OSCE, Alm.del - 2009-10 - Bilag 44: 2nd Committee Report

Since the early 1990s the international community has recognized that transnationalcrime and corruption are global problems. Many regional and intergovernmentalorganizations have started to become actively involved in this field. Their work has resultedin the adoption over the past 15 years of a range of international instruments by suchorganizations as the United Nations, the European Union, the Council of Europe, theOrganisation for Economic Co-operation and Development (OECD) and the Organization ofAmerican States.They all have a single goal – to establish common standards for combating corruptionat the national level through its criminalization and the unconditional implementation ofanti-corruption laws as well as activities to prevent corruption and, on a broader scale,transnational crime.In the European context, one of the first sources of “soft” international standardshighlighting the need for specialized institutions to be responsible for the prevention,investigation and prosecution of corruption offences were the Twenty Guiding Principles forthe Fight against Corruption, adopted by the Council of Europe in 1997.1In 1999 most of these principles were reflected in the Council of Europe CriminalLaw Convention on Corruption.2Following the adoption in 2003 of the United NationsConvention against Corruption3particular attention began to be paid to the problem ofpreventing this phenomenon. The entry into force of the United Nations Convention againstTransnational Organized Crime4imparted a fresh impulse to international co-operation incountering transnational organized crime and in suppressing it, something that helped tointroduce broader approaches to combating various forms of this kind of crime.Since the start of the global financial crisis the group made up of the world’s20 leading countries undertook firm commitments to ensure that conscientiousness andtransparency would become the cornerstone of the new international financial regulatory1Council of Europe: “On the Twenty Guiding Principles for the Fight against Corruption”,Resolution 97(24), 6 November 1997,http://www.coe.int/t/dghl/monitoring/greco/documents/Resolution(97)24_EN.pdfCouncil of Europe: Criminal Law Convention on Corruption, 27 January 1999,http://conventions.coe.int/Treaty/EN/Treaties/Html/173.htmUnited Nations Convention against Corruption (UNCAC), adopted by United Nations GeneralAssembly resolution A/RES/58/4 of 21 November 2003.United Nations Convention against Transnational Organized Crime, adopted by United NationsGeneral Assembly resolution 55/25 of 15 November 2000,http://www.unodc.org/documents/treaties/UNTOC/Publications/TOC%20Convention/TOCebook-e.pdf

-2-system. When the G20 turned their attention to the problems of economic reform and thestability of the banking sector, the adoption of measures designed to counter corruption as abreeding ground for transnational organized crime became a matter of critical importance.As United Nations Secretary-General Ban Ki-moon made clear in his address on theoccasion of International Anti-Corruption Day on 9 December 2009: “Development is not theonly casualty [of corruption]. Corruption steals elections. It undermines the rule of law. Andit can jeopardize security. As we have seen over the last year, it can also have a seriousimpact on the international financial system... When public money is stolen for private gain,it means fewer resources to build schools, hospitals, roads and water treatment facilities.When foreign aid is diverted into private bank accounts, major infrastructure projects come toa halt. Corruption enables fake or substandard medicines to be dumped on the market, andhazardous waste to be dumped in landfill sites and in oceans. The vulnerable suffer first andworst”.5The high level of crime, coupled with the “erosion” of society as a result of corruptionin low-income countries, is undermining global efforts to combat poverty and is threateningto frustrate the achievement of the development goals set out in the United NationsMillennium Declaration.It is very important for the OSCE to co-operate and co-ordinate its activities with theinternational efforts to combat corruption that are being undertaken by the United Nations,the World Bank, the International Monetary Fund, the Council of Europe and the OECD.In 2004 the OSCE Ministerial Council adopted at its 12th meeting in Sofia a decision(MC.DEC/11/04) reaffirming its commitment to make the elimination of all forms ofcorruption one of its priority tasks,inter aliathrough the implementation of nationallegislation and programmes to that end.At the 14th Ministerial Council meeting in Brussels in 2006, the OSCE adopted adecision (MC.DEC/5/06) on the threats and challenges posed by organized crime, stating thatorganized crime commands vast wealth, potentially undermining democratic values andthreatening the safety and security of ordinary citizens directly and indirectly.The Astana Declaration underscores the urgent need to expand co-operation and theexchange of information as regards cyber security and cybercrime within the internationalcommunity. In that connection, the Astana Declaration regards the Convention onCybercrime as the only international treaty at the present time that is directly concerned withthe issues of computer-aided fraud and falsification.The OSCE institutions and field missions are endeavouring to provide the public witha broad range of information and to encourage a partnership between governmental andprivate structures to combat organized crime and corruption, in addition to being engaged injoint activities with local, regional and international organizations.Organized crime and corruption warrant particular attention on the part of the OSCEParliamentary Assembly, since these are the most destructive among all the social ills.5Message of the United Nations Secretary-General, Mr. Ban Ki-moon, on the occasion of InternationalAnti-Corruption Day, 9 December 2009,http://www.un.org/en/events/anticorruptionday/sgmessages.shtml

