[Joint House and Senate Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





 COMBATING CORRUPTION IN THE OSCE: THE LINK BETWEEN SECURITY AND GOOD 
                               GOVERNANCE

=======================================================================

                                HEARING

                               before the

                       COMMISSION ON SECURITY AND
                         COOPERATION IN EUROPE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           NOVEMBER 19, 2014

                               __________

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            Commission on Security and Cooperation in Europe


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            COMMISSION ON SECURITY AND COOPERATION IN EUROPE

                    LEGISLATIVE BRANCH COMMISSIONERS

               SENATE                          HOUSE     

                                                    

BENJAMIN CARDIN, Maryland,           CHRISTOPHER SMITH, New Jersey,
  Chairman                             Co-Chairman
SHELDON WHITEHOUSE, Rhode Island     JOSEPH PITTS, Pennsylvania
TOM UDALL, New Mexico                ROBERT ADERHOLT, Alabama
JEANNE SHAHEEN, New Hampshire        PHIL GINGREY, Georgia
RICHARD BLUMENTHAL, Connecticut      MICHAEL BURGESS, Texas
ROGER WICKER, Mississippi            ALCEE HASTINGS, Florida
SAXBY CHAMBLISS, Georgia             LOUISE McINTOSH SLAUGHTER,
JOHN BOOZMAN, Arkansas                 New York
                                     MIKE McINTYRE, North Carolina
                                     STEVE COHEN, Tennessee
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
 COMBATING CORRUPTION IN THE OSCE: THE LINK BETWEEN SECURITY AND GOOD 
                               GOVERNANCE

                              ----------                              

                           NOVEMBER 19, 2014
                             COMMISSIONERS

                                                                   Page
Hon. Benjamin L. Cardin, Chairman, Commission on Security and 
  Cooperation in Europe..........................................     1
Hon. John Boozman, Commissioner, Commission on Security and 
  Cooperation in Europe..........................................     3
Hon. Sheldon Whitehouse, Commissioner, Commission on Security and 
  Cooperation in Europe..........................................    13
Hon. Robert Aderholt, Commissioner, Commission on Security and 
  Cooperation in Europe..........................................    16

                               WITNESSES

Dr. Halil Yurdakul Yigitguden, Co-ordinator of OSCE Economic and 
  Environmental Activities, Organization for Security and 
  Cooperation in Europe..........................................     4
Shaazka Beyerle, Senior Advisor, International Center on 
  Nonviolent Conflict............................................     6
Anders Aslund, Senior Fellow, Peterson Institute for 
  International Economics........................................     8

                               APPENDICES

Prepared Statement of Hon. Benjamin L. Cardin....................    22
Prepared Statement of Hon. Christopher Smith.....................    23
Prepared Statement of Anders Aslund..............................    24
Prepared Statement of Dr. Halil Yurdakul Yigitguden..............    26
Prepared Statement of Khadija Ismayilova.........................    38
Prepared Statement of Shaazka Beyerle............................    41
RFE/RL's Coverage of Corruption in the OSCE Region...............    44

 
COMBATING CORRUPTION IN THE OSCE REGION: THE LINK BETWEEN SECURITY AND 
                            GOOD GOVERNANCE

                              ----------                              


                           NOVEMBER 19, 2014

          Commission on Security and Cooperation in Europe,
                                                    Washington, DC.
    The hearing was held from 10:02 a.m. to 11:15 a.m. EST in 
Room SVC 203/202 Capitol Visitor Center, Washington, D.C., 
Senator Benjamin L. Cardin, Chairman of the Commission on 
Security and Cooperation in Europe, presiding.
    Commissioners present: Hon. Benjamin L. Cardin, Chairman, 
Commission on Security and Cooperation in Europe, Hon. Robert 
Aderholt, Commissioner, Commission on Security and Cooperation 
in Europe, Hon. John Boozman, Commissioner, Commission on 
Security and Cooperation in Europe, and Hon. Sheldon 
Whitehouse, Commissioner, Commission on Security and 
Cooperation in Europe.
    Witnesses present: Anders Aslund, Senior Fellow, Peterson 
Institute for International Economics; Dr. Halil Yurdakul 
Yigitguden, Co-ordinator of OSCE Economic and Environmental 
Activities, Organization for Security and Cooperation in 
Europe; Khadija Ismayilova, Host of ``Isden Sonra'' (``After 
Work''), RFE/RL Azerbaijani Service; Shaazka Beyerle, Senior 
Advisor, International Center on Nonviolent Conflict.

  HON. BENJAMIN CARDIN, CHAIRMAN, COMMISSION ON SECURITY AND 
                     COOPERATION IN EUROPE

    Mr. Cardin. Good morning. Welcome to this hearing of the 
Helsinki Commission. I particularly want to welcome our 
witnesses that are here for participating in this very 
important hearing. Yesterday I had a chance to speak to the 
Helsinki plus 40 group that was in town from the parliamentary 
assembly to look at where we need to progress.
    At that time, I acknowledge that the Helsinki agreement 
which will celebrate its 40th anniversary in the next year, has 
accomplished, I think, much more than was ever thought possible 
when it was first conceived almost 40 years ago. It has 
achieved, I think, two basic principles. And that is that good 
governance and human rights are critically important to 
stability and growth of a country.
    And secondly, the commitments that are made under Helsinki 
are not just the internal concerns of that country, but are of 
international concern to those countries that are members of 
the Helsinki process. So for all those reasons, I think we have 
been extremely successful over a 39-year period in bringing 
about a sea change, not just within the OSCE but also globally.
    Today's hearing, I think, is particularly important because 
it deals with the subject of combatting corruption on the OSCE 
region, the link between security and good governance. To me, 
this is the key--an area that has not gotten the same degree of 
attention as some of the other issues within the OSCE.
    It hasn't had quite the attention of the human rights 
dimension, although we certainly understand that an honest 
government is a basic right of all the citizens of its country. 
And it has not gotten the same type of exposure as military 
security has within the OSCE process. So we very much look 
forward to the discussion of combatting corruption and how we 
go about doing it.
    Democratic societies function best with a high level of 
trust in each other and the institutions that underpin 
democracy. Corruption undermines that trust, and thus 
undermines the very foundation of democracies. Research has 
shown a high correlation between failed states and endemic 
corruption.
    That's not to say that every country doesn't have some 
degree of corruption, including the United States of America. 
We understand that. But we also understand that those countries 
that are successful, have in place mechanisms to deal with 
corruption. They have independent judiciaries, they have a free 
media that acts as a watchdog against corruption and are 
committed to dealing with corruption at any level of 
government.
    But unfortunately there are countries within the OSCE that 
have not made that fundamental commitment. The upheaval and 
turmoil that we have witnessed over the past couple of years is 
surely one of the most convincing pieces of evidence that we 
have to show the link between corruption and security. The 
spark that lit the fire in Tunisia was a street vendor sick of 
paying bribes to the police. That's what was the spark in 
Tunisia.
    In Ukraine, the corruption that had plagued that country 
for decades only intensified recently. And a major component of 
the Euro-Maidan protests--the revolution of dignity--was the 
people's disgust with pervasive governmental corruption. With 
the election of President Poroshenko in May and a new, pro-
European parliament elected last month, Ukraine has a real 
opportunity. While it is not an easy environment given Russia's 
aggression and de-facto control of parts of Ukraine, some steps 
have already been taken. But much more needs to be done.
    In Russia, corruption and consolidation of power at the 
center has allowed the Putin government to undermine the 
legitimacy of its judiciary, silence independent journalists 
and systematically deprive NGOs of the ability to operate 
freely.
    In Hungary, the U.S. recently announced that six Hungarians 
were determined to be ineligible to enter the United States 
under the authority of Presidential Proclamation Number 7750, 
which makes individuals excludable when there is credible 
information that those individuals are either engaging in or 
benefiting from corruption. The head of the Hungarian Tax 
Authority has publicly stated she is one of the six.
    We went to great extremes in the Congress to underscore the 
individual human rights violations against Sergei Magnitsky and 
passed the Magnitsky Act, which made it clear in regards to 
Russia that we will not allow individuals who have committed 
gross violations of internationally recognized human rights to 
visit our country and use our banking system. We did that to 
underscore our outrage that Russia did not hold those officials 
accountable--in the Sergei Magnitsky tragedy--accountable for 
their actions.
    But in Hungary, the U.S. administration is using the basic 
tools it has to exclude individuals from our country that have 
participated in significant corruption within their own 
country. There are disturbing trends in Hungary, making it more 
difficult for civil societies and independent media to report 
on and combat corruption. This includes the expansion of 
criminal penalties for defamation using emergency parliamentary 
procedures and the subsequent threat to use those provisions 
against those raising concerns about the tax authority and the 
National Bank.
    So we have challenges. And it's not just in one country, 
two countries and three countries. We have challenges that the 
OSCE needs to confront. We need to figure out how we can 
develop the type of strategies that we have in the other 
baskets in the OSCE within the economic basket as to how we can 
deal with corruption within the OSCE and be a model for the 
global community.
    With that, I'm pleased that Senator Boozman is here, an 
active member of the Commission, and I call upon him for any 
opening comments that he would like to make.

  HON. JOHN BOOZMAN, COMMISSIONER, COMMISSION ON SECURITY AND 
                     COOPERATION IN EUROPE

    Mr. Boozman. Well, I appreciate you holding the hearing, 
Mr. Chairman, and as you pointed out--and I certainly associate 
myself with your remarks--the importance of this particular 
topic. So again, I look forward to the testimony. Thank you 
very much.
    Mr. Cardin. Well, thank you very much. Again, it's a 
pleasure to have you here today.
    Let me turn to our witnesses. Unfortunately, Ms. Ismayilova 
is not here. We had invited her to join us today. She's an 
investigative journalist with Radio Free Europe/Radio Liberty 
in Baku. She was not able to join us today because of a travel 
ban imposed on her by the government of Azerbaijan. She has 
provided a written statement and copies have been distributed 
and will be made part of our hearing. And we regret that she is 
not able to join the panel today.
    I would like to welcome Dr. Yigitguden, who has been the 
coordinator of the OSCE economic and environmental activities 
since February 2013. He is a former senior Turkish diplomat 
with extensive experience in the energy sector.
    We also have Ms. Beyerle, who is a visiting scholar at the 
Center for Transatlantic Relations at the School of Advanced 
International Studies at Johns Hopkins University. She is also 
a senior adviser with the International Center on Nonviolent 
Conflict. This year she published a book, ``Curtailing 
Corruption: People Power for Accountability and Justice.''
    And finally, we have Mr. Aslund, who is the senior fellow 
at the Peterson Institute for International Economics. He's an 
expert on economic policies in Russia, Ukraine and Eastern 
Europe, and he focuses on the broader implications of economic 
transition.
    The complete bios of all of our witnesses have been 
distributed and made available to all. And let me start, if I 
might, with Dr. Yigitguden.

