Cost of corruption in Norway; Navalny’s Anti-Corruption Foundation declared extremist and meet “Mr. Mmmmmm Xxxxxxxxxxx”

Hi, welcome to Oligarchy, where we are tracking how the super rich are changing the world for the rest of us.

MEASURING CORRUPTION

The battle against corruption has long had a slightly embarrassing secret, which probably everyone involved was aware of, but no one wanted to talk about too much, in case it discredited the whole campaign. The secret is this: although activists and politicians regularly cite specific numbers to illustrate how big a problem corruption is – $2 trillion is laundered every year being perhaps the classic example – these numbers are often rather shakily sourced.

There is a good reason to be unsure about the precise amount of money lost to corruption each year, in that the money is hidden by skilled enablers, stolen from countries dominated by corrupt politicians, and so on. But often the numbers cited are suspiciously specific – 37 billion pounds, for example – in a way that makes them look far better-sourced than they in fact are.

So kudos to Norway’s U4 Anti-Corruption Resource Center, which works with many of the world’s most important development agencies. It has taken a forensic approach to fact checking 10 of the most-cited numbers, with rather alarming results for anyone who has merrily cited them over the years – such as in this article by me, which is inspired by the claim that a trillion dollars is paid in bribes each year.

–          “Of the ten corruption statistics we assessed, not a single one could be classified as credible, and only two (an estimate of illicit financial outflows and an estimate of corruption’s impact on child mortality) even came close to credibility. Six of the ten statistics are problematic, some seriously so, and the other four are, as far as we can tell, entirely unfounded,” U4’s report stated.

Among the regularly-repeated figures that U4 analyzed was the claim that $2.6 trillion in public funds is stolen or embezzled each year, which was most prominently used in a speech by UN Secretary General António Guterres in 2018. Alarmingly, that figure has since mated with the $1 trillion in bribes figure, to give birth to an even larger estimate of $3.6 trillion.

–          “Our best guess as to what happened – and we acknowledge that this is only a guess – is that the speechwriter who inserted the ‘US$2.6 trillion’ estimate into the secretary-general’s 2018 speech simply misunderstood what this figure was supposed to estimate, or did not understand the difference between the cost of corruption and the amount stolen,” U4 writes.

I highly recommend the whole report, which is both fascinating and a rebuke to the many agencies and bodies that have failed to look into how reliable these statistics were before. U4 stated that it embarked on the analysis expecting some of the figures to be accurate but was surprised to find that essentially none of them could be accepted unquestioningly. Among its conclusions is one that says people should avoid “decorative” statistics, which give a spurious air of rigor to what is essentially just a claim that the problem is big, which I think everyone could agree with.

I can see why politicians and others are tempted to focus on a specific number, since admitting the level of uncertainty inherent in estimating the real effect of corruption risks making their interventions look bizarre. A recent policy paper from the Centre for European Reform stated that, “depending on the data one chooses to believe, corruption reduces EU GDP by between 120 and 990 billion Euros every year”. It’s a good report, but I’m surely not the only person who stopped to marvel at the degree of doubt inherent in quoting a spread like that, and subsequently failed to take much else in.

So, my conclusion from reading the U4 report is that, if we need accurate statistics, and if our current supposedly accurate statistics are in reality spurious, we need to get numbers that are rooted in reality, and to do it fast.

The field of corruption/money laundering/kleptocracy studies is scandalously under-resourced, considering how vast the problem is. Even if the numbers regularly cited are imprecise, no one is disputing that the problem is vast, so we are talking about billions upon billions of dollars being stolen, laundered, and spent.

So, if you have any control/say/influence/sway over any organization that could be persuaded to do granular, detailed work on the amount of money that gets stolen each year, where it goes, and what impact it has, please do what you can to make that work gets done. We need to know the true dimensions of the problem, so as to best know how to tackle it.

And, look on the bright side, this is in fact a golden opportunity. Thanks to U4, all the old statistics have been swept away, and any new and more reliable numbers you can produce will be able to colonize virgin territory.

