Box 10.1 The Extent of Corruption

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Corruption is intrinsically linked to tax crimes, as corrupt persons do not report their income from corrupt activities for tax purposes. The Financial

Action Task Force (FATF) includes tax crimes in the set of designated predicate offenses for money laundering purposes, explicitly recognizing the linkages between tax crimes and money laundering. Moreover, the extensive level of corruption related to tax has serious implications for government revenues and thus economic development, as indicated in Box 10.1.

Inter-agency collaboration strengthens the efforts of tax administrations to combat corruption. In

its 20101 recommendations, the OECD advocated greater cooperation and better information sharing between different government agencies active in the fight against financial crimes both domestically and internationally. Agencies, including financial intelligence units (FIUs), anti-corruption units, police, customs authorities, and the public prosecutor’s office are also involved in countering corruption. While most of the administration for prosecuting tax crimes related to corruption can be undertaken by tax authorities, they often require support in the form of information sourcing or expertise from other agencies who are also combating corruption. Entering into inter-agency collaboration may substantially enhance the efforts of a tax administration and other agencies combating corruption. Guidance on how this can be achieved is given in Case Study 20, along with references from Africa and other regions of the world.

Investigating and prosecuting alleged corruption requires robust evidence, which is often scattered across agencies that are accustomed to working

independently. Data sharing is an initial gateway for collaboration. In general, inter-agency cooperation between tax administration, financial intelligence units (FIUs), financial institutions, anti-corruption authorities, and other enforcement agencies can strengthen efforts to uncover cases of corruption through the sharing of information. The variety of expertise, skills, knowledge and experience offered by cooperation, not only provides joint teams with significant resources, but it also ensures that all offenses are properly identified, investigated and prosecuted. As the OECD has noted, many countries are looking at ways to enhance interagency cooperation so that they are working toward a common goal.2

There are multiple benefits that can be gained from a joint effort to prosecute tax evasion and other financial crimes including:

• Ensuring evidentiary standards are met for all charges through cooperation with the prosecuting authority;

• Access to mutual legal assistance from foreign law enforcement agencies;

• Access to specialized tribunals, including tax tribunals and anti-corruption tribunals, giving rise to a greater likelihood of success where the judicial process may take more time; and

• Prevention of any duplication of effort and any likelihood of compromising the actions of one agency.

Case Study 21 explores the basic requirements for effective prosecutions of financial crimes, the role of the tax administrations, and the limitations that must be overcome for them to happen. Experiences are highlighted from South Africa and Brazil.

BOX 10.1

The Extent of Corruption

“...in countries perceived to be less corrupt; the least corrupt governments collect 4 percent of GDP more in taxes than those at the same level of economic development with the highest levels of corruption.....and if all countries were to reduce corruption in a similar way, they could gain $1 trillion in lost tax revenues, or 1.25 percent of global GDP ” - IMF

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CASE STUDY 20

EXCHANGE AND COLLABORATION WITH TAX ADMINISTRATIONS

Inter-agency Collaboration to Detect Corruption

Introduction

The ability of a tax administration to share relevant information is often a key indicator of its effectiveness to proactively identify risks pertinent

to its mandate. This requires mechanisms to ensure that law enforcement and other tax authorities have full access to accurate and up-to-date information. If adequately planned, inter-agency collaboration is one of the ways to combat corruption. From the perspective of developing countries, the limited capacity of tax administrations could be in part overcome in cooperation with other law enforcement agencies.

Challenges encountered by tax administrations, customs, FIUs and other agencies

Challenges to effective cooperation between tax administration and other law enforcement agencies responsible for combating corruption and other financial crimes include the following:

• Administrative challenges: traditionally, the

obstacles to coordination between government agencies stem from fundamental cultural differences and motivations of different agencies. These include issues such as: » lack of interoperability among different IT systems, lack of secure email systems resulting in inability to send high-security material and widely differing software capabilities resulting in information transfer capacity limitations; » each agency seeking to preserve its independence and autonomy; » difficulty in synchronizing and coordinating organizational procedures and working approach; » different organizational objectives among collaborating agencies; » constituents bringing different expectations and pressures to bear on each agency; » questions of who claims success for successful prosecutions; and » the time period for pursuing cases.

• Legal challenges: these include specific restrictions and prohibitions, which may prevent an agency from obtaining access to relevant information from counterparty agencies.

• Operational barriers: these include timeconsuming or complicated procedures for obtaining information from another agency, a lack of awareness of the availability of information or other mechanisms for cooperation.

• Political challenges: these include a lack of support for agencies to adopt the changes required to remove or reduce legal and operational barriers.

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Models for sharing information

A study by OECD on inter-agency cooperation identifies the following four types of cooperation among different agencies:3

1. Direct access to records and databases

Tax authorities or other law enforcement agencies involved in investigating and prosecuting financial crimes may grant direct access to their records and information stored on their databases to designated individuals within other agencies or tax authorities. This access may be for a wide range of purposes or restricted to specific cases or circumstances. Direct access has the advantage that an agency requiring information can search for the information directly and, in many cases, can obtain it in real time. For example, in Iceland, tax crime investigators within the Directorate of Tax Investigations have direct access to databases held by the tax administration. However, allowing direct access carries the risk of access to data for purposes other than those for which it was initially contemplated. Countries may, therefore, seek to introduce safeguards to protect the confidentiality of sensitive information, by taking measures such as restricting access to databases to a few nominated individuals and maintaining access logs.

2. Mandatory sharing of information

An agency may be required to provide specific categories of information spontaneously, without requiring a request to be made. It has the advantage that officials within the agency holding the information identify what is to be shared, and they are likely to have a greater understanding of the information in their records. However, for this to be effective, an agency must have clear rules and procedures in place to identify the information that must be shared. Spontaneous sharing may be straightforward where an obligation exists to provide all information of a particular class, but it is more complicated where the exercise of judgement must be made to identify information that would be relevant to an investigation. Further, by itself, this method does not allow officials investigating to specify the information required. However, it may facilitate the detection of previously unknown criminal activity.

3. Spontaneous sharing of information

An agency may have the ability to provide specific categories of information spontaneously but can exercise its discretion in deciding whether to do so. Where this operates well, it can be at least as effective as the previous method. Information is shared spontaneously, but officials in the agency holding the data can exercise their judgement as to what to share. This model is particularly useful when it is backed by close cooperative working arrangements and a good understanding by officials in each agency of the information requirements of the other agencies. Models for information sharing that allow discretion to be exercised require clear rules for how this is to be done. For example, decisions as to whether or not relevant information is to be shared may be limited to individuals in certain positions or levels of management. At the same time, guidelines may set out the factors that can be taken into account in making a decision. The effectiveness of this type of legal gateway is also based on the ability of officials to identify relevant information and their willingness to exercise discretion to provide information. However, where there is no previous experience of inter-agency cooperation, the benefits to both agencies of sharing information must be made clear, or there may be a danger that officials exercise their discretion and choose not to share valuable intelligence.

4. Sharing information on request

An agency may provide information only when specifically requested. This may be seen as the simplest of the four methods for sharing information, as there is less need for rules or mechanisms to identify information for sharing or provide access to records. It also has the advantage of allowing officials to specify precisely the information they require. In the context of an ongoing transaction where investigators have identified specific necessary information, this can be a valuable mechanism. However, in many cases, an agency may hold information that an investigator is not aware of. This may mean that the investigator is unable to request information or is only able to do so at a later stage when the value of the information may be reduced.

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Successful practices

Several countries have introduced different models or operational mechanisms to allow agencies to work together in lieu of “legal gateways.”

All countries assessed by the OECD4 have legal gateways in place to allow tax administrations to share information collected for the purpose of a civil tax audit or assessment with agencies conducting tax crime investigations and with the customs administration.5 However, in many countries, FIUs, the police or the public prosecutor are not obliged to report information to the tax administration to evaluate taxes, and vice versa. Belgium and Korea explicitly prohibit the tax administration from sharing information related to nontax crimes.6 Fourteen countries assessed by the OECD prohibit the FIUs from obtaining tax information from the tax authority.7 Thus, despite the legal gateways to enable information sharing amongst agencies, some countries have introduced different models or operational mechanisms to facilitate collaboration between agencies.

A whole-of-government approach can be particularly effective. Different government

agencies collect and hold information on individuals, corporations and transactions, which can be directly related to the activities of other agencies in combating financial crime and tax evasion, including money generated from corruption. To be effective, a tax administration should establish cooperation with these law enforcement agencies, building a “whole of government approach” to improve the prevention and detection of financial offenses, leading to faster and more successful prosecutions, and increasing the probability of the recovery of the proceeds of corruption.8 For example, Canada has established a whole-of-government working group, which includes the Canada Revenue Agency, the Public Prosecution Service of Canada, the Department of Justice, the Canada Border Services Agency, FINTRAC, the Royal Canadian Mounted Police and Public Safety Canada.9 In the working group, Canada’s response to financial crime at large is discussed and opportunities to increase effectiveness are raised and studied, often resulting in recommendations for policy or legislative changes.

Information sharing has to be balanced with confidentiality and the right to privacy. Right to

privacy, coupled with confidentiality requirements can also have an impact on the information sharing between the tax administration and other law enforcement agencies. Different agencies share information under all types of cooperation. It is, however, critical to protect the confidentiality associated with the information in addition to the integrity of work carried out by other agencies. Sweden has enacted a new Data Disclosure Act, which provides for greater cooperation in tackling organized crime.10 The law aims to facilitate the exchange of information between authorities that cooperate to prevent or detect certain forms of crime. The information sharing and data disclosure is limited to cases where the need for an effective exchange of information is particularly strong and grounds for the protection of privacy do not prevail over the benefits of disclosing information. Also, the information shared between agencies through legal gateways is at all times required to comply with the provisions of the Secrecy Act.

Each country must design its own tailor-made model for inter-agency cooperation. The international

community has recognized the value of inter-agency cooperation. Many developed countries have initiated special programs based on inter-agency cooperation as an effective and efficient way of preventing, detecting, tracking and prosecuting corruption. A country should take into account its specific needs, the legal and organizational structure it has adopted and the particular risks that it faces in designing an appropriate model for inter-agency cooperation.

Finland has adopted a centralized approach for combating the grey economy.11 It has established the

Grey Economy Information Unit (GEIU) to promote the fight against the shadow economy by producing and disseminating reports about grey economy activities and how they may be controlled. The GEIU is a division of the Finland tax administration specifically established to work closely with other government agencies. It collects information from different government agencies regardless of existing confidentiality provisions. In preparing reports about grey economic activities, the GEIU has the right to receive, on request, necessary information held by other authorities, even where that information would not normally be available to the tax administration due to secrecy provisions.

The Netherlands has opted for a cooperative approach for tackling money laundering.12 It has

established the Financial Expertise Centre (FEC), which is a joint project between the National Tax and Customs Administration (NTCA), the Fiscal Intelligence and Investigation Service (which is structurally part of

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the NTCA), the National Police, the General Intelligence and Security Service, the Public Prosecution Service, the Netherlands Financial Markets Authority, De Nederlandsche Bank, and the Ministry of Finance and Ministry of Security and Justice (who are involved in regulating and monitoring activity in the financial sector). The mission of the FEC is to monitor and strengthen the integrity of the financial sector, and tackle issues of financial integrity through inter-agency cooperation. This entails sharing information.

Giving tax administrations access to suspicious transaction reports (STRs) would be beneficial in the fight against corruption. In many countries,

there is no obligation on the police, public prosecutor or FIU to report information to the tax administration. In addition, many countries do not have legislation to allow the tax administration access to STRs. Allowing such access will have several benefits, including an improvement in the detection of money laundering offenses and proceeds from corruption, greater success in tax crime investigations and prosecutions, and an increase in the actual quantity of tax assessed and recovery of the proceeds of crime. Further, access by FIU to other information held by the tax administration, such as declared income, tax payments, real estate as well as other property, cross-border financial transactions, and the results of tax audits, will help to detect corruption, though this has not yet been widely implemented.

In Italy, the FIU has direct access to the Account and Deposit Register (Anagrafe dei Conti) maintained by

the tax administration.13 The Account and Deposit Register includes information on accounts and financial transactions carried out by financial intermediaries, including banks, trust companies, brokerage companies and post offices. Legislation has also been passed, which allows the FIU direct access to the Tax Register (Anagrafe Tributaria). Further, tax officials must report to the FIU any suspicious transactions they encounter in the course of their work.

Other examples of information sharing include:

• Estonia:14 The police and the Tax and Customs

Board share information through a common intelligence database.

• Iceland: 15 Directorate of tax investigations conducting tax crime investigations has direct access to information contained in police databases. • Serbia:16 All state authorities and organizations, bodies of territorial autonomy and local government are required to report spontaneously to the tax administration all facts and information detected in the performance of their duties that are relevant to the assessment of tax liability.

Inter-agency cooperation is increasing across the globe

The concept of inter-agency cooperation is widespread among EU countries. One such initiative

is the establishment of the Croatian State Prosecutor’s Office for the Suppression of Organized Crime and Corruption. This is a Croatian Agency, supervised by the state attorney’s office but which also cooperates with the tax administration.17 Similarly, the Czech Republic has established Tax Cobra, a cooperation of police, customs, and finance administration.18 Using smart technology to triangulate data shared by agencies would make dissemination even more effective.

In Southeast Asia, Malaysia has established the National Revenue Recovery Enforcement Team (NRRET) to improve cooperation between law

enforcement agencies.19 The NRRET, which is headed by the Attorney General, is an inter-agency initiative aimed at fighting tax crimes and other financial crimes. Its members include the tax administration, Company Commission Malaysia, Central Bank of Malaysia, Malaysian Anti-Corruption Commission and Royal Customs Department. Its role is to improve cooperation between law enforcement agencies to ensure a holistic approach to development, good governance, and combating corruption, as well as to assist agencies in fighting financial crimes. The NRRET also monitors the sharing of information and planning of joint operations among law enforcement agencies in high profile cases.

In South Asia, India has set up the Economic Intelligence Council (EIC), which acts as the main body to ensure coordination among various

agencies. 20 The EIC meets twice a year and holds extraordinary meetings as and when considered necessary. The EIC is mandated to discuss multiple aspects of intelligence relating to economic security and to develop a strategy for the effective collection and collation of intelligence and its dissemination to various law enforcement agencies. It reviews crucial

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cases involving inter-agency coordination and approves mechanisms for improving such coordination. As far as sharing of information among multiple agencies is concerned, the EIC generally performs this through the meetings of its Regional Economic Intelligence Councils (REICs).

Recommendations

• Establish a bilateral agreement or memorandum of

understanding (MOU) to share information between the tax administration and agencies involved in

detecting and preventing corruption. This ensures

a clear legal framework for any information sharing with the agencies concerned. MOUs typically contain details of the types of information that will be shared, the circumstances in which sharing will take place, and any restrictions on sharing information (e.g., the information may only be used for specified purposes). It may also include other terms agreed by the agencies, such as the format of any request for information, details of competent officials authorized to deal with requests, agreed notice periods and time limits, and a requirement for the agency receiving information to provide feedback on the results of investigations in which the information was used. For example, in New Zealand, based on an information sharing agreement between the Inland Revenue and the New Zealand Police, the tax administration can share information with the police for the prevention, detection or investigation of a serious crime, or for use as evidence of a serious crime. The Inland Revenue of New Zealand can also share taxpayer information with the police or other agencies in cases related to the administration of taxation, investigation of tax crimes, and the facilitation of asset recovery.

• Establish a national task force. The task force

should be responsible for the timely collection and dissemination of relevant information to concerned agencies and for developing a framework that enables it to examine specific cases. This will help to identify a number of areas for further investigation across the full range of tax and economic crimes.

• Ensure connectivity between agency databases.

Lack of interconnectivity of databases of different government agencies is the biggest issue faced while sharing information with different agencies tackling corruption. Blockchain technology may be an appropriate platform for developing a common database system accessible to the agencies concerned. The Blockchain system may also facilitate the consolidation of information received by more easily identifying transactions undertaken by the same entity but reported by different companies/individuals.21 The United States Air Force is currently planning to test a Blockchain based database that will allow it to share documents internally as well as throughout the various branches of the Department of Defense and allied governments.22

• Review limitations in tax treaties on the sharing of information with non-tax departments. This can

help in removing barriers to information sharing.

• Conduct capacity building exercises to develop

a culture of cooperation with different agencies

working together. For example, setting up joint task forces or seconding personnel to different agencies to work together is an effective way of enabling skills to be transferred while allowing personnel to build contacts with their counterparts in another agency.

• Establish a system that balances the sharing of information with confidentiality. A suitable system

is one where the information can be shared only in cases where the need for an effective exchange of information is particularly strong and grounds for the protection of privacy do not prevail over the benefits of disclosing information. This helps to overcome the intense concerns about privacy and potential lack of trust among agencies.

Example 1: Kenya’s success with inter-agency cooperation to obtain and use data

Despite the myriad of laws in place to combat corruption, Kenya ranked 145th (out of 176 countries) on Transparency International’s Corruption Perceptions Index in 2016. To deal with the corruption, Uhuru Kenyatta, the President of Kenya in 2016, directed the

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Office of the Attorney General and the Department of Justice to undertake a thorough review of the legal, policy, and institutional framework for fighting corruption in Kenya. A taskforce23 was formed to oversee the whole process, drawing its membership from all ministries, departments, and agencies charged with fighting corruption in Kenya. One notable issue identified by the taskforce was the lack of proper coordination among agencies, resulting in duplication of effort. Combating corruption was an uphill task due to the lack of a coordinated framework for reporting corruption, information gathering, intelligence sharing, and cooperation in investigation, among other areas.

The birth of the multi-agency team

To tackle corruption and other economic crimes, Kenya established a multi-agency team (MAT)24 to ensure cooperation and synergies among a number of agencies involved in combating corruption. The MAT was composed of the Kenya Revenue Authority; Ethics and Anti-corruption Commission (EACC); Office of the Director of Public Prosecutions; Directorate of Criminal Investigations; National Intelligence Service; Financial Reporting Centre; Asset Recovery Agency; and Office of the President.

Terms of reference of the MAT

The MAT’s terms of reference were:25 • To enhance cooperation, coordination and collaboration among the agencies; • To engage other relevant agencies in order to enhance the effectiveness of the graft war; • To identify resource needs for each agency and lobby for the same; and • To develop effective communication strategies for awareness creation on the gains and achievements made in the fight against corruption.

Successes of the MAT

MAT has been successful in enhancing cooperation and collaboration amongst the agencies and in providing real-time information gathering and intelligence sharing. As of October 2016, Kenya had 406 corruption and economic crime cases pending in court. Out of these, 98 involved high-profile personalities such as cabinet secretaries, members of parliament, and chief executive officers of parastatals and state agencies. Kenya secured several convictions with various penalties, including imprisonment, mandatory fines, and restitution of property. One of the celebrated convictions involved a former member of parliament who was found guilty of 9 corruption counts relating to the loss of KSh4.5 million; the member of parliament, her husband, and 4 others were convicted and sentenced to payment of KSh24.95 million (about USD2.495 million) and 18 years imprisonment.26 In respect to asset recovery, Kenya has so far traced and recovered assets worth KSh9.8 billion between 2005 and 2016. In March 2017, the President reported that approximately KSh3 billion had been recovered or preserved. As of November 16, 2016, there were 174 civil cases pending in court for recovery of illegally acquired assets worth KSh3 billion.27 Further, in one interview, the EACC CEO Twalib Mbarak28 revealed that “there are numerous governors, MPs, and county officials and top government officials on its radar.”