 DR. HALIL YURDAKUL YIGITGUDEN, CO-ORDINATOR OF OSCE ECONOMIC 
  AND ENVIRONMENTAL ACTIVITIES, ORGANIZATION FOR SECURITY AND 
                     COOPERATION IN EUROPE

    Dr. Yigitguden. Thank you very much, Mr. Chairman.
    Chairman Cardin, Senator Boozman, ladies and gentlemen, it 
is a pleasure for me to testify today at the U.S. Helsinki 
Commission to members of the United States Congress. I 
appreciate the opportunity to be at the U.S. Congress today, 
and I am privileged to be a part of a hearing on combatting 
corruption.
    Before I continue, may I respectfully ask that my prepared 
statement, along with the ``Information Note on the 
implementation of the 2012 Dublin Declaration on Strengthening 
Good Governance and Combatting Corruption, Money Laundering and 
the Financing of Terrorism'' provided earlier to the commission 
be put into the record?
    Mr. Cardin. Without objection, that report will be put into 
the record, and without objection, all of the witnesses' 
statements will be made part of our record. And you may proceed 
as you wish.
    Dr. Yigitguden. Thank you very much, Mr. Chairman.
    Mr. Chairman, today I testify in front of you in my 
capacity of the coordinator of OSCE economic and environmental 
activities. Economic and environmental matters represent an 
important element of OSCE's approach to security.
    To tackle challenges in this area, my team cooperates on 
the ground with our current 15 OSCE Field Operations, organizes 
an annual economic and environmental forum and holds a yearly 
implementation meeting to assess progress and identify future 
priorities. The office works closely with the organization's 
chairmanship and performs under the guidance of the economic 
and environmental committee and the secretary-general.
    Our activities include anti-money laundering, transport and 
security, gender-sensitive labor migration, border and customs 
policies, water management, controlling dangerous waste, 
climate change, sustainable energy and involving the public in 
decisions affecting the environment. With other international 
partners, the OSCE is also an active member of the environment 
and security initiative.
    Today I will concentrate my speech on our work in the area 
of good governance and combating corruption.
    Good governance and transparency affect economic efficiency 
and growth and thus remain among key elements of the OSCE's 
comprehensive approach to security.
    The increasing importance of good governance issues 
requires continuous dialogue. Therefore, adopted in Dublin in 
2012 by all participating states of the OSCE, the Declaration 
on Strengthening Good Governance and Combating Corruption, 
Money Laundering and the Financing of Terrorism provides the 
OSCE and my office with a strong mandate. The declaration 
emphasizes that ``good governance at all levels is fundamental 
to economic growth, political stability and security.'' The 
document calls upon the OSCE ``to continue providing valuable 
assistance to participating states upon their request, also in 
sharing among themselves, through the OSCE platform for 
dialogue, national experiences gained and good practices.''
    There is a need to enhance efficiency and transparency of 
public institutions, implement higher standards of integrity 
and improve asset declaration systems to identify possible 
corrupt activities in the OSCE area. I am pleased to note that 
the OSCE supported training activities to develop increased 
awareness, professional capacity and knowledge in prevention 
and repression of corruption and money laundering produced 
results in 2014. For example, with the assistance of the OSCE, 
Kyrgyzstan was removed from the Financial Action Task Force 
grey list.
    The OSCE has been selected to chair the newly established 
Anti-Corruption Working Group in Tajikistan to lead 
coordination efforts engaging civil society and other public 
bodies on anti-corruption issues and initiatives. In 
partnership with the World Bank, we supported towards money 
laundering and terrorism national risk assessments in Croatia, 
Montenegro and the former Yugoslav republic of Macedonia this 
year.
    Distinguished members of the commission, money laundering 
and corruption are interlinked, and oversight and law 
enforcement authorities must have adequate skills and resources 
to conduct investigations and prosecutions of these phenomena. 
Contemporary crimes do not stop at national borders, and cross-
border exchange of information becomes essential.
    Therefore, one of our flagship events this year was a 
workshop on cross-border cooperation against corruption and 
money laundering for government officials from Central Asia, 
South Caucasus and Eastern Europe that took place in Vienna in 
early October. The event, co-organized with the United Nations 
Office on Drugs and Crime and Eurasian Group on Combating Money 
Laundering and Financing of Terrorism brought together 50 
participants from financial intelligence units, anti-corruption 
and law enforcement agencies, financial institutions and 
specialized international organizations. Participants and 
experts discussed links between corruption and money 
laundering, ways to counter cross-border movements of proceeds 
of corruption, domestic coordination in identifying, tracing 
and recovering illicit assets, use of legal persons and other 
legal arrangements to conceal criminal assets. Participants 
were also introduced to good practices for the drafting of 
mutual legal assistance requests as well as the use of regional 
networks to facilitate co-operation in asset forfeiture and 
recovery. I would like to express my gratitude to the 
government of the United States for providing financial support 
to this event.
    The acknowledgement of the negative effects of the lack of 
appropriate economic governance by the political leaders and 
policymakers can be seen in numerous developments in the OSCE 
area. Therefore, participating states should take advantage of 
the platform of OSCE offers and its capacity to produce results 
similar to those mentioned above.
    There is a need to enhance transnational cooperation among 
participating states as well as other international actors in 
the area of good governance. We remain convinced that the 
enhanced efforts should be supported to develop and deliver 
tailor-made capacity-building activities, to deploy anti-
corruption measures, strengthen national financial intelligence 
units and build additional corruption prevention mechanisms.
    Mr. Chairman, by 2015 my office also plans to publish a new 
OSCE Guide on Combating Corruption. The old one is 10 years 
old, so we are near to finalizing a new one. It will consist of 
five parts and 21 chapters written by more than 40 
contributors. The OSCE publication is being prepared in close 
cooperation with the Office of Democratic Institutions and 
Human Rights, Office of the Special Representative for the 
Freedom of the Media and major actors in the anti-corruption 
area, UNODC, OECD, Council of Europe's GRECO group, Anti-
Corruption Academy in Vienna and Basel Institute of Governance.
    In conclusion, let me assure you that my office, jointly 
with the OSCE network of field operations and partners, will 
continue conducting targeted regional and national awareness-
raising and training activities. We will also endeavor to 
mainstream good governance in our other economic and 
environmental activities by incorporating transparency and 
anti-corruption elements wherever relevant.
    Thank you very much again for the opportunity to serve as a 
witness at this hearing today. I very much look forward to our 
discussion and also to our continued cooperation. Thank you 
very much.
    Mr. Cardin. Thank you for your testimony.
    Ms. Beyerle.

   SHAAZKA BEYERLE, SENIOR ADVISOR, INTERNATIONAL CENTER ON 
                      NONVIOLENT CONFLICT

    Ms. Beyerle. Thank you, Chairman Cardin, for your 
leadership in drawing attention to corruption, particularly in 
OSCE participating states. And thank you, Senator Boozman, for 
coming today and for your interest. I know you both are very 
busy.
    It's an honor to participate in this hearing and to share 
with you conclusions and recommendations from new research on 
the positive role of citizens in impacting corruption, 
including in the OSCE region. It's fitting today that Congress 
will commemorate the 25th anniversary of the nonviolent Velvet 
Revolution and will honor the late Vaclav Havel.
    Since thousands of jangling keys rang through the air in 
Prague, citizens continue fighting and impacting corruption and 
impunity. Around the world and in some OSCE countries, 
literally millions of people have wielded nonviolent power to 
gain freedom, freedom from corruption.
    The focus of my research is on what civic actors and 
citizens, exerting their collective power, have been doing to 
curb corruption as they themselves define it and experience it.
    Sixteen cases were documented and analyzed in depth from 
around the world, including in four OSCE participating states: 
Bosnia and Herzegovina, Italy, Russia and Turkey.
    And recently, as Senator Cardin mentioned, in Hungary, 
thousands have mobilized against a corrupt, increasingly 
authoritarian regime and an Internet tax designed to thwart the 
free flow of information.
    But the good news is that citizens organized in nonviolent 
campaigns, movements and community initiatives are vital 
protagonists in combating corruption. And as importantly, these 
homegrown efforts generally don't require huge amounts of 
money, nor do they usually need external financial assistance. 
It's the ingenuity, creativity, resources and voluntary 
participation of ordinary people that provide the foundation 
for action. They've achieved notable outcomes, which were 
summarized in my written testimony.
    One example is the Movement to Defend Khimki Forest in 
Russia, where citizens have stalled the bisection of an old 
growth state-protected forest from a large highway and illegal 
development that involves mysterious shell companies around the 
world and the French firm, Vinci. Both the European Bank for 
Reconstruction and Development and the European Investment Bank 
have pulled out of the project, and the Paris prosecutor is now 
investigating Vinci for financial crimes.
    During my research, I asked activists what they need from 
external actors. They implore the international community, of 
course including the U.S., EU and OSCE, to look beyond formal 
NGOs. They say pay attention to and engage directly with civil 
society organizations and informal civic groups when they visit 
your countries or seek contact with your diplomatic missions on 
the ground. We don't need to put them through a convoluted 
process controlled by NGO gatekeepers to reach you.
    Second, threats and repression are the norm rather than the 
exception. Therefore, protection and solidarity can be critical 
when activists and their families request it.
    Based on my research, allow me to offer these additional 
recommendations. Some are not new but reinforce good practices 
underway.
    Sometimes civil society initiatives do seek financial 
assistance, but they want modest amounts for self-organization 
and capacity-building, not large amounts for formal projects 
designed by external actors.
    Also, the worst thing international actors can do is throw 
large sums of money at homegrown grassroots civic initiatives 
or to encourage them to turn into formal conventional NGOs. 
They don't need that to succeed.
    When it's wanted, provide legal and technical support and 
access to information that civil society may not be able to 
acquire in their own countries.
    A third recommendation is--where censorship and 
intimidation are rife--amplify civil society voices by 
supporting their online information and news outlets, 
alternative satellite television programming and multilingual 
international outlets such as Radio Free Europe and Radio 
Liberty. The bill that's now in the Senate to revamp Radio Free 
Europe and Radio Liberty is exactly the kind of measure that's 
valuable.
    Fourth, use top-down multilateral approaches, such as the 
United Nations Convention Against Corruption, and democratic 
mechanisms, in third party countries, such as our own, to 
support civil society movements and campaigns targeting 
corruption and impunity--for example, the aforementioned Paris 
prosecutor investigation of Vinci and congressional hearings 
such as the one we are having today.
    Lastly, please target global financial corruption. 
Legislative and institutional measures to curb illicit 
financial transactions and the conversion of ill-gotten gains 
into legitimate businesses and properties can disrupt systems 
of corruption that civil society is fighting in OSCE 
participating states. I've heard voices from civil society 
herald the Magnitsky Act. I'd like to thank you, Senator 
Cardin, and also Senator John McCain, for your efforts to 
extend the law's reach through the Global Magnitsky Human 
Rights Accountability Act. And I'd like to share with you that 
I was present when Sergei Magnitsky's mother, Natalia, received 
the 2011 Transparency International Integrity Award given to 
her son after his death. And I will never forget the sorrow 
that was etched in her face when she came up to the stage to 
receive the award.
    In conclusion, allow me to share a few lessons from this 
research. First, citizens bring a missing component to the 
anti-corruption struggle. They bring extrainstitutional 
pressure to push for change when power holders are corrupt and 
are unaccountable, and when institutional channels are blocked 
or ineffective.
    Second, traditional top-down approaches are based on a 
flawed assumption that once anti-corruption structures are put 
into place, illicit practices will naturally change. But as we 
know and as we see, unfortunately, that's not always the case. 
Indeed, how can we expect those benefiting from corruption 
within institutions to be the ones to curb it?
    A third conclusion from my research is that top-down and 
bottom-up approaches are complementary and definitely not 
mutually exclusive. Both are needed, and they create valuable 
synergies.
    Lastly, citizens don't fight corruption in the abstract. 
They do so to overcome poor unaccountable governance, poverty, 
displacement, organized crime and other forms of oppression and 
injustice. We can learn from their approach.
    In closing, allow me to pay tribute to the leaders, 
organizers and regular citizens who courageously and creatively 
are curbing corruption and abuse, one of whom is in the room 
today from Bosnia and Herzegovina, Srdjan Blagovcanin. They 
prove that while corruption brings out the worst in people, 
fighting corruption can bring out the best. Thank you for your 
attention, and I look forward to your questions.
    Mr. Cardin. Well, thank you very much for your testimony.
    Mr. Aslund.

