Mutual Evaluation, And The Inter-American Convention on Corruption:
Challenge and Opportunity
by
Stanley E. Morris
International Financial Consultant

Introduction

It is my goal to lay out the need for a system to ensure progress on implementing the Inter-American Convention on Corruption. However, it is important to recognize at the outset the leadership that Ambassador Ramacciotti is demonstrating in convening this special session of her Committee on Probity and Ethics. It is an honor to be included among the distinguished presenters many of whom are professional and personal friends. The Organization of American States is indeed fortunate to have the views of so many knowledgeable experts as it examines methods to further progress on the problem of corruption in our hemisphere.

The need to develop implementation mechanisms for international agreements is exceptionally important in our global economy with our world made smaller and smaller and by the revolution in communications and commerce. Indeed, the globalization of commerce, trade, and financial services places significant pressure on international efforts to address complex issues. The challenge is not simply adopting the best policies but ensuring that all nations in executing these agreements carry them out to an equal degree thus not creating competitive disadvantages among the signatories. In such areas as the environment, financial crimes, money laundering and public corruption, attention is being given not only to what the internationally accepted standards should be, but how to ensure that they are implemented consistently and fairly by each of the nations.

My background in addressing this issue comes primarily from international efforts to address the challenge of money laundering. Ten years ago it was determined that effective action against money laundering required action not only by law enforcement but by legislative bodies, regulatory agencies and the private financial sector. For five years, I headed the US delegation to the world body on money laundering, The Financial Action Task Force (FATF). My experiences with the FATF’s efforts to oversee compliance with its detailed recommendation included service as an on site evaluator of several countries, the organizer of the evaluation of the United States as well as participation in discussions of compliance by all 26 member nations. I also led delegations to regional bodies in Europe, Asia and the Caribbean as they moved to establish similar programs. Since retiring from the US Treasury Department, I have been serving as an expert advisor to the Council of Europe to assist in its program of anti-money laundering mutual evaluation. Given this background, it is not surprising that I believe systems of monitoring compliance with international agreements can work. In this brief paper, I would like to first lay out the principal advantages of such programs. Second present some initial thoughts on why corruption presents unique challenges and third and finally, some steps that suggest the time is ripe to establish such a program for the Inter-American Convention on Corruption (IACC).

 

The Role of Mutual Evaluation Systems in Achieving Compliance with International Agreements

Increasingly, there is reluctance to create "international policemen" to monitor international obligations. Also countries object to other nations unilaterally assessing their progress and performance. Instead, nations are turning to a process of mutual evaluation which provides a way for each country who has signed up to an agreement, to assess each others progress through a peer review approach. Different approaches have been taken over the years to monitor progress in carrying out international treaties and agreements. Creating new international organizations or adding major new monitoring functions to existing entities, however, increasingly is not an option both for budgetary and policy reasons. Establishing permanent staffs with the professional backgrounds and credibility necessary to assess complex issues is difficult and expensive. Mutual evaluation is being turned to in a number of different areas, because it serves as a way to monitor progress, it minimizes the growth of new permanent international bureaucracies, and it engages many more professional experts in the process.

Principal Characteristics of a mutual evaluation system -Essentially mutual evaluation has the following characteristics. Regular confidential meetings of officials from all signatory countries are held to discuss issues, review progress, and conduct the business of the ad hoc organization set up to establish the policy and oversee its implementation. While a small Secretariat (three or four people) is responsible for providing logistics, continuity and materials, the primary work of the organization is carried out by the government representatives who attend the meetings. The officers are elected from these representatives, and they carry out their duties on a part time, non-reimbursable basis.

Regular progress reports are required of each country, and they are discussed in the meetings. Shortcomings and successes receive equal attention. An opportunity is also made to present issues that identify how the problem may be changing...improving, getting worse or just behaving differently. Finally, on a regular basis, a team of three or four experts with different professional backgrounds is drawn from each of the participating nations to conduct an in-depth, on-site evaluation of a nations progress. This is important because simply examining laws and reports cannot assess actual compliance. Preliminary questionnaires are completed by the nation to serve as an aid in better focusing a three or four day on-site assessment visit. A member of the Secretariat also is included on the team to ensure consistency and aid in the final drafting of a report.

The teams that conduct the review speak with public and private officials either involved in implementing the agreement or who have a useful vantage point upon which to judge progress. A draft report is produced and shared with the host nation. "Negotiations" over its content occur and a final product is produced for review by all participating nations. This evaluation serves to maintain momentum for the implementation of the agreement as well as to increase knowledge and understanding. As every nation goes through the process, there is mutual respect and consideration by all participants involved. Also, because of the potential sensitivity of the evaluation report, only a carefully drafted summary is made available to the public. However, the full report is available to all participants. If shortcomings are identified the evaluated nation will report at subsequent meetings on steps taken to address them. The key to the success of mutual evaluation is that each nation is equal at the table, the evaluations are conducted by experts and each participating nation agrees to abide by the same procedures.

