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In foreign corruption cases, transparency creates accountability

Four years on, the fallout from the 1MDB scandal continues. A key conspirator has agreed to forfeit up to $900 million in assets. Malaysian investigators just alleged that the country’s ex-premier approached prosecutors and foreign royalty about a cover up. Over two dozen cases relating to the fund are pending in Malaysian courts alone. And Goldman Sachs, which sold 1MDB bonds, saw its profits plunge as it earmarked over a billion dollars to cover expected penalties from U.S. authorities.

Some of these steps toward accountability might never have happened had the U.S. Department of Justice not made a fateful decision. In June 2017, DOJ prosecutors in California released a 251-page civil asset forfeiture complaint related to the $4.5 billion corruption scandal. It described the mechanics of the schemes involved and named many of the international companies, banks, and lawyers that played enabling roles.

This move helped set off a chain reaction of accountability across four continents. In Malaysia, legislators, NGOs, activists, and journalists used information from the complaint to call for snap elections, demand the resignation of implicated officials, organize street protests, and even build a board game. International journalists and NGOs published reports and articles calling out the foreign enablers. With time, at least 11 additional countries launched investigations or court cases relating to 1MDB. Financial institutions, Malaysian officials, financiers, and executives faced legal action, and governments cooperated on asset seizures.

Back in Malaysia, it is tough to say what part such activities played in Prime Minister Najib Razak’s 2018 election loss and later prosecution. But his role in 1MDB certainly became a central campaign issue.

The public availability of the DOJ complaint is by no means the only precipitating factor in all of this. Courageous investigators in Malaysia deserve much of the credit. But the 1MDB case shows that when courts and prosecutors disclose facts from their foreign corruption cases, they can help other anticorruption actors to do their jobs more effectively. This case’s facts may be unusual, but the crucial role transparency played in the response is not.

In a new briefing from the Natural Resource Governance Institute, we’ve just published numerous other real-world examples of how the disclosure of FCPA and other anticorruption case documents can lead to decisive action against corruption. For instance, we’ve seen instances where government agencies drew on bribery case documents to impose related penalties like visa bans and Magnitsky Act sanctions. In other cases, transparency helped spur bribery and money laundering convictions, asset seizures, and public investigations in other jurisdictions.

The private sector also benefits when more facts reach the public domain. We’ve seen companies use foreign bribery case information to create better systems and practices for vetting their partners, deals, and investment locations. Info from court documents has also convinced banks to refuse some high-risk actors as clients, and to send more suspicious transaction reports to financial regulators.

Getting their hands on reliable facts is one of the biggest hurdles oversight actors face when trying to hold wrongdoers accountable for corruption. But when more details from foreign bribery cases go public, we found, journalists and NGO workers have gone on to identify bribe takers, facilitators and other implicated parties. Victims of corruption have also used the information to seek redress—through public interest and shareholder suits, for instance.

Transparency in foreign corruption cases remains selective and uneven. A handful of countries put out most of the available information. Going forward, government agencies in possession of the facts should strongly consider disclosing, as far as privacy, data protection, and judicial procedure rules allow, the names of all proven beneficiaries and enablers of corruption. They should also describe the deals, sectors, schemes and jurisdictions involved.

Transparency of this kind should extend to legal actions beyond foreign bribery—for instance, civil asset forfeitures and seizures, money laundering convictions and actions against proceeds of crime—and occur even when the case ends in a settlement agreement.

Because fighting corruption requires a collaborative, all-hands-on-deck approach, jurisdictions should make these details available cost-free and online whenever they can. Doing so can make the difference between real accountability and continued impunity.

Download the full NRGI report here.

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Aaron Sayne is a Senior Governance Officer and Melanie Reed is a consultant for the Natural Resource Governance Institute. NRGI is an international, independent, non-profit organization that promotes the transparent, accountable, and effective management of natural resources for the public good.

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