Corruption has its impact on the individuals, society and economic development on account of negative effects of biased decision-making on activities relating to major public works, FDI and environment in which all economic factors operate, besides affecting the public trust in the system leading to lack of participation in the society.
The UN Convention against Corruption sets out the types of corrupt criminal behaviour that signatory states are obliged or recommended to introduce into their legal systems. If a person promises to exert an improper influence over the decision-making process of a public official or private sector actor in return for an undue advantage, or solicits a bribe for exercise of a particular function in a particular way, it could be termed corruption. In addition, if the officials cannot explain their wealth in relation to the income they lawfully earn from the government or from the private sources, it could be attributed to bribe or embezzlement, misappropriation, concealment of property, money laundering or false accounting etc, as detected.
All these corrupt behaviours could also occur in the private sector. Corruption is often referred with reference to its scale, such as Mega or Small corruption, individual or organisational or systemic one that has been permeated in the foundation of a society, not easily traceable. Corruption can grow in a particular environment but mostly thrives in the case of weak governance structures and processes and absence of requisite legal and institutional framework for identifying, preventing and avoiding endemic corruption,
Corruption is not a new phenomenon. In the global environment when art of economic activities has been transformed into dedicated national forces and well-connected business houses and IT structures facilitating quick and comprehensive trade and investment activities in comparatively larger volumes. In addition, some other factors such as four pre-conditions that facilitate corruption. They include existence of incentives within a system that encourages corrupt activities, availability of multiple opportunities for personal enrichment that increases the temptation, limited risks of exposure and punishment and ineffective controls.
There is some element of corrupt practices in a number of societies, the scale being different from country to country. The global financial crisis 2008 had various facets. While there may be numerous causes of its spread but in terms of its effects, the greed and corruption in the financial sector lost the important trust of the people around the world in the broad financial system of the US. Starting from packaging billions of dollars' worth of not very transparent mortgages into bonds for subsequent sale by managing a Triple-A status from the rating agencies, the crime continues with forging of documents to foreclose fraudulently on countless homeowners.
But as the New York Times reported recently, "surprising aspect of Libor scandal... is for some of the world's leading banks to try to manipulate one of the most important interest rates in contemporary finance are clearly egregious. Americans are losing trust in many institutions....." It is generally believed both in the developed as well as developing world that corruption has become more prevalent over the years; various indicators also suggest so. European debt crisis is partially attributed to objectionable attitude of certain elements. Consequent pressures on the markets plummeted the development process and respective economies are still not on tract despite huge efforts made by the experts.
Transparency International's Corruption Perceptions Index ranks the countries as least and most corrupt. Status of developed countries is coming down. The World Bank also report about weakening of corruption controls. In addition to financial sector, overall corporate sector has grown weaker over years in terms of conduct of business and management of accounts and taxation. Developing countries are more prone although in terms of scale, developed ones' may not be better off.
Endemic nature of corruption has sought the attention of all towards it, identifying the causes and focusing on the measures to control. Efforts at global level and promotion of institutional mechanism such as co-operation amongst the countries and exchange of information and other measures and International Anti-Corruption Day bears ample testimony to this fact.
At individual country levels, creation of anti-corruption establishments and formulation of laws and devising of ways and means to prevent corruption are visible everywhere, supported by bilateral and multilateral agreements/arrangements to assist and to exchange the information that may supplant the domestic effort?
Amongst the major types, international white collar crime has assumed enormous proportions. It can be divided into (1) substantive white collar crimes, (2) procedural aspects of white collar crimes, (3) the role of international organisations, and (4) the role of non-governmental organisations. It has more economic and dynamic nature and keeps on changing its facets in response to economic changes and factors like advance complex business processes, led by ICT enabling e-commerce, cyber banking and innovative cyber financial products etc that are adapted by entrepreneurs in pursuit of legitimate goals that at times prompted the use of illegitimate means not ordinarily visible. Transnational organised crimes have degenerated into national security threats compelling the countries to implement various initiatives to combat those threats.
Transnational criminals not only diversify their crimes but also the instrumentalitizes countries, markets and networks. Growth is attributable to globalisation & trade liberalisation and emerging new technologies as important instruments to use corrupt practices for movement of money, goods, services, and people. The WTO's complex processes and trade liberalisation, extension of FTAs and mala-fide gets facilitated through absence of comprehensive enforcement mechanisms in the international trade and investment regimes and so do the governmental networks through facilitate while making of agreements.
Corruption indices have assumed greater significance for quite some time and are considered a useful tool to draw media attention to the problem effectively. Given the many types of corruption indicators, produced by various segments of the civil society, international organisations and governments for different purposes, it is important to know the limitations and constraints, particularly while formulating a policy or designing anti-corruption programmes.