The goals of mutual evaluation: There are four purposes served by a mutual evaluation system for monitoring the progress of international treaties, conventions and agreements. These are 1.) to increase knowledge among nations; 2) to monitor progress toward implementing the agreement by individual nations; 3) to identify problems with compliance; and 4) to build foundation for corrective action. To achieve these goals, successful mutual evaluation efforts must pay careful attention to concerns regarding each nations’ sovereignty and establish mutual respect among the officials from each nation involved in the process.

Increasing Knowledge - The complexity of many international problems has led to increasingly complex international arrangements to address them. Mutual evaluation means more than simply regular meetings of government officials with responsibility for a particular area. Because each nation should agree to report annually on its progress towards implementing the agreement, these self assessments are summarized by the small Secretariat and distributed to all participating nations. Discussions focus on problems and successes in implementation which also increases knowledge among nations surfacing ideas for innovative approaches. Individual on-site evaluations also identify important issues which expand the understanding of the problem and the way various nations are attempting to address it.

Monitoring Progress - There is no substitute for comprehensive, regular and candid assessments of the status of implementing international agreements. Just as the priority for enforcing laws varies with the public’s and political leader’s often changing views as to their importance, there are many international agreements that simply sit, gathering dust in international libraries because no monitoring mechanism was created. As agreements and treaties address complex problems, they often require action by many different government agencies, most of whom will have higher day to day priorities. Regular monitoring of progress serves to keep the issue alive and maintain the pressure for change. During the FATF’s evaluation of the United States, Secretary Rubin and other senior US officials met with the evaluation team and emphasized their commitment to anti-money laundering. This served to increase the anti-money laundering priority for the scores of regulatory and law enforcement agencies responsible for aspects of the US effort.

The monitoring process focuses on the overall implementation as well as the status of individual nations’ progress. The concept of peer review, i.e. experts and officials from all signatory nations sitting in judgment of the progress of the effort ensures a degree of fairness and realism often not seen when judgments are made by diplomats or international bureaucrats.

Identifying Problems - The process of examining a nation’s compliance will inevitably surface problems. The pace of reform will vary and the commitment of various ministries will also vary. Consequently, the opportunity to carry out a comprehensive review identifies not just where the shortcomings occur but who is in the best position to remedy them. The Organization of American States is looking at ways to provide financial and expert assistance in those areas where a countries compliance requires attention. In other cases, the mutual evaluation report can assist in establishing priorities for reform. The fact that every nation is going through the process and every evaluation identifies successes and failures, permits the officials who have primary responsibility in the nation for the initiative to increase attention to the problem. For example, during the mutual evaluation of Costa Rica, officials from that nation encouraged the Caribbean Financial Task Force to be very rigorous. They were looking at ways to create a fuller understanding of the problem within their government.

In addition to identifying problems of compliance within nations, mutual evaluation also permits an opportunity to assess the overall problem. For example, is corruption or money laundering increasing or decreasing and how is it being carried out. This leads to assessing whether the initial agreement is still valid and what adjustments should be made to address the changing character of the problem.

Achieving Corrective Action - The process of mutual evaluation can serve to strengthen the role of those officials who are attempting to increase the priority for reform within the government.. This will only occur if the evaluation is seen as an opportunity not to avoid criticism but instead to encourage corrective action. In addition, the knowledge gained from participating in the meetings and in conducting evaluations of other nation’s compliance serves to increase the expertise of the participants. Identifying approaches that have succeeded in other countries also provides the government representatives involved in the process with tools to be used within their own nation. Also the fact that regular progress reports and on-site evaluations will be required, helps maintain the momentum for change. Even the natural and healthy competitiveness between nations can serve to stimulate progress. It is interesting to note that countries that have been criticized for weak anti-money laundering regimes have used the mutual evaluation process to achieve reform and correct impressions. Switzerland served as an early President of the FATF; Panama and the Cayman Islands have been leaders in the Caribbean Financial Action Task Force and Cyprus has played a key role in the development of the Council of Europe’s program.

The challenge that exists for the "organization" of nations that make up the mutual evaluation system is to pay great heed to its credibility. If the processes are seen as fair and decisions reached through consensus, then the results of the efforts will have great credibility. Public pronouncements will have the weight of all of the nations that have come together to address the problem. This is critical to the success of the endeavor.

 

The Challenge of Evaluating Anti-corruption Programs -

The principal experience in applying programs of mutual evaluation has been in the area of money laundering. The responsibility for compliance in this area is primarily law enforcement, finance ministries, financial regulators and the private financial sector (banks, broker dealers, currency exchange houses, etc.). Corruption is more difficult. It involves more elements of the government and indeed goes to the heart of a nations’ democratic institutions. It involves the judicial, executive and legislative elements of the government, the private business sector and key elements of civil society including the media and academia. Also, unlike anti-money laundering, more often than not there is no single overseer of a nation’s anti-corruption efforts. This complexity, however, does not mean that an international program to monitor compliance based on the principals of mutual evaluation can not be successful. As Professor Mark Pieth and Mr. Peter Csonka will describe later, the OECD and the Council of Europe have recently established programs to address anti-corruption compliance with their respective conventions.

