CORNERING THE KLEPTOCRATS

Tuesday, March 31, 2009
BY FCPA

The United States fights foreign kleptocrats through Proclamation 7750, by denying them and their families U.S. visas. And through Section 314(a) of the Patriot Act, which it can use to reach out to more than 25,000 financial institutions to find accounts and transactions of anyone who may be involved in laundering kleptocratic assets. But there's nothing the United States can do on its own -- or even with its G-20 allies -- to turn back kleptocracy. Only a truly global program with real teeth can do that. And surprisingly, the framework for it is already in place.

The International Criminal Court (ICC), with its seat in The Hague, came into existence on July 1, 2002. It was created by a treaty called the Rome Statute (available here), which now has 108 State Parties. The ICC is a permanent international criminal court, with the mission to "help end impunity for the perpetrators of the most serious crimes of concern to the international community." The Court isn't part of the United Nations; its funding comes from State Parties, voluntary contributions from governments, NGOs, individuals and corporations.

Under the Rome Statute, the ICC Prosecutor can launch investigations after a referral from any State Party or from the United Nations Security Council. The Prosecutor can also initiate investigations by its own motion. So far, three State Parties -- Uganda, the Democratic Republic of the Congo, and the Central African Republic -- have referred to the Court situations occurring on their territories. And the Security Council referred the crisis in Darfur, Sudan -- a non‐State Party. That resulted in an ICC arrest warrant being issued this month for Sudan's president, Omar Hassan Ahmad Al Bashir, for war crimes and crimes against humanity. It was the first time the ICC had issued an arrest warrant for a sitting head of state.

The Court hasn't been used against kleptocracy, and the Rome Statute as written and currently interpreted might not cover it. But commentators, academics and activists are pressing the case for change.

Law professor and scholar Sonja B. Starr, who has worked inside other international tribunals, argued in a 2007 Harvard Law School working paper (available from SSRN here) that the international prosecution of grand corruption is needed and could be effective. She said that "on average, the richer a country is in natural resources, the poorer most of its citizens are likely to be. In many of those countries rich in oil, diamonds, and gold, most of the population lives in abject poverty, lacking in the most basic health, sanitation, and educational services. Meanwhile, government officials accumulate fabulous personal wealth, as billions of dollars vanish from the state’s coffers. . . The consequence is extreme poverty, and extreme poverty kills. Angola’s life expectancy, for instance, is 36.1 years; one-third of all children die before age five."

But, she said, ICC prosecutions might be the answer. Certainly they would disrupt on-going patterns of grand corruption. Arresting kleptocrats is one way; another is tracing and freezing their assets, a remedy well within the ICC's authority and ability to carry out. Even if the defendants could somehow evade arrest and trial, at least the stolen money that's been frozen couldn't be used to keep a corrupt regime in power or destabilize the region. And, she said, with convictions the ICC could order asset forfeitures, resulting in possible recoveries of huge amounts of looted national wealth. She also argued that referring cases to the ICC would increase transparency and accountability, making it harder for kleptocrats to extract bribes from international companies or use financial institutions to move or hide ill-gotten assets.

Father Gabriel Dolan of Nairobi's Catholic Justice and Peace Commission sees all around him the reasons why kleptocracy is a crime against humanity. He too thinks it should be prosecuted by the ICC:

When families spend their lives in 10 x 10 feet rooms and take three weeks to raise funds to bury their loved ones; when your neighbors are deprived of antiretroviral treatment (ART) because of unaccounted billions from the Global Fund for Aids; when casual workers earn Sh300 [$3.75] for 14-hour days and spend two bob to watch the evening news relay how the grand coalition has robbed them today, then you know that grand corruption is a crime against humanity. When hundreds of thousands cannot access secondary education and the majority are condemned to an early grave then you know the heavens cry out for justice. . . .

What's the downside? Some countries might not like the idea of a potential flood of ICC arrest warrants and prosecutions. Diplomatic tensions could rise, particularly within regional groupings. That already happened inside the African Union after the ICC issued the arrest warrant for Sudan's Al Bashir. His regional neighbors -- many of whom are State Parties and bound to comply with the Rome Statute -- are conflicted. They aren't sure now whether to invite him for dinner or place him under arrest. And some might wonder if putting kleptocrats at risk of international prosecution will encourage them to hold onto power, when they'd otherwise leave office in exchange for domestic amnesty, which the ICC doesn't recognize.

Where does the U.S. stand? As of today, it isn't one of the 108 State Parties to the Rome Statute. Under the Clinton administration, the United States joined the 60 countries that supported the founding of the International Criminal Court. But the Bush administration reversed that policy, citing risks to national sovereignty, and never signed the Rome Statute.

