Three steps towards corruption-free sustainable development

Corruption is crippling progress on poverty reduction, healthcare, education, climate action, and more.

A recent survey from Transparency International shows that over a quarter of African citizens, particularly the poorest and youngest, have to pay bribes to get hospital treatment or a driving license. In such cases, sustainable development remains a distant dream.

As world leaders meet in New York for the 2019 High-level Week to review the implementation of Sustainable Development Goals (SDGs), we are urging them to take three steps towards corruption-free sustainable development.

Countries use a common set of global and national indicators to monitor their progress towards SDG targets. Yet, there is a broad consensus among anti-corruption experts that we need to go beyond the official indicators to get an accurate picture of progress towards SDG 16.

Parallel reports produced by civil society are key. By referring to a range of additional indicators, these reports provide more accurate, timely, and comprehensive data that allows for an independent appraisal of a country’s progress in fighting corruption.

Since 2017, Transparency International has completed over forty parallel reports assessing the level of implementation of SDG 16 around the world. The results demonstrate that governments need to do more to prioritise anti-corruption measures if they are to achieve the SDGs by 2030.

Two areas of particular concern are political corruption and money laundering, both of which affect all countries in deeply troubling ways.

Corruption in politics undermines democracy and the rule of law. When political parties accept illicit donations or buy votes, they are less likely to promote the public interest once in office. Undue influence over policy-making can prejudice decision-making at the highest levels, with potentially devastating effects on the equitable and transparent allocation of the very resources key to development.

Our latest survey, the Global Corruption Barometer — Latin America and the Caribbean, shows that one in four people in the region have been offered bribes in exchange for votes, while 65 per cent of citizens think their government is in thrall to private interests. Corruption in politics invariably shifts politicians’ preferences towards the concerns of the rich and powerful to the detriment of poor and marginalised groups; it is anathema to the international pledge to “leave no-one behind.”

There are a range of existing policy instruments that can be used to curb political corruption, including political and campaign finance regulations, income and asset declaration regimes, lobbying registers, cooling off periods, legislative footprints and so on. However, these need to be effectively implemented by competent and well-resourced oversight bodies, which is currently not the case.

When leaders act transparently, we can make informed choices when we vote, and we can hold them to account once elected.

Money laundering allows corruption to fund lives of luxury — often far from where the money was stolen. Secretive jurisdictions, opaque corporate structures, weak customer due diligence, and inadequate supervision of gatekeepers all play their part in facilitating large-scale corruption schemes that illicitly siphon off funds from cash-strapped state treasuries.

So, how to address this?

• Governments should establish a central register of beneficial ownership information with strong verification mechanisms, and make it publicly available in an open data format. This way we can monitor the real beneficiaries of companies.
• Countries should comply with international commitments and extend due diligence requirements to relevant entities and professionals, such as lawyers, real estate agents, accountants and dealers in luxury goods.
• Financial institutions and other professionals with money laundering obligations should carry out due diligence on the people and entities they are doing business with and report any suspicious transaction to relevant authorities.
• Governments should ensure that regulation and supervision of financial institutions and other professionals with money laundering obligation is conducted consistently and on a risk-based approach.
• Jurisdictions should enforce anti-money laundering legislation through both administrative and criminal sanctions.

Corruption has an enormous effect on the ability of countries to achieve their sustainable development commitments. It hampers economic growth and increases inequality of income, access to services and resources.

Yet, in many countries very little is being done to address the issue. For instance, governments rarely include governance data in their SDG progress reports. International organisations likewise neglect this data when assessing countries’ SDG implementation, and civil society could also do much more to push for increased transparency in the implementation of the 2030 Agenda. When analysing the implementation of any SDG, including those related to climate change, health, gender equality or education, one should also assess the integrity of the system intended to deliver goods and services. Are budgetary and procurement processes robust, how are funds allocated, and is the distribution of resources conducted in a transparent manner?

(You can find some great ideas on how to use governance data to monitor corruption and anti-corruption in the SDGs in our Resource Guide)

An estimated five to seven trillion US dollars are needed per year to achieve the SDGs. To bridge the estimated annual funding gap of 2.5 trillion dollars, we need innovative approaches to mobilising and safeguarding resources, such as improved domestic revenue mobilisation.

The past few years have seen increased private sector involvement in financing development projects through mechanisms like blended finance, social enterprises, and sustainable investment. This is good news, as progress without multi-stakeholder engagement will be limited. However, novel forms of development finance and new private sector players also bring with them additional integrity risks. So far, little has been done to assess, quantify and mitigate these corruption challenges. We recently produced a working paper title, Better Blending: Making the Case for Transparency and Accountability in Blended Finance. Here, we suggests a few steps in order to increase integrity and reduce corruption risks in blended finance:

• Greater transparency and disclosure throughout the blended finance process to ensure that commercial objectives do not take precedence over development outcomes.
• Cooperation and information sharing between stakeholders, including development banks, intergovernmental organisations, institutional donors and other development finance institutions. There should be a systematic disclosure of standards on issues such as due diligence and beneficial ownership.
• Independent grievance mechanisms to investigate and sanction wrongdoing.