how-could-anti-corruption-interventions-tackling-global-corruption-benefit-the-uk

U4 Expert Answer How could anti-corruption interventions tackling global corruption benefit the UK? Query We wish to identify areas of strong evidence that can illustrate how the UK's attempts to combat international corruption, at home and overseas, can also help to secure the UK's national interests in terms of prosperity (better business links, increasing access to open and fair markets, more trade opportunities), migration flows, terrorist threats and reputational risks. Purpose Summary This request is designed to inform international As a country looking to expand and deepen trade anti-corruption business cases and the design of a with emerging markets, a leading player in cross-UK government anti-corruption strategy. overseas development assistance and a major destination for illicit financial flows, the UK has a Content crucial role to play in tackling global corruption. 1. Trade, growth and competitiveness Corruption has been shown to adversely affect 2. Overseas development assistance economic growth and market demand in 3. Security, crime and migration developing countries, while firm-level studies 4. References demonstrate corruption’s detrimental effect on firm growth, innovation and productivity. Research Caveats also demonstrates how corruption undermines global trade, exacerbates conflict, and facilitates There are few studies specifically related to the organised crime and illegal migration. UK. The literature typically focusses on the benefits of anti-corruption interventions in broader This brief discusses the numerous ways in which terms. anti-corruption efforts are in the UK’s national interest by improving the business environment, establishing fairer markets and countering security threats. In countries in receipt of UK development aid, targeted assistance can help to improve institutions and the regulatory regime, helping to build more prosperous, secure and resilient partners. Author(s): Matthew Jenkins, Transparency International, [email protected] Reviewed by: Robin Hodess PhD, Roberto Kukutschka, [email protected] Date: 24 August 2016 Number: 2016: 14 U4 is a resource centre for development practitioners who wish to effectively address corruption challenges in their work. Expert Answers are produced by the U4 Helpdesk – operated by Transparency International – as quick responses to operational and policy questions from U4 Partner Agency staff.

How could anti-corruption interventions tackling global corruption benefit the UK? 1. Trade, growth and risks of coercive or collusive corruption competitiveness (Transparency International 2014). There is an overwhelming weight of evidence that Alongside the trade in goods, the UK has rising corruption has a detrimental effect on a range of stock of foreign direct investment (FDI) in markets factors key to providing economic opportunities. and industries with high associated risks of Corruption is harmful to: corruption. In 2014, over 60% of UK FDI was outside of the EU (ONS 2016a). Between 2005 • growth (Ugur & Dasgupta 2011; Glaeser & and 2014 alone, UK outward FDI to African Saks 2006; Aidt 2009) countries doubled from £20.8 to £42.5 billion (ONS 2016b). Over half of this investment in • international trade (Ali & Mdhillat 2015; Dutt & Africa was in mining and quarrying (ONS 2016b), Traca 2010; De Jong & Udo 2006) a sector judged to be the most corrupt in an OECD (2014a) study, which found the extractives • market openness (Hakkala et al. 2008) industry accounted for 19% of all foreign bribery • return on investments (Lambsdorff 2003) cases. • foreign investment inflows (Thede & Corruption and international trade Gustafson 2012; Mathur & Singh 2013) • and business competitiveness and Broadly speaking, corruption functions as an obstacle to trade in two main ways. productivity (Fisman & Svenson 2007) First, corruption has a long-term detrimental Corruption stacks the deck against competitive, impact on the regulatory environment and the innovative and entrepreneurial companies seeking efficiency of the state apparatus as it creates to expand their overseas operations. Revealingly, incentives for politicians and public officials to 55% of 1,400 CEOs questioned in a recent PwC create more regulations, restrictions and (2016) survey identified bribery and corruption as administrative procedures to have more a threat to their business’s growth prospects. opportunities to extort payments from citizens and companies. This, in turn, is likely to exacerbate International trade rent-seeking behaviour and breed inefficiencies as the practice of obstructing matters until facilitating Background: the UK in international trade payments have been made spreads across the According to the latest available figures from HM public service (Argandoña 2004; Dzhumashev Revenue and Customs, UK exports were worth 2010). Unsurprisingly, studies show strong £24.9 billion in June 2016, while imports were associations between corruption, protectionist £40.2 billion (HMRC 2016). In 2015, exports regimes and opaque bureaucratic systems represented 27% of the UK’s GDP, whereas (Bjørnskov 2009; Bandyopadhyay & Roy 2007). imports were equivalent to around 29% (ONS This is particularly problematic for the business 2016a). Over the past 18 months, the value of environment, as corruption subverts the fair non-EU trade has ranged between 51% to 62% of awarding of contracts, reduces the impartiality and UK exports and 44% to 53% of imports (HMRC reliability of public services, distorts the allocation 2016). of credit and skews public expenditure (Transparency International 2011a). Both the nature of the UK’s top exports (mechanical appliances, motor vehicles, Second, there is now a widespread view that pharmaceutical products, electronic equipment corruption acts as a non-tariff barrier to trade, and aircraft (HRMC 2016)) and the kinds of export raising transaction costs and obstructing foreign markets in which UK firms operate entail investment (Zurawicki & Habib 2010; Ali & corruption risks. A number of the UK’s top trading Mdhillat 2015; Dutt & Traca 2010; De Jong & Udo partners include countries like Russia, India, 2006). Firm-level data on informal payments from Turkey, China and Saudi Arabia (HMRC 2016), in the 2010 World Bank Business Environment and which UK companies can be exposed to elevated www.U4.no U4 EXPERT ANSWER 2

How could anti-corruption interventions tackling global corruption benefit the UK? Enterprise Performance Survey found that in Reducing corruption in emerging markets some European countries bribery imposed an additional tax on businesses representing as Particularly in transition countries, initiatives to much as 10% of their sales (World Bank 2014). curb corruption in public administration often involve reducing red tape and streamlining Figure 1: The most problematic factors for administrative processes to reduce officials’ importing and exporting arbitrary discretion and opportunities to solicit bribes (Martini 2013). The OECD (2016) Source: World Trade Organisation 2015 emphasises that strategies to promote integrity in trade should strike an appropriate balance Worldwide, 15% of firms expect to have to pay a between easing red tape and establishing bribe to get an import licence, and this acts as a appropriate controls which take into account local severe deterrent to market entry (World Bank context and inherent risks. 2014). This is especially the case for UK firms; a 2015 survey found that 43% of UK compliance Bilateral initiatives such as technical anti- and legal professionals indicated they had corruption assistance or seconding officials to decided against doing business in a particular local administrations in emerging economies can country due to high corruption risks (Control Risks help reduce the necessity of “insider knowledge” 2015). of bribery patterns, middlemen and intermediaries. In turn, this has potential to lower business costs, Even where foreign companies are able to gain a reduce uncertainties and reputational risks, lessen foothold in a corrupt market, studies have shown vulnerability to extortion and make access to that greater levels of corruption are associated capital easier (Transparency International 2009). with higher firm exit rates, suggesting that corrupt Targeted efforts to curb corruption have been environments are highly unstable for businesses shown to yield significant benefits to improve the (Hallward-Driemeier 2009). regulation of the business environment (Breen & Gillander 2012). Efforts to curb corruption are a central component of measures to boost trade. This is increasingly As well as helping to make the business recognised by business leaders; a survey of 390 environment more conducive to inward investment senior executives revealed that 70% believed a and market entry by foreign firms, measures to better understanding of corruption would make reduce corruption in key markets have the them more competitive, help them make smarter potential to stimulate greater market demand by investment decisions and enter new markets unleashing greater economic growth and (PwC 2008a). increasing disposable income (Aidt 2009). The UK has a range of options to pursue anti- A 2010 study found that more effective control of corruption interventions abroad in ways which can corruption in sub-Saharan Africa had the potential benefit UK firms. to dramatically increase trade volume in general and imports in particular (Musila & Sigue 2010).1 This has the potential benefit of improving UK firms’ access to existing markets and opening new opportunities in others. Implications for the UK UK firms are reportedly (Control Risks 2015) the most hesitant in the world to conduct business in 1 The authors estimate that if a country with the same 5.9, its exports would improve by about 15% and corruption perception index as the African average of imports by about 27%. 2.8 were to improve its corruption level to Botswana's www.U4.no U4 EXPERT ANSWER 3

