn more about our new book on Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth by Andrew Dornbierer. Click through to Amazon to purchase a print copy at cost price or visit illicitenrichment.baselgovernance.org to view or download the full book, technical guidance on source and application analysis, and a database of illicit enrichment laws around the world.

• Read a case study by Tom Walugembe on the landmark USD 1.25 million illicit enrichment case of Uganda vs. Geoffrey Kazinda in October 2020.

A new short report on gendered corruption highlights the urgent need for more research and policy action on non-monetary corruption affecting women, such as sextortion and so-called double bribery. Gendered corruption: Initial insights into sextortion and double bribery affecting female businesswomen in Malawi offers an initial insight into sexual corruption based on interviews with 19 businesswomen in Malawi. Part of a wider research project into procurement corruption, the interviews aimed to explore the extent of gendered corruption as a coercive form of social exchange, as well as the role of informal corrupt networks in magnifying gender-specific inequalities. Though based on a small sample in one particular context, the findings indicate that more research into this topic is urgently needed globally with a view to mainstreaming sexual corruption into anti-corruption programming. Initial findings indicate that:

• Sextortion, forced sexual favours, "double bribery" and other forms of sexual corruption are perceived to be widespread in Malawi. 
• Women's risk of being subjected to sexual corruption increases in informal network settings, such as those in which business takes place.
• Socio-economic factors and gender-imbalanced power dynamics play an important role in enabling sexual corruption to take place with impunity.
• Trustworthy reporting and support mechanisms for sexual corruption are said to be lacking. 
• Existing female-only business self-help groups could provide a strong base for enabling women to address issues of sexual corruption and related gendered violence.

 

Overall, there is a great need for more research and policy attention globally to gendered corruption and related issues that still remain – tragically – hidden from view or considered as normal.  Read the report.

Our International Centre for Asset Recovery is seeking a Senior Asset Recovery Specialist to support its work with anti-corruption institutions across Sub-Saharan Africa. The overall goal of the various programmes is to strengthen asset recovery value chains, including through regional and international cooperation. The successful candidate will work with a close team to help build partner institutions’ capacity in these areas, with a particular focus on prosecution and asset recovery strategy and practice.  Among other requirements, you will need at least 10 years of experience conducting legal proceedings for complex financial crime. The exact location is to be discussed and decided. See the full job description and please apply by 23 July 2021.

We are delighted to have signed a Memorandum of Understanding with the Anti-Corruption Commission (ACC) in Zambia. Under the new partnership, our International Centre for Asset Recovery (ICAR) will support the Commission’s efforts to investigate and prosecute corruption cases and to identify and recover stolen assets. This includes support for international cooperation to obtain intelligence and evidence from abroad.  Speaking at the signing ceremony on 13 May, the ACC’s Acting Director-General Rosemary Nkonde-Khuzwayo expressed her confidence that the partnership would result in a stronger and more effective anti-corruption campaign. She was pleased to hear that there has already been substantial dialogue related to developing cases, which could potentially result in millions of dollars being recovered by the state, and looks forward to the regular presence of ICAR on the ground. Our Managing Director Gretta Fenner added that a key benefit of the partnership, alongside ICAR’s capacity building and technical support, was the ability for Zambia to benefit from the Basel Institute’s expertise in developing context-sensitive and evidence-based anti-corruption approaches. She also noted her appreciation to the United States Bureau for International Narcotics and Law Enforcement Affairs for their support. The agreement takes the number of active partnership agreements between the Basel Institute and government anti-corruption agencies to more than 20, spread across Sub-Saharan Africa, Latin America and Eastern Europe.

How do illegal wildlife products, live animals, exotic marine species and illegally logged timber end up in stores, zoos, aquariums and homes on the other side of the world?

Too easily, is the answer. Weaknesses in global supply chains make them vulnerable to exploitation by organised crime groups and bad actors working in legitimate businesses. Corruption opens the door to that exploitation. And the easy possibilities for laundering money from environmental crimes makes this illicit activity attractive to criminals around the world.

All the while, the health of the planet suffers and both private firms and financial institutions find themselves exposed to a host of physical, legal, financial and reputational risks.

Our new four-part learning series Wildlife crime – understanding risks, avenues for action aims to help private-sector decision-makers and compliance professionals, policymakers, anti-corruption and conservation practitioners, and law enforcement officers get a fast yet solid grasp of the main ways in which corruption and other financial crimes facilitate illegal trade in:

• Wildlife generally
• Exotic pets
• Timber and other forest products
• Marine species

The four topics are freely available as both PDF downloads and online resources on our Basel LEARN virtual learning platform, with no login needed.

There are interactive quizzes to test your knowledge after (or before!) looking through the resource, which aims to present relevant information, statistics and background knowledge in a user-friendly way.

Infographics depict the supply chain vulnerabilities in each focus area and are freely shareable under a Creative Commons licence, like the publications themselves. We hope the series will help to broaden understanding of the threats that wildlife crimes pose to sustainable development and clean business, and what concerned companies and others can do about them.

It was developed by the Green Corruption programme at the Basel Institute on Governance with funding from PMI Impact. The programme applies anti-corruption and governance tools to address environmental crime and degradation. 

Start learning

• Visit Basel LEARN to find all four topics alongside a host of free self-paced eLearning courses, guidelines and quick guides to anti-corruption and asset recovery topics.
• View all PDF downloads and direct links on the Wildlife Crime series publication page.

At a high-profile speech at the Ukraine 30 Forum last week, the Basel Institute's Managing Director Gretta Fenner emphasised that it is critical that Ukraine swiftly and professionally concludes the asset recovery processes started after the Revolution of Dignity. She also urged the country to fully empower its anti-corruption institutions and reduce the hurdles that have been put in their ways. High levels of corruption continue to drain the country's resources and threaten its democracy. Initiated by President Volodymyr Zelensky in February 2021, the Ukraine 30 Forum is a platform for discussion between the public and private sectors, civil society and other experts in the run-up to Ukraine's 30th anniversary of independence on 24 August 2021. Since February, the forum has tackled a range of critical topics including coronavirus, the justice system, education, digitalisation and national security. Gretta spoke immediately after President Zelensky and Prime Minister Denys Shmyhal on 15 June, on the second day of the Forum's special session on "An economy without oligarchs". Her full speech is below in English and can be viewed on YouTube here in Ukrainian and here in English (starting at minute 30:30). Mr President Prime Minister Excellencies, ladies and gentlemen And most importantly: Dear friends from Ukraine It is a privilege to speak to you this morning and to be part of Forum 30 which leads up to the celebration of 30 years of independence of Ukraine in August. I am sorry I cannot be with you in Kyiv today, especially as I was in your beautiful capital just last week. But let’s come to the topic of today: Corruption and asset recovery. Talking of these topics in the context of celebrating your country’s independence is very pertinent, because independence and the fight against corruption are closely entwined.

• If a country is captured by vested interests and corrupt crime groups, then democracy is at stake, and I believe you would all agree that democracy has been the goal of Ukraine’s independence.
• Second, it is crucial that anti-corruption institutions can act independently. If they are at risk of undue political or economic interference, they lose their ability to effectively combat corruption. 
• Third, when grand corruption is widely present, criminals steal large amounts of public assets. As a result the country lacks resources to invest in important public services and infrastructure. The country and its people are impoverished, and they become dependent on foreign aid.

