IMPACT

Corruption report doesn’t let ‘clean’ countries off the hook for enabling global financial secrecy

Transparency International cites Pandora Papers findings to fill blind spots in its annual corruption index.

A worrying new normal in corruption has taken hold internationally, anti-corruption organization Transparency International reports in its annual index, while also highlighting the role of enablers in aiding graft.

The Corruption Perceptions Index finds corruption levels stagnating for a majority of countries over the last 10 years.

With accountability and transparency being rolled back in the midst of the global COVID-19 pandemic, several top-scoring countries are on the downswing, the group found.

Western Europe saw several attempts to undermine anti-corruption efforts during the pandemic. The United Kingdom government was embroiled in a procurement scandal over awarding contracts without the usual scrutiny or competition. And the European Commission reprimanded Cyprus for selling citizenships to rich foreign nationals.

The United States, a top-scorer, also failed to reform even as it attempted to crack down on financial crimes. Last year, lawmakers passed legislation that would increase corporate transparency by requiring companies to report information about their beneficial owners to a government bureau. But persistent attacks on free and fair elections dragged the U.S.’s anti-corruption score to an all-time low, the report stated.

Latin American countries including Brazil, Venezuela, El Salvador and Colombia saw anti-democratic setbacks with leaders spreading misinformation, stifling activism and deploying excessive police force. Transparency International found Central American countries Nicaragua, Guatemala, and Honduras at a 10-year low in terms of corruption and democracy. COVID-19 was also used “as a smokescreen to introduce new restrictions on rights and accountability” in Central Asia and Eastern Europe, which was the second lowest performing region in the index.

Civil liberties in sub-Saharan Africa and Asia have also continued to dwindle, according to Transparency International. Though Chinese President Xi Jinping instituted controls to improve economic growth, China still suffers from weak human rights, the report said. Countries in the Middle East fare just as poorly, with authorities arresting some of the highest numbers of journalists around the world in the past year.

Secrecy in ‘clean’ countries enables corruption

The 2021 report cited examples uncovered in the Pandora Papers investigation of how private sector “enablers” assist corruption even in top-scoring countries.

It points the finger of blame at corporate service providers, real estate agents and banks who help corrupt leaders maintain illicit networks while escaping regulation and accountability themselves.

“The Pandora Papers scandal is only the most recent example of how many top-scoring countries allow politicians and oligarchs around the world to shore up their wealth,” Transparency International said.

“Various actors in the top-scoring countries are all too eager to help authoritarian and kleptocratic leaders clean not just their money, but also their reputations.”

The Pandora Papers exposed the offshore financial holdings of hundreds of politicians, oligarchs, business tycoons and criminals based on a trove of nearly 12 million records leaked from 14 different offshore service providers based in tax havens around the globe. Those include countries that have historically scored well on Transparency International’s Corruption Perceptions Index.

Transparency International cited ICIJ reporting on how entities in Singapore, New Zealand, and the United Kingdom helped a Sri Lankan power couple stash their wealth offshore. It also pointed to a Pandora Papers investigation on how 17 African politicians and business leaders opened secret accounts in the United Arab Emirates — ranked No. 24 in the corruption index — with the help of the Dubai-based offshore provider SFM Corporate Services.

The report highlighted Switzerland as another enabler of cross-border corruption due to an anti-money laundering loophole, as well as Pandora Papers reporting on secret real estate ownership in countries like Australia and the U.K.

The Pandora Papers also revealed that the No. 27-ranked United States is home to more than 200 secret trusts, many of which are located in Sioux Falls, South Dakota.

Other top-scoring countries the Pandora Papers identified as hubs of financial secrecy include Singapore and Hong Kong, which Transparency International ranked fourth and 12th, respectively.

Transparency International pulls data from 13 independent sources to calculate perceived levels of corruption of 180 countries and territories on a scale from zero to 100, zero being most corrupt.

The organization said it’s up to the top-scoring countries to curb cross-border financial abuse and support information exchange to make accountability possible. It recommends that groups like the Financial Action Task Force, composed of G7 nations, take the lead on reining in private sector corruption and financial secrecy to ensure true progress is being made.

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