Tuesday, November 07, 2006

Transparency International's Anti-Corruption Suggestion Box

Transparency International has just published the results of its 2006 Corruption Perceptions Index. TJN has previously commented on the inadequacies of TI's approach. We have also separately logged our concerns about the sponsorship link between the CPI and Ernst & Young, a globalised financial services company with offices in many tax havens(see Perceptions. Whose perceptions?. To give credit when it is due, TI has partially responded to our criticisms by inserting comments about the facilitators on the 'supply side' of the corruption chain:

"But the transaction is often enabled by professionals from many fields. Corrupt intermediaries link givers and takers, creating an atmosphere of mutual trust and reciprocity; they attempt to provide a legal appearance to corrupt transactions, producing legally enforceable contracts; and they help to ensure that scapegoats are blamed in case of detection"

This comment is followed up with recommendations which indicate that TI is moving away from its overweening pre-occupation with sinners in the public sector and is accepting that there might be systemic problems amongst private sector players, including financial intermediaries and their professional associations. These recommendations include:

Promotion and, where necessary, adoption of corruption-specific codes of conduct by professional associations for their members, for instance the International Bar Association, International Compliance Association, and professional associations for accountants,

Public education to ensure that honest intermediaries better understand their role;

Legal or professional sanctions for legal, financial and accounting professionals that enable corruption;

Greater scrutiny of the role of insufficiently transparent financial centres in facilitating corrupt transactions.


Drawing tax havens and offshore finance centres into the corruption debate is long overdue, but this doesn't go far enough. TI needs to publicly acknowledge that corruption extends to issues unrelated to bribery, including tax dodging which costs developing countries far greater revenue loss than bribery.

I have argued elsewhere that the perceptions index perpetuates a false impression of corruption. This matters because it impacts on country credit ratings and attractiveness for investors. So TI has an obligation to get these things right. The current index draws on the wrong perceptions from the wrong sources.

I do not dispute the pernicious impact of bribery on developing and developed countries, but I do dispute the narrowness of TI's definition of corruption. Far greater weighting needs to be attached to the role of financial intermediaries and other facilitators in aiding and abetting corrupt practices, and tax dodging should be rated as highly, if not higher, than bribery in terms of its impact on tackling poverty and undermining pro-growth development strategies.

TI has started to acknowledge the importance of these issues. Further progress is required. As far as I am concerned the jury remains out as to whether the Corruption Perceptions Index can be modified to take account of the serious and valid criticisms we have raised.

3 Comments:

Anonymous John Elliott said...

I agree with your criticism of TI's corruption perceptions index. It is not fit for purpose and should be scrapped. How about developing an alternative index to assess the degree of secrecy of different countries, for example, do they publish information about company ownership, do they reveal existence of trusts? This would highlight the countries which assist criminals with hiding the proceeds of crime.

1:02 am  
Blogger avaiki nius agency said...

As a journalist, I have had questions with Transparency International for nearly two years.

They remain unanswered.

These questions have to do with how Transparency International commissions reports.

This follows a country report, for my adoptive homeland in the Cook Islands, where the author failed the mention the country's biggest corruption scandal - a us$50 million Italian hotel project that went nowhere.

Nor did the author mention the fact that her brother was central to a supposed renegotiation of the project.

The report remains on the TI website, unchanged.

I asked TI how they went about selecting their report authors and how they ensured conflicts of interest are avoided.

No response.

How many other TI reports are authored by people closely related by blood or bonds to fingers in pies?

We just don't know. Maybe TI doesn't want to either.

10:16 am  
Anonymous David said...

Such a great article This comment is followed up with recommendations which indicate that TI is moving away from its overweening pre-occupation with sinners in the public sector and is accepting that there might be systemic problems amongst private sector players, including financial intermediaries and their professional associations. In which Greater scrutiny of the role of insufficiently transparent financial centres in facilitating corrupt transactions. Thanks for sharing this article.

9:38 am  

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