Challenges identified

Despite some great successes, MAT has faced a number of challenges: • The biggest challenge is the lack of legality of some of MAT’s operations, which have been challenged in the courts. • Archaic court procedures with respect to acceptance of documentary evidence, which required the originator of the evidence to appear before the court, and at times injunctions that derailed the prosecution, have made the work of

MAT difficult.29 • Politicization of the cases against high-ranked politicians has led to claims that MAT is discriminating against or favoring someone in the war on corruption.30 • Public awareness about the need for transparency is poor.

Lessons learned

MAT has been largely successful in prosecuting corruption and recovering assets. Some of the lessons learned are: • Individual institutions face capacity constraints and combining the collective expertise and information pool certainly helps in combating corruption. • A central depository for data is needed, not only on asset recovery but also for economic crimes and corruption-related cases. • The capacity of officers needs to be built continuously through training and cooperation with other similar bodies.

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Example 2: Nigeria’s challenges in achieving interagency cooperation to obtain and use data

Nigeria is an interesting example of an African country where lack of effective inter-agency cooperation is responsible for inefficiency in detecting and prosecuting corruption. Until 1999, Nigeria was under military rule. In 1999, the former military head of state, Olusegun Obasanjo, was elected as a civilian president on the platform of addressing corruption. In 2015, Muhammadu Buhari (current President reelected in 2019), from the All Progressive Congress, won the election on a platform where the fight against corruption featured prominently. Upon assuming office, he established the Presidential Advisory Committee on Anti-Corruption. Over the years, Nigeria established a range of anti-corruption institutions to address various aspects of the fight against corruption. These include the following key agencies:31

• Institutions addressing corruption in public

procurement: Bureau of Public Procurement; Code of Conduct Bureau; and Code of Conduct Tribunal;

• Institutions dealing with law enforcement:

Economic and Financial Crimes Commission; Nigerian Financial Intelligence Unit; Independent Corrupt Practices (and other Related Offenses) Commission; Special Control Unit on Money Laundering; and

• Institutions dealing with public complaints, public

information and government policy coordination:

Presidential Advisory Committee against Corruption; Public Complaints Commission; Technical Unit on Governance and Anti-Corruption Reform/Inter-Agency Task Team, Bureau of Public Service Reform.

The government also established a National AntiCorruption Strategy and Action Plan for the period 2017–2021. Despite having multiple regulatory agencies, including the tax authority, the nation still ranked 144th (out of 180 countries) on Transparency International’s Corruption Perceptions Index32 and continues to grapple with corruption scandals amid calls for fiscal transparency and accountability in governance. The situation may be the result of not only the inadequate capacities of existing institutions but also the lack of a coordinated approach and undue rivalry among the anti-corruption agencies, including the tax authorities. Some government departments were unwilling to share information and some responsibilities between agencies were duplicated.33 Also, most government systems are manual and therefore, retrieval of information becomes difficult. This situation has proved to be counter-productive, resulting in a string of losses of cases brought against high-profile suspects. In what counted as a major setback to the government, cases against Mike Ozekhome, a Senior Advocate of Nigeria (SAN)34; Joe Agi, also a SAN; and Adeniyi Ademola, a Justice of the Federal High Court; and his wife, Olubowale, were all dismissed within a few days. In most of the cases, the judges cited lack of convincing prosecution.35

Lessons learned

A number of lessons can be drawn for countries moving in a similar direction:

• Recognize the need for a clear policy and legal framework for cooperation;

• Develop a common technology platform to collect information and ensure interconnectivity of databases;

• Undertake capacity building exercises to train personnel on sharing information and building a culture of cooperation; and

• Establish a national agency responsible for overseeing the sharing of information between different agencies.

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CASE STUDY 21

EXCHANGE AND COLLABORATION WITH TAX ADMINISTRATIONS

Sharing Evidence with Joint Prosecution Teams

Introduction

The basic requirements for effective prosecutions

Investigating and prosecuting suspected perpetrators of corruption is very time-consuming and requires collaboration, expertise and knowledge

of the law. The process of detecting and proving corruption, fraud, tax evasion and other financial crimes requires many hours of work, specialized expertise and sometimes expensive software or surveillance equipment.36 Inter-agency cooperation between revenue authorities, financial intelligence units (FIUs) and other law enforcement agencies can be a force multiplier, offering additional resources, expertise, and legal tools.37 Effective cooperation can provide “critical cover in politically sensitive cases”, that can support law enforcement agencies to counteract any political risks.38 In order to successfully meet the objective of prosecuting a suspect, Joint Investigation Teams must operate within the confines of the law, set a strong terms of reference determining the scope and role of each agency, and ensure timely action.

The successful prosecution of corruption and other financial crimes entails cooperation among agencies with varying institutional cultures and differing scopes and objectives. The level of

cooperation between tax administrations and other domestic law enforcement agencies is critical in countering tax and financial crimes.39 Whilst there are several limitations on the scope of cooperation, opportunities exist in the form of existing cooperation models, the use of task forces and joint centers, and in applying international best practices.40

Tax administrations have a key role to play in

addressing serious crime. They are granted access to and are highly trained in examining the financial affairs, transactions, and records of millions of individuals and entities.41 Alongside examining the affairs of taxpayers, tax authorities are enabled by law to issue demand notices requesting the payment of outstanding taxes and pursue payment through specialized tax tribunals or through mediation efforts with the taxpayer. However, tax administrators are not always aware, especially in developing countries, either of the typical indicators of possible bribery, corruption, and other financial crimes not related to tax, or of their role in referring their suspicions to the appropriate law enforcement authority or public prosecutor.42 For this reason, as well as the way that key data is spread across various agencies, inter-agency cooperation to share information, investigate alleged financial crimes and, ultimately, prosecute is imperative.

The different agencies need to be able to share information effectively while abiding by data

protection rules. Some of the agencies involved may include the police, judiciary, public prosecutors, corruption investigation agencies, and financial intelligence units (FIUs). Each of these agencies/ institutions will already have some appreciation of the links between their functions and mandates in tackling financial crime.43 In the course of their activities, the different agencies will collect and hold information on individuals, corporations, and transactions, which may be directly relevant to the activities of other agencies. However, legal gateways will need to be established to enable the sharing of information.44 This will often be defined by domestic law and limited by regulatory restrictions governing the collection and use of information (e.g. General Data Protection Rules

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in the EU).45 This requires balancing data protection rights with inter-agency sharing of information. It is important to protect the confidentiality of information and the integrity of the mandate being fulfilled by each agency.46

Tax tribunals with less strict rules of evidence are an alternative to legal action. The decision to prosecute

will generally be anchored on access to lawfully obtained information (particularly regarding the rules of evidence), which is collected and shared between agencies through a mandated process. The collection and sharing of information for purposes of prosecution can only be successful if relevant agencies utilize their technical capacities to identify a financial crime, the appropriate avenue for scrutinizing that crime and the agency entitled to initiate action. Selecting the correct agency is especially important for tax administrators since tax evasion cases may be prosecuted by tax authorities in specialized tax tribunals. From time to time, the tax authority may negotiate with the taxpayer to recover revenues, especially where the chances of a successful legal action are low. Specialized tax tribunals often have less stringent rules of evidence and may be preferred where evidence has not been handled in line with strict rules of evidence. In addition, where a legal action has little chance of success, the tax authority may, at least, recover some revenue from the income generated by that asset.

The capacity to investigate may not always translate into a capacity to prosecute. Investigation

involves analyzing significant volumes of financial, banking, and accounting documents, including tax or customs records in order to identify illegal schemes, follow the money and gather financial intelligence.47 Prosecution will require similar expertise, but will also require gathering and presenting evidence for confiscation, seeking judicial authorization for specialized investigation tools and presenting the case to the court.48 effective prosecution. The ability to share information for purposes of inter-agency cooperation in prosecuting a financial crime is often dependent on the enabling framework in a country. In general, for purposes of prosecution it is imperative that the agreement to cooperate is implemented in accordance with the enabling provisions of the law. Countries can and have modified their laws to enable them to get better access to information. Some of the methods of cooperation include direct access to information contained in agency records or databases; an obligation or ability to provide information spontaneously; and an obligation or ability to provide information only on request.49

The role of tax administration and limitations to joint prosecution

In many countries, the limitations imposed on the tax authority’s ability to obtain information from other agencies pose a significant challenge to an Based on a review of 51 countries, the OECD found that some countries had barriers to the ability of tax administrations to share information with the police or public prosecutors in non-tax

investigations. In 15 countries, there was no legal obligation to report suspicions of serious non-tax offenses to the relevant authorities. In two countries, the tax administration was specifically prohibited from doing so.50 Mixed abilities to share tax information with the FIU were found, together with the prohibition in two countries from sharing with the authority responsible for conducting corruption investigations.51 In contrast, customs administrations, due to their role in countering illicit trade, were mostly allowed to share information with the police or public prosecutors investigating nontax offenses, and seven countries52 even permitted direct access to customs information.53 Notably, in almost all countries, legal gateways permit (not obligate) the police or public prosecutor to provide information to the tax administration for purposes of administering taxes and, generally, enable sharing with the FIU.54 Overall, while all other agencies that tend to be involved in the prosecution of a financial crime were permitted to share information with the police or public prosecutor, the limitation on tax administrations and the lack of an obligation for the police and public prosecutors to share relevant information are likely to impede an effective prosecution.

Tax administrations hold a wealth of personal and company information that is a valuable source of intelligence for other agencies tasked with identifying financial crimes. 55 Such information

relates to income, assets, financial transactions and banking information, among others. Tax agencies are enabled to engage in exchange of information on request (EOIR), spontaneous exchange of information or automatic exchange of information (AEOI) for tax

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purposes on the basis of either tax treaties, or Tax Information Exchange Agreements (TIEA). AEOI and EOIR provide tax authorities with a framework to request and obtain specific information relating to a taxpayer in a foreign jurisdiction; this information can be used to carry out a risk assessment and/or trigger a tax investigation.56 This may be beneficial to other law enforcement agencies investigating a financial crime. However, there are limitations on the sharing of information. For instance, tax authorities should refrain from engaging in fishing expeditions or requesting information that is not likely to be relevant to the tax affairs of a taxpayer.57 In addition, the information received must be treated with proper confidence and can only be shared with authorities involved in the assessment, collection, enforcement or prosecution of a tax related offense.58 Information can be exchanged with other law enforcement agencies where money laundering, corruption and terrorism financing may be concerned, but the supplying jurisdiction must be informed and authorize this.59

Since the proceeds or tools of corruption will often involve the use of other jurisdictions, exchange of information between tax authorities can prove advantageous to an inter-agency initiative to

prosecute. Where gathering evidence will require the cooperation of foreign authorities, mutual legal assistance can be key, particularly where prosecution is concerned, in executing proceedings or extradition.60 Mutual legal assistance can be provided via agreements between countries, the UN Convention against Corruption (UNCAC), or on the basis of reciprocity where no agreement exists. In Asia and the Pacific, some of the barriers to effective international legal assistance include the lack of legal basis for cooperation, differences in legal and procedural frameworks, language barriers, resource limitations and evidentiary issues.61 In addition, a relationship of trust combined with a strong and clear request for assistance was found to be key in enhancing mutual legal assistance.62 Other agencies can provide tax administrations with important information about ongoing or completed investigations that could influence the reopening of a tax assessment or initiate a tax crime investigation.63

In the Brazilian Petrobras investigation, tax auditors supported the transnational corruption investigation by analyzing suspects’ tax and customs data and sharing this with the police and public prosecutor as permitted by law.64 With that

information, officials were able to uncover evidence of money laundering, tax evasion and hidden assets and the investigation has, so far, resulted in criminal fines, tax penalties and recovered assets amounting to USD15 billion and 1,400 years in prison sentences.65 Brazil’s National Strategy to Combat Corruption and Money Laundering (ENCCLA) was set up as an inter-agency organization to fight money laundering and corruption through coordination and joint policy making among public officials.66

Criminal investigations can be affected by a country’s limitation on the tax authority’s sharing

of information. Where criminal prosecutions are concerned, the tax administration is often able to ensure that individuals and companies are required to pay tax on all of their income. This includes income derived from criminal activities, on which the tax administration can deny a deduction for expenses.67 However, in the event that information valuable to a criminal investigation is uncovered in a country that can limit the ability of tax administrations to share information, there is a likelihood that some elements of a financial crime may go undetected. In addition, where the tax administration may be limited from taxing the direct proceeds of a crime, cooperation with other law enforcement agencies could provide an avenue for alternative charges to be brought against a suspect.

A joint prosecution must be carried out within the confines and structures of the law, which can make prosecutions more difficult. For instance, if the

law provides that information obtained from the tax administration may be used for investigative purposes but not as evidence in proceedings, this would present a barrier to successful prosecution.68 Some laws may require that a formal criminal procedure is initiated under the authority of a public prosecutor or a court order obtained before an anti-corruption authority may receive tax information.69 Although this ensures an important balancing with protecting personal or confidential information, it may delay and increase the costs of the process. Countries should introduce laws to streamline this process and adapt the legal framework to enable sharing of information for purposes of providing evidence in a formal case.

Globally, jurisdictions apply different frameworks for prosecution of tax and financial crimes. Some

countries, such as Burkina Faso and Mexico, have a central prosecution authority that is also responsible for criminal investigations, whilst others do not involve public prosecutors in the investigations that will be

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carried out by the police or specialized agencies.70 In several countries, including New Zealand and Nigeria, law enforcement agencies, including the police, tax administrations or anti-corruption authorities, may prosecute cases directly.71 In a number of jurisdictions, for example Ghana, Rwanda, and Malaysia, public prosecutors responsible for the prosecution of a financial crime may either have the authority to delegate performance of significant elements of an investigation to a number of the agencies identified above, or they may not participate at all in the investigation process.72

Tax administrations generally carry out a separate process of prosecuting tax-related cases through specialized tax courts or tribunals, which are found in most developed and developing countries.

In most jurisdictions, the enforcement of taxes and the prevention of tax crime is the tax administration’s responsibility.73 The process of investigation for tax purposes will involve specialized audit teams accessing the financial and other information of a person; this process and the powers to access the information of a taxpayer are provided for by law. Taxpayers are often required to exhaust the tax procedural process before the courts are approached. The coordination of this process with the overall joint prosecution is key, since a failure in the specialized tribunal or inability to prosecute may weaken an overall case, particularly with regard to money laundering. Where a taxpayer agrees to comply with the orders of the tax administration and pay the outstanding taxes, this is likely to affirm the allegation of a tax crime having been committed and efforts to determine whether money laundering occurred will be further justified. If joint teams opt to initiate prosecution in specialized tax tribunals, they will need to ensure that the tax investigation is distinct from the overall investigation. Pursuing an action in the specialized tax tribunal should be considered where a criminal prosecution might not be possible or is unlikely to succeed. This may remove at least part of the proceeds of crime from the criminals by taxing the income generated from that asset and would entail less stringent requirements for evidence. Where tax authorities are involved in a joint prosecution process, they may make strategic decisions about whether or not to combine charges for tax crimes, corruption, and other financial crimes into a single prosecution.74

Obstacles to coordination between government agencies may arise from systemic and practical differences:

• Lack of political will and distrust amongst law enforcement agencies;

• The agency’s need to preserve autonomy and independence throughout the process to protect the integrity of its mandate;

• Organizational routines and procedures that may be difficult to synchronize and coordinate;

• Observing the rules of evidence to ensure admissibility in court;

• Differing organizational objectives between the collaborating agencies, which need to be balanced;

• Differing expectations and levels of pressure from and for each agency to deliver some element of the work; and

• Differing and incompatible technical platforms.

The importance of enabling law

The mandate of a joint prosecution effort must be clear and each agency must act within its empowering provisions. However, even where

empowering provisions exist, political interests may often undermine the legitimacy of a joint investigation team. In addition, the support of policy makers to introduce an enabling legal framework will be key.

Where extensive empowering provisions are not available, a Memorandum of Understanding (MOU)75 can affirm and evidence the objectives of inter-agency cooperation to prosecute. Under

Project Wickenby, the Australian Tax Office has direct access to information collected by the Australian FIU (AUSTRAC) and an MOU with AUSTRAC.76 Such an MOU should be compliant with the law and provide details on existing regulations, provide modalities of exchange of information, and facilitate shared objectives. It should not create legally binding obligations on the agencies, but it should foster a common understanding of objectives, procedures, and roles, and build trust between agencies.

Recognizing tax crimes as predicate offenses

The ability of tax administrations to be involved in prosecuting financial crimes is often made easier

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when tax crimes are recognized as predicate offenses to money laundering. The Financial Action

Task Force (FATF) recognized this in 2012, when they revised the Recommendations to include tax crimes as a predicate offense. Predicate offenses are types of criminal activity that give rise to funds or assets that can be laundered to obscure the illegal source.77 Where a tax crime is designated as a predicate offense, it means that a person may be charged with the offense of money laundering and the predicate offense, in this case tax evasion. This is important because it gives joint prosecution teams greater scope to secure a conviction or impose greater penalties, pursue cases of tax crimes involving other jurisdictions and recover the proceeds of crime through mutual legal assistance.78 The definition of a tax crime should be broad enough to cover the violation of all direct and indirect tax obligations. A narrow definition could limit the role of the tax administration. It also requires financial institutions and Designated Non-Financial Businesses and Professions to report suspicions of any predicate offenses relating to the proceeds of tax crimes; this will generally require some awareness of the risks and indicators amongst reporting entities and greater cooperation with tax administrations.

According to an OECD survey of 31 jurisdictions, the inclusion of tax crimes as a predicate offense had practical and positive impacts on their work.79

The most reported impact was better inter-agency cooperation, including an increased ability to work with other agencies on particular cases and on strategic and policy matters.80 Greater awareness amongst other law enforcement agencies, intelligence agencies and the private sector of the possibility of tax crimes occurring and better avenues for communication with other agencies were also reported.81 Notably, some jurisdictions reported an increase in prosecutions and that prosecutions were easier to undertake.82

The EU 4th Anti-Money Laundering (AML) Directive introduced a requirement for member states to introduce tax crimes as a predicate offense. While

no definition was specified, countries were expected to have effected this amendment by 26 June 2017, and by 1 January 2018 tax authorities were to gain access to data collected under AML laws. Ultimately, the European Commission had to open infringement procedures for non-communication of transposition measures against 20 member states. Of the 20, three countries, including Ireland, were referred to the Court of Justice.

Alongside laws defining the mandate of government agencies to cooperate, countries should introduce a wide definition of tax crimes as a predicate offense

to money laundering. This could enable cooperation in investigations that involve a broad range of tax crimes. Although there is no recommended definition of a tax crime, countries seeking to introduce them as a predicate offense should amend their AML laws to define the offense and the elements that make it a serious offense.83 Countries should also ensure that tax crimes committed in a foreign jurisdiction are considered tax crimes. The legal provisions should provide a broad set of tax-related offenses that constitute predicate offenses to money laundering. In particular, fiscal offenses relating to indirect and direct taxes should be included.84 This could ultimately entail straightforward non-payment of direct and indirect taxes being considered as a predicate offense to money laundering, or, potentially, certain cases of aggressive tax avoidance. In addition, countries will need to:85

• Establish, either through legislation or case precedent, that the predicate offense need not be proven in order to convict for money laundering, as established in the FATF recommendations;

• Prepare internal guidelines, handbooks and inperson training for investigators; and

• Introduce policies or directives that establish the mandatory requirement of opening a parallel financial investigation in every investigation of a predicate offense.

The introduction of tax crimes as a predicate offense needs to be effective. This will generally entail

countries ensuring that law enforcement agencies, other agencies required to provide information in accordance with the AML requirements, and Designated NonFinancial Businesses and Professions undergo thorough training and awareness raising.

Showing regard for the right to privacy

Particular care is required to ensure that cooperation between agencies does not lead to any curtailing of the right to privacy. Enabling

legislation is an important feature in framing the scope of each agency in the process of prosecuting financial crimes. However, an MOU can also provide an enabling framework for the authorities to cooperate.

