As the G8 leaders meet in Northern Ireland today and tomorrow, it is important that they make strides on two key anti-corruption issues: (1) Ensuring public officials and their relatives cannot cloak their identities and the source of their corrupt funds by using anonymous corporations and (2) Ensuring that extractive wealth fuels development rather than corruption and poor governance.
The use of anonymous corporations was highlighted in a report by a corruption watchdog group two weeks ago which discussed how $750 million of Angola’s debt repayment to Russia was diverted from Angola’s treasury using a shell company registered in Britain’s Isle of Man. The misuse of shell companies as a vehicle to facilitate corruption is not new. The 2011 study by the Stolen Asset Recovery Initiative — “The Puppet Masters” — found that in the vast majority of 150 grand corruption cases, corporate vehicles were misused to conceal the identities of public officials involved in corruption. These reports underline both the significance of the problem and also the potential cost to development. There is growing momentum on this issue as exemplified by the recent letter by a group of prominent anti-corruption experts to the G8 leaders. U.K. Prime Minister David Cameron has also made promising statements on this issue. It remains to be seen whether this momentum can be converted into concrete action to change the status quo. If the G8 countries are serious about tackling corruption, it is imperative that their leaders commit to collecting information on beneficial ownership of shell companies and work on national plans to achieve that objective.
Angola also provides an example of the importance of progress on extractive payments disclosures, the second issue that merits action by G8 leaders. Angola has been experiencing impressive economic growth driven by its oil sector, with oil production and its supporting activities contributing about half of the nation’s gross domestic product and 90 percent of exports. However, like many other oil rich countries, Angola has challenging governance and corruption issues, as highlighted by its low Transparency International Corruption Perceptions Index score.
According to the African Development Bank, Angola’s GDP grew at an estimated rate of 7.9% in 2012. However, Angola’s low score on the United Nations’ Human Development Index (a composite measure of health, education and living standards) indicates that the benefits of economic growth and oil wealth are not trickling down to large sections of the population. Other resource rich countries in Africa and elsewhere have a similar story and comparable governance issues. The G8 countries should increase pressure on the governments of these countries to disclose the revenues they receive in exchange for opportunities to exploit natural resources, and to adopt open and competitive bidding practices and budget transparency measures.
Similarly, companies that extract natural resources also share some responsibility for transparent practices. The E.U. and U.S. transparency rules for oil, gas, and mining companies are a great start. However, the G8 leaders should work on a global standard to ensure that Chinese and Russian companies, which are now significant investors in resource rich countries, are also brought into the fold.
The summit in Northern Ireland represents an important opportunity for G8 leaders to make meaningful progress in promoting transparency in the beneficial ownership of companies and extractive resources. Global development would benefit from their advancing that goal by prioritizing progress in these areas and setting the stage for G20 action on these issues later this year.
Claudia J. Dumas is President and CEO of Transparency International | USA.
Shruti Shah, a contributing editor of the FCPA Blog, is Senior Policy Director, Law & Regulation of Transparency International | USA.