26 Jul 2018

Becoming a billionaire by holding public office is getting harder.

Senior officials in Russia, Turkey, and China look like they will walk away from their political careers – super-wealthy.

Yet, for countries without the size, power and Security Council membership, their politicians will have a harder time squirreling away bribes abroad.

Events in Malaysia illustrate this broader trend.

1MDB in Context

Malaysian authorities recently arrested former Malaysian Prime Minister Najib Razak in connection with his involvement with the 1Malaysia Development Bhd state fund – or 1MDB.

His case follows the cookie-cutter model of all cases involving international corruption and money laundering.

Journalists found out about payments – which were supposed to go to government organizations – being wired to politicians’ personal bank accounts instead.

The details change from case to case. In Malaysia, Najib Razak stars as the politician. 1MBD as the public entity.

The international banks involved sit in Singapore and Switzerland. We do not hear about the banks involved in many of these cases.

South Korea’s case involving former president Park Geun-hye, Indonesia’s case involving former parliamentary speaker Setya Novanto r and even South Africa’s case involving (now former) President Jacob Zuma represent straight up, old school money-for-contracts.

Yet, much of this money still finds its way offshore. 

Money Laundering and PEPs

PEPs – or politically exposed persons – pose a special risk to banks and taxpayers. Corruption cannot occur without a corrupt public official at the other end of the brown envelope.

Recognising the risks they pose to the financial sector, lawmakers world-wide have put in place a dragnet to try and monitor them.

International organisations like the OECD and World Bank have been cheerleading countries everyone to tighten money laundering laws.  

Groups like the Egmont Group and the Wolfsberg Group literally sit around all day and think up new ways to monitor politicians.

Let’s not forget the Basel ‘central bank of central banks’ rules, or the G20’s work on finding out the names of the politicians at the end of the money laundering trail.

As rules pile up, PEPs and literally thousands of others have a harder time keeping their ill-gotten wealth.

Leadership by just a few countries makes even local corruption a risky proposition.

The US’s Federal Bureau of Investigation and Justice Department have targeted corrupt foreign public officials’ money for decades.

Anti-corruption laws in most jurisdictions now require extra-territorial application.

Under such application, a bribe paid in Kuala Lumpur violates US law just the same as if they paid it in Arkansas.

And Malaysians have not been spared.

Laws like these – for money laundering and other corruption-related crimes -- help power the US and Swiss claims against the perpetrators of the 1MDB swindle.

The 1MDB case portends the future of enforcement against PEPs.

Politicians face more demanding public back at home – who know about the international dragnet.

Big wigs attached to the FIFA (or International Federation of Football Associations) failed to avoid the kind of punishment they would have avoided 10 years ago, due to the mediatization of their corruption.

The same protests that shook the United Malays National Organisation also shook Romania’s government, as well as led to political upheavals in Brazil and Peru.  

Would protesters feel as sure of their success without foreign investigators and prosecutors backing up their accusations?

The Future of High-Level Thieving

For now, too many elected and unelected thieves continue to profit from public money. Similar protests in Mexico could have had the same effect.

They have not.

African PEPs continue amassing billions, with only sparse international enforcement actions targeting officials in Equatorial Guinea.

 Some scholars might argue that Bersih succeeded because they had a concrete plan. The 2011 Indian protests represent a prime example.

Similar attempts to take down officials in Gabon and Congo also failed because locals don’t call for dropping the global anti-corruption dragnet on their leaders.

 Instead, they remain feted global citizens.

Even the arch-corrupt former Ukrainian president Viktor Yanukovych continues to yuck it up in Moscow.

All the bank regulations and risk profiles in the world did not (and would not have) caught the 1MDB fraud.

Until more groups follow the Malaysian example, too many corrupt PEPs will continue amassing fortunes using public funds.

Until more of us in the West also take to our own streets, our own businesses and politicians will continue hosting them.

Seeing more foreign investigators in the news, and in our streets, may be a good start.