They signify the measurement tools also that may be used to assess the need for anti-corruption intervention, Fraud and corruption are impossible to measure precisely as perpetrators understandably try to hide the dirty deeds from the public view. Globally, it is reported that around one Trillion US dollar is the estimated amount related to corrupt practices, particularly tax evasion.
The amount of actual (accumulated) investments generated out of corrupt practices may be much higher. In our national context, although there has been no organised effort towards estimating the volumes pertaining to corruption but recent survey by Transparency International has placed Pakistan at serial no. 33 thereby indicating us as one of the most corrupt nations. The World Bank once estimated tax loss of Rs 600 billion. Recent reports by some agencies talk of estimated corruption of seven billion daily (basis though not indicated).
Corruption is continuously spreading due to various reasons, not fully known in respect of specific countries, circumstances being different. A few plausible explanations include defective socio-economic structure, rising income inequalities, growing role of corporate money in political campaigns, lack of sufficient legal structure and enabling environment to ensure accountability.
Other factors include enforcement of laws and regulations, political and economic dynamics that increase both the scope of wrongdoing and the incentives for the concerned to bend, or breaking the rules at their own free will, without chances of detection or prosecution in case they are apprehended.
Corrupt practices in developing countries evident from different sort of scandals of domestic and international levels as well as in developed countries (with still higher volumes and international character such as banking crisis 2008 involving financial contracts worth hundreds of billions of dollars, tilt of economic stimulus to more politicised sectors of the economy, adequate disclosure by corporate giants and daring resort to manipulation of Libor quite recently).
Bigger companies, with more complex and big balance sheets, have more places to hide the assets either within, in the accounts of subsidiaries or transfer of funds to Tax Havens that are prospering despite a hue and cry against corruption everywhere. Investments in banks and real estates abroad are most common tool in the developing countries. Although, it may not be easy to fathom the broader social implications of such corporate and individual rather societal wrongdoing, such acts essentially exemplify the critical nature of corruption in the globe, crying for effective preventive and enforcement measures.
In order to effectively combat corruption within a country and in today's global context and advent of new transnational crimes, one has to bring about significant transformations in national legal systems in collaboration with others. Individual countries have enacted a substantial amount of new legislation and developed various mechanisms and initiatives to combat new transnational crimes such as money laundering, cybercrime, intellectual property and international trade and tax related crimes, terrorism, and other organised crime. However, complex crimes like cybercrime exemplify the limitations of the legal systems to keep pace with the tremendous and rapid continuous changes in technology that have enabled criminals to perpetrate diverse crimes without risk of exposure of their identities.
In the context of growing international trade, intellectual property and counterfeiting, trade valuation and classification crimes have grown tremendously in recent decades. Criminals counterfeit everything from software to cosmetics and clothing; still they have been criminalized of late (and still difficult to enforce). Even money laundering that is an old one but the governments and the international community have only been criminalized them since the mid-1980s.
Tax-related crimes are of much higher significance being the root-cause of generation of funds from corrupt practices. International community has achieved considerable progress in tax and other enforcement co-operation for many years through exchange of information provisions within income tax treaties and exchange of information agreements, developed multilateral conventions, such as the 1983 Council of Europe/the OECD Convention on Mutual Administrative Assistance in Tax Matters; the OECD issued its harmful tax competition initiative with a list of tax havens that did not agree to publicly commit to bring their practices into compliance; the Financial Stability Board (FSB) issued its report on offshore financial centres, classifying them into three levels of compliance with international standards; and the Financial Action Task Force on Anti-Money Laundering (FATF) issued its list of 15 non-complying countries. Many other measures have also been adopted.
As a matter of fact, the relevant conventions require a broad range of international enforcement co-operation efforts, including evidence gathering and extradition, and also suggest a range of more customised bilateral co-operation agreements to identify the fraud and the perpetrators thereof. An all-embracing effort is to be made instead of focusing only on corruption in business. The prominent avenues of corruption exist in government. A successful anti-corruption policy would be one that sets the scope properly instead of working on few traditional modes of corruption, adheres to the principle of addressing both the symptoms and the root causes of corruption, and takes comprehensive measures to rectify both, combining punishment with prevention while focusing on the latter. Besides, the government should not waste vastly more money on robbing Peter to pay Paul than business does.
Addressing corruption
The work relating to corruption envisages prevention and enforcement. Ordinarily it is felt that an anti-corruption drive is restricted to punishing those involved in corruption. Prosecution of those indulging in corrupt practices may create the required deterrence for zero-tolerance across the board. However, there is still a need to draw a holistic approach that goes beyond criminalization and prosecution. But simultaneously, tone should focus on prevention too by developing transparent and accountable systems of governance supported by civil society and the media for improvement in public integrity, personal ethics of public and private officials and other concerned and ultimate (gradual) transformation of society through challenging the social norms and other elements that encourage corruption with the help of effective measurement tools to assess the need for anti-corruption interventions and evaluate their success.
