Report: Advanced Economies Complicit in Transnational Corruption

Anti-corruption efforts in seemingly “clean” advanced economies have stalled even as Russia’s invasion of Ukraine has brought to the fore that nation’s role in fostering kleptocracy in recent decades, Transparency International said in a report on Tuesday.

While painting a grim picture of the global fight against corruption, the Berlin-based watchdog put the spotlight on countries that have historically scored high, meaning favorably, on its annual Corruption Perceptions Index.

Those countries remain among the “cleanest” in the world. But from Germany to France to Switzerland, most saw their CPI scores drop or stagnate last year.

Five traditionally top-scoring countries — Australia, Austria, Canada, Luxembourg and the United Kingdom — saw a significant decline in their assessments, Transparency International said.

The U.S. scored 69, a “negligible” increase of 2 points, but a Transparency International expert called the rating “troubling.”

Even Denmark, ranked No. 1, was relegated to the “little or no enforcement” category in the fight against foreign bribery.

Cross-border corruption takes many forms, from countries allowing corrupt foreign actors to launder stolen funds through their economies to governments failing to punish companies that bribe foreign officials.

In recent years, investigators have uncovered myriad instances of corrupt money finding its way into Western economies, from nearly $2 billion worth of U.K. property owned by Russians accused of financial crime or with links to the Kremlin, to tens of billions of dollars laundered into Canada each year. 

Transparency International said that while its Corruption Perceptions Index does not capture transnational graft, that form of corruption remains the advanced economies’ “biggest weaknesses.”

Russia’s invasion of Ukraine “made it painfully apparent how inaction on transnational corruption can have catastrophic consequences,” the report says. “Not only have advanced economies helped to perpetuate corruption elsewhere, but they have also enabled kleptocracies to consolidate, threatening global peace and security.”

Gary Kalman, executive director of Transparency International U.S., said the U.S., thanks to the sheer size of its economy and financial secrecy rules, remains a “major facilitator of corruption internationally.”

“If you take a bribe for a thousand dollars, you put that in your pocket. If you’re trying to steal millions or billions, you need to find, as they say, ‘a more sophisticated investment strategy,’ and hiding it in an economy that’s over 20 trillion dollars makes it a little bit easier to hide,” Kalman said.

Transparency International is not the first organization to call out Western nations for aiding kleptocracy.

Last year, Treasury Secretary Janet Yellen said the United States was arguably “the best place to hide and launder ill-gotten gains.”

“And that’s because of the way we allow people to establish shell companies,” Yellen said. 

Transparency International said there are signs that the U.S. and other nations are taking the problem seriously but more needs to be done.

In 2021, the U.S. Congress enacted the Corporate Transparency Act, which aims to end the use of anonymously owned companies for money laundering.

Facilitating the transnational corruption, Kalman said, are financial service providers who are not currently subject to anti-money laundering reporting obligations.

“These are the lawyers, the accountants, the money managers, the corporate formation agents, those that create trusts for wealthy people, investment advisers who are currently not covered by any anti-money laundering responsibilities,” Kalman said.

To close the loophole, he said Congress should pass the Enablers Act, which was approved by the House of Representatives last year but fell short in the Senate.

A Justice Department task force created to seize Russian assets following Russia’s invasion of Ukraine is increasingly targeting enablers and facilitators of sanctions evasions.

Earlier this month, the Justice Department announced criminal charges against two businessmen, one of them Russian and the other British, for facilitating the ownership and operation of a luxury yacht owned by a sanctioned Russian oligarch.

The $90 million, 255-foot yacht, owned by Viktor Vekselberg, was previously seized by Spanish authorities at the request of the U.S.

The U.S. is also a member of the multinational Russian Elites, Proxies, and Oligarchs (REPO) Task Force, which has seized billions of dollars in Russian assets.

“While some governments appear to have finally woken up to the problem that they had helped create, ending top-scoring countries’ complicity in cross-border corruption —originating from Russia and beyond — requires a long-term, concerted effort,” Transparency International said.

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