Deterring Kleptocracy Demands an International Anti-Corruption Court
October 9, 2021
The Pandora Papers provide the most comprehensive look yet into the sprawling transnational networks that allow corrupt public officials and economic elite to launder and hide their illicit assets everywhere from the British Virgin Islands to Washington, D.C. The investigation shows that wealthy countries need to do far more to clean up the fiscal paradises they provide for kleptocrats, including by regulating professional enablers such as trust companies in South Dakota in the United States and real estate agents in London. U.S. lawmakers introduced legislation this week to do just that on the national-level. The global scale of the problem that the 11.9 million leaked confidential files from 14 financial service providers implicating public figures from over 90 countries demonstrates there is also the urgent need for a new international institution to hold kleptocrats and their professional enablers accountable.
Multilateral spending… is diverted to supercharge the gains of kleptocrats at the expense of solving the world’s paramount crises.
Fundamentally, international institutions exist to manage the tensions between the sovereignty of states and the ever-evolving global interdependence among them. The ease with which kleptocratic networks abuse interdependence to enrich themselves and maintain repressive regimes exposes the clear inability of existing global governance structures to counter kleptocracy.
The corrupt and their families enjoy opulent lifestyles in the liberal democracies where they prefer to stash their dirty money, while public health, welfare, and infrastructure crumble in their home countries. Outrage with the rapacity of kleptocratic governments produces instability and conflict as exploited populations rise up, often in the face of state violence from the security forces paid to defend the kleptocratic order. Multilateral spending to respond to the coronavirus pandemic, promote economic development, and combat climate change is diverted to supercharge the gains of kleptocrats at the expense of solving the world’s paramount crises.
Navigating the political risk, human rights abuses and general instability perpetuated by kleptocracy is an increasingly fraught enterprise for ethical companies, in particular those that are subject to the US Foreign Corrupt Practices Act and its counterparts that criminalize the bribery of foreign officials. They are further disadvantaged as international competitors that face no such constraints are willing to engage in corruption to secure lucrative public contracts and gain access to emerging markets. The delivery of quality public works and the fair competition that spurs innovation demands a level playing field for the business sector.
To mitigate the dangers of interdependence a new international institution is needed to address grand corruption. In June, hailing from 46 countries, over 125 world leaders including Nobel Laureates, former heads of state and government, cabinet ministers, high court judges, intergovernmental officials, business leaders, and representatives of civil society called for an International Anti-Corruption Court to hold kleptocrats accountable when national governments are unwilling or unable to do so. Subsequently, both the Liberal and Conservative party platforms for the September 2021 federal elections in Canada included commitments to advance the creation of the IACC, and further high-level support for the idea is growing around the world.
Liberal democracies have grown increasingly aware of the threats grand corruption poses to democracy, human rights, human health, and international peace and security. On June 3, the G7 Ministers released a statement that they “recognize that corruption is a pressing global challenge,” and, at the G7 Summit, the G7 leaders agreed to take collective action to combat corruption.
Transparency without accountability can deflate publics by reinforcing a sense that kleptocrats’ impunity is unassailable
In the United States, President Joe Biden also issued a national security study memorandum in June that established the fight against corruption at home and abroad as a core U.S. national security interest. He stated: “Corruption erodes public trust; hobbles effective governance; distorts equitable markets; undercuts development efforts; contributes to national fragility, extremism, and migration; and provides authoritarian leaders a means to undermine democracy worldwide.” Anti-corruption is also a key theme of the Summit for Democracy his administration will host in two parts, the first in December.
A large and mutually reinforcing set of anti-corruption measures are now under consideration in many international and national fora. They include national legislation requiring all the various kinds of professional enablers of corruption such as company formation agents and art dealers to meet the same basic due diligence requirements already required of banks in many countries. Establishing national-level beneficial ownership registries can also help enhance defenses against the onslaught of illicit financial flows.
The increased transparency provided by publicly available beneficial ownership registries like the U.K. Companies House is essential to helping law enforcement and investigative journalists uncover complex money laundering networks and will make it harder for kleptocrats to hide their stolen assets using anonymous shell companies. Such registries would also provide rich sources of evidence for the expert investigators and prosecutors who would build and try cases before an International Anti-Corruption Court. But they are not an end in and of themselves. Transparency without accountability can deflate publics by reinforcing a sense that kleptocrats’ impunity is unassailable.
The global fight against corruption does not need new legal frameworks. 187 countries are party to the UN Convention Against Corruption, which requires them to have laws criminalizing various forms of corruption including bribery, fraud and embezzlement. The OECD Bribery Convention and other regional agreements are further features of the international anti-corruption legal landscape. The glaring gap in global governance is a means of anti-corruption enforcement.
After the cataclysm of the Second World War, liberal democracies created ambitious new international institutions to manage their vulnerabilities and responsibilities. One institution that was not established in this period was a permanent international court to hold war criminals accountable. It was not until the 1990s that the horror of genocides in the former Yugoslavia and Rwanda created a window of opportunity for the creation of the International Criminal Court.
In this episode of the Global Governance Podcast, Augusto Lopez-Claros and guest, Senior U.S. District Judge Mark Wolf discuss kleptocracies and the need for an international anti-corruption court.
There are no singular tragedies to similarly create space for the creation of an International Anti-Corruption Court. Instead, the growing weight of grand corruption scandals in juxtaposition to the suffocating crises of public health, economic disparity, and climate change have sparked fervent citizen protest in country after country. The foment of the Arab Spring, the Revolution of Dignity in Ukraine, the turbulent aftermath of the Panama Papers across Latin America and many more protest movements are, at their core, driven by corruption. Post-pandemic, the globe will be entering a period in which public finances will be under increasing pressure. The time is now for an ambitious new international institution, an International Anti-Corruption Court, to enforce the existing anti-corruption legal framework.
Due to the transnational nature of kleptocracy, such a Court can be established effectively by a small number of founding member states, so long as they include several major financial hubs and other countries where kleptocrats routinely launder their illicit gains in real estate and other luxury assets. Although entrenched kleptocrats will not allow their countries to become member states, the Court would have extensive jurisdiction to prosecute them for crimes they commit in a member state.
The Court would further have the capacity through orders of restitution to recover and repatriate stolen assets to victim countries. Where repatriation to national governments would risk the recapture of assets by corrupt officials, the Court would also have the ability to repurpose recovered assets for the benefit of victimized societies. This could include directing funds to vetted humanitarian programs in victim countries or to refugee services provided elsewhere to nationals from victim countries. A bill proposed in Canada would authorize the Canadian government to similarly repurpose the frozen assets of corrupt foreign officials.
The key vulnerability of kleptocrats is their reliance on complex international networks of lawyers, bankers, real estate agents and other service providers. Pooling their sovereignty to establish an International Anti-Corruption Court is one of the most potent ways that concerned states can honor the fierce anti-corruption sentiment of global publics and greatly alter the international system that enables kleptocracy.
As a crime of calculation, both corrupt officials and their professional enablers will be deterred from criminality if they know that they could be tried before an international court and, at minimum, lose their assets and freedom to travel to member states without risking arrest and imprisonment. The Pandora Papers underline the fact that venal officials will always seek opportunities to use their public power to enrich themselves but improved global governance structures can greatly diminish their potential to succeed in doing so.