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The role of the tax administration can only extend as far as a tax crime may be concerned and the process will entail a simultaneous prosecution in alignment with tax procedures as mentioned above. Clearly setting out the roles of each authority throughout the prosecution process and ensuring strict adherence to the law ensures that the case cannot be dismissed based on procedural matters. Alongside respecting the rule of law, the right to privacy entitles persons to protection from arbitrary interference or intrusion from the state. Although the right is not absolute, limitations regarding banking secrecy and money laundering in general are often clear. The tax administration must evaluate whether sharing of information is in line with the requirements of the Constitution or Bill of Rights of their jurisdiction. Any limitations to the right to privacy should be balanced by some determination of whether it would be reasonably necessary for the attainment of the objectives underlying the joint investigation.

In making this assessment, the obligation of sharing taxpayer information with other agencies for purposes of investigating a financial crime must be balanced against the potential impact on the integrity of the tax system. 86 A tax

administration’s information sharing to address serious crime is acceptable as long as it is fit for purpose. In addition, balancing the right to privacy and the benefits to society must be evaluated based on the following:87

• The nature of the serious crime in question and the scope of the information required;

• The authority to access the information and the ability of the tax administration to provide it;

• The intended and potential use of the information; and

• The risk of misuse.

Investigating agencies will need to determine to what extent the information is available and will

be shared. The 4th AML Directive provides that the processing of personal data should be limited to what is necessary for the purposes of complying with the requirements of the Directive. Financial investigations are, by nature, intrusive and will result in obtaining the private information of an individual.88 Law enforcement agencies must remain aware of their country’s human rights legislation, which protects the right to privacy and associated considerations. They should therefore be able to justify such investigations as proportionate, non-discriminatory, legitimate, accountable, and necessary to the investigation to be undertaken.89

Joint teams should set the criteria for information

sharing. These should be based on the indicators of suspicious features that fall within the prevention of tax abuses and money laundering initiatives to ensure that the process of prosecution does not infringe upon the right to privacy. The criteria should include:

• Transactions with no real business purpose (substance over form);

• The use of offshore accounts, trusts or companies which do not support any economic substance;

• Tax schemes that involve high-risk jurisdictions (particularly jurisdictions with high levels of secrecy and low or no taxes);

• Highly complex tax structures;

• Unexplained wealth;90

• Short-term businesses involved in importing or exporting; and

• Use of cash transactions instead of appropriate financial instruments.

Conclusion

The obstacles to effective prosecutions go beyond the limitations imposed by legislation. The attention

drawn to legal challenges is warranted by the potential consequences of a failure to operate within the confines of the law. These failures include the inadmissibility of evidence, the consequence of which will result in rendering the entire process redundant. Joint teams may be limited by distrust amongst the enforcement agencies, differing expectations on the delivery of outcomes, and a lack of harmonized institutional procedures particularly regarding the use of technology to collect, hold, and share data.

Joint prosecution teams must have a clear mandate based on the law, clearly defining the role of each agency and determining clear procedures

for cooperation. They must remain aware of their limitations as any breach may result in a failed process, and be prepared to receive any additional support to ensure they meet the procedural requirements. Tax administrations will need to operate within the specialized courts and ensure that sharing of any

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information is enabled by the legal framework or any reasonable exceptions. In order to do so, countries should consider introducing tax crimes as a predicate offense in order to facilitate:

• Increased sharing of information and awareness about the nature of tax crimes.

• Mutual legal assistance.

• Prosecution of money laundering based on tax crimes involving foreign jurisdictions.

• Expanding the tools, skills, and resources available, including for asset recovery.

• Extending the statute of limitations through linking to money laundering.

Example: South Africa (Tannenbaum case)91

Brief facts of the case

The following South African agencies cooperated in a four-year investigation of Barry Tannenbaum that led to prosecution in 2009:

• South African Reserve Bank (SARB);

• South African Revenue Services (SARS): responsible for the collection of revenue and enforcement of compliance with tax and customs legislation (semiautonomous);

• South African Police Service (SAPS) Serious

Economic Offences Unit: tasked with preventing, combating and investigating economic crime;

• The Financial Intelligence Centre (FIC): assists in the identification of the proceeds of unlawful activities and combating of money laundering activities, amongst others; and

• National Prosecuting Authority (NPA).

Tannenbaum was accused of setting up a Ponzi scheme that involved at least 800 investors in South Africa, Germany, US, and Australia. The scheme promised investors returns of 200% per year in investments related to fraudulent pharmaceutical imports. On 30 July 2009, the North Gauteng High Court granted the Asset Forfeiture Unit in the NPA a preservation order in line with the Prevention of Organized Crime Act.92 The order froze an estimated R44 million held in two bank accounts belonging to Tannenbaum and his associate.

Cooperation and legal mandate of SARS

SARS’s five-year priority initiative proposed to adopt a whole-of-government approach in managing the customs border environment. This included continuing to strengthen risk management capabilities as well as international agreements and links with other jurisdictions. Further, SARS’s strategic plan emphasized a whole-of-government approach through collaboration with other government agencies to improve the government’s overall value chain.

SARS is mandated to conduct criminal investigations into all criminal offenses created under the Tax Administration Act. This applies to all tax acts whether indirect or direct taxes, excluding offenses under the Customs and Excise Act.93 SARS is also the only authority assigned the legal mandate to officially lay a criminal complaint with SAPS in respect of a Serious Tax Offense.94 In general, South Africa recognizes tax crimes as a predicate offense to money laundering.

• Section 73 of the AML/CFT Act provides that any investigation instituted in line with the Act, including those on the property, financial activities, affairs or business of any person, must be reported to the Commissioner of SARS or any officials with a view to mutual cooperation and sharing of information.

• Section 70(3) (c) of the Tax Administration Act 2011, provides for the disclosure of information to the FIC where such information is required for the purpose of carrying out their duties and functions.

In general, South Africa’s system provides an enabling environment for SARS to cooperate in a joint prosecution and review information obtained by other agencies with regard to the alleged tax crime.

Process of cooperation

The five agencies coordinated their efforts, ensuring that clear terms of reference identified each agency’s scope and mandate. The joint team determined a plan of action for the high-level investigation into serious allegations of fraud, money laundering, tax evasion and

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foreign exchange control violations. The responsibilities were set out as follows:

• NPA: freezing or forfeiture of assets of the main suspect and associates and determining whether to prosecute any of the persons or entities involved in the scheme;

• SARS: raising tax assessments and generating attachment orders;

• SAPS: supporting with seizure and arrest where possible;

• FIC: tracing the movement of finances; and

• SARB: accessing banking information, which revealed the use of Tannenbaum’s personal accounts to channel money out of the country.

SARS reviewed Tannenbaum’s tax filings in the period 2004–2009 and alleged that he had under-declared his income, resulting in tax, penalties and interest.95 Through investigations into Tannenbaum’s accounts, they discovered that he received about USD415 million and about USD324 million was paid to investors and agents in the scheme.96

The issuance of arrest warrants could not be enforced since Tannenbaum had fled to Australia and one of his associates was based in Switzerland. Although extradition proceedings were pursued, the process has taken many years and prosecutors were not optimistic that Australia would agree to the extradition request.97 Tannenbaum has also managed to evade authorities in Australia. The prosecution of Tannenbaum and his associates tied up state resources for several years with little progress made. In addition, investors and overall victims of the scheme have pursued litigation in efforts to recover their assets. Several of the businesses registered as part of the scheme are attached to different associates, whilst others are insolvent. This has had implications for recovery of assets by SARS.

Recommendations

For purposes of joint prosecution efforts, inter-agency teams should evaluate the following and encourage governments to strengthen any areas of weakness:

• Introduce enabling laws, including a broader legal mandate that permits the sharing of information between agencies where reasonable and the recognition of tax crimes as a predicate offense;

• Ensure cost effectiveness;

• The possibility of extradition where suspects may be based in foreign jurisdictions may arise and teams must remain aware of the potential implications for the case and the need for a speedy process;

• Determine clearly whether illegal schemes are taxable;

• Ensure clear frameworks for any information sharing with foreign institutions;

• Consider the role of victims or investors not only as witnesses, but also in pressing charges; and

• Information management—ensure that a member of the directorate of public prosecution is part of the team to enable the quick turnaround of ex parte applications.

With regard to asset tracing and recovery:

• Evaluate the appropriate time to implement preventative measures, including the freezing of assets; this should be done in the interest of ensuring that the person of interest is not alerted too early or too late;

• Understand the constraints existing in the requested country;

• Since cooperation with foreign jurisdictions will be imperative to the tracing and identification of assets for recovery and taxation purposes, ensure that there is a legal basis for assistance, no barriers will prevent cooperation and the appropriate legal instrument is chosen;

• Freezing of assets at the domestic level: determine how fast the judiciary can respond, what kind of coordination will be required, the asset management framework available and the costs associated with holding certain assets whilst proceedings are taking place; and

• Freezing of assets in foreign jurisdictions: since this will require mutual legal assistance, with foreign authorities and comply with the differing rules of procedure.

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Whilst the ultimate outcome may not have been a successful prosecution of the alleged offenders, the South African joint team was able to effectively coordinate efforts and engage in a process that should lead to more effective future investigations of financial crimes. The outcome does not take away from the commendable efforts made by the prosecution team and the recommendations made above represent the main lessons drawn by the involved agencies for future joint efforts.

Example 2: Brazil

Some additional lessons may be drawn from Brazil’s experience with Operation Car Wash, which involved 44 other countries where investigations were being carried out. This required the negotiation of new agreements with several states, including the United States and Switzerland.98 Using information obtained by the tax authority on the purchase of a luxury car by the daughter of a former director of Petrobras, the invoice revealed a connection with an operator of the corruption scheme whom the director had denied knowing.99 Further analysis of the director found that he was the beneficial owner of an offshore company owning a luxurious apartment where the operator once lived.100 Although the investigation is still ongoing, the authorities were able to engage in international legal cooperation that proved essential to obtaining relevant evidence of major crimes and in recovering illicit assets in foreign jurisdictions.101 Brazil had an array of regulations dealing with cooperation, including international treaties and agreements, direct assistance, extradition, and enforcement of foreign court decisions. To facilitate successful prosecution, enabling legislation must go beyond obligations for domestic institutions and establish cooperation across jurisdictions.

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Notes

1. OECD (2010). OECD Council Recommendation to Facilitate

Co-operation between Tax Authorities as well as other Law

Enforcement Authorities to Combat Serious Crimes, 14 2010,

C(2010)119 October. https://www.oecd.org/tax/crime/2010recommendation.pdf. 2. OECD (2017a). Effective Inter-Agency Cooperation in Fighting

Tax Crime and Other Financial Crimes, 3rd Ed. 2017, pg. 131. Available online at: https://www.oecd.org/tax/crime/ effective-inter-agency-co-operation-in-fighting-tax-crimesand-other-financial-crimes-third-edition.pdf. 3. OECD (2017b). Effective Inter-Agency Co-operation for sharing the information in Fighting Tax Crimes as well as other

Financial Crimes (Third Edition) – Part 1 – 2017.

4. OECD (n 2 above), page 14 5. Australia, Austria, Azerbaijan, Belgium, Brazil, Burkina Faso,

Canada, Chile, Colombia, Costa Rica, the Czech Republic,

Denmark, Ecuador, El Salvador, Estonia, Finland, France,

Georgia, Germany, Ghana, Greece, Hungary, Iceland,

India, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania,

Luxembourg, Malaysia, Mexico, the Netherlands, New

Zealand, Norway, Peru, Portugal, Serbia, Singapore, the Slovak

Republic, Slovenia, South Africa, Spain, Sweden, Switzerland,

Turkey, Uganda, the United Kingdom and the United States.

6. OECD, 2017, page 69. 7. OECD (n 2 above), page 15 8. AU/UNECA. (n.d.). Report of the High-Level Panel on Illicit

Financial Flows from Africa commissioned by the AU/ECA

Conference of Ministers of Finance, Planning and Economic

Development. https://www.uneca.org/sites/default/files/

PublicationFiles/iff_main_report_26feb_en.pdf. 9. OECD (2017a). Effective Inter-Agency Cooperation in Fighting

Tax Crime and Other Financial Crimes, 3rd Ed. 2017, pg. 131. Available online at: https://www.oecd.org/tax/crime/ effective-inter-agency-co-operation-in-fighting-tax-crimesand-other-financial-crimes-third-edition.pdf, page 26.

10. OECD, 2017a, page 21.

11. OECD, 2017a, page 27.

12. OECD, 2017a, page 27.

13. OECD, 2017a, page 22.

14. OECD, 2017a, page 92.

15. OECD, 2017a.

16. OECD, 2017a, page 22. 17. S Hodzic, 2016, ‘National report: Croatia’ paper presented at the conference ‘Improving tax compliance in a globalised world’, Rust, Austria, 30 June-2 July 2016.

18. D Nerudova & J Tepperova, 2016, ‘National report: Czech

Republic paper presented at the conference ‘Improving tax compliance in a globalised World Rust, Austria, 30 June-2 July 2016.

19. OECD, 2017a, page 24.

20. OECD, 2017a, page 25. 21. Julia de Jong, Alexander Meyer, and Jeffrey Owens (2017).

Exploring How Blockchain Technology Could Enhance

Financial Transparency through Registers of Beneficial

Ownership. https://www.eventleaf.com/Attendee/Attendee/

ViewExhibitorDocument?eId=3PiaJfTLiwOIvrBoRXLDRg %3D%3D&edId=bzzywXcAnmHwF7rqxGz ovg%3D%3D. 22. Mearian (2020). U.S. Air Force to pilot blockchain-based database for data sharing. https://www.computerworld. com/article/3519917/us-air- force-to-pilot-blockchain-baseddatabase-for-data-sharing.html.

23. Task Force on the Review of the Legal, Policy and Institutional

Framework for Fighting Corruption in Kenya (2015), see

Gazette Notice No. 2118 of 30th March 2015.

24. Oyugi (2016). Country Statement by Ambassador Michael AO

Oyugi, Ambassador/Permanent Representative of the Republic of Kenya to the UN and the International Organisations in Vienna, Austria and Leader of Delegation. 15 November 2016, 7th session of the Meeting of the Implementation

Review Group of the UN Convention Against Corruption,

Vienna, Austria. https://www.unodc.org/documents/treaties/

UNCAC/WorkingGroups/ImplementationReviewGroup/14- 16November2016/Statements/Kenya.pdf. 25. Kenya Law (2015). The Kenya Gazette (Special Issue), 31st

March,2015. http://kenyalaw.org/kenya_gazette/gazette/ volume/MTE1NQ-- /Vol.CXVII-No.33/.

26. Kenya Law, 2015.

27. Ibid

28. Obala (2020). EACC Boss: We Have Recovered SH22

Billion of Stolen Assets. https://www.standardmedia.co.ke/ article/2001356289/eacc-boss- interview-a-year-in-office.

29. Kihiu (2018). Govt Agencies Say Injunctions Frustrating Graft

Fight. https://www.capitalfm.co.ke/news/2018/08/govtagencies-say-injunctions- frustrating-graft-fight/.

30. Ibid.

31. Ibid.

32. Transparency International, 2018. 33. AU/UNECA. (n.d.).

34. This is a title conferred on legal practitioners in Nigeria who have distinguished themselves in the legal profession 35. Punch (2017). Inter-agency rivalry hurting anti-corruption war. https://punchng.com/inter-agency-rivalry-hurting-anticorruption-war/. 36. CAPI (2016). Center for Advancement of Public Integrity (CAPI) at Columbia Law School“, September 2016, pg. 2, https:// www.law.columbia.edu/sites/default/files/microsites/publicintegrity/files/leveraging_resources_and_relationships_- _ capi_community_contribution_-_september_2016_0.pdf. 37. Ibid.

38. Ibid.

39. Bernd Schlenther (2017), “Tax administrations, financial intelligence units, law enforcement agencies: How to work together”, in Jeffrey Owens et. al., Inter-Agency Cooperation and Good Tax Governance in Africa, 2017 Pretoria University

Law Press, pg.85 40. Ibid.

41. OECD (2013), ‘The role of tax examiners and tax auditors’,

OECD, 2013, pg. 15. Available online at: https://www. oecd-ilibrary.org/docserver/9789264205376-5-en. pdf?expires=1583685923&id=id&accname=guest&checksum =E3DC053922746958894C2 0B18F5AA90B

42. Ibid.

43. Ibid

PART II KEY INSTRUMENTS FOR FIGHTING CORRUPTION CHAPTER 10 EXCHANGE AND COLLABORATION WITH TAX ADMINISTRATIONS

44. OECD (2017), Effective Inter-Agency Cooperation in Fighting

Tax Crime and Other Financial Crimes, 3rd Ed. 2017, pg. 13. Available online at: https://www.oecd.org/tax/crime/ effective-inter-agency-co-operation-in-fighting-tax-crimesand-other-financial-crimes-third-edition.pdf 45. Bernd Schlenther, 2017, pg. 86

46. OECD (2017), n.11, pg. 13 47. Jean-Pierre Brun, Larissa Gray, Clive Scott & Kevin Stephenson, (2011), Asset Recovery Handbook: A Guide for Practitioners,

World Bank, pg. 23 48. Ibid

49. OECD (2017). n.11, pg. 13

50. OECD (2017), n.11, pg.14

51. OECD (2017), n.11, pg. 14 52. Costa Rica, Czech Republic, Estonia, Finland, Iceland,

Luxembourg and Sweden

53. OECD (2017), n.11, pg.14

54. OECD (2017), n.11, pg. 13-14

55. OECD & World Bank (2018), Improving Co-operation between

Tax Authorities and Anti-Corruption Authorities in Combating

Tax Crime and Corruption, OECD & World Bank, 2018, pg.13. Available online at: http://documents.worldbank.org/ curated/en/461181540209894462/pdf/131110-2018-10-19-

OECD-World-Bank-Improving-Co-operation- between-Tax-

Authorities-and-Anti-Corurption-Authorities-in-Combating-

Tax-Crime-and-Corruption.pdf 56. Global Forum (2019), ‘The 2019 AEOI Implementation Report’,

OECD, 2019, pg.2. Available online at: https://www.oecd.org/ tax/transparency/AEOI-implementation-report-2019.pdf 57. Commentary to Article 26 (Paragraph 1) of the OECD Model

Tax Convention 2017

58. Commentary to Article 26 (Paragraph 2) of the OECD Model

Tax Convention 2017, para. 12 59. Ibid

60. OECD (2013), ‘Mutual Legal Assistance and other forms of Cooperation Between Law Enforcement

Agencies’ OECD, 2013, pg.6. Available online at: https://www.oecd.org/corruption/acn/lawenforcement/

MLAandOtherFormsCooperationLawEnforcementAgencies_

ENG.pdf 61. Asian Development Bank & OECD (2017), Mutual Legal

Assistance in Asia and the Pacific – Experiences in 31

Jurisdictions‘, ADB & OECD, 2017. Available online at: https://www.oecd.org/corruption/ADB-OECD-Mutual-Legal-

Assistance-Corruption-2017.pdf 62. Ibid

63. Ibid

64. Ibid

65. Ibid

66. Shruti Sudarsan (2018), ‘Operation car wash: As Brazil faces challenges ahead, a silver lining appears’, Cornell SC Johnson

College of Business, September 2018. Available online at: https://business.cornell.edu/hub/2018/09/14/operation-carwash-brazil-challenges/

67. OECD (2017), pg. 23 68. OECD & World Bank (2018), pg.46 69. OECD & World Bank (2018), pg.46 70. OECD & World Bank (2018), pg.27 71. OECD & World Bank (2018), pg.27

72. OECD (2017), pg.49 73. OECD & World Bank (2018), pg.30 74. OECD & World Bank, (2018), pg.35 75. See Note on Inter-Agency Collaboration to Obtain and Use

Data to Detect Potential Corruption for model MOU. 76. Bernd Schlenther, (2017), pg.95 77. OECD (2017), “Fighting tax crime: The ten global principles”, 2017, pg. 53-54, http://www.oecd.org/tax/crime/fighting-taxcrime-the-ten- global-principles.pdf 78. Ibid

79. Ibid

80. OECD (2017), pg. 55

81. OECD (2017), pg. 55

82. OECD (2017), pg. 55

83. OECD (2017), pg.55 84. IMF Legal Department (2012), ‘Revisions to the FATF Standard – Information Note to the Executive Board’, IMF, 2012, pg. 7-10. Available online at: https://www.imf.org/external/np/pp/ eng/2012/071712a.pdf 85. FATF (2018), Annual Report 2017-2018, FATF, 2018. Available online at: https://www.fatf- gafi.org/publications/fatfgeneral/ documents/annual-report-2017-2018.html 86. Bernd Schlenther (2017), pg.99 87. Bernd Schlenther (2017), pg.99 88. FATF (2012), ‘Operational issues: Financial investigations guidance’, FATF, June 2012, pg.7. Available online at: https://www.fatf- gafi.org/media/fatf/documents/reports/

Operational%20Issues_Financial%20investigations%20

Guidance.pdf 89. Ibid

90. For more see Rita Julien (2019), “Unexplained wealth orders (UWOs) under the UK’s Criminal Finances Act 2017: The role of tax laws and tax authorities in its successful implementation”,

WU International Taxation Research Paper Series No. 2019 – 02, https://papers.ssrn.com/sol3/papers.cfm?abstract_ id=3465485

91. See Annex I

92. South African Government (2009), “R43 million Ponzi scheme money frozen”, https://www.gov.za/r43-million-ponzischeme-money-frozen

93. OECD (2017), pg.77

94. OECD (2017), pg. 77 95. Larry Schlesinger (2013), “The runaway Ponzi scheme

‘mastermind’ holed up on the Gold Coast”, 25 June 2013, Smart

Company, https://www.smartcompany.com.au/businessadvice/legal/the-runaway-ponzi-scheme-mastermind-holedup-on-the-gold-coast/ 96. Ibid

PART II KEY INSTRUMENTS FOR FIGHTING CORRUPTION CHAPTER 10 EXCHANGE AND COLLABORATION WITH TAX ADMINISTRATIONS

97. Rob Rose (2013), The Grand Scam: How Barry Tannenbaum

Conned South Africa’s Business Elite, 2013, Penguin Random

House South Africa.

