Disrupting Corruption: Anti-Corruption and Governance Policy Takeaways

Study Tour Participants

From September 16-23, 2023, the Friedrich Naumann Foundation’s Washington, DC office hosted ten anti-corruption experts for a week of meetings in Washington and Cleveland, OH. The delegation featured politicians, journalists, civil society leaders, and academics from Croatia, Germany, Hungary, Jordan, Kenya, Mexico, Sri Lanka, Venezuela, and Zimbabwe. During the eight-day trip, the delegation met with a wide range of experts, including federal and local government agencies, think tanks, and anti-money laundering experts.

A common theme emerged early during the week, as the participants came to know each other and about the state of corruption in everyone’s home countries. To the surprise of several, many of the delegates’ countries were facing similar challenges fighting corruption. Yet even with these similarities, key differences remain. Countries such as the U.S. and Germany function as “host countries” of corruption, or locations where corrupt actors from states around the world choose to hide their ill-gotten wealth. According to the Tax Justice Network, as of 2022, the U.S. ranked first in the world for “helping individuals to hide their finances from the rule of law,” while Germany ranked seventh.

Meanwhile, participants from other countries including Croatia, Zimbabwe, Kenya, and Sri Lanka lamented the flight of money from their nations to tax shelters around the world. Talented and ambitious citizens will often emigrate due to the negative repercussions of endemic corruption. The result is countries facing the double blow of losing both valuable public funds and skilled workers to corruption. Another damaging effect mentioned by numerous participants is the onset of public apathy towards corruption. Once the problem of corruption is regarded as insurmountable, many citizens, activists, and public employees will cease their efforts to combat it. This naturally leads to the consolidation of corruption in public institutions, furthering this vicious cycle.

Finally, the links between violence, both by state and non-state actors, and corruption, was a theme that emerged in countries including Mexico, Kenya, Zimbabwe, and Sri Lanka. In Mexico, violent actors often bribe judges to avoid prosecution, enabling organized criminal groups, usually drug cartels, to continue perpetuating their violence. Meanwhile, in countries like Kenya, Zimbabwe, and Sri Lanka, journalists and activists often receive serious repercussions from the state, including police brutality, arbitrary arrests, and even “disappearing,” or assassinations. In these varying ways, violence is closely linked to corruption, and is often used to intimidate or even eliminate those seeking to expose corrupt actors.

Liberal Democracies Have More to Offer in the Global Fight against Corruption

Throughout the week, the role of predominant democracies was a major topic, whether speaking with academics, civil society leaders, or economists. While most speakers were able to name examples of success and progress in fighting global corruption, the emerging trend was that powerful democracies can do much more to fight corruption, both within and outside of their borders. Civil society leaders in particular offered valuable insight as to areas where both leading countries and international corporations, turn a blind eye to, and in some cases enable, corruption around the world.

The ability to prevent multinational companies from engaging in corrupt acts remains a regulatory weakness. When operating in countries with corrupt public officials, some international corporations resort to bribery to obtain permits, market access, or other actions necessary to conduct business. The fact that these multinationals are often headquartered in major democratic powers means that these governments have the power to crack down on these acts of corruption. In fact, many countries do have laws on the books preventing corporations from engaging in bribery internationally, yet very few enforce these laws.

Transparency International’s Exporting Corruption 2022 report analyzed 47 countries accounting for 84% of global exports, and labeled only two countries, the U.S., and Switzerland, as engaging in “active enforcement.” These two countries accounted for only 11.8% of global exports. Meanwhile, 38 countries, combining for 55.3% of global exports, fell into the categories of either “limited enforcement” or “little to no enforcement.” More concerning is the fact that the overall enforcement of corruption abroad is backsliding internationally. From 2020 to 2022, only two countries improved their standing in Transparency International’s ranking, while nine dropped.

In addition to exporting corruption, many influential Western democracies have also become oases for oligarchs, despots, and other unsavory characters seeking to hide their ill-begotten wealth from prying eyes. While countries such as Switzerland or the Cayman Islands have long been notorious for playing these roles in global finance, they are no longer alone in aiding and abetting illicit financial flows.

