and its Link to other serioue crimes. Focus on Poly-Criminality.
Europol reports: The aim of this report is to inform law enforcement officials and policy makers about the various ways in which IP crime is linked to other forms of criminal activity. The report is in the form of a case book, presenting case examples where IP crime is linked to other forms of criminality.
IP CRIME AND ITS LINK TO OTHER SERIOUS CRIMES Focus on Poly-Criminality
europol-euipo_polycriminality_report
For the past 20 years, Putin has been driven principally by his desire to maintain power. To this end, he has weakened the state, eliminated competition, and personalized Russia’s political system. While an older generation of Russians credit Putin for helping Russia overcome the turmoil of the 1990s, in reality he has turned the country into a kleptocracy that does not work for ordinary Russians. As he has grown more paranoid about threats to his power—internal and external, real and imagined—Putin has suppressed the freedoms of Russians, increasingly through an arsenal of digital tactics.
As he has grown more paranoid about threats to his power—internal and external, real and imagined—Putin has suppressed the freedoms of Russians, increasingly through an arsenal of digital tactics.
Despite Russia’s internal weaknesses, Putin has boosted the country’s global standing. The lack of constraints on his power, his investment in modernizing his military, and his ability to exploit asymmetries of interest between Russia and the West have allowed Putin to seize opportunities, even those that violate international laws. Today, Russia has a role in most global issues of consequence. But Putin also understands the limits of Russian influence. He has therefore sought to undermine Western democracies to improve Russia’s relative standing. His tactics and strongman brand have created a model that anti-democratic leaders emulate. As Putin has alienated Russia from the West, Russia’s place in the world is increasingly alongside the regimes of Bashar al-Assad, Hassan Rouhani, Nicolás Maduro, and Xi Jinping. Much can be told from the company one keeps.
Companies with the highest percentage of female executives are, on average, 47% more profitable, 74% higher-performing on environmental, social and governance (ESG) factors, and 32% more transparent in ESG disclosure than those with the lowest, according to Foreign Policy Analytics’ groundbreaking Women as Levers of Change report. Through analysis of over 2,300 companies spanning 14 legacy industries around the world, female corporate participation is benefiting businesses from the boardroom to the bottom-line. And, we offer solutions for engaging these male-dominated, legacy industries to increase gender diversity within their sectors.
Mark Munn of Pennsylvania State University writes:
The jump in federal spending in response to the crisis of the coronavirus pandemic is not a new idea. Nearly 2,500 years ago, the people of ancient Athens had a similar plan – which succeeded in meeting the major threat they faced, but then tore Athenian society apart in a tangle of political recriminations after the crisis had passed.
As an historian of ancient Greece, the most telling parallel I see between current events and that long-ago past is the extreme partisan politics that befell Athens in 406 B.C.
In 406 B.C., Athens, a mega-power of the ancient Mediterranean that had built its economy on maritime trade, faccd a crisis. ,Despite recent successes in battle, deep partisan divisions over military leadership had left Athenian forces momentarily vulnerable to attack. Meanwhile, rival city-state Sparta had gained the backing of Persia and was building a navy that could challenge Athens’ control of the sea.
When the Spartans struck, they put the weakened Athenian fleet on the defensive, threatening to crush it and bring Athens to its knees.
A steel engraving of the naval battle of Arginusae in 406 B.C.
In the face of near-certain disaster, the Athenians rallied to respond, accelerating a shipbuilding program already underway by mobilizing all the resources of their Aegean empire. A new tax was passed on personal wealth, and additional money was raised by melting down the golden statues of Victory that had been dedicated on the Acropolis. The resulting coins were spent buying Macedonian pine to make oars to power the triremes, the most advanced naval fighting ships the world had yet seen.
To pull the oars, all able-bodied Athenian men, including knights who normally did not serve in the navy, were called up. Even that was not enough. The Athenians offered citizenship to all resident foreigners and slaves who were willing to serve.
In a little more than a month, the Athenians had assembled a fleet of triremes powerful enough to challenge the Spartan fleet and regain control of the sea.
