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State’s Sewall on New Frontiers in Addressing Corruption

09 December 2014

U.S. Department of State
Remarks by Sarah Sewall
Under Secretary for Civilian Security, Democracy, and Human Rights
Carnegie Endowment for International Peace,
Washington, D.C.
December 9, 2014

New Frontiers in Understanding and Addressing Corruption
International Anti-Corruption Day

(As delivered)

International Anti-Corruption Day

Opening

Thank you very much for the kind introduction, Sarah. It is a pleasure to be here today.

Just eleven years ago, the UN General Assembly designated this calendar date as International Anti-Corruption Day.

International and national anti-corruption efforts have moved dramatically and have seen a lot of progress in a short time – particularly in the establishment of international norms. But we must do more.

Today, I’d like to explain why anti-corruption remains a priority – and a national security concern for the U.S. government – and to outline how we can combat corruption in a more tailored, integrated, and effective way.

I should also explain my own perspective is a bit unique. The “J” U/S handles policy and programs on issues such as terrorism, refugees, security sector reform, human rights, and preventing conflict. Part of what makes us, “J” different is our focus on how U.S. foreign policy affects people as much as we look at foreign policy as pertains to governments. And corruption is an issue that gravely affects global citizens, in addition to undermining the international economy, regional security and good governance. So our J perspective starts from the premise that corruption is a populist scourge, and that securing human rights and personal safety and opportunity for all necessarily entails combating corruption. The more I understand about the challenges that J bureaus and offices face in their work, the more clearly I see corruption as an endemic threat that weaves throughout what would otherwise be disparate efforts, eroding the trust, efficiency, and justice that healthy societies require.

We all know corruption is bad. I’ll disaggregate three different negative effects: 1) its impact on human development; 2) on economic vibrancy; and 3) on security. As the Under Secretary for Civilian Security, I will highlight insecurity as perhaps corruption’s most underappreciated feature (although one that Sarah Chayes is doing much to highlight).

The Problem of Corruption

Human Development and Human Rights Impact

When politicians steal public funds rather than spend them appropriately, schools go without books, patients go without medicine, merchants go without bridges and roads.

The African Union estimates that one-quarter of Africa’s GDP is lost every year due to corruption – dramatically increasing levels of poverty in an already heartbreakingly poor region.

In just the health sector, World Bank surveys show that in some countries up to 80 percent of non-salary funds never reach local facilities. Then, when crises like Ebola hit, there is little institutional capability to address it.

Graft frays the fabric of the social contract, undermining attempts by government to assert legitimacy or establish democracy.

Corruption is also the glue that holds many authoritarian regimes together, giving rulers the ability to divide spoils, and the opportunity to out the “dirt” on cronies when convenient or if they turn disloyal.

Corruption leaves average citizens vulnerable.

When their rights are effectively are up for sale, laws to protect people – to halt human trafficking, hate crimes, and gender-based violence – go unenforced.

We see this, for example, in the Democratic Republic of the Congo, where victims of crime, including sexual violence, have little access to the justice system and, even when they do, they often find that perpetrators are likely to simply “buy” their way out of prosecution. The U.S. government is supporting mobile courts in the DRC to make justice more accessible in rural areas, but this intervention will not be able to succeed if corruption in the court system persists.

Economic Impact

The impact of corruption on growth, competition, and innovation is similarly well documented.

When companies have to pay bribes to cut through red tape it actually incentivizes the creation of more red tape, slowing transaction times and raising business expenses.

In fact, the World Economic Forum estimates that around the world, corruption adds an average of up to 10% to the cost of doing business.

Corruption has a particularly harmful effect on the many American companies that play by the rules, supported by robust enforcement here at home.

When our businesses go to compete overseas, corruption robs them of a level playing field.

If a public procurement decision in Russia is made not on the basis of merit but on the basis of bribery, then our companies will either stay home or lose the bid.

That affects our economy and puts pressure on our businesses to cut corners.

It also means that the Russian consumer loses out – receiving a substandard product because the contractor spent overhead on a bribe instead of on workmanship. “Shared prosperity,” the goal of the international economic system in its truest form, requires a shared commitment to transparent rule-based economies that work in the best interest of citizens, the United States and our partners overseas.

