Written by Jake Plenderleith on Tuesday 25 January, 2022
Transparency International’s (TI’s) Corruption Perceptions Index (CPI) 2021,[1] released this morning, reveals an unwelcome deterioration in the world’s fight against corruption.
The annual index ranks countries based on public sector corruption through a series of metrics, rating countries from 0 (highly corrupt) to 100 (very clean).
Rarely does it make for easy reading, with over two-thirds of countries scoring under 50 in 2020.
This year’s report is bleaker still, with ‘86% of countries making little to no progress over the last ten years’.
One of the key themes of the 2021 CPI is what TI called the ‘complacency’ shown by nations across the world in their anti-corruption efforts.
This was explicitly tied to the global rise of authoritarianism and decline of human rights, with TI describing democracy as ‘under attack’.
TI also claimed that anti-corruption has reached a ‘standstill’ in every area of the globe.
What’s the significance?
The summit and nadir of the 2021 Index is familiar: Denmark, Finland and New Zealand scoring well, and Somalia, South Sudan and Syria coming in last.
More worthy of note is the historic low for the United States (67), and unimpressive scores for Australia (73) and Canada (74).
In its analysis, TI also stressed the pandemic’s effect on transparency and accountability in Western Europe,
There are a handful of green shoots: Estonia (74), Seychelles (70) and Armenia (49) were all commended for significant developments.
But it’s hard to escape the general picture of decline that is the focus of TI’s analysis.
For those in compliance, it is an uneasy if not unexpected development. For some time now, corruption and financial crime have simultaneously become more widespread but harder to detect.
The ultimate significance of this year’s CPI is that the poor overall performance of countries globally underlines a stark reality that should already be something of a truism: corruption is becoming more, not less, prevalent, and can occur in any jurisdiction and country.
The challenge now posed to those in financial crime compliance is first in recognising this, and then in understanding what this means for accepting business.
Is the CPI effective?
In financial services, the CPI is usually held up as a reliable indicator of the prevalence of corruption across countries and jurisdictions.
But it has also come in for criticism, from questions about the wisdom of measuring perceived corruption to alleged bias against developing nations.
One of the most potent charges is its purported inability to reflect corruption that takes place in countries that typically sit at the CPI summit.
Take Denmark, for example, which in this year’s CPI comes out first, and is usually vying for the CPI top spot.
The country’s largest bank Danske Bank was embroiled in an enormous money laundering scandal involving its Estonian branch in 2017-18,[2] though a glance at the CPI for those years does not reflect this.
The issue is that the CPI can only measure that which people can see. And as corruption is by its nature slippery and secretive, this can make accurate reporting difficult.
That is not to say that the CPI is ineffective. It can and does illustrate where countries and jurisdictions are improving, where weaknesses remain and the daily, often devastating, impact of corruption on ordinary people.
The CPI also provides a very simple and easy to use tool, accessible to the expert and the layman.
All of which is commendable and welcome.
But by acknowledging those areas where the CPI is incapable of measuring corruption, it serves as a reminder to all financial crime compliance professionals of the need to look beyond the obvious and to ask questions.
In this respect, the growing push to cultivate curiosity within financial crime prevention teams is more easily understood, encouraging as it does the importance of asking questions, not accepting information at face value and pursuing more circuitous and indirect routes to the truth.
Ranking well on the CPI, then, is not sufficient evidence of an absence of corruption.
To its credit, TI acknowledged this in its analysis of this year’s index, pointing out that in those countries that score well, corruption can take ‘less flagrant forms’.
Further, TI point out that the CPI ‘does not capture issues related to financial secrecy and money laundering’, or the private sector’s role ‘in allowing the corrupt to safely hide and enjoy the proceeds of their crimes’.[3]
This recognition is one that will resonate with many professionals in the compliance and financial crime space.
The CPI remains a valuable information source for professionals looking to assess country risk in the year ahead.
But, given TI’s warning of financial crime going unnoticed at the top, looking beyond an impressive score is imperative for 2022.
[1] Transparency International, ‘Corruption Perceptions Index’: https://www.transparency.org/en/cpi/2021 – accessed January 2022
[2] Neil Hodge, ‘How Danske is cleaning up after a €200B money laundering scandal’, Compliance Week, 13 October 2020: https://www.complianceweek.com/aml/how-danske-is-cleaning-up-after-a-200b-money-laundering-scandal/29595.article – accessed January 2022
[3] Transparency International, ‘CPI 2021: Trouble At The Top’: https://www.transparency.org/en/news/cpi-2021-trouble-at-the-top – accessed January 2022