A common thread behind much of the financial success enjoyed by criminals is the prevalence and persistence of Corruption. According to the Global Corruption Barometer 2017, 1 in 4 people still regularly pay bribes. In this article, Transparency International (TI) flagship Corruption Perceptions Index (CPI) is analysed and based on this, It’s asked whether any meaningful progress has been seen since its inception more than 20 years ago.
However described, for example whether as “graft,”“kickback”, “payoff”, baksheesh”, “hush money”, “tips”, “grease”, “bung” or “sweetener,” corruption has a long and uninterrupted history, Whether it is thirty pieces of silver, the price for which Judas Iscariot was bribed to betray Jesus Christ, the US$15-35bio, the Former Indonesian President Mohammed Suharto is estimated by Transparency International to have embezzled, or the fact according to Transparency International that still too many Countries are failing “to significantly control corruption,” corruption is part of many people’s way of life.
There is no shortage of evidence as to the debilitating impact corruption has on society. It is indeed a cancer, as US Senator Frank Church stated in 1976 and was reiterated some twenty years later by the former President of the World Bank James Wolfensohn. Corruption thrives on weak institutions, political instability and vulnerability. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish. Corruption blights countries, infects industries and raises the costs of living and commerce.
Corruption can involve at least 4 main forms: Petty Corruption, Private Corruption, Organised Corruption and Grand Corruption. The level of Corruption is hard to measure, and any figures are by their nature only estimates. Still according to:
- the World Bank (WB) in 2004 estimated that the annual total of bribes paid worldwide was US$1 trillion and the WB also reported in 2012 that between US$20-40bio is lost to corruption and other crimes each year in developing countries, amounting to some 20-40% of all international aid sent to such countries each year.
- the UN in 2009 stated that political corruption costs up to US$1.6 trillion annually,
- the IMF in 2019 estimated that curbing corruption could generate about US$1 trillion in tax revenues annually across the world. In addition to increasing revenues, “Less corruption means lower revenue leakage and less waste in expenditures, and higher quality of public education and infrastructure,” said the report.
Unless and until we see progress against corruption, in all its forms, it’s unlikely that substantial gains will be seen against other crimes which are enabled and criminals protected by an entrenched system of corruption still in far too many places. Taking Corruption Perception Index of Transparency International as a barometer we can see that efforts of many over more than 20 plus years are not having as much an effect as we’d hoped.
Transparency International’s Corruption Perception
The 2018 version of the CPI published in January 2019, represents the latest report card on the state of corruption and traces its origins back more than 20 years to when the first CPI was issued for 1995. This first CPI assessed just 42 large industrialised Countries, whilst the latest CPI tracks perceptions of Corruption for 180 Countries and territories.
Whilst the methodology of the CPI has received criticism from many, and the annual results cannot be strictly compared to present a compelling trend analysis, not least due to methodology changes, there remains benefit in doing so, to see the relative fortunes of those in the Index and whether the Index is providing insight that’s useful. The emergence of the CPI highlighted the importance and increased the awareness of Corruption as a global issue. The report remains a key contributor to Country Risk Models globally used by FI’s in understanding and managing financial crime risk which includes Corruption.
CPI – key findings:
- Average score from 180 Countries in 2018 is 43/100, with 2/3rd below 50/100.
- In 2000, the average score was 4.8/10, & from 2010 it was 4/10, in 2015 it was 37/100 & in 2018
- As to Regions, Sub Saharan Africa at an average of 32 followed next last by C&E Europe at 39 and MENA at 45.
Here are some highlights based on a review of the CPI findings over its 20 plus years history:
- the first survey assessed 41 Countries in 1995, rating Countries on a 1-10 scale, with the least Corrupt being New Zealand, (9.55), Denmark (9.32), Singapore (9.26), Finland (9.12) & Canada (8.87) and the most Corrupt; Indonesia (1.94), China (2.16), Pakistan (2.25), Venezuela (2.66) & Brazil (2.70)
- by the year 2000 Transparency International had increased the number of Countries covered in the CPI to 90 in the hope that this would increase public discussion and action to address and reduce corruption and its effects. Coverage would continue to increase and Countries rated on a 1-100 scale, for example in 2003 (133 Countries covered), in 2005 (159), in 2010 (178) & in 2018 (180).
- more than two-thirds of countries reported in the CPI 2018 score below 50, while the average score is just 43/100.
