Transparency Times January 2019

From the Chair

Suzanne Snively ONZM Chair Transparency International New Zealand

Suzanne Snively ONZM
Chair
Transparency International New Zealand

From the Chair, January 2019 Special CPI Edition.

Along with Prince William, New Zealand’s Prime Minister, Jacinda Ardern, and Finance Minister, Grant Robertson, were the darlings at the Davos World Economic Forum (WEF) earlier this year. Meantime back home, preparations of the Special Report on corruption in New Zealand, led us to focus on WEF’s opinion survey.

This WEF survey is one of several contributary sources towards overall scoring in the Transparency International Corruption Perceptions Index (TI-CPI). It was the reason behind New Zealand’s fall in rank from first to second place (behind Denmark) in the latest CPI results. 

The key contribution to this decline was the 9-point drop within the WEF measure of corruption.  This measure is based on questions responded to by 66 New Zealand business executives between January and April 2018.

Last year marked the 15th anniversary of the 2003 adoption of the United Nations Convention Against Corruption (UNCAC). Since 2003, UNCAC has reached near-universal ratification by 186 countries as of September 2018.

Even with nearly all the world’s countries signed up to UNCAC, the prevalence of corruption remains substantial.  Tackling and preventing corruption has proven to be a complex challenge. A reason is the significant lack of understanding of corruption which, in turn, stems from the lack of measurement that provides knowledge about ways to eliminate it.

Measuring Corruption

When the measurement of corruption began, the difficulty of collecting relevant evidence favoured the use of indirect approaches. Rather than being based on the occurrence of the phenomenon, these approaches relied on other methods of assessment. This included expert assessments and composite indices.

Transparency International’s Corruption Perceptions Index (TI-CPI) is one of several indirect assessments of corruption that have been produced over the past two decades.

Results derived from the TI-CPI have attracted considerable attention from the media, policymakers and the public at large. In this way, it has been a useful tool to advocate for the fight against corruption and to give visibility to this topic in the international agenda.

A major challenge with the TI-CPI is that it provides insufficient information about the drivers of corruption needed for policymaking purposes.

TI-CPI’s measurement of corruption relies on a combination of contributing indicators including many that are perceptions of corruption, instead of direct measures of corrupt transactions.

To prevent corruption, governments need to keep track of the magnitude of, and trends in, its causes and to inform the population. This includes producing data to comply with the requirements of international monitoring.

The UN SDG Goal 16.5: A universal measurement of corruption

Target 16.5 of the Sustainable Development Goal calls on countries to “Substantially reduce corruption and bribery in all their forms”.

To assist in this, the United Nations Office on Drugs and Crime (UNODC) has been given the role of leading the development of indicators to develop a universal measure of corruption that can assist in improving the administration of programmes designed to eradicate it. UNDOC is progressing measures for SDG indicators 16.5.1 (public service corruption) and, jointly with the World Bank, 16.5.2, (corruption in business).  

The SDG’s questions are much more direct about whether public servants are involved in corruption than the survey questions asked by the WEF that are currently calibrated for the TI-CPI.

For example:
SDG 16.5.1 – Q2) Please consider all the contacts you had with a civil servant/public official in the last 12 months: was there any occasion when you had to give to any of them a gift, counter favour or some extra money (other than the official fee), including through an intermediary?

SDG 16.5.2 focus on corruption surveys amongst businesses will allow countries to gain knowledge of ways to prevent corrupt business practice.

Given the consequences of corruption, the sooner we adopt these new SDG questions, the better. 

It is time that New Zealand threw its weight behind SDG 16.5 so that the direct measurement of corruption can begin as soon as possible.  A first step of appointing a Cabinet Minister with a strong inclination to lead the development of SDGs, will enhance corruption detection both here and abroad.

Given the current level of engagement of New Zealand public officials to prevent corruption here, this will hugely add to our reputation as a good country.

Finally

Please take time to view the insightful video entitled The Struggle against Corruption: the Doha Declaration promoting a culture of lawfulness later in this newsletter.


Suzanne Snively, ONZM

Chair

Transparency International New Zealand Inc.

Corruption Perceptions Index 2018

New Zealand has one of the least corrupt public sectors in the world

New Zealand has again been ranked as having one of the least corrupt public sectors and judiciaries in the World. 

The Corruption Perceptions Index (TI-CPI) released today by Berlin based Transparency International has New Zealand dropping its score to come second after Denmark, whose overall score stayed the same.

Since the inception of the TI-CPI in 1995, New Zealand has vied for first place with the Scandinavian countries. For the 2017 TI-CPI, Denmark came second to New Zealand.

New Zealand’s drop in ranking is primarily due to poorer results from the survey conducted by one of the 13 sources of the TI-CPI, the World Economic Forum’s Executive Opinion Survey.

Because of the closeness of the TI-CPI values amongst the top-ranked group of countries, it is unclear if this change for New Zealand is a one-time deviation or a warning from executives of emerging concerns here.

The Chair of Transparency International New Zealand (TINZ), Suzanne Snively, said “Our public sector ranks very highly internationally, but we must resist complacency. We have a lot to lose if this fall were to continue, which would reflect a belief that there was a decline in the integrity of public administration in New Zealand. Our public sector, of which we should be very proud, has been ranked in the top five for the whole 25 years of the TI-CPI.”

In contrast, the ranking of two of our major trading partners, China and the United States, has fallen to new lows.

 “We know corruption exists in New Zealand, as exemplified by the recent case of bribery at Auckland Transport which saw two senior executives sent to prison last year. The recent NZTA case of bribes for driver’s licences is another example. These cases illustrate the nature of corruption and the need for strong integrity systems to identify and manage the risk of it,” says Snively.