Crimes of a kind that fall outside the area of organized crime – fraud, theft, everydaymurders and other forms of violence – seem when compared with organized crime lessthreatening, almost day-to-day events that have happened in all societies in all ages. Onlyorganized crime – the creation of gangs, the shadow economy, the mafia and corruption –strikes at all areas of public life and at all institutions of society and its underlying structure inmany countries. In its extreme form, when organized crime affects 30 to 50 per cent of socialrelationships6, it becomes a system of authority operating in parallel to the official one,controlling society and corrupting it, giving rise to both domestic and international conflicts.2.The global nature of organized crime

The international community must realize that organized criminal groups areoperating in a world that, as far as they are concerned, has, essentially, no borders. For theirpart, on the other hand, the law enforcement agencies function as a rule within the territorialand national jurisdiction of their States.The internationalization of crime today can be seen in ever-larger markets for the saleof narcotic drugs, weapons and other goods and services that are transported and processedby means of a network of criminal commercial organizations encompassing the entire world.According to experts, the volume of the illegal turnover accounted for by these organizationstotals hundreds of billions of US dollars and exceeds the budgets of many countries.7By entering into international strategic alliances, translational criminal organizationsare able, first of all, to seek outlets to new markets or to increase their share in existing ones;secondly, they can neutralize real or potential competitors or make them their partners. Somecriminal organizations have infiltrated the world economy at the global level and exhibit amulti-tier hierarchical structure. In other organizations this structure is simpler and turnovervolume smaller, but against this the degree of their adaptation to the environment in whichthey operate, their ability to survive and their level of professional flexibility are greater.Their common feature is a parasitic existence relying on goods produced by other people, thesale of unlicensed or banned products, the smuggling of legally produced goods, and the theftand concealment of various items.The global financial crisis is creating additional challenges for countries and, asparadoxical as it may seem, is opening up new opportunities for organized criminal groups,enabling them to act as one of the few sources of credit.3.Globalization and crime

-4-The emergence of international financial systems that have facilitated internationaltransfers of enormous sums of money and an increase in the number of transnationaleconomic transactions have at the same time complicated the possible mechanisms formonitoring monetary flows and establishing their origin. The modern mechanisms used intransnational operations make it possible for criminal organizations to gain access to the mostprofitable markets and to monitor them while remaining themselves in regions where there isa reduced risk and where they are outside the reach of the law enforcement agencies.Revenues from criminal activities merge indistinguishably in the electronic channels of theworld financial system and are laundered with the help of banks that are under the control ofthese organizations or of States with liberal financial regulations, thus inflicting considerabledamage on the world economic system.Globalization promotes the simplification and diversification of internationalexchanges and the creation of worldwide communication and financial systems, a fact that isactively exploited by criminals. To some degree, globalization is displacing the traditionalethnic criminal communities, which are ever more frequently giving way to multi-ethnic,multifunctional and macroregional criminal structures.4.4.1Transnational organized criminal activities in specific sectorsInformation technologies

