Global efforts to criminalise earnings from stolen wealth are making it hard to hide illicit money – Rajika Jayatilake

Good leadership results in the success of a nation as much as an organisation. Unfortunately, if the leadership is corrupt, corruption becomes the norm across the board. As the ‘Mayor of Silicon Valley’ Robert Noyce once said, “if ethics are poor at the top that behaviour is copied down through the organisation.”

And throughout the country as well…

This is what three economists at the World Bank – Jørgen Juel Andersen, Niels Johannesen and Bob Rijkers – discovered. Their observations and research are documented in one of the bank’s recent reports titled ‘Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts.’

The study claims that 7.5 percent of World Bank aid to developing countries (1999-2010) was deposited in tax havens such as Switzerland and Luxembourg. Further, more aid meant greater leakage – even up to 15 percent in the poorest nations.

So more poverty and foreign aid meant more money for corrupt rulers to steal!

A core discovery of the study is that aid to poverty-stricken developing nations “coincide with significant increases in deposits held in offshore financial centres known for bank secrecy.” In other words, corrupt rulers of poor countries robbed their people of billions of dollars of aid disbursements and stashed them in offshore financial centres where secrecy governs.

The UNDP recently estimated that US$ 2.6 trillion is stolen annually through corruption while another 1 trillion dollars is paid out as bribes. The total of this pilfered money amounts to five percent of global GDP. The United Nations Development Programme claims that in developing countries, funds lost to corruption are estimated to be 10 times the amount of official development assistance.

However, following years of unrelenting theft, global authorities and financial institutions have gradually begun establishing laws and regulations to identify earnings from stolen wealth, and exposing the perpetrators. Switzerland, which came into disrepute as a ‘dirty money hub’ because of its banking secrecy, has tightened its anti-money laundering regulations in an effort to bring them in line with international standards.

It has begun cracking down on illicit money when a country provides proof of the financial irregularities of persons or companies. The Swiss Federal Tax Administration (FTA) has swapped information on suspicious financial accounts with 75 countries based on the global Automatic Exchange of Information (AEOI).

Prior to that, the World Bank Group and United Nations Office on Drugs and Crime (UNODC) had initiated a partnership called the Stolen Asset Recovery Initiative (StAR) to enhance and assist international efforts, and prevent the creation of safe havens for stolen money.

StAR works with global organisations including the Conference of the States Parties to the United Nations Convention against Corruption (UNCAC), G8, G20 and the Financial Action Task Force, to influence and liaise with policy makers.

In December 2017, StAR supported the UK and US to co-host the first ever Global Forum on Asset Recovery (GFAR) in Washington D.C. The forum focussed on assisting four priority countries – viz. Nigeria, Sri Lanka, Tunisia and Ukraine.

Meanwhile, the Kleptocracy Asset Recovery Initiative (KARI) by the US Department of Justice seizes stolen assets while in the UK, the Unexplained Wealth Orders allow courts to order ‘politically exposed persons’ to explain why their assets are so much larger than their salaries back home.

According to Policy Director at Corruption Watch Susan Hawley, the StAR Initiative estimates that between US$ 20 billion and 40 billion dollars is stolen every year from the coffers of countries across the globe.

For instance, it was discovered that between 1990 and 2010, Kenyan politicians and their sidekicks robbed the country of three billion dollars. And in Tanzania, rulers siphoned out US$ 586 million. Ugandan rulers robbed 270 million dollars, Rwandan leaders stole US$ 190 million and Burundi lost 122 million dollars to corrupt governors.

In 2018, Kenya’s President Uhuru Kenyatta and his Swiss counterpart Alain Berset signed an agreement to recover Kenyan assets stashed in Swiss banks. It took a long time and the right conditions to prevail for Tanzania to be helped by StAR to freeze about US$ 5 million of stolen assets in 2016.

However, Uganda and Rwanda are still challenged in the task of asset recovery.

Of the five billion dollars that General Sani Abacha stole from Nigeria during his rule (1993-1998), the US and the British Crown Dependency of Jersey recently agreed to repatriate more than US$ 300 million to Nigeria. Switzerland returned 700 million dollars and other European countries sent back US$ 600 million or so.

This trend of global assistance to recover assets stolen by corrupt rulers shows that success can only be achieved with the collaboration of aid donors, havens and states from which the thieving elites hail.

As Albert Einstein once said, “the world will not be destroyed by those who do evil but by those who watch them without doing anything.”