The prevention of corruption is too often a low priority – partly because of the perception that we don’t have a problem. On closer inspection, the lack of prevention has resulted in high costs, particularly in the business sector, with evidence of money laundering and major fraud investigations from the Serious Fraud Office. It reported successful prosecutions for $188 million of alleged fraud during the 2017/18 year.

To maintain world leadership, New Zealand needs to:

  • Take a stronger approach towards corrupt business practices, transparency of corporate and trust ownership, and protection of whistleblowers
  • Hold our business and non-profit sectors to the same high standards
  • Set the “tone at the top” by extending the Official Information Act, introducing a code of conduct for Parliament and increased transparency around lobbying
  • Be open about incidents that involve corruption, immediately when they are discovered.

Lyn Provost, Patron of Transparency International New Zealand, said “the international perception of New Zealand as an open country free from corruption is a key driver of New Zealand’s reputation as a good place to do business and a safe place to travel. This reputation is hugely valuable to NZ Inc. We must be vigilant in maintaining that reputation”. 

Rebecca Smith, Director of the New Zealand Story notes that New Zealand ranks fifth in the Reputation Institute’s 2018 Country Reputation study.

Smith says “Being seen as an ethical country with high transparency and low corruption is an important factor in driving favourability and consideration for New Zealand globally. It is encouraging to once again see New Zealand at the top of the Corruption Perceptions Index.”

Compiled annually by Berlin-based Transparency International, the TI-CPI ranks countries worldwide by perceived levels of public sector corruption using 13 international data sources and risk assessments, 8 which are applied to calculate New Zealand’s score. It does not measure corruption in the non-profit or business sectors.

 

Corruption Perceptions Index 2018 – New Zealand Information

“Our research makes a clear link between having a healthy democracy and successfully fighting public sector corruption. 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 can use it to their advantage.”                      Delia Ferreira Rubio, Chair of Transparency International. 

“What the Corruption Perceptions Index published by Transparency International tells us is that New Zealand has one of the world’s least corrupt public sectors and judiciaries. Having remained for many years as one the highest ranked, New Zealand has a lot to lose from moving out of the very top group of countries. Maintaining our position among the top countries requires constant vigilance.”
Suzanne Snively, Chair, Transparency International NZ

 

What is the Corruption Perceptions Index?

Transparency International’s Corruption Perceptions Index (TI-CPI) scores and ranks countries/territories based on how corrupt a country’s public sector and judiciary are perceived to be by experts and business executives. It is a composite index, a combination of 13 surveys and assessments of corruption, collected by a variety of reputable institutions. The TI-CPI is the most widely used indicator of corruption worldwide. The TI-CPI does not consider corruption in the business sector.

What do the terms Rank and Score mean in this context?

A country or territory’s score indicates the perceived level of public sector corruption on a scale of 0-100, where 0 points means that a country is perceived as highly corrupt and a 100 points means that a country has sound integrity systems.

A country’s rank indicates its position relative to the other countries/territories included in the index.   

What are New Zealand’s RANK and SCORE for 2018?

New Zealand is ranked second in the world with score of 87 points (behind Denmark with score of 88).  This is a drop of two points since 2017, whilst Denmark’s score remained steady.  

All of the top seven countries are helped by robust rule of law, independent oversight institutions and a broad societal consensus against the misuse of public office and resources for private interests. Consistent with results from previous years, the index indicates that corruption tends to thrive in fragile states and countries enmeshed in conflicts.

Comment by Transparency International Zealand on the Ranking

  • New Zealand has vied for first place with the Scandinavian countries in the TI-CPI since its inception in 1995. In the 2017 TI-CPI, Denmark came second to New Zealand.
  • That New Zealand remains at or near the top year after year, is the key message that can be taken from the TI-CPI, compiled and published independently by Transparency International.
  • It is difficult to tell whether year over year variations are the result of the ongoing improvements to the various source indexes, or a change within New Zealand that is likely to be sustained without remedial action. 
  • We have yet to see trends signalling the need for serious concern about events of the recent past. Studies of New Zealand’s reputation indicate that international opinion trusts New Zealanders to do the right thing when corrupt practice is found.

How do we compare against neighbours and trading partners?

  • New Zealand is ranked Number 1 in the Asia Pacific Region
  • The 2018 TI-CPI ranking for the public sectors of New Zealand’s major trading partners are shown below with their 2017 TI CPI ranking indicated in brackets:
    • People’s Republic of China: 87 (2017: 77)
    • United States of America: 22 (2017: 16)
    • Japan 18 (2017: 20)
    • Australia: 13 (2017: 13)
    • United Kingdom: 11 (2017: 8)

Movement at the top

The list of countries in the top fifteen is unchanged but their order of ranking has altered for 11 of them.  The largest fall in ranking in this group was Norway, down 4 places although only a 1-point drop in score. Five of the 15 top countries remained stable for 2018 compared to 2017.

United States

With a score of 71, the United States, dropped four points since last year to earn its lowest score on the TI-CPI in seven years. This year also marks the first time since 2011 that the US drops out of the top 20 countries. The low score comes at a time when the country is experiencing threats to its system of checks and balances, as well as an erosion of ethical norms at the highest levels of power.

What affected New Zealand’s move from number 1 to number 2?

