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TI reveals political power correlation to corruption

Lack of campaign finance transparency and increased perceptions of political power among the wealthy are among factors that correlate with a high risk of corruption according to Transparency International’s 2019 Corruption Perceptions Index.

The annual report ranks 180 countries and territories by their perceived levels of public-sector corruption, using a scale of zero (highly corrupt) to 100 (very clean). In this year’s CPI, released Jan. 23, more than two-thirds of countries scored below 50, with an average score of just 43. Since 2012, only 22 countries have significantly improved their scores, including Estonia, Greece, and Guyana. Twenty-one have significantly declined, however, including Australia, Canada, and Nicaragua.

Additionally, according to the CPI, four G7 countries scored lower than last year. These countries are Canada (-4), France (-3), the United Kingdom (-3), and the United States (-2). Germany and Japan saw no improvement, while Italy gained one point.

Anti-corruption compliance considerations

Most notable from an anti-corruption compliance standpoint is the link between wealth and political power. Chief compliance officers should pay special attention to the following political factors that correlate with a high risk of corruption:

Lack of campaign finance transparency: Countries with “comprehensive and systematically enforced” campaign finance regulations received an average score of 70 on the CPI, whereas countries with non-existent or “poorly enforced” campaign finance regulations scored an average of just 34 and 35, respectively. Moreover, 60 percent of countries that “significantly improved” their CPI scores since 2012 also strengthened their enforcement of campaign finance regulations.

The 14 countries with the most comprehensive and successfully implemented campaign finance regulations that received an average score of 70 on the CPI are France, Lithuania, Costa Rica, the United Kingdom, Singapore, Ireland, Canada, Norway, South Korea, Georgia, Portugal, Belgium, the Czech Republic, and Finland.

Lack of consultation in political decision making: “Countries with broader and more open consultation processes score an average of 61 on the CPI,” TI said. By contrast, where little to no consultation occurs, the average score is just 32. Most countries that “significantly declined” in their CPI scores since 2012 “do not engage the most relevant political, social, and business actors in political decision making,” TI said.

Over half the countries that “significantly improved” their CPI scores since 2012 have broadened their range of consultation, including Guyana, Cote d’Ivoire, South Korea, and Ecuador, according to TI. “In contrast, 60 percent of the countries that have significantly deteriorated on the CPI over the past seven years have also seen a decline in the number of stakeholders who actively participate in policy consultation, in countries such as Nicaragua, Hungary, Turkey, and the Congo.”

Higher concentration of political power among wealthy citizens: A common societal perception is that wealth buys elections, as highlighted in the TI report. This perception is prevalent both in low-scoring countries and high-scoring countries. In the United States, in particular, “despite its relatively high CPI score of 69, the perception that the rich buy elections is higher than in countries with much lower CPI scores, such as Russia (28) or Venezuela (16),” according to TI.

Lack of systems to detect and manage conflicts of interest: Conflicts of interest occur when a person is in a position to derive personal benefit from actions or decisions made in their official capacity. “The most basic prerequisite to manage conflicts of interest is the clear separation of state budgets from private wealth,” TI said.

From an anti-corruption compliance standpoint, compliance officers should pay special attention to countries like Qatar and Saudi Arabia, where separation of state budget from private wealth does not exist in practice. “Rulers in these countries have both extensive monopolistic and discretionary powers as well as unfettered access to material resources, chiefly through oil rents, a problem exacerbated by the near-total opacity of public financial management,” TI said.

Even democratic countries are not immune to conflicts-of-interest risk, as indicated by those countries “with strong rule of law and institutional constraints” that ranked high on the CPI. A report from TI Switzerland, for example, found that “246 members of parliament have a total of 2,000 vested interests in 1,700 organizations,” but often fail to declare their interests because no adequate oversight mechanisms are in place.

Broader compliance message

“Our analysis of the CPI results over the past eight years, shows that over 60 percent of countries that have registered a statistically significant change in their CPI scores over this period, have strengthened their regulation of the disclosure of campaign donations,” TI said. Such countries include South Korea, Italy, Greece, Guyana, Myanmar, and Tanzania.

“On the other hand,” TI said, “more than half of the countries showing statistically significant declines in the index have either weakened the disclosure requirements for political campaigns or taken no action to improve transparency and enforcement in this area.” These countries include Bosnia, Herzegovina, Hungary, and Ghana.

Prudent chief compliance officers should use the CPI’s findings to help inform their anti-corruption compliance efforts. Specifically, compliance officers, with the help of outside experts, should focus their anti-corruption compliance efforts acutely on those countries that have non-existent or poorly enforced campaign finance regulations; a high concentration of political power among wealthy citizens; a lack of stakeholder participation in the policy-making process; and no systems in place to detect and manage conflicts of interest.

This article was originally published by Compliance Weekly.


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