98. Marcos Tourinho (2017), ‘Brazil in the global anticorruption regime’, RBPI, October 2017, pg.1. Available online at: http://www.scielo.br/pdf/rbpi/v61n1/1983-3121rbpi-0034-7329201800104.pdf 99. OECD & World Bank (2018), pg.64 100.OECD & World Bank (2018), pg.64 101. Leaders League (2020). ‘International cooperation and its relevance in Brazil’s legal system’. https://www.leadersleague. com/en/news/international-cooperation-and-its-relevancein-brazil-s-legal-system

References

OECD (2010). OECD Council Recommendation to Facilitate

Co-operation between Tax Authorities as well as other Law

Enforcement Authorities to Combat Serious Crimes, 14 2010,

C(2010)119 October. https://www.oecd.org/tax/crime/2010recommendation.pdf. OECD (2017). Effective Inter-Agency Cooperation in Fighting

Tax Crime and Other Financial Crimes, 3rd Ed. 2017, pg. 131.

Available online at: https://www.oecd.org/tax/crime/effectiveinter-agency-co-operation-in-fighting-tax-crimes-and-otherfinancial-crimes-third-edition.pdf.

Case Study 20: Inter-agency Collaboration to Detect Corruption

AU/UNECA. (n.d.). Report of the High-Level Panel on Illicit Financial

Flows from Africa commissioned by the AU/ECA Conference of Ministers of Finance, Planning and Economic Development. https://www.uneca.org/sites/default/files/PublicationFiles/iff_ main_report_26feb_en.pdf. D Nerudova & J Tepperova, (2016), ‘National report: Czech

Republic paper presented at the conference ‘Improving tax compliance in a globalised World Rust, Austria, 30 June-2 July 2016.

Julia de Jong, Alexander Meyer, and Jeffrey Owens (2017).

Exploring How Blockchain Technology Could Enhance

Financial Transparency through Registers of Beneficial

Ownership. https://www.eventleaf.com/Attendee/Attendee/

ViewExhibitorDocument?eId=3PiaJfTLiwOIvrBoRXLD

Rg%3D%3D&edId=bzzywXcAnmHwF7rqxGzovg%3D%3D. Kenya Law (2015). The Kenya Gazette (Special Issue), 31st March, 2015. http://kenyalaw.org/kenya_gazette/gazette/volume/

MTE1NQ--/Vol.CXVII-No.33/.

Kihiu (2018). Govt Agencies Say Injunctions Frustrating Graft Fight. https://www.capitalfm.co.ke/news/2018/08/govt-agencies-sayinjunctions-frustrating-graft-fight/.

Mearian (2020). U.S. Air Force to pilot blockchain-based database for data sharing. https://www.computerworld. com/article/3519917/us-air-force-to-pilot-blockchain-baseddatabase-for-data-sharing.html.

Obala (2020). EACC Boss: We Have Recovered SH22 Billion of Stolen

Assets. https://www.standardmedia.co.ke/article/2001356289/ eacc-boss-interview-a-year-in-office. OECD (2017a). Effective Inter-Agency Cooperation in Fighting

Tax Crime and Other Financial Crimes, 3rd Ed. 2017, pg. 131.

Available online at: https://www.oecd.org/tax/crime/effectiveinter-agency-co-operation-in-fighting-tax-crimes-and-otherfinancial-crimes-third-edition.pdf. OECD (2017b). Effective Inter-Agency Co-operation for sharing the information in Fighting Tax Crimes as well as other Financial

Crimes (Third Edition) – Part 1 – 2017.

Oyugi (2016). Country Statement by Ambassador Michael AO

Oyugi, Ambassador/Permanent Representative of the Republic of Kenya to the UN and the International Organisations in

Vienna, Austria and Leader of Delegation. 15 November 2016, 7th session of the Meeting of the Implementation

Review Group of the UN Convention Against Corruption,

Vienna, Austria. https://www.unodc.org/documents/treaties/

UNCAC/WorkingGroups/ImplementationReviewGroup/1416November2016/Statements/Kenya.pdf. Punch (2017). Inter-agency rivalry hurting anti-corruption war. https://punchng.com/inter-agency-rivalry-hurting-anticorruption-war/. S Hodzic, (2016), ‘National report: Croatia’ paper presented at the conference ‘Improving tax compliance in a globalised world’,

Rust, Austria, 30 June-2 July 2016.

Case Study 21: Sharing Evidence with Joint Prosecution Teams

Asian Development Bank & OECD (2017), Mutual Legal Assistance in Asia and the Pacific – Experiences in 31 Jurisdictions‘,

ADB & OECD, 2017. Available online at: https://www.oecd. org/corruption/ADB-OECD-Mutual-Legal-Assistance-

Corruption-2017.pdf Bernd Schlenther (2017), “Tax administrations, financial intelligence units, law enforcement agencies: How to work together”, in

Jeffrey Owens et. al., Inter-Agency Cooperation and Good Tax

Governance in Africa, 2017 Pretoria University Law Press, pg.85 CAPI (2016). Center for Advancement of Public Integrity (CAPI) at Columbia Law School“, September 2016, pg. 2, https:// www.law.columbia.edu/sites/default/files/microsites/publicintegrity/files/leveraging_resources_and_relationships_-_capi_ community_contribution_-_september_2016_0.pdf. FATF (2012), ‘Operational issues: Financial investigations guidance’,

FATF, June 2012, pg.7. Available online at: https://www.fatf-gafi. org/media/fatf/documents/reports/Operational%20Issues_

Financial%20investigations%20Guidance.pdf FATF (2018), Annual Report 2017-2018, FATF, 2018. https://www. fatf-gafi.org/publications/fatfgeneral/documents/annualreport-2017-2018.html. Global Forum (2019), ‘The 2019 AEOI Implementation Report’,

OECD, 2019, pg.2. https://www.oecd.org/tax/transparency/

AEOI-implementation-report-2019.pdf IMF Legal Department (2012), ‘Revisions to the FATF Standard –

Information Note to the Executive Board’, IMF, 2012, pg. 7-10. https://www.imf.org/external/np/pp/eng/2012/071712a.pdf Jean-Pierre Brun, Larissa Gray, Clive Scott & Kevin Stephenson, (2011), Asset Recovery Handbook: A Guide for Practitioners,

World Bank, pg. 23. Larry Schlesinger (2013), “The runaway Ponzi scheme ‘mastermind’ holed up on the Gold Coast”, 25 June 2013, Smart Company, https://www.smartcompany.com.au/business-advice/legal/therunaway-ponzi-scheme-mastermind-holed-up-on-the-goldcoast/.

PART II KEY INSTRUMENTS FOR FIGHTING CORRUPTION CHAPTER 10 EXCHANGE AND COLLABORATION WITH TAX ADMINISTRATIONS

Leaders League (2020). ‘International cooperation and its relevance in Brazil’s legal system’. https://www.leadersleague. com/en/news/international-cooperation-and-its-relevance-inbrazil-s-legal-system.

Marcos Tourinho (2017), ‘Brazil in the global anticorruption regime’,

RBPI, October 2017, pg.1. Available online at: http://www.scielo. br/pdf/rbpi/v61n1/1983-3121-rbpi-0034-7329201800104.pdf. OECD (2013), ‘The role of tax examiners and tax auditors’,

OECD, 2013, pg. 15. Available online at: https://www. oecd-ilibrary.org/docserver/9789264205376-5-en. pdf?expires=1583685923&id=id&accname=guest& checksum=E3DC053922746958894C20B18F5AA90B.

OECD (2017), Effective Inter-Agency Cooperation in Fighting Tax

Crime and Other Financial Crimes, 3rd Ed. 2017, pg. 13. https:// www.oecd.org/tax/crime/effective-inter-agency-co-operationin-fighting-tax-crimes-and-other-financial-crimes-third-edition. pdf.

OECD & World Bank (2018), Improving Co-operation between Tax

Authorities and Anti-Corruption Authorities in Combating Tax

Crime and Corruption, OECD & World Bank, 2018, pg.13. http:// documents.worldbank.org/curated/en/461181540209894462/ pdf/131110-2018-10-19-OECD-World-Bank-Improving-Cooperation-between-Tax-Authorities-and-Anti-Corurption-

Authorities-in-Combating-Tax-Crime-and-Corruption.pdf. OECD (2013), ‘Mutual Legal Assistance and other forms of

Cooperation Between Law Enforcement Agencies’ OECD, 2013, pg.6. https://www.oecd.org/corruption/acn/lawenforcement/

MLAandOtherFormsCooperationLawEnforcementAgencies_

ENG.pdf. OECD (2017), “Fighting tax crime: The ten global principles”, 2017, pg. 53-54, http://www.oecd.org/tax/crime/fighting-tax-crimethe-ten-global-principles.pdf. Rita Julien (2019), “Unexplained wealth orders (UWOs) under the

UK’s Criminal Finances Act 2017: The role of tax laws and tax authorities in its successful implementation”, WU International

Taxation Research Paper Series No. 2019 – 02, https://papers. ssrn.com/sol3/papers.cfm?abstract_id=3465485.

Rob Rose (2013), The Grand Scam: How Barry Tannenbaum Conned

South Africa’s Business Elite, 2013, Penguin Random House

South Africa.

Shruti Sudarsan (2018), ‘Operation car wash: As Brazil faces challenges ahead, a silver lining appears’, Cornell SC Johnson

College of Business, September 2018. https://business.cornell. edu/hub/2018/09/14/operation-car-wash-brazil-challenges/. South African Government (2009), “R43 million Ponzi scheme money frozen”, https://www.gov.za/r43-million-ponzi-schememoney-frozen.

PART III

Role of Institutions in Fighting Corruption

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION

CHAPTER 11 Anti-Corruption Agencies

Can Anti-Corruption Agencies be Successful in Combating Corruption?

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION CHAPTER 11 ANTI-CORRUPTION AGENCIES

Introduction

Anti-Corruption Agencies (ACAs) have, over the past 2 decades, received a great deal of attention and criticism because of the high visibility of their work and their seemingly limited impact compared to the resources devoted to them.

Although they are a new institutional response to corruption (as suggested by de Sousa, 2010), ACAs are often misunderstood and insufficiently analyzed. A few authors have tried to systematically evaluate the effectiveness of ACAs.1 This chapter builds on this literature and focuses on three less known experiences (UK, Lithuania, and Bhutan) to emphasize the importance of having a political commitment to tackling the problem of corruption, developing a deep understanding of the nature of the corruption problem, and mapping the existing institutional landscape before establishing a new anti-corruption agency if it is to be effective.

Is a stand-alone agency the best model?

A structured response to corruption often draws heavily on the United Nations Convention Against Corruption (UNCAC) as a comprehensive

practitioner framework. UNCAC Article 6 requires States Parties to establish (or ensure the existence of) anti-corruption body/bodies to take ownership of the corruption prevention policies, practices and procedures required by Article 5. Article 36 requires States Parties to ensure the existence of a body or bodies or persons specialized in combating corruption through law enforcement. Both Articles propose standards for such institutions, including that they should be independent, specialized, staffed, and have sufficient resources to meet their roles and responsibilities.

Many governments, multilateral and bilateral donors have suggested or opted for the establishment of a single agency—an anticorruption agency (ACA)—to undertake both

Articles’ functions. This approach has been reinforced by the perceived success of the Hong Kong experience. This route has resolved the reluctance of many donors to engage with existing inadequate and compromised public sector and law enforcement institutions. Many donors have therefore welcomed the establishment of a single agency to focus on ‘corruption’ and, through project funding, have supported these efforts as evidence of a country’s anti-corruption commitment. However, in a misreading of UNCAC, the focus on combining both Article 6 and 36 responsibilities has meant that these new agencies are often expected to take on a disparate range of roles, which may include national anti-corruption strategies, covert intelligence and money laundering investigations, asset disclosure and registration, and awareness programs for civil servants and citizens.

Despite the increase in the number of ACAs, their success has been mixed and limited. Experiences

from countries show that most of these agencies have fallen short of achieving the organizational standards set by UNCAC. The independence of the institutions (functional, budgetary and appointments), strategic focus, human and financial resources, and mechanisms for collaboration and coordination fall short of what would enable them to be effective. They have therefore not been successful in delivering according to their mandates and in line with citizens’ expectations, and in many cases have not had any significant impact on the trends, types and levels of corruption in their jurisdictions.

The pervasive institutional limitations raise questions as to whether the model of a standalone multi-functional ACA is the right one, or whether the need can be addressed through existing institutions. Focusing attention on

organizational inadequacies essentially ignores basic questions such as: Have ACAs been able to address the corruption ‘problem’, which is what they were set up to do? More importantly, is a dedicated agency the effective response, as part of a country risk-based anti-corruption strategy? These questions direct the focus onto a few relevant issues that give rise to further questions: (i) Was the ‘problem’ sufficiently defined to justify the need for a dedicated and often new agency? (ii) Does such a definition provide the basis from which to design a fit-for-purpose body and ensure its effective functioning? and (iii) Were wider issues, such as the agency’s organizational development and maturity, and its fit within its external institutional and operating environment taken into account? These three relevant issues will be returned to later in this chapter. To provide the context, it is necessary to look at two aspects of these basic questions.

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Corruption and the environment

Corruption has all too often been regarded as a stand-alone issue that can be addressed though the establishment of a stand-alone agency. Corruption

is considered a core inhibitor of issues related to democratization, economic development, human rights and the rule of law. While UNCAC provides an adequate summation of the types of offenses and unacceptable conduct that it considers corruption (and by implication indicates a range of institutions that should be involved in combating it), it silos corruption as a stand-alone issue. Accordingly, an ACA is a stand-alone response, from both the causes of the problem and from other areas of financial crime, as well as from other inhibitors of democratization, economic development, human rights, and the rule of law.

In most cases, countries do not develop a national anti-corruption strategy in advance of establishing an ACA and so do not tailor the design of such an

agency to the problem. 2 In the absence of such a strategy, there is often no pre-agency assessment of exactly what type of corruption is to be addressed and whether a dedicated ACA is an appropriate response. There is also limited understanding of the roles and responsibilities of the ACA and of its mandate with respect to other law enforcement and public sector

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institutions. Knowing the problem and clarifying how it is to be addressed ensures that an ACA can be designed to be focused and fit-for-purpose, and avoid getting involved in areas that do not fall within the normal understanding of corruption or becoming essentially the institutional repository of anything that has a ‘corruption’ dimension.3 At the same time, there is often a lack of clarity over the roles and responsibilities of other key institutions which also play a role in combating corruption, as well as the mechanisms and incentives to ensure the inter-connectedness and interdependence of the institutional landscape.

UNCAC itself does not recognize the dynamics of corruption as an operating environment. This

includes not only where corruption causes the most harm, promoting exclusion and inequality, or how far it may be rooted in legacy and cultural issues. It does not necessarily identify addressing corruption as a means to other developmental ends, such as fixing countries’ tax bases. Nor does it allow for the need to adjust or adapt the work of ACAs, or—by not specifying the roles of organizations—ensure the allocation of responsibility more properly taken on by other bodies. This is partly a consequence of the antecedents of UNCAC, partly its use of mandatory and optional classifications, and partly its presentation as a legal document suitable for treaty purposes. Hence, it is a prescriptive document (rather than a working document amenable for updating, revision and adaptation) and a continuing driver for addressing corruption at the multilateral or bilateral level to the point where not having such an ACA becomes the exception to the norm. The prescriptive nature of UNCAC, reinforced by its current review process, lacks an approach that recognizes corruption’s developmental and countryspecific trajectories as the starting point to assess the most effective strategic and institutional response to a dynamic phenomenon. Further, continuing to see corruption as a stand-alone issue has implications when it becomes less an end in itself than as a facilitator of issues being addressed by other agendas and agencies (for example, that of money laundering as a cornerstone of the fight against international illicit money flow, people trafficking, terrorist finance, and organized and serious crime).

Agency and the environment

Answering the ‘problem’ and ‘need’ questions

Establishment of a dedicated ACA based on a successful model from another country is a commitment to address corruption without considering the country-specific institutional environment which is long recognized as playing a significant role in determining the likely

effectiveness of an ACA.4 Although the success of the Hong Kong model (i.e., the establishment of the Independent Commission against Corruption) can be explained by the specific institutional circumstance, it is frequently seen as an explicit and immediate commitment to anti-corruption. It has also been assumed that the fully-formed replica, as the distillation of good operational practice and appropriate organizational arrangements, can become active and effective immediately, irrespective of both the necessity of the UNCAC standards for such agencies’ organizational development and maturity in practice, and the relationship with the agency’s external institutional and operating environment. This results in an expectation of high-level performance and quick results. Such outcomes, however, are predicated on an ‘ideal type’ organizational platform, without too much thought about what is required in organizational terms to deliver the expectations. At the same time, the point when an ACA is established is often the point at which it is loaded with most, if not all, the roles and expectations to address corruption without giving due consideration to parallel roles in the institutional landscape and complementary reforms in the wider environment. It has implications for the longer-term organizational capacity, capabilities, maturity, and credibility of the ACA, its perceptions among citizens, and its impact on the ‘corruption’ problem.