  • We have isolated the change in New Zealand’s 2018 Corruption Perceptions Index rank to just one data source, the Executive Opinion Survey (EOS) conducted by the World Economic Forum (WEF). This is a significant 9-point drop in perceptions of corruption that resulted from 66 New Zealand businesses executives who responded to this survey between January and April 2018. Results were published in the Forum’s Global Competitiveness Report. Two questions from this survey were used in the TI-CPI. 
  • The first question asked respondents to rate how common it was for firms to make undocumented extra payments or bribes connected with imports and exports, public utilities, annual tax payments, awarding of public contracts and licences or obtaining favourable judicial decisions. The second question asked executives to rate how common is the diversion of public funds to companies, individuals or groups due to corruption. Refer to From the Chair for text of these questions. 
  • Two other countries, Germany and Norway, experienced a similar drop in the WEF index and, like New Zealand, this was the only change of significance to their scores. However, the rank of Norway fell four places while Germany went up one place. This indicates that very similar change in component indexes can have a significantly different effect on the final country rankings. The WEF EOS scores over time are shown below.
  • The WEF survey is well recognized and respected.
  • It does not publish much about the content questions, such as which executives were surveyed, the range of companies they represent, and the level of consistency between survey participants, over time. 
  • It is hard to know what was front-of-mind for executives at that time, to allow us to draw specific conclusions. 
  • The time period covered by the whole mix of indexes spans periods of both the Labour-led Coalition and the previous National-led government.  It is possible that business respondents surveyed between January and April 2018 were reflecting increased knowledge about identifying corrupt practice through, for example, the implementation of the 2015 omni-bus anti-corruption legislation implemented over time since 1 July 2016.
  • Other factors that may have influenced the survey include:
    • the Auckland Transport corruption case decision,
    • the regular media releases from the Serious Fraud Office, and,
    • the annual report of the Police Financial Investigation Unit.

Is there corruption in New Zealand?

  • The TI-CPI measures comparative levels of corruption as perceived by those who have dealings with governments at any level. Being among the highest ranked countries indicates that the chance of finding that corrupt practices are systemic in some aspect of the public sector or the judiciary, is very low.
  • It does not suggest that there are no corrupt actions, but that a capable integrity system exists with practices to respond and remedy corrupt behaviour when uncovered.
  • See Examples of Corruption in New Zealand in this issue

Is this about all of New Zealand or just the public sector?

  • The TI-CPI is intended to report on measures about government at all levels, i.e. political and administrative, local and central government, and judicial processes.
  • The sources of information used to compile New Zealand’s score tend to focus on central government public officials, with some questions related to the judiciary, covering the rule of law.
  • There is little or no data in the compilation of New Zealand’s score related to local government, crown entities such as schools and hospitals, or elected politicians from either central or local government.
  • In one of the contributory surveys to the CPI, The Economist Intelligence Unit, the judiciary is queried in a question: “Is there an independent judiciary with the power to try ministers/public officials for abuses?”

Is it a factor of our size, remote location and small population?

  • The TI-CPI method used to compile the CPI is designed to take into account the size of the countries, compiling scores so they can be ranked against each other. Interestingly though, the countries which consistently rank at the top are all small countries with long standing democratic systems.  It may be that size strengthens the systems for preventing corruption, by the degree of localised oversight that can exist in a small country.
  • Transparency International’s research evidence finds a strong interrelationship between the health of democracies and corruption.
  • “With many democratic institutions under threat across the globe – often by leaders with authoritarian or populist tendencies – we need to do more to strengthen checks and balances and protect citizens’ rights,” said Patricia Moreira, Managing Director of Transparency International. “Corruption chips away at democracy to produce a vicious cycle, where corruption undermines democratic institutions and, in turn, weak institutions are less able to control corruption.”
  • Furthermore, International studies are also finding that income inequality can result in, or be a result of corruption.
  • Many countries at the top of the CPI have a number of attributes in common. This includes a respect for the rule of law, independent oversight of institutions, an independent media and space for civil society organisations to operate and speak out. Transparency International Key Messages, January 2019

How good is the Corruption Perceptions Index?

  • The methodology of the TI-CPI is based on taking 13 different indexes prepared by reputable global organisations which regularly measure perceptions of corruption from various perspectives. The inclusion of information sources that concentrate on particular groups of countries, adds precision to their rankings. But use of indices applicable to every country would produce more reliable rankings. 
  • Only 8 of the 13 information sources contribute to the calculation of New Zealand’s score. With few exceptions all of the top countries were evaluated against these 8 – and only these 8 – source indices. The other 5 data sources used in the TI-CPI apply to higher risk countries or supply additional regional data

How reliable are the results from year to year?

  • That the top fifteen (or so) countries have maintained their position overall in the face of continuing minor change in the ranking between them, justifies the overall level of confidence that TINZ has in the measures.  A deeper analysis is required to conclusively determine whether changes in the New Zealand position are the result of an increased level of corruption in New Zealand, changing perceptions about corruption or simple normal deviations within the data used to compile the TI-CPI.  
  • A high-level assessment in 2017 and also 2012, of the reliability of the final ranking of countries has been undertaken by the European Commission Joint Research Centre (ECJRC). Both audits found that the TI-CPI is conceptually and statistically coherent. For the 2018 TI-CPI a revised approach was used to calculate standard errors and effect sizes e.g. “the size of effects” (or impacts). 
  • The ECJRC 2018 report will be released in the near future, and an explanation including all formulas can be found on the Transparency International website.
  • The TI-CPI data includes a standard error range for each country. New Zealand’s composite score for 2018 is 87, with an error range from 83 to 91 which places the country with a ranking anywhere from first to tenth in the 2018 TI-CPI.

Significant movements up and down since 2015

For complete results see transparency.org.nz/corruption-perceptions-index/

Data Sources Used in the 2018 TI-CPI

The CPI 2018 is calculated using 13 different data sources from 12 different institutions that capture perceptions of corruption within the past two years.  These are listed below with the ones used to compile New Zealand’s score noted.