Reducing corruption and getting stolen assets back is important for Ukraine because the country urgently needs this money to build schools, hospitals, roads, and to invest in job creation. But it is important for another reason too: Asset recovery is considered a particularly powerful weapon against corruption. And when I say corruption here, I mean grand corruption, the kind that siphons of millions and billions from your country. If law enforcement is successful in depriving criminals of their stolen assets, the crime of corruption is all of a sudden much less attractive. And while it is important to put corrupt people in prison when found guilty, it hurts them a lot more if you also take their money away. The efforts of Ukraine since 2014 to recover stolen assets are therefore very important from both a social and economic development perspective, and from a criminal justice perspective. My organisation, the Basel Institute on Governance, has had the privilege of supporting Ukraine in its efforts to recover stolen assets since 2014, when very shortly after the Revolution of Dignity, the Office of the Prosecutor General asked us to assist with finding and recovering the money that was stolen by former President Yanukovych and his allies. This cooperation was reinforced with the signing, last year at the occasion of the visit to Ukraine of then Swiss President Simonetta Sommaruga, of a tripartite agreement between Switzerland, the Office of the Prosecutor General and NABU, underscoring the cooperation of Switzerland, Ukraine and my organisation to recover stolen assets. Since 2014, Ukraine has recorded progress, but the progress has sometimes been slower than we would hope. The first very positive development immediately after the Revolution of Dignity was the international reaction. Switzerland, which by the way finances our work in Ukraine, the European Union and other important jurisdictions, have immediately frozen assets suspected of having been stolen by the regime of former President Yanukovych. The intention of this international action to freeze these assets was to give Ukraine time to investigate the underlying crimes, to prove that the money stems from corruption, and ultimately to confiscate it so that it can be returned to Ukraine. But these freeze orders are not open-ended. And foreign countries cannot return the money to Ukraine without the help of Ukraine. Through our work, we were able to help advance the cooperation between Ukraine and the countries where assets have been frozen. These countries have provided Ukraine with information about the bank accounts and with other evidence. But now the ball is largely in Ukraine’s camp. It’s the Ukrainian institutions that need to finish investigating and then prosecute the cases, and the Courts that need to confirm the criminal origin of these assets. Only then can the other countries release the funds and the money can be returned to Ukraine. And with that money, schools can be built, or roads, or hospitals. Time is of the essence now; we may have another two or three years until most freezes will expire. That means that Ukrainian institutions have to work at full speed, and have to be allowed to do so, so that we can see successful prosecutions and confiscations in Ukrainian Courts. For this, Ukraine does have the necessary institutions, and this is another positive development that has happened since the Revolution of Dignity. In addition to the OPG, these include, as you know well, the National Anti-Corruption Bureau and the Special Anti-Corruption Prosecutor, two institutions with which we work closely and who are very important for this country. There is also ARMA and the National Agency for Corruption Prevention, and the State Bureau for Investigations. In this context I am particularly pleased to confirm that we have just signed a cooperation agreement with SBI last week when I was in Kyiv. And of course, very important, the High Anti-Corruption Court. These institutions are all very important, but they have an incredibly difficult job. Investigating cases of grand corruption is extremely challenging; expertise in the field of asset recovery is very rare; and the criminals are using their still vast resources to pay for some of the most experienced defence attorneys to make the job of NABU, SBI or OPG ever more difficult. On top of that, it has been hard to watch how over the years, a whole range of home-grown obstacles was put in the way of these critical institutions and how they continue to suffer greatly from instability brought to them from the outside: In the seven years that we have been supporting Ukraine, we have worked with five Prosecutors General, some of which were more, some less reform oriented. This is a real problem for the stability of this key institution, and has at times definitely had a negative impact on its performance. Adding to this problem is the fact that key anti-corruption institutions have not had a chief for a prolonged period. The positions of Heads of SAPO, of ARMA and of SBI have been vacant for far too long, and the selection process for Head of SAPO is in serious trouble. This is not to suggest that the Acting Heads of these institutions are not doing a good job; they are doing a very good job in many cases. But it adds to the instability, and it puts into question the will of some to enable these institutions to be effective.  And last but not least, as you know, there have been something like 18 attempts to remove the current Director of NABU from his position. And nobody will make me believe that this is because he is so bad at his job; rather, I would argue it is because he is a threat to those who have reason to fear him and NABU. In addition to that, we have had one backlash after the other when it comes to reforming Ukraine’s legislative framework.

• The decision by the Constitutional Court to rescind the asset declaration law is very problematic for example.
• The law on illicit enrichment, which was passed in Parliament just recently, is a poor replacement for the previous law. It has serious weaknesses, as confirmed by the Venice Commission, and it will make it extremely hard for investigators and prosecutors in their efforts to stem out corruption.
• And finally, ample evidence of serious corruption in the Ukrainian Court system may well be the final straw to Ukraine’s efforts to recover the billions of hryvnia that have been stolen, stolen from Ukraine, stolen from the people of Ukraine.

So this is a make or break moment. If we are not successful in recovering these stolen assets, then people will lose patience, they will lose hope, and they will lose trust in this country’s institutions, again. Because it will seem to people that the corrupt continue to get away with their crime. And it can seem like an invitation to others to also steal. Corruption may seem only one of the many problems this country has to grapple with. But you should remember that corruption is at the heart of pretty much any other problem you are facing. Corruption fuels conflict and is known as a serious threat to national security; corruption fuels organised crime; corruption destroys the health system; corruption leads to poor education; corruption leads to poverty. It is no exaggeration when we say that in many ways, corruption kills. Mr President, Prime Minister, ladies and gentlemen. This is a critical time. The international community, and my institution included, continues to support you in your efforts to fight corruption and recover stolen assets. But we must see sincere effort in Ukraine; we must see that there is an end to the undermining of the independence of key institutions; we must see these institutions with strong leadership; we must urgently re-instil independence, impartiality and professionalism in the Court system; and we must pass legislation that is up to international standards and that can work, not legislation that undermines the anti-corruption drive. This is what we hope to see from the politicians in this country, and I sincerely hope that they will show that they have the best interests of the country – and of the Ukrainian people – at heart. I trust and know that you do, Mr President, Prime Minister. We are here to help, and together with our partners in NABU, at OPG and at SBI, with our partners in Switzerland and across the world, we will continue to stand by your country’s side to end impunity for corruption and hopefully return many of the stolen assets to Ukraine, so they can be used for the benefit of the people of Ukraine. I thank you.

This quick guide offers a short introduction to illicit enrichment laws, which are emerging as a powerful tool to combat corruption and recover stolen assets. It was updated in June 2021 following the Basel Institute’s publication of an open-access book on Illicit Enrichment: a Guide to Laws Targeting Unexplained Wealth by Andrew Dornbierer. Freely available online along with a database of laws around the world, the book provides clear descriptions and practical guidance on different approaches to targeting unexplainable increases in wealth, how to establish cases in court, and common legal challenges to illicit enrichment laws.

What is illicit enrichment in a nutshell?

The definition of illicit enrichment can vary enormously from jurisdiction to jurisdiction. At the international level, the United Nations Convention Against Corruption (UNCAC) defines illicit enrichment as a “significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income”. At a State level, however, the scope of illicit enrichment laws can differ somewhat from the UNCAC article. For instance, some laws cover private individuals as well as public officials. Some definitions take into account excessive standards of living in addition to disproportionate assets. Many States don’t even use the term “illicit enrichment”. Instead they refer to the acquisition of “unexplained wealth” or “unexplained property”, or use other terms such as “unjust enrichment” or “illegal gains”.  Based on extensive analysis of international instruments, domestic laws, and jurisprudence from around the world for the book Illicit Enrichment: a Guide to Laws Targeting Unexplained Wealth, illicit enrichment can arguably be defined in a general sense as:  "The enjoyment of an amount of wealth that is not justified through reference to lawful income."

Why are illicit enrichment laws useful in anti-corruption efforts?

In the context of asset recovery mechanisms, illicit enrichment laws are quite unique as they do not require proof of a separate or underlying criminal activity before a judicial sanction can be imposed. Instead, courts only need to be satisfied that illicit enrichment has taken place – i.e. that a person has enjoyed some sort of wealth that has not been justified by their lawful sources of income. These laws can be particularly useful in the context of corruption investigations. In many cases, especially in cash economies and where small amounts of bribes are paid over time, it is almost impossible to prove every individual act of corruption. This means many corrupt officials are rarely prosecuted and get to keep the assets that they have acquired through their corruption. By using illicit enrichment laws, investigators and prosecutors can still pursue corrupt officials in such situations if they are able to at least identify the results of their corrupt acts, such as a disproportionate purchase of expensive property or other high-value assets despite their modest legal income.

Is it a crime?

While Article 20 of the UNCAC recommends that countries should criminalise illicit enrichment, legislative approaches to the concept vary wildly. Some countries have no laws. Some have illicit enrichment offences targeting public officials, such as in Mexico or Mongolia, while some have offences covering all individuals, such as Rwanda. In other countries, such as Kenya or Mauritius, the illicit enrichment law is not a criminal offence but is in the form of a civil action. This means that the primary aim of an action under the law in these countries is not to prosecute the individual who has illicitly enriched themselves but simply to recover the stolen assets. The level of enforcement also varies. In Hong Kong, for example, there were already successful cases leading to asset recovery back in the 1970s. In Tanzania, the courts are only just starting to adjudicate the first illicit enrichment prosecutions.

Why is there some controversy?

Some critics argue that illicit enrichment laws violate established legal rights by unfairly reversing the burden of proof and removing a presumption of innocence. Similarly, there are some fears that illicit enrichment laws may violate an individual’s right to silence and privilege against self-incrimination, two well-established legal principles that aim to guarantee fair judicial proceedings. An additional debate revolves around the principle against retroactive application, i.e. that a person should not be sanctioned for an action that was not defined as criminal at the time it was committed However, the vast majority of legal challenges against illicit enrichment laws on these grounds  have not been successful, and almost every court that has considered these issues have ruled that illicit enrichment laws do not unacceptably violate legal rights.

How is illicit enrichment investigated and prosecuted?

As this area of law is comparatively new, standard procedures or best practices are still very much being developed. Suspected cases of illicit enrichment often come about in the context of other ongoing corruption investigations. The initial lead may also come from newspaper articles or other regular intelligence channels. For most cases, a solid approach would include:

• a thorough financial investigation to determine how much money an individual might have had available over a certain period of time;
• a comparison between that income and how much money they spent in that time to acquire assets or maintain a certain standard of living.

The aim is to gather solid evidence – not guesswork – so that only individuals who have clearly acquired their assets from non-legal sources are subjected to legal proceedings. A key tool for investigators and prosecutors seeking to prove illicit enrichment cases in court is Source and Application of Funds analysis. Annex II of Illicit Enrichment provides step-by-step guidance on how to conduct this analysis. Our free eLearning course on Source and Application analysis also provides a hands-on practical case to work through.

Are there any recent case studies?

A successful case brought by Kenya’s Ethics and Anti-Corruption Commission against Stanley Mombo Amuti, a former low-ranking public official who could not explain how he purchased around USD 400,000 worth of property in 10 months, has set a precedent in Kenya for further use of this mechanism.  Uganda also experienced a recent success in a USD 1.25 million illicit enrichment case involving an accountant in the Office of the Prime Minister. Cases can go right to the top: the former President of El Salvador was recently convicted for illicit enrichment that occurred while he was in power.