Rather than seeing the establishment of an “ideal ACA” as a panacea to address corruption, one could explore other options. One solution is to use

the country’s vision as articulated in the National Anti-

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION CHAPTER 11 ANTI-CORRUPTION AGENCIES

Corruption Strategy (NACS) to determine whether an ACA is needed or whether an alternative response may be found among the existing institutional arrangements. Another solution, if an independent and new agency is considered necessary, may lie in supporting its establishment and evolution over time. This in turn requires defining ‘success’ in organizational terms and ensuring the necessary competences and approaches that support the evolution of the organization within its external environment to achieve the desired outcomes. Such a consideration may require an approach which looks to support organizational maturation issues until such point as the ACA is consistently able to do something achievable well within its existing resources and capabilities. Further, and perhaps more importantly, it is seen to do something well. This means working toward the ‘good enough’5 (or best possible) ACA and beyond until it is robust, credible and fit for the purpose for which it was intended (so long as that purpose has been identified). The next pages offer three examples of such alternative solutions and their effectiveness in addressing corruption at the country level.

Model I: Building an anti-corruption response from the existing institutional landscape

The United Kingdom (UK) was increasingly seen as a safe haven for illicit financial capital. The label

‘Londongrad’6 exemplified the longstanding preference of politicians and other Politically Exposed Persons (PEPs) for London as a safe investment and relatively relaxed regulatory regime for a high-end net worth resident lifestyle. As the media often commented, law enforcement or other dissuasive actions had been limited. The scale of the laundering of criminal proceeds, as the UK’s National Crime Agency warned in its 2015 threat assessment, was ‘a strategic threat to the UK’s economy and reputation’. The government’s Anti-Corruption Plan (2014) aimed to more effectively tackle ‘those who engage in corruption or launder their corrupt funds in the UK’ as well as return the proceeds of corruption (a core tenet of UNCAC in Article 3 but imperfectly applied thereafter by most developed countries).7 This commitment was reinforced by Prime Minister David Cameron at the ‘International Anticorruption Summit’ in London in 2016.

The UK’s plethora of agencies with different and competing mandates and administrative costs limited any coordinated response to investigating international corruption and the proceeds of

international corruption. There are nearly 50 police forces in the United Kingdom and a smaller number of agencies with a national remit, notably the National Crime Agency (NCA), the Serious Fraud Office (SFO) and the Crown Prosecution Service (CPS). Much of the effort to develop agencies’ relationships with other agencies is framed by strategies or plans (such as the police fraud strategy, the 2014 Anticorruption Plan [now the UK anti-corruption strategy 2017-2022], the serious organized crime strategy, the cybercrime strategy, and so on). There are high-level boards and inter-agency arrangements to facilitate intelligence, case-sharing or inter-agency work. Within such a patchwork institutional landscape, all of whom have been the subject of year-on-year financial cuts and of competing policy agendas, the cost associated with investigating bribery allegations in foreign jurisdictions, and the cost of identifying, tracking and recovering the proceeds of corruption, severely limited the response options. Certainly, a new dedicated agency was never on the table but a possible reconfiguration of existing expertise within existing institutional arrangements was.

The UK established the International Corruption Unit through a reconfiguration of expertise within existing institutional arrangements. The

Department for International Development (DFID) took the lead through a senior official who operated as the institutional ‘boundary-spanner’8 in negotiating between agencies and adapting responses to changing circumstances. The official was authorized to commit, ring-fence and oversee dedicated resources and influence the selection of likeminded officials to lead the initiative operationally.9 This enabled the allocation of dedicated investigation and intelligence units within existing law enforcement agencies, who were able to

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draw upon their agencies’ in-country liaison officers and other technical support, with access to dedicated CPS prosecutors. Practice demonstrated the need for greater flexibility as well as removing demarcation issues between the various units and agencies for more effective coordination and cooperation, as well as intelligence-gathering and information-sharing. Thus, further reconfiguration within existing law enforcement arrangements was achieved in terms of amalgamating intelligence- and investigation-based work. The outcome was the establishment of the International Corruption Unit (ICU) within the NCA, which also houses the UK Financial Intelligence Unit. The NCA also managed the ICU’s administrative, human resources, training, and other functions, with salaries, expenses and travel still largely funded by DFID.

The ICU was given dedicated staff and budget, and its capacity was enhanced, including support from the NCA, which yielded positive results. The

ICU has had an annual budget of some £4 million and a staff of 45 persons, of whom 30 were frontline investigators. It also has seconded officials from the SFO and the Financial Conduct Authority (the regulator for financial services firms and financial markets in the UK) to facilitate information-sharing. Staff expertise is enhanced by NCA financial investigator training, as well as bribery investigations training run by the City of London Police. Specialist support is accessible through NCA intelligence collection techniques, which the NCA can deploy in pursuit of its crime reduction mandate as well as the international liaison network of NCA officers attached to embassies overseas. In terms of organizational impact, the ICU currently has a caseload of 23 cases, and with current resourcing, they can handle in the region of 23-25 cases. By 2018, the value of assets restrained in the UK and overseas exceeded £683 million, while the cumulative amount of assets confiscated exceeds £55 million.

The key role played by the ‘boundary-spanner’ cannot be over-emphasized. The ICU’s achievement

very much reflects the intentions of UNCAC Article 36 and has relied on the flexibility of existing institutions and the availability of the ‘boundary-spanner’—a senior official with a clear focus and a degree of executive and financial authority as well as trust from relevant institutions to deliver the necessary institutional reconfigurations and maintain, to date, its organizational development and consolidation.

Model II: A ‘best possible’ agency

A deep understanding of the institutional and operating environment is crucial for the design of

a dedicated agency. Lithuania’s post-Soviet transition to democracy was impacted, not surprisingly, by former Soviet-led institutions and bureaucracy. As part of accession to the European Union, the European Commission insisted that Lithuania address corruption, which, given the legacy issues, meant that the solution would be a political issue. The government recognized the necessity to secure external support to address corruption with an aim to secure membership of relevant western liberal democratic groupings, such as the European Union and NATO, and later OECD.

Following its establishment, the new agency benefited from internal and external guidance and

followed a shrewd path. After due deliberations by commissions and with cross-party support, the Special Investigation Service (STT) was established. It was located as a unit within the Ministry of Interior and was able to handpick experienced staff on enhanced terms. The STT also drew on Ministry resources and technical expertise internally, as well as US expertise and resources and then EU consultancy programs externally.10 While the model may (to some11) seem like the three-function Hong Kong model, the Lithuanians saw the model as ‘the FBI model which was the most viable, economically feasible, and efficient’.12 The FBI provided the STT with early advice and support. The model in practice was very much a law enforcement-defined agency that focused on embedding its functions and competences. It did not over-extend itself within an evolving democratic context with pre-existing patterns of corruption and new ones emerging. In this context and against widespread citizen perceptions of corruption, the STT reflected what might be termed as an evolution towards a ‘good enough’ agency that was able to maintain organizational competence, resilience, and shape.

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In the early years of democratization, Lithuania benefited from a number of international programs to improve its law enforcement areas and help it to assume the obligations of EU membership.

The primary focus was on strengthening the STT’s investigative, intelligence and analytic functions. From the establishment of STT within the Ministry of Interior in 1997 to its establishment as an independent agency by law in 2002, it reported to the President and Parliament, which helped it to avoid isolation. This also addressed all the organizational issues that a new, independent agency was perceived to have suffered from in other countries. The STT was able to access in-house technical services and practitioner training and guidance that reinforced its own perceptions of its roles and requirements. STT’s successful progression from an agency under a ministry to an independent fitfor-purpose agency can be attributed to a number of factors:

1. From the outset, the STT was seen as a quasi-law

enforcement agency focusing on corruption (which

in turn is largely limited to bribery and abuse of office offenses). Its functions also included corruption prevention and corruption awareness, but these were seen as subordinate to its core function. It had strong leadership committed to its core function, who had direct involvement in directing the early shape and ethos of the agency; in 2006, about 83 percent of the STT budget was allocated for criminal prosecution and by 2014 nearly two-thirds of staff continued to work in this area (just over 10% work in the areas of prevention and awareness).

2. STT had the right human resources. Its original

employees, a number of whom moved later into management roles within the agency, had experience of work in other law enforcement institutions and were usually university graduates. The pattern (and method) of recruitment (by type, background and educational level) has largely been maintained. Despite losing staff when the original enhanced-salary scheme was ended and when private sector posts had greater attraction, the STT managed to maintain both its staff complement at around an average of 250, as well as the type of staff it wanted to appoint. This contributed to maintaining a continuing organizational culture. It also has taken a robust approach to those considered unsuitable for the organization (at times moving out up to 10% of staff in a particular year). The recent years indicate a gradual reduction of staff turnover (to 3%), which ensures continuity as well as retention of expertise and institutional memory.

3. STT benefited from a continuous practitioner and

technical training program. Although the initial

focus on the criminal investigation of corruption appeared to commit significant resources to minor offenses, the accumulation of competence and experience has been reflected in more recent years in an increasingly higher level of offender, primarily senior public sector and criminal justice officials.

4. STT’s effectiveness resulted from the combination of a strategic approach taken on the basis of informed intelligence and specific technical

approaches. Both covert and ‘open source’ intelligence informed strategic thinking as well as investigations. This, coupled with technical approaches and analysis, helped in corruption case management and in mapping the corruption problem by type and function, thus providing a better understanding of the drivers and location of the risk (some of which informed its prevention and awareness work).

5. STT established early in its development the need for a 5-year strategy supplemented by an annual business plan and a performance management

regime. The budget was maintained, rising moderately in recent years, allowing it to maintain and recruit staff. This in turn enabled it to function effectively without significantly overloading the organization in terms of caseloads or cases that stretched the capacity and competency of the organization especially in the early years.

6. STT succeeded in developing links with domestic and overseas organizations that were able to provide valuable guidance to the newly established

agency. It managed to negotiate the difficult formative years and survived countervailing influences and agendas as a consequence of both its strong but politically-connected leadership and its equally strong esprit de corps among its staff. This was facilitated by methods of recruitment and internal promotions, as well as its focus on a law enforcement approach to its investigative functions.

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Model III: A specialized agency: The importance of assessing the institutional landscape and operating environment

Moving towards a democratic society that has a strong traditional culture has both benefits as well as unintended consequences for addressing

corruption. This is demonstrated by Bhutan, a country that began the process of democratization from an environment where the society and state were largely based on personal connections and kinship. The consequence, according to a 2007 external review, was strong concentration of powers; weak or non-existent checks and balances; poor transparency; undefined discretionary powers; unclear rules and procedures; and patronage.

The Bhutan Anti-Corruption Commission (ACC) was established as part of the 2005 constitutional arrangements, with the aim of rooting out corruption right from the beginning. It was very much

a pre-emptive move announced by the Royal Decrees to anticipate the consequences of social, economic, and political change and curb ‘self-interest leading to corrupt practices’. The corruption ‘problem’ appeared to relate more to the risks posed by the emerging democratization process than to what may be described as traditional cultural behavior. Little attention was given to the potential consequences of criminalizing such practices or to the effect of democratic notions of public accountability and merit-based decisionmaking on the existing currency of social and political relationships within the state.

The ACC as a single agency had an extensive portfolio of responsibilities and its staff and activities were quickly ramped up. It was expected

to address criminal behavior and had powers to prevent and investigate corruption. The ACC began work in 2006, with 3 commissioners and 8 staff. Within 5 years it had 3 commissioners, 16 staff in investigations, 5 in prevention, as well as 18 management and support staff. By 2018, there were over 50 staff in investigations (including technical staff), 14 in prevention and 45 management and support staff, making a total of around 120 staff. Within 5 years it drafted the first National Anti-Corruption Strategy (2008–13) (NACS) as part of its duty under the Act to operationalize the government policy of ‘Zero Tolerance to Corruption’. It developed a detailed Operations Manual, began public opinion surveys in 2007 and rolled out a National Integrity Assessment model in 2009, developed together with the South Korean Anti-Corruption Agency. This later incorporated the corruption perception surveys. It also began to conduct system studies, based on investigations and complaints from both citizens and the media.

Furthermore, despite the very challenging environment, the ACC was set up without an institutional and corruption risk assessment, which could have helped identify institutional gaps and weaknesses that the ACC could have begun to

address in its work. This lack of strategic planning had consequences for the agency’s impact. Efforts of the ACC were not complemented by a wider set of reforms that needed to focus on developing a public service ethics culture, as well as on mitigating some of the effects of particularism in practice through more robust internal controls. This led to the uneven development of the wider institutional landscape and operating environment, with the following consequences:

1. Many reforms did not address past cultural heritage

issues. Such issues included the presence of personal connections, kinship and hierarchy, which fostered a clientelist sub-climate that favored the political and business elites. This underlines the wider failure of educational and information processes, which should have derived from a national anti-corruption strategy. Not all awareness and educational responsibilities should be located within a single institution. Further it presents the ACC with continuing challenges because it has to focus on what it interprets as a corruption problem, but which is more rooted in the traditional cultural norms and values. This is confirmed both by the recent ACC Integrity Assessment reviews and its latest (2018) Annual Report:

Corruption in the form of favoritism and nepotism are prevalent in public service delivery. This corroborates with the significant number of complaints received by the ACC on abuse

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of functions,…Abuse of function is the highest type of alleged corruption offenses constituting more than 50 percent and over the last five years the trend in the percentage has been increasing annually. Further, majority of the complaints that qualified for investigation pertained to abuse of function (48.6%)…the decentralization process in the country is expected to aggravate the corruption vulnerabilities with more authority and resources for the LG functionaries.13

2. The ACC’s ‘ownership’ of the NACS did not include means to ensure parallel engagement by other

public organizations. The first NACS—and thus the one that sets the stage—was a broad statement of intent that did not require the ACC’s substantive engagement with all the relevant ministries and agencies. Of the 21 objectives, only 7 involved the ACC in conjunction with other institutions, while implementation was the responsibility of the Committee of Secretaries. Furthermore, there were no measurable actions, activities or outputs, although this was rectified in the revised strategy. The ACC itself noted in 2009 that ‘fighting corruption is perceived as an ACC battle…without the concerted and conscious effort of all actors, the cadre’s lone battle against corruption will continue to remain an action of sorts at best and a mockery at worst’.14

3. The ACC’s efforts were not complemented by increases in the capacity of other institutions, as envisioned in the National Internal Control

Framework. The State Audit Institution (RAA) in 2017 pointed to the continuing levels of inappropriate or inadmissible payments for contracts, services and expenses. It also noted that these were primarily due to the lack of effective accountability mechanisms, weaknesses in internal controls and the tolerance of unethical conduct. Some 270 staff in the RAA were insufficient to audit some 930 agencies with nearly 1,300 accounts; only 50% could be reviewed annually. With less than 50 internal auditors in the internal audit service (IAS), internal control risks are not addressed. The National Internal Control Framework, which was set up in 2013, had envisaged that the IAS would not only fulfil its responsibilities to assess risks and strengthen internal control mechanisms at various levels of management, but would also supplement the mandates of the RAA and ACC.

4. The civil service, as a whole, is uneven in its approach to the establishment of a basic ethical framework built on public ethics, accountability and merit.

This is generally reflective of the slow progress on embedding the expectations of the NACS. The civil service also appears reluctant to integrate into their work plans the increasing amount of information produced by the ACC on areas of vulnerability and risk. The roles of parliamentary oversight and accountability have not been developed as per the revised NACS. The efforts of ministries to promote ethical environments are still a learning process. There is also a lack of clarity as to the exact relationship between the legislature and the civil service, and where the general responsibility for governance should lie. In terms of the strategy, shifting primary responsibility for prevention to ministries has not yet been achieved.

The first national anti-corruption strategy did not

have the intended impact. As explained above, the lack of an environmental and corruption risk assessment had consequences for the NACS’s impact. Several additional reasons were identified in a 2013 review:15

• Only a few departments and agencies have conducted strategic reviews of institutional capacity to prevent and combat corruption, or implement plans to strengthen this capacity, despite the availability of practical tools to do so developed by the ACC and external partners;

• Implementation of the NACS was perceived to be the sole responsibility and accountability of the ACC; this is likely to be one of the key reasons why the NACS is little known and governancerelated reforms are not seen in connection with the

NACS. There is limited awareness that measures to strengthen good governance, focusing on transparency and accountability, have a direct and highly important impact on reducing corruption risks; and

• Communication around implementation of the NACS was inadequate. In addition, the absence of clarity about leadership and implementation roles in relation to the NACS resulted in a lack of systematic monitoring, oversight and evaluation of implementation. This can partly be attributed to the aspirational and voluntary nature of the NACS.

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Some external reviews have noted the ACC as a well-organized agency, reflecting good practice approaches to management and delivery of its

functions. For example: “the ACC has made important contributions to citizens’ awareness and understanding of the meaning and consequences of corruption. It has managed to acquire a strong reputation very quickly and has built institutional capacity to carry out an extensive mandate and detailed functions. The ACC is a consolidated institution with a clear mandate, a clear vision, well-established capacities and a strong esprit de corps.”16

On the other hand, the consequences described above indicate the size of the challenges still

facing the ACC. They not only identify the weaknesses associated with the wider reform process but also an ACC chasing a continuing corruption problem rooted in both the culture and the democratization process:

This is a serious cause for concern because money in politics will fundamentally erode and eat away at the heart of our relatively young democracy. It may create a pervasive culture of corruption that could result in a governance which systematically favors the rich over the poor and the well-connected over the disconnected. Corruption may seep into the fabric of our government, making policy decisions to favor the privileged few rather than the public good thereby creating a legacy of patronage.17

This emphasizes how the ACC’s position in the institutional landscape should have been determined at the time of its establishment. A

more coherent and coordinated approach to the wider anti-corruption environment and the responsibilities of the wider institutional landscape was never developed. As a result, the ACC does not fit entirely into this environment and the environment does not fully facilitate its purpose. This could and should have been anticipated at the time the ACC was established. The question should have been: what should come first – the NACS or the ACC?

Comparing the three models and their possible impact

Impact as organizations

The operational impact on the ground of the UK’s ICU has been substantial, though this is not always

recognized by the media. Its impact is primarily reflected in the increase in the number of corruption cases under investigation. The ICU has also diversified to the countries to which its cases relate and built strong relationships with overseas law enforcement authorities. While the work of the NCA18 is often reported in the media, that of specialist units is only sporadically mentioned. This is often a consequence of the complexity of the institutional landscape and the tendency of the UK media not to spend too much time explaining specialist functions to a general readership.

STT is seen as a credible agency addressing more significant corruption issues, such as its criminal justice corruption investigations, international corporate bribery, and the financing of political

parties. In terms of the organizational and institutional arrangements, it is a ‘fit-for-purpose’ agency with a managed portfolio of roles and functions, adequate resourcing, and strong professional leadership. This was recognized by OECD’s review, which reported that ‘all representatives at the on-site visit were unanimous in their praise for the STT’s professionalism and efficiency’ as Lithuania sought (and achieved in 2018) membership of the OECD. Lithuania has demonstrated its willingness to cooperate with other countries and to set up networks for its law enforcement practitioners.19 In terms of external domestic impact, therefore, public perceptions may now consider it a ‘good enough’ agency. Many of the continuing corruption issues may be more of a consequence of delays in embedding wider reforms. On the other hand, in terms of the types of corruption that face a consolidating democracy, the agency may be considered as a ‘best possible’ agency and fit-for-purpose for the increasingly complex and significant corruption problems facing the country.

