Cameron steers drive for transparency in financial affairs

Questions arise about whether advancing transparency is the same thing as combating corruption
David Cameron © Reuters

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A month ago, David Cameron was struggling to shed the image of a man born with an offshore spoon in his mouth. By the end of Thursday, he hopes to be seen instead as a champion of the struggle against corruption and the poverty, violence and misrule it begets.

The UK prime minister is keen to use a summit in London to advance a drive for “transparency” in financial affairs. Leaving aside the Panama Papers’ revelations of his father’s offshore dealings, Mr Cameron seems genuinely keen to tackle graft. There are, though, growing questions about whether advancing transparency is the same thing as combating corruption.

The transparency lobby’s first big achievement was the creation in 2002 of a coalition of companies, governments and activists called the Extractive Industries Transparency Initiative. The EITI confers a stamp of approval on oil and mining companies that publish their payments to governments and on governments that publish what they receive. Clues to how money goes missing are to be found in the gaps between the two sets of figures.

The EITI was a breakthrough and led to disclosure of such payments being made mandatory for EU and US companies. Yet it has serious limitations. It is voluntary and counts unrepentant kleptocracies among its members. Its supporters have made naive claims that it could lift millions out of penury. And it does little to reduce straight-up bribery, which companies do not tend these days to record in their books, regardless of whether they are to be published.

Thursday’s agenda will reflect the next wave of transparency, which is concerned with names rather than numbers. But campaigners believe the UK is unwilling or unable to force its semi-independent territories in the Caribbean and the Channel Islands to adopt public registries of the true owners of companies and other entities. Those territories include some of the tax havens most favoured by the corrupt.

Diarmid O’Sullivan, formerly of the anti-corruption group Global Witness, concluded in a 2013 report called ‘What’s the point of transparency?’ that it is “not a substitute for actions . . . in other areas — for example, cracking down on corporate bribery and tax avoidance, and on the cross-border laundering of stolen funds by banks.”

The corruption investigations that have shaken rulers in Brazil, Malaysia and elsewhere, not to mention the defenestration of the barons of football at Fifa — all came about through the courage and cunning of judges, prosecutors, investigators and witnesses, not voluntary disclosures.

Gavin Hayman of the Open Contracting Partnership, which lobbies to bring “radical openness” to the procurement processes by which governments spend $9.5tn annually, counters: “It’s vital to lock up the corrupt but you also have to set up a system to minimise the opportunities to cheat.”

He expects commitments to open contracting in the summit communiqué. But he accepts: “You can’t just have transparency without the rule of law. Then you’re just being transparently corrupt.”

In that light, the UK’s anti-corruption credentials look rather weaker. The National Crime Agency estimated last year that “hundreds of billions” of criminal dollars are laundered annually through UK banks. The bodies whose task it is to visit justice on the corrupt — the Crown Prosecution Service and the Serious Fraud Office — have had their budgets cut. The UK’s record on prosecuting bribery and money laundering attracts derision abroad.

Enforcement is harder than transparency. Tessa Lorimer, a white-collar crime barrister at the law firm Withers, says tracing money across borders is “a very slow, laborious process”. The summit will lay out plans for much-needed improvements in international co-operation.

“You can move money around the world in the blink of an eye,” Ms Lorimer says. “The technology has surpassed the intelligence-gathering — and the laws.”

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