This Week in AML
This week, Transparency International released its Corruption Perception Index for 2023. John and Elliot discuss the Index and several other items and their meaning for the financial crime compliance community.
The Corruption Perception Index for 2023 and More - TRANSCRIPT
Elliot Berman: Hi, John. How are you today?
John Byrne: Hi, Elliot. I'm good, thanks. I was obviously in your backyard last weekend in Milwaukee and back here. It was pretty much the same weather. We're in the 30s here and the 30s there. Nice quick little trip to see Marquette win another game. And as we're recording this, they were able to beat Villanova at home yesterday at the end Villanova, which is something that didn't used to happen in the Jay Wright years. So that's always a positive.
Elliot Berman: That's true. They made it harder than it may have needed to be, but they did pull it out.
John Byrne: And I know so many people listen to our conversation just to know how Marquette's doing.
Elliot Berman: That's true. I'm worried about losing the Marquette audience.
John Byrne: That's right. So we're going to spend a lion's share of our quick conversation today on Transparency International's Corruption Perception Index for 2023, but just a couple of other quick items that I wanted to mention. The Federal Trade Commission has just issued in the past week this is Identity Theft Awareness Week, the week of the 29th of January, and while this is a clear consumer protection week, angle, they have posted quick analysis of the ways your business can mark identity theft awareness.
I just thought I'd mention them very quickly. And there's three items. They say, make sure you implement sound data security practices. And obviously we would make the case that the financial sector leads the way a lot of times in cybersecurity, but also making sure that small businesses have that.
And then help people that have experienced identity theft. Yeah. Again, another area where I know that. We've all had, unfortunately, personal situations where there's been scams against people that we know or ourselves, and I find the financial sector really great in responding to that, so that's something the FTC is highlighting.
And then the third one is, just in general, spread the word about identity theft awareness through your various social networks. And so that's also something. So this is on the FTC website bottom line is, I think our audience generally does a lot of this, if not more, but I think it's always good to highlight it because clearly, the government and the private sector have identified this week as a key area to remind everybody that identity theft is still a major problem.
Elliot Berman: They note in the release that they have a new publication which you can download, and it's called How to Spot, Avoid, and Report Identity Theft in Your Language, and it's available in multiple languages. For those of our listeners who are looking for a customer piece, or a training piece, or something like that, that might be something to look at as a way to communicate with the general public about this challenging issue.
John Byrne: And also, January ends Human Trafficking Awareness Month. Obviously, though, that's a 12 month challenge for all of us. And the State Department, on their website, lists how to identify and assist a trafficking victim. So obviously you want your processes and procedures to look at financial footprints that could be indicators of the use of funds to enhance and move trafficking or smuggling, but the indicators to help victims on the State Department website talks about, while it's not an exhaustive list, some key red flags.
Somebody that's living with their employer, inability to speak to an individual alone, that happens many times in a financial institution, the employer is holding the identity documents. More horrifically, signs of physical abuse, submissive or fearful individuals, and questions to ask if you think somebody is a victim. Can you leave your job if you want to? Do you live with your employer? Has your family been threatened? Are you in debt to your employer?
And then they also list where to get help. We did a webinar last week, where Polaris talked about their hotline that's been so impactful for many years, but there's also a national trafficking hotline from the governments, 24 hours toll free, multilingual, and of course 911.
So this particular list of items and red flags from the State Department, but was recently highlighted by Internal Revenue Service's Criminal Division because they are obviously actively working on anti trafficking as well. So again, as the month closes down, we can't lose sight of the importance of this issue and we'll obviously at RightSource continue to highlight events and highlight reports and projects as they are posted and identified.
Elliot Berman: For those of you who weren't able to listen to our live stream of our webinar about human trafficking, by the time this podcast posts the full recording will be available on our website, so certainly feel free to go to AMLrightSource.com and you'll be able to watch the entire recorded session.
John Byrne: One more thing before we dive into the Corruption Perceptions Index. FinCEN several days ago issued a finding and a notice proposed rulemaking on Al-Huda Bank. It's an Iraqi bank that according to the Treasury, serves as a conduit for terrorist financing, as a foreign financial institution, of primary money laundering concern.
The several quotes within the press release from the head of FinCEN, from the undersecretary, But clearly here, this is a yet another example of the quick response from the Treasury Department, FinCEN, and other entities on issues that deal with the abuse of certain institutions and making it clear through this process, Special Measure 5, which would prohibit domestic financial institutions and their agencies from opening or maintaining a correspondent account for or on behalf of Al-Huda Bank. So that information is available on FinCEN's website.
Elliot Berman: Yes, it is. So let's talk about the index. John, where would you like to start?
John Byrne: Transparency International is a tremendous organization that provides so much important, both data and recommendations and strategies dealing with global corruption and other issues, of course. But they're, as their name suggests, pushing constantly for more transparency in various jurisdictions.
The index and you can look at how their methodology works, they use a scale from 0 to 100, 100 being very clean, 0 being highly corrupt. They look at 180 countries, and their overall theme this year is corruption is thriving, sadly. And they rate all the countries as we've mentioned, but they also talk about where those countries have fallen down.
So some of the things in their cross border corruption cases, even if a country's doing better or well based on the analysis, Transparency International says cross border corruption cases is unfortunately impacting top scoring countries. sometimes that resort to bribery when doing businesses abroad. So that's an issue.
