Thieves of State: Why Corruption Threatens Global Security (30 page)

Contracting guidelines should direct aid officials to steer clear of implementing partners whose beneficial owners are members of corruption networks. When it seems impossible to do so, a rigorous cost-benefit analysis should be conducted to determine whether the beneficiary population might not be best served in the long run if the project were not carried out at all.

Contracts should be better tailored, stipulating conditions for the use of the money (rather than the endless paper formalities that are currently imposed to avoid fraud, but that often end up favoring network-linked implementers that command the working capital required to hire sophisticated grant-writing professionals). Provisions should stipulate—as
Norway’s foreign assistance contracts do, for example—the reimbursement of aid money when conditions are not met. Future aid should be conditioned on remedial action.

To provide sufficient oversight for the millions of dollars in aid provided annually, independent monitoring and evaluation must be featured in every aid contract. Such monitoring activities should be considered integral to the program being funded—not part of “overhead,” a budget line that donors constantly seek to minimize. Independent special inspector generals, such as those empowered to oversee U.S. aid to Afghanistan and Iraq, should become the norm, and their enforcement powers should be enhanced.

When planning assistance to anticorruption efforts abroad, Western governments should resist the temptation to think of corruption primarily as a technical problem, to be addressed by means of equipment or capacity building. Donor agencies should distinguish between countries in which a significant number of government officials who matter are making a bona-fide effort to address the problem—and where technical assistance might help them—and countries whose corrupt governments are extracting resources largely unchecked. In those cases, anticorruption assistance is likely to be captured as yet another rent—including by regime-affiliated nonprofits.

Legitimate civil society organizations cannot be expected to bear the whole burden of anticorruption efforts alone, especially if other Western interactions with the corrupt government tend to enable it. Civil society assistance should be provided with attention to the real power dynamics, to the risk activists incur, and to the types of support other than money that might give them more weight.

Transparency, while a good starting point, should not be thought of as a synonym for accountability; too often it has proved to be no such thing. Funding for transparency programs should seek those that make that link explicit. Alternatively, they should be focused on sectors or revenue streams most likely to expose external enablers, so Western activists can make use of the newly available information in support of local civil society efforts.

Finally, donor agencies should consider expanding the range of civil society institutions they support beyond the familiar set of issue-oriented
NGOs. Professional organizations, even labor unions, may have an interest in combating corruption, as well as the economic clout and institutional infrastructure needed to gain traction. Aid providers should also think more creatively in terms of innovative, broad-based, nonviolent citizens’ movements.

SECURITY SECTOR TOOLS

I
N JUNE 2014
, President Obama announced a new counterterrorism approach that would place increased emphasis on cooperation with host-country militaries. “I believe we must shift our counterterrorism strategy . . . to more effectively partner with countries where terrorist networks seek a foothold,” Obama argued, calling for a fund of up to $5 billion “which will allow us to train, build capacity, and facilitate partner countries on the front lines.”
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But recent fiascos in Libya as well as Iraq have illustrated the potential pitfalls of such a strategy.
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Even—or especially—when short-term counterterrorism imperatives are at stake, host-country military units should not be seen as a substitute for a government that commands the respect of its people. Careful analysis of the structure of potential partner regimes, along the lines described in the “Intelligence Tools” section above, should inform any decision on whether and how to engage with host-country militaries. Anticorruption vetting procedures should be developed.

In general, U.S. military assistance tends to be supplied in standard packages: provision of funds that can be used only to purchase U.S. military hardware (which usually comes with certain conditions attached), training for units or educational opportunities for individual foreign officers, and the staging of joint exercises. But such packages should be more thoughtfully designed, taking the specifics of each country into account—the role different security branches play in the kleptocratic structure, the fungibility of money within recipient-country budgets, the desired, and likely, impact of expanded educational opportunities for officers in the United States, and other such factors. Much more effort should be devoted to imposing creative conditionality on the provision
of military assistance, such as requiring remedial anticorruption efforts, or culturally sensitive companion outreach to the civilian population.

Western military units that are in fact deployed to play an “advise and assist” role, or special operations teams that are often the first to deploy into a potentially hostile environment—and tend, in their hurry, to forge alliances of convenience—must be made aware of the pernicious downstream effects of inadvertently enabling a kleptocratic network. Such considerations should be integrated into their doctrine and training. Once in a country, they must immediately assign intelligence resources to studying the linkages and practices of the locals they work with. They should be instructed to observe and report on their trainees’ behavior and to intervene on corruption issues as necessary.

Guidelines, like those for donor agencies, should direct military contracting officers to study and avoid local security companies or service providers whose beneficial owners are members of corruption networks.

Western militaries often help implement disarmament, demobilization and reintegration programs for foreign militias when conflicts are winding down, or they provide assistance for reforms to security sectors in transitioning countries. These programs should also take corruption concerns into consideration. Often military forces, and especially the police, are the first government representatives the population encounters. So their behavior is particularly critical in shaping ordinary people’s view of their young government. In these contexts, focus on corruption is perhaps the most vital of all.

In countries where the military is the most powerful governing institution, such as Algeria or Egypt or Pakistan, the chairman of the Joint Chiefs of Staff (CJCS)—not the secretary of state—plays the role of chief U.S. diplomat. It is his relationship with his counterpart that represents the U.S. government’s channel to the real rulers. In that context, the CJCS must widen the aperture through which he regards the country, seeing well beyond the confines of a traditional military-to-military relationship. All of the tools listed in the “intelligence” and “diplomatic” sections above are critical to his interactions with those countries and to his reporting on them to his peers on the U.S. National Security Council.

