In a series of articles titled “Towers of Secrecy,” the New York Times in 2015 revealed the opaque way in which much high-value U.S. real estate is owned by famous and politically connected persons from around the world. Transparency International conducted a similar exercise in the United Kingdom, showing how apartments in the exclusive London boroughs of Kensington and Chelsea were owned by shell companies. In 2016, information leaked from the law firm Mossack Fonseca revealed that many of the world’s famous and politically powerful individuals own assets in such convoluted ways that their control over those assets is all but invisible to the outside world.
How is it that some public officials have been able to amass such wealth when 161 countries around the world have financial disclosure laws on their books? These laws, introduced in the fallout of the Watergate affair in the United States, were meant to detect significant increases in wealth during an official’s time in public office as well as private interests that conflict with the public interest. But, although the rules are on the books, many practitioners are still struggling with the intricacies of the rules and how to implement them in the socioeconomic, historical, and legal contexts of their own countries.
Even such a simple thing as how a form is designed can produce huge discrepancies. In one country, an early version of an interest disclosure form read, “Please declare all your interests,” and provided a large blank space to be filled in by the public official. Upon analyzing the forms received by public officials, financial disclosure staff members noticed the different interpretations that each filer had given to the same guidance. Whereas one senator detailed every company he had an interest in, the number of shares, and their value, another filer simply wrote, “I have agricultural interests.”
These challenges in implementing effective and efficient financial disclosure systems have not gone unnoticed as we carry out our work to provide client countries with advice and tools to increase transparency and strengthen the overall integrity of their financial sector.
The Stolen Asset Recovery Initiative (StAR)—a partnership between the World Bank Group and the United Nations Office on Drugs and Crime (UNODC)—has just issued a handbook based on rigorous data analysis aimed at helping governments who are struggling to implement financial disclosure systems. The book offers practical advice ranging from who should file, how often, and in what form? It also addresses the link from the disclosure process to enforcing it. We have seen cases where countries are unwilling or hesitant to apply sanctions because many disclosure systems have yet to connect all the dots in a way that would make sanctions appropriate, consistent, and just.
As public outrage mounts against public officials who have significantly increased their wealth during their time in public office or hidden their assets through complex ownership arrangements, this guidance is both timely and practical. A financial disclosure system can help build a climate of integrity in public service and prevent abuse of power and, ultimately, it can be an effective tool in the fight against money laundering as well as in efforts to recover assets. We know that that the abuse of public power for private gain has the greatest impact on the poor and that the link between poor governance and persistent poverty is a hard one to break.
We hope that the practitioners who use this book will find it to be a useful tool in guiding their decision making, and, ultimately, to help their countries build more effective systems that improve accountability and transparency.
Gloria M. Grandolini is Senior Director for Finance and Markets Global Practice, Finance & Markets, World Bank Group.