1.

African Development Bank Country Policy and Institutional Assessment 2016 

 

2.

Bertelsmann Stiftung Sustainable Governance Indicators 2018

New Zealand

3.

Bertelsmann Stiftung Transformation Index 2018

 

4.

Economist Intelligence Unit Country Risk Service 2018

New Zealand (pay-walled)

5.

Freedom House Nations in Transit 2018

 

6.

Global Insight Country Risk Ratings 2017

New Zealand (pay-walled)

7.

IMD World Competitiveness Center World Competitiveness Yearbook Executive Opinion Survey 2018

New Zealand

8.

Political and Economic Risk Consultancy Asian Intelligence 2018

 

9.

The PRS Group International Country Risk Guide 2018

New Zealand (pay-walled)

10.

World Bank Country Policy and Institutional Assessment 2017

 

11.

World Economic Forum Executive Opinion Survey 2018

New Zealand

12

World Justice Project Rule of Law Index Expert Survey 2017-2018

New Zealand

13.

Varieties of Democracy (V-Dem)

New Zealand (pay-walled)

What does the Corruption Perceptions Index Measure?

All of the sources measure public sector corruption, or certain aspects of public sector corruption, including the following:

  • Bribery
  • Diversion of public funds
  • Use of public office for private gain
  • Nepotism in the civil service
  • State capture
  • The government’s ability to enforce integrity mechanisms
  • The effective prosecution of corrupt officials
  • Red tape and excessive bureaucratic burden
  • The existence of adequate laws on financial disclosure, conflict of interest prevention and access to information
  • Legal protection for whistleblowers, journalists and investigators

What does the Corruption Perceptions Index NOT Measure?

Based on the dimensions included in its external sources, the following aspects are not captured in the Corruption Perceptions Index

  • Citizen perceptions or experience of corruption
  • Tax fraud
  • Illicit financial flows
  • Enablers of corruption (lawyers, accountants, financial advisors etc),
  • Money Laundering,
  • Any type of private sector corruption
  • Informal economies and markets

Transparency International New Zealand – National Integrity Systems Assessment

Transparency International New Zealand is soon to publish an update of the 2013 Integrity Plus: New Zealand National Integrity Systems Assessment (NIS).   This update has found a very welcome level of progress by public officials on addressing recommendations in the 2013 NIS.  It also makes five recommendations about policy changes that will prevent corruption.

Whilst the TI-CPI focuses on the public sector and judiciary, a NIS assessment is essentially a risk-assessment of the wider integrity system including the non-profit (civil society) and private (business) sectors. It is an evaluation of whether the ‘pillars’ of a country’s governance systems, and the underlying societal foundations, function well and in balance with each other to safeguard against the abuse of power.

More details will be provided in the next issue of Transparency Times.

Examples of Corruption in New Zealand

Newsletter Co-editor
Member with Delegated Authority for Open Government Partnership, Parliamentarian Network and SGDs

David Dunsheath

TINZ Member with Delegated Authority for Open Government

Transparency Times Newsletter Co-editor

Corruption exists in New Zealand where there will always be individuals and organisations looking to break or bend the rules for personal advantage. Technology is adding new tools and levels of sophistication for corrupt practices. Corruption prevention, detection and prosecution remain critical for New Zealand. We can’t be complacent with our reputation as one of the least corrupt countries in the world.

What are we talking about?

Corruption is the abuse of entrusted power for private gain. It includes Bribery which is the offering, soliciting, giving or receiving of a financial or other advantage, to influence the actions of a person in charge of a public or organisational duty.

Corruption and bribery, encompass a variety of activities. Examples include:

  • the misuse of funds/resources
  • bribery, forgery, extortion
  • money laundering
  • fraud as a subset of corruption that extends to theft, false accounting or the supply of false information, embezzlement, misappropriation, false representation, tax evasion, and insider trading, theft of intellectual property.

Whereas the majority of corruption can be labelled as fraud, this subset is beyond the scope of this article.

Examples of political corruption

The non-disclosure of political party funding has again surfaced, together with concerns over foreign donations to political parties.

Investigative journalist and author of several books, Nicky Hager, has made various allegations of political corruption and cover-ups. In “Dirty Politics” he identified inappropriate collaborations between government ministers and bloggers claimed to influence the 2011 election outcome.

In 2007, New Zealand Pacific Party MP, Taito Philip Field, was imprisoned on 11 bribery and corruption charges and 15 obstruction of justice charges.

Examples of public sector corruption

In December 2018, the State Services Commissioner’s inquired into state sector spying on the public. This uncovered system-wide failings across the entire public service. These included a pattern of inappropriate closeness with private contractor, Thompson & Clark, and poorly managed relationships with other contractors. The Serious Fraud Office (SFO) is investigating two government employees who undertook secondary employment with this contractor.

In 2018, corruption and bribery was identified within the New Zealand Transport Agency (NZTA). This was associated with issuing new driver licenses. Fake documentation and light-handed testing was involved.

Senior managers, Stephen Borlase (Projenz) and Murray Noone (Auckland Transport) were jailed for procurement corruption and bribery offences totalling $1.2 million. They colluded between 2006-13 with undocumented false invoicing and and undisclosed massive gifting. Projenz achieved a rapid rise in uncontested contracts and resultant vast increase in revenue.

Peter Meng Yam Lim (senior Immigration New Zealand officer) and Ms Kooi Leng Pan (airport worker) were each found guilty of four bribery and corruption charges in 2015. They received S26,000 from two victims to help them obtain visas, even though Lim was not in a position to provide these.

