This article first appeared in Richard Bistrong’s Front-Line Anti-Bribery Compliance Blog and is republished with his permission.
The following post was written by guest, James Cohen. James is an independent international development consultant based in Ottawa, Canada. He focuses on corruption, human security, and corporate social responsibility. Recent contracts and collaborations include the African Centre for Justice and Peace Studies and the Global Organisation for Parliamentarians Against Corruption. He has experience with organizations such as Transparency International UK and the Geneva Centre for the Democratic Control of Armed Forces.
Maps are powerful visual cues used by many organisations to communicate their research. The most well known data set on corruption is Transparency International’s annual Corruption Perception Index (CPI) and its accompanying map below (Source: Transparency International’s 2014 CPI map).
The CPI map depicts levels of perceived corruption in warm colors, from shades of yellow to red. The lack of any “cool” colors like green or blue signals that no country is entirely free from corruption.
View individual country results here.
The Colors of Corruption
That said, looking at the map gives a quick visual cue that there are safer (yellow) places in the world — predominantly in North America, northern Europe, Japan, and Australia. Then there are the reds and deep reds covering just about all of Africa, most of Asia, and the majority of Latin America. This global visual perpetuates the idea that we in the West are generally good, and those places in red are deeply corrupt. However, a deeper analysis demonstrates that the CPI map both conveys, and unintentionally conceals, the realities of corruption.
The CPI map does convey petty corruption (e.g. citizens paying bribes to government officials) and large-scale corruption (e.g. politicians stealing state assets). What the map doesn’t show is that large-scale corruption does not stay within national borders.
Most stolen money from corruption leaves the country where the theft occurred. Those funds often move to developed countries, which the CPI displays as low in corruption. For the most part, citizens in those yellow countries don’t experience corruption on a day-to-day basis; rather, corruption there mostly happens behind closed doors and as we have recently seen with respect to many of the recent enforcement actions, those are often Western bank doors.
Looking at the African continent on the CPI map, saturated mostly in shades of red, it loses more money annually through illicit financial flows than it receives in foreign aid. The issue has been raised by the High Level Panel on Illicit Financial Flows from Africa, led by former South African President Thabo Mbeki. The UN-established body estimates that the African continent loses $50 billion annually — roughly twice what’s received in financial aid. A report by a coalition of aid organisations led by Health Poverty Action published a damning report on the perception of Africa as a drain on wealthy countries — when, really, the continent is a net creditor to the world, via these illicit cash flows, to the tune of roughly $60 billion.
In recent years, the dialogue on corruption has corrected itself on this point by putting more emphasis on the burden of illicit financial flows and the issues of anonymous shell companies. The recent G20 meeting in Brisbane, Australia recognised this, after pressure from groups including Transparency International to address issues including money laundering and proceeds from crime. G20 leaders acknowledged that they need to tackle shell companies in their final communiqué. Prior to the meeting, some governments started developing better legislation and policies to deal with their country’s role in addressing global corruption such as the UK and Denmark’s announcements of creating public registries of corporate beneficial ownership information.
Despite these shifts, the annual CPI map came out on December 3, 2014 and, continues to show corruption as something contained within borders. In fairness, Transparency International does a great service in publicising the CPI (full disclosure: I worked for Transparency International’s UK chapter from 2011-2013), and other programs, like tracking foreign corruption legislation in OECD countries; however, most casual observers just see the map and take away the visual message.
A new map on illicit financial flows would be challenging to create, but it would go a long way to complement Transparency International and other advocacy groups which elevate our understanding of corruption. For example, Global Witness’s ‘Great Rip Off’ map project shows locations harboring shell companies and links them to victims of illicit financial flows. The map depicts cases that have been uncovered, calling attention to shell-company-friendly governments and giving an idea of the harm they’ve caused. The map is live and Global Witness continues to add cases as they are discovered.
The Tax Justice Network (TJN) bolsters this work with the Financial Secrecy Index (FSI). The FSI “ranks jurisdictions according to their secrecy and the scale of their activities”.
Other organisations have estimated the losses to developing economies due to illicit financial flows. Global Financial Integrity (GFI) examines macro-level economic trends and trade mis-invoicing in its annual report on illicit financial flows out of emerging economies. With this data, they even produced a ranking of top 25 outflow countries between 2002 and 2011. In its report, GFI also displays average illicit financial flow to GDP ratio.
So, estimating and visually representing illicit financial flows is possible. A new corruption map could build on the work of Global Witness, TJN, and GFI. A next step for a new corruption map would be determining the directions of flows. That kind of map could look something like this:
Do we really need another corruption map?
But Global Witness already produces a pretty good map, so why not just use that and build it up? While Global Witness has built its reputation — one of its founding members won a TED prize for her campaign on shell companies — Transparency International is still the best-known name in anti-corruption, cited most often by journalists and politicians, and the CPI is the most well-known anti-corruption resource. Thus, it would be my hope that Transparency International might embrace this concept and to consider this issue in its future mapping programs.
In addition to supporting advocacy efforts the new map can also have practical benefits for the business community. Compliance with anti-corruption legislation is slowly, but progressively getting stricter. TRACE and the Rand Corporation recently produced a new index and map on business bribery risk based on demands and input from the business community. A map on illicit financial flows can alert businesses to banking jurisdictions which government regulators may target and can be a due-dilligence tool as well. Additionally, companies looking to use corporate social responsibility as a brand advantage can use the map to demonstrate they are not contributing to illicit financial flows, but instead supporting local tax revenue and investment.
Making a new map wouldn’t be a dramatic shift for Transparency International; it would actually fall in line with other recent changes. First, the methodology of the CPI was changed in 2012 to address the long-standing issue of comparing the CPI between years. Second, a map focusing on illicit financial flows would bolster the direction Transparency International is taking on since the election of its new chair, José Ugaz. The former prosecutor who took down Peruvian President Alberto Fujimori is leading the organisation from a predominantly advocacy role to a more confrontational ‘name and shame’ tactic in order to fight impunity.
A new map showing illicit financial flows would still face the corruption data challenge of complete accuracy, but it would go a long way in helping bring the discourse on illicit financial flows to the public and it would break the mentality that ‘we’ (in the West) are clean and ‘they’ (in the rest) are corrupt. Instead, it would show the shared challenge of combating corruption and allow deeper analysis into the factors facilitating specific illicit financial flows.
Postscript by Richard Bistrong: After having read James’ work, I went ahead and asked a number of compliance and risk professionals for their perspective on this issue. Alison Taylor, Senior Managing Director, Control Risks, responded “I think a map of illicit financial flows would be great, though would be very interested in understanding where the data came from and the methodology used.” Her colleague, John Bray, Director (Analysis) at Control Risks shared that “Country ratings serve a purpose – different purposes depending on what goes into them and what comes out. Maps have a visual appeal that is hard to beat.” He added that with respect to James’ proposal “His current idea sounds interesting: it touches on the point that there are (at least) ‘two ends’ of corruption.” Philippe Montigny, CEO, Ethic Intelligence, added “I do share your views, that while a new map can add value, it is important to know the quality of the data that are used, to avoid conveying wrong messages.” Thus, it would appear that the main challenge is data driven, as opposed to the concept, and I would invite Transparency International to submit their own views of James’ mapping proposal.