In midsummer, 406 B.C., the Athenian and Spartan fleets met in battle in the waters between the island of Lesbos and the coast of Asia Minor. It’s known as the battle of Arginusae, after the small islands off the Asian coast that served as a base for the Athenian fleet; today they are the Turkish islands of Garip and Kalem near the city of Dikili.
Athens won decisively, killing the Spartan commander and destroying nearly half his fleet. The victory was costly: Athens lost 25 out of their 150 triremes, each with a crew of 200 men. A few of the ships were sunk close to shore, and their crews were rescued. But most of the ships lost, carrying more than 4,000 men, were adrift farther out at sea, and went down in a storm that came up in the afternoon of the battle.
Athens was saved. Sparta pleaded for peace, but Athens rejected the terms offered, confident that its navy’s proven strength required no compromises with its foe. The fleet’s commanders, eight of the 10 generals elected annually by the people of Athens, were the heroes of the day. In the elections that followed in the weeks after that battle, six of the eight were reappointed to their commands.
The remaining two generals came home to undergo a mandatory part of public service to Athens: a review of their year in office and an audit of their spending on the public’s behalf.
Rowers in a Greek trireme are carved on a monument dating to close to the time of the battle of Arginusae.
As Athens was preparing for battle, all the generals were entrusted with extraordinary amounts of money to finish and outfit ships, to hire and provision crews and more, all at top speed. In the haste to get the job done, not all the money was accounted for.
This was an opening for partisan prosecutors to investigate. One popular politician, a watchdog of the people’s money, filed charges of financial wrongdoing against one of the fleet’s generals.
The investigation revealed deeper evidence of financial abuse and mismanagement involving other generals as well as the original one accused. All the generals who had commanded during the battle were summoned back to Athens so their accounts could be audited. Four of the remaining six returned home; the other two chose not to return, fearing the consequences that awaited them at home.
The generals faced prosecution from political opponents, including men who had served as ship captains during the battle and therefore would know about financial malfeasance in the preparations. If convicted, the generals faced having all their property confiscated and their Athenian citizenship revoked – changing them from national heroes to complete outcasts.
Together, the generals decided to defend themselves by attacking: They accused two of their most prominent opponents, popular political rivals who had been officers under their command, of failing to carry out their duties of recovering the shipwrecked crews. It was a serious charge, alleging responsibility for most of the battle’s casualties, that could have rendered the accusers ineligible to prosecute the generals.
The generals’ strategy backfired. Such serious new charges meant the whole matter was referred to the full Athenian assembly, the sovereign decision-making body of 5,000 to 6,000 Athenians. There, the two accused officers defended themselves against charges of dereliction of duty by producing the generals’ own report from after the battle, which made clear the storm – not human negligence – had made the rescues impossible.
That outraged the Athenians, who were angry at the generals for so transparently trying to escape their own accountability that they would accuse their officers of capital crimes. What began as an investigation of financial wrongdoing had become a contest over blame for the loss of life after the battle. The mood of the assembly determined the outcome, which was that all the generals were responsible for failing to save their men after the battle. The surviving records say nothing about the outcome of the charges of financial wrongdoing.
The verdict called for capital punishment: All six generals who had returned to Athens were put to death by hemlock poisoning.
A private grave relief in memory of an Athenian marine who died at sea; the date is uncertain but most likely from a decade or more after the battle of Arginusae. Athens, National Archaeological Museum, no. 752/Mark Munn, CC BY-ND
Everything began with enormous spending in response to an urgent crisis. Actions that seemed necessary at the peak of the emergency ended up as cover for misappropriations of public money.
But once the crisis passed, people saw those actions in a different light. Those who were found to have used the panic of the moment as an opportunity for personal gain ultimately paid the highest price. No doubt part of the reason they were judged so harshly was because so many of their fellow citizens had been forced to sacrifice their lives in a battle that enriched the powerful few.
The Economist writes:
When Bernie Madoff owned up to a $65bn Ponzi scheme in December 2008, it was not out of guilt. He knew the game was up. Three months earlier Lehman Brothers had imploded. The market meltdown sent clients clamouring to withdraw from his funds, leaving them depleted with many investors still unpaid. American regulators had not spotted the fraud, despite a tip-off years earlier. It was not them that did for Mr Madoff, but recession.
