International | Tackling corruption

What David Cameron’s anti-corruption summit did and didn’t achieve

A step in the right direction

LANCASTER HOUSE, near Buckingham Palace in London, was used to film scenes for “National Treasure: Book of Secrets”, a Hollywood adventure starring Nicolas Cage. It was, therefore, a fitting venue for an international anti-corruption summit on May 12th. David Cameron, Britain’s prime minister and the host, has styled himself as a champion of transparency and efforts to stamp out the financial secrecy that allows public wealth to be looted and hidden using murky offshore arrangements. He has called corruption “the cancer at the heart of so many of the world’s problems” and “one of the greatest enemies of progress in our time”.

Most international summits are flops, and there were certainly some bad omens for this one. Organisation was poor, meaning attendance was thinner than the hosts would have liked. Around 40 countries sent representatives, only 11 of whom were heads of state or government; America sent its secretary of state, John Kerry. There was some speculation that an apparent gaffe by Mr Cameron the day before the event—he was recorded telling the queen that two of the participating countries, Nigeria and Afghanistan, are “fantastically corrupt”—might have been a stunt designed to propel the summit up news organisations’ agendas. The comments were “gold dust”, purred one anti-corruption campaigner.

Inevitably, the event failed to live up to the expectations of the ever-growing army of such activists. ActionAid, an NGO, lamented that Mr Cameron had “fallen at the final hurdle” by not forcing full transparency on the British Virgin Islands and other British overseas territories. This web of jurisdictions, closely bound in with the City of London and dubbed “Britain’s second empire”, accounts for between a quarter and a third of global offshore activity.

But the event was certainly not a complete waste of time. The participants signed a commitment to “expose corruption wherever it is found, to pursue and punish those who perpetrate, facilitate or are complicit in it, to support the communities who have suffered from it, and to ensure it does not fester in our government institutions, businesses and communities”. They pledged to “end the misuse of anonymous companies to hide the proceeds of corruption” and to “driv[e] out those lawyers, real estate agents and accountants who facilitate or are complicit in corruption”, thereby “denying the corrupt the use of legitimate business channels”. And each published a statement in which it set out its corruption-fighting priorities.

Having already said it would become the first G20 country to set up a publicly accessible register of beneficial owners (the human beings behind shell companies), Mr Cameron’s government made another widely-trailed announcement this week: offshore shell companies and other foreign entities that buy or already own British property will have to declare their owners in the new register. So too will those bidding on government contracts. Foreign firms own more than 44,000 properties in London alone. A good proportion are assumed to have been bought with the proceeds of corruption.

Numerous other countries have pledged to follow the lead of Britain, Ukraine and the small handful of others in embracing public registers of company owners. Among the converts are South Africa, France, Nigeria and the Netherlands. Several territories, including some of the Britain’s offshore dependencies, also joined a group of countries that agreed last month, in the wake of the Panama papers leak, to exchange beneficial-ownership information from their registers on an automatic basis. That brings the number of countries taking part to 40.

But universal backing for public registers was a wish too far. The communiqué instead essentially espouses the standard hammered out some years ago at the Financial Action Task Force, a global anti-money-laundering forum: accurate, timely beneficial ownership information, collected and made available to those with a “legitimate” need for it. Britain’s overseas territories continue to resist adopting public registers, though they have agreed to collect information centrally and to speed up access for law enforcers in London. They argue that the “gatekeeper” system they have developed over more than a decade, under intense international pressure—in which regulated corporate service providers are expected to collect and verify information—works reasonably well. Nevertheless, Mr Cameron says he will continue to push them towards the “gold standard” of public registers.

Long used to criticism, the island territories did some finger-pointing of their own at Lancaster House. Allan Bell, chief minister of the Isle of Man, suggested that while it was “all very well to pick on small jurisdictions”, it was time to acknowledge “the elephant in the room”: America. The iron-clad corporate anonymity offered by states such as Delaware, Nevada, South Dakota and Wyoming has become notorious. Yet the superpower escapes the international censure that it deserves. Barack Obama’s administration recently introduced a rule and several proposals to shine light on shell companies, but these fall short: it would still be possible for nominees to masquerade as real owners.

Also discussed were intelligence-sharing and asset recovery in cross-border corruption probes. The “mutual legal assistance” framework under which countries ask for help in solving cases is horribly unwieldy. In a bid to streamline it, Britain announced an “International Anti Corruption Co-ordination Centre”, based in London, in partnership with America, Canada, Australia, New Zealand, Switzerland and Interpol. Experts from these countries’ national crime agencies will help prosecutors, so they “no longer have to go round with a begging bowl” to get information, as one expert puts it.

Around 20 of the participating countries pledged to introduce or strengthen laws that will make it easier to seize and return assets that have been acquired with dirty money. A global asset-recovery forum will be held in 2017. This will focus on assistance to Nigeria, Ukraine, Tunisia and Sri Lanka. Last month, the British government unveiled proposals to introduce “unexplained wealth orders”, a legal instrument that would reverse the burden of proof, so that people suspected of having used stolen money to buy property would have it stripped from them by a court if they could not show their wealth was accumulated legitimately. This chimes with one of the themes of the conference: that, by providing a safe haven for stolen assets, financial centres foster corruption in poor countries.

Some of the outcomes that garnered less attention may turn out to be among the most important. Public procurement isn’t sexy, but it matters: it accounts for 30% of government spending—or nearly $10 trillion a year—and a good chunk of this is lost to corruption. An estimated 60% of the world’s bribes come from public contracts, points out Martin Tisné, a transparency expert with the Omidyar Network, a foundation. The participants signed up to making such contracting open by default; from now on, governments that keep the details hidden will have to explain why.

Ensuring that countries keep to their latest burst of commitments will be quite a challenge. An initiative called the Open Government Partnership, to which 33 of the 40-odd participating countries have signed up, could help in this regard. Members will be expected to embed their summit commitments in their “national action plans”, which are subject to independent monitoring every two years—and NGOs have become rather good at kicking up a stink when these promises are not met.

The summit will have pushed some countries into moving further and faster than they might have otherwise. It could help to create a coalition of the willing in the fight against corruption, say campaigners. But such coalitions can be fragile. The London gathering was, at best, a promising start.

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