GCC states get serious in anti-corruption fight

There are stiffer penalties for financial malpractice and other offences related to graft.

A taboo word only a few years ago, corruption is now hitting the headlines in the Gulf oil producing states, as they step up their fight against financial malpractices and other offences related to graft.

Most of them have established bodies to combat corruption and have introduced stiffer penalties against such offences while others have signed international agreements for co-operation against laundering, corruption and other crimes that they now believe could destabilise their financial systems.

Departing from previous policies when corruption and related crimes had gone almost unnoticed and unpunished, the six Gulf Co-operation Council (GCC) countries are now publicly reporting such offences, reiterating their commitment to global anti-crime efforts and summoning ministers and other senior officials for unprecedented questioning on suspected misappropriation of funds.

The UAE has emerged as one of the pioneers in the Arab World in the fight against corruption, laundering and other financial offences by signing scores of relevant agreements with other countries and creating a financial monitoring system to ensure all state funds are managed and spent properly.

The State Auditing Court (SAC), formed on the orders of the late Sheikh Zayed bin Sultan Al Nahyan, has recorded many cases involving misappropriation of federal funds and has reported that its surveillance activities have resulted in the recovery of large sums of wasted money and in curbing such malpractices.

In remarks this week, the SAC said it had detected more illegal financial operations at federal offices and had informed the attorney-general about such offences and about those involved, so they could be prosecuted.

Financial abuses uncovered

"Over the past year, we have uncovered some financial abuses related to corruption and misappropriation of funds at the federal level… Several employees are involved in such operations and they have been referred to the public prosecutor," SAC Chairman, Hareb Al Amimi said. "We are pursuing our monitoring assignment upon the instructions, and with the support of the supreme authorities… We will exert strenuous efforts to preserve public funds in line with the intensified measures undertaken by the UAE to combat all forms of corruption and other financial offences."

In another statement earlier, the SAC said it had unveiled major fiscal offences in federal government establishments involving nearly Dh300 million during fiscal year 2007-2008, but said all the funds had been recovered. It said many civil servants were involved in what it described as "illegal financial practices". Amimi said operations during those years were discovered during the SAC's annual review of actual spending by the country's various government offices within their assigned budgets for last year.

"The Auditing Court has succeeded in recovering around Dh300 million for the state coffers during 2007 after the funds were disbursed illegally and without any justification at various departments under our authority," Amimi said. "Our trained and specialist teams managed to unveil major cases at some federal departments. Investigations have shown that some employees are involved in illegal practices and offences that have resulted in large financial losses to the state. We have presented comprehensive reports about such cases to the higher authorities to take suitable measures."

Amimi said the SAC had received orders to step up auditing activities in federal departments to ensure state funds are properly and efficiently used. He did not provide details of these offences but said these involved funds spent outside the budgeted allocations or those that were not used for the assigned purpose. He added some cases had not been tackled yet and that they were specified in the report presented to the competent authorities.

"The Auditing Court has the authority to investigate all cases to make sure allocations for each federal department and other government offices are spent in accordance with the specified objectives and purposes to guarantee budget efficiency and prevent waste of public funds," he said.

"The Court is empowered to fight corruption through periodic follow-up and monitoring of public funds… It has powers to interrogate any official party in case it finds convincing evidence that public funds have been misused." Over the past years, the SAC has reported several cases involving abuse of public funds but officials said this year such cases have declined sharply because of intensified auditing and anti-corruption measures.

As a result, the UAE has been classified by several global rating and research organisations as having one of the lowest corruption rates in the developing world. The latest rating came from the US Heritage Foundation, which issues annual reports on more than 150 countries covering progress in their efforts in economic and trade liberalisation, combating corruption and other fields.

UAE's efforts lauded

In its 2008 report about the UAE, Heritage said the Gulf country's economy is 62.8 per cent free, which makes it the world's 63rd freest economy. Another global organisation has also testified to the UAE's anti-corruption efforts, citing an increase in the detection of such abuses.

Germany-based Transparency International said its 2008 index showed what it described as lower perceived levels of corruption in the UAE, Qatar, Oman, Bahrain and Jordan. "In the case of the UAE, one explanation for an improved score may be the increase in corruption cases involving high-level executives, as well as the strengthening of the emirate's Financial Audit Department."

The index ranked the UAE second only to Qatar in the Arab World and 35th among more than 200 countries, in anti-corruption measures. Extending its fight beyond money laundering, the UAE said early this year it would sign deals with scores of countries to combat corruption and tax evasion as part of an overall strategy to fight financial crime.

Central Bank Governor Sultan bin Nasser Al Suwaidi also declared the UAE's intention to keep up the fight against financial crimes but stressed that global co-operation was vital to win the war against such activities.

Addressing more than 500 delegates at an anti-money laundering conference in Abu Dhabi recently, Suwaidi said the UAE had been at the forefront of regional efforts to combat illegal financial activities.

He noted the Financial Intelligence Unit (FIU) at the Central Bank has been working actively in collaboration with similar units in other countries to detect financial crimes and find ways to eliminate them.

"Our FIU, in line with its strategy to actively co-operate with other FIUs and regulators, has written to competent authorities in certain countries to extend cooperation in matters of tax evasion and corruption. We, in the UAE, welcome co-operation with any country in this regard," he said.

Co-operation with other countries

Suwaidi, Chairman of the UAE National Anti-Money Laundering Committee (NAMLC), gave no details of such deals but a Central Bank official reported earlier that the UAE has already signed memoranda of understanding (MoUs) with 22 countries and is expected to sign similar deals with 14 countries and organisations this week as part of a plan to finalise 92 MoUs.