     ANDERS ASLUND, SENIOR FELLOW, PETERSON INSTITUTE FOR 
                    INTERNATIONAL ECONOMICS

    Mr. Aslund. Thank you very much, Mr. Chairman, Senators 
Boozman, Whitehouse. Thank you very much for this opportunity 
for me to speak on what I consider a very important topic: 
corruption in Ukraine and how we can defeat it. And my message 
to you is that it can be done, but it has to be done now (hard 
and fast) by the new government.
    Ukraine today is in a triple crisis. The worst is of course 
the military aggression from Russia, and that has caused an 
aggravation of the financial crisis, but the underlying crisis 
in Ukraine is its old internal enemy, that is corruption, and 
that's what I'm going to talk about today. But all these 
threats need to be fought at once, and Ukraine needs all the 
international support it can get.
    Your words about the importance of good governance today, 
Mr. Chairman, ring very true with regard to national security 
for Ukraine. They all go together. Ukraine would not be in this 
national security crisis without its severe corruption.
    Ukraine ranks 144 out of 177 on Transparency International 
corruption perception index so this is a profoundly corrupt 
country. The corruption really reached its peak under President 
Viktor Yanukovych, and indeed, the corruption, together with 
repression, were important reasons why he was ousted.
    The fight against corruption must start at home, and it 
must start from the top and with a political cleansing of the 
top. And this process started, as you mentioned, on October 26 
when Ukraine elected a new government which has a solid reform 
majority. Among these 423 new deputies, most are new deputies. 
They have not been in the old, rather corrupt situation before.
    Many, a few dozen of the new deputies are anti-corruption 
activists. These are not likely to be silenced or bribed. But 
the new parliament which is soon to convene, it needs now to 
form a new coalition government, and it should start to act 
both against the financial crisis and against corruption.
    After the politics comes the state. Ukraine's public 
service is widely considered pervasively corrupt. Cleansing 
Ukraine from its corruption will require several interrelated 
measures, and Estonia and Georgia show how you clean up the 
government.
    To begin with, the state needs to reduce its regulatory 
role by abolishing a lot of old Soviet regulations which have 
now just been used for extortion. The deputy prime minister, 
Volodymyr Groisman, said recently that Ukraine has 80 different 
inspectorates controlling organs and controlling departments, 
and he argued that at least 60 should be closed down. These 
organs do not work in order to improve regulation of a state, 
but they are organs in order to extort money from the citizens 
and repress them as well.
    Minimizing state interference in the economy, whether by 
privatizing state-owned assets or cutting regulations, reduces 
opportunities for corruption. In October, Ukraine adopted a law 
on lustration. It scrutinizes top officials which have served 
in high positions in corrupt agencies. This entails the 
creation of an independent commission to scrutinize all top 
judges and prosecutors in Ukraine because you can't have an 
independent judiciary that is independently corrupt. It has to 
be cleaned out from outside.
    Since the early 1990s, all the truly rich in Ukraine made 
their money on gas trade. It functions like this: you buy gas 
at a low state-controlled price and you sell it currently at a 
12 times higher price. In that way, a few billion dollars are 
made by very few people each year in Ukraine. There's one way 
of solving it: unify the energy prices. The common objection is 
that this will have social costs, but give compensation to the 
poor for the social costs, (real cash compensation); the World 
Bank is very skillful at doing this. They've done so in more 
than 30 countries, notably in Latin America, where 
administration is often worse than in Ukraine. So this is 
possible, and it has to be done. This is not a matter of social 
cost. It's a matter of fighting corruption, because the people 
that control the gas trade have normally owned Ukrainian 
politics.
    Another source of major corruption is public procurement. 
The general perception under Yanukovych was that 50 percent was 
a normal kickback for a public contract. The government 
officials now say that 20 percent of all public contracts were 
stolen, which sounds low, but that would be 2 percent of GDP. 
What is needed is a law on public procurement that it be open 
and transparent. Such a law has been adopted, and it is 
important that the new government really implements it.
    Of course, the tax system is another major source of 
corruption. The tax police have been the most repressive organ 
in Ukraine. A lot of changes need to be done in the tax system 
to clean it up, simplify it, in particular, abolish the tax 
police. Taxation should not be a matter of repression. It 
should be transparent and legal.
    Coming to the international side, there are two things that 
are important. One is the association agreement with the 
European Union, which is a document of nearly 3,000 pages. It's 
a laundry list of reform laws that Ukraine needs to adopt. And 
the European Union is offering technical assistance to get that 
done. The Ukrainian people have made a choice for Europe, and 
if they stick with it and pursue reform with determination, 
they have the best chance to clean out the Augean stables of a 
long-corrupt system.
    The other international organization that plays a major 
role in Ukraine is International Monetary Fund. So far, it's 
mainly IMF demands that have done away with corrupt practices 
such as the strong demand for a decent procurement law. And of 
course, the United States is the biggest shareholder in the 
IMF. The United States also engages directly in Ukraine through 
bilateral assistance, through USAID. It rightly engages in 
Ukraine's energy reforms, which, as I've mentioned, will be 
crucial for controlling top-level corruption in Ukraine, and on 
top of that, improve state finances and energy efficiency and 
national security.
    So my final words are that the United States has a major 
interest in the economic and legal success of a democratic and 
friendly Ukraine, and the United States can do a great deal in 
this regard. Thank you, Mr. Chairman.
    Mr. Cardin. Thanks. Let me thank you very much for your 
testimony. We've been joined by Senator Whitehouse--it's nice 
to have him here--and Congressman Aderholt, who is vice 
president of the parliamentary assembly. So it's good to have 
our colleagues here, and I thank Senator Boozman for his being 
here. I know he has the Veterans Committee that's meeting, so 
thank you for your attention.
    I want to comment first, Mr. Aslund, on your point about 
Ukraine. I was at the Millennium Challenge Corporation's 
celebration last night of its 10th anniversary. It's a 
development assistance program that we have in the United 
States which is pretty consequential. There's significant funds 
that are made available to try to deal with poverty through 
economic growth in countries around the world.
    But a precondition is that the country must have in place 
the mechanisms to deal with corruption and good governance. And 
it's a competitive fund and the funds are not made available 
unless we in fact move forward on that. And it has had great 
success. It's known in our country as one of the most 
transparent agencies in government. It's consistently ranked 
number one in that regard.
    I'd contrast that to what the United States has done in 
Iraq. We made substantial funds available for economic growth 
and saw so much of that siphoned off in corruption and corrupt 
governance. So you've given a--I thought a very strong list of 
benchmarks that must be achieved in Ukraine for it to be 
successful, and that we all are very much engaged in stopping 
Russia's incursions into Ukraine and doing what we can to help 
the Ukrainian people be able to maintain an independent 
country.
    We are very much engaged in dealing with their economic 
needs on the international front. But it seems to me that there 
has to be a very open, transparent process in Ukraine, and 
benchmarks and accountability. And that we're not doing the 
people of the Ukraine any favor if the current changes end like 
the Orange Revolution ended, without progress being made. So 
how do we go about setting up that system of accountability and 
benchmarks so that, in fact, Ukraine--the people of Ukraine at 
the end of the day will not only have an independent country 
that is safe from the incursions of Russia, but also one that 
has good governance so that their people can share the wealth 
of their country in a fair manner?
    Mr. Aslund. Thank you. This is very much the key question, 
Mr. Chairman. And my answer to this is what Ukraine needs to do 
a lot from top down to, front-load the program, do all these 
major things that can be done straightaway immediately. And to 
this, we have a problem with the finances. Ukraine now is 
running out of international reserves. The exchange rate is 
plummeting. Inflation is rising. The banks are collapsing 
because of that. At least half of the banks are in fact 
bankrupt and need to be closed down or recapitalized.
    So in this situation you really need to do away with 
everything that is corrupt on the state budget--clean it out 
altogether. Otherwise, Ukraine will be in a financial meltdown 
within, say, four months. So it's really critical. So 
therefore, Ukraine doesn't have time. The United States, as one 
of the closest countries to Ukraine, needs to say: You do it 
now, otherwise you are cooked.
    Mr. Cardin. Dr. Yigitguden, can you tell us whether--how 
you're working within Ukraine to deal with following up on some 
of the points that Mr. Aslund mentioned?
    Dr. Yigitguden. Mr. Chairman, we were continuously 
contacting the Ukrainian delegation in Vienna at OSCE and 
Ukraine authorities and our presence in Kiev. Finally, after 
three visits to the site, meeting with the authorities with the 
ministry of justice, ministry of interior and the financial 
intelligence units, we could design a program to work with the 
Ukrainian authorities. I must say, we are very thankful for the 
United States; the different agencies from the United States 
are working closely with the Ukrainian authorities on asset 
recovery issues. This is very helpful for the government.
    And we designed upon their request a project on anti-money 
laundering and combatting financing of terrorism field. With 
our presence in Ukraine, we will be assisting the state 
financial monitoring service of Ukraine--this is their 
financial intelligence unit--in designing and launching a 
national system for national risk assessments. This system 
would assist the Ukrainian financial intelligence unit and 
other relevant government agencies in identifying, assessing 
and understanding money laundering risks and enhanced 
capacities for the implementation and the development of 
national anti-money-laundering and counterterrorism financing 
regime.
    The project will gather national and international experts, 
forming an expert group that will collect and analyze data for 
the national risk assessment, covering main financial sectors 
of the national economy like banking, insurance, stock 
exchange, et cetera. It will also review, analyze and provide 
recommendations to design and amend relevant laws, regulations 
and set parameters to enforce measures to mitigate money 
laundering and terrorism financing risks.
    Key beneficiaries of this project will be the state 
financial monitoring service of Ukraine and the state training 
institution for experts on financing monitoring. This morning I 
received an email that we got a request from Ukrainian side. 
They want to study the system in Lithuania. So from 1st till 
5th of December, we will bring them together with the Ukrainian 
authorities to work on this field, to learn from their 
experiences. And we will continue next year to work with the 
Ukrainian authorities.
    Mr. Cardin. I think that's very helpful. And I applaud your 
efforts. I think it would be very useful for you to make 
available to the OSCE community the progress that Ukraine is 
making on the points that were brought out in Mr. Aslund's 
testimony. What are they doing about regulatory reforms? What 
are they doing about procurement and state-owned enterprises, 
the independence of a judiciary free of corruption? What are 
they doing about energy sector reform? What are they doing 
about their tax system?
    I think all those are obvious areas that breed corruption. 
And the solutions may be difficult to achieve politically, but 
we know that they need to progress toward doing that. So I 
think the more transparency that we show on that, I could just 
tell you that, speaking as this senator, we're going to help 
the Ukrainian people, but we're not going to provide funds that 
are being used for corruption. And sometimes you have to make 
some tough decisions if the money isn't getting to where it's 
intended. So advertising the progress on these fronts, I think, 
would be extremely helpful to us.
    I want to ask one other question if I might, to Ms. 
Beyerle. You mentioned civil societies, which I think are 
critically important here, and how we finance civil societies. 
We have just completed the Berlin plus 10, dealing with anti-
Semitism. Ten years ago there was a conference in Berlin that 
dealt with the challenges in anti-Semitism and an action plan 
was developed. And as I understand it, the final statement by 
the chair in office indicated that we must show more economic 
and political support for civil societies in fighting 
intolerance and anti-Semitism.
    And it seems to me the same challenge is here in 
corruption, that we do need to do a more effective job in 
supporting the work done by civil societies. Do you have some 
specific suggestions as to what the OSCE could do in adding to 
the strength of the role of civil societies in fighting 
corruption?
    Ms. Beyerle. Thank you. I do know that the OSCE engages 
with civil society and that various NGOs can be accredited to 
be a part of some of the meetings with member state 
participating countries. And I know that they interact with 
civil society on the ground in countries and they conduct 
things like integrity trainings for officials in countries. But 
my recommendations are really simple, and not very expensive. I 
would urge the missions on the ground to engage more actively 
with civil society organizations that are not traditional NGOs, 
to engage with civic groups that are mobilizing citizens 
together, to involve them in activities that they do, to give 
them access to meet with officials who are coming from the OSCE 
itself, to monitor their status when they face harassment and 
intimidation. These are the kinds of things that are helpful.
    Other things that could be interesting--and Dr. Yigitguden 
would be able to answer if it's possible within the parameters 
of the OSCE, but I do think there is a way to do it--is to 
encourage more civil society peer exchanges. For example, it 
was mentioned that there is a plan to bring Ukrainian officials 
to Lithuania to meet their counterparts at the government 
level, to learn from their counterparts in Lithuania. That can 
also be very important at the civil society level. Peer-to-peer 
exchanges, bring people who are active--who are actively 
fighting corruption on the ground together from different 
countries within the OSCE and even with people who have 
successfully impacted corruption outside the OSCE--to share 
their experiences and insights.
    So in addition, I would suggest--and again, this could be 
something for the OSCE and other external actors--is to work 
with civil society groups to produce anti-corruption 
mechanisms--in which they have provided input. There is a 
notion that we have in the people power realm of collective 
responsibility. And we need to bring in to deliberations about 
what should be done, for example, to reform government 
ministries--to bring in voices from the citizenry can be very 
important because they actually have the insights about how 
corruption functions within a government ministry, or within a 
government office. They actually have good ideas and good 
suggestions about how to address it, how to disrupt it. And 
they actually can play a role, for example, through monitoring 
of activities that tend to be corrupt.
    So I'll leave it at that and I would be happy to discuss it 
further later.
    Mr. Cardin. Well, thank you very much. Senator Whitehouse.