What work does the Basel Institute do in this area?

The Basel Institute’s International Centre for Asset Recovery (ICAR) works with partner countries to help enhance their capacity to recover stolen assets and combat corruption. As part of this wider effort, in some countries we are working to improve knowledge of illicit enrichment laws and how to use them responsibly and effectively.  Why? Because when drafted and enforced fairly, illicit enrichment laws can be an incredible weapon in the fight against corruption. 

Learn more

• Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth by Andrew Dornbierer is freely available on Basel LEARN alongside a database of illicit enrichment laws and step-by-step guidance on conducting Source and Application analysis.
• Hard copies are available to purchase at cost price via Amazon. See Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth for the relevant links. 
• Download a PDF of this quick guide.
• View this quick guide on LEARN in English, Spanish, French and Portuguese.

The Basel Institute on Governance and the Thai Institute of Directors (IOD), in conjunction with the Thai Private Sector Collective Action Against Corruption (Thai CAC), have today signed a Memorandum of Understanding to jointly support the promotion of anti-corruption compliance.

The agreement covers the launch of a pilot project that aims to encourage the local certification of anti-corruption compliance programmes in SMEs, while alleviating the due diligence burden on multi-national companies.

The Thai CAC will engage, educate and build the capacity of SMEs around anti-corruption policies and systems, as well as the requirements of multinational companies on transparency and due diligence for their suppliers.

The Basel Institute will provide technical assistance with financial support from the KBA-NotaSys Integrity Fund.

The Thai CAC is an initiative by the Thai private sector which aims to tackle corruption via Collective Action and aims to bring effective anti-corruption policy and mechanism into implementation by companies in order to create an ecosystem of clean business community.

Learn more

• Find out more about the concept of local compliance certification through Collective Action and how this novel approach is being applied around the world.
• Explore the B20 Collective Action Hub to learn more about how Collective Action can help to build stronger public-private partnerships in the fight against corruption.
• Pana Ratanabanangkoon, Project Director of the Thai CAC, spoke about the initiative's work and achievements at an UNGASS 2021 side event co-organised by the Basel Institute's Collective Action team and the Swiss Federal Department of Foreign Affairs. Watch the recording.

A new open-access book published by the Basel Institute on Governance explores the rapid growth of illicit enrichment legislation around the world and its use to target corruption and recover illicitly obtained assets.

What does illicit enrichment mean for combating corruption?

An increasing number of countries are introducing mechanisms to target people who enjoy an amount of wealth that can't be explained by their lawful income. These mechanisms - known as illicit enrichment laws or unexplained wealth laws - allow investigators and prosecutors to recover assets that have clearly not come from lawful sources without having to prove the specific criminal action that gave rise to these proceeds. As such, they are particularly useful to target corruption offences, where it is often difficult to point to an obvious victim or to a specific criminal act.

Why are illicit enrichment laws sometimes controversial?

As a comparatively underdeveloped area of law, the concept of illicit enrichment sparks debate. Critics argue that certain characteristics of these types of laws contravene longstanding legal rights such as the presumption of innocence. The vast majority of courts that have considered these laws, however, disagree with these claims and have instead ruled that they justifiably fit within established rights and procedures. Consequently, in many countries, illicit enrichment laws are currently playing a vital role in the recovery of proceeds of crime and corruption. To support practitioners and policy makers in this emerging field of law, Illicit Enrichment by Andrew Dornbierer provides a comprehensive guide to both criminal and civil-based illicit enrichment laws and how they have been applied by investigators and prosecutors to target unexplained wealth and recover proceeds of crime.

Analysis of laws and cases from 103 jurisdictions

Covering relevant laws from around the world, the book explains the different approaches that legislators have taken to define, codify and sanction unjustifiable and unexplainable increases in wealth. The scope ranges from laws that take the form of criminal offences to those based solely in civil procedure, such as unexplained wealth orders. Through an extensive examination of jurisprudence, the book further explains the different approaches and interpretations that judiciaries have taken when applying these laws, particularly in the context of existing legal rights. Aimed at investigators, prosecutors, legislators and academics, the open-access book features:

• Extensive analysis of jurisprudence and cases around the world
• Tables, flow charts and graphics explaining key concepts
• Discussion of common questions and challenges
• A collection of laws from 103 jurisdictions, also as an online database
• A step-by-step guide to financial investigation and source and application analysis to support illicit enrichment cases

Illicit Enrichment was developed and published by the Basel Institute on Governance through its International Centre for Asset Recovery, with research support from the NYU School of Law.

Open-access and peer review

This book is freely available and shareable as an open-access research publication under a Creative Commons CC BY-NC-ND 4.0 licence. In line with accepted practice for open-access research, the book has undergone an open peer review with three diverse and highly qualified reviewers. Find the reviews and author comments in the introductory notes.

Where to find it

• Read Illicit Enrichment online or download a PDF of the book on our Basel LEARN platform at illicitenrichment.baselgovernance.org. This version also contains:
  • Annex I: A database of illicit enrichment laws in 103 jurisdictions, also available as a PDF
  • Annex II: Guidance for practitioners on how to conduct source and application analysis to support illicit enrichment cases
• A free eBook version is available on Google Play.
• Purchase a printed copy via Amazon – see all links to local Amazon stores here.

30 June webinar

If you're interested in hearing from the book's author Andrew Dornbierer and practitioners experienced in applying this legislation to recover stolen assets in their countries, join us on 30 June at 13:00 CET for a virtual event on Illicit enrichment laws – an underused tool to target corruption and recover stolen assets?

During SDC Governance Week, a cross-agency learning event for staff and partners of the Governance network of the Swiss Agency for Development and Cooperation (SDC), the Basel Institute’s Public Governance team will speak about its support to the agency’s development of new strategic anti-corruption guidelines. The process of updating the guidelines aims to reflect evolving risks, emerging understandings of corruption and fresh evidence about effective approaches to anti-corruption interventions. In this quick guide, Claudia Baez Camargo, Head of the Basel Institute’s Public Governance team, explains the purpose, focus and value of strategic anti-corruption guidelines for development agencies:

In what context do development agencies face corruption issues?

In their efforts to promote sustainable development around the world, development agencies and their country offices face a variety of corruption risks. Some risks directly threaten funded projects, for example if money intended to finance a new hospital is embezzled, or the building contract is given to the friend of a local politician and at an inflated value. Other corruption risks more indirectly, or at least less visibly, impact the ability of development agencies to achieve their project goals. For instance, if sextortion – the coercive extraction of sexual favours – is prevalent, it will undermine programmes aimed at promoting gender equality. And when corruption is a systemic issue, it hampers sustainable development directly and in multiple ways. Development agencies may therefore consider addressing systemic corruption issues strategically through a dedicated anti-corruption programme.

What is a “strategic” approach to anti-corruption?

The above three types of corruption risk that development agencies face often overlap and spring from the same underlying factors. These factors, or drivers, include the political economy and prevailing power relations in a country or community, as well as the social norms that influence people’s behaviour. A strategic approach to anti-corruption in a specific context will therefore always start with a good diagnosis that covers two broad areas:

• First, the major corruption issues in that country or context that are hindering sustainable development. For example, widespread petty corruption in the health sector or a flawed procurement system that sees inflated contracts going to political cronies.
• Second, the underlying drivers of those problems, such as social norms around the need to give “gifts” to health workers, or state capture through powerful networks of elites.

Strategic approaches to anti-corruption will be based on this diagnosis and design projects that are – at the very least – relevant, feasible, sustainable and mindful of risks or unintended consequences.

Setting out an anti-corruption strategy in black and white – why?

Not all development agencies have written guidelines setting out their strategic approach to anti-corruption. But they have multiple benefits. Their main purpose is to support the development of evidence-based and effective anti-corruption programming decisions. This makes targeted anti-corruption interventions more likely to succeed in their goals, to help the beneficiary communities in tangible ways and to be a good use of taxpayers’ money. By setting out their strategic anti-corruption approach in black and white, the agency leadership clearly signals which areas are important to focus on and how to go about it. This clear messaging is extremely useful for staff in country offices who face the task of identifying which programmes to fund and how best to design them. New staff joining the country office can quickly grasp not only which projects are being implemented and how, but also – very importantly – why. The consistent underlying approach also provides a solid base for learning from the experiences of peers in other country offices.

Developing the guidelines – a valuable collaborative exercise

Like all strategic documents, the value is not only in the final product but in the process of developing it. What helps tremendously when developing anti-corruption guidelines is to convene a series of discussion groups that bring people from multiple units, disciplines and levels of hierarchy around the table. This is because corruption is a transversal issue, cutting across almost all other thematic areas and professional specialisms. It is not just a topic for the anti-corruption department and external anti-corruption experts, but needs to include the experiences, views and concerns of those working on the ground. Getting a broad range of inputs helps to make the guidelines more robust and reflective of the real challenges that country offices and programme managers face. The process also helps to get buy-in, which is crucial when it comes to implementation. An agile approach with multiple rounds is probably needed. At the Basel Institute, we typically also find it valuable for a partner anti-corruption organisation or expert to sense-check and challenge the drafts. It is worth taking this time to get the strategic guidelines right. This is because unlike hands-on operational guidance documents and tools that may evolve more rapidly, the strategic guidelines are approved at the highest levels of the agency and need to be built to last.