How could anti-corruption interventions tackling global corruption benefit the UK? countries perceived to be highly corrupt. Analysis Collective action to harmonise standards in of capital outflows confirms that businesses from international trade countries like the UK have tended to make fewer investments in highly-corrupt environments Alongside legalistic approaches, for which it is relative to multinationals from other countries with difficult to establish a global standard, coordinated higher levels of corruption (Sanyal & Samanta attempts to push the anti-corruption agenda 2008; Godinez & Garita 2016; Cuervo-Cazurra forward at global forums and international 2006). At present then, pervasive corruption in conferences is an effective means of rapidly foreign markets carries clear domestic costs for establishing such norms. the UK; corruption functions as a damper on job creation which could otherwise be generated by As was seen at the London Anti-Corruption export-led business expansion. Summit in May 2016, countries are increasingly prepared to enter “coalitions of the willing” to Effective measures to tackle corruption in collectively pioneer higher standards, moving overseas markets could put UK firms at lower risk further and faster than more globally of coercive corruption, encouraging them to make representative international forums. Whereas use of their competitive advantages on a level countries are rarely willing to “go it alone”, footing with companies from countries with higher multilateral initiatives on beneficial ownership, levels of corruption. Moreover, as risks are open contracting or blacklisting corrupt companies reduced, trade opportunities open up for smaller demonstrate the effectiveness of UK leadership companies which cannot afford the same level of and extent of its normative influence. This can internal controls as larger firms. help allay fears that the UK is going too far, too fast. Promoting transparency and anti-bribery measures at the international level A prominent example of how international anti- corruption initiatives can benefit businesses is the Secondly, at the international level, the promotion World Customs Organisation’s SAFE Framework of transparency and strong anti-bribery provisions of Standards. This can help level the playing field helps make the global market more open and by standardising the submission of electronic data competitive. on inbound, outbound and transit cargo shipments. Countries joining the SAFE framework The UK is a standard setter in this area, which are required to implement harmonised risk brings both reputational and commercial management frameworks and collaborate with advantages to UK firms. Particularly since the requests from other countries to inspect high-risk passing of the UK Bribery Act, UK firms have cargos. The SAFE scheme is also beneficial for been compelled to implement stringent compliant businesses, as they are eligible for compliance programmes which mean they are authorised economic operator status, granting well-placed to conduct business worldwide without them faster processing of their goods and reduced fear of falling foul of anti-corruption provisions. examination rates (World Customs Organisation Such anti-corruption legislation is increasingly 2015). viewed positively by business leaders. The majority of businesspeople surveyed by Control More broadly, participation in good governance Risks (2015) believed anti-corruption laws initiatives such as the Open Government improve the business environment (81%), deter Partnership (OGP) also has the potential to corrupt competitors (64%) and make it easier for improve competition. The spread of digital good companies to operate in high-risk markets technologies, such as open data and (55%). These laws are seen to make it easier to e-procurement, can help to reduce both corruption resist coercive corruption in risky markets, as and accusations of corruption, which can result in firms can use the risk of prosecution as lengthy legal proceedings. For instance, justification to refuse, and, consequently, officials e-procurement systems can help UK firms to bid in these countries are less likely to demand bribes fairly with local enterprises and make the award (Control Risks 2015). decisions more transparent and comprehensible, www.U4.no U4 EXPERT ANSWER 4

How could anti-corruption interventions tackling global corruption benefit the UK? helping UK companies to understand how to or 7.5% of baseline trade in the region (Helble, improve the quality of their bids. Given that Shepherd & Wilson 2009). between 30% to 40% of companies report losing bids due to corrupt procurement processes (PwC Countries seeking trade deals are increasing 2008a; Control Risks 2015), these systems can using negotiations not only as a vehicle to enlarge be very useful to businesses entering new their market access but also a means to reduce markets. market opacity (Lejárraga 2013). The B20 Group, which represents businesses from the G20 Implications for the UK countries, has been vocal in support of such Encouraging UK firms to commit to voluntary approaches (OECD 2016a). initiatives like the United Nations Global Compact (2016) or the Export Trading Group’s Global Anti- Moreover, the desire of some countries with high Corruption Policy could also help raise awareness incidences of corruption to establish trade about the importance of anti-corruption in all relations can provide an opportunity to table aspects of a firm’s business and create a culture sensitive issues surrounding governance, of compliance. Business commitment to voluntary accountability and transparency as part of the initiatives like these can also help overcome negotiations (OECD 2016a). Both bilateral and collective action dilemmas by normalising ethical multilateral trade agreements can contribute to behaviour (OECD 2016a). efforts to curb cross-border bribery by including commitments to ratify global anti-corruption Embedding transparency provisions into conventions such as the OECD Anti-Bribery trade agreements Convention or specific clauses depriving transactions found to be corrupt from the standard Transparency is fundamental to reduce investment protection provided for in the information asymmetries in complex markets; it agreement (Lejárraga & Shepherd 2013; Tushe underpins the ability of companies to fully 2014). understand the conditions and constraints for entering and operating in a given market (OECD Supporting suppliers and partners to comply 2016a). with anti-corruption provisions Improving the transparency of the trading Having been a pioneer of regulating domestic environment is an important complement to firms, the UK could support suppliers and partners traditional trade deals which seek to reduce tariffs in foreign markets to become fully compliant with and barriers. Greater transparency in trade deals anti-corruption standards. Not only is this in the can help to increase both market awareness by interest of suppliers’ upstream UK counterparts making trade policies better known and and partners but there is a solid business case for understood by foreign suppliers, as well as promoting anti-corruption measures across supply improving the predictability of trade policies by chains, regardless of the risk of detection. opening up the decision-making process (OECD 2016a). Corruption commonly affects business growth and productivity, lowering performance, innovation and Given the importance of future projections to long-term growth prospects (Starosta de business decisions, it is no surprise that trade Waldemar 2012; Rossi & Dal Bo 2006). Some agreements with extensive transparency studies (Fisman & Svenson 2007) have shown mechanisms are found to be have a greater that corruption and bribe paying has a negative positive effect on trade flows than those with correlation with firm growth: a 1% increase in the shallow commitments to transparency (Lejárraga bribery rate is associated with 3% reduction in firm & Shepherd 2013). growth. A study of the Asia-Pacific Economic Cooperation A lax corporate culture can inculcate unethical (APEC) countries, for instance, found that and unsustainable business practices or lead to improving trade-related transparency could raise internal fraud. If detected, the costs and inter-APEC trade by approximately US$148 billion sanctions, as well as reputational impact, can be www.U4.no U4 EXPERT ANSWER 5

How could anti-corruption interventions tackling global corruption benefit the UK? extremely costly for companies, who in many in International Business Transactions, such as cases see their average shareholder value the UK Bribery Act or the US Foreign Corrupt plummet. Revealingly, 55% of business surveyed Practices Act, have influence beyond their by PwC (2008b) stated that reputational fallout borders, especially with multinationals. As the UK was the most damaging aspect of corruption Bribery Act also applies to all non-UK companies cases. with UK operations, the act has created a compliancy standard for major western companies Companies which comply rigorously with anti- (Cooper 2011). Given that the nationality of corruption stipulations can reap substantial investors and owners of foreign affiliates is benefits, such as reduced exposure to internal becoming increasing blurred, and multinationals fraud, greater confidence in the integrity of involve on average three jurisdictions (UNCTAD business partners and lower sanctions in legal 2016), the interlinked nature of global commerce proceedings due to self-reporting (Wickberg means that national legislation has ever-greater 2012). In some emerging markets, such as the potential for global impact. JPMorgan Chase, for Philippines and Brazil, a reputation for compliance instance, requires companies that want to become with anti-corruption standards can grant suppliers to comply with their anti-corruption companies a “preferred supplier status”, giving policy that refers to the FCPA and the UK Bribery them preferential access to procurement Act (Wickberg 2012). processes (Wickberg 2012). Likewise, both the WTO Agreement on Trade Facilitation and the Active enforcement of the Bribery Act, alongside European Union’s Community Customs Code efforts to detect and prosecute those who break require member states to provide authorised the law has the potential to establish a strong, economic operator (AEO) status to firms who had global anti-bribery “norm”, which in the long term established internal integrity controls, supply chain could ease businesses’ entry into difficult markets security and compliance with customs and create fairer marketplaces. requirements (World Trade Organisation 2014). This status often permits AEO firms to profit from Some businesses nevertheless view the Bribery simplified import and export procedures (OECD Act as an unfair handicap to UK firms seeking to 2016a). do business abroad, particularly in tough markets like the BRICS countries: Brazil, Russia, India, Implications for the UK China and South Africa (FTI Journal 2013). Such Measures by the UK government to support anti- criticism is in line with several academic studies corruption among the suppliers and partners of which suggest that international anti-bribery UK multinational corporations are in the interest of conventions have increased transaction costs all parties. Not only does it check potentially between signatory countries and importers from damaging business practices and reduce highly-corrupt countries (D’Souza 2012). companies’ exposure to corruption risks, it could enable UK firms to expand their market presence However, recent surveys of businesses have to new parts of the world while still meeting found that although UK companies are cautious international stock exchange demands for supply about investing in risky markets, this was the case chain control (OECD 2016a). before the Bribery Act came into force (Control Risks 2015). Moreover, after an initial period of Such efforts are, however, dependent on the wait-and-see, it seems that companies from the continued effective enforcement of legislation with countries with the toughest laws and enforcement, extraterritorial reach, such as the UK Bribery Act such as the UK, are increasingly willing to take and the US Foreign Corrupt Practices Act (FCPA). bold investment decisions (Control Risks 2015). The suggestion is that stringent legislation has Active enforcement of existing anti-corruption compelled companies to adapt their business measures practices, and anecdotal evidence indicates that comprehensive risk management strategies, Legislation implementing the OECD’s Convention compliance training and internal audits are on Combatting Bribery of Foreign Public Officials www.U4.no U4 EXPERT ANSWER 6