Corruption is a socio-historical phenomenon, an inveterate global ailment and has grown into an issue of great concern to the general public. There is thus a need to broaden the scope of activities of the related agencies to prevent corruption at the weaker sources and gradually build a long-term mechanism with the help of public that can help educate and prepare for prevention of corruption. The usual mechanism applied for this purpose includes real political will within the country itself to drive reforms for prevention of corruption in public/private sectors, asset recovery after proper investigation and international co-operation to develop a joint strategy in view of strong socio-economic relationship between the countries.
There is a need to contextualize the matter of control over corruption. For this purpose:
-- Proper strategy should be developed to combat corrupt activities that may include the sharing of intelligence, exchange of information, facilitation strategy and monitoring of implementation.
-- Scope should be expanded by including all business transactions pertaining to individuals and institutions of private/public sectors, tax-related crimes involving imports, exports, asset building, including accounting and book keeping, money laundering, securities and possible outcomes of sources such as foreign bank accounts, real estate investments and other asset building within the country and abroad.
-- Preventive measures may include promoting integrity, honesty and responsibility amongst government officials, development of co-ordinated anti-corruption policies and their effective implementation involving the civil society also. Existence of an effective body, with adequate and modern legal and administrative structure with enabling environment along with operational independence.
The goals of preventive measures should be to strengthen the systems for recruitment, retention, capacity building and promotion of employees, promoting the transparent code of conduct, appropriate procurement system based on transparency and competition and an objective criteria for decision-making that affect prevention of corruption.
The private sector may also be allowed to take preventive measures and allow participation of individuals and groups outside the public sector such as civil society, NGOs and community-based organisations to involve in the proposed measures.
-- The other important measures may include the bilateral and international co-operation through necessary agreements for extradition, exchange of information, allowing authorities to use evidence including cover or other operations for valid purposes. Monitoring to see the status of implementation and facilitation of other obligations under valid agreements and through other fora like international chambers of commerce and industry and NGOs, etc, is equally important.
Technical assistance from IFIs and the UN conventions, etc, can be sought for training of officials in investigation and prosecution in corruption related systems and processes. Institutions like the World Bank and the IMF that have huge funds at their disposal and have transparent rules for disbursement and procurement that could be used in conjunction with domestic rules and regulations to prevent corruption in procurement and disbursement of public funds.
-- As regards Enforcement, there is a need to develop and construct international enforcement regime in which international institutions affect collaboration amongst states by defining international relationship with the help of explicit principles, norms, rules and decision making procedures. The issues, solutions, , anti-money laundering and financing matters solutions, tax avoidance and anti-corruption measures can be mutually undertaken to build enforcement schemes against transnational crimes. Even establishment of Financial Intelligence Units has also been resorted to by certain countries to develop regulatory regime.
-- International Enforcement Networks have been identified and used to build trust and relationship for regular flow of information and use of linkage to enforce decisions from related governments, state-to-state co-operation and global governance for capacity building and implementation. Task forces like Financial Action Task Force and other mechanisms developed under the auspices of FTAs, the Asean, Nasfta, the EU are now visible in international regulatory regimes and international enforcement networks and can be utilised for direct communications instead of usual bureaucratic channels that cause delays.
-- As per chapter-5 of the UN Convention, Return of assets should be ensured by invoking the provisions of bilateral co-operation and allow civil action through courts to establish the title of the proper that has been acquired through undisclosed/unexplained sources. International co-operation agreements may also be invoked for this purpose.
-- Role of civil society and NGOs is very important. It has been used successfully in various countries.
Corruption has been institutionalised and is endemic in developing countries. Facts are stated frequently by various institutions that hardly show any respite in corrupt practices. Corruption appears to have degenerated into a plague that can hardly be corrected or removed through existing arrangements.
International developments regarding white collar crimes are positive and favourable environment can be used by the countries like Pakistan to prepare an effective framework for prevention and enforcement of anti-corruption strategy. For this purpose, government can seek necessary support at various levels and from different sources including international institutions for building a comprehensive Anti-Corruption system for the country. International agreements and conventions can be utilised in building a state-of-the-art system that could be effectively used for bringing back the precious foreign currency worth billions of dollars in foreign banks and other ill-gotten assets.
Any innovative scheme implemented by a properly created organisation and with the support of necessary deterrence to be created on basis of reliable data about the concealed assets can help achieve the desired goals of financial stability, growth and establishment of a just society that could help build an economically independent Pakistan carrying a soft international image.