Turning strategy into practice – implementing the guidelines

Strategic guidelines are not a recipe for what you should do, but a recipe for how you should think and what you should consider. How best can a development agency help staff turn that knowledge into practical action and avoid it getting lost in the heaps of paperwork that country offices inevitably have to deal with? A must-have is an operational guidance document that translates the guidelines into practical resources and tools. Additional short explainers on particular topics, like how to set up a useful monitoring and evaluation system on anti-corruption, are often helpful. But however user-friendly these documents are, they are the basis for discussion and not a substitute for it. Some ideas to encourage dialogue and active implementation are:

• Short training interventions, in which country staff have the opportunity to raise questions about their specific issues.
• Peer learning events on anti-corruption, to share experiences with colleagues and learn what’s working elsewhere.
• An on-demand support function for country staff to bounce ideas around and discuss doubts and concerns relating to anti-corruption.

Learn more

• Find out more about the Public Governance team and its research, training and technical assistance services.
• See the team’s dedicated resource site on informal governance and its implications for the fight against corruption.
• Download this quick guide as a PDF and view all quick guides.

The following statement by the Basel Institute's Managing Director, Gretta Fenner, was aired at the Special Session of the UN General Assembly against Corruption on 4 June 2021. Watch the video here.

Excellencies, Ladies and Gentlemen, I thank you for the opportunity to deliver a short statement on behalf of the Basel Institute on Governance.

We welcome the political declaration as a text that provides useful guidance. In particular, we welcome those parts of the text that go beyond previously agreed language, many of which reflect the recommendations that our organisation has made in the context of the consultation process.

Among those, we in particular welcome that paragraph 11 calls upon member states to go beyond the minimum in relation to criminalisation, with a special reference to illicit enrichment, and the paragraphs that encourage states to adopt regimes for both conviction and non-conviction based confiscation.

We are encouraged that the political declaration recognises that states do not yet live up to their commitment to afford each other the widest measure of cooperation when it comes to investigating corruption and recovering stolen assets. In many countries international cooperation remains burdened by unnecessary bureaucracy and sometimes procedural law that would appear to be biased in favour of the defence. 

We are also encouraged that member states in paragraph 6 have endorsed the notion of Collective Action as an important emerging norm in corruption prevention.

Finally, we are gratified that the declaration refers strongly to the importance of independent law enforcement and the critical role played by non-state actors.

The gist of this document gives thus reason for hope. But the reality is that on most days, the fight against corruption still feels like a very steep uphill battle. The levels of corruption remain incredibly high, and not a single country is spared. Of course in parts this is the consequence of positive developments. The media and civil society as well as bolder law enforcement action have helped us to see corruption better, and to understand its consequences better. More people are upset about it.

And we should celebrate these successes, and in particular the many courageous individuals, in law enforcement, in the media and ordinary people who resist, who stand up and protest; many of them at great personal sacrifice.

But corruption is a very resilient and adaptive disease. We are no longer (only) dealing with the kind of corruption that involves stealing from state coffers or paying someone off. This means purely legal and technical solutions are just not enough. We must understand the political economy of corruption, and we must invest in education so that still more people are able to see through the corruption fog.

Second, corruption has become even more globalised. It is a spiderweb connecting politicians and businesses regardless of political colour or nationality, aided by nifty middlemen and the still many blind spots on the world map.

This stands in stark contrast with the increasing break-down of global solidarity and governance, marked by misguided references to national sovereignty and masked by the excuse of bureaucracy. It makes it virtually impossible for law enforcement to stand a chance. The criminals are laughing; we make it so easy for them.

So we must ask more of you, and you must ask more of each other.

First, we ask that you truly endorse the strong language encouraging countries to go beyond the mere minimum. Don’t be held back because others may not go as far as you want to. Show true leadership, not comparative leadership.

Second, please, for once, be ready to be fully accountable. For the fight against corruption to succeed we need a lot, but what we don’t need is another political statement that is not followed through.

So I call upon you all to allow for full and public scrutiny of what you will do to implement the commitments made today.  Those who risk their lives to fight corruption, those who lose their lives because of corruption, every day, in every corner of the world, they deserve that. I thank you.

H.E. Ambassador Stefan Estermann, Head of the Prosperity and Sustainability Division, Swiss Federal Department of Foreign Affairs, made the following opening remarks at our joint virtual side event on Collective Action at the 2021 Special Session of the General Assembly against Corruption (UNGASS) on 2 June. View the full recording of the side event.

Ladies and gentlemen, The Swiss government is proud to partner with the Basel Institute in sponsoring this side-event on collective action.

The Basel Institute has inspired and promoted collective action initiatives ever since when it was founded in 2003. It has advised a wide range of private sector, non-governmental and government actors and firmly established itself as an international knowledge center in this field.

The Swiss government benefitted from the Basel Institute’s experience and advice in the drafting of our first national anti-corruption strategy that was adopted in November last year. One of the goals of the Swiss strategy is to ensure that companies with honest business practices do not find themselves at a competitive disadvantage on international markets.

We are determined to support the companies that invest in compliance and do business with integrity. As a State Party to the United Nations Convention Against Corruption, we are supposed to promote the use of good commercial practices among businesses, and between businesses and the State – this is Article 12 of the Convention.

I would argue that collective action is indeed a good practice, not just because it is undertaken for all the right reasons, but also because it works! So what is collective action? I will not define it but simply say that it is the solution to collective action problems, like the so-called prisoners’ dilemma. Collective action problems arise in situations where individuals would be better off cooperating – but fail to do so because they do not trust each other – or at least not enough. This applies to preventing and fighting corruption.

We all know that corruption is bad for business. All the States Parties of the UN Convention against Corruption are committed to prohibiting foreign bribery, and to enforcing this prohibition. But can we be really sure that our main competitors will play by the rules? Are we not putting our companies at a disadvantage if we vigorously enforce the foreign bribery prohibition – while some competitors may be allowed to take a free ride, and bribe their way into new markets?

To this problem, the OECD Anti-Bribery Convention, through collective action, has produced an ingenious solution: Thanks to a robust peer review mechanism, the parties are assured that other jurisdictions will indeed enforce the foreign bribery prohibition, and that their companies will not undercut fair competition by resorting to corrupt practices.

Of course, we would be even more comfortable if all major exporting countries were parties to this Convention and participated in the peer review. For collective action to be successful, the most important players should be on board. At today’s side-event, we are going to explore a few examples of collective action.

I look forward to learning more about these initiatives from the distinguished panelists. We are going to see how collective action plays out in different environments.

According to the Political Declaration adopted at this special session of the General Assembly against corruption, all UN Member States will encourage the private sector to take collective action, including through the establishment of public-private partnerships. Let us therefore continue to develop these tools, and use them more broadly.

I hope that the success stories that lie before us will indeed inspire more initiatives in more markets and environments. Each success story builds more confidence that we can overcome corruption if we do it together!

In the name of the Swiss government, I wish to thank the Basel Institute for co-organizing this side-event, and the panelists for their readiness to share lessons learned.

Post-webinar update: Read the event summary here, view the full event on YouTube or listen to the audio recording. *** An increasing number of countries are introducing mechanisms to target people who enjoy an amount of wealth that can't be explained by their lawful income. These mechanisms - known as illicit enrichment laws or unexplained wealth laws - allow investigators and prosecutors to recover assets that have clearly not come from lawful sources without having to prove the specific criminal action that gave rise to these proceeds. As such, they are particularly useful to target corruption offences, where it is often difficult to point to an obvious victim or to a specific criminal act. What different approaches to illicit enrichment legislation exist around the world? How do they work in practice? What are the key debates and concerns that are holding countries back from developing and implementing these laws? This virtual event will discuss these issues and more, based on experience in recent cases. Jonathan Spicer, Senior Asset Recovery Specialist at the Basel Institute on Governance, will moderate a panel of experts and practitioners:

• Andrew Dornbierer, Asset Recovery Specialist, Basel Institute on Governance and author of Illicit Enrichment: A Guide to Laws Targeting Unexplained Wealth (newly published in June - see news release)
• Tom Walugembe, Asset Recovery Specialist, Basel Institute on Governance
• Paul Keyton and Preeya Raghoonundun, Director and Assistant Director, Integrity Reporting Service Agency, Mauritius
• Phillip G. Kagucia, Assistant Director, Ethics and Anti-Corruption Commission, Kenya

The event takes place on Wednesday, 30 June at 13:00 CET. All are welcome. Download the event flyer

The Zanzibar Anti-Corruption and Economic Crimes Authority (ZAECA) and Basel Institute on Governance have today signed a Memorandum of Understanding to support Zanzibar’s fight against corruption. The agreement covers a suite of capacity building and mentoring interventions focused on financial investigations, international cooperation to gather information and evidence to prosecute cases of corruption and related financial crimes, and the recovery of stolen assets. Together, these will equip ZAECA officers with the fundamental skills and emerging techniques they need to investigate and prosecute corruption cases, trace illicitly obtained assets both domestically and internationally, and launch efforts to recover them for the benefit of the people of Zanzibar and Tanzania more broadly. The Basel Institute’s International Centre for Asset Recovery (ICAR) will provide the technical assistance and capacity building foreseen under the MoU with financial support from the Swiss Agency for Development and Cooperation (SDC). The new programme will benefit from ICAR’s strong presence in the East Africa region, with an existing network of field offices and embedded experts as well as strong relationships with key anti-corruption and related law enforcement agencies.

