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Institutional Restraints on Power

The institutional design of the state can be an important mechanism in checking corruption. Of particular importance is the effective development of institutional restraints within the state which is most effectively achieved through some degree of separation of powers and establishment of cross-cutting oversight responsibilities among state institutions. Effective constraints by state institutions on each other can diminish opportunities for the abuse of power and penalize abuses if they occur.

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Independent & Effective Judiciary

"Obey justice and restrain reckless wrongdoing, for such wrongdoing harms the poor, and even the noble find it an unwelcome burden that weighs them down and brings them ruin."

Hesiod, circa 800 BCE

Corruption has a devastating effect on the legal system. It distorts law-making, court rulings and law enforcement and in the end, erodes the rule of law. This has devastating consequences for the society as well as economic activity. The legal system is one of the fundamental pillars of a market economy whose role as arbiter of the law encompasses both the formulation and implementation of public policy. In addition to deciding criminal cases, the courts are responsible for upholding property rights, enforcing contracts, and settling disputes. Failure of any of these roles is costly, reducing incentives to invest or forcing firms to resort to more costly private means of contract enforcement and protection. In addition to these direct economic costs, a corrupt legal system has a wider impact, undermining the credibility of the state and making the implementation of public policy more difficult.

Paradoxically, any anti-corruption strategy needs a functioning legal system to build on if it is to introduce real change. The challenge is therefore to clean up the legal system and turn it from being an arena of corruption into an effective tool for fighting corruption. Suggestions for how this could be done and how legal reform can be used as an effective first step within broader governance reform is outlined below.

An independent, competent and clean legal system is key in every anti-corruption strategy.

In the absence of independence, the executive may try to appoint their own supporters to the court or to punish judges through diminished benefits or unattractive postings. Therefore, the political system needs to provide for independence of the judiciary from the executive and legislature. In order to increase independence, budget and management responsibility should remain with the judges. Judges should also enjoy personal immunity to protect them from claims based on damages resulting from exercising their judicial duties. While independence and protection from political and public pressures is a key ingredient for a functioning and fair judiciary, judges have to be held accountable for their professional conduct. High professional and ethical standards guiding judges' and court officials' behavior should be maintained by introducing a judicial code of ethics. Law societies and bar associations can help in promoting professional standards. Instituting annual asset declaration also contributes towards transparency and works as a deterrent to accepting bribes.

 Judges have to be competent, i.e. possess appropriate qualifications and high ethical standards in addition to political neutrality. Appointment and promotion have to be on the basis of merit (emphasizing ability, integrity and experience) and not as a result of bribes. If applicants to the Attorney General's Office have to bribe in order to get hired there is little hope for the capacity of this Office to uphold the rule of law. Lawyers demanding bribes and court clerks who advance files against a small extra payment add to a web of corruption that surrounds judicial institutions. 
Upholding the rule of law by prosecuting corruptors in a country that is inherently corrupt is a daunting task and does not come without risk. In Indonesia, the Supreme Court Justice who sentenced the son of Indonesia's former ruler Suharto to 18 months in jail was shot dead on his way to work while the convict "Tommy" (Hutomo Mandala Putra Suharto) remained at large for one year. The same court overturned the graft conviction before Tommy was eventually caught by the police. Not surprisingly, a "Diagnostic Survey of Corruption in Indonesia" showed that the judiciary was ranked as the third most corrupt institution in Indonesia.

The same rules of independence, competence and integrity apply to other actors within the judicial system as well such as court clerks, investigators, prosecutors and the attorney general.

Anti-Corruption Legislation

While a well-functioning, competent and clean judiciary is key in upholding the rule of law on a day-to-day basis, anti-corruption laws turn out to be an effective means of an anti-corruption strategy. Anti-corruption laws work to deter corrupt actions, prosecute corruptors and resurrect a sense of justice which has become a rare commodity in endemically corrupt countries.

A few considerations should be taken into account if creating effective anti-corruption laws:

  • The laws should match the enforcement capacity of the country's institutions. Since the level of integrity and capacity will be rather low in most countries where corruption is rampant, a law should be easy to understand and unequivocal in its applicability.
  • Introducing bright-line rules: they are easy to understand and apply but come at the cost of reduced flexibility. Examples include a ban on hiring of relatives or friends regardless of qualification; a ban on receiving any gift in excess of a small set value or a mandatory declaration of assets.

Legislation supporting the transition towards a corruption-free society includes a freedom of information law, whereby citizens can demand the disclosure of information regarding government activities; a whistle-blower protection law in order to encourage the reporting of corruption cases; conflict of interest laws, procurement laws and party financing laws. Anti-money laundering regulations also contribute towards curbing fraudulent practices.

