On the Tracks of a Global Vice

Article excerpt

Corruption may be as old as government, but rapid globalization has given it alarming new dimensions. For the United Nations, the scourge has become a top priority, although so far, the battle is being waged in thick fog

Public corruption is a crime as old as government itself In the fifth century BC, Plato talked about it in his Laws. Two centuries later, the Indian political reformer Kautilya [1] listed 40 temptations that civil servants might yield to. But the state of corruption today is unprecedented in at least two respects: scandals are erupting the world over, and people are no longer in the mood to tolerate them.

In less than a year, two sitting presidents--Joseph Estrada in the Philippines and Alberto Fujimori in Peru--have been forced to resign, while a former president--Carlos Menem of Argentina--has been put under house arrest. In each case, the main legal charges and the immediate public outcry against them involved corruption.

Something that until recently was seen as just an internal government affair has become an explicit priority for all international bodies, from the G-8 nations and the World Bank to the United Nations, which plans to draft an anti-corruption convention by 2002. This surge of activity reflects various concerns, but has been fed by a single process: globalization.

The first "mandate" on corruption received by international bodies has come from governments themselves.

Twenty years of ever-faster financial transactions, spurred by deregulation and the rise of electronic communications, has turned money gained from criminal activities into a source of political and financial instability. And money embezzled through corruption has gone hand-in-hand with the money made by organized crime.

"These two kinds of crime feed off each other, hiding and recycling their profits in the same way," says Daniel Dommel, president of the French branch of the NGO Transparency International. "To stay out of sight, organized crime uses corruption, which weakens institutional safeguards against such criminals."

In recent years, several scandals have revealed the extent of the scourge. In the summer of 1998, the International Monetary Fund (IMF) lent Russia eight billion dollars to stave off the collapse of the ruble. Benyamin Sokolov, Russia's chief auditor, told a BBC interviewer in November that year: "We have looked into what happened to some of the IMF money and we have to admit that several billion dollars did not go to the programmes they were earmarked for. Some of it was simply stolen."

The following summer, the biggest money-laundering scandal in U.S. history erupted, with the Bank of New York at its centre. According to the FBI, the Russian mafia used this venerable financial institution to funnel $10 billion back into the Russian economy after its passage through the tiny Pacific island-state of Nauru, famous for "offshore" banks that ask few questions of their customers.

"Forty years ago, just one place in the world, Switzerland, guaranteed secrecy for its banking clients, but today there are more than 50 such countries," says Yves Meny, head of the Robert Schumann Centre at the European University Institute in Florence and author of Democracy and Corruption in Europe (Cassell, London, 1996). Monitoring financial movements, particularly through tax havens, is now one of the main features of the battle against corruption.

An annual blacklist

The Financial Action Task Force on Money Laundering (FATF), which grew out of meetings of the G-8 countries and is based at the Organization for Economic Cooperation and Development (OECD), has since 2000 published an annual blacklist of the most financially suspect countries, sending a sharp jolt through the genteel world of international finance.

"We want to get all banking centres, including the least willing, to conform to international standards," says FATF executive secretary Patrick Moulette. …