Booms help fraudsters paper over cracks in their accounts, from fictitious investment returns to exaggerated sales. Slowdowns rip the covering off. As Baruch Lev, an accounting professor at New York University, puts it, “In good times everyone looks good, and the market punishes you harshly for not keeping up.” Many big book-cooking scandals of the past 20 years emerged in downturns. A decade before the crisis of 2007-09 the dotcom crash exposed accounting sins at Enron and WorldCom perpetrated in the go-go late 1990s. Both firms went bust soon after. As Warren Buffett, a revered investor, once put it: “You only find out who is swimming naked when the tide goes out.” This time, thanks to a pandemic, the water has whooshed away at record speed.
Much of the swimwear was already threadbare: a borrowing binge has strained many corporate balance-sheets. Some dirty secrets are beginning to come out. Take Luckin Coffee, which had expanded to take on Starbucks in China, attracting big-name investors like Blackrock and Singapore’s sovereign-wealth fund. On April 2nd the Nasdaq-listed Chinese chain announced an ongoing internal probe amid allegations that its chief operating officer and other employees may have fabricated over 2bn yuan ($280m) in sales. On April 14th Citron Research, a short-seller, accused gsx, a Chinese online-tutoring firm listed in New York, of inflating last year’s sales. In a statement gsx denied the allegations and said Citron’s report was misleading and “full of subjective maliciousness”.
These revelations have revived fears over the flaky corporate governance of Chinese firms listed on foreign exchanges, whose audits, conducted at home, China’s government makes it hard for outsiders to inspect. A gaggle of fraud-hunters like Citron and Muddy Waters, which outed Luckin, claimed numerous scalps after the first wave of such listings a decade ago. This time they are looking beyond China.
Blue Orca Capital, an Asia-focused fund targeting corporate “zeros”, expects opportunities to pop up in other emerging markets, Europe and America. “My entire career has been in a bull market,” says its founder, Soren Aandahl. “This is exciting.” Mr Aandahl is eyeing any firms with discrepancies between the amount of capital they need to raise and the cash their accounts say they are generating. Others are focusing on industries hit hardest by the pandemic, such as travel, entertainment and property.
Only a small minority of firms resort to outright fraud. Far more prettify profit-and-loss statements with accounting wheezes that fall in a grey area. This accounts for much of what John Kenneth Galbraith, an economist, called “the bezzle” and “psychic wealth”: gains that appear real but prove illusory.
In the bull market startups became masters of conjuring up novel metrics that flatter performance. WeWork’s “community-adjusted” earnings before interest, taxes, depreciation and amortisation (ebitda) transformed a hefty loss for 2018 under Generally Accepted Accounting Principles (gaap) into a profit. Illegal? No. A red flag? Absolutely. Many investors turned a blind eye because they bought into what Mr Aandahl calls “the myth in the shareholder list”: all would be well if other high-profile backers were on board (as with Luckin).
Non-gaap adjustments have spread like wildfire through corporate accounts, making it harder to discern what numbers reflect a firm’s true financial position. The average number of non-gaapmeasures used in filings by companies in the s&p 500 index has increased from 2.5 to 7.5 in the past 20 years, according to pwc, a consultancy. In credit agreements analysed by Zion Research Group, the definition of ebitda ranges from 75 words to over 2,200. gaap is far from perfect, but some of the divergence from it has clearly been designed to pull wool over investors’ eyes. One study found that non-gaap profits were, on average, 15% higher than gaapprofits.
Playing around with earnings and revenue-recognition metrics is this generation’s equivalent of dotcoms using bots and other tricks to boost “eyeballs” 20 years ago, says Jules Kroll of k2 Intelligence, the doyen of corporate sleuths. “When an area is hot to the point of overheated, there is a growing temptation to juice the numbers.” In an ominous sign, SoftBank, a Japanese technology conglomerate which bet big on WeWork and dozens of other startups, said this week that it expects an operating loss of ¥1.4trn ($12.5bn) in its last fiscal year.
Besides exposing old schemes, the pandemic is likely to give rise to new ones. When economic survival is threatened, the line separating what is acceptable and unacceptable when booking revenues or making market disclosures can be blurred. Mr Kroll reckons that “amid such massive dislocation, some will inevitably cheat.”