The Bhutan ACC is seen as a well-organized

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agency, reflecting good practice approaches to management and delivery of its functions. The

ACC is highly visible in Bhutan and recognized as a champion of good governance. Due to a significant amount of outreach, the ACC is gradually gaining trust within Bhutanese society, which was initially sceptical of an additional law enforcement type agency,20 and has been a notable force in promoting the anti-corruption message and in investigating and prosecuting corrupt officials.21 It has determined its roles and responsibilities and established a strategy that integrates the three areas of activity: education, prevention and investigations. It has managed to improve the quality of complaints through education, investigate substantive complaints, and use the evidence from investigated cases to inform its review of system weaknesses through its system studies. It is developing its preventative responsibilities through the Integrity Assessments and system reviews. Organizationally, it has developed an accessible and open management approach, with detailed and documented procedures. It has also built awareness, through its change management program, of the need to self-assess and review what it does and how it does it, with enough time to allow organizational consolidation and a level of organizational stability and focus. Its main issue, however, is its position in the institutional landscape and a continuing balancing act between how much it influences, or is influenced by, its operating environment.

Impact on corruption

The ICU has achieved a coherent set of responses that reflect both UNCAC and the UK government rhetoric, and is therefore well placed to implement new initiatives to address the investigation of international corruption and the proceeds of

international corruption. The identified corruption problem led to a specific need that did not require a dedicated agency response. The response that was devised was carried out within existing institutional arrangements and, in terms of this particular corruption issue, is being addressed in a law enforcement context.

The Lithuanian STT and Bhutan ACC have had less success in terms of their impact on the general presence, prevalence and perceptions of corruption.

Indeed, the collateral damage from the existing and emerging corruption types and trends is that the STT is not necessarily seen as environmentally – as opposed to organizationally – effective. The STT’s approach to engagement with citizens lies primarily with surveys of perceptions and attitudes, and its awareness and prevention efforts are largely targeted at risk sectors, promotional material, and (probably decreasing) joint work with voluntary and civil society bodies to promote education and values.

This may reflect not only the agency’s prioritization of resources, but also weaknesses in partner

organizations. In the case of STT, the Ministry of Education failed to give full support to Lithuania’s anticorruption education programs, thus hampering their effectiveness. Indeed, one of the issues of longer-term impact is how far a specific agency is responsible for cultural and social change, and how far that must lie with governments, ministries, and so on, to find the appropriate means to change social mores.

In Bhutan, the key issue concerned the balance between democratization and traditional cultural

values. The impetus for reform was predicated on an understanding that an absolutist monarchy was not sustainable and that Bhutan’s delicate relations with neighboring countries would not be shored up by not engaging with the international community. While the commitment to democratization has been genuine, it has also been partly tempered with ‘defensive democratization’. This means a move toward universalism adapted to maintain elite privilege, hierarchical management and many of the societal facilitators of traditional cultural norms and values.22 Thus, development along the particularisticuniversalism continuum would appear to be predicated on preserving the country’s cultural traditions. Not all of these are amenable to (and may even seek to influence) democratization and the development of public accountability and merit-based decisionmaking in the public sector. This has consequences for the demands on, and the effectiveness of the work of, the ACC. As its own integrity assessment noted in 2016, there continued to be a need ‘to reinforce coordinated efforts towards improving service delivery, strengthening accountability mechanisms, ethical leadership and corruption prevention measures in the agencies to improve the level of integrity’.23

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION CHAPTER 11 ANTI-CORRUPTION AGENCIES

Conclusion

The alternative models discussed in this chapter highlight three issues relating to the need for, or design of, an ACA.

1. The essential first step in any proposal for the establishment of an ACA is a risk or threat-based review of the existing institutional and operating

environment. Such review ideally can help identify the corruption problem and provide an understanding of the political landscape and the space for reform. It helps to answer the following questions: (i) What is the corruption problem that such a body/bodies would address? (ii) Is the problem sufficiently defined to justify the need for a dedicated entity or agency? (iii) Does such a definition provide the basis for the design of a fitfor-purpose body and ensure that the standards noted above will support its organizational development and maturity?

2. Practitioners and government officials must pay attention to wider issues, such as the agency’s organizational development and maturity, and its fit within the existing institutional landscape and

operating environment. Simply supporting an ACA is not enough; it must be designed to address— and adapt to—its institutional and operating environment. The environment in turn should be encouraged to develop in ways that complement and facilitate not only the work of the ACA but also the roles and responsibilities of other institutions. A lesson from the experiences of the UK, Lithuania and Bhutan is the centrality of the ownership, implementation and monitoring of national anticorruption strategies in determining the need for an ACC and, if there is, ensuring complementary reforms in the external environment.

3. The design of an ACA should involve an understanding of the corruption problem and a recognition of the importance of the inter-connectedness and inter-

dependency of the institutional landscape. While

the donor tendency has been to allow an over-focus on one agency, national anti-corruption strategies have generally under-achieved in improving the institutional landscape and operating environment. Understanding the corruption problem and clarifying modalities to address it ensures that the need for an ACA can be established, and if so decided, designed to be focused and fit-forpurpose. This also entails determining the roles and responsibilities of other institutions, as well as the mechanisms and incentives to ensure the connectedness of the institutional landscape and a collective approach to addressing corruption from a range of perspectives.

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Notes

1. Recanatini, F. 2011. Anti-Corruption Authorities: An Effective

Tool to Curb Corruption? in International Handbook on the Economics of Corruption, Susan Rose-Akerman and

Tina Soreide, eds., 2011; Doig, A., & Norris, D. (2012).

Improving anti‐corruption agencies as organisations.

Journal of Financial Crime, 19(3), 255-273. https://doi. org/10.1108/13590791211243101.

2. For a review and discussion of country-level AC strategies, please see Norton Rose Fulbright. 2016. Countries Curbing

Corruption: An Examination of 41 National AC Strategies. 3. Such as the powers of the Thai NACC in relation to malfeasance in office – which may include intentional exercise of power contrary to the provisions of the Constitutions or any law - or the multiple remits (such as bribery, fraud, money laundering, asset disclosure, ethical standards, inspections and whistleblowing) of the Ugandan Inspectorate of Government. 4. Huther, J. and Shah, A. 2000. Anti-corruption Policies and

Programs: A Framework for Evaluation. World Bank Policy

Research Working Paper No. 2501. Washington: World

Bank; Shah, A. 2007. ‘Tailoring the Fight Against Corruption to Country Circumstances’. In Shah, A. (ed). Performance

Accountability and Combating Corruption. World Bank:

Washington.

5. Drawn from Bruno Bettelheim (1988). A Good Enough

Parent. Vintage Books; 1st Vintage Books Ed edition).

Expanded in Doig, A., Watt, D. and Williams, R. 2007. ‘Why

Developing Country Anti-corruption Agencies Fail To

Develop: Understanding The Dilemmas Of Organisational

Development, Performance Expectation, And Donor And

Government Cycles In African Anti-corruption Agencies’.

Public Administration and Development. 27. pp1-9; 2006

‘Hands-On or Hands-Off? Anti-Corruption Agencies in Action,

Donor Expectations, and a Good Enough Reality’. Public

Administration and Development. 26. pp163-172. These articles were in turn based on an empirical study: Doig, A.,

Watt, D. and Williams, R. 2004. ‘Measuring ‘success’ in five

African Anti-Corruption Commissions - the cases of Ghana,

Malawi, Tanzania, Uganda & Zambia. U4 (www.u4.no). Here it is argued that, like good enough parenting, sponsoring bodies should not try to create the agency they would like to have at the outset, but should instead recognize that the best they can do is to help the agency toward a successful future by providing the means and mentoring to give it the organizational confidence and competence to do so until – and when – it reaches organizational maturity.

6. ‘Londongrad’ is shorthand for the concerns summarized in 2016 by Roberto Saviano, the Italian investigative journalist, who said: ‘If I asked you what is the most corrupt place on

Earth you might tell me it’s Afghanistan, maybe Greece,

Nigeria, the South of Italy, and I will tell you it’s the UK. It’s not the bureaucracy, it’s not the police, it’s not the politics but what is corrupt is the financial capital.’ 7. See World Bank/StAR. 2009. Stolen Asset Recovery.

Management of Returned Assets: Policy Considerations.

Washington: World Bank and Proceeds of Corruption:

Frameworks for the Management of Returned Assets. Draft

Concept Note. World Bank and UNODC/StAR. 2014. Left out of the Bargain. Settlements in Foreign Bribery Cases and

Implications for Asset Recovery. Washington: StAR. 8. A person able to facilitate mutually-beneficial inter-agency arrangements through: building sustainable relationships; managing through influencing and negotiation; managing complexity and interdependencies; and managing roles, accountabilities and motivations. 9. The same official led the extensive discussions between

DFID, the SFO and other agencies to agree a set of general principles (issued by the SFO and CPS in June 2017) intended to ensure that overseas victims – affected states, organizations and individuals – of bribery, corruption and economic crime, are able to benefit from asset recovery proceedings and compensation orders made in the UK. 10. A subjective observation was that most of the ‘consultants’ from the US and the UK in the early years were serving law enforcement and public sector officials whose level of practitioner expertise and technical competence offered a peer-to-peer experience that was compatible with STT expectations and aspirations, facilitating knowledge transfer. 11. In 2013 an UNCAC review team managed to misinterpret the STT as ‘one of the most successful “copies” of the Hong

Kong’s Independent Commission against Corruption model’. 12. Kuris, G. (2012). Balancing Responsibilities: Evolution of

Lithuania’s Anti-Corruption Agency, 1997-2007. Princeton

University: Innovations for Successful Societies. p5. 13. Bhutan Anti-Corruption Commission. 2018. Annual Report 2018. Thimphu: Bhutan Anti-Corruption Commission: 81. 14. Quoted in: UNDP/UNODC. 2010. Bhutan: Capacity

Assessment of the Anti-Corruption Commission. Bangkok:

UNDP/UNODC: 22.

15. Basel Institute on Governance. 2013. National Anti-Corruption

Strategy (NACS) of Bhutan 2008-13: Evaluation Report. Basel:

Basel Institute on Governance.

16. Transparency International. 2015. Anti-corruption Agency

Strengthening Initiative: Assessment of the Bhutan Anticorruption Commission. Transparency International: Berlin. 17. Bhutan Anti-Corruption Commission, 2018. 18. For example, in relation to the use of Unexplained Wealth

Orders or the establishment of the National Economic Crime

Centre.

19. OECD. 2017. Phase 2 Report on Implementing the OECD Anti-

Bribery Convention In Lithuania. Paris: OECD: 42, 43.

20. Swiss Agency for Development and Cooperation. 2016.

Bhutan: We Can Win the Fight Against Corruption. Asia Brief.

SDC: Bern.

21. Bertelsmann Stiftung. 2018. Transformation Index.

Bertelsmann Stiftung: Brussels.

22. See, for example, G. E. Robinson. 1998. ‘Defensive

Democratisation in Jordan’. International Journal of Middle

East Studies. 30.

23. Anti-Corruption Commission. 2016. National Integrity

Assessment 2016. Thimphu: Bhutan.

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION CHAPTER 11 ANTI-CORRUPTION AGENCIES

References

Anti-Corruption Commission. (2016). National Integrity Assessment

Report 2016. Thimphu: Bhutan. Basel Institute on Governance. (2013). National AntiCorruption

Strategy (NACS) of Bhutan 2008-13: Evaluation Report. Basel:

Basel Institute on Governance.

Bertelsmann Stiftung. (2018). Transformation Index. Bertelsmann

Stiftung: Brussels.

Bhutan Anti-Corruption Commission. (2018). Annual Report 2018.

Thimphu: Bhutan Anti-Corruption Commission: 81. Bruno Bettelheim (1988). A Good Enough Parent. Vintage Books; 1st Vintage Books Ed edition).

Doig, A., & Norris, D. (2012). Improving anti‐corruption agencies as organisations. Journal of Financial Crime, 19(3), 255-273. https://doi.org/10.1108/13590791211243101. Doig, A., Watt, D. and Williams, R. (2004). ‘Measuring ‘success’ in five African Anti-Corruption Commissions - the cases of Ghana,

Malawi, Tanzania, Uganda & Zambia. U4 (www.u4.no).

Doig, A., Watt, D. and Williams, R. (2006) ‘Hands-On or Hands-Off?

Anti-Corruption Agencies in Action, Donor Expectations, and a

Good Enough Reality’. Public Administration and Development. 26. P. 163-172.

Doig, A., Watt, D. and Williams, R. (2007). ‘Why Developing

Country Anticorruption Agencies Fail To Develop:

Understanding The Dilemmas Of Organisational Development,

Performance Expectation, And Donor And Government Cycles

In African Anticorruption Agencies’. Public Administration and

Development, p.1-9. G. E. Robinson. (1998). ‘Defensive Democratisation in Jordan’.

International Journal of Middle East Studies, p. 30.

Huther, J. and Shah, A. (2000). Anti-corruption Policies and

Programs: A Framework for Evaluation. World Bank Policy

Research Working Paper No. 2501. Washington: World Bank;

Shah, A. 2007. ‘Tailoring the Fight Against Corruption to Country

Circumstances’. In Shah, A. (ed). Performance Accountability and Combating Corruption. World Bank: Washington. Kuris, G. (2012). Balancing Responsibilities: Evolution of Lithuania’s

Anti-Corruption Agency, 1997-2007. Princeton University:

Innovations for Successful Societies, p.5.

Norton Rose Fulbright. (2016). Countries Curbing Corruption: An

Examination of 41 National AC Strategies.

OECD. (2017). Phase 2 Report on Implementing the OECD Anti-

Bribery Convention In Lithuania. Paris: OECD: 42, 43.

Recanatini, F. (2011). Anti-Corruption Authorities: An Effective

Tool to Curb Corruption?, in International Handbook on the

Economics of Corruption, Susan Rose-Akerman and Tina

Soreide, eds., 2011.

Swiss Agency for Development and Cooperation. (2016). Bhutan: We Can Win the Fight Against Corruption. Asia Brief. SDC: Bern.

Transparency International. (2015). Anti-corruption Agency

Strengthening Initiative: Assessment of the Bhutan Anticorruption Commission. Transparency International: Berlin. UNDP/UNODC. (2010). Bhutan: Capacity Assessment of the Anti-

Corruption Commission. Bangkok: UNDP/UNODC: 22. UNODC/StAR. (2014). Left out of the Bargain. Settlements in

Foreign Bribery Cases and. Implications for Asset Recovery.

Washington: StAR. World Bank/StAR. (2009). Stolen Asset Recovery. Management of

Returned Assets: Policy Considerations. Washington: World Bank and Proceeds of Corruption: Frameworks For the Management of Returned Assets. Draft Concept Note. Washington: World

Bank; World Bank.

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION

CHAPTER 12 Supreme Audit Institutions

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION CHAPTER 12 SUPREME AUDIT INSTITUTIONS

Introduction

Why are SAIs so important?

Supreme Audit Institutions (SAIs) are the chief auditors of the government and play a pivotal role in ensuring transparency and accountability. The

independence and operating capacity of SAIs are important foundations for providing fiscal oversight through presenting credible and timely audit results to legislatures, government, civil society, and the general public. The primary purpose of an SAI is to report on the management of public funds and the quality and credibility of governments’ reported financial data. Its recommendations can help strengthen institutions. With adequate independence and capacity, SAIs can contribute to combating corruption both through directly reporting on transactions and internal controls, and by assessing ways to improve the accountability and performance of government agencies and anticorruption bodies. They can also contribute through undertaking “performance audits” of government or quasi-government entities. The International Organization of Supreme Audit Institutions (INTOSAI) has issued ISSAIs, the international standards of SAIs for the delivery of effective audit reports. SAIs are not primarily responsible for tackling corruption and fraud. However, given the nature of the work performed by SAIs, including checking government accounts, reviewing regulatory compliance, and assessing the performance of government institutions, SAIs are capable of contributing to the anti-corruption agenda.

SAIs play a unique role in detecting and preventing corruption, when they have the mandate, tools and trust of the government to take on the fight against

corruption.1 SAIs’ audit mandate generally is broad enough to cover the entire public sector and flexible enough to examine government activities at any level. This could range from individual financial transactions, specific business practices, such as procurement, to a comprehensive corruption prevention system of an entity or whole-of-government. SAIs at the minimum have financial, compliance, and performance audits in their tool list, which enables them to evaluate the legality, integrity, efficiency, and effectiveness of government operations. Last but not least, SAIs are one of the most trustworthy institutions, which helps them open up the audit process for active citizen engagement as a part of their anti-corruption mechanisms such as hotline and fraud net.

The central role of SAIs in combating corruption is that of prevention through the promotion of sound financial management and robust internal control mechanisms in public entities. Sound financial

management, with effective financial reporting and disclosure of any deviations, is an effective deterrent to fraudulent and corrupt activities. SAIs can help public bodies strengthen their corruption prevention framework (or build a more comprehensive framework) by assessing the efficiency and effectiveness of the framework and recommending the relevant authority to address the shortcomings identified during the audit.2 SAIs contribute to building public awareness of corruption and financial impropriety through timely and periodic public disclosure of audit findings. SAIs may strengthen other pillars of the national integrity system through close collaboration and coordination with other institutions in the public sector.

SAIs are expected to raise red flags that would deter and detect fraud and corruption and assist law enforcement agencies to bring perpetrators to

justice. Prevention, detection and response activities are interdependent and mutually reinforcing to some extent. Early detection is a powerful prevention method that sends a clear message to the potential perpetrators. Detection is also useful to assess the appropriateness of preventive measures. SAIs may use detected fraud or corruption cases for publicity, to attract the attention of parliament, citizens and media, and put additional pressure on government to fix the problems effectively. Surprise audits that may be conducted for detection, act as a good deterrent. Some SAIs have institutionalized the detection function by setting up a designated unit and developing forensic and investigative audit guidelines and manuals. In order to vitalize the forensic audit function, SAIs may also require a firm statutory position, strong leadership, an integrity-first organizational culture, audit staff with relevant capacity, access to data and information, and collaboration with key stakeholders.

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION CHAPTER 12 SUPREME AUDIT INSTITUTIONS

How can SAIs strengthen their effectiveness?

Detecting fraud and corruption requires proper guidance and training for auditors. 3 Detecting

corruption is neither easy nor straightforward, since it is fundamentally a crime of deception and deceit. Fraudsters use all sorts of deception techniques to conceal illegal acts. Auditors may also interfere inadvertently with potential future legal proceedings or investigations. Training on forensic or fraud audits helps auditors to be better prepared to detect irregularities and collaborate with the law enforcement agencies. The more auditors know about what perpetrators are likely to do, the better are their chances of finding the red flags associated with potential fraud and corruption. With good understanding on fraud and corruption schemes and professional skepticism, auditors can distinguish anomalies or potential red flags from regularity.

To be more effective, SAIs need to strengthen their relationship with parliaments and anti-corruption

agencies. Strong external relations and partnerships is one of the key indicators to evaluate the effectiveness of an SAI. In fragile situations where state building or rebuilding is in progress, SAIs are confronted with many difficult challenges in building such partnerships.4 In the context of weak parliamentary oversight and lack of a proper feedback mechanism of audit results into the budget-setting process, parliamentarians do not take the audit findings or budget settlement process seriously. In such an environment, it is important to raise awareness on the role of SAIs and the value of audit findings through briefings for new and relevant members of parliament. This can be enhanced by ensuring that audit reports are user friendly and easily understood. SAIs can help build the capacity of members of parliament and their staff through, for example, joint study visits and exposure to advanced countries where SAIs and parliaments work together effectively. Similarly, when the rule of law is weak, suspected fraud or corruption cases transmitted by the SAI are not pursued by law enforcement agencies. SAIs could establish formal collaboration agreements with law enforcement agencies, where the scope of collaboration extends to information sharing, joint conferences and workshops to share knowledge and experiences, referred case follow-up, staff exchanges and joint agenda setting.