 HON. SHELDON WHITEHOUSE, COMMISSIONER, COMMISSION ON SECURITY 
                   AND COOPERATION IN EUROPE

    Mr. Whitehouse. I'm a former prosecutor. I was the attorney 
general of my state. And I was the United States attorney, the 
federal prosecutor for my state. And in addition to the 
importance of an independent and incorruptible judiciary, it's, 
to me, equally important that there be prosecutive capabilities 
so that the independent and honest judiciary have cases before 
them to work on. That does not seem to be a skill set that has 
been very well maintained in the Ukraine. It's a skill set that 
doesn't last very well in corrupt political environments. It's 
the antithesis, frankly, to a corrupt political environment.
    So rebuilding that prosecutive capability seems to me 
vital. In that regard, both the National Association of 
Attorneys General and the National District Attorneys 
Association and the United States Department of Justice have 
very considerable assets of experience and capability in that 
area. And I've spoken to those organizations about trying to 
get more involved specifically in the Ukraine. I think they 
offer a couple of things. The first they offer is added 
resources, training, mentorship and so forth.
    They also add a bit of a defense, I guess I'd say, against 
efforts to have the corruption world intrude into and force its 
effects into these types of decisions, not because--just to use 
the example of the Ukraine--not just because the Ukrainian 
prosecutors won't be as honest as any other prosecutor, but 
because it gives them an additional tool in their arsenal to 
say, well, you know, I just can't buckle on this because we've 
got all these folks from out of the country watching and you 
have to understand that that's just the way it is right now. 
And I think that gives a boost from anticorruption efforts.
    So I would urge that we continue to try to seek the support 
of what's called NAAG, the National Association of Attorneys 
General, the NDAA and the Department of Justice in putting that 
kind of resources in place, on location, in the offices, both 
to develop the capability and to provide a counterpoint, I 
guess I'd say, to people who are saying quietly to somebody, 
you know, you're getting too excited about this. This is, you 
know, really something that you needn't be looking into so 
much. And if you really want to protect your budget and your 
people, you know, I think you'd be making a mistake to 
concentrate so many of your resources in this case, blah, blah, 
blah.
    That's the way in which the corruption force works its will 
against prosecutors. And if they're in a position to say, you 
know, I appreciate that but I've got an office full of people 
who are going to blow the whistle on it if we try. And it's--
don't blame me. This is just the situation we all live in. I 
think that hardens up the prosecutive capability. So I'd love 
to hear your thoughts on that and happy to support.
    Rhode Island is one of the few states--there are three of 
them--in which the attorney general is also the district 
attorney. So we did all of the criminal prosecutions, all the 
felony prosecutions, most of the misdemeanor prosecutors--
everything that wasn't a municipal offense. And so I'm one of 
the rare people who has actually been a member of the NDAA and 
the National Association of Attorney Generals and a former U.S. 
attorney. So I'm very happy to work with you to try to make 
sure we're steering the resources in that direction. I think 
it's very important and I'd love to help. So your comments to 
that.
    Mr. Aslund. Thank you. I presume that's for me. Thank you 
very much, Senator Whitehouse. I think that this is really 
critical. As happens now in Ukraine, hardly any of the 
Yanukovych gang has been properly prosecuted. Who is most easy 
to pay off? You can guess. The prosecutors have massive power. 
The best way for them to make money is not to pursue a case. Of 
course, there might be something that is missing in the case, 
we don't know, but it's very remarkable none of them has been 
properly prosecuted.
    Ukraine has 10,000 prosecutors, 20,000 judges. Probably 
both numbers should be halved. It's a very large number if you 
compare with any Western country. What's important is that they 
become decent and honest, because this is a pervasively corrupt 
institution. The top prosecutors appoint the lower prosecutors. 
Since the top prosecutors have been corrupt for a long time, 
they make sure that they don't get any unnecessarily honest 
prosecutors around them.
    So therefore, what you need to do is to take out the top. 
This is what the governing is doing through the new law on 
lustration. It has sacked approximately 100 top prosecutors. 
That's where we need to start. Then what you said here, another 
element is to get the international assistance in that you need 
to have an international council that assesses prosecutors. 
It's pretty easy to see if people are corrupt or not in these 
cases.
    This is what East Germany did. They went through all the 
judges and all the prosecutors. They undertook a complete 
lustration of the civil service. Ukraine needs to do that, 
particularly in these two areas--prosecutors and judges. It's 
not only technical assistance. You really need to have peer-
controlled over appointments. There are a lot of Ukrainian-
speaking judges in North America, in Canada and the United 
States. This is a good resource the U.S. and Canada can draw 
on.
    And there are lots--there are thousands of young lawyers in 
Ukraine who are disgusted by what they see. They have primarily 
gone into the private sector, to commercial law, in order to 
avoid being drawn into the dirty legal system. They know the 
laws. They know how to work as lawyers. So there is a resource. 
These are the people who should be brought in, but then, of 
course, they have to be properly paid, and if you make them 
much fewer, then you could get it done, and this is critical 
that the United States can help with technical assistance in 
this area.
    Mr. Whitehouse. Well, thank you, and let me thank Chairman 
Cardin for his leadership in this commission. He's very active, 
and perhaps this is an issue we could put on our commission 
docket as something to consider how we can encourage NAAG and 
(DAA ?) and the Department of Justice to work together to help 
support this kind of activity, particularly in the Ukraine, but 
wherever it's a problem.
    Mr. Cardin. Well, let me just thank Senator Whitehouse for 
that suggestion. We make significant resources available here, 
and I think perhaps one of the most valuable things we could do 
is provide the technical assistance, but also the oversight for 
accountability. I must tell you, we are not going to be too 
patient on seeing progress made to deal with corruption, nor 
will the people of Ukraine be too patient here. They have a 
history of taking things into their own hands in the streets if 
they're not satisfied about what is happening. So I think it's 
important that we do that, and I think you're absolutely right. 
We have the capacity to really help them understand what needs 
to be done, but just as importantly, evaluate as progress is 
being made as to whether they're achieving that or not.
    Congressman Aderholt.

HON. ROBERT ADERHOLT, COMMISSIONER, COMMISSION ON SECURITY AND 
                     COOPERATION IN EUROPE

    Mr. Aderholt. Thank you, Mr. Chairman. Mr. Aslund, let me 
just go back to what you were saying about the number of 
prosecutors and judges in Ukraine. That was--you said 10,000 
prosecutors, 20,000 judges?
    Mr. Aslund. Yeah.
    Mr. Aderholt. Which you said, by Western standards, would 
be quite high. What contributed to that, and were they given 
out as just positions that just--sort of give you a little 
history about that? How that happened or came about?
    Mr. Aslund. Well, it's the old Soviet system. If you look 
up on the police force, Ukraine has 300,000 policemen. Britain, 
which is substantially larger, has 120,000 policemen. Part of 
it is that the Soviet Union, as a share of the population, had 
the largest number of jail mates--prisoners in the world. The 
U.S. is also high in this regard, but the Soviet Union was 
higher. And therefore, you had an overcapacity. The Soviet 
Union had a murder rate that was the same as in the United 
States--at the peak, around 1990, of eight, nine murders per 
100,000 population. So it was very high, and it hasn't been 
cleaned up. So this is largely a Soviet inheritance.
    Mr. Aderholt. So it's a holdover from the Soviet days?
    Mr. Aslund. Yeah.
    Mr. Aderholt. Of course, as I'm sure you know, President 
Poroshenko spoke at a joint session of Congress just a few 
months ago here in Washington, and we very much appreciated his 
coming and speaking to the joint session. One of the things 
that would be interesting, as far as President Poroshenko and 
the prime minister--you know, how committed, in your opinion--
and I'll open this up to any on the panel--do you think that 
they truly are to fighting corruption?
    Mr. Aslund. I do think that they are committed, but they 
always have other interests. They are both highly competent, 
and it was a wonderful speech that President Poroshenko gave 
here to the joint session of Congress, but the truth of the 
pudding is in the eating. We have to see that they really 
deliver. In order to be in politics, you have to consider many 
interests, and the question is how you manage to do it well.
    Mr. Aderholt. You'd put them on a scale quite high as 
their--you think they're committed to it. Of course, what 
happens is another question, but as far as their commitment at 
this point--you see as--you see them as quite committed?
    Mr. Aslund. Knock wood, that's my view.
    Mr. Aderholt. Yeah. Any assessment from the other----
    Mr. Yigitguden. I would say there are two ways to fight 
against corruption. One, to work closely to train prosecutors, 
financial intelligence units, Ministry of Interior officials 
and so on. On the other side, to make the legislation simple 
and understandable for every citizen. Citizens, they don't 
understand the complexity of legislations. Sometimes, they are, 
I would say--may be exaggerated--happy to pay bribes to achieve 
something, to get something, because it's sheer impossible for 
them to go to--to this difficult legislation, so we should 
encourage countries in this regard--EU should play a role to 
simplify legislations in this region that the people can 
understand, and it's no room for corruption there.
    This will be a best way. We are trying to mainstream our 
activities, not only working with the authorities fighting 
against corruption and anti-money-laundering, but also in other 
areas. We work in the field of customs and transportation trade 
facilitation with our (booklet?); we organize trainings with 
best practices from 200 best practices from all over the world. 
How the customs procedures can be simplified that trade can be 
facilitated much faster, and there is less space for corruption 
in customs areas.
    Similarly, in the environmental field environmental good 
governance via the huge network of Aarhus centers, we are 
increasing the awareness of the ordinary citizens how they can 
access to the information in the environmental decision-making 
process, whether the authorities there are corrupt and they 
give, say, permission without consulting with the population. I 
think we need to mainstream all activities in all areas that 
the citizens are aware, first of all, about their rights, and 
secondly, they have a simple legislation, simple rules that 
they can understand, and there is no room for corruption. Thank 
you.
    Mr. Cardin. Thank you. Ms. Beyerle.
    Ms. Beyerle. Thank you. I would second what my two co-
panelists said and provide an example. Ukraine and other 
countries may now face the opportunity--and it's a good 
opportunity--to change, revamp, reform laws on the books. And 
laws can be complicated, as was mentioned, or they can be 
simple. They can also be user-friendly to citizens, or they can 
prevent or be obstacles to citizens using the laws. So a key 
law--for example, is the right to information or freedom of 
information, as we call it in the United States.
    The laws can be convoluted, or they can be something that 
anyone can use. And when it's something that anyone can use, 
this becomes a tool, a weapon that society can use to fight 
corruption. And these kinds of activities are what reinforce 
the top-down efforts that have been described today. So, for 
example, in India, the Right to Information Act was actually 
developed through constitutional lawyers and legal experts from 
civil society, and after a 10-year movement--social movement--
it was passed. It is one of the strongest freedoms of 
information acts in the entire world, and there is now a 
movement in India--the 5th Pillar movement--training and 
encouraging citizens to use this on a daily basis to actually 
thwart corruption that they face in their daily lives.
    The corruption that's manifested from the activities that 
the panelists have discussed--for example, corrupt judges, 
corrupt judicial systems, corrupt bureaucracies; all go hand-
in-hand. Consultation with experts and grass-roots leaders from 
civil society can provide a different perspective that can be 
built into the top-down changes that are being developed.
    Mr. Aslund. Sorry--may I add here, many laws have been 
adopted recently in Ukraine. In the spring, there was the 
adoption of freedom of information act. In October, last month, 
a package of anti-corruption laws was adopted. That includes 
electronic registers for all enterprises. Most big enterprises 
in Ukraine are owned by anonymous offshore companies, so their 
real owners are not formally known. That's also true of real 
estate and property that you don't know actually who owns it, 
and now they are demanding to have registers, electronic 
registers that would be publicly available to everybody. The 
very important law on prosecution was finally adopted. This was 
what Viktor Yanukovych was not prepared to accept because in 
the old Soviet system, the prosecutor was superior to the 
judge, so the prosecutor could until now go in and change a 
verdict of the court, which is just the old Soviet system.
    And--let's see. What else? Yeah, and of course, law on 
money laundering has also been adopted every much because of 
demands from the international community. Also a law on an 
anti-corruption bureau which has special rights to go after top 
officials that appear to be corrupt, which several other post-
Communist countries have done to clean up because the 
prosecutors cannot be trusted to deal with top officials. Thank 
you.
    Mr. Aderholt. Thank you, Mr. Chairman.
    Mr. Cardin. Let me make an observation, and that is that 
this hearing has been extremely helpful, and I thank all three 
of our witnesses for their--for their testimony and more 
importantly for your contributions to this--to this area. I 
remember during the early days of our discussions on 
trafficking in this commission, this commission took up this 
issue many years ago. And we knew that every country needed to 
improve, but there were some countries that were problematic in 
dealing with trafficking. And it took a long time, but we were 
able to obtain I think objective standards for evaluation. And 
of course, the United States Congress passed the Trafficking in 
Persons report, which evaluated the progress being made in 
every country, including the United States, and pointed out 
progress where it could be continued, but then established 
different tiers with consequences if you don't at least reach 
certain tiers of progress.
    I think we need the same effort with corruption. I thought 
the testimony today has laid out some fundamentals that are--
need to be in a country in order to have acceptable 
institutional protections against corruption--the independent 
judiciary and prosecutors, or laws on how government deals with 
procurement, and there are others that may not be present in 
Ukraine which are pretty clear are necessary in order to have 
the protections against corruption. And as I said, every 
country can improve, including the United States. We understand 
that. So I think such an evaluation might be very, very 
helpful.
    Part of that, of course, is having an independent judiciary 
and allowing investigative journalists. And once again, I 
regret that Ms. Ismayilova is not here. Azerbaijan is a friend 
of the United States. We have a very close relationship on many 
issues. And I would just urge Azerbaijan to understand the 
importance of protecting independent journalists and allow 
independent journalists to be able to carry out their work, and 
Azerbaijan will be a stronger country as a result of those 
types of activities. I think that's an important point for us 
to mention. We have the ministerial meeting coming up in 
December in Basel. We'll have a transition between the Swiss 
chair in office and the Serbian chair in office. And I just 
hope that we would be more visionary as to how we want to 
elevate the work on this subject, and we look forward to 
working with you, doctor, as to how we can underscore that 
importance and continued ability, the institutional presence in 
that regard.
    I've been informed by staff that Canada this week will be 
considering a transparency issue in regards to extractive 
minerals. As you know, we passed a transparency provision here 
in the United States. Europe has also acted on transparency. 
When Ms. Beyerle, you mentioned the sources of corruption, we 
know that trafficking is a source of funds for corruption in 
organized crime. We know that corruption on the use of the 
minerals of a country and supporting a corrupt government's 
sources of corruption, we know illicit drugs and illicit arms, 
all these are sources that fund corruption. And as Mr. Aslund's 
pointed out, unfortunately, public service in some countries is 
a source of corruption.
    So I think all this gives us a way to really elevate this 
issue to a much more important area. And bottom line, it deals 
with the same principles of Helsinki, OSCE, the security of our 
country is based upon stable countries around the world, and 
you can't have stable countries if you don't have good 
governance; you can't have good governance if you have 
corruption.
    Senator Whitehouse.
    Mr. Whitehouse. I'm good.
    Mr. Cardin. Thank you all very much for your contribution.
    Mr. Whitehouse. Appreciate this very much.
    Mr. Cardin. Appreciate it very much.
                            A P P E N D I X