The fifth event in the Corrupting the Environment webinar series explored the latest trends in the online sale of environmental goods, including live animals and wildlife products. What is happening, where, how much and who is doing it? And what are we missing in our efforts to detect and prevent it? Co-hosted on 21 May by the OECD and Basel Institute on Governance, the event featured speakers from the Europol, Global Initiative Against Transnational Organized Crime (GITOC) and Basel Institute’s International Centre for Asset Recovery. Scroll down for links to the full video and audio recording, or read the following short summary.

Why is it still easy to buy illegal wildlife online?

Among the many activities that have shifted more online due to the pandemic is illegal wildlife trade. This is hardly surprising. Illicit trade tends to go along with trends in legitimate trade, and various studies already point to growth in online retail sales of all types of consumer goods. It is concerning, though. This is not only because the internet makes it easy to buy and sell endangered products across borders and to evade domestic legislation. It is also because of the internet's role in socialisation and norm formation. Seeing endangered species being auctioned openly on Facebook while you catch up with friends or browse news makes this crime seem normal and acceptable. This is not new, just a worrying acceleration. The online sale of wildlife products and other environmental goods, live and dead, was already rampant across social media, classified ads sites, B2B wholesaler websites and catalogue sites. Why isn’t being detected and taken down, and the criminals caught?

How policy priorities and regulations (would) support enforcement efforts

One barrier to effective action against the online sale of environmental goods is under-resourcing of law enforcement. With stretched funds, it is hard for police to raise illegal wildlife trade up their priority lists. This is particularly acute in many developing countries that are the sources of these illegal goods. The problem of low prioritisation is changing in some areas, for example in the decision to include environmental crime as one of the 10 EMPACT priorities, Europol’s priority crime areas, under the 2018-2021 EU policy cycle. A second challenge is weak regulation of the cyber sphere. There is some excellent work underway through voluntary initiatives and partnerships with tech companies such as the Coalition to End Wildlife Trafficking Online. But the limitations of voluntary action by NGOs and the private sector are highlighted by the persistent and continued sale of endangered wildlife online. For example, many platforms including Facebook have imposed clear bans on all trade in live animals and seem to be getting better at deleting content that is reported by NGOs and citizen activists. But it is hard to analyse these results without transparent data on the posts deleted and their content, which is not available. Plus, one can still easily find people auctioning live wild animals and whole pieces of ivory or rhino horn openly to their followers. In some cases, social media adverts feature illegal wildlife, ie the social media firms are not only facilitating but also directly profiting off IWT. Tech companies would need to invest significantly in tools to more effectively stop both the trade and related socialisation, as well as to systematically store and provide usable information on illegal wildlife sales to law enforcement. The fragmentation of the social media and online sales platforms by language adds to the complication. Without clear regulation that applies to all relevant online platforms internationally, it is hard to imagine any single company making that type of investment. (Though we would like to be proven wrong!)

Drilling down from the tip of the iceberg

In truth, we are only just scratching the surface of the illegal sale in environmental goods, even of products that are bought and sold openly on the public web. Data on the scale and scope on online sales of illegal wildlife trade are still dangerously patchy. By combining techniques for machine learning and social media analysis, GITOC research reveals that the largest markets for some products may be totally off the radars even of conservation and law enforcement specialists. Adverts appear on a multitude of platforms, often attached to personal phone numbers and in clear violation of the platform's policies. Europol's work on wildlife and other environmental crimes supports this finding – that a lot of illegal activity hides in plain sight on the open web. In European priority areas (reptiles, glass eels and birds) a major issue is the intermingling of legal and illegal supply chains, which make it easy to "launder" illegal species into legal markets and trade them openly online. Though the international law enforcement response is at an early stage, secure communication channels and partnerships like the EU Wildlife Cybercrime Project and EnviCrimeNet are starting to bear fruit. There are also valuable efforts to build capacity for cyber investigations among law enforcement and to include cyber and financial investigation specialists in environmental crime teams, an approach strongly advocated by the Basel Institute.

Shining a light into the dark web

The data gets even patchier as you enter the dark web. A 2018 GITOC report on Illicit Wildlife Markets and the Dark Web predicted that online sales of wildlife products would rise on the dark web, where the perpetrators are more professional and probably linked to other criminal activities like illegal drugs and arms sales. Although the dark web helps to protect the buyer and seller's anonymity to some extent, the tide is turning. Law enforcement operations to seize and close down dark web markets now often involve the authorities continuing to run the site for a short period. This is providing valuable intelligence on sellers, buyers and operational methods – intelligence which will increase as it is shared and compared across jurisdictions and sectors.

Following the (virtual) money

Cryptocurrencies are mostly used for illegal transactions on the dark web, again in an attempt to conceal the identities of the buyer and seller. Unfortunately for criminals, cryptocurrencies are not as anonymous as many people think. In many cases, blockchain analysis makes it possible to trace transactions, deanonymise them and even geolocate them. The international response to emerging financial crime threats relating to cryptocurrencies is also strengthening fast, as indicated by the latest annual Global Conference on Criminal Finances and Cryptocurrencies co-organised by Europol, INTERPOL and the Basel Institute on Governance. Regulations are helping to shine light here. If criminals want to cash out their illegal funds, they have to do this through cryptocurrency exchanges, which now fall under the scope of the Financial Action Task Force standards on anti-money laundering and are therefore obliged to monitor transactions and conduct customer due diligence. The implication? We could do a lot to improve detection of illegal wildlife trade online by combining two sets of red flags that are currently kept separately.

• Red flags that trigger regular suspicious transaction reports (STRs) by financial institutions including cryptocurrency exchanges.
• Red flags on environmental or wildlife crimes such as the customer’s background, location, profession and activity patterns, many of which are identified by initiatives such as the United for Wildlife Taskforces.

If good communication channels exist between financial institutions and law enforcement, this could help detect suspicious transactions and money laundering activities by environmental criminals that result in investigations on the ground. Importantly, even small pieces of information about a single seizure, transaction or customer have triggered large cases in the past. Europol and INTERPOL play a key role in ensuring this information is channelled to the relevant authorities in compliance with legal frameworks and in a form that can be actioned. Financial institutions and other companies wishing to share information can reach out to the EU Wildlife Cybercrime Project or the National Units of Europol or INTERPOL.

Building specialist skills and special relationships

Building capacity for cryptocurrency analysis among law enforcement is a clear urgency. Another low-hanging fruit is capacity for forensic analysis of digital devices seized in wildlife crime investigations, which often contain a wealth of data on transactions, operations and platforms. A third is building and maintaining the channels and relationships that are necessary for effective information exchange. Although these all hit against the barriers of unequal resources and competing priorities in different countries, specialists in cybercrime, cryptocurrencies and (virtual) financial investigation have a clear place in the fight against illegal online sales of environmental goods. Their role will only grow as both legal and illegal trade continue to intermingle and shift online.

With thanks to our panel

• José Antonio Alfaro Moreno, Team Leader, European Serious and Organised Crime Centre (ESOCC), Europol
• Simone Haysom, Senior Analyst, Global Initiative Against Transnational Organized Crime 
• Federico Paesano, Senior Financial Investigation Specialist, Basel Institute on Governance
• Juhani Grossmann, Team Leader - Green Corruption programme, Basel Institute on Governance (moderator)

More

• Watch the full webinar on YouTube. 
• Learn more about the OECD-Basel Institute Corrupting the environment series and register now for our next event on the illegal waste trade on 16 June.
• The intermingling of legal and illegal supply chains is an underlying theme in the Basel Institute’s four-part series on Wildlife crime – understanding risks, avenues for action. See in particular the resources on Illegal wildlife trade and financial crime, Illegality in the exotic pet trade and Forest crime and the illegal timber trade.
• Federico Paesano leads an open-registration course on Cryptocurrencies and Anti-Money Laundering. Delivered virtually over four 3-hour sessions, the course aims to help practitioners from a wide range of law enforcement, financial and business sectors prevent, detect and investigate the use of cryptocurrencies for illicit activities.

A new free eLearning course on the Basel Institute’s virtual learning platform addresses a common barrier to successful corruption and money laundering cases and attempts to recover stolen assets from abroad. Major corruption and money laundering cases often have an international dimension and almost always require law enforcement practitioners to request information and cooperation from their counterparts abroad. We often see, through the mentoring and capacity building work of our International Centre for Asset Recovery (ICAR), that practitioners do not always maximise the potential of informal information-sharing channels before moving to the formal process of mutual legal assistance (MLA). Then, at the MLA stage, there are several key elements that could greatly facilitate the drafting of the request and improve the chances of obtaining a positive response. Weak capacity in these two areas is not uncommon in any jurisdiction. Yet it severely impacts the chances of achieving a successful conviction in transnational crime and corruption cases, or freezing and recovering assets that have been stashed in foreign jurisdictions. Authoritative guidelines and manuals exist, and are included in the course as both base and reference material. But it is only by going through the process of reaching out to foreign counterparts and preparing MLA requests themselves that practitioners can understand the concepts of international informal and formal cooperation and how they may be applied in real cases in their own legal and institutional contexts.

