Nathan Lynch, Compliance Complete
When Lee Chong San gets together with his colleagues from anti-corruption campaigner Transparency International, he is occasionally ribbed for having never been jailed for his work with the voluntary organisation. Lee, 72, is a veteran anti-corruption campaigner who is also a senior adviser to the TI Secretariat in Berlin. As such, he is acutely aware that falling out with political authorities — and its consequences — is an occupational hazard.
"I feel a bit incomplete in the sense that when I was on the board with TI and we went to meetings in Berlin they would jokingly compare our 'CVs'. A number of my colleagues on the board had been in jail before for their work. I have not been to jail yet, so they used to say that I clearly hadn't been too effective," Lee quipped.
The level of commitment that is required for an anti-corruption campaigner in South-East Asia is something that may come as a shock to people who carry out more traditional jobs in the compliance sector. Lee, who has a daughter living abroad, has accepted the challenge because fighting corruption in developing countries is too important a job to pass up for personal concerns. TI is full of volunteers and Lee has so far dedicated 12 years to the organisation.
"I just hate corruption and all of the consequences that it has for society," Lee said during an interview with Thomson Reuters.
Before he retired, Lee was a senior executive in the oil and gas industry — a sector that is no stranger to bribery and corruption involving public officials. When he left the industry at 60, he decided to focus his energies full-time on the interminable battle to reduce corruption in South-East Asia.
In this interview he discusses, among other things, the role of regulators in the financial sector in helping to battle corruption in developing nations.
How critical do you believe the issue of anti-corruption is for South-East Asian nations, such as Indonesia and Malaysia, as they continue the rapid expansion of their domestic economies?
I don't think sufficient attention has been paid to these corruption dangers in South-East Asia. If I look at the Corruption Perceptions Index (CPI), all of the countries in this region — except for Singapore and maybe Brunei — are sitting right at the bottom half of the list. So that says a lot about the state of corruption and why it's so important to address those issues if growth is to be sustained.
I think in this region, most countries are very much prone to corruption risk. They are economies that are set to invest massively in infrastructure in order for them to continue their development and this type of infrastructure development is an area where corruption is so easy to be introduced. For instance, with the development of roads, in Malaysia the cost of a kilometre of highway is so much higher than what you would pay for in other parts of the world.
A lot of the countries in South-East Asia also have oil and gas. This industry is again one of the areas that corrupt practices can come into play. That's why I think it is so important to address these issues of corruption in the extractive industries.
According to TI, growth in these countries has slipped a bit and that can be attributed to the level of corruption in the region. So that is indicative of what corruption can do to impair sustained growth.
The other thing is that money that could be ploughed back into further investment, further infrastructure, is instead siphoned off. It might end up in a developed country where it's hidden away and cannot be traced. So the capital cannot be used for the development of the country from which it has been taken.
So sustainable growth has to be helped by the fact that you have anti-corruption initiatives, laws and regulations — and the political will to enforce those things.
What role do you think the financial sector has to play — especially banks and financial institutions — in combating corruption in developing countries?
For corruption to thrive these people need to get the money out of the country. For them to be able to enjoy the fruits of their sins, they need to launder the money. Now if the banks are firm and sincere about trying to put a stop to this money laundering, for example, then they can make it difficult for people to enjoy the fruits of their illegal activities.
I think it is not only limited to the banks or financial institutions within the borders of these countries themselves. I think it's more important also for those illicit funds to be stopped at the receiving end — the developed countries. If you look at what has happened all the time, the money goes off to say London or Manhattan and other developed places, where the money goes into financial institutions. Then it's not seen again because of the way it's been laundered. So there is no way you can trace those funds. It makes it difficult for anti-corruption efforts to get funds out and recover them. So there has to be a concerted effort between the financial institutions, law enforcement, the anti-corruption campaigners and the politicians in order to really do something about this.
Across the region we have seen people coming to power on an anti-graft or an anti-corruption ticket. Then once they gain power what happens in practice is usually quite disappointing. Is that something that you have observed and, if so, what impact does that have on the fight against corruption — and democracy itself?
Obviously the fight against corruption is something that politicians find it very handy to have in their manifesto when they are campaigning. Then eventually, when they get into power, I guess the maxim that "power corrupts" ensures that they think they can get away with things because they have the reins of government in their hands.
If you don't mete out punishment to the people who have been corrupt in the past then you always give the ones who come after them the feeling that nothing is going to happen to them. So they go and make hay while the sun shines and the whole cycle starts over again.
So, regardless of what political regime comes in to power, if they don't have the political will to come out and do things for the people rather than for themselves, then all these things are just ways of getting themselves into the seat of government. Unfortunately, these things are happening all over again in most parts of our region. I guess the only country that stands out well is Singapore with regard to having more concern for the people in the country than enriching themselves. But I don't think that's the case across the region.
In view of all this, how do you see South-East Asian nations performing on the Corruption Perceptions Index (CPI) in the near future?
They've been performing pretty poorly really and I don't see them coming up any time soon. I kind of feel that some of the countries, like Indonesia, are doing much better — and of course it will take a while for them to come up from where they are. But if you look at all the countries in South-East Asia, except for Singapore and Brunei, they score from 49 to 16 — with zero being seen as the most corrupt. So they have a long way to go in their ability to fight corruption and be seen to be less corrupt than they are right now.
