Activists say donor governments should track down illicit flows of money from developing countries as a matter of course, not divert aid funds to do so, as proposed by the OECD
(Corrects OECD development aid amount to $130 billion a year, instead of $130 million.)
NAIROBI (Thomson Reuters Foundation) – Donors should be “daring” and “innovative” and use aid money at home to recover assets stolen from developing countries, a senior OECD official said, adding that this offered the highest possible return on aid money.
Western aid budgets are being squeezed, and development experts are looking for new ways of using aid to mobilise other sources of finance for developing nations, such as attracting private investment and boosting tax revenues.
Attention is also focusing on stemming illicit financial flows out of developing countries.
Sub-Saharan Africa has lost $1 billion a week for the past 30 years in illicit financial flows, according to the African Development Bank and Global Financial Integrity. OECD development aid has stagnated at about $130 billion a year.
One new idea is to use aid money to pay for anti-corruption institutions in donor countries to investigate, freeze and return looted wealth - though some activists say it is the responsibility of donor governments to do this anyway, without using aid funds.
“There is hardly any area where you can get higher returns on aid money,” Jon Lomoy, director of the Development Cooperation Directorate of the Organisation for Economic Co-operation and Development, told Thomson Reuters Foundation.
“If you look at the ratio between investment and returns on investment, this is far beyond what you can expect from any other use of aid.”
TRAILBLAZER
Lomoy cited the British government’s Department for International Development (DFID) as a trailblazer.
The City of London, the world’s second most important financial centre, has long been criticised for allowing banks to handle illicit money, much of it stashed in British bank accounts by senior officials in developing countries or transferred to tax havens.
Since 2006, DFID has given £9 million ($14.4 million) to anti-corruption units within the City of London and Metropolitan police forces which pursue foreign officials’ money laundered in London and investigate allegations of bribes paid abroad by UK companies.
“Stamping out corruption is a vital part of DFID’s work and something I feel incredibly strongly about,” Secretary of State for International Development Justine Greening told Thomson Reuters Foundation. “When corruption happens in developing countries it is the very poorest people who foot the bill.”
Over £100 million ($160 million) of assets have been restrained, confiscated or forfeited and almost £14 million has been returned to developing countries as a result of DFID's initiative.
“We are encouraging agencies to follow the lead of DFID and use aid money to fund investigation and prosecution at home,” Lomoy said. “We also encourage donors to be a bit daring and innovative here.”
The City of London’s Overseas Anti Corruption Unit (OACU) has nearly 20 live cases and has convicted more than six people this year.
An OACU investigation led to the UK’s first conviction for bribes paid abroad. In 2008, a British company director and an adviser to Uganda’s president were jailed in England for paying £80,000 in bribes connected with a defence project.
DETERRENT
Most important is the deterrent effect on countries like Nigeria, whose economic development has been held back for decades by massive corruption.
James Ibori, governor of Nigeria’s oil-producing Delta State until 2007, was jailed for 13 years in 2012 after pleading guilty to 10 counts of fraud and money laundering worth $79 million, in one of the UK’s biggest embezzlement cases.
Ibori is the most senior Nigerian politician to be held to account for corruption.
In contrast Diepreye Alamieyeseigha, ex-governor of oil-producing Bayelsa state, was sentenced to two years’ jail in Nigeria in 2007 for corruption and money laundering but served just days of his sentence after spending nearly two years in detention awaiting trial.
He received a pardon from President Goodluck Jonathan earlier this year, which means he can re-enter politics. Anti-graft activists condemned his short jail sentence and pardon as inadequate, given his theft of millions of dollars of public money.
The two cases, however, do appear to have deterred other officials. “A senior investigative officer in Nigeria stated that ‘there was an 80 percent drop in Nigerian assets going to the UK after the cases of the governors’,” U4 said in a report.
Some activists say that money spent in donor countries on fighting corruption should not be taken from the aid budget.
“It’s not something you do as aid. It’s something you do because it’s your responsibility as a government,” said Tove Maria Ryding, an analyst with the European Network on Debt and Development, an advocacy group.
“It’s a political problem, when we start calling it ‘aid to Africa’ when we take action against the individuals that are illegally taking money out of Africa.”
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