Turning theory into practice

The interactive and self-paced course on International Cooperation and Mutual Legal Assistance in Criminal Matters takes participants step by step through a fictional investigation into a corrupt e-passport procurement deal, covering:

• Seeking information on the internet and in databases
• Using mutual administrative assistance (MAA), often described as “informal” channels, to obtain information and prepare formal MLA requests
• Combining domestic and international information and leads
• Planning and writing effective MLA requests that have a good chance of receiving a rapid and positive response
• Anticipating and dealing with reasons for refusal of MLA

On average, it takes three hours to complete the 10 sessions. At the end, the participants can download a personal certificate. More importantly, they will have internalised the fundamental skills needed to collect and request information and evidence from international sources.

For whom is it useful?

Investigators, prosecutors, financial intelligence analysts, investigating judges and other criminal justice operators involved in any transnational criminal investigation – not only corruption and money laundering – will find the course relevant and useful to their work. In particular, we encourage those who have completed onsite or virtual ICAR training programmes in Financial Investigations and Asset Recovery, Advanced Operational Analysis or Corruption in Infrastructure Projects and Procurement to take the course as a follow-up. It will also help to build foundational knowledge before attending ICAR’s instructor-led training programme on Offshore Structures and Mutual Legal Assistance.

Get started

• The course is freely open to all. Simply register or log into our LEARN platform and start on session 1!

More than 860 public officials from 20 cities across Peru have completed a five-week virtual training course of the Subnational Public Finance Management (PFM) Programme, which our Lima-based team implements under the Swiss-Peruvian SECO Cooperation. Focused on strategic planning approaches and new Peruvian planning regulations, the training was developed in collaboration with the PFM Experts Network. This is an initiative of PFM graduates from a previous diploma course offered by the Programme.

Agile and creative training approach

The success of the training course follows our team’s growing experience in offering virtual training in a context of strict lockdowns and challenging internet and computer access, which course co-organiser Limberg Chero explains in this blog post. The course included:

• Self-paced eLearning courses with videos hosted on the Basel Institute’s LEARN virtual learning platform, giving students the flexibility to study in their own time.
• Real case studies presented through recorded interviews with experienced public officials who were members of the PFM Experts Network. This form of peer-to-peer learning helped students connect theory to reality.
• A final exam with fixed timings.
• Facebook and Telegram groups with 1,100+ members. These channels were partly for sharing news and updates but also for learners to raise questions and interact with one another about the course topics.
• Virtual meetings via Zoom to allow students to deepen their interactions and grow their networks. These were triggered by the high levels of interaction between the students on Facebook and Telegram.

Breaking the ice and building bridges

The interaction, mutual support and relationship-building are a crucial aspect of the course design and outcomes. The training approach helped to build bridges between different groups of people thinking about or implementing planning policies. Tellingly, it is now the graduates themselves – and their institutions – who are reaching out to their networks and recommending they sign up to future editions of the course. Although the Subnational PFM Programme is targeted at 11 countries, the virtual nature of the training means it that public servants all across Peru can benefit at no extra cost.

Learn more

• Find out about the Subnational PFM Programme and download the factsheet (in English)
• Visit the Programme website (in Spanish)
• See updates from the team on the Programme Facebook page

The UN General Assembly Special Session against Corruption (UNGASS) calls for countries to adopt a wide range of measures to recover assets stolen through corruption. This includes non-conviction based forfeiture (NCBF), which is emerging as a powerful tool to recover illicit assets when a criminal conviction is not possible. What can we learn from actual cases of NCBF around the world? What should States consider when introducing NCBF legislation? How can it be applied more effectively and what challenges stand in the way? These questions are the focus of a side event at the 2021 Special Session of the General Assembly against Corruption (UNGASS) on 1 June, co-hosted by our International Centre for Asset Recovery (ICAR) and the Stolen Asset Recovery Initiative (StAR) of the World Bank and UNODC. The event takes place virtually in English on Tuesday, 1 June at 09:00 EST / 15:00 CET and is open to all. Register here: Recovering stolen assets through non-conviction based forfeiture.

The panel

Our panel of expert speakers represents both requesting and requested States with experience in applying NCBF to recover stolen assets. Co-moderators:

• Gretta Fenner, Managing Director, Basel Institute on Governance
• Emile Van Der Does De Willebois, Co-ordinator, StAR Initiative

Panellists:

• Stefan Cassella, Independent asset recovery and money laundering expert
• Patrick Konsbruck, Public Prosecutor, Grand Duchy of Luxembourg
• Oscar Solórzano, Senior Asset Recovery Specialist and Head of Latin America, Basel Institute on Governance
• Nona Tsotsoria, Judge of the European Court of Human Rights

Agenda and background information

The UNGASS side event follows our submission to the UNGASS 2021 Consultation Process last year on NCBF and international cooperation, and a speech by panellist Oscar Solórzano at a preparatory meeting on optimising cooperation in asset recovery. In (very) brief, the issue is this: Increasingly, States are turning to NCBF mechanisms as a means to recover the proceeds of corruption and other criminal activity. The United Nations Convention against Corruption (UNCAC) recognises NCBF as being a relevant alternative forfeiture mechanism in cases where suspects have died or absconded. States have also successfully used NCBF mechanisms to recover criminal proceeds in other cases where prosecution of an individual may not be possible. This is a positive development in general. However, as NCBF is increasingly adopted by States, it faces new challenges, in particular where evidence or assets are located in States which have not yet adopted such mechanisms. This restricts the ability of States to fulfil their commitment under UNCAC to “_provide the widest measure of mutual legal assistance in investigations, prosecutions and judicial proceedings in relation to offences covered by the Convention_”. The session will explore:

• how NCBF mechanisms have developed as a means of recovering assets stolen through corruption;
• which models exist;
• what issues need to be considered in adapting one of these models to a local context;
• how States have found ways to provide mutual legal assistance in NCBF cases where the requesting State has not yet adopted a similar mechanism;
• challenges to NCBF, including on the grounds of fundamental rights.

The panellists will discuss cases from different jurisdictions where NCBF procedures have been applied, international assistance has been provided and assets have been returned.

More

• Watch the event on YouTube
• Download the event flyer
• Learn more about the StAR Initiative and the International Centre for Asset Recovery
• View the calendar of UNGASS 2021 side events
• The Basel Institute's Collective Action team and Swiss Federal Department of Foreign Affairs are co-hosting another UNGASS side event on 2 June on Collective Action: Building Efficient Public-Private Partnerships. Do join the session for a fresh perspective on the joint fight against corruption.

On Wednesday, 2 June, we are honoured to be co-hosting a virtual side event at the 2021 Special Session of the General Assembly against Corruption (UNGASS) in collaboration with the Swiss Federal Department of Foreign Affairs.

Register here for the 60-minute session at 19:00 CET/13:00 EST: Collective Action: Building Efficient Public-Private Partnerships.

About the event

Why does the draft UNGASS Political Declaration 2021 recognise and encourage the use of anti-corruption Collective Action, as the Basel Institute recommended in a submission to the Consultation Process last year?  

What does Collective Action mean for governments, companies and citizens? Does it work in practice? Is it an efficient way for the public and private sectors to partner? What benefits can it bring? 

This panel discussion seeks to inspire, enlighten and engage participants on the scope and possibilities of anti-corruption Collective Action.

The speakers will explain how partnerships between the public and private sectors are helping address systemic corruption issues in their countries and sectors.

Opening remarks

H.E. Ambassador Stefan Estermann, Head of the Prosperity and Sustainability Division, Swiss Federal Department of Foreign Affairs 

Panel

• Klaus Moosmayer, Chief Ethics, Risk and Compliance Officer, Novartis
• Cecilia Müller Torbrand, CEO, Maritime Anti-Corruption Network (MACN)
• Pana Ratanabanangkoon, Project Director, Thai Private Sector Collective Action against Corruption (Thai CAC)
• Gilbert Sendugwa, Senior Regional Manager, CoST – the Infrastructure Transparency Initiative in Africa

Moderator: Gemma Aiolfi, Head of Compliance, Corporate Governance and Collective Action at the Basel Institute on Governance

More

• Watch the event on YouTube
• Download the event flyer

Our Collective Action team asked the London-based Institute of Business Ethics how it makes its research so practical and useful to decision-makers on the ground. Head of Research, Guen Dondé, explains:

Since its foundation in 1986, the Institute of Business Ethics (IBE) has always strived to be a safe space for organisations of all kinds to join forces and tackle the ethical issues they are facing.

Today, more than 30 years on, we can rely on an ever-growing community of Ethics and Compliance (E&C) practitioners who come together from different industries and help us to look at the challenges ahead, but with our feet firmly on the ground.

We have always taken a very practical approach to how we do research, and our publications aim to be most useful to practitioners on the front line. 

Head in the clouds, feet on the ground

Philosophy, classical and modern, is an obvious starting point for those interested in understanding more about ethics and its implications for us as a society.

But what does ethics mean when it comes to day-to-day business practices and decisions? Very early on, we came to the realisation that this next step is usually missing. Often, the people on the ground find themselves struggling to reconcile the philosophical theories that they have learned in books with the reality of their daily job.

