Corruption
News & Blog
Publications
Policy Brief 9: Informal networks and what they mean for anti-corruption practice
Corruption is frequently associated with money alone and the behaviours of a few individual “bad apples” operating in otherwise healthy governance systems. This is too simplistic. As the latest research shows, including research in Tanzania and Uganda on which this Policy Brief is based, corruption is a networked phenomenon. This Policy Brief explains what this means and its implications for anti-corruption practice.
When ordinary citizens and business people face problems, like constrained access to public services or an uneven playing field, they invest time, effort and resources in building informal networks.
Held together by personal connections and corrupt payments, these informal networks are a problem-solving mechanism. They allow members – such as business people, other citizens and public officials – to pursue a variety of goals. The networks aid in easing access to public services, for example, or helping a business to run smoothly, or securing business opportunities with the government. Informal networks can be leveraged to speed up long and complicated permit processes or exploit weaknesses in formal tender processes to obtain undue access to contracts. When red tape is used by public officials to extort bribes from service users, informal networks can help manage and overcome these demands.
In contexts in which these informal networks are widespread, the research shows that conventional anti-corruption measures, such as introducing more regulations, policies and controls, can actually backfire and increase corruption.
Breaking this self-reinforcing cycle of networked corruption requires a shift in thinking and approaches:
- Focusing on networked corruption as opposed to individual corrupt behaviours.
- Tackling corruption both from the demand and the supply side by addressing inefficiencies and weaknesses in public systems that cause problems for ordinary citizens and business people. This may make it less likely that they will resort to corruption through informal networks to overcome the public service weaknesses.
- Harnessing informal networks for anti-corruption objectives. This includes leveraging new insights into social norms and networks and establishing Collective Action initiatives to better target the underlying drivers of corruption.
About this Policy Brief
This publication is part of the Basel Institute on Governance Policy Brief series, ISSN 2624-9669. It presents findings from a research project entitled “Harnessing informality: Designing anti-corruption network interventions and strategic use of legal instruments”, funded by UK Aid as part of the Global Integrity Anti-Corruption Evidence Programme (GI-ACE).
It is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND 4.0). Suggested citation: Baez Camargo, Claudia, Jacopo Costa, and Saba Kassa. 2022. “Informal networks and what they mean for anti-corruption practice.” Policy Brief 9, Basel Institute on Governance.
The nexus between corruption and money laundering: deconstructing the Toledo‑Odebrecht network in Peru
The paper targets the nexus between corruption and money laundering. Scholars and practitioners recently observed how offshore financial centers and financial infrastructures have become central in facilitating corruption and other criminal activities.
Offshore vehicles often serve to conceal the connections between business people and politically exposed persons. Secrecy jurisdictions and service providers have emerged as key actors in these illicit schemes.
The paper explores the following questions:
- How do money laundering activities and offshore financial infrastructures sustain corruption?
- Who are the key actors involved, how do they interact, and their division of labor?
- How do actors and clusters govern the social-financial web of relations?
It applies a combination of social network analysis (SNA) and network ethnography to the corrupt connection between the former Peruvian President Alejandro Toledo and the Brazilian construction giant Odebrecht Group. The research analyzes publicly available data from the Lava Jato and Ecoteva investigations in Brazil and Peru. It deconstructs the illicit scheme’s mechanisms step-by-step, uncovers the functions of different actors and clusters, and illuminates the social norms and informal governance practices that regulate the exchange.
The research highlights how the financial infrastructures of the private and public spheres are integrated and analyzes the informal governance system designed to control the transnational corruption network. The study makes it possible to understand how the nexus between corruption and money laundering works. It also supports the emerging understanding of corruption as a collective, transnational and financially advanced phenomenon.
Acknowledgement and citation
The paper is based on research conducted as part of a collaboration between the Basel Institute’s Public Governance team and its International Centre for Asset Recovery (ICAR).
Citation: Costa, Jacopo. 2022. “The nexus between corruption and money laundering: deconstructing the Toledo-Odebrecht network in Peru.” Trends in Organized Crime. https://doi.org/10.1007/s12117-021-09439-6
Human resource management patterns of (anti) corruption mechanisms within informal networks
In this article, we propose to comprehend the corruption mechanisms of tender bidding processes in terms of Human Resource Management (HRM) practices within informal networks.
Taking the context of Kazakhstan, we analyze the behavior of individual actors as members of informal networks. Our analysis shows that both corruption and anti-corruption mechanisms can be explained in terms of HRM practices such as (camouflaged) recruitment (e.g. of powerful government officials via network ties), compensation (e.g. kickbacks for corruption; social recognition or shame for anti-corruption) and performance management (e.g. demonstrative punishment for corruption; extreme formalization, peer pressure or social sanctions for anti-corruption).
This report is part of a research project funded by the Anti-Corruption Evidence (ACE) Programme of the UK’s Department for International Development (DfID) and the British Academy.
Maximizing stakeholder trust as a tool for controlling corruption
Corruption, particularly bribery of government officials, inflicts substantial damage on people, society, and the world, and warrants control. Collective efforts to control corruption tend to focus on rules and compliance with those rules. This paper suggests that collective action also consider the creation of strong ethical cultures in business firms. Implementation of such programs is impeded by the difficulty in prescribing a course of action and by the difficulty in measuring the strength of an ethical culture.
This paper suggests the measurement and maximization of stakeholder trust as a proxy for measures of ethical culture. The qualities that engender stakeholder trust correspond with ethical behaviors.
Stakeholder trust confers benefits on business firms, which will incentivize and justify its measurement. Implementation of a program focused on ethical culture would benefit from collective action both by normalizing behaviors and in the development of sophisticated measurement tools.
Confronting Corruption
Corruption undermines nearly all key legal and developmental priorities today, including the effective functioning of democratic institutions and honest elections; environmental protection; human rights and human security; international development programs; and fair competition for global trade and investment.
This book chronicles the global anticorruption steps taken since the movement advanced after the end of the Cold War. It provides a realistic assessment of the present state of affairs by critically evaluating what existing anticorruption programs and treaties have accomplished and documenting their shortcomings, while developing an action agenda for the next decade.
The authors argue that reformative action is imperative, and the forces of globalization and digital communication will level the playing field and erode the secrecy corruption requires. They define corruption, document its effects, discuss the initiatives that changed public perception, analyze the lessons learned, and then evaluate how to move forward with existing initiatives charting a new path with new, differentiated strategies.
