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Standing still? What the world’s biggest economies are doing about corruption

Transparency International chair Huguette Labelle evaluates the progress of Group of twenty leading economies (G20) on the corruption front.

In the wake of the financial crisis, it was clear that the world economic crisis could not be governed by the small group of western economies who composed the G8. In November 2008 the group of 20 leading economies met for the first time at head of state level to prevent a global recession and to address the crisis which put national economies at risk and dramatically increased poverty worldwide.

Lobbying the G8 to fight corruption and make the financial system more transparent had been one of our priorities for many years, so naturally our focus shifted to the G20 very quickly, especially since we have chapters in 17 of the 19 G20 countries, and a liaison office at the European Union (the 20th G20 member).

The financial crisis created the impetus to give prominence to the G20. Governments know that measures preventing another contagion of credit crunch and financial crisis are in the interests of every country. Much is still required of the G20, but it will remain a crucial instrument for handling the global economy through troubled waters.

After the financial crisis, greater transparency?

On 5 April 2012, Transparency International called on finance ministers from G20 countries to make the financial system more transparent.

Measures called for include greater enforcement of “know your customer” rules by banks, greater disclosure by companies of their operations, taxes and other payments to governments, and stronger regulation in the financial sector to prevent conflicts of interest and excessive risk-taking.

What makes the G20 different from other summits?

We hope that the fact that the G20 has prioritised the fight against corruption could bring new momentum to the global anti-corruption agenda.

When the G20 announced their anti-corruption action plan, many of us at Transparency International were surprised by how ambitious and comprehensive it was. Looking back at why the G20 was founded in 2008 to react to what came close to a global financial meltdown this looked like a belated acknowledgement that a lack of transparency, accountability and integrity contributed to causing the global crisis.

This nine point anti-corruption action plan was very specific in its goals, such as implementing the UN Convention against Corruption, from which many of the goals are drawn. However, we very quickly recognised the importance of making sure words led to action. After all, the Un treaty has still not been ratified by three of the G20 member countries: Germany, Japan and Saudi-Arabia.

Many of the issues we had spent over a year campaigning for the G20 to tackle were included: money laundering, foreign bribery, protection for whistleblowers, measures to prevent corruption in the public sector, and, at the same time as we were discussing the issue at our global conference, the recovery of assets stolen by corrupt officials and leaders.

Why does such action need to be taken at global level?

With ever more sophisticated means being used to facilitate corrupt acts, such as the bribes and stolen assets running through intermediaries and subsidiaries in offshore havens, global measures are needed to confront a scourge that has become truly global.

Previous efforts to spread international rules against corruption have shown that as many jurisdictions as possible need to participate, if certain companies are not to be left at a disadvantage for being more transparent and operating with greater integrity. This brings a level playing field for businesses that operate within the rules.

As I explained at Transparency International’s last annual meeting, the work of the G20 goes well beyond the countries involved. It is to be hoped that encouraging the leading economies to take strong anti- corruption and pro-transparency measures will affect other countries. The G20 is therefore one of our best hopes for creating a positive contagion effect, to counteract the negative contagion created by the financial crisis.

Will the action plan deliver results?

What makes the G20 Anti-Corruption Action Plan stand out is that it includes some deadlines, such as a commitment to implement whistleblower protection rules within two years. The G20 committed to publish progress reports measuring whether such goals have been met. Nevertheless, as these progress reports are self-assessments there is a need for external monitoring and advocacy. This approach is similar to that taken by the Open Government Partnership.

The action plan presented the opportunity for spreading anti-corruption commitments beyond the OECD member states to the emerging economies, thus hopefully levelling the playing field for western companies bound by stricter foreign bribery legislation.

For example, business lobbies in OECD countries had for years opposed strong punishment of companies for bribing officials in other countries, saying that the companies from emerging economies would have no such constraints. With the world’s strongest emerging economies effectively pledging to apply the same rules, the “one hand tied behind the back” argument no longer applies.

To see a group of the most powerful states on the globe, make such solid commitments creates the potential for unprecedented progress in the fight against corruption.

What other progress on anti-corruption have the G20 achieved so far?

The progress report published after the G20 summit in Cannes in November 2011 listed some impressive achievements, from whistleblower protection for private sector employees in Korea to the establishment of an anti-corruption commission in Saudi Arabia. While many of the achievements did not come about just because of the G20, the fact remains that several G20 countries are doing a lot more to fight corruption than they were before 2008.