Part of this commitment is about protecting our own financial systems from harboring stolen assets. Proceeds of corruption are often sheltered in banks or shell corporations in Western Europe and the U.S. These ill-gotten gains frequently are used to prop up unaccountable regimes or finance terrorism.

We are working with our partners, especially at the G20, to guarantee that our financial systems are not havens for stolen assets. It has become easier to trace how corruption erodes democracy and eats away at prosperity.

We now have several tools, such as the World Bank and UN measures of corruption’s impact on development, the U.S. State Department’s annual Human Rights Reports, NGOs like Transparency International that document corruption’s impact on freedom and accountability, and institutions like the OECD that quantify corruption’s impact on business.

But corruption has other impacts, perhaps more difficult to measure but no less insidious.

Security Impact

It turns out that corruption is even more dangerous than we thought.

Corruption alienates and angers citizens, which can cause them to lose faith in the state, or, worse, fuel insurgencies and violent extremism.

Examples abound. In Afghanistan, the Taliban continues to exploit public discontent with corruption to garner support.

In Iraq, disillusionment with the government – including its corruption – creates fertile soil for ISIL to exploit. Just last week, Iraqi Prime Minister al-Abadi discovered that 50,000 “ghost soldiers” were listed on the government payroll, costing Iraqis approximately $380 million a year.

Citizens feel betrayed by these scams, indirectly because their taxes and resources are enriching nominal “public servants” but also directly because they do not receive the security and protection they both finance and require.

Take the example of Nigeria, where corruption has hollowed out the national military, leaving soldiers underfed, underpaid, and unable to defend citizens against internal threats such as Boko Haram.

The cost is grave: In 2014 alone, Boko Haram has killed more than 4,000 people and displaced some 1.5 million. It has declared an Islamic Caliphate in northeast Nigeria and taken the reins of governance in some communities. While the United States is working with Nigerian partners to confront this threat and prevent atrocities,that work is much harder to do because of corruption’s corrosive effects on the military.

Transparency International has found that many countries have weak controls over defense procurement, risking similarly debilitating outcomes.

The challenge of corruption cuts deeply across the security sector. For example, countless police turn the other way at checkpoints, and customs officials turn the other way at borders – all in exchange for bribes. This paves the way for drug cartels, terrorists, and other international security threats.

Consider that in the wake of the Westgate attack in Kenya, police arrested and detained suspected Al Shabab terrorists. But according to Human Rights Watch, suspects could quickly buy their release by paying a bribe of approximately $100.

In this way, corruption can enable local threats that have broader implications for security around the globe.

Corruption also complicates post-conflict peacebuilding, because those who profited from the war economy are best placed to win political power and, through corruption, continue serving their narrow interests. Ukraine provides another illustration of how corruption can both increase instability risks and cripple the state’s ability to respond to those risks.

The Maidan Movement was driven in part by resentment of a kleptocratic regime parading around in democratic trappings. Corruption had drained service delivery, scared off investment, and crippled the justice system. Businesses and even foreign countries had for years bought and bribed their way into political influence over Ukrainian legislative and procurement decisions.

And as public frustration boiled, Russian interference escalated.

Security institutions that were needed to fend off Russian aggression struggled to mount an adequate defense. They had been weakened by years of graft, rendering them ineffective.

Nigeria and Ukraine are not just cautionary tales – they are wakeup calls for the international community. That is why our embassies in two dozen countries in central and Eastern Europe are currently drafting action plans for supporting and cooperating on anti-corruption reform in their host country.

Corruption is not just an affront to American values; Left unaddressed, corruption in distant lands can cut to the heart of our national security. Yet I’m unaware of any security organizations that systematically monitor corruption. The international community is only starting to grapple with the seriousness of corruption’s destabilizing security impact.

Preventing and Responding to Corruption

So that’s the disaggregation of three different impacts of corruption, and it’s clear that the challenge is extremely important. It’s also clear that addressing this challenge comprehensively is really tough. I think it’s worth underscoring both the range of tools that we have and some of the concrete impact that we can see as a result of our efforts.

At the State Department, our Bureau of International Narcotics and Law Enforcement works on corruption along with bureaus that handle economics, energy, and human rights, and together State collaborates with USAID, Treasury, the Department of Justice, Interior, and Commerce – each of which brings specialized tools to the table.

• We leverage international conventions, pressing governments to implement the commitments they have made to combatting corruption.