In an environment where corruption is widespread, establishing the integrity of SAIs can be a

challenge.5 As SAIs move closer to the frontline of fighting corruption, the temptations and risks to the auditors will grow, as will stakeholders’ expectations on the SAI’s integrity. Top management of the SAI must lead by example in maintaining high integrity and establishing zero tolerance regarding staff violations, failing which they will not be able to administer or propagate an organizational culture of integrity. Another potential challenge that SAIs face is the modality to reconcile the individual case-based approach of detection (i.e., forensic audits) and the system-based approach of prevention (i.e., traditional audits).6

Different external audit systems, Westminster7 , Judicial or Board model, have their strengths and weaknesses that may have implications for their effectiveness in combating corruption. These three

models can be distinguished, at least theoretically, in terms of centralization or decentralization of authority, susceptibility to political influence, openness and transparency, and ability to enforce audit findings.8 The distinguishing aspects—leadership, independence, accountability, and effectiveness—are all recognized as the fundamental principles of public auditing. Rapid convergence among the different types of SAI models has taken place since the introduction of ‘The International Standards of Supreme Audit Institutions’ (ISSAIs).

While the effectiveness of an SAI largely depends on its operational and financial independence, it is also influenced by the external audit model they follow, the country context, and the associated

norms of behavior. The two case studies discussed below demonstrate the effectiveness of the SAIs in two different contexts. The case study of SAI Ghana is an interesting example of an overlapping or hybrid model of a Westminster type SAI equipped with sanction powers. Other Westminster type SAIs have established forensic audit functions, though the Westminster model is known to focus more on the supporting role of SAIs, targeting prevention of corruption rather than detection or sanction. The second case study on India, also a Westminster model, demonstrates the key role played by the Comptroller and Auditor General (CAG) in unearthing major inappropriate financial transactions costing the government huge sums of money.

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Case study 1: Role played by Ghana’s Supreme Audit Institution

Corruption perception has been a long-standing

concern in Ghana. For instance, the Governance and Corruption Survey conducted by the Ghana Centre for Democracy and Development (CDD Ghana) in 2000 found that 75% of the Ghanaian households surveyed regarded corruption as a serious national problem; 59% of households saw corruption as a major problem in the private sector; and 86% saw it as a major problem in the public sector. A later survey in 2005 conducted by the Ghana Integrity Initiative (GII) also indicated that Ghanaians perceived corruption as equally serious, with 92.5% of urban households in Southern Ghana citing corruption as prevalent in the country while 90% of those surveyed considered it a serious problem.

Whilst some efforts have been made to address corruption, independent assessors find that the country has made little progress, as measured by global rankings in recent years. Amidst a growing

perception of corruption amongst public officials, the public has become increasingly cynical about the government’s commitment and ability to effectively tackle corruption. In 2015, Ghana ranked 56th in the world on Transparency International’s Corruption Perception Index (TI-CPI) but slipped quickly over the years to 80th place in 2019. Ghana’s position in the World Governance Indicator’s Control of Corruption measure has improved from 53rd place in 2015 to 49th place in 2017, before regressing to 53rd place in 2018. Corruption is perceived to exist in all branches of the Ghanaian Government and has been a highly politicized issue since the country’s transition to a multiparty democracy in 1992. In 2017, the new government undertook several measures, introducing electronic services and digitization to reduce the human interface in the delivery of several public services, including the issuance of electronic passports.

Ghana has several institutions to fight corruption, but they are fragmented and face persistent implementation challenges. Besides the traditional

law enforcement agencies such as the Ghana Police Service (GPS), the Bureau of National Investigations (BNI) and the courts, the other institutions established to curb corruption in Ghana are the Commission on Human Rights and Administrative Justice (CHRAJ), the Economic and Organized Crime Office (EOCO), and the Financial Intelligence Centre (FIC). However, many of these bodies struggle with issues that limit their ability to effectively perform their duties, such as a severe lack of resources.9 For example, the CHRAJ, despite being the leading anti-corruption institution in Ghana, does not have the power to prosecute, nor the required budget autonomy. Both the CHRAJ and EOCO have been reported to face interference from the executive, due to the structure of their boards and the appointment of directors and commissioners. Similarly, in his various writings and a public lecture given at the University of New York in January 2019, Mr Whittal, a Commissioner at CHRAJ, has consistently proposed the need to remove the appointment procedures from the executive: “the time has come to amend the laws on the appointment of the heads of state anti-corruption institutions—EOCO,CHRAJ and including the Financial Intelligence Centre (FIC)—to wean them off excess control by the executive.” As a result, perceived public confidence in the mandated constitutional bodies against anti-corruption has been fast eroding.

The National Anti-Corruption Action Plan (NACAP) reflected an awareness by the government of the main drivers of corruption. In 2014, the Government

launched the 10-year NACAP, which acknowledged and listed the various drivers of corruption in Ghana, including institutional weaknesses, low salaries, a skewed incentive structure, and insufficient enforcement of laws within the patrimonial social and political context. In addition, the document described the reasons for the failure of past efforts to curb the drivers of corruption and specified new measures to tackle the issues in a more holistic and coordinated manner. The accompanying foreword to the Ghana National Anti-Corruption Action Plan (NACAP) (20122021) acknowledges that the absence of the Ghana Audit Service (GAS) in developing the plan was a missed opportunity that the country could have pursued to better understand some of the core drivers of corruption in the country.

Similar to other SAIs globally, GAS has a mandate to promote and uphold financial integrity, but its impact had been limited. The GAS derives its

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mandate from Ghana’s Constitution. Articles 184, 187 and 286 of the 1992 Constitution established a broad mandate covering the activities for the Auditor General (AG), including to (i) audit the public accounts of Ghana and any other public office, (ii) take into custody the asset declarations of persons who hold public offices, (iii) determine and approve the form or manner in which public accounts are kept, (iv) submit audit reports, draw attention to irregularities, and make appropriate recommendations on the Ghanaian public accounts and the Central Bank’s statement of foreign exchange receipts and payments, and lastly (v) the AG may disallow any item of expenditure contrary to the law and impose a surcharge on the person responsible. While this entailed powerful and far-reaching authority for the AG, it was a common view that implementation of these powers was weak, and that audit reports produced by the GAS were reduced to mere “journalistic reports of events”10 with little real impact.

Since the appointment of a new AG in December 2016, GAS’s core financial oversight role has gained renewed prominence, which has in turn enhanced its contribution to anti-corruption efforts. Several

key undertakings have contributed to GAS’s impact on financial integrity:

• Judicious use of disallowance and surcharge powers

In 2017, the Supreme Court ruled that the AG be required to exercise its powers of disallowance and surcharge to commence the recovery of public funds that have been found to be illegally spent or lost through negligence or misconduct.11 These powers enable the AG to disallow any unlawful expenditure and impose a surcharge on the person(s) responsible. Anyone aggrieved by a disallowance or a surcharge can appeal to the High Court as provided for by Article 187(9) of the Constitution within 14 working days of the surcharge. To facilitate the process, particular courts were identified and assigned by the Chief Justice to hear these appeals.

The refusal of previous AGs to exercise the disallowance and surcharge powers had resulted in a loss of almost GHS2.5 billion worth of public funds through ministries, departments, and agencies (MDAs) alone from 2003 to 2014, and GHS5 billion through public boards, corporations, and other statutory institutions between 2009 and 2014. The new AG established a special task force to review all previous Audit Reports to reveal instances where the powers of disallowance and surcharge may be applied to recover lost public funds. Between June 2017 and November 2018, the GAS issued 112 surcharge certificates and returned a total amount of GHS67.3 million (USD12.2 million) back to government coffers. This achievement inspired other African SAIs to pass similar legislation on disallowances and surcharges. In 2019, the GAS stopped publishing special reports on disallowance and surcharge activity, and instead incorporated it in their usual audit reports to Parliament as a step towards establishing it as a fixed and regular part of the audit process.

• Audit of persistent arrears

Ghana’s persistent fiscal slippages were mainly driven by weaknesses in the public financial management (PFM) commitment control systems. In 2017, the AG worked closely with the World Bank and the IMF to undertake an audit of government payment arrears that had accumulated over the period 2013–2016. The audit was to: (1) verify the types and amounts of arrears accumulated; (2) identify the root causes for the arrears; (3) limit the future accumulation of arrears; and (4) develop a coherent strategy for managing and clearing the existing stock of arrears. As part of the audit, all MDAs were required to submit their outstanding liabilities to GAS for validation, which was tediously undertaken by examining and cross-checking the supporting warrants, contract documents, invoices, procurement records, and other documentation. Bank statements of the respective MDAs were also checked to ensure that the liabilities were not already settled. In prior years, such arrears were commonly settled and paid for without verification.

The outcome of the audit revealed several corrupt practices and led to the recovery of substantial sums of money, strengthening of commitment controls and prosecution of offenders. The total outstanding commitments submitted by the MDAs for verification of arrears amounted to GHS11.3 billion (USD2 billion), 51% of which were rejected by GAS as invalid arrears due to fraudulent reasons, such as double or triple payments to contractors for the same services rendered. The audit also revealed weak control mechanisms and poor record-keeping practices by the MDAs that facilitated corrupt activity. Internal auditors at the MDAs reported abuse and silencing through

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threats, transfers, or invitations to participate in corrupt schemes. The findings of the report were subsequently shared with Parliament and civil service organizations (CSOs). Any payment of invalid arrears thereafter would lead to a surcharge against the person who authorized, made, or received the payment.

• Audit of ghost workers in the public sector

In the past two decades, Ghana’s macro-economic instability has persistently been driven by two main drivers: the level of debt and the size of the wage bill. With the support of the World Bank-financed Public Financial Management Reform project, the AG partnered with the Special Prosecutor, the Ghana Police, CSOs, other anti-corruption bodies and heads of MDAs to undertake a government-wide verification of genuine government employees. The aim of this was to eliminate ghost workers who artificially inflated the payroll and allowed corrupt officials to steal the surplus. Employees in all the institutions were asked to produce authentic individual employment documents, following which the list of genuine government employees was matched against the payroll list kept by the Controller and Accountant General. In January 2020, GAS reported that the audit found 10,689 ghost workers on the public sector payroll. A final invitation was issued to these employees to verify themselves, and a failure to do so within the stipulated timeframe would result in their being disallowed from remaining on the payroll, and a surcharge on the salaries paid to these ghost workers would be imposed on the heads of the MDAs involved.

• Certification of Public Financial

Management Systems

In Ghana, the AG is responsible for certifying the PFM systems that are used by the government. Once a system is developed and its objectives are articulated, it is subject to review by GAS to ensure that the internal control arrangements in place are strong and that the system will not allow the enabling of corruptive breaches. One of the key aspects that is reviewed by the AG is the extent to which there is an appropriate segregation of duties to prevent collusive practices, which have been known to underpin corruption in Ghana.

• Undertaking of special audits

The AG embarked on several special audits on selected state institutions in 2018. One such example was an investigation of the Ghana Broadcasting Corporation (GBC), where it was revealed that the corporation had under-stated revenue realized for the 2014 World Cup by GHS3.5 million (USD626,273). The management was advised to update the financial statements accordingly to account for the disparity, a failure to do so would result in the officers responsible bearing a surcharge of the amount in question.

The leadership of the AG himself has also been an important contributor to GAS’s impact, as he championed initiatives beyond the usual activity of

GAS. The AG’s firm and untiring anti-corruption stance has led GAS to undertake interests that spill over into what a robust anti-corruption agency might pursue in other countries:

• Being a voice of reason in safeguarding the public purse

As a result of his public crusade and determined actions against corrupt officials, the AG has emerged as a strong figure in Ghana’s anti-corruption war. In various speeches, and through joint platforms with CSOs, he has been instrumental in sensitizing the public on the dangers of corruption and urging the media and the public to expose corrupt public officials, prompt investigations, reinforce the works of anti-corruption bodies and put pressure on the government to change laws and legislation that create enabling platforms for corruption in the country. He has also consistently advocated for effective collaboration between GAS, the public, the private sector, and CSOs in fighting corruption. The public has been responsive to his call, and over time they have become instrumental in providing important pieces of information that have assisted in GAS’s audits and investigations. In 2019, the AG was voted Integrity Personality of the year at the Ghana Integrity Awards, owing to his strong stance against corruption.

• Partnering with CSOs

The AG has often partnered with CSOs to name and shame corrupt officials and institutions based on the findings of his annual and special audits, and lobby for changes in laws and legislation that facilitate corruption. This has generated deterrent mechanisms that were not present before he took office.

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• Using the Right to Information Law

In May 2019, Ghana’s President signed the Right to Information (RTI) Act into law, implementing the public’s constitutional right to information held by any public institution and fostering a culture of transparency and accountability in government. Even though the RTI is provided for in the 1992 Constitution, the country struggled for years to pass the relevant law. The AG partnered with CSOs to lobby for the passing of the law and has been vocal in supporting the use of it for CSOs, the public and media in providing GAS with crucial and relevant information to investigate and prosecute corrupt officials.

• Pushing for transparent asset disclosure

The AG has been critical of the weak enforcement and flaws of the asset disclosure system in Ghana. As per the current laws, asset declarations by public officials are sealed in an envelope and marked secret, only to be opened in the event of a corruption investigation or if ordered by the court. The AG has deemed this to be ineffective and urged public officials to declare their assets publicly. Working with the Special Prosecutor, he has also demanded that the provisions of Article 286 of the Constitution and Public Office Holders (Declaration of Assets and Disqualification) Act 1998 (Act 550) be observed. This requires all qualifying public officers to submit written declarations of all assets owned within three months after taking office and at the end of four years. Unlike in previous years, the AG has partnered with CSOs to name and shame officials that have not yet met this requirement. One such example was the refusal to confirm the appointment of the new Chief Justice in 2019 until she had shown evidence of having declared her assets over the previous four years.

Factors behind GAS’s impact

SAIs are not always able to play an effective role in promoting financial integrity. In Ghana, its impact has been aided by several factors:

1. Financial and administrative autonomy: GAS’s

financial and administrative independence has been instrumental in allowing it to maintain impartiality, counter corruption effectively, and fulfil its mandate. While most public bodies in Ghana are subject to the supervision of the Ministry of Finance, GAS maintains its operational control, with minimal external interference in decision making or the appointment or removal of staff. In addition, the Parliament is accustomed to providing GAS with the financial resources it requires yearly, as stipulated in the annual budget GAS submits.

2. Personal conviction and knowledge of the AG:

Besides a strong mandate, the AG’s personal convictions and deep-rooted knowledge of the legal and constitutional authority of the office have enabled GAS to be effective in the fight against corruption.

3. Provision of quality reports that are accessible to

the public: Audit reports are made publicly available to increase the transparency and accountability of public institutions.

4. A direct reporting relationship to Parliament:

GAS reports directly to Parliament, although it has a Board whose role is merely advisory on key policy matters. The Audit Service Board according to article 189 is responsible for employing staff (except AG) for the audit service and determining their conditions of service. The Public Accounts Committee has at certain times exerted pressure on audited bodies to comply with GAS’s recommendations.

5. An effective arrangement with the Internal Audit

Agency: GAS works very closely with the Internal Audit Agency using ISSAI 9150 and has established a memorandum of understanding to ensure there is an appropriate exchange of information on corruptive practices.

6. Continued capacity building: For example, GAS

has undergone the World Bank Integrity Vice Presidency’s preventive and forensic training on matters of evidence and follow-through on corruption leads.

GAS’s achievements in recent years owe partly to the strong leadership and conviction of the current AG, posing a risk for the sustainability of GAS’s momentum and impact on the anticorruption war in the future. A change in AG may

jeopardize the current traction that the GAS has in curbing corrupt practices and bringing offenders to

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justice. Nonetheless, the progress achieved and public support garnered in recent years are likely to create the necessary pressure, as well as enabling environment, for future AGs and GAS to continue the fight against corruption.

Case study 2: The role of the Supreme Audit Institution in India

In India, the Office of the Comptroller & Auditor General (CAG) is the SAI responsible for ensuring accountability and oversight of government functionaries and programs. The CAG is mandated

by the Constitution to audit the accounts of the Union Government and of all the State Governments of India, including institutions substantially financed by the Government of India. The CAG is also mandated to prescribe the accounting format and standards that public institutions must adhere to. Employing more than 45,000 employees across 141 field offices,12 the CAG mainly undertakes three types of audits: (i) Financial audits that ascertain if financial statements are properly prepared and present financial information fairly; (ii) Compliance audits that examine if the applicable laws, rules or regulations are complied with; and (iii) Performance audits that are independent assessments of the extent to which a public institution operates economically, efficiently and effectively, and fulfills the objectives that it set for itself. All of the CAG’s audit reports are laid before the Parliament and Legislatures of the States.13

Over the years, the CAG has strengthened its audit capacities and shifted its emphasis to riskbased performance audits. The CAG’s staff has

undergone continuous training to better conduct and report audits, as well as conform to national auditing standards and international best practices. This capacity building was partly supported by the World Bank. In 2007, the CAG’s office also shifted its focus to conduct more performance audits that promote economical, effective and efficient governance. As practiced in more advanced SAIs globally, the CAG also started undertaking more risk-based audits, detecting and prioritizing high-risk and high-value areas where efforts can be concentrated to draw maximum impact.

Beginning in 2008, the CAG undertook several high-profile performance audits that generated public awareness and helped transform the role of the audit in strengthening accountability, transparency and governance across the public

sector. Some of these performance audits caught the public and media’s attention because they exposed misallocations of public assets at undervalued prices. The public discourse and investigations triggered by these findings resulted in policy reforms and the removal of several government officials that were involved in the alleged corruption. While critical audit findings have not always led to prosecution of the accused individuals, they have contributed to a higher risk of detection for those contemplating corrupt acts. The investigations undertaken by the CAG gained traction with the public and made a significant impact in the fight against corruption in India as a result.

Performance audits by CAG

Telecom licenses. In 2008, the CAG undertook a performance audit of the issuance of telecom licenses and award of spectrum. The performance audit report revealed gaps in policy implementation, and an estimated loss of public funds based on deviation from prescribed rules. CAG’s report tabled in the Parliament exposed corruption amounting to several billion dollars to the public exchequer, something that attracted the attention of the media and civil society. In 2012, the Supreme Court of India ruled that the 2G spectrum allocation in 2008 was “unconstitutional and arbitrary” and cancelled 122 licenses and spectrum allocated to eight companies.