An un-managed conflict of interest situation arose in 2018. A lobbyist consultant was temporarily contracted to the Prime Minister’s Office. She then returned immediately to her private employment without a stand-down period or other safeguards. 

The Office of the Auditor General reported 73 cases of fraud in public entities during 2017/18. complete with the fraud types, methods and reasons for these happening. 

Examples of other corruption

The Panama Papers, the 1MDB trustee case and the Unaoil bribery scandal provide glimpses into the opaque world of offshore money laundering and the clear use of New Zealand as a conduit for corruption. These and other revelations resulted in the Shewin Inquiry with resultant tightening of New Zealand’s trustee laws.  

Sporting at all levels, provide a fertile basis for match-fixing corruption with resultant financial gains by players and corrupt punters. For example:

  • in 2018, New Zealand cricketers were embroiled in such allegations involving 15 international test matches spanning 2009 to 2012.
  • eleven arrests were made in 2018 during an unprecedented police inquiry into harness race-fixing and drug offending as part of 17-month investigation.
  • allegations last year of corrupt player recruitment practices by a secondary school have been defended
  • the risk of corruption in the form of performance-enhancing substances, remains ever-present at all levels of competitive/professional sport.

Deloitte in its 2017 bribery and corruption survey “One step ahead—Obtaining and maintaining the edge Deloitte Bribery and Corruption Survey 2017 Australia and New Zealand.” found that more than 1 in 5 organisations reported recent incidents of corruption in their organisation. [Add Charts – I don’t think we need permission just give them credit]

Conclusion

Corruption exists in New Zealand where there will always be individuals and organisations looking to break or bend the rules for personal advantage.  Technology is adding new tools and levels of sophistication for corrupt practices. Corruption prevention, detection and prosecution remain critical for New Zealand – we can’t be complacent because of this top ranking. 

Source: Deloitte Bribery and Corruption Survey 2017 (Australia and New Zealand) “One step ahead – Obtaining ad maintaining the edge”
Source: Deloitte Bribery and Corruption Survey 2017 (Australia and New Zealand) “One step ahead – Obtaining ad maintaining the edge”

 

 

The Struggle against Corruption

Featured Video Play Icon

 

UNODC – United Nations Office on Drugs and Crime
Published on Oct 22, 2018

Contributor: Timothy K. Kuhner, Associate Professor, University of Auckland, Faculty of Law and TINZ member produced this documentary with the United Nations Office on Drugs and Crime (UNDOC). The Struggle Against Corruption is a powerful 20-minute documentary piece featuring interviews with members of UNODC staff.

Instead of a golden age of political integrity and economic prosperity, the last four decades since the end of the Cold War have brought the world to a dangerous juncture. People are experiencing rising inequality and powerlessness. They’re wondering about the fate of their families, their communities, and the systems that move the world today.

When you add climate change in, our moment in history starts to look a lot like science fiction. Cynicism, frustration, and desperation are rising in countries around the world, often as a reaction to the perceived failure of democracy and globalization.

If all these problems were intimately related, if they’re all part of a single transformation occurring in power centres across the world, if there was something that people everywhere could do about it, then that would be an opportunity the global community could hardly afford to miss.

To understand this possibility, you have to try on a change of perspective. And it all begins with corruption.

This brand new short film from UNODC brings together UN experts and academics to look at how corruption has manifested itself throughout history, what the implications have been, and how we can work to counter this crime.

Lessons from South Korea

Suzanne Snively
TINZ Chair

Suzanne Snively ONZM
Chair, Transparency International New Zealand

South Korea has a new President and a renewed focus on reducing corruption.

On 7 December 2018, the Korean Institute of Criminology, and the Anti-Corruption and Civil Rights Commission (ACRC) hosted the Korean Institute of Criminology (KIC) International Forum on “Anti-Corruption Reforms for a Transparent Society: Experiences and Lessons”. There are lessons here too for New Zealand.

South Korea: Corruption Prevention through Public Administration

Officials at the Anti-Corruption and Civil Rights Commission (ACRC) and the Ministry of Justice, Republic of Korea (MOJ) co-organised and supported the event. It included experts, high level officials, and scholars from Sweden, New Zealand, the USA, and Hong Kong, bringing global perspectives and expertise in anti-corruption. 

The presentations reinforced the findings that only a very small proportion of the world’s population is corrupt and the best antidote is building trust and transparency.

The Korean Institute of Criminology (KIC) is Korea’s sole national research institute mandated to undertake comprehensive and systematic research on root causes of and solutions to crimes. For twenty-nine years since its inception, the institute has successfully fulfilled its mission of contributing to the formulation of national criminal policies and preventing crimes.

Even so, South Korea’s ranking on the Corruption Perceptions index has failed to improve.

Denmark

Thomas Lehmann, Ambassador of Denmark to Korea, spoke about Denmark’s high CPI ranking, reminding attendees that Denmark is the second least corrupt country measured by Transparency International’s 2017 Corruption Perceptions Index. He reasoned that this is the case because:

  • The dialectic of trust (interpersonal/institutions)
    • Trust reinforces stability and social cohesion
    • Low corruption levels generate trust.
  • Zero tolerance paradigm since the era of absolute monarchy
  • The Scandinavian welfare model
    • The Scandinavian countries all rank in the top 6 of the least corrupt countries globally
    • Countries’ features include generous and universal welfare services, a profound social security system and decent public sector salaries.
  • Checks and balances:
    • The ombudsman of Denmark is an independent entity to investigate complaints about the public administration
    • The Public Accounts Committee is appointed by the Parliament to carry out the audit of the Danish public accounts
    • The State Prosecutor for Serious Economic and International Crime is a unit of the Danish Prosecution Service whose main duties are investigating and prosecuting cases concerning serious economic crime
    • The press. According to the Danish Public Administration everybody – including the media – may demand access to documents submitted to or made by an administrative authority as part of administrative procedures
    • Danish anti-corruption efforts are led by a ‘coalition of concerned’ – politicians and senior government officials, the private sector, and by citizens, communities, and civil society organisations

Sweden

Dr Erik Wennerström is Director General and head of the Swedish National Council for Crime Prevention. This is a government agency for judicial statisticians and analysts. He listed three key reasons that Scandinavian countries continued to score well on the TI-CPI.

