Luay al-Khatteeb writes: Once again, the subject of illicit financial flows from kleptocratic regimes is in the international spotlight, this time in the form of the “Panama Papers.”
What is surprising is the level of shock at something that should have been obvious. For a long time, many financial institutions turned a blind eye to nefarious PEPs (politically exposed persons) and not just in Switzerland, as we see now with big names such as HSBC, once again deflecting allegations.
The industrialized world can’t afford any more surprises like this, otherwise aid and loans will continue to enter weak states, only to be rapidly snuck out.
Encouragingly, there are signs that governments and regulators are being energized by the Panama Papers. The U.S. Treasury will soon announce a requirement that banks disclose the owners of shell companies, and in the UK regulators set a deadline for banks to disclose details of clients’ relations with Mossack Fonseca, the company at the centre of the current storm.
Iraq, with lamentably high corruption, can be a litmus test for revived effort. Iraq also desperately needs to recover stolen assets, because it is running out of money for both fighting ISIS and rebuilding Iraq, in order to prevent ISIS 2.0.
Luckily, the United States is leading the way with the formation of the Kleptocracy Asset Recovery Initiative (KARI), but far more global coordination is needed. In Iraq, financial assistance should be put into ministries to train people in spotting and preventing corruption.
There are certainly good young people who want change in the Iraqi government, the challenge is creating a culture where they can speak out. That will take a renewed and internationally coordinated capacity building effort. As an example, the Higher Council of Education Development, an Iraqi organization that has sent four thousand students overseas to help ministerial capacity, had a budget of just over $100 million last year. The international community must urgently help Iraq to resource such work, because so far war expenditures dwarf other efforts. [Continue reading…]