In the era of globalization, international laws gain tremendous importance.
The
 OECD Convention on Combating Bribery marked a breakthrough in making illegal what traditionally had been considered a necessary component of international business transactions, two decades after the US enacted the Foreign Corrupt Practices Act.

Other international documents were developed: In 1996, the General Assembly of the UN adopted the U.N. Declaration against Corruption and Bribery, urging states to adopt national anti-corruption legislation, implementing professional accounting standards as well as a business code of ethics. During the same session, an International Code of Conduct for Public Officials was adopted. The OECD followed suit with its adoption of the Recommendations and Principles for Managing Ethics in Public Services in 1998. Regional Initiatives include the Organization of American States' "Inter-American Convention against Corruption", the Global Coalition for Africa's "Principles to Combat Corruption in African Countries" (1999), and a series of laws by the EU and the Council of Europe.

Independent Prosecution and Enforcement

Independent prosecution remains a crucial challenge for many developing countries. Often the legal framework for anticorruption is incomplete or unclear. Because direct evidence of corrupt acts is often difficult to obtain, many countries have criminalized activities that are often associated with corruption, such as laundering proceeds from corruption and other crimes. Click HERE for more detailed information on the legal framework for prosecution of money laundering cases.

Anti-money Laundering

"Dirty" money is "laundered" to make it appear "clean" when illegally obtained money is transformed so that it appears to have come from legitimate sources. The series of transactions can be complex, but three basic steps are typically involved: placing the illicit cash in the banking system, layering transactions to make it difficult to trace the funds, and integrating the illicit money with money from legitimate sources.Legislation is needed that defines money laundering, declares it a criminal offense, and designates a state authority to receive suspicious transactions reports, maintain and analyze these data, cooperate with other countries in investigations of financial crimes, and coordinate efforts with international institutions. Financial institutions should be obliged to review transactions and report suspicious activities to authorities, and to have written policies and procedures in place so that the institution can be confident its customers are not using it for the purpose of money laundering.Some countries in transition have anti-money laundering laws in place, but few enforce them effectively. Common weaknesses include: failure to criminalize the transfer or possession of money obtained from illegal activities; failure to oblige non-bank financial institutions (such as insurance companies, securities firms, investment companies, or cambios) or businesses often used by money launderers (casinos, bookmakers, garages) to report suspicious transactions; failure to provide the legal basis for seizure of proceeds from illegal transactions; and lack of capacity and resources to enforce the law.Source: World Bank. 2000. Anticorruption in Transition. A Contribution to the Policy Debate. Washington, D.C., p. 44

Audit Organizations

Audit organizations can also have an important role. For full effectiveness, State Audit Offices should be backed by parliamentary committees that review and follow up on their reports. By contrast, watchdog enforcement agencies have a mixed record and have too often been subject to capture themselves. A condition for their effectiveness is the prior establishment of a core of strong, independent, and credible professionals in the judicial, prosecutorial, and police arms of the state.

Transparency and Recourse in Administrative Decisionmaking

A frequent complaint is favoritism of the state in cases brought by citizens. Government decisions are less prone to corruption when they are predictable, transparent, and accountable. Administrative procedures law provides the legal foundation for sound government decisions by providing rules for the way government bodies behave. These procedures protect the rights of citizens by guaranteeing participation in government decisions by interested parties, openness and transparency of decisions, adequate responses to public inquiries, and the availability of recourse. Mechanisms of recourse include appeal within government bodies, judicial scrutiny, and ombudsmen. Explicit administrative procedures allow citizens who are affected by administrative decisions to know that decisions will be made according to predictable rules rather than the will of the administrator.Cf. Galligan, Denis J. and Daniel M. Smilov, eds. 1999. Administrative Law in Central and Eastern Europe, 1996-1998. Budapest; New York: Central European University Press; Ithaca, N.Y.: Distributed in the U.S. by Cornell University Press Services

Legislative Oversight

Parliaments can play a crucial role in overseeing the actions of the executive branch of Government and thus help reduce corruption. Their power is built on the fact that they can hold state institutions accountable, represent the people a the highest level of government and exercise legislative powers, which they can utilize to press for effective anticorruption legislation.

However, their effectiveness depends on their willingness, their capacity and power within the political structure of a country. The World Bank Institute conducts workshops and training courses for parliamentary strengthening in over a dozen countries. This has led among other to the creation of regional networks of parliamentarians, such as African Parliamentarians Network Against Corruption (APNAC) and Global Organization of Parliamentarians Against Corruption (GOPAC). Participants in several regional workshops also contributed to the development of A Parliamentarians Handbook for Fighting Corruption.

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