MULTILATERAL TOOLS

M
ANY OF
the suggestions included in the “Aid Tools” section above apply equally to international grant- and loan-making institutions. Forensic and 360 audits should be conducted on loans and assistance packages, together with rigorous due diligence on recipient governments and organizations, and the true necessity of projects to the population. Too many infrastructure loans provided by the IMF or other multilateral institutions, to pay for such white elephants as the port in Kelibia, Tunisia, or the Rabat-to-Casablanca high-speed rail line, have in fact served as cash cows for kleptocratic elites. Suffering populations, meanwhile, have had to foot the bill. Too often, multilateral organizations furnish technical or capacity-building assistance, seeing such support as apolitical. But, in the context of a captured state, economic or even capacity-building support is always political. Careful analysis of who is receiving such assistance (truly mid-level constructive actors who could launch wholesale reform in the future, as is often argued?), or what use the government intends to make of the enhanced capacities, should be undertaken before launching such programs.

Reporting requirements that exist, such as those covering extractive industries, should be enforced and tightened. Membership in such reporting associations should not serve as a whitewash for kleptocratic governments—or the multinational corporations that do business with them.
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Data transparency rules should encompass the release of data to the public, not just to member governments. And international organizations themselves should be subject to the type of “access to information” rules that many Western governments have enacted at home, so beneficiary populations can see the use to which money provided their governments has been put.

International institutions should continue reducing the barriers to sharing financial intelligence and information that identifies beneficial owners of front companies. The IMF and the Asian Development bank, among others, can put pressure on kleptocratic countries to reform their banking practices holistically—not just to enforce minimums on capital reserves. For, as was the case in Ben Ali’s Tunisia, central banks controlled
by kleptocratic networks may recapitalize private institutions that have provided nonperforming loans to system cronies, thus in effect transferring wealth from the population to the network.

Existing international regulations on potential revenue streams, or facilitation services that enable kleptocratic practices, require enforcement. Such regulation covers extractive and financial industries as well as land registries. Less formal codes of conduct, applied to facilitators such as accountants and lawyers, should be tightened and enforced by professional associations.

Multilateral bodies must also ensure that enabling legislation called for in anticorruption conventions has indeed been passed and is being put into effect. Rigorous peer reviews could be part of that process. Or an independent international enforcement and monitoring body, along the lines of the Organization for the Prohibition of Chemical Weapons, which won the 2013 Nobel Peace Prize, might be appropriate.

Refusing to hold important multilateral meetings in targeted kleptocratic countries would help create an international climate of disapproval.

Finally, international institutions as well as bilateral lenders should consider canceling or reducing “odious debt”—particularly in cases where kleptocratic governments have been removed and transitioning countries are cash-strapped. In cases where the private capture of donor funds is patent, it is unfair to make a victimized population also pay for the criminality of its rulers. Forcing lenders to assume more of the risk might help induce them to choose the loans they will extend with greater care.
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(Where a kleptocratic regime remains in place, on the other hand, debt-forgiveness may ease the economic pressure that gives populations some leverage over their political elites.)

BUSINESS TOOLS

T
HROUGH THE
investments they make, their modes of operation, and the relationships they build (and how they build them) in host countries where they work, multinational corporations are themselves significant foreign policy actors. Their objectives and motivations may differ from
those of their originating nations, but that distinction is often not discernible to host-nation populations.

Businesses, especially those that make significant capital investments, such as in the extractive industries, should reassess the time horizon they apply to their risk analysis. Actions that may seem to reduce short-term risk, such as paying off or cozying up to gatekeepers for the kleptocratic elite, may be exacerbating longer-term risks to company investments, by exciting popular indignation against the government and against its business enablers. (Attacks on oil company personnel in southern Nigeria are a case in point.) Businesses should use the framework suggested in the “Intelligence Tools” section above to analyze the business environment in such countries. They should use such analysis to inform their choices on where to invest, with whom to partner, and which branch of commerce or industry to select.

They can add to general knowledge—and facilitate curbs to the corrupt practices that both distort the business environment and threaten security—by systematically reporting to their home-country foreign or commerce ministries the bribe solicitations they have received.

They should understand that what are frequently referred to as “facilitation payments” are not as innocuous as often suggested. Distinguishing between such “petty” bribery and so-called “grand” corruption, or major pay-to-play requirements, is a flawed analysis in countries such as the ones examined in this book. These systems are vertically integrated, and “petty” facilitation payments enable and reinforce their structure and practices. While it may seem impossible to avoid paying such petty bribes, anecdotal evidence indicates that a flat refusal to do so—especially by apparently powerful or desired foreign partners, ideally acting in concert—usually succeeds, and may help alter the incentive structure. At least the collecting of detailed information (name of bribe-taker, position, amount, circumstances, relevant legal provisions, etc.) and lodging of complaints, as well as actively seeking redress, represents a first step toward breaking down systematic impunity.

In light of all the considerations above, businesses should consider expanding their notions of “corporate responsibility” to include their role in facilitating the development or survival of kleptocratic systems.
Such an expanded view is especially critical for direct enablers, such as banks and accountants, or PR or lobbying firms. Insofar as kleptocratic governments are functioning criminally, then their facilitators are accessories. They bear some of the moral—if not currently much material—responsibility, not just for the criminal behavior, but for the often dramatic and destabilizing and expensive reactions it sparks. And businesses will increasingly be held responsible: as home-country populations become increasingly sensitized to these issues and information becomes increasingly available, repetitional risk in encouraging such regimes will grow.