The Urgency of Fighting Corruption Challenges to Our Freedom

Talk to international visitors in the United States as guests of the U.S. Department of State
Frank Vogl
April 9, 2024.

“Power corrupts, absolute power corrupts absolutely.”

Oligarchs, crime bosses, financial “enablers,” powerful politicians, elite influencers – once they see themselves above the law, then corruption so often results.

To a considerable degree, academics and lawyers have tended to focus a good deal of their attention on corruption in the affairs of government and public officials, influenced no doubt by the famed dictum by Lord Acton, a 19th century British politician, who stated that: "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."

These approaches to define corruption are too narrow. To look at the issue solely in legalistic terms, - for example, the U.S. Supreme court has defined the issue so narrowly that it requires hard evidence of an explicit reward in return for a bribe - it calls for what is known as a quid pro quo.

 The fact is that when many people say they do not trust a major institution, public or private or non-profit, or that they do not trust a leading politicians or prominent business person, then frequently they base their view on a suspicion that there is corruption. The perspective may be vague and general and difficult to pin down, yet for many people there is a sense that those wielding power may be more inclined to serve themselves than to serve the public at large.

 Public trust in government is a crucial issue. Moreover, beyond such considerations and legal definitions, corruption is a matter of morality as well. Citizens understand that even if actions under their national laws, or under the ways in which the courts interpret such laws, may be deemed to be legal - they know that the actions are fundamentally wrong. They are immoral. They are unethical.

 Today, I want to talk about corruption in the context of critical geo-political issues and in terms of basic values of freedom, morality, honesty, integrity and human rights.

Pathways to Freedom

Pathways to Freredom by artist Julia Vogl, www.JuliaVogl.com photo by David Lally

 My daughter, the artist Julia Vogl, interviewed hundreds of people in Boston about their views of freedom and then constructed this massive installation on Boston Common, the central park of the city, which she called Pathways to Freedom.

 The title is a challenge to all of us - more so today than at any time since the end of World War Two.

In many parts of the world, caught in violence and conflict, basic issues of security are paramount over time, I believe, such security demands freedom of movement, freedom of assembly, freedom of speech.

Fighting oppression has a long history. In 1770, Paul Revere adopted this picture - it became a famous poster - depicting the massacre by the British of people in Boston - it was a trigger for the American war of independence - a fight for freedom from a corrupt imperial power.

 The same artistic idea was used 38 years later by the Spanish artist Francisco de Goya to portray the massacre of his fellow Spanish citizens by the invading French -  and - we find an highly similar same scene 60 years later when Eduard Manet portrays the execution of Napoleon 3rd’s generals in Mexico as the Mexican nationalists sought to free themselves from the imperial French governors.

 Ladies and gentlemen.

 Addressing the House of Commons on February 24, 2022, then British Prime Minister Boris Johnson stated: “Shortly after 4.00 a.m. this morning, I spoke to President Zelenskyy of Ukraine as the first missiles struck his beautiful and innocent country and its brave people.”

 Russia’s initial attack, followed by more than two years of relentless bombardment, has highlighted in the brightest of colors one of the gravest challenges of our time – the threats to our security and to our democracy posed by authoritarian governments all of which today are corrupt.

 Hundreds of thousands of people have died over the last 26 months in Russia and in Ukraine. Many millions of Ukrainian citizens have been uprooted and become displaced persons. Thousands of Russians have fled their country.

 The Russian regime has long repressed its citizens, but since the invasion of Ukraine the situation has become far worse. Investigative reporting in Russia no longer exists. Civil society organizations that sought to expose corruption have disappeared. Arbitrary arrests are commonplace, even of innocent people who placed flowers in public places to mark the death of Alexei Navalny. 

 His murder is a wake-up call not only to the unlimited brutality of Putin, but to the urgent need for Western governments to do far more to protect activists and journalists across so many nations run by authoritarians.

 The terrible consequences of kleptocracy have for too long been sidelined in public debate because of an under-appreciation of its threats to human rights, to democracy, and to international security. 

 The danger is ever-present that the murder of Navalny, and, for example, that of Jamal Khashoggi, by violent kleptocratic dictatorships, such as Russia and Saudi Arabia, fail to have a lasting influence on Western foreign policies – ones that need to give far greater priority to issues of safeguarding human rights and countering corruption.

 Kleptocracy’s Global Reach

 More than one-half of the world’s population today live under authoritarianism, or quasi-authoritarian rule. That is approximately four billion people who lack the freedoms that we so often take for granted.