How could anti-corruption interventions tackling global corruption benefit the UK? enabling the best companies to negotiate corrupt overseas, it also implies anti-corruption marketplaces more successfully than their interventions abroad could increase the volume of competitors (Control Risks 2015). inward FDI into Britain as levels of corruption among the UK’s trading partners decrease. Moreover, by factoring corruption risks into their investment decisions, companies are becoming This is particularly significant for emerging more efficient; firms from countries with stringent markets, which despite becoming an increasingly anti-corruption provisions are reporting fewer significant source of FDI outflows (UNCTAD 2016) losses to corrupt competitors compared with a often suffer from high incidences of corruption. A decade ago (Control Risks 2015). According to a survey (Control Risks 2015) found that business recent OECD (2016) report, a reputation for leaders in economies such as Nigeria, Mexico, probity can be useful in helping firms to win public Brazil, India and Indonesia largely welcome tenders and secure lucrative joint ventures. measures to level the playing field and address the inconsistent enforcement of domestic anti- Foreign direct investment corruption laws. Corruption is a key determinant of FDI origin and Many of these countries are involved in collective destination (Cuervo-Cazurra 2006), and there is action initiatives like the Open Government substantial evidence that corruption acts as a tax Partnership, and enhanced collaboration with on FDI (Thede & Gustafson 2012; Mathur & Singh foreign states and businesses could potentially 2013). Indeed, in high-growth transition countries, lead to positive spillover effects, such as closer corruption has been identified as the most economic ties. important determinant of investment growth – ahead of firm size, ownership, trade orientation, Tax policies and illicit financial flows industry, GDP growth, inflation and openness to trade (Asiedu & Freeman 2009). Corruption can affect government revenues in a number of significant ways. Studies have Datasets (Belgibayeva & Plekhanov 2016) confirm consistently demonstrated that corruption: a virtuous cycle between investment flows and control of corruption: • reduces tax revenues (Coppier no date; Rose- Ackerman 1975; Schleifer & Vishny 1993) • there are greater investment flows between countries with good control of corruption • exacerbates tax evasion (Rangazas, Moumouras & Ivanyna 2010) • as corruption decreases, investment from countries with lower incidences of corruption • inflates government spending (Hwang 2002) increases • weakens tax administrations (Hwang 2002) • undermines the productivity of “effective” • as the quality of a county’s institutions and control of corruption improves, the country government expenditure (Ghosh & Neanidis may even attract less investment from 2010; Nawaz 2010) countries with widespread corruption Other work has demonstrated that the • greater investment volumes from less corrupt distributional effects of corruption in the tax countries can further reinforce the system are socially regressive, as the richest strengthening of economic and political taxpayers have the most to gain from evading institutions that keep corruption in check taxes and are the least vulnerable to extortion (Hindriks, Keen & Muthoo 1999). Implications for the UK The net effect of all this is to decrease steady- Efforts to reduce corruption in high-risk markets state growth rates and leads in some cases to have the potential to edge out competitors from governments raising tax rates (Ghosh & Neanidis countries with higher incidences of corruption. 2010). In contrast, measures to improve control of Moreover, the virtuous circle described above is corruption are strongly associated with better not only good for UK business looking to invest www.U4.no U4 EXPERT ANSWER 7

How could anti-corruption interventions tackling global corruption benefit the UK? performance in tax collection (Ajaz & Eatzaz than lowering tax rates (Aghion et al. 2016). 2010). Moreover, higher local corruption was found to weaken the positive effects of lowering taxation on Figure 2: Corruption and tax collection in the EU growth, innovation and business entry (Aghion et al. 2016). Source: Mungiu-Pippidi 2016 Tax, international business transactions and Most academic papers and NGO activism on this illicit financial flows topic centre on the implications for developing countries, as corruption strips low-income states Certain kinds of taxation are particularly of revenue which could be used to finance key vulnerable to corruption. These are generally public services, weakens their financial systems revenue streams with frequent interaction and causes long-term damage to their economic between different tax authorities and businesses. potential (Hakenrath 2014). Analysis has shown that taxes and customs duties on international trade are among the most However, more recent work considers both the targeted by corrupt officials (Imam & Jacobs role that industrialised countries play in enabling 2007). Indeed, corruption can distort the very practices such as BEPS2 and secrecy composition of government revenue; cross- jurisdictions, as well as the negative impact on national studies have found that countries with developed countries themselves (Hakenrath higher incidences of corruption generally increase 2014). taxes on international trade rather than domestic taxes (Hwang 2002). Particularly since the 2008 financial crisis led to yawning fiscal deficits, governments of developed As well as public sector corruption being strongly countries have increasingly acknowledged the detrimental to cross-border trade, other forms of need to prevent tax leakages (The Guardian corruption facilitate illicit behaviour on the part of 2013; Hearson 2014). Academic work confirms private sector enterprises, which may seek to that these problems are not limited to developing avoid legitimate taxation in their countries of countries; a cross-country survey found that operation (Sahadat 2015). In recent years, corruption is also a significant determinant of tax increasing attention has been paid to illicit performance in high-income countries (Bird & financial flows (IFFs) (World Bank 2016), defined Martinez-Vazquez 2008). Another study of US by the OECD as “resources generated by counties found that taxation’s marginal impact on methods, practices and crimes aiming to transfer growth depended sharply on local corruption financial capital out of a country in contravention levels, and suggested that reducing corruption of national or international laws” (OECD 2014b). would have a greater positive impact on growth Although only a small percentage of IFFs are believed to be directly linked to embezzlement and bribery (Schneider 2010), corruption is closely linked to many practices that facilitate these flows: it helps companies, individuals and criminal organisations to evade taxes or launder the proceeds of criminal activities and avoid punitive measures (Chêne 2011). According to Global Financial Integrity, every percentile increase in the corruption control indicator showed a decrease in illicit financial flows (Kar & LeBlanc 2013). Developing and emerging economies with high 2 BEPS, or base erosion and profit-shifting refers to tax in tax rules to artificially shift profits to low or no-tax avoidance strategies that exploit gaps and mismatches locations. www.U4.no U4 EXPERT ANSWER 8

How could anti-corruption interventions tackling global corruption benefit the UK? incidences of corruption are therefore particularly tax havens and beneficial ownership provisions at risk: one estimate states that between 2003 and enhancing international cooperation in and 2013, these countries lost US$6.6 trillion to enforcement (Hearson 2014). illicit financial flows (Kar & Spanjer 2014). Finally, there is also the question of reputational Implications for the UK risk. In its evidence to Parliament’s International While this transfer of wealth from low-income Development Committee in 2012, DFID noted that countries to developed economies may not the UK is a common staging-post or destination appear to be particularly damaging to the recipient for many of the proceeds of illicit financial flows states, in developing countries illicit flows reduce due to its position as a leading global centre of public income, crippling long-term growth, leading financial and legal services (DFID 2012). Indeed, to high inequality and larger fiscal deficits (De La the UK’s position as a target for attempts to Croix & Delavallada 2009; Depken & Lafountain launder ill-gotten gains and its perceived inaction 2006). In turn, this drastically lowers demand for over tax havens is a challenge to the UK industrial goods or services provided by advanced government’s efforts to coordinate international economies (Global Financial Integrity 2015). action against global corruption (Sachs 2016; Oxfam 2016). Moreover, “transfer pricing” arrangements between entities in the same supply chain may 2. Development cooperation also operate to the detriment of revenue collection in developed countries, as taxable income is also There is substantial evidence for a strong, positive minimised in these jurisdictions (Hearson 2014). correlation between control of corruption and In 2009, investigative journalists from The human development. Plotting Transparency Guardian revealed how some firms had International’s Corruption Perceptions Index established themselves as a UK company tax- against the United Nation’s Human Development resident abroad with brands owned in a third Index (a combination of health, wealth and country (The Guardian 2009). Other companies education indicators) clearly demonstrates this were found to deliberately accrue enormous debts trend (Kaplan 2012). in its UK operations to minimise taxable profits (Ritter 2015). Figure 3: Corruption and human development Efforts to tackle the enabling ecosystem of illicit Source: Kaplan 2012 financial flows have great potential to protect tax bases both in the UK and in overseas countries The relationship between these two indicators is where UK businesses operate. Any measures confirmed by regional studies, which demonstrate seeking to tackle IFFs must nevertheless build that in both the Asia Pacific (Rajasa 2014), and upon the effective implementation of national anti- sub-Saharan Africa (Nguemegne 2011), corruption policies such as those on anti-money corruption adversely affects human development laundering. Several studies have shown that once other variables like growth, welfare addressing problems like tax evasion and IFFs in expenditures and political system have been isolation is ill-advised and ineffective, and that comprehensive anti-corruption measures are a key ingredient to success (African Union Commission 2012; Rangazas, Moumouras & Ivanyna 2010). A U4 brief on tax-motivated IFFs recommends looking at tax issues through an “anti-corruption lens” focused on building integrity and transparency of governance institutions, increasing financial transparency in areas such as www.U4.no U4 EXPERT ANSWER 9

