CORRUPTION Syndromes of Corruption

From analysis to reform 213
forms: leaders who have been practicing corruption with impunity may
have to face credible threats to end the flow of funds. Donor countries
contemplating such steps must prepare themselves for resistance from
domestic business interests accustomed to profitable deals with the
Moguls, particularly since many countries in this group are dependent
upon the extraction and export of natural resources. To the extent that
Moguls have been siphoning off aid and loan funds some early reductions
in corruption may result from restricting or cutting off the flow, but the
longer-term benefits of conditionality may be preceded by social and
economic difficulties in the target countries. Carrots, as well as sticks,
may still be effective in Official Mogul cases: aid and loans can reward
meaningful guarantees of civil liberties and encourage the development of
‘‘civic space’’ as noted above.
Aid and loans involve the movement of funds into countries, but the
reverse flow is important too. Official Moguls and their clients (like
Oligarchs in the preceding group) frequently send their corrupt gains
abroad, where institutions are stronger and returns are greater. Measures
to make it difficult to hide such funds – real names on bank accounts, rather
than just numbers – the ability to freeze such funds quickly on credible
evidence of corrupt origins or uses, and the willingness to seize and repatriate
them when appropriate – may not prevent corruption but will make it
more difficult to conceal and use the gains. Anti-money-laundering initiatives
in 2000 and 2001 by the inter-governmental Financial Action Task
Force (FATF, 2004) and ‘‘Know Your Customer’’ programs (Financial
Services Authority, 2003) requiring banks and investment brokers to
document the sources of large deposits are important first steps, but have
also drawn significant criticism from business and libertarian groups
(McCullagh, 1998; Singleton,1999). Like the OECD treaty they reflect
a growing recognition of the global scope of both corruption and the reform
efforts it requires, and like that treaty effective action will require Influence
Market and other advanced societies to examine the role of their own
financial institutions in the international dirty money market.
Here again suggested reforms are familiar ones. But equally important
are those that are not recommended, such as rapid political liberalization
or privatization. Official Mogul societies have furthest to go in reform
terms; indeed, many anti-corruption measures will have to await basic
developments in institutions and the growth of at least some free countervailing
forces in politics and the economy. Still, countries in this group are
not condemned to pass through a stage of Oligarch and Clan corruption
on their way to something better. We can imagine a more enlightened
regime building institutions that are public rather than personal in their
agendas and basis of authority. Indeed, the very lack of constraints that aids