Information technologies have accelerated the emergence of new conditions that arebeing exploited by criminal groups to commit crimes at the national and international levels.Criminal associations and individual criminal business “specialists” are making full use of thelatest technologies for laundering money acquired through criminal means for gainingunauthorized access to information systems, etc.Since in a wide variety of transactions an ever greater emphasis is placed on theidentification of individuals and legal entities, society is becoming extremely vulnerable andunprotected in the face of the unauthorized acquisition (theft) of citizens’ personal data and ofother related fraudulent activities. As a result of the spread of modern technologies for theprocessing and transmission of information and communications, new forms of economiccrimes have emerged that use personal electronic data. These forms are interlinked with otherkinds of crime such as money-laundering, corruption and cybercrime.Most cases of transnational fraud and unlawful use or falsification of personal datacan be traced back to organized criminal groups. According to Interpol data released inAugust 2000 at the sixth meeting of the Working Group on co-operation between lawenforcement authorities in Central and Eastern Europe in combating cybercrime, criminalproceeds obtained through the unlawful use of the latest technology rank third in the world interms of proceeds after trafficking in narcotic drugs and weapons.According to a number of American experts, the average cost of losses from a singlecybercrime in the United States amounts to around 500,000 dollars, whereas the averagefigure for a single physical bank robbery has been put at 3,200 dollars. Each month,according to experts, databases throughout the world are attacked thousands of times byinternational hackers. For example, in 2005 the United Nations Commission on CrimePrevention and Criminal Justice published data on the fraudulent transfer to unintended

The highly profitable nature of operations in the fuel and energy sector is drawing theattention of criminal structures to the economic agents in that sector. Criminal associationsare stepping up their efforts to infiltrate the commercial and financial activities of companiesoperating in the extractive industry. The scale of these criminal operations has moved fromthat of sporadic pilfering to large-scale control over both individual enterprises and entiresectors.With the direct involvement and lobbying of corrupt government officials, energyresource exporters are selected, selling prices are set, sales volumes are determined, and therevenue gained through export activities over which there is no supervision is distributed.Increasing transparency and accountability in the activities of the fuel, energy andextractive sectors is the task of the Extractive Industries Transparency Initiative (EITI),which is a coalition of governments, business and civil society. Only six of the OSCEparticipating States are taking part in that Initiative or have announced their intention to joinit.94.3Ecology and the environment

-6-on Biological Diversity.11However, wood products resulting from the felling of trees inviolation of national laws frequently find their way into illegal international trade channels.Activities of this kind are having negative environmental, social and economic consequencesin many countries. For this reason, it is important to criminalize the illicit trade in andtransport of protected species of plants, fauna or products that are traded in violation ofnational or international law – all the more since activities of this kind are being carried outon a transnational scale, while the criminal groups are at the same time involved in otherforms of unlawful activity.New expanding markets such as trading in carbon emission quotas as part of theworldwide response to climate change require more serious monitoring if they are to operateeffectively.4.4Cultural heritage

Surplus financial assets from the activities of transnational criminal groups are alsoused to acquire unique artefacts of cultural value, something that represents an assault onboth the historic evidence of the culture and the identity of peoples and also on the sharedheritage of humanity. This area of activity, in which representatives of customs and lawenforcement agencies and government officials may be involved, has once againdemonstrated the transnational character of organized crime and its links with corruption.12Unfortunately, the demand for valuable cultural artefacts and the heightenedinvolvement of criminal groups in all aspects of illicit trafficking is frequently linked to therelocation, loss or destruction of the cultural heritage of peoples. It is regrettable that thetransfer of such artefacts is also carried out through legal market channels such as auctionsand via the Internet. On the basis of the UNIDROIT Convention on Stolen or IllegallyExported Cultural Objects13, Interpol has released a disc containing information on more than31,500 stolen works of art.145.Corruption