• We include anti-corruption provisions in free trade agreements and apply financial sanctions to protect U.S. markets from the stability and liability risks of harboring the proceeds of corruption.

• We enforce the Foreign Corrupt Practices Act, which since 2009 has generated around $3 billion in penalties and convictions against more than 50 individuals, including high-level executives.

• At the State Department, we use our visa sanction authority in a nonpolitical manner to deny entry to corrupt leaders. Recently, we denied visas to six Hungarian officials and their cronies due to corruption. This action also bolstered public concern, and on November 9th, the streets of Budapest filled with 10,000 protesters who called for the resignation of corrupt public officials.

• We provide at least $600 million dollars a year to build the capacity of foreign governments to combat corruption, largely through strengthening law enforcement mechanisms.

• We support independent civil society organizations so that they can press their governments to prevent and combat corruption, such as the Czech Republic, where 20 NGOs banded together to form an anti-corruption coalition, supported in part by a grant from the U.S. Embassy.

• The United States is co-chairing the G-20 Anti-Corruption Working Group with Turkey, in an effort to drive a “race to the top” on issues like beneficial ownership, which would require companies to identify the actual person who owns or controls them, in line with the President’s recent proposed legislation on beneficial ownership.

We are also proud to have helped launch the Open Government Partnership in September 2011, bringing global civil society and governments from 65 countries together to strengthen their internal, vertical relationships of accountability between governments and their citizenry at home.

• Two-thirds of these countries have included commitments to anti-corruption or whistleblower protection in the latest round of OGP National Action Plans, each of which were developed through a consultative process between governments and civil society.

• And today we are helping prevent corruption in the oil, gas, and mining sectors by supporting the Extractive Industries Transparency Initiative and implementing our own commitments domestically.

Our efforts have impact.

• We’ve supported the International Commission against Impunity in Guatemala, and three months ago, both the Director and Deputy Director of the Guatemalan Penitentiary System were arrested for receiving bribes in return for prisoner transfers. They later were charged with money laundering and corruption.

• In Nigeria and Sierra Leone, we are supporting civil society and government leaders to participate in civic code-a-thon events that have generated new open government tools, such as an infographic in Nigeria that clearly explained, in simple terms, the proposed federal budget.

• And in the country of Georgia, the government is following through on its OGP commitments to combat corruption by making political party financing transparent and developing an online system for government procurement.

These are just a few examples of the impact we are able to have. But given the complexity and entrenchment of corruption in many countries, the United States must become more focused, more creative, and more collaborative as we continue working to enhance our anti-corruption impact.

First, what does it mean to become more focused?

In the past year, the United States government has developed interagency mechanisms to foster better unity of effort across the different entities that are working on anti-corruption efforts so that we can come together to determine where we should be better prioritizing our anti-corruption resources toward countries where corruption poses a risk to U.S. interests, and where we are likely to have impact.

Applying this prioritized approach will require integrating a range of tools targeted at a range of actors – a comprehensive “soup-to-nuts” approach that hits enough nodes of corruption to generate real momentum for action.

For instance, in areas of Central America, one cannot just address police corruption without also looking at corruption in other elements of the justice system such as judges and prisons and even politics.

Otherwise, “islands of integrity” that we build up in the police force will quickly be washed away by the tide of corruption in other parts of the ecosystem.

Applying a comprehensive approach to focus countries means continuing to mainstream consideration of corruption into all of our development and security programming, so that what we don’t necessarily identify as anti-corruption efforts are nonetheless reinforcing efforts that go by the name of anti-corruption. This approach was first laid out in USAID’s 2005 Anticorruption Strategy. We can do more to better implement that.

In Mozambique, USAID’s health program is increasing access to clean water – and as an example of what it means to layer your anti-corruption efforts, they are simultaneously building up civil society by putting community groups in charge of governing the wells. While it does not guarantee that there cannot be corruption, residents are better equipped to deliver community goods.

We will continue pressing for anti-corruption synergies across our efforts, including expanding consideration of corruption in our security partnerships.

Second, what does it mean to adopt creative approaches to anti-corruption? First, you have to tailor them to the local context. You can’t just take best practices and drop them into point B because they worked in point A. You also need to emphasize anti-corruption law enforcement by working on the prevention pieces, so that you’re not just relying on after-the-fact prosecution.

