from Development Channel

This Week in Markets and Democracy: Malaysia’s Corruption Probes, Ghost Workers, and Lax OECD Bribery Laws

Malaysia's Prime Minister Najib Razak leaves parliament in Kuala Lumpur, Malaysia, January 26, 2016. Malaysia's attorney-gener...gift from the royal family in Saudi Arabia and there were no criminal offences or corruption involved (Reuters/Olivia Harris).

March 4, 2016

Malaysia's Prime Minister Najib Razak leaves parliament in Kuala Lumpur, Malaysia, January 26, 2016. Malaysia's attorney-gener...gift from the royal family in Saudi Arabia and there were no criminal offences or corruption involved (Reuters/Olivia Harris).
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International Investigations Take Over as Domestic Malaysian Justice Fails

New evidence shows that transfers from troubled state investment fund 1MDB into Malaysian Prime Minister Najib Razak’s personal bank accounts may top $1 billion—$300 million higher than previously thought. Yet Malaysian authorities continue to clear him of wrongdoing. The attorney general’s office ended its case, saying it found no evidence of graft, and Parliament is delaying a long-awaited investigatory report on the fund. The government has also shut down a Malaysian news site reporting on corruption and threatened harsh punishments for journalists who leak “official secrets”—a thinly-veiled warning to would-be whistleblowers. Less politically malleable are international authorities who continue to probe the cross-border case. Singapore recently seized a “large number” of related bank accounts. Criminal proceedings in Switzerland allege misappropriation of up to $4 billion in state money. And in the United States, the Department of Justice opened an inquiry into Najib’s U.S. real estate holdings and the Federal Bureau of Investigation (FBI) into the 1MDB case itself. Najib maintains the money was a political donation from an unnamed Saudi royal, a claim that conflicts with the growing financial paper trail.

How to Get Rid of Ghost Workers

The Nigerian government cut nearly 24,000 non-existent, or “ghost workers” from its payroll, a move that saved $11.5 million last month alone. A Finance Ministry audit showed that workers’ names and bank accounts did not match, and some accounts were paid several times. Ghost workers cost many nations: Iraq paid at least $380 million per year to 50,000 soldiers who never reported for duty, Kenya found over 12,000 retired or fictitious civil servants on its payroll, and Cameroonian officials estimate that almost a quarter of the government’s 220,000 employees could be ghost workers, running up a $12 million monthly tab. Technology—in particular biometric screenings and bank ID verification systems—is helping reformers uncover these costly shams.

Lax Bribery Laws in the OECD

The Organisation for Economic Co-operation and Development (OECD) called out member nations Finland, Slovenia, and Belgium for weak anticorruption measures. Though all three countries rank favorably on Transparency International’s Corruption Perceptions Index, recent evaluations by the OECD Working Group on Bribery highlight their failures to prosecute companies and people that pay bribes elsewhere. Finland lags on adopting adequate whistleblower protections, Slovenia’s anticorruption commission is politicized, and Belgium has yet to convict a single national for foreign bribery. Though the OECD Anti-Bribery Convention is not legally-binding (unlike the United Nations Convention against Corruption), it distinctively and importantly takes on corruption’s supply side—going after those who pay, rather than demand bribes.

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