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Thu. February 29, 2024
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Credibility of G8 countries rests on keeping financial markets clean
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Zambia's former president, Frederick Jacob Titus Chiluba, is famous for his clothes. In a raid, 349 designer shirts, 206 jackets and suits, and 72 pairs of shoes, many of them bearing Chiluba's personalised FJT monogram, were seized as part of an investigation into corruption and graft. In May, he was found guilty of siphoning millions from state coffers while in power, and his clothes were cited as "the most telling example of corruption" by the London high court judge presiding over the case. The story of Frederick Chiluba and his monogrammed designer clothes, in a country where the majority of citizens live on less than one dollar a day, has played out as a lively scandal in the media. After he refused Zambian President Mwanawasa's offer of a pardon in exchange for a guilty plea and the return of most of the money, the Zambian government initiated a civil case against him in the United Kingdom, on the basis that the money he stole had passed through banks in London on its way offshore. The case led prosecutors through Belgium, the UK, the US, South Africa and the Caribbean. Upwards of US $40 million was discovered to have been diverted from the Ministry of Finance into an account at the London branch of the Zambia National Commercial Bank (Zanaco). The UK court found Chiluba guilty and ordered him to repay US $39 million to the Zambian state. Chiluba's guilty verdict was a rare story of successful international cooperation. Asset recovery cases normally deal in the millions of dollars, the interest on which creates a built-in incentive for banks to delay cooperation in corruption investigations. As long as legal proceedings continue, the holding bank earns interest on the stolen assets. Yet Chiluba's case is small potatoes as the proceeds of corruption go. The International Monetary Fund estimates that up to US $1.8 trillion is laundered annually, much of it derived from corrupt practices. But it takes two to tango. Plundering government coffers won't get a corrupt government official far if banks are unwilling to take the money, and if countries deny safe haven. According to Nuhu Ribadu, Head of Nigeria's Economic and Financial Crimes Commission, about 80 percent of the proceeds of corruption in Nigeria are taken overseas. Without the cooperation of the world's largest financial centres, attempts to clean up and regain assets lost to corruption in poor countries are doomed. With the themes of economic 'growth and responsibility' and African development at this year's Group of Eight (G8) summit in Heiligendamm, much is being made of mutual responsibility and good governance. In fact, a leaked draft of the G8's Africa communiqué stressed the need for African governments to improve governance systems, and strengthen accountability and transparency. But without looking at their own role in keeping financial institutions clean, their call for good governance rings hollow. Taking steps to prevent financial centres from accepting dirty money, making international wire transfers more transparent, and closing loopholes for anonymous transfers to offshore centres, and returning stolen funds will free up capital for economic development and fighting poverty. But all too often, a lack of cooperation between countries means the money smuggled out of developing economies stays in Western banks, accumulating interest while the poor wait and the blame game goes on. Nigeria's Economic and Financial Crimes Commission complains of problems with the French. Peru's efforts to recover the money stolen by former President Alberto Fujimori were thwarted by Japan. Much more can be done to increase international cooperation on asset recovery, and relatively painlessly. The United Nations Convention against Corruption (UNCAC) provides the framework for recovering stolen assets across borders. It contains provisions on asset declarations for public officials and an enhanced role for banks with regard to high-risk clients – so-called politically exposed persons. But among the G8, Canada, Germany, Italy and Japan have yet to ratify this landmark agreement. In some cases, ratification is being held up by almost comic minutia in national legislation. In Germany, the major stumbling block is a hair-splitting definition of what constitutes a public official. The bribery of civil servants in Germany is currently very well regulated; the bribery of parliamentarians in Germany is not. And, perhaps with the fear of overzealous prosecutors wafting across the Bundestag, the measure remains frozen. Transparency International's chapters in both G8 and African countries want the G8 leaders to live up to their side of mutual accountability for African development, and to cooperate with African efforts to recover stolen assets. This means cooperating with investigators in African countries to trace, freeze and return stolen assets, and with prosecutors for legal assistance. It also means closing loopholes in national legislation that currently allow the anonymous transfers of funds to offshore centres. The Chiluba case shows it can be done. The court's ruling will make corrupt officials think twice before plundering state coffers. After a century of look-the-other-way banking, G8 leaders have the power to ensure that this ruling is not the last of its kind. Maybe then, Chiluba will be remembered, not as the leader with the monogrammed shirts, but as the first to fall. Akere Muna is President for the Pan African Lawyers Union and Vice Chair for Transparency International.

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