So, as you think about what it means to prevent corrupt acts in the broader web of commerce and government, consider such questions as what would make a DMV employee decide not to demand “a little extra” in exchange for a driver’s license?

It might be streamlining the process of getting a license, so there are fewer discretionary transactions to be tampered with in the first place. Estonia has pioneered this model, developing e-governance tools that made government operations more transparent and accountable to civil society, business the media and, most importantly, Estonian citizens.

Or creativity might demand that public employees are adequately compensated for their work at the outset.

If they can make ends meet from their salaries, they are less likely to demand a bribe.

But boosting transparency remains the cornerstone of prevention - helping people understand what the actual rules are so that they cannot be misled between what is actually a real fee, and what is a bribe demanded on the spot.

In Nepal, a wiki platform supported by the NGO the Accountability Lab crowd-sources information on topics like how to get a birth certificate or driver’s license to help ensure that Nepalis can demand proper procedures as they enter into transactions, and that government employees know they will be held accountable if they break the rules.

Websites like I_Paid_A_Bribe.com go one step further – enabling citizens in India to shed light on first-hand experiences of corruption to help track graft at local agencies.

Simple, transparent, procedures have a dual benefit. Not only dothey make government more efficient, they restrict opportunities for corruption.

Third, way in which I think the U.S. government will continue to evolve its anti-corruption efforts is through partnerships, both inside and outside government.

Tackling corruption demands support from civil society as well as multilateral partners simply because the problem is so complex and the solutions must be so long term. Therefore even as we work to boost anti-corruption programming funds at State and USAID, we are exploring how to increase collaboration with the private sector and multilateral development banks to expand our impact.

Also, in the coming year we plan to launch experimental “Anti-Corruption University” – an initiative that will involve exchanges between our diplomats and universities and NGOs around the world.

Because ultimately, no one nation can do this work alone.

All in all, we have a diverse toolkit that we are striving to apply more strategically. Yet, the biggest factor in the success or failure of U.S. efforts remains something largely out of our control, and that is the extent to which foreign government officials choose to support increased accountability or work to block it.

In the end, it remains a question of political will. Vice President Biden recently asked the question why Plan Colombia worked. He concluded that it was not just because the United States invested $9 billion dollars in it - or because Colombia invested $36 billion dollars in it. More fundamentally, it was about the political will that Colombia invested in that process, which included more transparent and accountable governance.

Political will means that those brought up on anti-corruption charges are the biggest violators, not just the biggest political rivals. The success of anti-corruption efforts in countries like China depends on ensuring that these efforts do not become politicized.

The central role of political will to the anti-corruption fight explains why it is so critical now to identify and support political openings when they emerge.

New leaders elected on a platform of anti-corruption reform can change the tide if they make good on their commitments, such as President Ghani in Aghanistan, President Jokowi in Indonesia, Prime Minister Modi in India. We will assess whether or not their efforts in office will meet their campaign pledges to boldly address corruption.

We must accelerate our partnerships with these reform-minded leaders when these strategic windows of opportunity open up.

The United States cannot create or control reformist leadership, but we can be ready to support it on behalf of people whose lives will be profoundly affected by the restoration of trust, efficiency, and justice.

Conclusion

Since the establishment of International Anti-Corruption Day in 2003, many international fora have emerged and many commitments have been made to fight graft.

The UN Convention Against Corruption now encompasses 173 countries.

Regional bodies like the African Union have affirmed the UN’s standards in conventions of their own.

In the Americas, the OAS’ peer review mechanism for the world’s first anti-corruption convention, the Inter American Convention Against Corruption, is now well regarded and respected.

Indeed, we have near-universal consensus on the norms for how governments should control corruption.

That is a very important step.

But it is easy to become self-congratulatory about laws and words.

The problem before us is addressing the implementation gap in applying these.

The impact of corruption on our own national security and the security of civilians around the world calls us to act. The United States will work with likeminded partners toward a more focused, creative, and collaborative approach to combating corruption.

I’d like to end with an adage from Liberia that has actually emerged in response to the description of collective action against corruption, and it sums up the international challenge well:

"One straw of a broom can easily snap when trying to clean up the dirt; but when all the straws of the broom work together, we can clean the house."

Thank you for being here. I’ll now turn to Sarah Chayes and we can open the floor up for questions.