“First off is the importance of merit – common practice back then was to recruit the sons of high nobility to various offices in public administration. In a matter of recruitment, Oxenstierna noted an expression of interest from a highly qualified commoner for a particular office and had him appointed instead of a group of less qualified, but noble sons”.

“Secondly, the prohibition of bias or conflict of interest – officials who have a direct or indirect personal interest in the outcome of a particular decision may not take part in the preparation of the decision, nor in the actual decision-making. Should bias be discovered after the fact, the decision may be annulled and the official sanctioned. In modern Swedish administration, an official does not have to say more than “may I be excused from this decision”, and then leave the room, something that is regarded as perfectly normal”.

“The third principle that we can thank Oxenstierna for is impartiality and objectivity. When a matter of public authority is to be decided, the legal basis for the decision being taken will normally spell out the interests that need to be tried against each other (e.g. the interest of the state or the collective vs the interest of an individual or a group of individuals). The principle prohibits the introduction of additional interests – such as what is beneficial for the current government, personal interests of the decision-maker in question, societal antipathy against particular groups of individuals, etc. – into the decision-making”.

Wennerström also noted three key steps to set the tone at the top:

  • Collaborate with other organisations
  • Follow up the preventive measures
  • Exercise, exercise, exercise!

Hong Kong

The former Deputy Commissioner of Hong Kong’s Independent Commission Against Corruption (ICAC), Daniel Ming-Chak Li, provided a history of how Hong Kong addressed corruption over the years. He listed the following as making reasons why Hong Kong has maintained low levels of corruption since, despite the large immigration from main land China.

Checks and Balances:

  • Separate power of prosecution
  • Judicial supervision
  • External advisory committees
  • Legislature
  • Media
  • Internal monitoring

Cognizance

  • Corruption breeds corruption – it is not going to disappear.
  • Integrity building is a long-term project – there is no quick solution.
  • Strong political commitment and vast public support are essential in order that the system works.
  • Anti-corruption efforts must be consistent and seen to be consistent in order to maintain a sustainable deterrent effect.
  • Political leadership must realise that it would not have the moral authority to take action against errant citizens if it did not lead by example.
  • Firm integrity leadership is important – one that serves the public interest, the national interest, and the international interest as stipulated under the United Nations Convention Against Corruption.

South Korea: It’s Time to Strengthen Business Integrity Systems

South Korea has experienced strong economic growth over the past 30 years, accelerated by investment from the United States and other western democracies. This means that as well as working within government to strengthen integrity systems, it has the opportunity to work with its businesses to strengthen theirs.

South Korea’s 2018 TI-CPI ranking is 57, compared to 51 in 2017. This is a fall in ranking as great as that for the United States. Given its rapid economic growth, South Korea is well placed to turn its direction around.

This was the theme of Transparency International New Zealand’s presentation to the conference: Business Integrity is the Best Anti-Corruption Measure Suzanne Snively 6 Dec 2018

Inequality intricately linked with corruption

Joanna Spratt

Advocacy and Campaigns Director

Oxfam New Zealand

Our global economy is delivering an ever-increasing, inequitable distribution of wealth amongst humanity.  

  • A major contributor to inequality is ‘grand corruption’
  • Corruption, such as bribery, hurts the poorest the most.

Public good or private wealth?

Oxfam International recently released its annual inequality report Public Good or Private Wealth? It highlights how our global economy is broken. Over the last year, billionaires increased their wealth by 12 per cent, while the people who comprise the poorest half of humanity saw their wealth drop by 11 per cent.

Something is wrong when a small number of individuals can amass more wealth than they will ever make use of in their lifetimes, while billions of people struggle to make ends meet. Not only is this situation unfair, but it hurts us all.

Inequality perpetuates poverty, erodes trust, fuels crime, makes us unhappy, negates economic growth, and robs opportunity from the poorest – including shortening their lives. Inequality engenders feelings of injustice and exclusion, which can contribute to political instability and institutional fragility.

Critically, inequality fuels ever-escalating corruption and undermines efforts to reduce it.

 At a fundamental level, the fact that so few have so much, and so many have so little, erodes trust in our political leaders and systems. It causes people to doubt the institutions of the state that should be working to ensure everybody gets a fair go in life.

For example, if ordinary citizens see that those at the top are not paying their fair share in taxes, such as multinational corporations, they are then less likely to trust that the system is fair. This undermines their support of the entire tax system. The inability of governments across the world to ensure that the super-wealthy are paying their fair share of tax means that ordinary citizens lose faith in the system.

 Grand corruption

‘Grand corruption’ has, arguably, the most significant negative impact on inequality and poverty. Grand corruption is the unethical use of elite power to advance self-interests, at the expense of everyone else. Directly, it can involve elite lobbying for low taxes, resulting in ever-decreasing tax rates for wealthy individuals and corporations. The wealthy can also influence governments to act in their interests across the world.