=======================================================================

                          Prepared Statements

                              ----------                              


Prepared Statement of Hon. Benjamin L. Cardin, Chairman, Commission on 
                   Security and Cooperation in Europe

    Good morning and welcome to this hearing of the Commission on 
Security and Cooperation in Europe. We have a panel of distinguished 
witnesses with us today to discuss combating corruption in the OSCE 
Region and the link between security and good governance.
    Combating corruption may be the most important task we face today.
    Democratic societies function based on a high level of trust in 
each other and the institutions that underpin democracies. Corruption 
undermines that trust, and thus undermines the very foundation of 
democracies. Research has shown a high level of correlation between 
failed states and endemic corruption.
    That's not to say we don't have corruption in democracies. We do. 
But the level of corruption is not as high and having strong 
institutions such as an independent judiciary and an independent media 
are integral to keeping corruption in check.
    The upheaval and turmoil that we have witnessed over the past 
couple of years is surely one of the most convincing pieces of evidence 
that we have to show the link between corruption and security. The 
spark that lit the fire in Tunisia was a street vendor sick of paying 
bribes to the police.
    In Ukraine, the corruption which has plagued that country for 
decades only intensified during the regime of Viktor Yanukovych. A 
major component of the Euro-Maidan protests--the ``revolution for 
dignity''--was the people's disgust with pervasive governmental 
corruption. With the election of President Poroshenko in May and a new, 
pro-European parliament elected last month, Ukraine has a real 
opportunity. While it is not an easy environment given Russia's 
aggression and de-facto control of parts of Ukraine, some steps have 
already been taken, but much more needs to be done.
    In Russia, corruption and consolidation of power at the center has 
allowed Putin's government to undermine the legitimacy of its 
judiciary, silence independent journalists and systematically deprive 
NGOs of the ability to operate freely.
    In Hungary, the U.S. recently announced that six Hungarians were 
determined to be ineligible to enter the United States under the 
authority of Presidential Proclamation Number 7750 which makes 
individuals excludable when there is credible information that those 
individuals are either engaging in or benefiting from corruption. The 
head of the Hungarian Tax Authority has publicly stated she is one of 
the six.
    This is clearly an exceptional measure and I'm sure not undertaken 
lightly. On the contrary, I believe, this reflects on other 
developments which have made it more difficult for civil society and 
independent media to report on and combat corruption. This includes the 
expansion of criminal penalties for defamation using ``emergency'' 
parliamentary procedures and the subsequent threat to use those 
provisions against those raising concerns about the Tax Authority and 
the National Bank.
    I'd like to turn now to our witnesses for their contribution. 
Unfortunately Khadija Ismayilova, an investigative journalist with 
Radio Free Europe/Radio Liberty in Baku, was not able to join us today 
because of a travel ban imposed on her by the Government of Azerbaijan. 
She has provided a written statement and copies have been distributed. 
We regret that she is not able to join us here for the hearing.
    I'd like to welcome Dr. Halil Yurdakul Yigitguden, who has been the 
Co-ordinator of OSCE Economic and Environmental Activities since 
February 2013. He is a former senior Turkish diplomat with extensive 
experience in the energy sector.
    Next is Ms. Shaazka Beyerle, who is a visiting scholar at the 
Center for Transatlantic Relations at the School of Advanced 
International Studies at Johns Hopkins University. She is also a Senior 
Advisor with the International Center on Nonviolent Conflict. This year 
she published a book, ``Curtailing Corruption: People Power for 
Accountability and Justice.''
    Finally, Mr. Anders Aslund is Senior Fellow at the Peterson 
Institute for International Economics. He is an expert on economic 
policies in Russia, Ukraine, and Eastern Europe, and he focuses on the 
broader implications of economic transition.
 Prepared Statement of Hon. Christopher Smith, Co-Chairman, Commission 
                 on Security and Cooperation in Europe

    Thank you, Mr. Chairman, and to everyone joining us this morning. 
Combating corruption has been a priority of this Commission almost 
since its inception, and I am delighted that we are spending some time 
today with the OSCE Economic Coordinator and our other witnesses to 
further our understanding of this important topic.
    Corruption in the public sector fuels many of the ills that plague 
OSCE states--among them is certainly trafficking in human beings. In 
case after case after case, we have seen examples that show corruption 
was responsible for the border guard turning a blind eye to the victim, 
and was responsible for police colluding with traffickers to thwart a 
rescue, and was responsible for the prosecutor refusing to bring 
charges against a trafficker.
    I have been fighting human trafficking for over fifteen years and 
am the author of the landmark United States' Trafficking Victims 
Protection Act of 2000, and its 2003 and 2005 reauthorizations. These 
laws created a bold new strategy that included sheltering, asylum and 
other protections for the victims, long jail sentences and asset 
confiscation for the traffickers, and tough sanctions for governments 
that fail to meet minimum standards. They also created the annual 
Trafficking in Persons Report, which evaluates nearly every country's 
progress toward achieving the minimums standards to eliminate 
trafficking over the previous year.
    We have seen enormous progress in so many countries, but fighting 
corruption remains one of the most difficult--and critical--aspects of 
combatting human trafficking. Victims need to know that if they come 
forward, or if they share their stories with prosecutors after rescue, 
they will be safe and justice will be done. Corrupt government 
officials need to know that no one is above the law and that their 
crime of exploiting those they are supposed to protect will not go 
unpunished.
    No country is immune to corruption, including our own. Just this 
year in Washington, D.C., two policemen were caught in separate 
instances of human trafficking. One, sadly, took his own life before 
trial. The other was sentenced to 7 years in prison, with 10 years of 
supervision after release.
    While we all hope that our governments and law enforcement are free 
of corruption, a lack of prosecutions for corruption can be a bad sign. 
Ukraine is at a turning point in many respects, not the least of which 
is whether it will ensure that its public servants are in office to 
serve the country, rather than their own prurient interests. Ukraine is 
to be commended for making anti-corruption legislation, which was 
adopted in October, a priority for the new parliament.
    As Dr. Mark Galeotti's \1\ research has recently indicated, Russian 
criminal networks have moved in to take advantage of Crimean port of 
Sevastopol and the influx of $4.5 billion in development funds from 
Russia. Many are concerned that Crimea will become an international 
center of organized crime. While we must do nothing that implies 
recognition of Russia's illegal occupation of Crimea, we should do 
everything we can to hold Russia responsible for any smuggling and 
trafficking in Crimea--and anything we can to stop it.
---------------------------------------------------------------------------
    \1\ Professor of Global Affairs at New York University's School of 
Professional Studies--Center for Global Affairs (http://www.vice.com/
en_ca/read/how-the-invasion-of-ukraine-is-shaking-up-the-global-crime-
scene-1106.
                  Prepared Statement of Anders Aslund

    Mr. Chairman, I would like to thank you for this opportunity to 
speak on an important topic, how the new Ukrainian government can fight 
corruption. At present, Ukraine faces three imminent threats. The 
greatest threat is of course Russian military aggression. As a 
consequence of this war, Ukraine is in a horrendous financial crisis, 
but it also needs to deal with its old internal enemy, corruption. All 
these three threats need to be fought at once, and Ukraine needs all 
the international support it can get.
    Ukraine is pervasively corrupt. Transparency International ranks 
Ukraine 144 out of 177 countries on its corruption-perception index. 
Corruption was at the heart of popular discontent with the deposed 
regime of former President Viktor Yanukovych, and widespread graft 
helps explain why the economy stalled in 2012 and 2013. Kiev must 
tackle this problem urgently.
    The scale of the alleged graft under the previous administration is 
breathtaking. Prime Minister Arseniy Yatsenyuk has accused the 
Yanukovych regime of stealing $37 billion from the state--equal to one-
fifth of Ukraine's GDP in 2013--during its four years in power. The 
ouster of Yanukovych in February has created an opportunity to confront 
corruption in Ukraine.
    The fight against corruption must start from the top. Politics must 
come first. Ukraine's political institutions have been thoroughly 
corrupted. Oleh Rybachuk, the chief of staff to former-president Viktor 
Yushchenko, runs a nongovernmental organization that has examined the 
apparent expenditures and legally declared incomes of the 450 members 
of parliament who sat from 2007 to 2012. Mr. Rybachuk's NGO found that 
only a handful of these members could have plausibly claimed to live 
solely off their official incomes.
    Political cleansing at the top is the necessary precondition for 
Ukraine combating corruption. This process has started. On October 26, 
Ukraine carried out free and fair parliamentary elections. Out of the 
423 deputies, a majority has never been parliamentarians before and a 
large number of anti-corruption activists were elected. They are not 
likely to be bribed or silenced. The new parliament is soon to convene 
and a new coalition government needs to be formed swiftly and start 
acting to fight both the financial crisis and corruption.
    Next comes the cleansing of the state. Ukraine's public service is 
widely considered pervasively corrupt, as many people who have tried to 
secure a business license could attest. Cleansing Ukraine of its 
corruption will require several interrelated measures. Estonia and 
Georgia have shown the way. To begin with, the state needs to limit its 
regulatory role by abolishing or merging many state agencies. Deputy 
Prime Minister Volodymyr Groisman has stated that Ukraine has ``80 
different inspectorates, controlling organs, and control departments in 
ministries.'' He argued that at least 60 should be closed and a maximum 
of 20 remain.\2\ Minimizing state interference in the economy--whether 
by privatizing state-owned assets or cutting regulations--reduces 
opportunities for corruption.
---------------------------------------------------------------------------
    \2\ ``Iz 80 inspektsii i kontrol'nykh organov dolzhno ostat'sya 
maksim 20--Vladimir Groisman,'' Pravitel'stvennyi Portal, July 30, 
2014, Available at http://www.kmu.gov.ua/ (accessed on July 31, 2014).
---------------------------------------------------------------------------
    In October, Ukraine adopted a law on lustration, which scrutinizes 
or ousts officials who have served in high positions in corrupt 
agencies. This entails the creation of an independent commission 
scrutinizing all the top judges and prosecutors in Ukraine and 
dismissing those found to have engaged in graft.
    Since the early 1990s, the truly rich in Ukraine have made their 
fortunes on trade with natural gas, imported from Russia or produced in 
Ukraine. At present, the domestic price of natural gas produced by 
state-owned companies is a paltry $30 per 1,000 cubic meters, while the 
market price is twelve times higher. Deputy Prime Minister Volodymyr 
Groysman has said that gas worth $2.5 billion a year was sold this way 
under Yanukovych.\3\ The obvious resolution of this problem is to unify 
the energy prices at a market level. Then this corruption would finally 
be eliminated. The deregulation of gas and electricity prices in this 
case must be seen as a matter of combating corruption, not as a social 
issue. Poor households could be fully compensated with a minor share of 
the current budget cost.
---------------------------------------------------------------------------
    \3\ Ekonomichna Pravda, September 11, 2014.
---------------------------------------------------------------------------
    Another major source of corruption is public procurement. Under 
Yanukovych, kickbacks of 50 percent were considered normal. One of the 
new government officials claimed that the total embezzlement of 
procurements amounted to only one-fifth.\4\ Public procurement must be 
made open and competitive. Ukraine has recently adopted a law on public 
procurement requiring open public tenders, and voters should demand 
their leaders follow that law to the letter. Considering that total 
public procurement in Ukraine is about $12 billion a year, and 2 
percent of GDP could be kept away from corrupt operators through better 
procurement this would be a great gain of $2.4 billion.
---------------------------------------------------------------------------
    \4\ ``Pervy zamministra kabmina Parakyda; Na goszakupkakh 
vorovalas' kazhdaya pyataya grivna (First Deputy Minister of the 
Cabinet of Ministers Parakuda: In State Procurement Every Fifth Hryvnia 
Was Stolen),'' Focus, October 20, 2014.
---------------------------------------------------------------------------
    The new government should also cut public expenditures, and 
corrupted subsidies must be eliminated. The tax system also needs to be 
simplified and the tax police abolished, to shield taxpayers from 
lawless persecution.
    In October, Ukraine also promulgated a package of anti-corruption 
laws. These laws aimed at a more appropriate definition of corruption, 
greater transparency, and the creation of a new independent 
investigating organ, the Anti-Corruption Bureau for the investigation 
of top level officials suspect of corruption. At the same time, Ukraine 
tightened its legislation against money laundering.
    By signing the Association Agreement with the European Union, 
Ukraine has committed itself to adopting hundreds of reform laws, while 
the European Union has committed itself to providing substantial 
technical assistance in drawing up new laws and reorganizing state 
agencies. The Ukrainian people have made a choice for Europe. If they 
stick with it and pursue reform with determination, they will have 
their best chance to clean out the Augean stables of a long-corrupt 
system.
    The other major international organization that plays a major role 
in Ukraine is the International Monetary Fund, in which the United 
States plays a key role in the as its biggest shareholder. The United 
States also engages directly in Ukraine through bilateral assistance 
through USAID. It rightly engages in Ukraine's energy reforms which 
will be crucial not only for state finances and energy efficiency but 
also for the improvement of governance in Ukraine. The United States 
has a major interest in the economic and legal success of a democratic 
and friendly Ukraine.
    Mr. Aslund is a senior fellow at the Peterson Institute for 
International Economics and author of ``How Ukraine Became a Market 
Economy and Democracy'' (Peterson Institute, 2009). He is currently 
completing a book ``Ukraine: What Went Wrong and How to Fix It.''
          Prepared Statement of Dr. Halil Yurdakul Yigitguden