-7-illegal felling of trees to dangerous medicines and poorly or illegally built structures that cancollapse with fatal consequences – corruption can cause unprecedented harm.The “open door” between State agencies and the private sector makes possiblefraudulent transactions involving government procurement based on non-competitive bidsand untransparent processes and results in enormous expenditures and the widespreadcirculation of goods and services undeserving of confidence.In addition, corruption makes access to capital far more expensive, reduces the valueof the companies involved and undermines the morale of the employees. It subverts the basisof fair competition, results in the loss of new business opportunities and breeds a bureaucracythat is itself marked by corruption.The findings of scholarly research into “law and finance” show that, despite the factthat “laws on paper” may meet high standards, it is precisely such factors as corruption, anineffective law enforcement system and a poorly functioning judiciary that result insignificantly lower chances of attracting the external financing so necessary for transitioneconomies.15By exploiting shortcomings in national legislation, corrupt judicial and lawenforcement authorities become accomplices in the pillaging of private property.These phenomena can be prevented if there is a comprehensive legislative basis andan effective and independent judicial system. The OECD Principles of CorporateGovernance, which have been incorporated into the legislation of many countries with atransition economy, have provided a successful defence and guaranteed protection of theproperty and income of both domestic and foreign investors.In a number of countries the public health system is regarded as one of the Stateinstitutions most affected by corruption. As noted in a recent fact sheet of the World HealthOrganization, every year throughout the world approximately 750 billion US dollars are spentin the pharmaceutical market. At the same time, 10 to 25 per cent of public procurementspending is lost to corrupt practices.16Shortages of drugs and the availability of counterfeitand substandard medicines lead to patients suffering and have direct life or deathconsequences. The appearance in the market of dangerous or ineffective medicines as well asof drugs that have been illegally registered is something that is encountered in both wealthyand poor countries. In countries with a high level of corruption the indicators for infantmortality are higher even despite the existence of health care quality control.Another source of concern is the potential increase in the exploitation by criminalgroups of human need, poverty and deprivation for the illegal trade in human organsinvolving the use of violence, coercion and kidnapping of persons for the use of their organsin transplant operations. In cases of this kind, the human body is used by those engaged inthis trade as a commodity, something that is inadmissible, wherever it may take place.

Many conditions that led to the financial crisis are linked to corruption-associatedrisks. These include conflicts of interests, the corrosion of the system of stimuli that influencedecision-making, insufficient transparency and responsibility within various market segmentsand among different market players, and also serious flaws in the exercise of corporatechecks and management and in ensuring that the demands of corporate standards and ethicsare met.The adoption of recent strategies to lower corruption-associated risks in business isalso linked to efforts to prevent a repetition of the financial disaster. The crisis has focusedattention on the inadequacies in the work of the regulatory bodies and on the critical state ofaffairs in the area of international collaboration.Secret deals and illegal commercial mergers represent problems of corruption thatimpact the market. Authorized lobbying paves the way for attempts to illegally influencegovernment officials or to push through political decisions that are not in the interests ofsociety. The unlimited financial power of certain companies and sectors involved in trade andindustry is harnessed to exert an excessive and improper influence on politicaldecision-making. The inability to regulate this influence results in the emergence ofkleptocratic systems and slower economic growth.As the Nobel economics prize-winner Douglass North has pointed out, these interestgroups are so closely integrated with existing public institutions that they shape theseinstitutions’ policies to their own ends, thereby limiting the opportunities for the reforms thatare so needed in our rapidly changing times.17Such instances of administrative corruptionshow a clearly defined tendency to transform themselves into what has been referred to as a“State capture”. This term refers to the actions of certain influential persons, groups orenterprises, in both the State and private sectors, aimed at bringing influence to bear on thedrafting of laws, decrees and other instruments of State policy with a view to their own profitor advantage.5.3Corruption perception assessments in the OSCE region