For example, Oxfam found that multinational pharmaceutical companies had influenced the United States government to pressure developing countries on their behalf. Sanctions were threatened if health officials continued with efforts to make medicines affordable or if tax officials persisted in attempts to clamp down on pharmaceutical tax avoidance. This sort of corruption perpetuates inequality. (See Prescription for Poverty – Oxfam 2018)

Indirectly, grand corruption affects inequality because governments lose revenue such as through lost taxes. This leaves less money for education, health, social protection, and other services that support everyone, and which people who are poor rely on. For example, Oxfam found that in 2017 in the Dominican Republic, corruption was depriving the state of enough revenues to double health spending.

Fairness and transparency

The way forward is to improve fairness and transparency in the system. Not only does this help prevent and reduce inequality, but also corruption. In turn, resolving corruption will assist in reducing inequality. It is a virtuous cycle.

Oxfam is calling on governments to end the under-taxation of rich individuals and corporations. But to tax wealth more, we need to see it. We need more transparency in our global tax system, both for corporations and individuals. We need more information in the public realm so that we can make sure that the wealthy pay their fair share – and that we grow a world where everyone gets a fair go in life.

Ultimately, that will also grow trust in our societies and allow us all to flourish as equal humans on our home, the Earth.

Visit the Oxfam New Zealand website for information and to become involved in their actions.

Troubles in Denmark

Steve Snively Newsletter Editor and Webmaster

We are not the only least corrupt country with corruption

Transparency International New Zealand is regularly criticised for promoting New Zealand’s status as one of the least corrupt countries in the World.

Critics will point to a number of events sullying New Zealand’s reputation such as political party corruption, providing sanctuary to money laundering as exposed by the Panama Papers and Paradise Papers, the  Auckland Transport corruption case and questionable behaviors during the Christchurch earthquake recovery. They insist that there is no reason for New Zealand to be considered among the least corrupt countries in the world.

Corruption in Denmark

All is not perfect in newly-minted, least corrupt country in the world, Denmark.

Denmark and other top CPI performers, like the United Kingdom, Luxembourg and Netherlands, have all been implicated in major money laundering scandals in recent years.

In late 2017, the “Azerbaijani Laundromat” investigation from the Organized Crime and Corruption Reporting Project (OCCRP) revealed that between 2012 and 2014, two Danish banks operating in Estonia, Danske Bank and Nordea, handled up to 2.4 billion euros (US$2.7 billion) from suspicious Azerbaijani sources. The scale of the operation is now estimated to be US$230 billion.

Bloomberg reported on this story and more in October 2018, “Dirty Money, Fraud and Tax Evasion Rock Corruption-Free Denmark

Rest assured, Danes are asking, “How can we be the least corrupt country in the world”.

Least corrupt is not un-corrupt

Least corrupt does not equate to not corrupt. Anti-corruption advocates in TI-CPI top countries are well aware that they are not corruption free and must remain vigilant in corruption prevention efforts. While they are in an enviable position of being able to focus more on corruption prevention than exposing corruption, we all face the challenge of complacency and risk of further infection from the disease of corruption.

Low corruption countries share common traits that are not impacted by any single event. These characteristics include open government, press freedom, civil liberties and independent judicial systems. According to Transparency International low corruption countries use a “bottom-up [participation] model based on public trust, transparency and social capital.” They “all have high GDP per capita, low inequality rates, literacy rates close to 100%, and prioritize human right issues (e.g. gender equality, freedom of information).”

Impact on the Corruption Perceptions Index

The impact of recent corruption cases is not reflected in Denmark’s 2018 TI-CPI score due to the timing of survey data collection and compilation latency. 

Our expectation, however, is that downward movement in 2019 will likely not be catastrophic. Denmark will undoubtedly remain in the top 6 if not the top 3. Denmark will respond – as New Zealand would – in a way that demonstrates the robustness of their integrity systems and remain consistently at the top in the long run.

The fundamental contributing factors to Denmark’s low corruption culture are unchanged.

Turn low corruption into no corruption

The ongoing challenge for New Zealand – and Denmark – is to strive for perfection and satisfy our critics by turning low corruption into no corruption. We need to remain vigilant about strengthening our institutions of democracy, human rights and systems of transparency.

TINZ is always looking for financial support, members, subject matter experts and organizations to join us in the challenge of making New Zealand a corruption free role model. How would you like to help?

Submissions schedule

TINZ encourages you to exercise your democratic responsibilities by responding to invitations from government agencies, with your opinions on future direction-setting and legislation. 

The following two centralised websites known to TINZ, invite and facilitate public submissions on a variety of legislation, policies, levies, plans and projects currently being processed, together with recently closed submissions:

Unfortunately only some agencies utilise either or both of these facilities. Other agencies conduct their own publicity.  TINZ aims to ensure this fragmentation is remedied within the spirit of the new Open Government Partnership National Action Plan (2018-2020).

Submissions currently being sought

The following invitations known to be of relevance to TINZ, are currently open for public comment by their stated deadline. We encourage everyone to become involved directly as important opportunities to exercise your democratic responsibilities.

Regulations to support high value dealers to comply with the AML/CFT Act

  • Friday 15 February 2019
  • Views are sought on defining the applicable threshold for high value dealers. This is the value a cash transaction needs to be at or above to trigger obligations under the AML/CFT Act. Transaction values below the applicable threshold or not in cash do not trigger obligations.

  • Also sought are views about a proposed regulation to clarify obligations for registered auctioneers under the AML/CFT Act.