How could anti-corruption interventions tackling global corruption benefit the UK? controlled for. Other analyses at both cross- provide support to anti-corruption work, which can regional (Akçay 2006) and national level produce be programmatic or case-based in nature. similar results (UNDP 2003). The majority of donor agencies’ anti-corruption Corruption is particularly damaging for human work is likely to be programmatic. Anti-corruption development as it retards income growth and interventions can target the demand side (related denies lower-income groups access to basic to improving the quality of public institutions), the health care (Ortega, Casquero & Sanjuan 2016). supply side (working with civil society and the An IMF working paper found that a one standard private sector to improve accountability), or a deviation point increase in corruption resulted in combination of the two. The UK is a leader in the an income reduction for the poor of 7.8 field, using overseas development assistance for percentage points a year (Gupta, Davoodi & a variety of innovative anti-corruption programmes Alonso-Terme 1998). designed to reduce corruption in countries such as Nigeria, Uganda and Ghana (DFID 2016; Chr. While the nature of the relationship between trade Michelsen Institute 2016). liberalisation and human development is hotly contested (Malhotra 2004; Hamid & Amin 2013), Donor agencies are also well-placed to support better outcomes in health, education and poverty investigations into foreign bribery. Given that such reduction have the potential to spur greater investigations require close interaction and market participation and generate increased communication between different types of demand for goods and services in emerging institutions in the donors’ home and host economies (UNDP 2006). A number of studies countries, donor agencies can also act as bridges have pointed to the existence of a virtuous cycle and mediators between governments and between human development and trade (Ranis & domestic companies (De Simone and Zagaris Steward 2006; Davies & Quinlivan 2006; Rui 2014). Cased-based approaches to anti- 2013; Banik no date). corruption, such as asset recovery, can be very fruitful. One OECD estimate is that for each $1 Moreover, relationships between donor and spent on investigating the proceeds of corruption recipient countries can also entail spillover into originating from the developing world and commercial relations: a recent study found that transferred to OECD countries, up to $20 has each dollar of German overseas development been tracked and frozen, a significant proportion assistance was associated with an average of which was repatriated to the country of origin increase of $0.83 of German goods exports, and (OECD 2014b). that these aid-induced gains could be associated with the gross employment of over 200,000 Implications for the UK German workers (Martinez-Zarzoso et al. 2016). According to OECD Development Assistance Committee statistics (2016b), over a third of UK Aid therefore contributes powerfully to economic aid flows to the least developed countries in the growth, trading relations and human development world, including Ethiopia, Bangladesh, South in developing countries (Kosack & Tobin 2006). Sudan, the Democratic Republic of the Congo, Anti-corruption policies play a central role in both Afghanistan, Sierra Leone and Tanzania, all of improving development outcomes and ensuring which rank poorly in governance indicators value for money of development assistance (Transparency International 2015). programmes. Donor agencies are uniquely placed to support these kinds of anti-corruption Anti-corruption integrity measures within interventions abroad. development programmes are therefore crucial to ensure that taxpayers’ money is being spent The role of donor agencies effectively and not contributing to underlying corruption in the country of operation. The position of development agencies as contact points between developing and developed countries make them the perfect partners to www.U4.no U4 EXPERT ANSWER 10

How could anti-corruption interventions tackling global corruption benefit the UK? 3. Security and crime Fragile states and conflict Security Corruption exacerbates conflict in three significant ways: it creates conditions in which conflict is Threats to global security range from pandemics likely to occur, fuels and maintains existing armed and climate change to cybercrime and terrorism. struggles (O’Donnell 2006), and weakens peace- Effective responses to such challenges require building and peace-keeping efforts (Le Billon stable governments committed to combatting 2008; World Bank 2011). In this way, corruption threats as they emerge. Corruption is a crucial helps to generate and prolong conflict and forces consideration in these discussions for a number of people to leave the afflicted areas (North, Wallis & reasons. Firstly, corruption is both a product and a Weingast 2013; Chayes 2015). driver of instability and conflict as it undermines the rule of law and faith in public institutions The fragility of a state is not only shaped by the (Rodrik, Subramanian & Trebbi 2004). Corruption forces that attempt to undermine or confront it, but thus cripples the ability of governments in fragile also by its ability to provide essential goods and or conflict-ridden states to tackle security threats. services for its citizens. Failure to do so can result in grievances, and ultimately the rejection of Second, corruption is a crucial enabling dysfunctional official institutions can play into the mechanism for organised criminality and hands of extremist and criminal organisations able terrorism. Where corruption is widespread, it can to offer surrogate structures (Dix, Hussmann & stymie regulatory and governance systems. This Walton 2012). allows criminals to cleanse and launder profits from illicit black markets in human beings, Corruption is therefore a driver of diminished weapons, drugs, conflict diamonds, poached security; a 2010 study found that economic ivory, illegally harvested timber and oil from downturns caused by corrupt flows out of the terrorist-controlled territories. country were prime triggers for conflict when a certain party did not benefit from corrupt The criminal underworld and authoritarian regimes resources themselves (Andvig 2010). alike rely on corruption to siphon off their ill-gotten gains, fund their illegal activities or even finance A good example of this is Yemen, which was the terrorist organisations abroad. Failing regimes fifth largest source of illicit capital from the with weak and unstable institutions provide the developing world between 1990 and 2008, during perfect breeding ground for a multitude of security which time about US$12 billion was looted from threats. the country (Hill et al. 2013). Constant capital flight from the country, both from public funds and Third, corruption can prevent effective responses through tax evasion, contributed to the years of from the security services, allowing criminals to economic stagnation that culminated in the 2011 escape investigation and prosecution. This is uprising against the government. Since then, covered in a previous Helpdesk answer on instability and fragility have led to an increase in corruption in security services. capital flight, lowering the country’s tax base and public resources, and creating a vicious cycle of Prioritising anti-corruption efforts should be seen conflict and economic disparity (Midgley et al. as one way to help strengthen security; anti- 2014). money laundering provisions can thwart terrorist organisations, while tackling corruption in Corruption also plays a large role in facilitating developing countries can reduce incentives to cross-border smuggling of weapons and emigrate and mitigate the destabilising effects of insurgents. Whether to maintain followers or to grand corruption and state capture. purchase weapons and supplies, large sums of capital are essential. Conflicting parties generally want to keep the amounts and sources of this capital secret as it may derive from illegal activities, external sources (which may prompt www.U4.no U4 EXPERT ANSWER 11

How could anti-corruption interventions tackling global corruption benefit the UK? other states to financially assist opposing parties), International crime or from the state itself – as is the case with bribery or embezzlement (Ralston 2014). Transnational criminal organisations capitalise on corruption in the financial system to cover up the Corruption can also keep conflict going, even if origin and use of profits derived from criminal the state is subjected to arms or trade embargos. activities. They tend to shift profits abroad to avoid Schneider (2010) notes that both states and arms domestic law enforcement from detecting, seizing dealers use illicit flows to keep conflicts funded or freezing these funds (Shelley 2005). Indeed, and supplied by using hard-cash transfers or profits from crime or generated by criminal letters of credit issued by banks to exchange organisations constitute the largest component of commodities for supplies. Private sector illicit financial flows in the world (30% to 35%), companies, often headquartered in developed ahead of transfer mispricing, tax evasion or countries, can also be implicated in such systems; outright corruption (Baker & Joly 2008). some timber companies in Africa have been found to be acting as middlemen between armed rebels Much of the financial, drug trafficking and and financial institutions, purchasing arms and organised crime of the type which directly affects materials, trafficking weapons and selling timber the UK depends on these kinds of mechanisms. in exchange for part of the profits extracted from Measures to prevent such criminal activity depend forestry (African Union Commission 2012). on detecting, investigating and prosecuting corruption occurring at the interface between Implications for the UK domestic and international markets. According to the World Economic Forum’s Global Competitiveness Report, the cost of terrorism to DFID-funded anti-corruption investigation teams, the UK not only increased between 2014 and such as the Proceeds of Corruption Unit and the 2015, but is higher than in most EU countries. In Overseas Anti-Corruption Unit, have enjoyed this particular indicator, the UK ranks 82/144 some successes in this field; by their own countries (World Economic Forum 2016). calculation investigating over 150 cases of Reducing terrorism abroad is therefore one way to overseas bribery, successfully prosecuting 27 reduce costs for UK businesses and make them individuals and recovering £200 million of stolen more competitive. assets (DFID 2015). The recent formation of a dedicated International Corruption Unit at the UK Corrupt practices offer an ideal channel for National Crime Agency (NCA) with a clear remit to terrorists, particularly those of the state-funded investigate international corruption cases with a variety (Zdanowicz 2009). Many terrorist bearing on the UK is encouraging. organisations, like the FARC forces of Colombia, There are, however, concerns that neither illegally extract minerals, such as gold or complex commercial fraud nor international tungsten, and sell them to large multinational corruption cases are NCA priorities (The Wall companies to finance their activities (Bargent Street Journal 2016), and ongoing uncertainty 2013; Gomez 2012). Similarly, transnational about the future role of the Serious Fraud Office, terrorist organisations, like Hezbollah, the Islamic which, unlike the NCA, is a non-ministerial State, Al Qaeda and Hamas, have developed independent body (Transparency International extensive multinational networks to finance 2014). themselves with the use of secret jurisdictions and offshore banks (Baker & Joly 2008). Such Implications for the UK mechanisms directly affect organisations’ ability to Future steps to tackle international criminality in carry out terrorist attacks against the UK, its allies the UK could involve greater efforts to investigate and its interests. the inflow of “dirty money” into the UK, notably into the property market (Simmon & Simmons 2016). Deeper cooperation with authorities in other jurisdictions, particularly the United States and Switzerland, could also be helpful in this regard (Covington 2015). www.U4.no U4 EXPERT ANSWER 12