Of all the academic researchers of offshore skullduggery, one of the best is Jason Sharman – co-author of a legendary research project into shell companies – and he has since embarked on a new project probing deeper into the willingness of the financial system to move dirty money. He has just published a chapter from one of his other books online, setting out how he’d like the world to combat kleptocracy.

–          “In a world where kleptocracy is unremarkable, holding individual leaders accountable for corruption crimes committed in office is a revolutionary idea that undermines centuries of accepted practice and conventional wisdom. It has the potential to transform international diplomacy and world politics more broadly,” he writes.

TRANSPARENCY

This week is the deadline for the submission of comments on the US government’s proposals for how its register of company ownership will work under the Corporate Transparency Act, which means another hurdle has been passed in the long slog of this promising-looking text becoming hopefully-transformative reality. I sincerely hope that officials will pay attention to this document from the Alliance for Securing Democracy, at the German Marshall Fund, which makes a very compelling case for an expansive definition of ownership, specifically to avoid many of the problems that Britain’s poorly thought out system has faced. You really don’t want to end up with a registry packed full of names like Mr. Mmmmmm Xxxxxxxxxxx, or indeed Mr Xxx Stalin, believe me.

–          “Authoritarian regimes who see themselves as waging war against the United States but unable to compete militarily have taken to weaponising the corruption that is endemic to their political systems. If the realm of malign finance is their geopolitical battlefield of choice, their favourite armaments are anonymous U.S. corporations, LLCs, trusts, foundations, partnerships, and other similar entities,” the report, by Josh Rudolph, concludes.

Progress continues on other fronts in the US, with the House Foreign Affairs Committee approving the Countering Russian and Other Overseas Kleptocracy ‘CROOK’ Act last month (does anyone know when the US practice of giving bills amusing/appropriate acronyms began? I’d be interested to know), which would divert fines paid for corruption offenses towards supporting anti-corruption work outside the United States.

The bill has been enthusiastically supported by anti-corruption groups both in the US and elsewhere, and hopefully, it will receive a vote in the House soon. It is heartening to see progress in the US but, to be honest, it is also a little depressing to contrast this with what’s happening in the UK, where we’re currently debating whether the prime minister sought covert political donations from wealthy supporters to pay for childcare. Like all the best British scandals, however, it’s both sordid and cheap, so I suppose it shouldn’t have been unexpected.

LIBEL TOURISM

Another three Russian billionaires, plus the oil giant Rosneft, are suing journalist Catherine Belton and her publisher HarperCollins, who is already being sued by Roman Abramovich, for defamation and data protection offences. Her book Putin’s People was published a year ago, so the flurry of claims came in just before the deadline.

I have not seen the details of their complaints, which were revealed by the FT, but I have read the book, which is a superb account of how Russia has been mistreated by its rulers over the last 30 years. It is heartening that HarperCollins is standing by Catherine Belton and her work.

She is not the only person currently being targeted by powerful Russian interests. I recommend you read this interview with Roman Anin, who reveals quite how far the Russian state will go in trying to prevent him from working.

WHAT I’M READING

One of the best things about being from the town of Hay-on-Wye is that every year we get to host the world’s best writers, performers, comedians and more for a superb festival. Sadly, thanks to the pandemic, it’s going to be virtual again this year, which means there will be far fewer events than normal, and fewer chances for me to go on stage and quiz interesting people. Still, I am delighted to have the chance to chair this conversation about the legacy of empire.

I have already read Sathnam Sanghera’s book Empireland in preparation, and now I’m reading Kehinde Andrews’ The New Age of Empire. I am accustomed to seeing how the British Empire (and others) echoes in how corruption, financial flows and more operate in the world today. These books have made me realize that is part of a far larger conversation, and I’m really looking forward to hearing what these two thinkers have to say.

See you next Wednesday,
Oliver

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Oliver Bullough

Oliver Bullough is an author and journalist from Wales, who specializes in writing about financial crime, often when it has links to the former Soviet Union. His most recent book is Moneyland, why thieves and crooks now rule the world and how to take it back, and he is currently trying to write another one despite lockdown.

@OliverBullough