Bruce Dorris, head of the Association of Certified Fraud Examiners, the world’s largest anti-fraud outfit, says the effects of covid-19 look like “a perfect storm for fraud”. It may engender everything from iffy accounting to stimulus-linked scams as thousands of firms—including bogus applicants—hustle for help. One fraud investigator points to private-equity-owned firms as potential targets. “There are lots of them, they are highly leveraged and they may not qualify for bail-outs because they have deep-pocketed sponsors,” he says. That increases the temptation to resort to unseemly practices. The ebbing tide is likely to reveal plenty of corporate nudity. That will not stop some businesses from taking up naturism
Companies with the highest percentage of female executives are, on average, 47% more profitable, 74% higher-performing on environmental, social and governance (ESG) factors, and 32% more transparent in ESG disclosure than those with the lowest, according to FP Analytics’ groundbreaking Women as Levers of Change report. Through analysis of over 2,300 companies spanning 14 legacy industries around the world, we show how female corporate participation is benefiting businesses from the boardroom to the bottom-line. And, we offer solutions for engaging these male-dominated, legacy industries to increase gender diversity within their sectors
A variety of market challenges are straining the bottom lines of a host of legacy industries. Changing global market conditions are intensifying competition among long-time industry rivals, while innovative new entrants shake up established business models. Consumers, particularly millennials and younger generations, are becoming more health-conscious and increasingly factoring environmental, social, and corporate governance considerations into their purchasing decisions, demanding less-harmful products and more sustainable corporate practices. Together, these factors are pushing companies to improve productivity and efficiency while evolving their business models toward addressing today’s critical environmental, social, and health challenges.
Increasing gender diversity could provide a means to respond to such pressures and enhance competitiveness and profitability. FPA’s company-level analysis reveals that a higher percentage of women in executive management is associated with higher profitability. Interviewees detailed how women are leading their organizations down new revenue-generating paths, advancing innovation in inertia-prone industries, and increasing transparency to build stakeholder trust.
Charts created by the International Monetary Fund trace the early stages of the Coronavirus pandemic:
China was the first country to experience the full force of the disease, with confirmed active cases at over 60,000 by mid-February. European countries such as Italy, Spain, and France are now in acute phases of the epidemic, followed by the United States where the number of active cases is growing rapidly. In many emerging market and developing economies, the epidemic appears to be just beginning.
n Italy, the first country in Europe to be severely hit, the government imposed a national lockdown on March 9 to contain the spread of the virus. As a result, attendance in public places and electricity use have declined dramatically, especially in the northern regions where infection rates have been considerably higher.
The economic consequences of the pandemic are already impacting the United States with unprecedented speed and severity. In the last two weeks in March almost 10 million people applied for unemployment benefits. Such a sharp and staggering increase has never been seen before, not even at the peak of the global financial crisis in 2009.
.
Disruptions caused by the virus are starting to ripple through emerging markets. After showing little movement early in the year, the latest indices from purchasing manager surveys (PMIs) are pointing to sharp slowdowns in manufacturing output in many countries, reflecting drops in external demand and growing expectations of declining domestic demand. On a positive note, China is seeing a modest improvement in its PMI after sharp declines early in the year, despite weak external demand.
The modest improvement in economic activity in China is reflected in daily satellite data on nitrogen dioxide concentrations in the local atmosphere – a proxy for industrial and transport activity (but also the density of pollution as a by-product of fossil fuel consumption). After a steep decline from January to February during the acute phase of the pandemic, concentrations have increased as new infections have fallen, allowing China to gradually relax its strict containment measures.
The recovery in China, albeit limited, is encouraging, suggesting that containment measures can succeed in controlling the epidemic and pave the way for a resumption of economic activity. But there is huge uncertainty about the future path of the pandemic and a resurgence of its spread in China and other countries cannot be ruled out.