How could anti-corruption interventions tackling global corruption benefit the UK? Other initiatives also have the potential to aid UK both income inequality and liquidity constraints, authorities’ attempts to clamp down on illicit which in turn disproportionately impairs the ability behaviours. Two notable examples would be the of low- and middle-skilled inhabitants to emigrate reform of the Suspicious Activity Reporting (Cooray & Schneider 2014). Tackling corruption in mechanism (which only led to the blocking of countries of origin is believed by some academics seven transactions in 2014), and the introduction to be a means of reducing levels of brain drain of Unexplained Wealth Orders as in Iceland and (Dimant, Krieger & Meierrieks 2013). Australia (Simmon & Simmons 2016). A previous Helpdesk response on unexplained wealth orders Figure 4: Brain drain and the control of corruption as an anti-corruption tool may be of interest here. in the EU Migration Source: Mungiu-Pippidi 2016 There is evidence of a clear but nuanced Illegal migration and human trafficking correlation between higher levels of corruption Corruption both facilitates trafficking and and increased motivation for migration. The magnifies illegal migratory flows by destabilising literature surrounding migration and its causes democracies, weakening rule of law and identifies a lack of economic opportunities and a development. At the same time, trafficking, which lack of security as two key drivers of legal and can involve global or regional networks, illegal migration (Poprawe 2015). As described contributes to a country’s corruption as it relies on above, there is ample evidence that corruption pay-offs to police, judges and ministers at all has an impact on economic opportunities and levels (Transparency International 2011b). security, and thus operates as an indirect driver of migration (Wheatland 2016). As increasing numbers of displaced people seek safe refuge in Europe, people smuggling has Studies also find that corruption in its own right become increasingly lucrative and ruthless. can act as an incentive for migration out of corrupt Corruption is central to the modus operandi of countries and towards countries with lower levels people smugglers and human traffickers, enabling of corruption (Poprawe 2015; Cooray & Schneider them to circumvent law enforcement, border 2014). Schneider (2015) argues that as well as protection and immigration controls (Rusev 2013). retarding economic growth, corruption can lead to Officials are bribed to obtain or overlook migrants’ a situation in which jobs are no longer distributed documents, or waive controls or regulations fairly, leading to workers seeking to migrate for job (OECD 2015). Refugees and illegal migrants can opportunities. be a lucrative source of additional income to border officials and organised criminal gangs Corruption affects migration in two particularly (Koser 2008). A 2015 investigation found that salient ways: brain drain and illegal migration. illegal immigrants smuggled to the UK from Afghanistan and Pakistan found that, on average, Brain drain Recent research has investigated the role corruption plays in exacerbating “brain drain” from low-income countries (Dimant, Krieger & Meierrieks 2013). Notably, corruption is a determinant of who becomes a migrant. While emigration increases across the board with higher levels of corruption, once a certain threshold of corruption is surpassed, it is generally the affluent and educated who emigrate. Studies suggest this is because corruption is naturally accompanied by increasing levels of www.U4.no U4 EXPERT ANSWER 13

How could anti-corruption interventions tackling global corruption benefit the UK? smugglers’ fees were around 250% of a Andvig, J. C. 2010. “Corruption and Conflict: household’s annual income (Al Jazeera 2015). Contrasting Logics of Collective Action”. In Troubled Regions and Failing States: The Corruption is therefore a major obstacle to the Clustering and Contagion of Armed Conflicts, prevention, detection and control of people edited by Kristian Berg Harpviken, 77-102. smuggling. Moreover, illegal migration is closely Emerald Group Publishing Limited. linked to illicit financial flows: money laundering is http://www.emeraldinsight.com/doi/abs/10.1108/S a central component of concealing the origins of 0195-6310%282010%290000027007 the proceeds from people smuggling (OECD 2015). Argandoña, A. 2004. Corruption and Companies: The Case of Facilitating Payments. IESE 4. References Business School Working Paper No. 539. http://www.iese.edu/research/pdfs/DI-0539-E.pdf African Union Commission. 2012. Illicit Financial Flows: Report on the High Level Panel on Illicit Aridgo, I. 2014. Links between Illicit Financial Financial Flows from Africa. United Nations Flows and Peace and Security. U4 Expert Economic Commission for Africa. Answer. http://www.u4.no/publications/links- http://www.uneca.org/publications/illicit-financial- between-illicit-financial-flows-and-peace-and- flows security/ Aghion, P., Cage, J., Ufuk, A., and Kerr, W. 2016. Asiedu, E. and Freeman, J. 2009. The Effect of Taxation, Corruption, and Growth, Harvard Corruption on Investment Growth: Evidence from Business School Working Paper 16-075. Firms in Latin America, Sub-Saharan Africa, and http://www.hbs.edu/faculty/Publication%20Files/A Transition Countries. Review of Development ACK-HBSWP-Jan16_520961cd-db29-47b9-a28a- Economics, (13), 200-214. 7288d8e43cb1.pdf# https://core.ac.uk/download/files/153/6711784.pdf Aidt, T.S. 2009. Corruption, Institutions and Baker, R., & Joly, E. 2008. The Issue of Illicit Economic Development, Oxford Review of Financial Flows. Commentaire, 31(124). Economic Policy, 25(2), 271-291 http://www.gfintegrity.org/storage/gfip/rwb%20ej% http://oxrep.oxfordjournals.org/content/25/2/271.a 20winter%202008%20commentaire%20piece.pdf bstract Bandyopadhyay, S. and Roy, S. 2007. Corruption Ajaz, T. and Eatzaz, A. 2010. The Effect of and Trade Protection: Evidence from Panel Data, Corruption and Governance on Tax Revenues, Federal Reserve Bank of St. Louis Working Paper The Pakistan Development Review, 49(4), 405- Series 22. 417 http://research.stlouisfed.org/wp/2007/2007- https://www.jstor.org/stable/41428665 022.pdf Akçay, S. 2006. Corruption and Human Banik, N. No date. Does Trade Actually Help to Development, Cato Journal, 26(1). Build Capabilities: The Case of Asia. http://achc.org.co/documentos/investigacion/reco https://www.oecd.org/site/progresskorea/4358605 mendados/R4.pdf 8.pdf Al Jazeera. 2015. “The Billion-Dollar Business of Bargent, J. 2013. FARC Run Tungsten Mining in Refugee Smuggling”. South Colombia, Insight Crime. http://www.aljazeera.com/programmes/countingth http://www.insightcrime.org/news-briefs/farc- ecost/2015/09/billion-dollar-business-refugee- exploit-tungsten-mining-in-south-colombia smuggling-150913113527788.html Belgibayeva, A. and Plekhanov, A. 2016. Does Ali, M.S.B. and Mdhillat, M. 2015. Does Corruption Matter for Sources of Foreign Direct Corruption Impede International Trade? New Investment? Birkbeck College Working paper Evidence from the EU and the MENA Countries, 1604. http://eprints.bbk.ac.uk/15260/1/15260.pdf Journal of Economic Cooperation & Development, or 36(4), 107-119 http://kangur.uek.krakow.pl/bibl_ae_zasoby/siec_l http://www.sesric.org/jecd/jecd_articles/ART15021 okalna/Ebor/w176.pdf 601-2.pdf www.U4.no U4 EXPERT ANSWER 14