-9-statistics of the European Bank for Reconstruction and Development,19and also the data ofthe International Corruption Perceptions Index prepared as part of the “Report on Corruptionin the World” by the public organization Transparency International20, offer a survey ofcorruption perception ratings throughout the world. These studies involve questioningordinary citizens, political scientists and managers both in the countries themselves andabroad.In 2009 some countries of the former Soviet Union showed an increase in theirCorruption Perceptions Index scores (Georgia, Azerbaijan and Kazakhstan – the holder of theChairmanship of the OSCE in 2010). Nevertheless, the low ratings given in the Index for thepost-Soviet republics demonstrate that corruption in these countries remains systemic andthat the sectors where the problem is greatest are the judicial system, the law enforcementagencies, the customs service, property rights, land registration and construction projects.The leaders of these countries frequently acknowledge, candidly and publicly, theepidemic nature of the corruption facing them. The State’s excessive involvement in theeconomic and business sector, political corruption, a lack of confidence in the official bodiesresponsible for countering these phenomena together with a high level of tolerance on thepart of the public towards corruption-associated practices merely aggravates this problem. Byitself, a Corruption Perceptions Index of less than three points is a national disgrace for anycountry. What this means is that the government authorities are unwilling (and, lesscommonly, unable) to acknowledge corruption as a threat to the national security of theircountry and to the personal security of its citizens or to take the kind of measures that wouldgradually minimize this threat.While focusing on the problems of the transition-period countries, one cannot but takenote of the considerable efforts that have been undertaken by the States of theAnti-Corruption Network for Eastern Europe and Central Asia and the Istanbul action plan tocombat corruption in co-operation with other international organizations along with civilsociety and business representatives for the purpose of lowering the level ofcorruption-related phenomena and of improving State and corporate management. One mustalso not overestimate the importance of the prospect of membership of the European Unionas a lever for the intensification of anti-corruption efforts in the countries of South-EastEurope.But all is not well in the politically stable countries of the European Union either.During the year that has elapsed since the last study there has been a deterioration in thesituation in a number of the new member countries of the European Union, a fact that isexplained by the period of political instability that ensued following the resignation ofgovernments, by delays in carrying out the necessary reforms and by frequent reshuffling ofpersonnel in the law enforcement agencies.

As long ago as the first century B.C. the ancient Roman historian Gaius SallustiusCrispus wrote: “Wealth does not diminish greed”. These words resonate with the statementcontained in United Nations Secretary-General Ban Ki-moon’s message of 9 December 2009referred to above: “Corruption is not some vast impersonal force. It is the result of decisions,most often motivated by greed”.The political elites are unable to achieve either an economic, scientific, technologicalor social breakthrough for the reason that, if it continues to be what it is today, corruption willkeep on eating up the very resources that they might otherwise have invested in the future oftheir countries.Mention might be made of the progress achieved in the matter of accession to theConvention against Transnational Organized Crime and the protocols to it, progress that hasled to the establishment of a virtually universal framework for international co-operationcovering a broad range of serious crimes.However, much still remains to be done in this area. The fact is that the Conventionwas designed as a basic document for general purposes. Accordingly, many countries need tointroduce amendments to their national laws, and strengthen their law enforcement structuresand justice systems. Repeated and urgent appeals have been made to countries that have notyet acceded to these documents to do so.

Translator’s note1.Page 2 of the original Russian text referred to MC.DEC/6/06 on organized crime. Thishas been corrected in the English translation to MC.DEC/5/06.2.Some of the website addresses given in the footnotes in the English translation differfrom those given in the original Russian report so as to ensure easy access to theEnglish-language version of the relevant conventions or documents.3.The ancient Greek historian Sallust mentioned in the first paragraph of the conclusionof the original Russian report is in fact an ancient Roman historian. This has been correctedin the English translation and his name has been given in full as requested by the Rapporteur.