- in 2000, the average score was 4.8/10. This has generally got worse as lower income Countries are included in the CPI with the increase in coverage. Nevertheless since 2010 the average score has largely stagnated with 2010 (4/10), 2015 (37/100) and 2018 (43/100).
- for the latest 2018 Index there is little change in the top 10, (Denmark, New Zealand, Finland, Singapore, Sweden, Switzerland, Norway, Netherlands, Canada, Luxembourg).
- for the last 3 years, the top 7 countries in the CPI consist of the four Nordic nations – Denmark, Finland, Sweden and Norway, plus New Zealand, Singapore and Switzerland. Yet that doesn’t mean that these countries are corruption-free. Countries in the top 20 (least corrupt) in 2010 that didn’t make it into the top 20 in 2019 was Qatar 33/62), replaced by Belgium.
- Qatar has fallen significantly from a top 20 place in 2010 with a score of 77 to 33rd place with a score of 62 (scales aligned). Other decliners of note include Hong Kong from a score of 84 in 2010 to 76 in 2018, Singapore from 93 to 85, Australia from 87 to 77, Turkey from 44 to 41, Spain from 61 in 2010 (Spain had a score of 70 in 2005) to 58, Brazil from 37 to 35 & Libya from 22 to 17. Also notable fallers from 2015 are Chile (70 to 67), Malta (60 to 54) & Hungary (51 to 46). For the US see separate bullet below.
- Senegal has improved significantly from a score of 29 in 2010 to 45 in 2018 (scales aligned). Other improvers of note include, Greece from a score of 35 in 2010 to 45 in 2018, Russia from a score of 21 to 28, China from a score of 35 to 38, & the UK from a score of 76 to 80. Other notable improvers from 2010 to 2018 include Estonia from 65 to 73, Guyana from 27 to 37, India from 33 to 41 and Ivory Coast from 22 to 35.
- worst scoring countries in the CPI 2018 are Somalia, Syria and South Sudan with scores of 10, 13 and 13, respectively. The 20 Countries with the worst scores (most corrupt) in 2010 that have moved up the list and out of the bottom 20 are Russia (28), Tajikistan (25), Papua New Guinea (28), Laos (29) & Kenya (27), replaced with Cambodia, Yemen, Libya, Haiti & North Korea.
- from a regional perspective, averages are up since 2010, apart from in the MENA Region which is flat. Not surprisingly Western Europe and the EU has the best results but has only increased from 6.53/10 to 66/100 from 2010 to 2018. The Region that fares worst is Sub Saharan Africa though it has increased from 2.85/10 to 32/100 over the same period. For Africa, only eight of 49 countries score more than 43 out of 100 on the 2018 Index, reflecting commitments from African leaders in declaring 2018 as the African Year of Anti-Corruption. The largest gains have been seen regionally in the Americas with a change from 3.94/10 to 44/100 again over the same period, though no improvements have been made over the last 3 years.
- the US dropped 4 points in the CPI 2018, from 75 to 71, and failed to rank within the top 20 nations for the first time in eight years. The 2018 US score matches it’s score in 2010 (71/100 versus 7.1/10) – (Scores aligned). Curiously the 2018 score almost matches the scores for the US in both 2005 and again in 2015 (7.6/10 versus 75/100). Whilst this fluctuation is curious, more important is that overall it is dropping down the rankings, which is a concern as the US holds a symbolic position as a leading advocate of tackling corruption.
- Whilst China has seen its score improve slightly from a score of 35 in 2010 to 39 in 2018, the high level of Corruption perception that remains and afflicts the world’s second largest economy and the worlds most populous nation remains a deep source of concern despite President Xi’s much vaunted Anti Corruption drive, which by taking these results into account suggests its having little effect overall.
The lack of progress according to the CPI calls into question whether more needs to be done, particularly on public corruption which is the focus of the CPI, and in particular whether the levels of Corruption should be taken more into account in FATF Country evaluations than they have in the past. As Transparency International itself states, “Our research makes a clear link between having a healthy democracy and successfully fighting public sector corruption,” and “Corruption is much more likely to flourish where democratic foundations are weak and, as we have seen in many countries, where undemocratic and populist politicians capture democratic institutions and use them to their advantage.” Perhaps FATF should focus even more in its Country evaluations and asses Countries based on their attitude and record on corruption and not just on their results for technical compliance and effectiveness.