Coal blocks. In 2012-13, the CAG published a performance audit report that revealed the inefficient allocation of coal blocks to private and public sector enterprises between 2004 and 2009. The report14 highlighted the delay in the introduction of competitive bidding for the allocation of coal blocks for captive mining, despite making the decision to operationalize competitive bidding since 2006. In the final report

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submitted to Parliament, the CAG reported “an estimated USD26 billion in financial gains made by private coal block allottees, part of which could have accrued to the exchequer if the competitive bidding process had been implemented.”15 The CAG report notes ‘’this allocation lacks transparency and objectivity.”16 The CAG’s findings led to investigations surrounding the issues of nepotism and collusion in the allocation of national resources. The issue, popularly referred to as “Coalgate” by the media, eventually led to investigations by the Central Bureau of Investigation against the public officials involved as well as the firms allotted the coal blocks. The CAG report also resulted in the formation of an Inter-Ministerial Group to deliberate the forfeiture of coal blocks that were not developed on time. The Inter-Ministerial Group eventually recommended the deallocation of 13 blocks and the forfeiture of bank guarantees for 14 allottees.17 The Parliamentary Standing Committee also reported the allocation of all coal blocks between 1993 and 2008 as unlawful, and the Supreme court eventually cancelled a total of 214 coal blocks that were awarded improperly during this time.18 Dismissing a public interest litigation that challenged the CAG’s power to conduct performance audits, the Supreme Court of India further ruled that “the CAG’s work to investigate into austerity, efficiency, and effectiveness by which the government has used its resources is embedded in the 1971 Act. Performance Audit Reports prepared under the Regulations should be viewed accordingly. The Court did not see any unconstitutionality in the regulations.”19

Commonwealth Games. The CAG also undertook two performance audits20 pertaining to the Commonwealth Games XIX (CWG), held in New Delhi, India in October 2010. In 2003, the right to host the CWG-2010 was awarded to Delhi on the guarantee of the Government of India, in conjunction with the Government of the National Capital Territory of Delhi, to bear the expenditures of hosting the games. The Indian government laid out substantive plans to upgrade infrastructural facilities within the city in preparation for the games. The objective of the CAG’s performance audits post-completion of the games in 2011 was to assess the (i) adequacy and effectiveness of budgeting and financial management, and (ii) effectiveness and efficiency of agencies in planning and executing the infrastructure projects for the event.21 The performance audit found incidences of improper planning, procurement, and contract management that drove up the cost of the games. The CAG report states: “In the absence of a single point of authority and accountability and the lack of a clear governance structure, a multiplicity of co-ordination committees were created, disbanded, and reconstituted at different points of time. This approach was not methodical, consistent and effective, and also led to complete diffusion of accountability. The argument of urgency was used to obviate the regular process of tendering for award of contracts. We found numerous instances of single tendering, award on “nomination basis”, award of contracts to ineligible vendors, inconsistent use of restrictive Pre-Qualification (PQ) conditions to limit competition to favour particular vendors, inadequate time for bidding, cancellation, and re-tendering of contracts, and inexplicable delays in contract finalization, all of which seriously compromised transparency and economy.”22

All of the above examples of performance audits raised the profile and relevance of the CAG and created awareness amongst the public on the role of the SAI as a primary catalyst for improved governance, accountability and public service delivery in India. The audits by the CAG thus became an important instrument to expose alleged corruption, nepotism, and abuse of power in the public sector.

In addition to the disclosure of audit findings, several other factors have aided the CAG’s effectiveness in fighting corruption in the past

decade. Since 2008 it has undertaken a number of actions that have improved the scope and usefulness of its outputs, enhanced its credibility and renewed public confidence in the CAG to expose and combat corruption. These were:

• Continuous institutional capacity building. The

CAG has worked continuously to strengthen its audit capabilities, thereby improving the visibility and credibility of its audit reports. In addition to staff training, the CAG modernized and upgraded audit software and infrastructure for both the CAG’s office and its state branches. In 2008, the CAG froze new recruitments in the clerical cadre and focused hiring at the assistant audit officer level, ensuring that recruits had the required qualifications such as a commerce or accounting background, to undertake more complex risk-based audits. As a result of these efforts, the CAG’s reports came to be perceived as credible and reliable source materials for use not only by the public and media, but also by legislative committees, courts, investigative agencies and international organizations. On the

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international front, the CAG became a member the United Nations Board of Auditors in 2014, serves in the Committee of the International Organization of Supreme Audit Institutions (INTOSAI), and also assists in the capacity building of SAIs in other countries in the region.23

• Production of more user-friendly, timely and

impactful audit reports. Prior to this, the CAG’s audit reports left little impact on Parliament, the media or the general public, as each report typically took 2 to 3 years to publish and was usually long and difficult to read. However, the CAG worked to produce shorter and punchier 10- to 20-page audit reports, and significantly shortened the time taken to publish a report to 8 to 9 months. The previous time lag made it difficult to hold public attention, thus lessening the impact of the audits undertaken. The quicker publication not only mitigated this, but also ensured accountability as concerned public officials still held their posts within the shorter time frame, and faults in government programs could be quickly resolved.

• Maintained independence and integrity. CAG’s

independent position as a constitutional authority continues to provide grounds for the criminal investigations and court cases from its reports. The CAG’s office can disseminate reports to the media regularly and is a powerful force for accountability and transparency in India.

• Strong leadership and determination of the CAG.

Besides having an adequate legal mandate, CAG’s leadership has enabled the office of the CAG to be very effective in the fight against corruption and rejuvenated the public image of the office and its work. All three of the audits described above, alongside several other audits that gained prominence, were undertaken underpinned by strong leadership.

• Increased engagement with the public. The CAG’s

office increased its outreach to the public and other stakeholders to seek inputs and determine the scope of audits. For example, prior to conducting a social audit on water pollution, a two-day conference involving civil society experts, government agencies, and international and regulatory bodies, was organized by the CAG in March 2010 to exchange knowledge and share concerns regarding the issue. Following the conference, the CAG’s office sought feedback from the public on the water pollution problems they faced through various means, including an advertisement in the newspapers. The office received more than 700 letters and e-mails, which it used to frame the objectives and questionnaires for the audit. The CAG also started teaming up with social action groups, tapping into their knowledge and expertise on issues of public concern.

The CAG serves as an example of how SAIs can become more effective and successful in exposing and preventing corruption, by prioritizing highimpact audits, continually strengthening capacity and improving citizen engagement. The efficacy

of the CAG’s office in stirring public interest and in initiating corrective measures through its audits was enhanced following a range of reforms made within the office since 2008. Strong leadership of the CAG had also facilitated these reforms and pushed through the release of impartial, but often uncomfortable audit findings to the public and media. A combination of these factors has enabled the CAG’s office to properly conduct independent and critical evaluations of the performance of high-value government projects, as well as provide critical insights for further investigations by other law enforcement and anti-corruption agencies, and for the implementation of corrective and preventive measures to avoid reoccurrence of any wrongdoing or inefficiency. Like many public sector institutions, the CAG’s office also needs to continuously invest in improving its capacity, both human resources and systems. Through these ongoing improvements, this office continues to command the respect of the public and is a huge deterrence against corruption and rent seeking behaviors. It has a number of international affiliations and memberships, and the CAG of India has been elected as Chair of the UN Panel of external auditors for the year 2020.

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Notes

1. The Congress of the International Organization of Supreme

Audit Institutions (INTOSAI), held in 1998 in Montevideo,

Uruguay, discussed and delivered concrete recommendations for SAIs to make an effective contribution to the fight against corruption. See also U4. 2018. “The Role of Supreme Audit

Institutions in Fighting Corruption” for a more detailed overview.

2. ISSAI 5700 “Guideline for the Audit of Corruption Prevention”. https://www.issai.org/pronouncements/guid-5270-guidelinefor-the-audit-of- corruption-prevention/. 3. According to the survey conducted in 2010 by INTOSAI

Working Group on Fight Against Corruption and Money

Laundering (WGFACML), only one-third of SAIs (18 out of 54) responded positively on the questions of availability of audit staff and training program specialized in audits related to corruption or money laundering. See http://wgfacml.asa. gov.eg/.

4. INTOSAI. CBC Workstream in support of Auditing in Complex and Challenging Contexts (ACCC). https://www.intosaicbc. org/accc/.

5. INTOSAI provides IntoSAINT, a tool to assess the vulnerabilities and the maturity of the integrity controls of SAIs and to strengthen integrity in SAIs. See https://www.intosaicbc.org/ intosaint/

6. INTOSAI Working Group on Values and Benefits of SAI (WGVBS) plans to develop a guide on potential risks and challenges by incorporating the investigative powers among their functions. See http://www.wgvbs.org.mx/wp-content/ uploads/2018/10/01-SAIs-investigative-powers-14mar19.pdf. 7. A model where the work of the SAI is intrinsically linked to the system of parliamentary accountability. 8. DFID. 2004. Characteristics of Different External Audit

Systems. Briefing. http://gsdrc.org/docs/open/pf31.pdf. 9. Poor funding, coupled with inordinate delays in releasing budgeted funds, has often delayed investigations and implementation of planned programs, in addition to increasing the cost of operations (CHRAJ -SEVENTEENTH

ANNUAL REPORT 2010)

10. News Ghana. (2017, Jan 20). Auditor General Agrees with

Occupy Ghana On Disallowance and Surcharge Powers.

Retrieved from https://www.newsghana.com.gh/auditorgeneral-agrees-with-occupy-ghana-on-dis-allowance-andsurcharge-powers/ 11. The decision materialized as a result of an action filed against the government by Occupy Ghana on claims that the powers have never been exercised by the AG. The court ruled that the

AG must act on its annual reports, take steps to retrieve any public funds found to have been misappropriated and ensure enforcement of the orders including criminal prosecution where necessary.

12. CAG. 2016. CAG Performance Report 2014 -2015. https://cag. gov.in/sites/default/files/performance_activity_report/CAG_

Performance_Report_2014-15.pdf. 13. See https://cag.gov.in/hi/content/audit-report. 14. CAG. 2013. Report No.7 of 2012-13, August 2012- Performance

Audit of Allocation of Coal Blocks and Augmentation of Coal

Production, Ministry of Coal. Retrieved from https://cag.gov. in/content/report-no-7-2012-13-%E2%80%93-performanceaudit-allocation-coal-blocks-and- augmentation-coal. 15. Para 4.3 of the above report and Executive Summary of the

Report Page V, (equivalent of Rs 1.86 lakh crores or USD 26 billion as per the report).

16. CAG, 2013.

17. Press Trust of India. 2012. Govt decides to deallocate two more coal blocks. https://www.news18.com/news/india/govtdecides-to-deallocate- two-more-coal-blocks-524663.html.

18. Rajagopal, Krishnadas. 2014. Supreme Court quashes allocation of 214 coal blocks. The Hindu. https://www.thehindu. com/news/national/supreme-court-quashes-allocation-of-allbut-four-of-218-coal-blocks/article6441855.ece; and Ministry of Law and Justice. 2014. The Coal Mines (Special Provisions)

Second Ordinance, 2014. No.7 of 2014. https://coal.nic.in/ sites/upload_files/coal/files/curentnotices/291214_2_0.pdf. 19. CAG. (n.d.) Important Judgements. https://cag.gov.in/hi/ content/important-judgements#chapter1. 20. Two audits were conducted, facts are represented from both reports, one was tabled in August 2011 and one in 2012. 21. CAG. 2011b. Report No. 6 of 2011 – Performance Audit of

XIXth Commonwealth Games. https://cag.gov.in/content/ report-no-6-2011- %E2%80%93-performance-audit-xixthcommonwealth-games.

22. CAG, 2011.

23. CAG, 2016.

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Afrobarometer. (2018). Ghana summary of results (2017). https://afrobarometer.org/sites/default/files/publications/

Sommaire%20des%20r%C3%A9sultats/gha_r7_sor_10042019. pdf.

Arthur-Mensah. (2019, Jan 3). Disallowance and Surcharge to

Become Part into Audit Process. https://www.ghananewsagency. org/economics/disallowance-and-surcharge-to-become-partinto-audit-process-143681. CAG. (2010). Report No.19 of 2010. Performance Audit Report on the Issue of Licenses and Allocation of 2G Spectrum by the Department of Telecommunications. https://cag.gov.in/ content/report-no-19-2010-performance-audit-issue-licencesand-allocation-2g-spectrum-union. CAG. (2011a). Report No. 4 of 2011 - Performance and Compliance

Audit on Commonwealth Games Government of Delhi. https://cag.gov.in/sites/default/files/audit_report_files/Delhi_

CWG_2011_exe-sum.pdf. CAG. (2011b). Report No. 6 of 2011 – Performance Audit of XIXth

Commonwealth Games. https://cag.gov.in/content/report-no6-2011-%E2%80%93-performance-audit-xixth-commonwealthgames.

CAG. (2013). Report No.7 of 2012-13, August 2012- Performance

Audit of Allocation of Coal Blocks and Augmentation of Coal

Production, Ministry of Coal. https://cag.gov.in/content/reportno-7-2012-13-%E2%80%93-performance-audit-allocation-coalblocks-and-augmentation-coal.

CAG. (2016). CAG Performance Report 2014 -2015. https://cag. gov.in/sites/default/files/performance_activity_report/CAG_

Performance_Report_2014-15.pdf. CAG. (n.d.) Important Judgements. https://cag.gov.in/hi/content/ important-judgements#chapter1. CDD-Ghana. (2000). The Ghana governance and corruption survey evidence from households, enterprises and public officials (English). Washington, D.C. : World Bank Group. http:// documents.worldbank.org/curated/en/749401468253174124/

The-Ghana-governance-and-corruption-survey-evidencefrom-households-enterprises-and-public-officials. Centre for Budget and Governance Accountability. (2014).

Reporting in Public Interest: Value and Impact of CAG’s Audits. http://www.cbgaindia.org/wp-content/uploads/2016/03/

Reporting-in-Public-Interest-Value-and-Impact-of-CAGs-

Audits.pdf. Damani. (2016). The History of Telecom Spectrum in India: The 2100MHz and 2300MHz Auctions. https://gadgets.ndtv.com/ telecom/features/the-history-of-telecom-spectrum-in-indiathe-2100mhz-and-2300mhz-auctions-828448.

DFID. (2004). Characteristics of Different External Audit Systems.

Briefing. http://gsdrc.org/docs/open/pf31.pdf. Ghana Audit Service. (2019, Jan 6). OccupyGhana Salutes Auditor-

General on Disallowances And Surcharges And Urges The

Prosecution Of Persons Found Culpable. https://ghaudit.org/ web/2019/01/06/occupyghana-salutes-auditor-general-ondisallowances-and-surcharges-and-urges-the-prosecution-ofpersons-found-culpable/ Ghana Audit Service. (2019). Report of the Auditor-General on

Special Audits Carried Out on Selected State Institutions in the

Year 2018. https://www.graphic.com.gh/images/pdfs/reportof-the-auditor-general-on-special-audits-carried-out-onselected-state-institutions-in-the-year-2018.pdf Ghana Audit Service. (2020, Jan 28). Notice of Intention to Disallow and Surcharge – Nation-wide Payroll and Personnel Verification

Audit. https://ghaudit.org/web/2020/01/28/public-noticenation-wide-payroll-and-personnel-verification-audit-nppva-2/ Ghana Legal Information Institute. (2017). OCCUPY GHANA

VRS ATTORNEY-GENERAL. https://ghalii.org/gh/judgment/

Supreme%20Court/2017/10/OCCUPY%20GHANA %20%20 %20%20VRS%20THE%20ATTORNEY%20GENERAL.pdf. GII. (2005). Voice of the people Survey – an Urban corruption perception survey in Southern Ghana. INTOSAI. CBC Workstream in support of Auditing in Complex and Challenging Contexts (ACCC). https://www.intosaicbc.org/ accc/.

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Ghana On Disallowance and Surcharge Powers. https://www. newsghana.com.gh/auditor-general-agrees-with-occupyghana-on-dis-allowance-and-surcharge-powers/. News Line Ghana. (2018, Feb 6). Auditor General blows MDAs’

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PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION

CHAPTER 13 Justice System

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION CHAPTER 13 JUSTICE SYSTEM

Introduction

Defining the justice system

The justice system plays a key role in fighting the various forms of corruption across all sectors.

The justice system is understood to comprise “the institutions that are central to resolving conflicts arising over alleged violations or different interpretations of the rules that societies create to govern members’ behavior; and that, as a consequence, are central to strengthening the normative framework (laws and rules) that shapes public and private actions.”1 This normative framework includes the rules about preventing and sanctioning corrupt practices.

Beyond these rules, the justice system has the key task of upholding the rule of law more broadly, including by providing checks and balances on abuse of power by the executive and legislative branches

of government. As the World Development Report 2017 summarizes it, the rule of law at its core is “the impersonal and systematic application of known rules to government actors and citizens alike” and requires that both “be bound by and act consistently with the law.”2 This task is particularly relevant in contexts of elite capture and grand corruption, because they result in the normative framework itself being skewed. Justice institutions then become the last resort to ensure the supremacy of fundamental principles of rule of law, fairness, and equality.

The justice system is more than a loosely

connected set of independent institutions. These

institutions constitute a network of interdependent actors. The performance of each of them is affected by the performance of the others. Courts are at the core of dispute resolution and are supported in this function by a range of other justice sector institutions, including the prosecution service, public defenders, bar associations, state and civil society legal aid providers, police, alternative dispute resolution mechanisms, administrative adjudication and enforcement mechanisms, customary and communitybased institutions, anti-corruption and human rights commissions, ombuds offices, judicial academies, and more.

Preventing and sanctioning corrupt practices

The justice system plays both a preventive and a repressive role in the fight against corruption. On

the repressive side, it empowers citizens, businesses, and other stakeholders to actively fight corrupt practices by denunciating perpetrators and bringing facts and evidence to the attention of relevant justice institutions. While the starting point may vary and lawsuits in civil or administrative courts may proceed, the criminal justice chain is generally the one that is ultimately set

PART III ROLE OF INSTITUTIONS IN FIGHTING CORRUPTION CHAPTER 13 JUSTICE SYSTEM

in motion to sanction perpetrators. On the preventive side, justice institutions also play a key role in enforcing the rules put in place to prevent corruption. Thus, when government officials, for example, do not comply with transparency requirements, even ahead of yet to materialize subsequent corrupt behavior, they can be held accountable for that, which in turn strengthens the effective implementation of this anti-corruption framework. Moreover, the effective functioning of the criminal justice chain sends a strong signal of deterrence, including by increasing the likelihood of being caught in case of wrongdoing.

The roles of the different institutions

Justice institutions play different roles in fighting corruption, but each institution’s performance

counts. While it is important for the overall justice system to perform effectively so anti-corruption efforts can succeed, each institution plays a particular role. Below is an overview of the role of the key institutions.

The courts

For most observers of anti-corruption efforts, one of the most visible moments is when someone is convicted of a crime by a criminal court, with or without a jury trial depending on the country. These can be specialized anti-corruption courts, specialized anti-corruption chambers, or just the general criminal courts.

The role of other courts for anti-corruption efforts is less visible, but nonetheless important. Lawsuits in civil courts can provide an effective complement to more commonly used criminal approaches as a way to recover stolen assets.3 Insolvency proceedings can be used to recover corruption proceeds.4 Depending on the jurisdiction, civil or administrative courts can hear cases filed by journalists who are denied access to information in violation of freedom of information legislation. More broadly, administrative courts offer a venue for citizens and civil society to challenge abusive or simply illegal (in)actions by public authorities and their officials. Proving corruption in a public procurement case may be more challenging than proving the illegal nature of an administrative (in)action. While this does not normally result in a criminal sanction of the public official or the corruptor, the ultimate (in)action sought by the corruptor can be annulled or declared void this way.

The effectiveness of courts in fighting corruption is not just a function of their own performance, but also of the performance of institutions that participate in their proceedings or contribute to earlier stages of the process prior to indictment. The effectiveness and quality of the investigations led by the prosecution service and/or the police in terms of the comprehensiveness, timeliness, and quality of evidence, and compliance with legal requirements are ultimately reflected in the quality of the case presented to the court. While the courts have the ultimate decision power, they do not operate in isolation. They depend on a range of other justice sector institutions to carry out their mandate.

The prosecution service

The prosecution service is a key part of the criminal justice chain that, on behalf of society and in the public interest, ensures the application of the law where the breach of the law carries a criminal sanction.5 This includes legislation criminalizing corrupt practices. In criminal justice systems, public prosecutors normally (i) decide whether to initiate or continue prosecutions; (ii) conduct prosecutions before the courts; and (iii) may appeal or conduct appeals concerning all or some court decisions.6 Thus, without a well-performing prosecution service, the effectiveness of the fight against corruption would be seriously undermined, because corruption cases may not be successfully brought to the court or the court would not be able to adequately sanction perpetrators, due to the low quality of the indictments.

Moreover, in many criminal justice systems, public prosecutors also (i) implement the national crime policy; (ii) conduct, direct or supervise investigations; (iii) decide on alternatives to prosecution; and (iv) supervise the execution of court decisions.7 They carry out their mandate while taking into account both the rights of the individual and the necessary effectiveness of the criminal justice system in the fight against corruption.