Y. J. Fanusi, a former CIA officer and current senior fellow at the New American Center for Security writes: On March 2, the U.S. Department of Justice indicted two Chinese nationals for allegedly laundering cryptocurrency on behalf of North Korea. The laundering scheme ferreted away part of almost $250 million worth of virtual currencies stolen from a cryptocurrency exchange in 2018 by the North Korean-affiliated Lazarus Group. Through elaborate software programming, the two Chinese nationals, Tian Yinyin and Li Jiadong, converted much of the stolen cryptocurrency into regular currency at Chinese banks.
The case exemplifies how cryptocurrency obfuscation tools and techniques are likely to play a growing role in financing threats to U.S. national security. As U.S. adversaries get more acquainted with blockchain technology, their hostile cyber operations are likely to rely increasingly on cryptocurrency activity. And rogue states are likely to become more innovative in using cryptocurrencies as they try to dampen the impact of U.S. economic sanctions.
A three-step formula for illicit finance is revealed: steal from exchanges, launder the digital currency and convert the tokens into real cash—hack, launder and cash-out.
The first step involved tactics familiar to anyone who has attended a basic cybersecurity awareness orientation. The Lazarus Group hackers tricked an employee of an unnamed exchange into clicking on an email that downloaded malware onto the employee’s computer. That malware gave the hackers remote access to the computer, allowing them to steal the private digital keys that controlled the exchange’s cryptocurrency wallets. They then withdrew $234 million worth of cryptocurrencies and sent them to digital wallets controlled by the Lazarus Group.
Next, the hackers sought to launder the funds by moving the crypto into wallets that would appear unrelated to the hacking. Most cryptocurrency transactions are visible for anyone to follow by browsing the online public ledger of transactions—the blockchain. Since they had a clear connection to the hacking, the Lazarus Group could not directly sell the stolen tokens for cash at most cryptocurrency exchanges. Instead, operatives in North Korea set up accounts at a variety of exchanges, using doctored photos and fake, non-North Korean identity documents. The hackers then transferred the stolen crypto using a programming script that moved the funds automatically through hundreds of newly created digital wallet addresses and eventually into North Korean-controlled accounts at the exchanges. Some of these funds were delivered to cryptocurrency exchange accounts held by Tian and Li, who spent the next several months doing additional laundering before finally converting crypto to cash.
The cash-out step was also multilayered. Tian and Li ran an unregistered cryptocurrency trading operation, converting stolen cryptocurrency into fiat currency and transferring it to customers in exchange for a fee. From July 2018 through April 2019, they traded with customers on various peer-to-peer exchange websites and opened up accounts at multiple Chinese banks to deposit their earnings from these trades. At one U.S.-based exchange, Tian transacted over 8,000 times, trading bitcoin for $1.4 million in iTunes gift cards. Overall, the pair made thousands of deposits into their Chinese bank accounts and laundered more than $100 million worth of ill-gotten crypto traceable to the Lazarus hack.
This laundering scheme probably posed no technical challenge for North Korea. The open-source software programs the hackers used to create thousands of digital wallets in minutes are freely available online. These wallets are called “unhosted” or “non-custodial” wallets because they are not controlled by any exchange and cannot be blocked or shut down by a third party. Unlike the wallets used at exchanges, there is no need to provide any ID to acquire them. They are truly pseudonymous instruments.
And the scheme was likely cost efficient. The Lazarus group funded part of their broader cyber operations with the hacked cryptocurrencies. Using funds sent to their unhosted wallets, the operatives paid in bitcoin for website hosting, domain names and virtual private networks. Those services supported additional phishing campaigns, allowing the hackers to create fake websites that delivered malicious code to other exchanges—a vicious cycle of laundering and hacking.
As the North Korean case highlights, two things enable cryptocurrency laundering: easy access to unhosted wallets and the existence of cryptocurrency exchanges around the world with lax anti-money laundering (AML) measures.
Unhosted wallets pose an even thornier challenge. The ability for parties to transact digitally without a financial intermediary is the primary breakthrough of cryptocurrency technology. Unhosted wallets lower the barrier to financial services, bringing financial inclusion to unbanked and underbanked populations—though there is little data to support this assertion. Ultimately, financial authorities cannot realistically ban open-source software, so the current regulatory framework targets the on and off ramps where people cash out: cryptocurrency exchanges. Regulators tolerate the loophole of unhosted wallets because—for the time being—crypto has minimal purchasing value unless converted to fiat currency.