 We stand in awe of the Ukrainian people as each day they suffer enormous hardship and yet continue to be unwavering in their fight for liberty. So too, consider for example, the valiant women who protested for months in the streets of Iran’s cities who craved basic freedoms, including the freedom to hold their government to account.

 I cannot speak for each of you. You come from many countries with very different regimes and approaches to freedom. My belief is that the fight by the people of Ukraine should be our fight because kleptocracy knows no national boundaries in the 21st century.

Publicly unaccountable governments are corrupt governments. They govern dozens of nations – from Azerbaijan through the alphabet to Venezuela and Zimbabwe. Never before in modern times have so few people in so many countries stolen so much so swiftly from their citizens. Look at what has happened in Syria.

 The Assad regime has destroyed half of the country, hurled millions of people into desperate refugee situations, developed an economy that depends on Iran, Russia and drugs - state capture here has created enormous human misery and great wealth for the ruling family.

Governments that are not accountable to their citizens - like Assad’s in Syria - pose enormous dangers to both their own citizens, who they repress, and across their borders.  They have a long track record of aggression against neighboring countries, of supporting civil wars and terrorism.

 Today, we see Russia, China, and Iran, strive to undermine Western democracy, seek to steal technology and work to bolster autocratic regimes in developing countries. And a common feature time and time again is corruption.

 “A scar disfiguring the era in which we live”

We live in a world where citizens either enjoy the rule of law, where there is fairness and honesty in the judiciary, or they live under the hammer of tyranny. In his recent memoir, “1000 Years of Joys and Sorrows,” Chinese artist Ai Weiwei writes: “When administrative power is unlimited, when the judiciary is subject to no scrutiny when information is shielded from public view, society is bound to operate in the absence of justice and morality. Corruption of the judiciary is the public face of a morally bankrupt body politic, a scar disfiguring the era in which we live.”

 In this slide you first see the results of an earthquake in China, but it could be in Turkey, in Mexico and in so many other countries where bribes by builders of government officials have allowed buildings to be erected that are not true to safety codes and that have collapsed, killing thousands of people, as a result. You also see an art installation by artist Ai Weiwei called “Straight” using metal rods from a school that collapsed in the earthquake of 2008 in Sechuan where  5,000 children died, and 15,000 were injured.

Corruption kills.

Why?  Because all authoritarian regimes have captured the institutions of justice. They have placed themselves above the law.

 And by this means they place their cronies and relatives in positions of power, provide opportunities to steal state funds, and to secure the loyalty and support of top law enforcement, military and business leaders, while accumulating staggering wealth for themselves. The abuse of public office for personal benefit is the definition of corruption.

 Hundreds of millions of people in the poorer countries of the world are daily subjected to extortion. Petty corruption abounds. The poor are extorted by the local police; they must pay bribes to get their children into schools and get the sick into clinics and secure decent housing. Many people, primarily women, are victims of Sextortion – when they cannot pay bribes with cash, then they are extorted to pay with sex.

 Corruption’s Victims

In no country is petty corruption rampant where grand corruption is not present. Grand corruption is the wholesale theft of state assets by government leaders and their associates.  It involves outright theft of tax revenues, huge kick-backs on public procurement contracts, plundering state-owned enterprises, and misusing law enforcement to extort cash from the private sector.

 The stolen funds are used by leaders to boost the incomes of subordinate politicians and public officials. These loyalty bribes must be constantly paid and that drives the leaders to constantly divert more and more public funds from legitimate government programs, such as basic public services. The poor are always the victims. Corruption is never a victimless crime.

Securing the loyalty of supporters gives senior officials enormous scope to rob and to plunder. Health ministers use their budgets to buy cheap counterfeit medicines from China, or out-of-date medicines. Generals sell weapons on the black market to rogue foreign groups, including terrorist organizations. Government infrastructure projects are a huge source of dirty income, from rigged bidding to inflated contracts.

 Securing Dirty Cash

Those who steal on a grand scale are acutely sensitive to the risk that should they ever lose power then their successors will confiscate their wealth. They go to great lengths to ensure that their wealth resides outside of their countries and their favored destinations for their funds are the world’s largest and most open capital markets, notably the United States and Western Europe. They use shell holding companies in Cyprus, Malta, Cayman Islands, British Virgin Islands and other offshore places to hide their illicit transactions.

 As international media investigations have shown, such as the Panama Papers, to ensure that their funds are transferred secretly and then safely invested the kleptocrats and their cronies, including the oligarchs, need skilled Western enablers.  These are bankers, lawyers, auditors, real estate brokers, art and antiquities dealers, and financial consultants.