India has ratified the UNCAC - albeit more likely due to pressure by its citizens than from the G20. China has new legislation criminalising bribery of foreign public officials and Russia has joined the OECD Anti-Bribery Convention; India and Indonesia have similar draft legislation. Furthermore, the G20 have committed to use the OECD’s new compendium on best practices in whistleblower protection as a basis for national legislation - to be passed by the end of the year.

We see less progress on the G20’s commitment to make the financial system more transparent. Of course, while we take satisfaction in the progress, we must also bemoan the failure too. Today we are in the middle of a sovereign debt crisis in Europe and the US which has created unhelpful uncertainty about the global economy. This crisis can in part be attributed to the failure of public authorities to tackle bribery and tax evasion.

“By failing to deliver on financial reform, G20 continues to tackle the symptoms and not the causes of the financial crisis”

Transparency International reaction to 2011 G20 Cannes Summit

To be fair, with regard to financial transparency the G20 have supported the revision of the Financial Action Task Force (FATF) standards which has had some positive results such as tax evasion becoming a predicate offense for money laundering.

However, it remains to be seen whether G20 countries now take steps to adapt their legislation to the revised FATF standards – only that and the respective prosecutions and sanctions will make life more difficult for dictators stealing public money, tax evaders and drug dealers.

If the G20 are serious about combating money laundering, they need to tackle the crucial issue of disclosure of the beneficial owner of trusts and companies.

On 26 March a UK bank paid almost US $14 million in fines for failing to maintain money laundering systems. Read more.

All G20 countries have committed to the Multilateral Convention on Tax Information Exchange. By facilitating information exchange at an international level the Convention has the potential of becoming an effective tool in the fight against money laundering. However, this would only be the case if it is also signed by developing countries and secrecy jurisdictions and the option of automatic information exchange is used by many signatories.

While the G20’s anti-corruption measures are more impressive than their achievements in financial reform, the progress made should give us hope that it is not too late to ensure that the lasting legacy left by the financial crisis is one of lessons learned, not lessons forgotten.

What can civil society do regarding the G20 agenda?

In 2010, the G20 set themselves the target to lead by example by achieving individual and collective progress on their anti-corruption commitments by 2012. Civil society is closely monitoring the implementation of the G20 plan and contributing to advancing the agenda by providing regular recommendations to the G20 Anti-Corruption Working Group. Furthermore, we can mobilise public pressure where needed and communicate what is at stake to a broader base of citizens.

By making representations to G20 leaders and the G20 anti-corruption working group, we have encouraged it to set high benchmarks and concrete goals on money laundering and tax evasion.

The Mexican Presidency of the G20 has stated the aim of consulting with civil society. This is a welcome step that has led to our invitation to an important side meeting to the G20 for businesses: the B20 (Business 20) Task Force on Improving Transparency and Anti-Corruption. This is partly due to TI’s constructive engagement with the G20 Anti-Corruption Working Group and its ongoing advocacy for civil society participation in G20 processes. This group will send the G20 recommendations on corruption issues relevant for the business sector. Membership in the group will enable us to meet with the G20 Anti-Corruption Working Group at their 18 April 2012 meeting.

Together with other civil society groups we have been lobbying for a C20, a civil society summit. Ideally this would take place early on in the process and enable international civil society to put forward their recommendations to the G20 sherpas (the government officials who work behind the scenes) and heads of state.

How do you engage with the G20?

Through its international network Transparency International is able to influence the G20 at national and global levels with a coordinated advocacy strategy. Our National Chapters in G20 countries meet with related government officials and brief the media in their countries on our views of the issues.

Furthermore, we work closely with other civil society organisations, such as Global Witness, the Task Force on Financial Integrity and the UNCAC Coalition. This is crucial to share relevant information. Our message is clear, the commitments made by the G20 are vital in preventing and dealing with the massive world damage caused by corruption.

What will be high on the agenda in 2012?

For this year the G20 have committed to work on public sector integrity, including anti-corruption measures in public procurement, principles for an effective framework for stolen asset recovery and a set of principles for visa denial to corrupt officials. That is why the recommendations we made to the G20 in February 2012 focussed specifically on those areas. The G20 officials have recognised our work by distributing our submissions formally to all of the working group’s members, and by referring to them in the progress report they published at the 2011 G20 Summit in Cannes.

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