Our purpose as an organisation is to promote high standards of business behaviour based on ethical values. To achieve this, we don’t claim that we have all the right answers to any ethical dilemma that people might have. On the contrary. Resolving an ethical dilemma more often than not requires a lot of discussions, and internal and external consultations, in order to find the course of action that is most appropriate.

Our job is to facilitate those conversations and encourage E&C practitioners to share examples of good practice with their peers. Everything we do is informed and shaped by our engagement with our supporters, insight from our network and our own research into key trends and issues. We listen, distil and raise awareness by sharing the latest good practice through our publications, events, training and tools. In our experience, there are three fundamental steps:

Step 1: Engage

Engaging staff and embedding ethical behaviour can be difficult. To help organisations to do this effectively, we play the role of advisor and critical friend by sharing insights and good practice gathered through our research and our network.

We can provide a wealth of practical experience in embedding business ethics and can offer guidance to organisations on a range of programme areas.

Step 2: Network

Corporate ethics roles can be lonely places and our communities are considered by participants to be valuable safe spaces where peer-to-peer learning can take place through the sharing of experiences and stories.

Through the IBE, many have found a friendly ear or an encouraging challenge to help them take their programmes to the next level. Conversations with this network also contribute significantly to the IBE's work programme by informing our priorities for future discussions, research, publications and events.

Step 3: Learn

We carry out regular research into business ethics issues and publish practical guidance, which is always developed working closely with organisations and experts in order to ensure that the output is helpful, relevant and easily accessible.

We also work collaboratively with other stakeholders and their representatives to ensure that we are up to date with the latest thinking and that a variety of perspectives is always considered when we develop our thinking.

We keep evolving and improving our approach: for example, in 2020 we instituted a new Supporters Forum annual event, where one of the goals was to learn about what research companies wanted to see. Our research agenda for 2021 reflects some of the outputs of this discussion.

Putting ethics at the heart of business strategies

The collaborative relationships we have nurtured with organisations of all sectors and sizes have been crucial to encourage businesses to put ethics at the heart of their strategy.

This is not just a question of addressing specific problems like environmental protection and the use of new digital technologies, important though these are, but of instilling the right mindset throughout business organisations.

Companies increasingly understand that, to be successful, they need to deliver value (not just in financial terms) to their stakeholders and to society as a whole, from which they derive their licence to operate. This is an ambitious but necessary objective that requires Collective Action and multi-stakeholder cooperation.

The Basel Institute on Governance is delighted to have signed a cooperation agreement with the Procuraduría General del Estado in Ecuador. The agreement covers collaboration with our International Centre for Asset Recovery (ICAR) in the recovery of assets resulting from corruption, money laundering and other financial crimes affecting the State. The agreement builds on our fruitful engagement since 2018 with Ecuador’s Fiscalía General del Estado (Attorney General’s Office) and Unidad de Análisis Financiero y Económico (Financial Intelligence Unit). The Procuraduría General del Estado is an autonomous constitutional institution which, in addition to other responsibilities, leads the Ecuadorian Government’s efforts to recover stolen assets from international financial centres. It is currently led by Iñigo Salvador Crespo, who took office in 2018. Our collaboration with these three key institutions in Ecuador highlights that international asset recovery is a complex process requiring several public bodies with different competences to work closely together. Building capacity to recover stolen assets therefore strengthens the entire judicial value chain, including the links between the main institutions responsible for investigation, prosecution and confiscation of illicit assets. Our ICAR team in Latin America looks forward to supporting the prosecutors in their ongoing cases, capacity building and collaboration with domestic and international counterparts. The virtual signing ceremony took place on Monday, 26 April 2021. Alongside Iñigo Salvador Crespo were the directors of the main departments of the Procuraduría General del Estado. The Basel Institute was represented by Oscar Solórzano, Head of Latin America, and Diana Cordero, Embedded Asset Recovery Specialist.

Our International Centre for Asset Recovery training team has delivered another virtual version of our flagship Financial Investigations and Asset Recovery training programme to 19 anti-corruption officers from 14 African countries. The training was provided at the request of the Commonwealth Africa Anti-Corruption Centre (CAACC) and funded by the African Development Bank. The virtual delivery took place using video conference and the Basel Institute’s LEARN platform. As part of the week-long training programme, the participants – mostly investigators from Botswana, Cameroon, Eswatini, Ghana, Kenya, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Sierra Leone, South Africa, Uganda and Zambia – worked together in breakout rooms to investigate a complex corruption and money laundering simulated investigation. They had to collect "evidence" to prove the offences and explore the various formal and informal avenues that investigators can use to obtain information and trace assets in foreign jurisdictions. One participant echoed the general feeling that the training was "a great experience – the content was extremely relevant to my daily tasks."

Blending online training with self-paced eLearning

We are increasingly using the "blended learning" approach by incorporating self-paced eLearning modules into our usual hands-on and practical instructor-led course. A key financial investigation skill that many participants lacked is the analysis of large volumes of financial data, in particular bank statements. For this purpose, participants took the eLearning module on Financial Analysis using Excel before attending the online workshop. Fictitious bank statements were then provided to the participants to analyse in the context of the simulated exercise to apply their newly acquired skills. “An eye-opener”, said one participant.

Putting laws into practice

Finally, the training highlighted the underutilisation, in most of the countries represented, of anti-money laundering legislation in the fight against corruption and the recovery of stolen assets. Participants, for instance, mentioned that despite the existence of asset recovery mechanisms such as non-conviction based confiscation in their domestic legislative framework, such avenues were not sufficiently explored.

The fourth event of the Corrupting the Environment webinar series co-hosted by the Basel Institute and the OECD focused on how behavioural approaches can and must complement interventions tackling illegal wildlife trade (IWT) and other environment crimes. The panel comprised voices from practitioners, activists and policymakers, reflecting the variety of actors involved in fighting IWT. The panel’s moderator was Dr. Frédéric Boehm, Economist/Policy Analyst at the OECD. Gayle Burgess, Behavioural Change Programme Leader at TRAFFIC, Alex Ngabirano, Founder and Director of the Bwindi Development Network in Uganda, and Dr. Saba Kassa, Public Governance Specialist at the Basel Institute on Governance, participated as speakers.

Behaviour change approaches: a promising tool to fight green corruption?

Conservationists and anti-corruption practitioners are realising the power of applying insights from social and behavioural change theory when designing anti-IWT interventions. One of the ideas is that by influencing the social norms of target consumer groups, e.g. buyers of wildlife used for medicine, it is possible to trigger positive alternative behaviours which directly reduce the volume of IWT. Gayle Burgess of TRAFFIC summarised the three different strategic approaches often found in behavioural change interventions:* Advocacy: efforts aimed at changing the regulatory framework around IWT

• Social mobilisation: influencing the social norms surrounding IWT and that affect people’s perceptions of the issues and ethical norms
• Behaviour change communication aimed at switching a negative behaviour to a desirable one in conservation and wildlife management The INTEGRITY framework was developed as a memory aid for conservation practitioners to ensure they consider a behavioural change component when designing anti-corruption interventions. It’s absolutely not about following a checklist, though. Before applying behavioural approaches, practitioners should carefully analyse the context and map the relevant actors. If, for instance, corruption is related to structural economic factors – like low wages for public officials – then behavioural insights may not change the target behaviour (e.g. accepting bribes) because the underlying driver of corruption is not addressed. Hence, behavioural interventions are most effective when a previous in-depth context analysis has taken place and when part of a holistic approach.

Bwindi Development Network – a success story?

Alex Ngabirano is the founder and director of the Bwindi Reformed Poachers project in Uganda, which aims to reform traditional poachers and help them transition into sustainable livelihood activities. Drawing on more than 20 years’ experience working to protect mountain gorillas and support Bwindi National Park’s frontline communities in Uganda, Alex works with former poachers who accepted to abandon their hunting tools to form their own association and participate in community projects. Some are directly involved in conservation activities; others lead tourist groups in the natural park. The revenue generated by these activities is reinvested in community education and development. From a behavioural insights perspective, former poachers promoting the messages to refrain from poaching is a very effective approach to change the norms and values around IWT within their community. For example, by highlighting the collective distress caused by poaching activities, reformed poachers can address the underlying motivation to engage in IWT. The hope is that this successful model can be replicated in other national parks in Uganda, especially since the increasing price of IWT driven by higher global demand is fuelling more poaching in the country. Conservationists in other countries fighting rampant poaching and trafficking of wild animals would do well to consider this option.

What do behavioural change interventions in China, Vietnam and Uganda teach us?

Gayle Burgess shared key findings from TRAFFIC’s work using behavioural approaches to influence consumer demand in IWT in China and Vietnam. In China, TRAFFIC worked with fifth-generation ivory carvers to re-purpose their skills using sustainable alternative materials. Results from evaluation surveys indicate that 30% to 40% of the workforce has adopted the desired behaviour and is now adopting sustainable materials. In Vietnam, TRAFFIC’s survey suggested that illegal rhino horn was connected to prestige and status, mostly in the business community. So, TRAFFIC carried out an extensive communication campaign to change behaviours employing the Vietnamese concept of Chi or strength of will. This reminded consumers that success and strength come from within and not from part of an endangered animal from a faraway land, shifting behaviours away from IWT use. What about behaviour at the other end of the supply chain, in source locations? Saba Kassa talked about the research on the drivers of wildlife trafficking that the Basel Institute has carried out in Uganda under a project funded by PMI Impact. What emerged is that socio-economic drivers such as poverty and social pressure are compounded by strong narratives that legitimise engaging in the early stages of IWT, making it socially acceptable to accept bribes or not enforce regulations. The research highlighted the importance of looking at people’s internal motivations and barriers to change behaviour while not losing sight of the socio-economic background and context conditions in which the intervention takes place. So, behavioural change approaches are needed to change narratives, stereotypes and social norms that make engaging with IWT acceptable. These interventions also reinforce the importance of understanding the political economy, actors and power relations of the context where the intervention will take place. A holistic approach, engaging local communities and understanding the interplay of narratives and structural drivers of corruption, are some of the elements anyone designing an intervention and wanting it to be successful should consider.  