How could anti-corruption interventions tackling global corruption benefit the UK? Bird, R. and Martinez-Vazquez, J. 2008. Tax Cuervo-Cazurra, A. 2006. Who Cares about Effort in Developing Countries and High Income Corruption? Journal of International Business Countries: The Impact of Corruption, Voice, and Studies, 37(6), 807-822 Accountability, Economic Faculty Publications, 27. http://www.jstor.org/stable/pdf/4540385.pdf http://scholarworks.gsu.edu/cgi/viewcontent.cgi?ar ticle=1027&context=econ_facpub D’Souza, A. 2012. The OECD Anti-Bribery Convention: Changing the Currents of Trade, Bjørnskov, C. 2009. Can Bribes Buy Protection Journal of Development Economics, 97(1), 73-87 Against International Trade? http://wp.peio.me/wp- http://ssrn.com/abstract=1452687 content/uploads/2014/04/Conf3_DSouza- 24.11.09.pdf Breen, M. and Gillander, R. 2012. Corruption, Institutions and Regulation, Economics of Davies, A., and Quinlivan, G. 2006. A Panel Data Governance, 13(3), 263-285 Analysis of the Impact of Trade on Human http://www.csae.ox.ac.uk/conferences/2011- Development, The Journal of Socio-Economics, EDiA/papers/508-Gillanders.pdf 35(5), 868-876. http://www.sciencedirect.com/science/article/pii/S Chayes, S. 2015. Thieves of State: Why 1053535705001800 Corruption Threatens Global Security. New York: W.W Norton & Company. De Jong, E. and Udo, E. 2006. Is Corruption Detrimental to International Trade? Radboud Chêne, M. 2011. The Potential of UNCAC to University Nijmegen Working Paper. Combat Illicit Financial Flows, U4 Helpdesk http://congress.utu.fi/epcs2006/docs/C1_de%20jo Answer. ng.pdf http://www.u4.no/publications/the-potential-of- uncac-to-combat-illicit-financial-flows-2/ De La Croix, D. and Delavallada, C. 2009. Growth, Public Investment and Corruption with Chr. Michelsen Institute. 2016. “Sugar Project in Failing Institutions, Economics of Governance, Uganda & STAAC Project in Ghana.” 10(3), 187-219 http://www.cmi.no/projects/1991-sugar-project-in- http://perso.uclouvain.be/david.delacroix/pdfpubli/ uganda-staac-project-in-ghana ecogov09.pdf Control Risks. 2015. International Business De Simone, F. and Zagaris, B. 2014. Impact of Attitudes to Corruption Survey. London: Control Foreign Bribery Legislation on Developing Risks. Countries and the Role of Donor Agencies. U4 https://www.controlrisks.com/webcasts/studio/201 Issue. 5-GENERAL/corruption-report/corruption-survey- http://www.u4.no/publications/impact-of-foreign- 2015.pdf bribery-legislation-on-developing-countries-and- the-role-of-donor-agencies/ Cooper, K. 2011. “The Bribery Act 2010: Significant Implications for International Trade”. Department for International Development (DFID). http://www.incelaw.com/en/knowledge- 2012. Supplementary Written Evidence Submitted bank/publications/the-bribery-act-2010-significant- by the Department for International Development. implications-for-international-trade http://www.publications.parliament.uk/pa/cm20121 3/cmselect/cmintdev/writev/130/tax22d.htm. Cooray A., Schneider F. 2014. Does Corruption Promote Emigration? An Empirical Examination, Department for International Development (DFID). IZA Discussion paper series no. 809 2015. “New Crime Unit to Investigate Corruption http://ftp.iza.org/dp8094.pdf Affecting Developing Countries”. https://www.gov.uk/government/news/new-crime- Coppier, R. No date. Corruption, Tax Revenue unit-to-investigate-corruption-affecting-developing- and Growth: A Non-Linear Relationship? countries Universita Degli Studi Di Macerata Working Paper 27. Department for International Development (DFID). http://www2.unimc.it/dief/wpaper/wpaper00027/file 2016. “Justice for All Programme”. Paper https://devtracker.dfid.gov.uk/projects/GB-1- 114161 Covington. 2015. Trends and Developments in Anti-Corruption Enforcement. Covington London. www.U4.no U4 EXPERT ANSWER 15

How could anti-corruption interventions tackling global corruption benefit the UK? Depken, C. and Lafountain, C. 2006. Fiscal Global Financial Integrity. 2015. Illicit Financial Consequences of Public Corruption: Empirical Flows: The Most Damaging Economic Condition Evidence from State Bond Ratings, Public Choice, Facing the Developing World. Washington D.C.: 126 (1-2), 75-85. Global Financial Integrity. https://www.jstor.org/stable/30026576 http://www.gfintegrity.org/wp- content/uploads/2015/09/Ford-Book-Final.pdf Dimant, E., Krieger, T., and Meierrieks, D. 2013. The Effect of Corruption on Migration 1985-2000, Godinez, J. and Garita, M. 2016. The Dimensions Applied Economics Letters, 20(13), 1270-1274. of Corruption and Its Impact on FDI Decision http://groups.uni- Making: The Case of Guatemala, Business and paderborn.de/fiwi/RePEc/Working%20Paper%20n Politics, 18(2), 123-141 eutral/WP67%20-%202013-10.pdf http://www.degruyter.com/view/j/bap.ahead-of- print/bap-2013-0033/bap-2013-0033.xml Dix, S., Hussmann, K., and Walton, G. 2012. Risks of Corruption to State Legitimacy and Gomez G, I. 2012. Colombia's Black-Market Stability in Fragile Situations, U4 Issue 2012:3. Coltan Tied to Drug Traffickers, Paramilitaries, Bergen: Chr. Michelsen Centre for Public Integrity. Institute.http://www.u4.no/publications/risks-of- http://www.publicintegrity.org/2012/03/04/8284/col corruption-to-state-legitimacy-and-stability-in- ombia-s-black-market-coltan-tied-drug-traffickers- fragile-situations/ paramilitaries Dutt, P. and Traca, D. 2010. Corruption and Gupta, S., Davoodi, H., and Alonso-Terme, R. Bilateral Trade Flows: Extortion or Evasion? The 1998. Does Corruption Affect Income Inequality Review of Economic and Statistics, 92(4), 843- and Poverty? IMF Working Paper 1998:76. 860. http://www.imf.org/external/pubs/ft/wp/wp9876.pdf Dzhumashev, M. 2010. Corruption and Regulatory Hakenrath, M. 2014. Illicit Financial Flows and Burden. MPRA Paper 2081. their Developmental Impacts: An Overview, http://mpra.ub.uni- International Development Policy. muenchen.de/2081/1/MPRA_paper_2081.pdf https://poldev.revues.org/1863 Fisman and Svensson. 2007. Are Corruption and Hakkala, K., Norbäck, P., & Svaleryd, H. 2008. Taxation Really Harmful to Growth? Journal of Asymmetric Effects of Corruption on FDI: Development Economics, 83(1), 63-75 Evidence from Swedish Multinational Firms, http://www.sciencedirect.com/science/article/pii/S Review of Economic and Statistics, 90(4), 627- 0304387806001106 642. http://www.jstor.org/stable/pdf/40043105.pdf?_=1 FTI Journal. 2013. “The Realities of the New UK 471005964452 Bribery Act.” http://www.ftijournal.com/article/the-realities-of- Hallward-Driemeier, M. 2009. Who Survives? the the-new-uk-bribery-act Impact of Corruption, Competition and Property Rights Across Firms, World Bank Policy Research Ghosh, S. and Neanidis, K. 2010. Corruption in Working Paper 5084. Public Finances, and the Effects on Inflation, http://elibrary.worldbank.org/content/workingpaper Taxation, and Growth. Brunel Economics and /10.1596/1813-9450-5084 Finance Working Paper Series 10-14. https://www.brunel.ac.uk/__data/assets/pdf_file/00 Hamid, Z. and Mohd Amin, R. 2013. Trade and 16/82042/1014.pdf Human Development in OIC Countries: A Panel Data Analysis, Islamic Economic Studies, 21(2), Glaeser, E.L and Saks, R.E. 2006. Corruption in 55-70. America, Journal of Public Economics 90(6), http://www.irti.org/English/Research/Documents/I 1053-1072. ES/018.pdf http://projects.iq.harvard.edu/files/gov2126/files/gl aesersaks_2006.pdf Hearson, M. 2014. Tax-motivated Illicit Financial Flows: A Guide for Development Practitioners. Bergen: Chr. Michelsen Institute. http://www.u4.no/publications/tax-motivated-illicit- financial-flows-a-guide-for-development- practitioners/ www.U4.no U4 EXPERT ANSWER 16