That hasn't stopped support for the ICC from spreading across all regions, however. Among the African countries, for example, State Parties now include: Benin, Botswana, Burkina Faso, Burundi, Central African Republic, Chad, Congo, Democratic Republic of Congo, Comoros, Djibouti, Gabon, Gambia, Ghana, Guinea, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritius, Namibia, Niger, Nigeria, Senegal, Sierra Leone, South Africa, Tanzania, Uganda and Zambia.

Will the new U.S. administration shift its policy toward the ICC, and eventually throw U.S. support behind the prosecution of grand corruption? There's been some talk about it in Washington, but no action. At least not yet.

Last week, while we were looking into ways the U.S. fights foreign kleptocrats, we heard about Presidential Proclamation 7750. It was issued in 2004 and, by 2006, a high State Department official was calling it a "key tool" in America's anti-corruption arsenal. Yet except for a couple of mentions we found in the African press, Proclamation 7750 was -- and is -- practically invisible.

To find out why, and to learn more about how this anti-corruption tool works, we spoke this week with a couple of U.S. State Department officials. They can't be identified and wouldn't go on the record. But here's the background they provided.

The Foreign Corrupt Practices Act doesn't reach the kleptocrats -- it applies only to bribe-payers and not bribe-takers. And the truth, as the kleptocrats know, is that they're beyond the reach of practically all the laws of other countries. There just aren't that many big sticks to use against corrupt foreign officials.

That's why Presidential Proclamation 7750 is so important. It was issued a year after the G-8's 2003 commitment to deny safe havens to kleptocrats. It helped do that by suspending entry into the United States of past and present corrupt foreign officials and those who bribe them. It also barred their spouses, children, and dependents who benefited from the corruption.

The State Department can't publicly release the names of those denied entry under Proclamation 7750 -- U.S. law generally prohibits disclosure of visa-related information. And while the deterrent effect can't be measured, the idea is that whatever makes life more difficult or expensive for kleptocrats is a good thing. The Kenyan reformer John Githongo, for example, has advised the U.S. that denying the children of corrupt African leaders access to U.S. and U.K. universities is a big deal. The State Department says it welcomes that kind of input, and that's why Proclamation 7750 is only used against children who are college age and above.

The American press hasn't talked about Proclamation 7750, and that's too bad. It's probably because the names of the banned kleptocrats have to be kept secret, draining the entertainment value and pizzazz out of the story. But because quite a few corrupt foreign leaders believe they've been banned from the United States because of Proclamation 7750, and have complained back home about their treatment at the hands of U.S. authorities, the law is better known in developing countries, especially among those who might be targeted.

State Department officials regularly meet with anti-corruption NGOs. Any allegations leveled by NGOs are carefully evaluated along with other available evidence to determine that the individuals fall within the categories defined in the Proclamation. A decision to designate is vetted by several bureaus at the State Department and is approved by a high-level Department official. And despite the public's lack of awareness, the government thinks the program is working well. As when an NGO reported that corrupt officials in a developing country were engaged in systematic and illegal asset stripping of the country's natural resources. A State Department official said the NGO report led to further U.S. investigations and ultimately to some visa determinations under Proclamation 7750.

Sometimes leads come to the State Department from whistleblowers. They're typically anti-corruption investigators or officials in developing countries who've been effective in their roles -- and are therefore fired from their jobs, threatened, or blocked by corrupt judges or opponents. They might show up at a U.S. embassy, ready to talk. The information they bring is checked -- sources are vetted for reliability and evidence is weighed for credibility. Other sources are sought. "We don't want the United States to be used as a tool by political factions in other countries," an official said. "So we're very tough when we look at the evidence. Otherwise the program will lose credibility." For example, corroboration sometimes comes from bank documents showing secret transfers of illicit cash.

The visa bans are essentially lifetime actions, so the stakes are high. The program has plenty of support within the government -- in recent appropriations bills, for example, Congress directed the State Department to use Proclamation 7750 to ban from the U.S. foreign officials "involved in corruption relating to the extraction of natural resources in their countries." The State Department can even use Proclamation 7750 to ban foreign leaders who travel on diplomatic passports, except in limited cases where the U.S. is bound by treaty-based obligations.

This post is Part II of our series, Cornering The Kleptocrats. In Part III, we'll talk about a proposed way to pursue, prosecute and punish corrupt public officials

Posted by The FCPA

1 comments:

Anonymous said...
It's also important to note that more than 50 other countries (the G8, the OAS, and APEC) have committed to deny entry to corrupt officials, as well as to recover their stolen assets, pursuant to what is called the "No Safe Haven" commitment.