What can we do to support behavioural research and practice in IWT interventions?

We know that corruption facilitates IWT, but we don’t know exactly how, where or to what extent. In order to save the world’s last remaining endangered species from being butchered and transported across the oceans, we need more evidence. Perhaps we’re overstating the role of corruption as a major driver of IWT? Or perhaps smart anti-corruption interventions can cut a crucial link in the trafficking chain. Smarter monitoring and evaluation of counter-IWT interventions is one way to better understand the dynamics of corruption in a specific context, its biggest risks and its consequences for tackling IWT. The Basel Institute’s Green Corruption programme is working with the Tackling Natural Resource Corruption (TNRC) project to explore five crucial areas where corruption intersects with environmental crimes, including one joint component on behavioural interventions in collaboration with TRAFFIC. And as Alex Ngabirano emphasised, community education remains essential in combating IWT sustainably by empowering future generations.

Learn more

• View the full webinar on YouTube.
• Learn more about the Green Corruption programme and Corrupting the Environment event series.
• Read about another recent webinar on behavioural insights to tackle corruption in a crisis, hosted by the Basel Institute's Public Governance team as Knowledge Partner at the 2021 OECD Global Anti-Corruption & Integrity Forum.

The following summary reflects key messages emerging from the Harnessing the intangible: enhancing integrity during crises Knowledge Partner session on 25 March 2021 at the 2021 OECD Global Anti-Corruption & Integrity Forum. Hosted by the Basel Institute and moderated by Claudia Baez Camargo, Head of Public Governance, the event explored how practitioners could tailor approaches to strengthen integrity during an emergency response to counter recurrent social norms and informal practices. The panel incorporated a wide range of perspectives from health, anti-corruption and behavioural research, featuring Dina Balabanova and Eleanor Hutchinson of the London School of Hygiene and Tropical Medicine, David Jackson of the U4 Anti-Corruption Resource Centre, and Ruth Persian of The Behavioural Insights Team.

Why aren’t traditional approaches to tackling corruption and promoting integrity working?

A key takeaway from the session is that mainstream anti-corruption interventions focusing on accountability, transparency and law enforcement measures have not been as effective as we would like in combatting corruption. Could this be because we don’t make enough effort to understand the local context, social networks and power dynamics in the target countries as well as individual actors’ experience and motivation? A growing body of evidence suggests so. For example, recent research carried out in Nigeria by the London School of Hygiene & Tropical Medicine reveals that the causes of absenteeism among Nigerian health workers are much more complex than one might expect. They encompass economic pressures, structural inefficacies and managerial/organisational dynamics, with the research also emphasising that these are shaped by sociocultural factors and political relationships. Without a more nuanced analysis of how and why people behave as they do and the context in which they make decisions, laws and rules alone are unlikely to change the drivers of corrupt behaviour. Initiatives are increasingly focusing on improving health system governance, but thinking about the “upstream” social and political factors is essential. Exploring social norms can offer insights into the drivers of unethical/corrupt decision-making. For instance, the Basel Institute’s current research project in Tanzania under the GI-ACE programme shines a spotlight on, among other things, social norms related to returning favours or serving family members first. Health workers are put under pressure to make special concessions to their kinship or those who offer gifts. If people follow these informal rules, merely changing or strengthening laws or rules will not get rid of the underlying drivers of corruption or violations of integrity. The message is clear: when designing interventions, it is critical to first understand the context, including what social norms are at play and which behavioural and structural barriers to behaviour change the different actors face.

Are we less rational than we think – and even worse in a crisis?

Traditional economic thinking has assumed that human beings are rational agents acting according to an analytical, cost/benefit analysis. In his best-selling book, Thinking, Fast and Slow, Daniel Kahneman referred to this as slow “System 2” thinking. In contrast, System 1 thinking is fast and automatic, and more susceptible to environmental influences and biases than we think. However, policies and systems are often designed with only System 2 in mind. Furthermore, in situations where decision-makers act under a lot of pressure and stress – as is the cases in crises –  evidence shows that System 1 is most likely to take over when making decisions. This has to be taken into account when designing interventions. In the context of the Covid-19 pandemic, interventions could support medical staff and policy makers by simplifying how information is displayed and framed. For instance, a study showed how changing how prescription instructions are framed can lead a significant reduction in prescription errors in UK’s National Health Service (NHS). It seems likely that this finding can be generalised: by providing information at the right time and an easily accessible format and by simplifying decision-making, people working under a lot of stress are supported to take the right course of action.

Do crises amplify integrity issues? Or is “crisis” mode quite normal?

The pandemic has merely exacerbated the fact that health systems around the world are in a constant state of crisis, with regular shortages and understaffing. This generates different pressures on staff workers, with a direct link to integrity issues. One issue relates to the political economy of a country. For instance, sanctioning health workers for corrupt behaviour if they enjoy political protection may lead to severe consequences – like job losses – for head of departments. An intervention that does not take this into account would do more harm than good. Gendered norms and expectations also drive behaviour. In the case of absenteeism among Nigerian health workers mentioned above, for example, female nurses are often expected to juggle their shifts with family care and contribution to the household economy (e.g. farming). Merely changing rules or management without understanding people’s behaviour and the expectations they face in a complex system will not yield the expected results. As for political power, understanding how social and family networks are structured and operate is key to designing effective anti-corruption interventions.

Harnessing behavioural insights to drive change

A solid political economy analysis will help build understanding among anti-corruption practitioners – but what should they do with that understanding? The next step is to understand how to use these insights into different networks to design more effective interventions. This is the idea behind another GI-ACE project led by the Basel Institute on Harnessing Informality: Designing Anti-Corruption Network Interventions and Strategic Use of Legal Instruments. To continue with the example of absenteeism among health workers, individuals who are negatively affected by this (more working hours, more pressure due to the added activities related to the Covid-19 responses) may be more likely to support an intervention to address the issue. So, clearly identifying networks of allies with a reason to support a change in favour of integrity should be an essential step of any intervention.

How social norms affect behaviour – for better or for worse

Another interesting point raised during the session was how we all belong to different reference groups which form part of our identity. Social norms stem from these reference groups and influence our behaviours in different ways. We follow descriptive norms because they relate to common behaviour, whereas we respect injunctive norms because we think that others think these behaviours are socially appropriate. For example, assisting our family materially because we think that others perceive this as the right thing to do.  These last norms generate social pressure as we are scared by the social sanctions we would incur by violating them. Social norms become particularly salient during crises when, as mentioned above, System 1 thinking is likely to take over in stressful situations where actors need to make fast decisions under a lot of pressure. Rather than changing social norms, perhaps the objective in the Covid-19 crisis and more generally should therefore be relieve individuals from the pressures generated by the norms. Norms of elites need careful consideration. Cases of decision-makers violating social distancing norms may make it permissible to violate health guidelines in the eyes of the public. However, research shows that trend-setters – i.e. people within groups leading by example by adopting virtuous behaviours associated with social norms (like respecting social distancing) – play an equally important role in changing undesirable behaviours associated with social norms. Revealing information about these virtuous behaviours within reference groups can incentivise others to change their own behaviour vis-à-vis a social norm. Another option that requires careful consideration and handling – and a deep understanding of political economy, behaviours and norms – is for governments to publicly condemn corrupt behaviour using normative interventions, for example naming and shaming individuals who violated covid-19 regulations.

Can social norms be changed?

So: relieving individuals from the pressures generated by social norms is one avenue for intervention. Another common form of intervention aims to correct people’s incorrect perceptions of social norms. More drastically, perhaps some norms need to change in order to form the basis of a stronger, healthier and more resilient society. Is this possible? The short answer that emerged at the session is yes. Three elements must be present:* People need a reason to change.

• People must trust each other.
• A mechanism must be in place to let change occur (e.g. a civic space). This implies that changing social norms to encourage integrity is a collective effort. It is also an immensely challenging one – but nonetheless essential if we wish to enhance integrity during crises as well as during “business as usual”.

Learn more

• Read more about our Public Governance team’s research on social norms and related factors here.
• Learn more about the UK-funded Anti-Corruption Evidence (ACE) programme and its two components: SOAS-ACE (led by SOAS University of London) and GI-ACE (led by Global Integrity).
• Read a publication on the London School of Hygiene & Tropical Medicine (LSHTM)  website by Dr Dina Balabanova (LSHTM), Professor Obinna Onwujekwe (University of Nigeria) and Dr Eric Umar (University of Malawi) on Understanding and eliminating health sector corruption impeding UHC at district level in Nigeria and Malawi: institutions, individuals and incentives.
• Watch a video recording of the session on YouTube.