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Corruption Perceptions Index – do movements in the middle also reflect the regulatory environment?

International Compliance Association

Corruption , CPI

Corruption Perceptions Index – do movements in the middle also reflect the regulatory environment?

The new Transparency International Corruption Perceptions Index (CPI) has been released and you can see the results here. The Index is used in many financial crime models and is a highly regarded tool for geographic risk insight.

The best performing countries are still the best (Denmark, New Zealand) and the worst performing countries are still the worst (Somalia, South Sudan, Syria). This is of course reflected in the financial crime risk models I mentioned earlier, as sanctions, terrorism and other factors can be more prevalent in the jurisdictions towards the bottom of the list.

 

Movement in the Middle

The most interesting aspect of the Index this year is the movement in the middle. TI have also identified this and have led with the ‘crisis of democracy’ aspect for the 2018 Index. This is thought-provoking insight:

“Cross analysis with global democracy data reveals a link between corruption and the health of democracies. Full democracies score an average of 75 on the CPI; flawed democracies score an average of 49; hybrid regimes – which show elements of autocratic tendencies – score 35; autocratic regimes perform worst, with an average score of just 30 on the CPI.”

Although the CPI is based on the perception of the public sector, are there other conclusions we could draw? Do movements in the middle also reflect the regulatory environment?

There were two other names on the list that jumped out as ‘movers’ which fell outside the ‘flawed democracy’ analysis. Those were Malta and Australia, which have experienced ‘significant decline since 2012’. Now – to be clear – I am not an expert on the Maltese or Australian regulatory landscape but it did make me think about some articles I have read recently.

 

Regulatory Scrutiny

Malta has been in the news in terms of financial crime issues at Satabank. In this article a source is quoted as saying “the extent to which crime seems to have infiltrated this bank is quite astounding” and “this makes previous money laundering cases look like child's play”.

Australia has received similar coverage in the last 12 months, with Commonwealth Bank of Australia agreeing “to pay the biggest civil penalty in Australian corporate history, after admitting to more than 53,000 money-laundering law breaches that allowed drug syndicates to funnel millions of dollars offshore”. The inference being that this is the tip of an iceberg and that the wider Australian system is in desperate need of review.

 

 

Media Coverage

The P in the CPI is around ‘Perception’. I guess it could also be the P in ‘Press’.

So much of what we feel about our environment is driven by what we experience in the media to which we are now exposed 24/7. If you read reputable articles about harmful activity, this influences your confidence and therefore your perception.

I’m straying outside of the data set used by TI here I think, as well as the people who are involved in its creation (‘informed views of analysts, businesspeople and experts’) – but as the public are increasingly exposed to the failures of firms, it struck me that there could be a link here and that an index such as the CPI could be a springboard for further consideration in terms of regulatory frameworks?

I’m not sure we’ll see much movement around the top and the bottom of the CPI list ever but I shall keep my eye on the middle and the regulatory issues that emerge – and maybe we can revisit my theory next year.

If you are interested in the above, you might also like to read the following:

The link between corruption and democracy - Latin America’s growing intolerance of corruption.

Maltese journalist investigating corruption is killed in car bomb – thinking about negative news screening.


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