Legal and regulatory activity surrounding crypto and illicit finance will likely grow in the coming years as U.S. adversaries rely increasingly on cryptocurrency operations to fund threats.
This nexus among cryptocurrencies, state-sponsored cyber operations and U.S. national security has also surfaced with other adversaries. Russian military intelligence officers laundered and spent $90,000 worth of crypto to support their cyber operations and information warfare during the 2016 U.S. presidential election.
National security officials must get smarter on cryptocurrency for the U.S. to combat the money laundering typologies emerging on blockchains rather than in banks. This means training analysts on blockchain technology and getting them acquainted with developments in the crypto space. And financial regulators will have to continually assess whether exchanges are effectively managing the risks from unhosted wallets. If they do not manage them, new regulatory frameworks may be needed to plug crypto’s regulatory gaps. This could involve developing guidelines for how much exchanges can interact with unhosted wallets. But any new rules need not be conceived by regulators in isolation. Blockchain proponents should also innovate to create products that advance the promises of this technology while mitigating the risks from bad actors. As the recent indictments show, U.S. adversaries are working creatively to exploit the loopholes. The U.S. needs to bring its A-game to meet this emerging threat.
As a Senator and expert on banking, Elizabeth Warren has provided an indispensable oversight to government and banking activities. It is not surprise to find her at the forefront of the massive spending proposed to combat the corona virus in the US.
Before Elizabeth Warren was a senator from Massachusetts and a Democratic presidential candidate, she ran the Congressional Oversight Panel that was in charge of overseeing the $700 billion Troubled Asset Relief Program (TARP) bailout that Congress approved after Wall Street crashed in 2008. In that capacity, Warren, then a Harvard law professor, kept a close watch on where the money was going and crafted public reports that disclosed that the Treasury Department had overpaid $78 billion for assets it bought from failed banks and that large chunks of the money were not being used well.
Last month, Congress passed a $2 trillion coronavirus bailout and assistance bill, and it contains a $500 billion fund from which the Trump administration, at its sole discretion, can dole out money to big corporations in distress. What’s the best way to monitor this flow of billions? Warren, no surprise, has some ideas.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, Warren notes, has four overall parts: sending money to hospitals and other health care facilities, expanding unemployment benefits, providing assistance to small businesses, and establishing what she agrees is a $500 billion “slush fund” for large corporations. There is also money in the bill for education, food security, and state and local government responses to the crisis. Donald Trump and his administration may use this money to “reward their political friends and punish their political enemies.” Warren points out, “I spent a lot of time in the negotiations [over the bill]…to try to get at least some curbs on how the money is spent and some oversight. Republicans basically said this is going to be the price of getting money to our medical providers, getting money to people who are unemployed, getting money to small business: ‘You guys are going to have to go along…with this slush fund for giant corporations.’”
The oversight provisions in the measure do include a special inspector general for pandemic recovery, who will track all loans and expenditures made from the $500 billion fund, and a congressional oversight commission, similar to the one Warren ran years ago, which will monitor this spending and evaluate its impact. But Warren points out the commission will only be as strong as its members, who have yet to be appointed:
When Warren was the cop on the bailout beat, she generally had the support of a Democratic Congress and the Obama administration. That won’t be the case this time around. Trump has already said he has the right to block the new special IG from sharing information with Congress and the public. And the CARES Act contains no provisions that allow any outside review of expenditures or loans before Treasury Secretary Steven Mnuchin okays them. Whatever he (or Trump) decides, goes.
In this environment—with a president hostile to transparency and accountability—what can be done to cast sunlight onto Mnuchin handing out $500 billion in taxpayer dollars to big companies?
Warren recommends: 1. Be consistent in talking about this every single day. We can’t let this just drop off the radar screen. Remind people the slush fund exists. 2. Dig into individual pieces and tease out whatever information we can. 3. Shout about any bad examples that turn up. Point out this is taxpayer money, money that could have been used for personal protective equipment or health care professionals…money that could have been used to help small business and to help people who are unemployed.