 The enablers are on Wall Street, in the City of London, in Zurich, and in all of the key Western financial capitals, as well as in Dubai and Singapore.  They aid and abet enormous transnational criminal activity.  Indeed, the complicity of the enablers on our shores with corrupt regimes aboard highlights the universal nature of grand corruption today. It is a vast, threatening global conspiracy driven by greed. 

 We are talking about upwards of three trillion dollars of dirty cash flowing annually through the world’s financial system. I believe a conservative estimate of well over $600 billion is laundered into U.S. investments alone every year – more than the total annual sales of Walmart, the world’s largest retailer.

 For example, according to a Justice Department filing in mid-December 2022, over five years the Danske Bank of Denmark transferred over $160 billion into four U.S. banks from its branch based in Estonia for mostly Russian clients. We are talking about astronomical numbers.

 For example, the U.N. Conference on Trade and Development has estimated that illicit flows of cash from sub-Saharan Africa exceed $85 billion – close to double the total amount of foreign aid flowing into the region.

 Bankers have no shame

 Over the last 20 years, more major global banks have been investigated and forced to settle large-scale money laundering and corruption cases with the U.S. Justice Department than ever before. The history of cases under the U.S. Foreign Corrupt Practices Act underscores the greed and shamelessness of too many bankers.

 When the leaders of Sudan were committing genocide in Darfur almost 20 years ago they were transferring $6 billion into Western markets through the Geneva branch of France’s largest bank, BNP-Paribas. When JP Morgan Chase and Deutsche Bank wanted to win governmental finance contracts in China so they put the children of senior Chinese officials on their payrolls. When the President of Malaysia and his cronies wanted to steal vast sums, so they conspired with Goldman Sachs that issued $6 billion of international bonds – around $4.5 billion was stolen.

The bankers are by no means alone. The enablers daily enrich themselves by pursuing secretive dealings for their kleptocratic clients. They use every loophole in U.S. laws and regulations. They take full advantage of Switzerland’s bank secrecy law. They secure opacity for their dealings from the governments of the UAE, Cyprus, Malta, Austria and Luxembourg, and many more.   If we want to reduce the powers of the kleptocrats, then we must sanction them abroad, prosecute their enablers here at home, and support civil society pro-democracy forces across the world.  

 Pursuing Enforcement Reform

 A fundamental review is essential of Western trading and financial international policies. Let us start with trade.

 Saudi Arabia, which sent a woman to prison for 45 years for Tweeting anti-government comments, and that butchered journalist Jamal Khashoggi, continues to be allowed to buy American arms, as is the case with the United Arab Emirates. The U.S. seeks to cultivate diplomatic and trading relationships with both these countries despite the fact that both have conspired with Russia to curb global oil supplies to secure very high prices.  Moreover, Russians fearing sanctions have found refuge for themselves and their wealth in the UAE.

Then, the U.S. has supplied arms to Azerbaijan, even though it imprisons opponents, including journalists, and has long been engaged in vast money laundering into the UK.  Germany turned a blind eye for years to Russia’s domestic oppression as it became totally dependent on Russian oil and gas – it was a huge error. It failed to understand that governments run by tyrants are unreliable business partners.

More fundamentally, you need to ask what happens to our respect for human rights when we place securing trade deals ahead of integrity and our basic values?  

 The answer is not to cut off all trade with corrupt regimes, which would be absurd – rather there needs to be far greater consideration of core issues of national security and human rights when Western governments are involved in trade with regimes that do us harm today, or could well do so in the future. To achieve this there should be far greater all-of-government coordination to ensure that the Commerce Department does not approve a deal that the State Department might question and that USAID would view as directly counter to its goals.

 Klepto-Debt

It is time to get tough in the arena of international finance. In recent years too many countries borrowed far more cash than they could manage. Some of the cash was stolen by top officials. Some of the debt came from China through non-transparent deals – China is now the largest official lender to sub-Saharan Africa. The result is that more countries are now in default than ever before on their foreign debts or on the brink of defaulting – from Argentina to Zambia, from Lebanon to Sri Lanka.

I call it klepto-debt. The debtor governments turn to the International Monetary Fund and it responds with bail-out cash. It recently did a bail-out deal providing more than $8 billion to Egypt whose military has consistently been plundering national finances and according to the Department of State has anywhere between 20,000 and 60,000 political prisoners. The European Union provided another $8 billion.