The obvious concern about the CPI index is that is that perceptions don't always match reality. A lot of people would say that first-world corruption is there but it's more veiled and is done under the guise of a functional rule of law and democracy. Do you think that that's a problem, in the sense that a "perceptions" index will just reflect stereotypes about corruption?
I think that's a fair comment with regard to the fact that this is a perceptions index. TI has never indicated anything else — it's a reflection of the image the country projects. Having said that, TI has made a lot of effort to try to be as objective and transparent as possible in the number of reports they take in and compile before they come to a conclusion. So I think there is a strong effort to match reality and perception.
Of course it's never going to work perfectly. But I don't think there's any other report available that does a better job of making these assessments. I think you have to work with what we have at the moment. There could be good brains working to come up with something that can be more objective or more reflective of reality on the ground. But until such a report can be made, I guess we're stuck with what we have right now.
What role does foreign anti-bribery legislation — such as the U.S. Foreign Corrupt Practices Act and the UK Bribery Act — have to play in mitigating developing world corruption? Is it critical to set the agenda and set the bar for developing nations to aspire towards? Or is it simply an act of window dressing from developed nations that have their own problems with political corruption?
I don't think it's a case of a whitewash, or window dressing, I think some pretty good effects have flowed on from those bribery laws.
If you are looking for investment from the UK or for that matter the U.S. then you had better be sure that your laws are consistent with what they have. Companies are not going to be comfortable investing in your country if bribery is rampant. These company directors will be worried because they have to pay bribes in a foreign country and they could go to jail for that in the UK.
So in that sense it is good that such legislation is in place. Developing countries that are looking for investment need to conform to the requirements of, for example, the UK. So in that sense I think there should be more laws of that nature that require the developing countries to conform.
What about anti-money laundering (AML) reforms, driven by the Financial Action Task Force? The AML regime in most countries has been in place for at least 10 years now and we have had plenty of time to see how effective they are. How do you think this global AML agenda is playing out across the region?
A lot of capital is still going out of these developing countries and a lot of those money flows are not legitimate. So somehow, somewhere, the AML regime is not working too well. The danger is that all the banks do is tick boxes and say they've done things to ensure that they know their customers etcetera and then the money still goes out.
I think the more important thing is practical reforms in the developed countries where the money is going to. If we actually block that money flow then I think it's more effective than just saying that the developing countries have to put laws in place regarding AML.
Once the money has moved into the banking system in the developed countries, it's so hard to get that money traced because of the secrecy laws and so on. So if one is serious about making sure that this money laundering is not rampant, then you have to look beyond what we are currently doing.
Does the AML issue go hand-in-hand with the anti-bribery agenda? Can one be successful without the other?
They definitely have to go hand-in-hand. If you can't put a stop to laundering then it gives a very good incentive for people to be corrupt, knowing they can get the money out and laundered. Then they live happily ever after. So it does go hand-in-hand with things like trying to stop human trafficking, stopping the drug trade and so many other things that people do as predicate crimes.
Sometimes you wonder how sincere the financial institutions are in trying to reduce this kind of illicit money flow. I would suspect that quite a bit of their money flow comes from corrupt activities.
You see situations where a dictator has been arrested, for instance, and there is an effort to recover money that has been stolen from the country. Usually only a portion of what has been alleged to have been taken out is recovered. Everything goes into accounts where it can't be traced. So it raises the question, what are the governments in these countries doing with regard to putting a stop on this illicit money flow?
What do you see as being the biggest issues in the fight against corruption in South-East Asia in coming years? Are there any milestones that you hope to see being reached?
Actually, there are so many that it's hard to know where to start [laughs]. In South-East Asia the political will is something that we just don't see with regard to trying to do something on corruption. I think sometimes these guys are too cosy. In Malaysia, for example, there's now been 50-odd years with the same party in power. Of course there's a lot of grumblings with regard to the way elections are currently conducted and how money is used to get the results that the current government wants.
Unless you get a groundswell of people rising up against the regime, it's unfortunately going to be hard to see how things might improve for the better. So I guess it's a question of having to be vigilant and hopefully people in the ruling parties will eventually wake up with a conscience and want to do something. In the end, whatever happens it will have to come from the government itself. With everything that we at TI say that we advocate for and we plead for, nothing will happen without the government's willingness to eliminate corruption.
Finally, what role do you see global regulatory bodies as playing in the quest to reduce corruption in developing and developed nations? Do they actually have a moral right to try to intervene in what's going on in South-East Asia for instance?
Of course international bodies like the FATF can come up with recommendations and regulations but if there is no will to implement at the local level then all the good work amounts to nothing. It's just window dressing and whitewashing and so on. It doesn't have any beneficial impact on the country and people like us living in those countries.
On a commercial level, businesses will definitely not want to come to countries where the corruption perceptions are poor. Those are the kind of incentives that will encourage countries to improve on how they are perceived. In doing that they hopefully will put laws and regulations in place themselves that will make sure that the corruption is tackled seriously.