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U.S. falls in latest index of global corruption rankings, out of top 20 cleanest regions: watchdog

Thursday, January 31, 2019   (0 Comments)
Posted by: Brian Monroe
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By Brian Monroe
bmonroe@acfcs.org

January 31, 2019

The United States has taken a precipitous tumble in the latest country rankings of perceived global corruption, falling out of the top 20 for the first time in since 2011 due to an “erosion of ethical norms at the highest levels of power,” according to a transparency watchdog group.

That is just one of the sobering takeaways in Transparency International’s 2018 Corruption Perceptions Index, an annual grading exercise yielding insight into the grip of graft in nearly 200 jurisdictions, a key indicator as well of broader financial crime risks for particular regions. The document is required reading for anti-money laundering (AML) officers.

The index, which ranks 180 countries and territories by their perceived levels of public sector corruption according to experts and businesspeople, uses a scale of zero to 100, where zero is highly corrupt and 100 is very clean. But, sadly, “more than two-thirds of countries score below 50 on this year’s index, with an average score of just 43.  

Similar to past indexes, Denmark, New Zealand and Finland sat comfortably atop the mountaintop, with scores in the mid to high 80s, while South Sudan, Syria, and Somalia wallowed in the valley of despair, managing a meager 13 at best.

However, as the Danske Bank scandal multi-billion dollar money laundering scandal unfolds, there is something rotten in Denmark.

This year’s Corruption Perceptions Index reveals that the “continued failure of most countries to significantly control corruption is contributing to a crisis in democracy around the world,” according to the report.  “While there are exceptions, the data shows that despite some progress, most countries are failing to make serious inroads against corruption.”

“Corruption chips away at democracy to produce a vicious cycle, where corruption undermines democratic institutions and, in turn, weak institutions are less able to control corruption,” said Patricia Moreira, Managing Director of Transparency International.

There are no democracies that score below 50 on the CPI. Similarly, very few countries which have autocratic characteristics score higher than 50. 

TI’s corruption index is also another tool to help AML compliance officers, watchdog groups and civil society champions get a sense of where graft has an iron grip, and if that clenched fist is tightening or loosening – issues that have direct import to country financial crime risk rankings.   

But while many of the countries reside in similar strata as prior years, some trends are concerning – particularly that the U.S. is seen as more corrupt under the current administration.

As well, the numbers must be read in the broader context of actual events and negative news offering a more expansive view of what is really going on.

Case in point: While Denmark only dropped one spot to No. 2, the country is being racked by the Danske Bank scandal, where an Estonian branch potentially moved nearly $230 billion in suspicious funds – a high-profile investigation that has already tarnished the country’s previously nigh pristine fincrime image.


 

Getty Photo, courtesy of TI

CPI Snapshot: What the index doesn’t measure is money laundering or AML compliance perceptions

Denmark, which tops the list this year, has recently been rocked by the money-laundering scandal surrounding Danske Bank, its biggest lender, among other corruption cases. About US$230 billion of suspicious transactions are thought to have passed through Danske Bank’s Estonian branch, which has been linked to the Russian Laundromat and Azerbaijani Laundromat schemes uncovered by the Organized Crime and Corruption Reporting Project (OCCRP). In November, Danske Bank was preliminarily charged for breaking Denmark’s anti-money laundering laws.  

Swiss banks, and other financial intermediaries and enablers, regularly play a significant role in large-scale money-laundering and corruption schemes around the world, such as those related to 1MBD in MalaysiaOdebrecht and Petrobas in Brazil, or Mozambique’s “tuna bond” scandal

The Financial Action Task Force, which scores countries across 11 categories on their anti-money laundering effectiveness, gave only one top-seven country, Sweden, a high effectiveness score, and that in only one of the 11 categories.  


 

Graphic courtesy of TI

Ramping up, stamping out corruption

Regardless of country scores, TI has a roadmap to bolster countering corruption, with some tactics potentially helping strengthen financial crime countermeasures and boost transparency, including:

  • Balancing checks: Strengthen institutions and preserve checks and balances to ensure whether in a company or in government, the powerful and elite have someone looking over their shoulder – and penalties for getting caught.
  • Enforcement effectiveness: Close the implementation gap between anti-corruption legislation, practice, oversight and enforcement for failures.  
  • Power, Accountability: Hold governments accountable, give citizens the power, freedom to speak out against those in power.
  • Watching watchdogs: Ensure broad protections for journalists so they don’t have to fear for their lives when reporting on the graft behind the glitz and exposing grand corruption.

The report also details the changing images, for good and ill, of certain countries.

In the last seven years, “only 20 countries significantly improved their CPI scores, including Estonia, Senegal, Guyana and Côte D’Ivoire. Equally troubling, 16 countries significantly decreased their scores, including Australia, Chile, Malta, Hungary and Turkey,” according to the report.   


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