ICC FraudNet Global Report 2021

Press Release

ICC FraudNet Global Report 2021

08 Feb 2021

Standing Up to Government Corruption: Access to Justice through Civil Asset Recovery and Private Funding as Alternatives to Public Investigation and Forfeiture

8 February 2021

We are pleased to introduce ICC FraudNet's annual Global Report, 'International Developments and Perspectives in the field of Fraud, Financial Crime and Asset Recovery.'

Grant Thornton is proud to be one of the contributing Strategic Partners of the Inaugural report which showcases thought-pieces, briefings and analyses from across the globe.

Standing Up to Government Corruption: Access to Justice through Civil Asset Recovery and Private Funding as Alternatives to Public Investigation and Forfeiture

At page 10 of the Report, director James Pomeroy of Grant Thornton BVI examines corruption in the public sector. At a time of increased global uncertainty, the author outlines important background on government or ‘official’ corruption, and reinforces the devasting effects that corruption has both in the context of developed countries, but also developing states in which unaccountability and corruption is systemic. The paper discusses civil recovery of the proceeds of official corruption, outlining the key stages and the multi-stakeholder approaches required to maximise the recovery of value. It also discusses the insolvency process as a machine of recovery. It also addresses the important question of funding in the context of the risk-value balance, set against other political, economic and social constraints often seen in such cases.

Introduction

Corruption is the abuse of power by those in positions of trust, influence, or authority, for personal benefit at the cost of the broader society. It robs nations of their financial, social, and environmental well-being, it pervades the psyche of citizens and leads to all kinds of decay, widening the divide between the powerful and the powerless. Left unbroken, the cycle of corruption continues for generations, leaving apathy and a blunted sense of hope to those who live in a corrupt society. Corrupt behaviour is nothing new and has been the subject of considerable international focus for decades. Professor Paul Heywood observed that despite the heighted attention, “citizens across the world simply don’t believe that such initiatives have had any effect […] the real danger is that corruption becomes seen as a norm within any political process.” In 1997, the United Nations recognized the seriousness of the impact of corruption across societies, undermining the rule of law and leading to violations of human rights, adopting the United Nations Convention Against Corruption. Why stand up to corruption? Surely, the obvious and overly simplified answer must be to make a better life for all, to elevate the standard of living across a population, and to bring wrongdoers to justice. All are more easily said than done. What can be done, and how? These may not prove to be the rhetorical or unanswerable questions they first appear. There are paths to recovery, albeit slow and long term in nature. These include implementing, monitoring, and enforcing governance regimes and shifting societal norms and expectations about the behaviour of public officials. Cultures of corrupt states are so imbued with cynicism and acquiescence that bad actors can carry on their schemes with bold impunity, caring little about scrutiny or its likelihood. Interrupting the cycle demands a shift away from apathy and indifference. There may be more immediate pathways to change, either in a tangible way by finding and recovering stolen assets and corrupt wealth, or in a less palpable one, through the psychological benefit to society from seeing corrupt actors brought to justice.

The Cost of Corruption

There are obvious, large scale, immediate economic and financial costs of corruption. They include the value extracted directly from the state and converted into personal benefit in the usual ways such as luxury homes, expensive automobiles, yachts, planes, and other hard goods. Unfortunately, glitzy, high-profile hard assets often over-shadow the negative downstream effects on society. Smaller scale corruption, like the bribes paid by ordinary citizens to ensure that everyday life carries on uninterrupted, takes on a more mundane appearance and revolves around issues such permits being issued, goods being retrieved from customs, and official forms being stamped. While relatively smaller individual transaction values, these aggregate to something larger than the sum of their parts and contribute to a weakening of society by virtue of the nature of act, rather the amount. A death by a thousand cuts. More significant pay-to-play schemes involve high level collusion between the private and public sector. Bribery and corruption on this scale involves trillions of dollars extracted from public coffers and divided amongst the participants in these schemes. In 2018, UN Secretary General Antonio Guterres estimated that corruption costs the global economy more than $1 trillion paid in bribes, and another $2.6 trillion across other forms of corruption. According to the United Nations Development Programme’s Sustainable Development Goal 16, corruption, bribery, and tax evasion account for more than $1.25 trillion annually in developing countries alone, enough to lift the populations of those countries above the poverty threshold of only $1.25 per day for at least six years.  

This article was originally published in the ICC FraudNet Commercial Crime Services Global Report 2021.

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