These hard cash inflows have come at a time when the Cairo regime is desperately short of foreign exchange and when it is highlighting its strategic Middle East diplomatic role to Western donors as the war in Gaza rages. Time and again these donors shunt considerations of human rights and corruption aside when providing foreign aid.

Or look at Pakistan which has been felled by massive floods, terrorism, decades of corrupt political leadership, and frequent financial crises – right now it is again on the verge of bankruptcy. The political system is in chaos with the most popular national leader in jail. This is a country run by a military establishment that undermined U.S. security efforts in Afghanistan over two decades. Nevertheless, it is continually securing funds from the IMF – the organizations where the U.S. has the largest shareholding and which sees economic stability in Pakistan as a vital strategic priority.

 Good Administration

 Western governments, if they seek to secure democracy, need to heed the maxim of Alexander Hamilton who wrote in the Federalist Papers, “Good administration is the key to good government.”

This demands a major ramp-up of enforcement on both sides of the Atlantic of existing anti-money laundering and anti-corruption laws and regulations. The world must tell Putin that his murder of Navalny and his jailing of so many brave activists is a crime that will be punished. And this message needs to be bluntly distributed by Western diplomats to all governments that oppress their citizens.

 Sanctions Need to Work

When Boris Johnson spoke to the House of Commons as Russia’s launched its attack against Ukraine, he, like other world leaders, announced a large package of economic sanctions on Russia and on the oligarchs. He declared with a Churchillian flourish: “We will continue on a remorseless mission to squeeze Russia from the global economy piece by piece, day by day and week by week.”

 The sanctions have largely failed. Russia’s economy is not in decline. Even the IMF anticipated around 2.6 percent Russian GDP growth this year.

The Russians, aided by China, India, Turkey and many other countries, have circumvented many of the economic sanctions - most importantly those that relate to Russia’s energy exports. For example, Libya is paying a significant role in funneling sanctioned Russian oil into Europe, according to a joint Bloomberg-The Sentry investigation.

Austrian and Italian banks are still highly active in Russia, as are a host of Western corporations, according to a study last year by scholars at Yale University’s School of Management. While some mansions and yachts belonging to oligarchs have been seized, there have been few asset confiscations, and even fewer criminal charges brought against oligarchs for sanction violations. It is high time that far more resources were devoted by Western governments into enforcing sanctions and investigating why Russia is so successful in evading them.

 Democracy at Risk

 It was encouraging that President Biden, who hosted the first Summit for Democracy in December 2021 should have so clearly made the point: “Fighting corruption is not just good governance. It is self-defense. It is patriotism, and it is essential for the preservation of our democracy and our future.”

The oft repeated grand statements by national leaders in support of democracy has an increasingly hollow ring when Western funds aid flow into the coffers of kleptocratic regimes, when sanctions on Russia seem to be largely failing despite Navalny’s murder and when the U.S. Congress fails to provide essential aid to Ukraine.

As a report by the Economist Intelligence Unit stressed: “Democracy is a moral system as well as a system of government, and it is moral in the sense that it expresses an attitude towards people. The basic moral premise of democracy is the idea that all people are equal. Democracy is made for people, not the people for democracy.”

If we value our democracy and our security then our policies and our diplomacy need to be still more tied to our core values. In her memoir, titled “Lessons from the Edge,” Marie Yovanovitch, the brave former U.S. Ambassador to Ukraine wrote: “In principle, our values and our interests are nowhere more aligned than when it comes to fighting corruption. When leaders view their positions in government as sinecures serving their personal interests rather than those of their constituents, it not only contravenes our values, it also goes against our interests, our long-term interests.”

Alexei Navalny, who was murdered in a Russian prison. See my article.

Promoting Freedom

Across the world there are hundreds of journalists and civil society activists in Russian, Chinese, Belarussian, Egyptian, Iranian and Turkish prisons, or daily harassed by their governments.  They are committed to the cause of anti-corruption as a vital key to securing freedom for all and the dignity of every individual. We dare never forget those who have been murdered, like Navalny and Nemtsov in Russia, Jamal Khashoggi in Said Arabia, and so many more who spoke truth to power knowing the risks they were taking - they did so in a sense of patriotism and in a fight for freedom.

 The fight against corruption is not an end in itself. It is central to supporting human rights, democracy, and security. It is a war to promote a world where every individual can live in dignity and look forward to freedom and prosperity for their children. This is the fundamental importance of why Ukraine dare not be defeated and why across the world the gathering momentum of kleptocracy must be reversed.

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