Good morning to all friends and fellow corruption hunters assembled at the Fragrant Harbor. Thank you to Hong Kong for convening 500 of the world’s anti-corruption champions at the Convention Center. I am sorry that I cannot join you in person.
I have always been impressed by ICAC, ably led by Commissioner Peh. It is tough, and ahead of the curve. My office, the World Bank’s Integrity Vice Presidency, or INT, has been lucky to count ICAC among its partners and allies.
I’m not sure which other anti-corruption agency has its own TV show, especially one that has been airing since the 1970s. The show is based on true ICAC cases. Last season featured the spectrum of fraud and corruption, from a Housing Department official who awards government contracts in exchange for bribes, to a businesswoman who faked letters of credit worth more than US $6 million.
It’s important that these stories are told. They are all too familiar to us. These days, we see corruption’s erosion of trust in our financial system, our politics, our governments and even our sports.
I last spoke at ICAC in 2012. Since then, the economic landscape of the globe has continued to shift. So, what is the state of play today? Are we winning the fight against corruption?
In their essence, the risks we face have not changed. We are making ever-better use of new tools at our disposal, such as the UNCAC; the OECD Anti-Bribery Convention; the UK Bribery Act; and the new anti-corruption legislation in China.
Change and growth are especially visible where you sit, in Asia. They bring new actors, and new opportunities to promote integrity.
State-owned enterprises have become a financial force. China alone has 112 state-owned multinationals, and Sinopec is the third largest company in the world by revenue. The new Asian Infrastructure Investment Bank is purported to have $100 billion at its disposal, and is publicly committed to operating as “an ethical organization with zero tolerance for corruption.”
We can achieve much by continuing to march to the beat that has led us this far.
Yet at the same time, the world is a very different place than it was even five years ago. The amount of money at stake is greater. The ways and means of fraud and corruption are more sophisticated. The Petrobras case is just one example of the scale and complexity of modern bribery.
World opinion makers say corruption has increased; and that power and technology generate grand corruption.
We face new challenges. The time is ripe for a new rule book to fight corruption.
Most of us prioritize the bribe giver, and the bribe taker. This morning, I suggest we sharpen our focus on the middlemen. The enablers of corruption; those who profit off its proceeds.
One crucial enabler is agents. Commitment, facilitation, and milestone fees are risky. They may be disclosed in official contracts, but that doesn’t mean they’re not corrupt. For example, 13 recent INT investigations found bribes, ranging from 3- to 18% of contract value, and totaling more than US$28 million, which flowed through agents.
If we successfully tackle corrupt agents, we can make bribes much harder to pay.
Nor are agent problems limited to development projects. Last September, a Hong Kong court jailed a securities firm representative for nine months for bribery. He was convicted of two counts of accepting an advantage as an agent, by receiving more than HK$365,000 in illegal trading commissions.
Then, there are financial institutions. The general consensus, as World Bank President Jim Kim recently noted, is that illicit financial flows are larger than all foreign aid and foreign direct investment combined. That is a staggering sum, and its management involves multitudes.
A skim of the headlines might lead one to think that these shepherds of funds are the problem: BNP Paribas. Deutsche Bank. HSBC. Barclays. Yet I think they could be allies in our work. As Singapore’s Lee Kuan Yew reputedly said: “Fighting corruption is like cleaning stairs: To be successful, one has to start at the top.”
Money matters. Past estimates put globally traded securities at $168 trillion; World GDP at $78trillion; and shadow banking assets at $75trillion. It is conceivable that a small portion of these assets will not stand the test of sunlight.
One dilemma we often confront is the secrecy of ownership. I cannot question how a public official, with a modest salary, holds millions in assets, if I have no way of knowing that they belong to him in the first place.
To borrow a thought, financial firms can help us address tax evasion, when undeclared earnings end up in the web of financial centers.
Remedying this requires international cooperation to eliminate the demand and supply for tax havens. We need regulations that untangle the web of beneficial ownership. And we need to support the execution efforts of the almost 90 countries that have committed to cross-border tax data exchanges. More than anything, we need to disrupt people’s ability to move money to places where it cannot be found.
Colleagues and friends, as we look to the future, we can ask ourselves many useful “status check” questions:
1. Have we kept pace with the integration of financial systems, and multi-jurisdictional entities?
2. Are we better positioned to identify fraud in our economies, and remedy it before another crisis occurs?
3. Could we guide our asset recovery efforts by aiming to recoup more money than the financial industry earns from its fees processing illicit funds?
As anti-corruption advocates, we are used to facing setbacks. We know what it means to be patient and persevere.
Now is the moment for experts like you to assert yourselves. You know firsthand what’s happening on the ground, and why. Your collective knowledge can influence—and change—the rules of the game.