How could anti-corruption interventions tackling global corruption benefit the UK? Helble, M., Shepherd, B. and Wilson, J. 2009. Kosack, S. and Tobin, J. 2006. Funding Self- Transparency and Regional Integration in the Asia Sustaining Development: The Role of Aid, FDI Pacific, The World Economy, 32(3), 479-508 and Government in Economic Success, http://developing-trade.com/wp- International Organization, 60, 205-243. content/uploads/2014/11/DTC-Article-Chapter- http://faculty.georgetown.edu/jlt58/Research/kosa 2009-1.pdf ck_tobin_io.pdf Hill, G., Salisbury, P., Northedge, L., & Koser, K. 2008. Why Migrant Smuggling Pays, Kinninmont, J. 2013. Yemen: Corruption, Capital International Migration, 46(2), 3-26 Flight and Global Drivers of Conflict, Chatham http://onlinelibrary.wiley.com/doi/10.1111/j.1468- House Report. 2435.2008.00442.x/abstract http://www.chathamhouse.org/sites/files/chathamh ouse/public/Research/Middle%20East/0913r_yem Lambsdorff, J. 2003. How Corruption Affect en_es.pdf Economic Development. http://www.wiwi.uni- passau.de/fileadmin/dokumente/lehrstuehle/lambs Hindriks, J., Keen, M., and Muthoo, A. 1999. dorff/Papers/C_Development.pdf Corruption, Extortion and Evasion, Journal of Public Economics, 74, 394-430. Le Billon, P. 2008. Corrupting Peace? http://projects.iq.harvard.edu/files/gov2126/files/hi Peacebuilding and Post-Conflict Corruption. ndriks_1999.pdf International Peacekeeping, 15(3), 344-361. http://www.tandfonline.com/doi/abs/10.1080/1353 HMRC. 2016. “UK Overseas Trade Statistics: 3310802058851 June 2016.” https://www.gov.uk/government/uploads/system/u Lejárraga, I. 2013. Multilateralising Regionalism: ploads/attachment_data/file/543746/OTS_Releas Strengthening Transparency Disciplines in Trade, e_0616.pdf OECD Trade Policy Papers No. 152. http://dx.doi.org/10.1787/5k44t7k99xzq-en Hwang, J. 2002. A Note on the Relationship between Corruption and Government Revenue, Lejárraga, I. and Shepherd, B. 2013. Quantitative Journal of Economic Development, 27(2). Evidence on Transparency in Regional Trade http://www.jed.or.kr/full-text/27-2/hwang.PDF Agreements, OECD Trade Policy Papers No. 153. http://dx.doi.org/10.1787/5k450q9v2mg5-en Imam, P. and Jacobs, D. 2007. Effect of Corruption on Tax Revenues in the Middle East, Malhotra, K. 2004. Trade, Growth, Poverty IMF Working Paper 07-270. Reduction and Human Development: Some https://www.imf.org/external/pubs/ft/wp/2007/wp0 Linkages and Policy Implications. Present at 7270.pdf UNDP XVIII G-24 Technical Group Meeting, 8-9 March 2004, Geneva. Kaplan, S. 2012. “How Corruption Relates to http://www.policyinnovations.org/ideas/policy_libra Development.” Fragile States. ry/data/01144/_res/id=sa_File1/ http://www.fragilestates.org/2012/02/01/how- corruption-relates-to-development/ Martinez-Zarzoso, I., Nowak-Lehmann, F., Klasen, S., and Johannsen, F. 2016. Does Kar, D., and LeBlanc, B. 2013. “Illicit Financial German Development Aid boost German Exports Flows from Developing Countries: 2002-2011”. and German Exployment? A Sectoral Level http://www.gfintegrity.org/report/2013-global- Analysis, Journal of Economic and Statistics, report-illicit-financial-flows-from-developing- 236(1), 71-94. countries-2002-2011/ https://ideas.repec.org/a/jns/jbstat/v236y2016i1p7 1-94.html Kar, D., and Spanjer, J. 2014. Illicit Financial Flows from Developing Countries: 2003-2012. Martini, M. 2013. Reducing Bureaucracy and Washington D.C.: Global Financial Integrity. Corruption Affecting Small and Medium http://www.gfintegrity.org/report/2014-global- Enterprises, U4 Helpdesk Answer. report-illicit-financial-flows-from-developing- http://www.transparency.org/whatwedo/answer/re countries-2003-2012/ ducing_bureaucracy_and_corruption_affecting_s mall_and_medium_enterprises www.U4.no U4 EXPERT ANSWER 17

How could anti-corruption interventions tackling global corruption benefit the UK? Mathur, A. & Singh, K. 2013. Foreign direct OECD. 2015. Corruption and the Smuggling of investment, corruption and democracy, Applied Refugees. Paris: OECD Publishing. Economics, 45(8), 991-1002. http://www.oecd.org/corruption/Corruption-and- http://papers.ssrn.com/sol3/papers.cfm?abstract_i the-smuggling-of-refugees.pdf d=2212956 OECD. 2016a. Fighting the Hidden Tariff: Global Midgley, T., Attree, L., Wheeler, T., & Vaughan- Trade Without Corruption. Paris: OECD Lee, H. 2014. “Defining and Measuring the Publishing. External Stress Factors That Lead to Conflict in http://www.oecd.org/cleangovbiz/2016-Integrity- the Context of the Post-2015 Agenda.” Forum-Background-Report.pdf Musila, J.W. and Sigue, S.P. 2010. Corruption OECD. 2016b. “Development Finance Data.” and International Trade: An Empirical http://www.oecd.org/dac/financing-sustainable- Investigation of African Countries, The World development/development-finance-data/ Economy, 33(1), 129-146. https://www.researchgate.net/publication/4653835 ONS. 2016a. “UK Perspectives: Trade with the 3_Corruption_and_International_Trade_An_Empir EU and Beyond.” ical_Investigation_of_African_Countries http://visual.ons.gov.uk/uk-perspectives-2016- trade-with-the-eu-and-beyond/ Mungiu-Pippidi, A. 2016. The Good, The Bad and the Ugly: Controlling Corruption in the European ONS. 2016b. “The UK’s Trade and Investment Union, ANTICORRP Work Package 3 Report. Relationship with Africa: 2016”. http://anticorrp.eu/wp- https://www.ons.gov.uk/economy/nationalaccount content/uploads/2016/04/D3.4.1-The-Good-The- s/balanceofpayments/articles/theukstradeandinve Bad-The-Ugly.pdf stmentrelationshipwithafrica/2016 Nawaz, F. 2010. Exploring the Relationships Ortega, B., Casquero, A., and Sanjuan, J. 2016. between Corruption and Tax Revenue. U4 Corruption and Convergence in Human Helpdesk Answer. Development: Evidence from 69 Countries during http://www.transparency.org/files/content/corruptio 1990-2012. Social Indicators Research, 127(2), nqas/228_Exlporing_the_relationships_between_ 691-719. corruption_and_tax_revenue.pdf http://link.springer.com/article/10.1007/s11205- 015-0968-8 Nguemegne, J. 2011. Corruption and Human Development in Africa. New York: Xlibris Oxfam. 2016. “Tax Havens ‘Serve No Useful Corporation. Economic Purpose’: 300 Economists Tell World Leaders.” North, D., Wallis, J, and Weingast, B. 2013. https://www.oxfam.org/en/pressroom/pressrelease Violence and Social Orders: A Conceptual s/2016-05-09/tax-havens-serve-no-useful- Framework for Interpreting Recorded Human economic-purpose-300-economists-tell History. Cambridge: Cambridge University Press. Poprawe, M. 2015. On the Relationship between O’Donnell, M. 2006. Post-conflict Corruption: A Corruption and Migration: Empirical Evidence Rule of Law Agenda, Civil War and the Rule of from a Gravity Model of Migration, Public Choice, Law. 163(3-4), 337-354. PDF available here. OECD. 2014a. OECD Foreign Bribery Report. PriceWaterhouseCoopers, 2008a. Confronting Paris: OECD Publishing. Corruption: The Business Case for an Effective http://www.oecd.org/corruption/oecd-foreign- Anti-Corruption Programme. bribery-report-9789264226616-en.htm http://www.pwc.com/gx/en/forensic- accountingdispute-consulting-services/business- OECD. 2014b. Illicit Financial Flows from case-anticorruption-programme.jhtml Developing Countries: Measuring OECD Responses. Paris: OECD Publishing. PriceWaterhouseCoopers. 2008b. From https://www.oecd.org/corruption/Illicit_Financial_Fl Vulnerable to Valuable: How Integrity Can ows_from_Developing_Countries.pdf Transform a Supply Chain. http://www.pwc.com/en_US/us/supply- chainmanagement/assets/pwc-sci-112008.pdf www.U4.no U4 EXPERT ANSWER 18

