This Week in AML
This week Transparency International released its 2022 Corruption Perceptions Index (CPI). The CPI uses a number of criteria to evaluate the status of corruption in 180 countries. For 2022 the global average remained unchanged at 43 on a 100 point scale. The report shows that 124 countries have not made any change since 2021 and the number of countries declining has increased. John and Elliot discuss some of the findings in the CPI and the links between corruption, deterioration in human rights, the rise of authoritarianism, and the continuing assault on democracy.
2022 Corruption Perceptions Index Released – Things are Still Not Improving - TRANSCRIPT
Elliot Berman: Hi, John. How are you today?
John Byrne: Hi, Elliot. How's it going out there in the warm Midwest?
Elliot Berman: It's a little warmer than it's been, and we're supposed to have some continued warmup except for Friday when it's supposed to be in the single digits. But while you're here, you'll just have to uh, run indoors.
John Byrne: One of the things I'm excited about doing when I'm in Milwaukee this week, besides. Marquette basketball game. We're doing something for the commercial banking program on Monday with local FBI and a former AML Voices participant Dennis Lamel to talk about financial crime issues with banking students.
So we're excited about doing that. We're doing that on Monday in Milwaukee. So I'm happy to be able to spend some time with the students there and hopefully get some folks thinking about this, what we do as a career.
Elliot Berman: Yeah, that'll be great. I know we've, you and I have both talked with students in that program in the past about encouraging them to think about the compliance side of banking and the operations side of banking in addition to the customer facing.
I'm hoping to be able to slide over and watch you guys chat. That's great.
John Byrne: Earlier this week, Transparency International released the 2022 Corruption Perception Index. We've talked about that before with these conversations, but also we've had the pleasure of having folks from that world speak on our webinars.
And I thought a couple things struck me, and I know you have thoughts there as well, people should remember that the way the index is crafted, you look at 13 different data points. They review 180 countries, and for 2022, basically there's been no major change. In fact, for the most part 124 countries have remained stagnent in their corruption protection levels or how the index measures success and 25 countries improve, but 31 declined. So I thought that based on all of that, not great news for all of us that care about dealing with corruption issues that we know are one of our priorities from the US government, but also a global challenge.
Elliot Berman: Yes, absolutely. Just again, additional reminders. So the index scores from one to a hundred. One being a very clean country and a hundred being a country that's has a very high corruption index.
John Byrne: It's actually the reverse.
Elliot Berman: Oh, you're right. Thank you. A higher score is good and a low score is bad. The top six countries in the index this year were Denmark, Finland, New Zealand, Norway, Singapore, and Sweden. We ended up with six rather than five because there were some tie scores and the worst scores the most potentially corrupt areas are Yemen, Venezuela, South Sudan, Syria, and Somalia.
John Byrne: Yeah. So don't be packing your bags for those countries anytime soon.
Elliot Berman: No, I think that would be it'd be a good idea not to do that. Two-thirds of the country score below 50. And the average score of all 180 is 43. I think what you said earlier is, somewhat disturbing that there's been, the vast majority of the countries who are in the index made no progress at all and we had more slippage than growth.
They also looked at this looking at six regions Western Europe and the European Union had the highest regional, average regional score of 66 and Sub-Saharan Africa had the lowest with 32. So again not totally surprising on Western Europe, considering the number of the countries in the top six that are in Western Europe and the United States had a score
John Byrne:69. 69. So they came in 24th. Yep. Canada was 74, came in 14th. One of the things that I also looked at was a former panelist that we've had the pleasure of talking to Gary Coleman was asked about this for a interview with Voice of America, and he made the case that even though we improved, I think we improved, the US improved two points from last year. He said that the US based on the sheer size of our economy and our financial secrecy rules, or the lack thereof from his perspective is quote, a major facilitator of corruption internationally. And Transparency International has, as they have said have called out for changes in terms of dealing with shell companies. That's why they supported the Corporate Transparency Act, which as we both know is still being implemented. They also were very strong supporters of what was called the Enablers Act that we also talked about. It had the potential of making it through in the last Congress, but did not, was not included in the National Defense Authorization Act.