According to the Tax Justice Network’s Financial Secrecy Index for 2022, the U.S. now tops the globe in their “ranking of jurisdictions most complicit in helping individuals to hide their finances from the rule of law.” Japan was listed at number 6, Germany at number 7, and the U.K. at number 13. Several experts throughout the week voiced their concerns that backed up this report’s findings. Countries such as the U.S. and Germany are attractive locations for illicit funds due to their strong rule of law, massive economies that make injecting large sums of money easier to obscure, and the general lack of transparency in some crucial financial markets, particularly real estate and private investment.

Real estate in the U.S. has become a particular cesspool for dirty international money. Investigative journalist Casey Michael, now the Head of Combating Kleptocracy Program at the Human Rights Foundation, writes, “Pick a case of international kleptocracy, and you are likely to discover a link to US properties.” From the Malaysia IMDB scandal to Ukrainian oligarchs, corrupt actors from around the world have found safe haven in the U.S. for their wealth.

In fact, from 2006 to 2016, Igor Kolomoisky and Gennadiy Bogolyubov, both of Ukraine, funneled hundreds of millions of dollars into real estate in Cleveland, Ohio, eventually becoming “the largest commercial real estate holders in Cleveland.” The government of Ukraine would later have to inject $5.5 billion into the Ukrainian bank Privatbank, nationalizing it in the process, to save it from insolvency. Yet these acts also harmed the city of Cleveland. As Michael told the Cleveland Review of Books, Kolomoisky and Bogolyubov completely neglected the major downtown properties after purchasing, merely using them as a place to hide their stolen funds. This severely drove down the value of these properties, and “at best set the city back 15-20 years.” The example of Cleveland highlights that financial secrecy does not merely harm the countries where the wealth is stolen, but also harms the citizens in locations where the wealth is hidden. Corruption has a way of poisoning everything.

Local Governments lead the way on new Policies Combatting Corruption

While the U.S. Congress is often maligned as moving at a snail’s pace and unable to adequately respond to urgent issues, American local politics is often where innovations in policy can be found. The city of Cleveland is an excellent example of this, with the implementation of the new Chief Ethics Officer in the Mayor’s Office.

Shortly after entering office in early 2022, Cleveland Mayor Justin Bibb created and filled the position of Chief Ethics Officer. Mayor Bibb himself described the new position as “key to advancing our mission of a modern, responsive and transparent City Hall.” Conversations with local officials in Cleveland illustrated that the role of the Chief Ethics Officer is primarily as an educational and guiding role, rather than a prosecutorial one. That being said, the Chief Ethics Officer is certainly able to refer cases of corruption ethics violations to the proper authorities if violations are uncovered or reported.

Although the position of the Chief Ethics Officer is less than two years old, the office already boasts some significant accomplishments. According to local officials, more than 8,000 city employees had already been trained on proper ethics rules in less than a year and a half. Instead of working to punish ethics violations, those working with the Chief Ethics Officer aim to prevent violations from ever happening, and in that sense, it appears they have been successful. According to other local officials, 52 criminal violations had already been prevented due to educational and reporting efforts. Another key indicator of progress is that the City of Cleveland has reacted incredibly positively to the creation of the new office. The office of the Chief Ethics Officer has received countless messages and referrals from local citizens, highlighting the enthusiasm of the local population for standing up for ethical governance.  

In a sign of further progress, Cleveland is not alone in creating offices for the sole purpose of fighting corruption and ensuring ethical governance. The city of Atlanta has had a Board of Ethics since 1984, with the board changing its name to The Governing Board of the Inspector General and the Ethics Office in May of 2023. In October 2023, the Anaheim, California City Council voted to create a chief ethics officer position following the exposure of a corruption scandal implicating Disneyland officials bribing local politicians. Phoenix, Arizona appointed the first members of its ethics commission in December of 2023. While the U.S. certainly has numerous areas for improvement to combat corruption, the progress of local and state governments taking on corruption and fighting to promote ethics is a bright positive for anticorruption and good governance advocates across the country.