Recent TINZ submissions

In case you missed it

Corruption Perceptions Index

New Zealand has one of the least corrupt public sectors in the world TINZ Media Release – New Zealand has again been ranked as having one of the least corrupt public sectors and judiciaries in the World. The 2018 Corruption Perceptions Index (has New Zealand dropping its score to come second after Denmark

The root cause of corruption Tabish Khair – The Hindu. If we want to cut down on corruption, we will have to start working more seriously on reducing the huge chasm between the rich and the poor

Corruption Perceptions Index 2018 shows anti-corruption efforts stalled in most countries Transparency International (Berlin) Media Release. Analysis reveals corruption contributing to a global crisis of democracy

New Zealand transparency, integrity and accountability

The Best Countries For Business 2019: U.K. On Top, U.S. Down Forbes. New Zealand is ranked as the 5th

SSC report into use of private investigators ‘disturbing’, says Prime Minister Jacinda Ardern A State Services Commission inquiry into the use of private investigators by government agencies has revealed some disturbing and unethical behaviour, Prime Minister Jacinda Ardern says.

An ‘affront to democracy ”New Zealanders need to be able to trust that covert surveillance is only ever used in the public interest, with appropriate safeguards and to the highest ethical standards.” Otago Daily Times. [Note from Steve – is this an issue for us to pay attention to? The article assumes more knowledge than I have and is rambly]

The Act that revolutionised public finance Thirty years on, Victoria University of Wellington’s Professor Ian Ball leads an assessment of the legislation he helped draft and how it might be reformed to meet the complex needs of today. Victoria University of Wellington will be a hosting a conference to mark the 30th anniversary of the Public Finance Act, 26–28 July 2019.

Transport Ministry fraudster Joanne Harrison to be released from jail and deported to UK It seems farcical that a serial, multi-country fraudster since 2005, can get off so lightly, because of a side-swiping deportation order! Maybe an example of siloed govt agencies, simple cost savings for Corrections, and/or duped Parole Board?

Govts often abuse Electoral Act to stay in power – Nick Smith Both major parties have changed the law to benefit their own re-election chances, Nick Smith says, as he puts forward some ideas on electoral reform.

New Zealander arrested in $3 billion international fraud loan scheme A New Zealander is one of three former Credit Suisse bankers embroiled in an international fraud loan scheme.

New Zealander ‘a mastermind’ of Mozambique scam A New Zealand man with links to Christchurch is being portrayed as a key player in a multi-billion dollar scandal enveloping the African nation of Mozambique.

Editorial: Serious Fraud Office right to be vigilant over Provincial Growth Fund corruption risk NZHerald

Serious Fraud Office warns billions in public funding potentially misused The chief executive of the financial crime investigation agency, Julie Read, said she expected up to 5 percent of government funding to be obtained or used fraudulently.

Govt demands change in insurance sector after damning report The government will fast-track consumer protection measures in the financial sector, after a damning report into life insurance companies

Who stole the crypto from the crypto jar? Imagine a heist where you can see the bank vault the robbers have put the gold bars in, but you just can’t get at them.Or an unbreakable, unopenable, cookie jar on the shelf in front of you.This appears to be the situation with at least some of the millions of dollars of funds stolen from Christchurch digital assets exchange Cryptopia.

NZ’s electoral process the best in the world – report The annual Democracy Index, put together by the Economist Intelligence Unit (EIU), once again has New Zealand showing the rest of the world how it’s done.

Australia

Corruption investigators have raided Australia’s Labor Party offices in Sydney and it’s reportedly over links to Chinese influence

Funding for new anti-corruption body well below what experts say is needed

Pacific

Former Solomon Islands premier arrested on corruption charges The former premier of the Solomon Islands province of Temotu has been arrested on corruption charges.

Former French Polynesia mayor sentenced for corruption The former mayor of Fakarava in French Polynesia has been given a ten-month suspended prison sentence for abusing public funds.

International

Brexit gives ‘unique opportunity for international co-operation on corruption’ That is according to the UK government in its updated anti-corruption strategy,

26 Billionaires Own The Same Wealth As The Poorest 3.8 Billion People A new economic system is needed to tackle rampant inequality, says a new Oxfam report.

International Money Laundering

Cyprus banks challenging money laundering associations NICOSIA, Cyprus (AP) – Banks in Cyprus are concerned that their adoption of some of the toughest anti-money laundering regulations in the world has not been fully recognized abroad, the chief of the Association of Cyprus Banks said Monday.

OECD in Cayman to check on tax transparency reform OECD’s top tax officials visited the Cayman following the jurisdiction’s implementation of new legislation regarding economic substance that ensures companies have enough economic activity on the Island and not just a mailbox.

Indictment Alleges Former Credit Suisse Bankers Conspired to Circumvent the Bank’s Internal Controls in $2 Billion International Corruption and Money Laundering Scheme

Germany has “massive” money laundering problem says Transparency International Germany has a “massive problem” with money laundering by criminal organisations in its property sector, according to a report by the German branch of Transparency International.

Transparency International

10 quotes about corruption and transparency (Vol 2) After the success of our first edition, we’ve gathered more inspirational quotes about corruption and transparency for you. We hope you find them as inspiring and empowering as we do!

Fighting corruption around the globe — highlights from our chapters in 2018

Political asylum for ex-presidents: an easy way to impunity?

TINZ Team

TINZ engages New Zealand and the New Zealanders in a broad range of issues related to building stronger integrity systems to mitigate the impact of bribery and corruption. TINZ Directors, Members with Delegated Authority and staff provide subject matter expertise in the topic areas of interest. Below is a list of TINZ Subject Matter Experts as of June 2019.

To view by topic, visit the category page which lists TINZ topics and respective current subject matter experts. The TINZ Team when this newsletter was published can be found at TINZ Team January 2019