And Gary's comment about that is that lawyers, accountants, money managers, corporate form. Agents, those that create trust for wealthy people. They're currently not covered by AML responsibilities, and he's not wrong. And he really believes strongly that they need to close that gap. And so a bill has been reintroduced, there's a lot of skepticism that it would make it through this divided Congress.
So even though the US has done better, our sheer size, organizations like Transparency International, concerned that it's we're just so big. And then they also, in that same story quote Janet Yellen who said last year that the US and she's the treasury secretary, was quote, the best place to hide and launder Ill got gains.
And that's because of the shell company issue. While a lot of this is starting to be addressed, I think that's relevant too, as we try to figure what all this means in terms of our community's response to due diligence, reporting, detection training, and all those sorts of things.
Elliot Berman: Yes. So there's a couple of areas that they that the report focuses on.
[00:06:28] One is the link between corruption and security threats and how having a a very corrupt government can really represent security threats both to the people of that country, but also to other countries in the region. And the other one that I thought was interesting, not surprising, but interesting, was corruption and resilience to organized crime.
So the adverse impact of strong organized crime organizations in a country or in a region, which is often directly related to the level of corruption, is a serious problem that they point point out. Additionally, they do make four recommendations. Things that they believe will enhance transparency and therefore reduce corruption.
One is to reinforce checks and balances and to promote separation of powers. We see certainly in authoritarian regimes where a strong and separate judiciary and legislative function are eaten away at and therefore there's no check and balance on power, which also can directly connect to corruption.
They talk about the importance of sharing information and upholding the right to access it. Again, that's the transparency component. Limit private influence by regulating, lobbying, and promoting open access to decision making. Again, another element of transparency and a reason that a lot of people are concerned about the level of corruption in the United States because our lobbying infrastructure has essentially routinized what in some countries would be viewed as corrupt activity. And that is the peddling of influence. And then fourth to combat transnational forms of corruption. They find that foreign bribery, corporate secrecy, and complicit professional enablers are a are forms of transnational corruption that need to be dealt with. And those specifically align with what you just talked about from both Gary's quotes and those of secretary.
John Byrne: Yeah the index is amazing. They do so much, there's so much detail here. As we mentioned. It goes by region, it goes by different categorizations. It goes, you can go country by country to figure out where there's been gaps, where there's been some improvement. The information I think can really help, not just those of us that have international and global organizations, but even if you don.
Your client base in most cases is going to have global connections, so that becomes pretty important. So corruption is, again, it's a priority in the US obviously it drives everything as they say. It's a fuel for conflict and social unrest. It takes needed resources away from people that need those resources.
And this is a welcome index in that the information is welcome, but it tells us we have. a lot more to do. So when you get a chance, take a look at not just the overall summary, but some of the detailed parts of the index, and I think you'll find some value there and definitely a training tool for your internal staff.
Elliot Berman: Agreed. So John, what what else do you have that you're working on?
John Byrne: Couple things. Did an interview earlier this week or late last week with Jim Lee, who is the IRS chief of the criminal division and Jim talked about the challenge he had for his staff regarding the value proposition of BSA data.
So that'll be posted fairly soon. Also, going to interview next week, a former enforcement lawyer from the OC C, and then I am interviewing Tom Vartanian, who has just written a book about. Issues with the internet. He had written a book two years ago that I interviewed him about, and that was about all the financial crises in the US and what we've learned from them.
So I got those couple of things set up and we're work, we're working to effort. Several other hopefully very interesting. Folks to talk about various things in law enforcement issues, regulatory issues, you name it. And I'll say the folks listening here, if there's somebody or some issue you want us to cover, send us a note, you'd be happy to do it.
Elliot Berman: Yes. Our webinar this month is on the 28th of the month livestream, 1:00 PM Eastern Time, and 6:00 PM GMT. And it's on compliance for mid-size banks, tips and trends. We'll have panelists from some mid-size banks and really be able to dig into how they're embracing the challenges related to financial crime compliance in their environments.
And lastly, just want to remind you that if you enjoy our content, there's a lot more of it on our website. And if you have a financial crime compliance challenge that we can be of help with, certainly reach out to us and we'll connect you with the right people in our organization who can help you with effective and efficient solutions. John, have a good week, travel safely and I'll see you while you're here.
John Byrne: Sounds good, Elliot. Take care of yourself. Stay safe.
Elliot Berman: Bye-bye.