Indeed because of the complexity of the anti-corruption challenge, there is an even greater need to develop programs that improve knowledge, ensure progress, identify problems and carry out corrective action. The effectiveness of anti-corruption programs is largely contingent on continued attention. An evaluation system that is consistent and fairly applied while developing expertise and maintaining continued focus on the problem in each nation party to the convention is likely to be the critical element in success. However, the design of such an effort must recognize that corruption presents unique challenges and furthermore that all parties to a mutual evaluation program must participate as equals. These issues have been debated in several forums over the past six months and recommendations have been made that make it timely for the OAS to consider establishing such a program for the Inter-American Convention on Corruption.

 

Establishing a Multilateral Monitoring Mechanism for the IACC

As a result of several converging factors, considerable momentum is building towards the establishment of a multilateral mechanism of mutual evaluation and monitoring of the IACC. It is important to note that the concept of mutual evaluation is no longer a novel one in the Americas’ The first regional body established as a part of the Financial Action Task Forces international anti-money laundering efforts was created by the nations of the Caribbean and surrounding nations. The CFATF, whose membership makes up over half of the countries in the OAS, has been in existence for over six years and has conducted mutual evaluations of most of its members. Recently three additional nations (Mexico, Brazil and Argentina) joined the Paris- based FATF and are undergoing mutual evaluations as a requirement of their membership. Several signatory nations from the America’s to the OECD Convention on Bribery have also undergone the evaluation procedures undertaken by that body. Finally, the OAS has launched efforts in the areas of drug trafficking and money laundering to establish multilateral monitoring mechanisms to assist in compliance.

However, as noted above, corruption presents different and difficult challenges. As a consequence, a Roundtable of Experts was convened on November 11 & 12, 1999 to identify approaches to furthering progress in the implementation of the IACC. The Roundtable, sponsored by The American University, Washington College of Law, the Inter-American Bar Association and Transparency International, produced a set of Findings, Considerations and Recommendations. The experts, representing nations from throughout the hemisphere, called for the creation of "a multilateral monitoring mechanism to promote implementation and enforcement of the Convention." They also recommended that "the functions of this mechanism would include the exchange of information, the development of technical cooperation, and the conduct of regular evaluations of the parties’ effective implementation of the Convention, through a peer review process." In addition the experts felt that it was important that there be consensus as the basis for the evaluations and every effort should be made to include consultations with the private sector and civil society during the evaluation process. The results from this important event were presented to OAS Secretary General Gaviria in December 1999.. It is significant that many of the speakers at this event participated in the Experts Roundtable and in particular, Ambassador Ramacciotti who played a very constructive role in that meeting.

Meanwhile, the staff of the OAS has developed an excellent, comprehensive questionnaire that will serve as a key foundation in the development of any mutual evaluation program. This nearly forty page document both demonstrate the complexity of the issue, but also that it is possible to craft an evaluation instrument that will ensure progress towards full and effective implementation of the IACC.

Finally, an important message was delivered on this subject at the conclusion of the meeting of Western Hemisphere Finance Ministers in Cancun, Mexico. The Joint Ministerial Statement issued on February 3, 2000 called " upon all member governments to ratify and implement the OAS Anti-Corruption Convention and to support establishment of a follow-up OAS mechanism for multilateral and mutual review and evaluation of progress towards effective prevention and punishment of corruption." (emphasis added.)

Thus considerable momentum is in place to develop a system of peer review based mutual evaluation. This meeting and the experts assembled have an excellent opportunity to press forward on the establishment of a new system that will further the goals of the IACC. 

 

Conclusion

The Inter-American Anti-Corruption Convention was the first major international instrument addressing this exceedingly important subject. It attempted to address not only the demand side of the problem (i.e. criminalizing bribery) but also the supply side issues (i.e. the need to create programs of good governance that reduce the breeding grounds for corruption.) As it was the first such effort, it is not perfect. However, given the complexity of the issue and the fact that corruption is inevitably a changing phenomenon, no instrument could be perfect. However, the nations of this Hemisphere have an opportunity to establish a multilateral program of evaluation that not only assist them in implementing the convention, but also improve their understanding of new ways to treat the problem.

As experience in other forums has shown and the Experts group concluded, the system should have certain characteristics. Its primary goal should be increasing knowledge and progress and not be punitive. The process of evaluation should be based on peer nations working together and the focus should be on experts and not be a political process. Finally, the evaluations should include all interested elements of society. Anti-corruption efforts, perhaps more than any other issue, requires the involvement of important elements of society outside of government. The private business sector, the media, academic experts and non governmental organizations must play critical roles in reform efforts and thus must be closely linked into any successful multilateral monitoring system. This makes the challenge different and more difficult. It appears that the foundations have been set, however, to meet that challenge.