    Mr. Chairman, today I testify in front of you in my capacity of the 
Co-ordinator of OSCE Economic and Environmental Activities. Economic 
and environmental matters represent an important element of the OSCE's 
approach to security. To tackle challenges in this area, my team co-
operates on the ground with our current 15 OSCE Field Operations, 
organizes an annual Economic and Environmental Forum and holds a yearly 
Implementation Meeting to assess progress and identify future 
priorities. The Office works closely with the Organization's 
Chairmanship and performs under the guidance of the Economic and 
Environmental Committee, a body of representatives of the OSCE's 
participating States, and the Secretary General. Our activities include 
anti-money laundering, transport and security, gender-sensitive labour 
migration, border and customs policies, water management, controlling 
dangerous waste through to sustainable energy, climate change, and 
involving the public in decisions affecting the environment. With other 
international partners, the OSCE is also an active member of the 
Environment and Security Initiative. Today I will concentrate my speech 
on our work in the area of good governance and combating corruption.
    Global political and economic challenges call for additional 
efforts in the area of good governance, including measures aimed at 
increasing transparency, accountability, integrity and sound financial 
management. Good governance and transparency affect economic efficiency 
and growth, and thus remain among key priorities of the elements of the 
OSCE's comprehensive approach to security.
    The increasing importance of good governance issues requires 
continuous dialogue. Therefore, adopted in Dublin in 2012 by all 
participating States of the OSCE, the Declaration on Strengthening Good 
Governance and Combating Corruption, Money-Laundering and the Financing 
of Terrorism provides the OSCE and my Office with a strong mandate to 
promote good governance principles. The Declaration emphasizes that --I 
quote--``good governance at all levels is fundamental to economic 
growth, political stability, and security''--end of quote. The document 
calls upon the OSCE--I quote--``to continue providing valuable 
assistance to participating States upon their request, also in sharing 
among themselves, through the OSCE platform for dialogue, national 
experiences gained and good practices''--end of quote.
    The need to enhance efficiency and transparency of public 
institutions, implement higher standards of integrity and improve asset 
declaration systems to identify possible corrupt activities in the OSCE 
area remains, and we have and will continue working in these areas. I 
am pleased to note that the OSCE supported training activities to 
develop increased awareness, professional capacity and knowledge in 
prevention and repression of corruption and money laundering produced 
results in 2014. For example, with the assistance of the OSCE, 
Krygysrtan was removed from the Financial Action Task Group (FATF)'s 
`grey list'. The OSCE has been selected to chair the newly established 
Anti-Corruption Working Group in Tajikistan to lead coordination 
efforts engaging civil society and other public bodies in anti-
corruption issues and initiatives. In partnership with the World Bank, 
we rendered components of technical support towards money laundering 
and terrorism National Risk Assessments in Croatia, Montenegro and the 
former Yugoslav Republic of Macedonia.
    Distinguished members of the Commission, money laundering and 
corruption are intertwined, and oversight and law enforcement 
authorities must have adequate skills and resources to conduct 
investigations and prosecutions of these phenomena. Contemporary crimes 
do not stop at national borders and cross-border exchange of 
information becomes essential. Therefore, one of our flagship events 
this year was a workshop on Cross-border Co-operation Against 
Corruption and Money Laundering for government officials from Central 
Asia, South Caucasus and Eastern Europe that took place in Vienna in 
early October. The event, co-organized with the United Nations Office 
on Drugs and Crime (UNODC), and Eurasian Group on Combating Money 
Laundering and Financing of Terrorism (EAG) brought together 50 
participants from financial intelligence units, anti-corruption and law 
enforcement agencies, financial institutions and specialized 
international organizations. Participants and experts discussed links 
between corruption and money laundering, ways to counter cross-border 
movements of proceeds of corruption, domestic coordination in 
identifying, tracing and recovering illicit assets, use of legal 
persons and other legal arrangements to conceal criminal assets. 
Participants were also introduced to good practices for the drafting of 
Mutual Legal Assistance requests as well as the use of regional 
networks to facilitate co-operation in asset forfeiture and recovery. I 
would like to express my gratitude to the government of the United 
States for providing financial support to this event.
    The acknowledgement of the negative effects of the lack of 
appropriate economic governance by the political leaders and policy-
makers can be seen in numerous developments in the OSCE area. 
Therefore, participating States should take advantage of the platform 
the OSCE offers and its capacity to produce results similar to those 
mentioned above. There is a need to continue fostering trans-national 
co-operation among participating States as well as other international 
actors in the area of good governance offering best practices and 
opportunities to share experiences. We remain convinced that the 
enhanced efforts should be supported to develop and deliver tailor made 
capacity building activities, to deploy anti-corruption measures, 
strengthen national financial intelligence units, and build additional 
corruption prevention mechanisms.
    Most of our work benefits from close co-operation with OSCE Field 
Operations. Their presence on the ground enables them to collaborate 
with governmental and non-governmental stakeholders thus assisting 
their host countries in implementing their commitments in the OSCE's 
second dimension, thus providing an invaluable contribution to our 
joint work.
    Mr. Chairman, by 2015 my Office also plans to publish OSCE Guide on 
Combating Corruption. It will consist of five parts and 21 chapters 
with inputs provided by more than 40 contributors. This OSCE 
publication is being prepared in close co-operation with ODIHR, Office 
of the Special Representative for the Freedom of the Media and major 
actors in the anti-corruption area such as the UNODC, OECD and Council 
of Europe's Group of States against corruption (GRECO) and Basel 
Institute of Governance. The topics covered by the Guide will stretch 
from anti-corruption strategies and bodies, conflict of interest and 
public procurement regulations to the role of the media, lobbying, 
mutual legal assistance requests and investigations.
    In conclusion, let me assure you that my Office jointly with the 
OSCE network of Field Operations and partners will continue conducting 
targeted regional and national awareness-raising and training 
activities. We will also endeavour to mainstream good governance in our 
other economic and environmental activities by incorporating 
transparency and anti-corruption elements wherever relevant.
    Thank you very much again for the opportunity to serve as a witness 
at this hearing today. I very much look forward to our discussion and 
also to our continued co-operation.
    Thank you.
 Information Note on the Implementation of the 2012 Dublin Declaration 
   on Strengthening Good Governance and Combatting Corruption, Money-
               Laundering and the Financing of Terrorism

                              Introduction

    The Ministerial Council Declaration on Strengthening Good 
Governance and Combatting Corruption, Money-Laundering and the 
Financing of Terrorism adopted in Dublin in 2012--MC.DOC/2/12 (Dublin 
Declaration) reiterates that ``good governance at all levels is 
fundamental to economic growth, political stability, and security. Good 
public and corporate governance, rule of law and strong institutions 
are essential foundations for a sound economy, which can enable 
participating States to reduce poverty and inequality, to increase 
social integration and opportunities for all, to attract investment and 
to protect the environment''.
    The document enlists commitments of participating States (pS) aimed 
at enhancing their capacities and strengthening co-operation in 
combating corruption, money laundering and the financing of terrorism 
and calls upon the OSCE and its network of Field Operations ``to 
continue providing valuable assistance to participating States upon 
their request, also in sharing among themselves, through the OSCE 
platform for dialogue, national experiences gained and good 
practices''.
    Since the adoption of the Dublin Declaration, the Office of the Co-
ordinator of OSCE Economic and Environmental Activities (OCEEA) and the 
OSCE Field Operations, in co-operation with partner organizations, have 
assisted pS in implementing relevant commitments stemming from a number 
of OSCE Ministerial Council and Permanent Council Decisions, as well as 
on the OSCE Strategy Document for the Economic and Environmental 
Dimension. Activities have included support in implementation of the 
United Nations Convention against Corruption (UNCAC), prevention of 
corruption, promoting integrity in public service, regulatory reform, 
preventing conflict of interest, national risk assessments in anti-
money laundering and countering the financing of terrorism (AML/CFT), 
leveraging AML to combat trafficking in human beings, implementing the 
Financial Action Task Force (FATF) recommendations and standards, asset 
disclosure by public officials, engagement of civil society and the 
public sector in combating corruption, and others.
    These activities have often been cross-dimensional in nature and 
engaged the OSCE Office for Democratic Institutions and Human Rights, 
the OSCE Transnational Threats Department and its relevant units, and 
other offices of the Organization.
    Tasked by the Swiss 2014 OSCE Chairmanship, this Note, structured 
on main components of the Dublin Declaration, is designed to reflect on 
the OCEEA and the Field Operations activities, while discussing 
remaining challenges and achieved successes.

