Maryland Senator Ben Cardin, ranking member on the Senate Foreign Relations Committee, recently introduced legislation with an ambitious goal: “to identify and combat corruption in countries, to establish a tiered system of countries with respect to levels of corruption by their governments and their efforts to combat such corruption, and to assess United States assistance to designated countries in order to advance anti-corruption efforts in those countries and better serve United States taxpayers.” It is great to see Senator Cardin looking for ways the United States can contribute to the global fight against corruption, and there is some smart language in the bill. Of course, it wouldn’t be a CGD blog if I didn’t also have some suggestions on how to make the bill even better.
The meat of S.3210 is a mandate that the State Department produce an annual tiered ranking of countries’ anti-corruption efforts, based on measures including “whether the government of the country vigorously investigates and prosecutes acts of corruption” and “is cooperating with governments of other countries to extradite corrupt actors when requested.” For countries that score poorly, placing in Tier 3 or 4, the State Department and the US Agency for International Development (USAID) would be required to take additional steps to bolster the accountability of programs in those countries. Specifically, the measure directs the State Department, in coordination with USAID and the Defense Department, to conduct corruption risk assessments for foreign aid programs in those countries, include anti-corruption clauses which allow for the termination of the contract if corruption is discovered, require the disclosure of the beneficial ownership of all contractors and subcontractors receiving funding, and establish a mechanism for investigating allegations of misappropriated foreign assistance funds.
The requirement to disclose beneficial ownership of all contractors and subcontractors receiving funding is a new and welcome step towards greater transparency, building on the great start of the Foreign Aid Transparency and Accountability Act. A beneficial owner is a person who enjoys the benefits of ownership (rent or profits, as it might be) even though the legal title to the asset is in another name. Disclosing the beneficial ownership of contractors makes it far easier to spot if the Minister has just steered a government contract to a firm controlled by her brother, for example. And open registries of beneficial ownership for all firms are becoming the global norm (the UK set one up in April of this year). The beneficial ownership requirement in the bill could be more impactful if it applied to all firms that directly or indirectly receive US assistance (not just those ranked as corrupt). And on the topic of transparency, S.3210 could also do more by pushing USAID, State and the Millennium Challenge Corporation (MCC) into the forefront in implementing US commitments on open contracting by mandating contracts financed by US foreign assistance be published in full by default and that contracting information meets the open contracting data standard.
While we are at it, Congress could also encourage the use of aid delivery mechanisms that can't be derailed by corruption. One example is cash on delivery. If you don’t pay out until after the results have been demonstrated, you can be sure that corruption hasn’t stopped the desired outcomes being achieved.
More broadly, because US foreign assistance comprises only a fraction of a percentage government expenditure in many recipient countries, that aid will deliver the greatest impact in fighting corruption through support for global and local efforts to tackle the problem. The 2005 USAID strategy on anticorruption is still relevant and had some strong recommendations on this subject including support for budget and procurement transparency, merit-based, transparent public sector employment practices, community oversight of public investment and service delivery and improved land tenure and registration systems. Congress might recommend a larger share of foreign assistance for such programs.
I admit the tiered ranking proposal is likely to pose a serious challenge in implementation. Pretty much any broad ‘corruption ranking’ is a pseudo-scientific exercise at best, one that risks being capricious and unfair to foreign assistance recipients and little help in guiding US anti-corruption efforts to where they are most needed. But US taxpayers should have confidence that corruption isn’t derailing American support for development. And US assistance has an important role in reducing the toll of corruption on development progress more broadly. If Congress passed legislation that backed beneficial ownership requirements and open contracting, supported local champions in the fight against corruption in their own countries, and promoted programs that deliver results, it could play an important role in making sure both goals were met.