With no clawbacks allowed the only recourse is to jump on every piece of information that comes out because that influences the next decision that gets made. The only restraint is “public opinion.
Warren’s tips essentially boil down to this: pay attention, pay attention, pay attention Use crowdsourcing oversight.
W-T-W.org welcomes any comments and suggestions to create crowdsourcing oversight.
Criminals use Bitcoin to Launder Dirty Money
Laws are on the books in many countries of the world. They are often not enforced. Here is a proposition for an International Anti-Corruption Court
Mark L. Wolf, a Senior United States District Judge and Chair of Integrity Initiatives International (“III”), writes: Integrity Initiatives International (“III” was formed in 2016 to focus on strengthening the enforcement of criminal laws to combat “grand corruption” — the abuse of public office for private gain by a nation’s leaders, who are coming to be known as “kleptocrats.”
Grand corruption is endemic in many countries and has devastating consequences. It does not flourish because of a lack of laws. 186 nations are parties to the United Nations Convention Against Corruption (“UNCAC”). They all have criminal laws prohibiting extortion, bribery, and money laundering. They also have international obligations to enforce those laws against their nations’ leaders. However, kleptocrats enjoy impunity in their own countries because they control the administration of justice, including the courts.
In 2016, leaders from more than forty countries met in London for the Anti-Corruption Summit. They endorsed a Global Declaration Against Corruption, committing each represented nation to the proposition that “the corrupt should be pursued and punished.” The Declaration emphasized the “centrality” of the UNCAC. Implicitly recognizing that existing institutions and efforts have not been adequate, the participating governments committed themselves to “exploring innovative solutions” to combat corruption. An International Anti-Corruption Court (“IACC”) would be an invaluable innovation.
The IACC is an evolving concept. In III’s current conception, it would employ: expert investigators, such as those at the International Anti-Corruption Coordination Centre, whose head is Rupert Broad.
The IACC would have jurisdiction over corrupt leaders and those who conspire with them, including those who pay them bribes or assist in laundering their illicit assets. The IACC would, therefore, provide for the prosecution of public officials who demand or accept bribes, which is not permitted under the United States Foreign Corrupt Practices Act or its counterparts in other countries.
The IACC would not necessarily require the enactment of any new criminal statutes. It could enforce each nation’s domestic anti-corruption laws that are required by the UNCAC. Alternatively, a uniform statute adopted by members of the IACC could be enacted.
The IACC could be made part of the existing International Criminal Court (“ICC”). However, for principled and pragmatic reasons, III believes a separate court would be preferable.
Like the ICC, the IACC would operate on the principle of complementarity. This means that only leaders of countries that are unwilling or unable to prosecute them for corruption would be subject to prosecution in the IACC.
The principle of complementarity would give countries an incentive to strengthen their national institutions and efforts to combat corruption, which will remain of primary importance. For example, the threat of prosecution in the ICC prompted all parties to support strengthening the sanctions in the agreement to end Colombia’s lengthy civil war.
An IACC would not be too costly. The IACC would impose fines that could be used to pay for its operations, as fines partially fund the United States courts.
Sentences of kleptocrats would also include orders of restitution to the countries they robbed. Therefore, prosecution could be a much more efficient and effective means of recovering assets than civil suits, which often last for decades and are frequently inconclusive.
An IACC is urgently needed. As the then United States High Commissioner for Human Rights said in 2013: “Corruption kills …. The money stolen through corruption every year is enough to feed the world’s hungry 80 times over.” The current refugee crises are largely caused by migrants fleeing corrupt failed states. Climate change is exacerbated by kleptocrats who profit from illegal destruction of forests. It is foreseeable that much of the money the international community is contributing to combat climate change in developing countries will be lost to corruption if the impunity of their leaders is not ended.
Finally, the IACC is achievable. The IACC has the support of: countries including Colombia and Peru, and the strong interest of others such as Nigeria and Malaysia, as we have heard at this conference; NGOs, including Global Witness, Human Rights Watch, and many chapters of Transparency International; and courageous young people, such as the leaders of the 2014 Ukrainian Revolution of Dignity.
The proposal to create the IACC will be addressed and adopted by the United Nations at its 2021 Special Session on Corruption.