                    Good governance and transparency

                               challenges
    Citizens expect a State to protect legitimate economic activities 
from corruption, money laundering and other illegal and criminal 
practices by establishing clear rules and regulations to govern the 
economic relationships and consistently enforcing them. The quality of 
and adherence to these rules have an impact on internal markets, as 
well as on fostering trust in public and democratic institutions, and 
attracting foreign investment. Good public and corporate governance are 
key factors of sustainable economic growth and economic development, 
thus contributing to national and regional stability and security. In 
the face of the current global economic difficulties, stronger efforts 
towards enhanced good governance are particularly needed in the OSCE 
region and beyond.
    It is worth underlining that good governance is not about making 
`correct' decisions; it is about promoting the respect for key 
principles in the decision-making process that includes accountability, 
transparency, participation, respect of the rule of law, 
responsiveness, equity and inclusiveness, as well as effectiveness and 
efficiency.
    Increasing transparency of public expenditure and budget making 
procedures, legislative reform, audits and public procurement 
procedures, are important measures towards garnering participation of 
citizenry in government and improving trust. However, these 
transparency measures are ineffective if not made in such a way that 
they may be understandable and easily accessible to the public. 
Improving the efficiency of public administration, combined with 
greater transparency in the public sector and higher standards of 
integrity in the behaviour of public servants, is essential in 
strengthening corruption prevention capacities and mitigating 
corruption-related risks.
    The ``soft-law'' tool of introducing codes of conduct and ethical 
principles of behaviour for public servants is widely used throughout 
the OSCE area. In particular, asset declarations, receipt of gifts and 
employment opportunities prior to, during and after leaving public 
service--are usually covered in codes of conduct to prevent conflicts 
of interest.
    In September 2014, the Open-ended Intergovernmental Working Group 
on the Prevention of Corruption of the Conference of the States Parties 
to the UNCAC encouraged the States Parties ``to establish and 
strengthen asset declaration systems applicable to public officials, 
aimed at the identification and resolution of conflicts of 
interest''.\5\
---------------------------------------------------------------------------
    \5\ UN Conference of the States Parties to the United Nations 
Convention against Corruption, Open-ended Intergovernmental Working 
Group on the Prevention of Corruption, Fifth session, Vienna, 8-10 
September 2014, https://www.unodc.org/documents/treaties/UNCAC/
WorkingGroups/workinggroup4/2014-September-8-10/V1404178e.pdf.
---------------------------------------------------------------------------
    Asset and private interest disclosure by decision makers remains 
among the essential tools for effectively managing conflict of 
interest. According to the Organisation for Economic Co-operation and 
Development (OECD), among the 34 member countries of the Organisation, 
of which 27 states are the OSCE pS, 86 percent require their top 
decision makers in executive and legislative structures to disclose 
their private assets.\6\ However, less than half of the OECD Member 
States perform internal audits of the submitted information for 
accuracy.\7\
---------------------------------------------------------------------------
    \6\ Transparency International, Setting a high bar for conduct, 
http://blog.transparency.org/2012/07/19/codes-of-conduct-a-tool-to-
clean-up-government/.
    \7\ OECD, Government at a Glance 2013, 2013, http://
www.keepeek.com/Digital-Asset-Management/oecd/governance/government-at-
a-glance-2013_gov_glance-2013-en#page3.
---------------------------------------------------------------------------
    Yet, many pS have introduced income- and asset-disclosure systems 
for public officials. In order for these systems to be effective they 
first need to contain high risk categories of public officials as well 
as their family members. Also, oversight authorities and law 
enforcement must have adequate skills and resources to conduct audits 
and investigations. Moreover, it is important for countries to engage 
in cross-border exchange of information on politically exposed persons 
(PEPs) and for banks to make logical connections between PEPs and known 
business associates. An asset disclosure system whose accuracy cannot 
be verified is ineffective.
    Conflict of interest legislation still remains underdeveloped in 
many countries and it may not regulate abuse of authority of public 
officials in such areas as influence peddling or procedures for 
awarding public procurement contracts. For instance, business relations 
or political party affiliations between members of public procurement 
award selection panels of contracting entities and bidders are often 
overlooked. Indeed, public procurement is an area particularly prone to 
corruption, especially in sectors like construction, maintenance 
services and waste management, owing to deficient control mechanisms 
and risk management.
    Corruption in public procurement procedures siphons off scarce 
public resources, often results in shoddy public works and erodes the 
trust of citizens and businesses in government. The level to which a 
state's public sector is held accountable through the rule of law and 
procedures and decisions are made transparent to its citizens, 
correlates highly with the degree of citizens' trust, and in turn, the 
level of stability and security. Public procurement has been identified 
by the OECD and UNODC as a main risk area sector of significant 
concern.
    A transparent and fair public procurement system is perhaps the 
most visible measure of a government's public accountability. In the 
absence of a transparent and fair system of using public funds, 
particularly in times of economic downturn, citizens' trust in 
government wains and the perception that government funds are being 
misused or misappropriated dangerously grows.

    OCEEA activities in good governance and transparency since 2013:
    The OCEEA and several OSCE Field Operations, often in co-operation 
with the UNODC, have supported efforts to raise awareness and 
facilitate the implementation of the UNCAC. The below listed workshops 
were designed and conducted for relevant public officials, civil 
society and private sector representatives and intended to assist 
states in preparing for review under the UNCAC. They included, inter 
alia, components dedicated to asset disclosure mechanisms, codes of 
conducts for civil servants, transparency in public procurement, 
whistle-blower protection, conflicts of interest and international co-
operation.
    In April 2013 in Astana, the OSCE, UNODC and OECD co-organised a 
regional workshop entitled Sharing Good Practices and Lessons Learned 
from Development and Implementation of Anti-Corruption Preventive 
Policies.
    In April 2013 in Ashgabat, the OCEEA and the UNODC co-organised a 
national training on Mechanisms to Increase Integrity in Public Service 
and Prevent Corruption and the Laundering of its Proceeds.
    In June 2013, in Jurmala, Latvia, the OCEEA, the OECD Anti-
Corruption Network for Eastern Europe and Central Asia and the UNDP co-
organised an expert seminar on Prevention of Corruption, Effective 
Measures and Their Practical Implementation: Institutional and 
Sectorial Approaches. The seminar was followed by a separate workshop 
for representatives of Central Asian countries on income and asset 
declaration systems and conflict of interest legislation as tools for 
preventing corruption.
    In September 2013 in Tashkent, the OSCE and UNODC co-organised a 
two-day national training workshop on Mechanisms to Increase Integrity 
in Public Service and Prevent Corruption.
    In March 2014, in Dushanbe, the OCEEA participated in and 
contributed to a workshop on Anti-corruption prevention measures--
Progress made, future priorities and the role of civil society in the 
prevention of corruption in Tajikistan co-organised by the OSCE Office 
in Tajikistan and the UNODC.
    In June 2014, in Tirana, the OCEEA, the OECD, the OSCE Presence in 
Albania, the UNDP and the UNODC co-organised a regional expert seminar 
on Prevention of Corruption--Main Trends and Examples of Successful 
Practice in Eastern Europe and Central Asia.
    In October 2014, in Vienna, the OCEEA, the UNODC and the EAG held a 
regional training on Cross-border Co-operation Against Corruption and 
Money Laundering.
              successes: good governance and transparency
Regulatory reform in Armenia
    In 2012, Armenia's National Center for Legislative Regulation, 
supported by the OSCE Office in Yerevan and several other donors, 
launched a 2-year Rapid Regulatory Simplification Project which aimed 
at reviewing and streamlining regulations and increasing transparency 
in 17 sectors of the Armenian economy. Known as the ``regulatory 
guillotine'', the reform makes use of best international practices to 
assess and streamline the national regulatory frameworks affecting 
business activity and the daily lives of citizens. By the end of 2013, 
7 priority sectors had been reviewed and legislation streamlined to 
reduce ``red tapes'' on businesses and citizens. The overall estimated 
impact on the Armenian economy is calculated to represent the 
equivalent to 0.5 percent of national GDP. The project is being 
continued in its second phase.
OSCE supported Good Governance Resource Centre in Turkmenistan
    The OSCE Centre in Ashgabat, in partnership with the Government of 
Turkmenistan, supported the establishment of a Good Governance Resource 
Centre that was officially opened on 1 May 2014 in Ashgabat. Located at 
the premises of the Ministry of Finance, the Centre offers diversified 
information, conducts educational events and provides expert 
information on good governance. It also offers access to a library and 
specialized databases and periodicals. In addition, the Centre works 
with relevant government authorities on developing national legal acts 
and regulations on AML/CTF measures in compliance with FATF standards. 
Following recommendations identified on 2 September 2014 at a round 
table in Ashgabat, a report with recommendations to enhance good 
governance practices will be submitted to the Ministry of Finance and 
the Parliament of Turkmenistan later this year. The Centre is an 
innovative initiative within the OSCE context as it provides a long-
term approach towards the promotion of good governance practices in 
Turkmenistan.
Manual on the Role of Responsible Authorities in Preventing Conflict of 
        Interest developed in Albania
    In 2013, with the support of the OSCE Presence in Albania, the High 
Inspectorate for Declaration and Audit of Assets and Conflict of 
Interest (HIDAACI) of Albania developed and published a Manual on the 
Role of Responsible Authorities in Preventing and Controlling Conflict 
of Interest. The Manual aims to assist 580 responsible authorities in 
all the central and local public institutions to more effectively 
detect, prevent and resolve cases of conflict of interest. The 
publication is intended to be a reference tool for officials, civil 
society, business community, law students and researchers. It is 
available on the HIDAACI website and it is being used by its staff for 
training purposes.
Ukraine goes digital in combating corruption
    The OSCE Project Co-ordinator in Ukraine assisted local self-
government authorities in one of the regions to develop and launch a 
digitized public service provision system. In 24/7 mode, service 
recipients (citizens and the private sector) can download the necessary 
forms and keep track of service requests that have been submitted to a 
virtual government office. The system makes public service provision 
more transparent and efficient and thereby significantly reduces 
corruption risks.