How could anti-corruption interventions tackling global corruption benefit the UK? PriceWaterhouseCoopers. 2016. Redefining Rossi, M. and Dal Bo, E. 2006. Corruption and Business Success in a Changing World, 19th Inefficiency: Theory and Evidence from Electric Annual Global CEO Survey. Utilities, Journal of Public Economics, 91(5-6), https://www.pwc.com/gx/en/ceo- 939-962. survey/2016/landing-page/pwc-19th-annual- http://www.sciencedirect.com/science/article/pii/S global-ceo-survey.pdf 004727270600154X Rajasa, A. 2014. Understanding Relationship Rui, D. 2013. Does Increased Per capita Trade between Human Development Index and Lead to Human Development? Corruption Perception Index in Asia-Pacific https://repository.library.georgetown.edu/handle/1 Economic Cooperation Members, IBMT Journal, 0822/558634 11(11). http://papers.ssrn.com/sol3/papers.cfm?abstract_i Rusev, A. 2013. Human Trafficking, Border d=2653542 Security and Related Corruption in the EU, DCAF Brussels: Migration and Security Sector Paper Ralston, L. 2014. Trafficking and Fragility in West Series. http://www.dcaf.ch/Publications/Human- Africa, World Bank Policy Research Working Trafficking-Border-Security-and-Related- Paper 7079. Corruption-in-the-EU http://elibrary.worldbank.org/doi/abs/10.1596/1813 -9450-7079 Sachs, J. 2016. “To End Corruption, Start with the US and UK. They Allow It in Broad Daylight.” Rangazas, P., Moumouras, A. and Ivanyna, M. https://www.theguardian.com/commentisfree/2016 2010. The Culture of Corruption, Tax Evasion, /may/12/anti-corruption-summit-us-united- and Optimal Tax Policy. kingdom-tax-havens https://msu.edu/~ivanynam/research/corr_cult/Iva nyna_Mourmouras_Rangazas_Corruption_And_T Sahadat, C. 2015. “Curbing Illicit Financial Flows ax_Policy_2010.pdf from Africa: Are Current Initiatives Achieving Enough?” New Delhi: Centre for Development and Ranis, G. and Stewart, F. 2006. Successful Human Rights. http://www.cdhr.org.in/post-2015- Transition towards a Virtuous Cycle of Human agenda/illicit-financial-flows/ Development and Economic Growth: Country Studies, Yale University Economic Growth Center Sanyal, R., and Samanta, S. 2008. Effect of Discussion Paper No. 943. Perception of Corruption on Outward US Foreign http://www.econ.yale.edu/~granis/papers/cdp0943 Direct Investment, Global Business and .pdf Economics Review, 10(1), 123-140. http://econpapers.repec.org/article/idsgbusec/v_3 Ritter, I. 2015. Illicit Financial Flows: An Analysis a10_3ay_3a2008_3ai_3a1_3ap_3a123-140.htm and Some Initial Policy Proposals. Berlin: Friedrich Ebert Stiftung. http://library.fes.de/pdf- Schneider, F. 2010. The Hidden Financial Flows files/managerkreis/11487.pdf of the Organized Crime: A Literature Review and Some Preliminary Empirical Results. Presented at Rodrik, D., Subramanian, A. and Trebbi, F. 2004. the Conference “Illicit Trade and Globalization” Institutions Rule: The Primacy of Institutions over CESifo Venice Summer Workshop, Venice Geography and Integration in Economic International University, San Servolo, July 14-15, Development, Journal of Economic Growth, 9 (2), 2008. 131–165 https://www.imf.org/external/pubs/ft/wp/2002/wp0 Schneider, F. 2015. Does Corruption Promote 2189.pdf Emigration? IZA Working Paper 192. http://wol.iza.org/articles/does-corruption-promote- Rose-Ackerman, S. (1975). The Economics of emigration-1.pdf Corruption, Journal of Public Economics, 4(2) 187-203. Shleifer, A., and R. Vishny. 1993. Corruption, The https://ideas.repec.org/a/eee/pubeco/v4y1975i2p1 Quarterly Journal of Economics, 108(3), 599-617. 87-203.html http://qje.oxfordjournals.org/content/108/3/599.abs tract www.U4.no U4 EXPERT ANSWER 19

How could anti-corruption interventions tackling global corruption benefit the UK? Simmons and Simmons. 2016. “What Will Be the Tushe, N. 2014. “Why We Need Anti-Corruption Role of the International Corruption Unit?” Provisions in US Free-Trade Agreements”. FCPA http://www.elexica.com/en/legal-topics/crime- Blog. fraud-and-investigations/04-what-role-for-the- www.fcpablog.com/blog/2014/5/13/why-we-need- international-corruption-unit anti-corruption-provisions-in-us-free-trade- agre.html Starosta de Waldemar, F. 2012. “New Products and Corruption: Evidence from Indian Firms”, The Ugur, M., and Dasgupta, N. 2011. Evidence on Developing Economies, 50(3), 268-284. the Economic Growth Impacts of Corruption in http://www.csae.ox.ac.uk/conferences/2011- Low-Income Countries and Beyond. London: EDiA/papers/035-Waldemar.pdf EPPI-Centre, University of London. https://eppi.ioe.ac.uk/cms/Portals/0/PDF%20revie The Guardian. 2009. “Firms’ Secret Tax ws%20and%20summaries/Corruption%20impact Avoidance Schemes Cost UK Billions”. %202011%20Ugur%20report.pdf?ver=2011-08- http://www.guardian.co.uk/business/2009/feb/02/t 25-153146-490 ax-gap-avoidance United Nations Conference on Trade and The Guardian. 2013. “UK’s Tax Gap Rises by Development (UNCTAD). 2016. World Investment £1bn to £35bn.” Report 2016. Geneva: United Nations Publication. http://www.theguardian.com/politics/2013/oct/11/u http://unctad.org/en/PublicationsLibrary/wir2016_e k-tax-gap-rises-hmrc-avoidance-nonpayment n.pdf The Wall Street Journal. 2016. “Brexit Secures the United Nations Development Programme. 2003. Future of Serious Fraud Office”. Corruption and Human Development, Human http://blogs.wsj.com/riskandcompliance/2016/07/2 Development Reports. 2/brexit-secures-future-of-serious-fraud-office/ http://hdr.undp.org/en/content/corruption-and- human-development Thede, S. & Gustafson, N.A. 2012. The Multifaceted Impact of Corruption on International United Nations Development Programme. 2006. Trade, The World Economy, 35(5), 651-666. International Trade and Human Development: http://papers.ssrn.com/sol3/papers.cfm?abstract_i LAO PDR. d=2051317 http://hdr.undp.org/sites/default/files/lao_2006_en. pdf Transparency International. 2009. Global Corruption Report: Corruption and the Private United Nations Global Compact. 2016. “UK Sector. Berlin: Transparency International. Participants.” Available here. http://www.transparency.org/whatwedo/publication /global_corruption_report_2009 Wheatland, B. 2016. Literature Review: Corruption and Migration, U4 Helpdesk Answer. Transparency International. 2011a. “Bribe Payers http://www.transparency.org/whatwedo/answer/lite Index”. rature_review_corruption_and_migrations http://www.transparency.org/bpi2011/results Wickberg, S. 2012. The Business Case for Transparency International. 2011b. Corruption Fighting Corruption, U4 Expert Answer. and Human Trafficking, Transparency http://www.transparency.org/whatwedo/answer/bu International Working Paper. siness_case_for_fighting_corruption http://www.transparency.org/whatwedo/publication /working_paper_corruption_and_human_traffickin World Bank. 2011. World Development Report. g Download PDF here. Transparency International. 2014. “Exporting World Bank. 2014. “Business Environment and Corruption: UK Country Profile”. Enterprise Performance Surveys: Corruption.” http://www.transparency.org/exporting_corruption/ http://www.enterprisesurveys.org/data/exploretopi UK cs/corruption#all-countries--7 Transparency International. 2015. “Corruption World Bank. 2016. “Brief on Illicit Financial Flows.” Perceptions Index.\" http://www.worldbank.org/en/topic/financialmarketi http://www.transparency.org/cpi2015 ntegrity/brief/illicit-financial-flows-iffs www.U4.no U4 EXPERT ANSWER 20

How could anti-corruption interventions tackling global corruption benefit the UK? World Customs Organisation. 2015. WCO Safe Framework of Standards to Secure and Facilitate Global Trade. Brussels: World Customs Organisation. www.wcoomd.org/en/topics/facilitation/instrument- and- tools/tools/~/media/2B9F7D493314432BA42BC84 98D3B73CB.ashx World Economic Forum. 2016. The Global Competitiveness Report 2015-2016. http://reports.weforum.org/global-competitiveness- report-2015-2016/ World Trade Organisation. 2014. “Trade Facilitation Agreement.” https://www.wto.org/english/tratop_e/tradfa_e/trad fa_e.htm World Trade Organisation. 2015. Aid for Trade at a Glance 2015: Reducing Trade Costs for Inclusive, Sustainable Growth. Paris: OECD Publishing. http://dx.doi.org/10.1787/aid_glance- 2015-En Zdanowicz, J. 2009. Trade-Based Money Laundering and Terrorist Financing, Review of Law & Economics, 5(2), 855-878. https://datapro.fiu.edu/campusedge/files/articles/z danowiczj3008.pdf Zurawicki, L. and Habib, M. 2010. Corruption and Foreign Direct Investment: What Have We Learned? International Business & Economics Research Journal, 9(7). http://www.cluteinstitute.com/ojs/index.php/IBER/a rticle/view/593 www.U4.no U4 EXPERT ANSWER 21