In Saudi Arabia, the largest Arab economy and the world's top oil exporter, anti-corruption actions have taken a new turn with heated debates by the kingdom's Shura Council (appointed parliament) about the problem.

The kingdom has already created a General Auditing Bureau (GAB) as a public funds watchdog but it has come under fire by Shura members over a recent scandal involving the alleged waste of nearly $29 billion (Dh106.51bn) in government funds.

The accusations traded between the Shura, the GAB and other government institutions coincided with moves by Saudi Arabia to promote itself as one of the world's best and safest investment destinations within a long- term diversification programme intended to reduce its reliance on unpredictable oil sales.

In a strong attack on the GAB and other public departments, the Shura Council said it believed around SR109 billion (Dh106.7bn) in public funds had been wasted or misappropriated and demanded the retrieval of that money. The charges immediately triggered a response from the GAB, which rebuffed Shura's claims and clarified the source and destination of those funds. But it acknowledged a sort of mismanagement of those funds.

Until recently, publicised official enquiries about misappropriation of funds and corruption cases have been taboo in Saudi Arabia and most Arab countries. The policy turnaround followed intensifying moves, mainly by Gulf nations, to open up their economies, attract foreign investment and eliminate red tape, corruption and other malpractices for a better standing of mushrooming global indices that measure nations' progress.

Such measures have allied with other steps to tear down capital barriers to turning Saudi Arabia into a top destination for foreign direct investment in the Arab World, followed by the UAE. In Kuwait, another GCC oil heavyweight, officials announced this week the completion of legislation to form a "Public Authority for Integrity" (PAI), an organisation committed to implementing anti-corruption policies. The announcement was made by Salah Al Ghazali, Chairman of the Kuwait Transparency Society (KTS). "The formation of the PAI came as a result of a fusion of four different anti-corruption legislation, including the anti-corruption law, the fiscal liability law, the conflict of interest law and the informant protection law."

Al Ghazali explained that in addition to combining the four legislations into a single draft, legislators also made some enhancements such as changing the name from the Anti-Corruption Authority to the Public Authority for Integrity. "We wanted to reflect a positive meaning," he said.

Graft source of instability

Qatar, Oman and Bahrain have also formed anti-corruption and money laundering bodies and have often reported interrogation of ministers and other officials by their legislative systems. Addressing the UN in late 2009, Qatar's Ambassador Nasser Abdul Aziz Al Nasser outlined his country's policy towards corruption.

"Corruption is a serious threat to the rule of law, stability and security in society as well as to the equal distribution of resources. The phenomenon of corruption is a source of instability in many countries, especially as it undermines the credibility of political leaders, weakens the relationship of trust between citizens and their institutions and thus undermines the foundations of society as a whole."

He described as "worrisome" the relationship between corruption and other forms of crime, especially organised crime and international terrorism, drug trafficking, money laundering and other manifestations of economic crime.

"With the view to combating all manifestations of corruption, Qatar supports all international efforts aimed at tackling this phenomenon in an effective and sustainable manner. The government of Qatar is also working towards enacting laws in line with international instruments aimed at preventing illegal funds from finding their way into the national economy.

"Similarly, Qatar co-operates with various stakeholders of the international community, including civil society organisations and the private sector in order to find a way of preventing corruption and following up on implementation of the acceding countries to the UN Convention against Corruption."

In its report on the Middle East and North Africa (Mena), Transparency International (TI) said it believed corruption was still prevalent and widespread in the region despite intensifying anti-crime measures. It said most countries exhibit weaknesses in accountability and access to civil and political rights and political participation is less advanced in the Arab World than in other developing regions.

"The fight against corruption in the Mena region must address its root causes. In order to have real impact, efforts must involve multiple sectors of the society including initiatives from the public (such as anti-corruption reforms and conventions), from within parliaments, from civil society and the private sector. Anti-graft conventions can be a useful political tool to promote anti-corruption reform. The United Nations Convention against Corruption (UNCAC) is the only international convention applicable in this region."

The report said the 2008 TI Corruption Perceptions Index (CPI) reflects a varied landscape for Mena, with 13 countries scoring below five, indicating a serious corruption problem, and only five countries scoring above five. "The 2008 CPI results illustrate that although corruption and lack of transparency constitute a fundamental challenge for the region's development, increased debate on the issue is driving slow but steady steps towards structural reform."

HOW UAE COMBATS MONEY LAUNDERING, TERRORISM

The UAE's anti-money laundering and corruption efforts include:

- Joining international and regional anti-money laundering and combating of terrorism financing efforts through accession and ratification of regional and international conventions and initiatives, including 13 UN conventions on terrorism and three related amendments;

- Implementing UN Security Council resolutions on subjects and issues relating to money laundering, terrorism financing and related crimes;

- Implementing the Financial Action Task Force's 40 recommendations on money laundering, the Special 9 recommendations on combating terrorism and related global initiatives;

- Establishing appropriate legal frameworks to safeguard the UAE economic security and ensure a proactive role in the international community's efforts to fight all crime;

- Supporting international and regional co-operation in anti-laundering and counter-terrorism financing and other crimes;

- Being a signatory to the non-proliferation treaty and endorsing the Global Initiative to Combating Nuclear Terrorism; and

- Holding several local and regional conferences and seminars to train experts, bankers and junior staff.

Do you think severe penalties will discourage people from indulging in such acts? HAVE YOUR SAY.

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