And then they list several things on how you would identify the clear areas of weaknesses. And so integrity in officials in office, the judiciary, all sorts of things like that. But the one area I'll mention very quickly and throw it back to you is they look at different regions of the world.
And the index looking at the Americas, they focused on the lack of independent judiciary. So they've seen that in a whole host of countries. And they mentioned specifically the only two countries in the region that have improved in this area, Guyana and Dominican Republic. They also said others have gotten worse and they were surprised by that.
Canada and Uruguay are the top of the regional rankings, But they are actually doing well with more robust checks and balances. Venezuela, Haiti, Nicaragua, with the lowest scores and again, complete lack of independence by the judiciary. So that's an important element here, the lack of transparency.
And then I'll just highlight that they said places like Brazil, Mexico, and Honduras. What they identified is the removal of judges and prosecutors without merit by other branches in the state. And they highlight that impacts public trust in the judiciary, which is so important.
And the last thing, even in our own country, they say the U. S. has a rating of 69, which is good, but weak ethics rules for the Supreme Court raise serious questions of judicial integrity. But they do say, fortunately, U. S. federal and state judiciaries largely continue to function with appropriate independents that are free from executive and legislative interference. And they do highlight that there have been attacks on the independents of the judiciaries, but they've largely failed. Again, the U. S. is mentioned as well as all these other countries. The other regions are as well. Which jumped out at you?
Elliot Berman: Western Europe and the European Union that's 31 countries. And the average score for that region is the best of any of the average scores for any region and that's 65. Some of the top scoring countries in the world, Denmark, Finland, Norway, are in that grouping. And even the bottom scores in that region, Romania, Bulgaria, and Hungary, their scores are in the 40s.
Estonia has a score of 76 and they were up six points since 2016. And Italy with a score of 56 was up nine points since 2016. They noted some recent decliners, including the UK, down nine points since 2018. And Poland and Austria both had some backsliding in the last number of years. And they say that even in this strong region the current index reveals that anti corruption efforts have stagnated or declined in more than three quarters of the countries. That's something to be concerned about.
The global bottom, Somalia is at the very bottom with a score of 11, Venezuela, Syria, South Sudan at 13, Yemen at 16. So that's the bottom five.
On a global basis, only 28 of the 180 countries measured in this year's index have improved in the, over the last 12 years. And 34 have significantly worsened. So from a trend line perspective, we're not doing very well. And as you pointed out things particularly things about the judiciary, checks and balances, and clear transparent elections are a major issue.
The other thing, two thirds of the countries score below 50. That's 120 countries. That is not good. The things that you and I have talked about on other podcasts and we've seen is that being able to overcome corruption and keep transparency active is the result of a pile of a lot of smaller, significant things that have to be continually worked on.
You never get a chance to plant your flag and say, we're successful, we have no corruption. If that's ever true, it's for an instant, and then you have to go right back to work.
John Byrne: I also think it's important, and we've talked about this as well before, that the way the data sources are utilized, because people can look at a report and say, ah, Transparency International, it's an advocacy group, but their data sets are very comprehensive.
They look at bribery, diversion of public funds, ability of the government to contain corruption in the public sector, red tape when it could actually increase opportunities, nepotism, appointments in the civil service, state capture by narrow vested interest, and importantly, access to information on public affairs and government activities.
And there's some others as well. So they do look at a whole series of data points when they come up with this measurement. So it's very clear to your point everybody has some corruption they have to deal with, but the scope of the elements, I think, really makes what Transparency International do so valuable if we're trying to figure out ways to improve, whether we're a policymaker or we're an institution dealing with resources and training and compliance.
Elliot Berman: Yes we recommend the report. We will link to the website where all the various elements of the report are accessible. John, what else is in the pipeline?
John Byrne: I did an interview earlier this week that will get posted in the next week or two with the Human Security Collective about de risking issues and FATF Recommendation 8. I think you'll find that extremely valuable.
Next week, we're going to be talking to folks Ari Redbond from Redbord, sorry Ari, I do that constantly, from TRM Labs, about some of the issues in the crypto world, and he's been kind enough, he's going to set aside some time for us next week. And then I have a couple of others that I'm efforting at this point, and then you just mentioned we did the panel discussion on human trafficking last week and that recording will be made available.
I urge everybody to listen to that. The panel was tremendous. Gave us reflections from private sector, policy side and the government, which is all the important stakeholders for human trafficking.
Elliot Berman: Yes, and this coming month, our webinar will be on banking as a service and it's Thursday the 22nd at 1 p. m. Eastern, and you can sign up on our website. It's a hot topic that the regulators are focusing on, and we all are focusing on. It's not really a new issue, but it's taken on new urgency.
John Byrne: Sounds good. And then, Elliot the AML Partnership Forum, which will be held in D.C. in March, the 18th to the 20th. We are up and accepting registration, so people should take a look at that. We are putting together an amazing group of speakers and panelists, and I know folks that are either in D.C. or can travel to D.C. during that time will find it a great opportunity to network and communicate with our partners, whether in the private or public sectors.
Elliot Berman: And you can register for the Forum at amlpf. com.
John Byrne: Elliot, have a great rest of your week, and we'll talk again.
Elliot Berman: You too. Bye bye, John.