 Combating corruption, money laundering and the financing of terrorism

                               challenges
    The EU Anti-Corruption Report issued in February 2014 identifies 
corruption as a phenomenon which impinges on good governance, sound 
management of public money and competitive markets, and, in extreme 
cases, undermines the trust of citizens in democratic institutions and 
processes. According to the Report, corruption costs the European 
economy approximately 120 billion euros per year. Eurobarometer survey 
results show that 76 percent of EU citizens believe that corruption is 
widespread and 56 percent think that the level of corruption in their 
country has increased since 2011.\8\
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    \8\ European Commission, Report from the Commission to the Council 
and the European Parliament, EU Anti-Corruption Report, Brussels, 
3.2.2014, COM(2014) 38 final, http://ec.europa.eu/dgs/home-affairs/e-
library/documents/policies/organized-crime-and-human-trafficking/
corruption/docs/acr_2014_en.pdf.
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    Only twenty OSCE participating States scored 60 or above and ten 
even had a score of less than 30 on the latest Transparency 
International Corruption Perception Index where 0 is for ``high 
corruption'' perception and 100 is for ``low corruption''. The average 
score among the assessed OSCE participating States is approximately 
54.4.\9\
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    \9\ Based on statistics provided by the ``Corruption perceptions 
index'' which measures the perceived levels of public sector corruption 
in 177 countries and territories, http://cpi.transparency.org/cpi2013/.
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    As indicated by the UNODC in September 2014, the importance of 
preventing corruption through the promotion of good governance has 
``increasingly come to the fore, notably in the ongoing dialogue on the 
post-2015 development agenda''.\10\ Yet, despite relevant obligations 
in line with international instruments,\11\ prevention of corruption 
has been mostly understood as part of law enforcement activities. This 
creates a major challenge for the implementation of corruption 
prevention measures and implementation of the good governance reforms 
as per the UNCAC and highlighted in the Dublin Declaration.
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    \10\ UNODC Executive Director Yury Fedotov's statement at the third 
International Conference on Small Island Developing States (SIDS), 
http://www.unodc.org/unodc/en/frontpage/2014/August/unodc-warns-of-
small-island-states-vulnerability-to-corruption-during-global-meeting-
in-samoa.html
    \11\ Notably the UNCAC, Council of Europe anti-corruption legal 
instruments, including the Resolution (97) 24 on 20 Guiding Principles 
for the fight against corruption and the recommendations No. R (2000) 
10 on codes of conduct for public officials and No. R (2003)4 on common 
rules against corruption in the funding of political parties and 
electoral campaigns.
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    Fifty six OSCE participating States have ratified or acceded to the 
UNCAC. Fifty six are members of the Egmont Group of Financial 
Intelligence Units and all 57 are members of the Financial Action Task 
Force (FATF) and FATF-style regional bodies.
    Although repressive measures alone are not sufficient to tackle 
corruption in an effective manner, the ability of a judicial system to 
impose dissuasive criminal sanctions plays a major deterrent role and 
is a clear sign that corruption is not tolerated. Indeed, several 
factors can influence the efficiency of law enforcement and prosecution 
forces in investigating corruption, such as the estimated extent and 
nature of corruption they must address, the balance with preventive 
measures, the capacity and resources at their disposal, the potential 
obstacles to investigations, including the effectiveness of the 
judiciary. In particular, judicial independence, as well as proper 
funding of investigative and judicial authorities, is imperative in 
establishing effective anti-corruption and AML/CTF measures.
    Ensuring the rule of law requires drafting and implementing 
legislation that regulates selection and promotion procedures, 
independent oversight, and independent budgets for the judiciary. 
Investments in judicial and investigative bodies quickly bring returns 
which is evident in functioning assets seizure and forfeiture systems.
    Asset recovery represents one of the major challenges for the OSCE 
pS in the good governance area. Chapter V of the UNCAC reaffirms that 
asset recovery, that includes tracing, freezing, confiscation, and 
repatriation of crime and corruption proceeds stored in foreign 
jurisdictions is an international priority in the fight against 
corruption. Modern advancements of financial, transportation and 
communication infrastructures allow corrupt `politically exposed 
persons', among others, to conceal massive amounts of stolen wealth 
overseas by using differences in legal systems and bank secrecy in some 
recipient countries.
    According to the Report of the Conference of the States Parties to 
the UNCAC in 2013, ``all efforts should be made to conduct a financial 
investigation into assets illegally acquired and to recover such assets 
through domestic confiscation proceedings, international cooperation 
for purposes of confiscation or appropriate direct recovery measures.'' 
\12\
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    \12\ UNODC, UN Convention against Corruption: Progress report 2013, 
25 November 2013, http://www.transparency.org/whatwedo/pub/
un_convention_against_corruption_progress_ report_2013.
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    A report by the Parliamentary Assembly of the Council of Europe on 
corruption and tax heavens \13\ refers to the Stolen Asset Recovery 
Initiative of the World Bank (StAR) \14\ and the UNODC that analysed 
150 grand corruption cases and found a direct link between large-scale 
corruption by high-level public officials and the concealment of stolen 
assets through opaque shell companies, foundations and trusts. The 
report highlights the root problems concerning tax havens, such as 
(fiscal) bank secrecy, lack of transparency and effective public 
oversight, regulatory dumping, predatory tax arrangements and abusive 
accounting techniques inside multinational enterprises.
---------------------------------------------------------------------------
    \13\ Parliamentary Assembly of the Council of Europe, Promoting an 
appropriate policy on tax heavens, 5 April 2012, http://
assembly.coe.int/ASP/XRef/X2H-DW-XSL.asp?fileid=18151 ⟨=EN.
    \14\ The World Bank and the UNODC, The Stolen Asset Recovery 
Initiative (StAR), http://star.worldbank.org/star/.
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    Successful conviction of corruption cases, money laundering and 
terrorism financing crimes--from identification through prosecution, 
sentencing and finally stolen asset recovery--requires a multi-layered, 
multi-disciplinary and multi-national approach calling for effective 
national legislative frameworks, compliant with international 
standards, as well as co-operation among investigative and financial 
oversight authorities at national and international levels among 
Financial Intelligence Units (FIUs), law enforcement and prosecutors.
    In addition, improved international co-operation requires further 
engagement by pS to sign bilateral and multilateral treaties and 
agreements on assets recovery and co-operation in criminal matters. In 
this respect, the recent adoption of a directive on the freezing and 
confiscation of proceeds of crime in the EU is a promising signal.\15\ 
The directive aims to make it easier for national authorities to 
confiscate and recover the profits made from cross-border and organised 
crime.
---------------------------------------------------------------------------
    \15\ EU, Directive of the European Parliament and of the Council on 
the freezing and confiscation of instrumentalities and proceeds of 
crime in the European Union, PE-CONS 121/13, 5 March 2014, http://
register.consilium.europa.eu/doc/srv?l=EN&f=PE%20121%202013%20INIT.
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    Whistle-blowers' protection in public and the private sectors is 
also necessary to encourage individuals to come forward with 
information on corruption. Guarantees must be put in place that a 
person who discloses to relevant authorities allegations of corruption 
suffers no retaliation. The Council of Europe has issued the 
Recommendation no. CM/Rec(2014)7 of the Committee of Ministers to 
member States on the protection of whistle-blowers,\16\ including a 
series of principles to guide member States when reviewing their 
national laws or when introducing legislation and regulations or making 
amendments as may be necessary and appropriate in the context of their 
legal systems.
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    \16\ Council of Europe, European Committee on Legal Co-operation 
(CDCJ), Recommendation CM/Rec(2014)7 of the Committee of Ministers to 
member States on the protection of whistle-blowers, https://
wcd.coe.int/ViewDoc.jsp?Ref=CM/Rec(2014)7&Language=lanEnglish&Site=CM 
&BackColorInternet=C3C3C3&BackColorIntranet=EDB021&BackColorLogged=F5D38
3.

    OCEEA activities in combating corruption, money laundering and 
terrorism financing since 2013:
    In the area of anti-corruption, anti-money laundering and combating 
the financing of terrorism, the OCEEA has worked on assisting pS in the 
implementation of the main international instruments, in particular the 
UNCAC, 40 + 9 FATF Recommendations, the UN Convention for the 
Suppression of the Financing of Terrorism, the UN Convention against 
the Illicit Traffic in Narcotic Drugs and Psychotropic Substances and 
the 3rd EU Directive on Combating Money Laundering. The Office has 
closely co-operated with the UNODC, World Bank, the OECD, the Egmont 
Group, the Council of Europe, the EAG, Basel Institute on Good 
Governance and others.
    In December 2012, the OCEEA launched the ``OSCE Handbook on Data 
Collection in support of Money Laundering and Terrorism Financing 
National Risk Assessments''. A Russian language version has been 
released in October 2014. The Handbook provides guidelines on improving 
data collection in an effort to combat money laundering and the 
financing of terrorism. It is also intended to inspire further dialogue 
and co-operation among national authorities and other stakeholders to 
stimulate an exchange of experiences and good practices among states in 
the OSCE region and to raise awareness of the importance of 
comprehensive data collection for informed decision-making.
    In August 2014, the OCEEA jointly with the OSCE Office of the 
Special Representative and Co-ordinator for Combating Trafficking in 
Human Beings, and the OSCE Transnational Threats Department/Strategic 
Police Matters Unit released a research paper on ``Leveraging Anti-
Money Laundering Regimes to Combat Trafficking in Human Beings''. The 
paper, which combines research findings from various publications and 
seminars from 2008 to the present, focuses on trafficking in human 
beings as a specific type of transnational crime that also gives rise 
to corruption practices.
    From 2013 to date, the OCEEA has supported efforts of the OSCE 
Field Operations aimed at promoting and offering training based on the 
``OSCE Handbook on Data Collection in support of Money Laundering and 
Terrorism Financing National Risk Assessments''.
    In partnership with the World Bank, the OCEEA has also rendered 
components of technical support towards National Risk Assessments 
(NRAs) in Kyrgyzstan (May 2013), Croatia (March 2014), Montenegro 
(March 2014) and the former Yugoslav Republic of Macedonia (May 2014). 
A NRA is a process by which countries identify the threat of money 
laundering activity in their jurisdiction, the vulnerability of the 
country in terms of its ability to prevent and intercept specific types 
of illicit financial activity and its resulting impact.
    In addition, the following training and capacity building events 
were organised for relevant officials from Financial Intelligence 
Units, the Prosecutor's Office, Ministry of Interior/law enforcement 
officials, the banking sector and others.
    In March 2013, in Tashkent, the OCEEA and the OSCE Project Co-
ordinator in Uzbekistan, held an international training on the revised 
FATF International Standards on Combating Money Laundering and the 
Financing of Terrorism & Proliferation.
    In April 2013, in Borovoe, Kazakhstan, the OCEEA in co-operation 
with the World Bank and Kazakhstan's Committee for Financial 
Monitoring, the OSCE Centre in Astana, and the US Embassy in Kazakhstan 
held a two-day national workshop on the revised FATF international 
standards.
    In May 2013, in Bishkek, the OCEEA supported a workshop on Money 
laundering risks in Kyrgyzstan which was jointly organised by the OSCE, 
the World Bank and Kyrgyzstan's State Financial Intelligence Service.
    In May 2013, in Podgorica, a series of meetings were held with the 
OCEEA's participation to further advance the draft of the National 
Action Plan to Prevent and Suppress Terrorism, Money Laundering and 
Terrorism Financing.
    In October 2013, in Durres, Albania, a regional conference on 
Strengthening Co-operation on AML/CFT and Fighting Corruption in South 
Eastern Europe was organised together with the OSCE Presence in 
Albania, and the Albanian General Directorate for the Prevention of 
Money Laundering.
    In November 2013, in Ashgabat, the OCEEA jointly with the OSCE 
Centre in Ashgabat organised a national training workshop on Mechanisms 
to prevent money laundering.
    In December 2013, in Athens, the OCEEA together with the OSCE 
Mission to Serbia and the Financial Intelligence Unit of Greece held a 
working meeting of practitioners from Serbia and Greece to share 
challenges and good practices in linking anti-money laundering and 
anti-corruption efforts.
successes: combating corruption, money laundering and the financing of 
                               terrorism
OSCE Guide on Combating Corruption
    The OCEEA has established close links with experts from 
organizations such as the UNODC, OECD, Council of Europe/GRECO, 
UNCITRAL, Basel Institute on Governance/International Centre for Asset 
Recovery, the European Commission and International Anti-Corruption 
Academy as well as with ODIHR and FoM in developing the OSCE Guide on 
Combating Corruption. The topics covered by the Guide will stretch from 
international and regional initiatives, anti-corruption strategies and 
bodies, conflict of interest and public procurement to role of the 
media, lobbying, mutual legal assistance, investigation, AML and asset 
recovery. The Guide is expected to be finalized in 2014.
OSCE/OCEEA partnership frameworks in the area of anti-corruption and 
        AML-CFT
    Since 2005, the OSCE has the observer status to the Organisation 
for Economic Co-operation and Development (OECD) Anti-Corruption 
Network for Eastern Europe and Central Asia (under the Istanbul Anti-
Corruption Action Plan).
    Since 2006, the OSCE has the observer status to the Eurasian Group 
on Combatting Money Laundering and Financing of Terrorism (EAG).
    Since 2008, the OSCE has the observer status to the Council of 
Europe's Committee of Experts on the Evaluation of Anti-Money 
Laundering Measures and the Financing of Terrorism (MONEYVAL).
    Since 2011, on a bi-annual basis, the OSCE and the UNODC issue 
Joint Action Plans.
    In March 2011 the OSCE and the International Anti-Corruption 
Academy concluded a Memorandum of Understanding concerning co-
operation.
    Since 2012, the OSCE has the observer status to the Egmont Group of 
Financial Intelligence Units.
    Since 2013, the OSCE has the observer status to the Financial 
Action Task Force (FATF).
    In October 2013, the OSCE and the UN Development Programme (UNDP) 
concluded a Memorandum of Understanding.
Improving public procurement transparency and the prosecution of 
        corruption in Serbia
    Since 2013 the OSCE Mission to Serbia has continued to focus on 
assisting the host country with creating a transparent and efficient 
public procurement system and training law enforcement and prosecutors 
on investigating alleged violations. The Mission has moderated peer-to-
peer meetings among public procurement bodies and law enforcement and 
prosecutors on enhancing co-operation on identifying risks and sharing 
timely information on alleged corruption with criminal investigators. 
The Mission has trained 20 prosecutors in charge of public procurement 
corruption through specially developed case studies based on past 
alleged corruption in public procurement in Serbia. In 2014 the Mission 
has provided support to the development of a NGO-run public procurement 
transparency website that contains information on tenders, awarded 
contracts, procurement selection boards and bidders to allow citizens 
and journalists to track how public funds are spent and potentially 
identify alleged breaches of conflict of interest.
Monitoring assets disclosures of public officials and AML/CFT: the 
        Greek model
    The Hellenic Anti-money Laundering and Counter-terrorist Financing 
and Source of Funds Investigation Authority serves both as Greece's 
Financial Intelligence Unit (FIU) as well as its monitoring body of 
public officials' assets and income disclosures. The Authority is 
staffed by seconded officials from various ministries and law 
enforcement agencies and is headed by an independent prosecutor. 
According to this set-up, the authority can investigate bank accounts 
and determine whether officials have accurately disclosed their income 
and assets. In this way corruption and money laundering investigations 
are handled within the same institution.
Kyrgyzstan removed from the FATF `grey list' in 2014
    Following the OSCE Centre in Bishkek assistance, in July 2014, 
Kyrgyzstan was removed from the FATF's `grey list' and would no longer 
be subject to the FATF's monitoring process under its ongoing global 
process of compliance with requirements on AML/CFT. The decision was 
announced at the third FATF Plenary meeting in June 2014 in Paris 
certifying Kyrgyzstan's ``demonstrated significant progress'' in 
addressing the strategic AML/CFT deficiencies identified in their 
mutual evaluation reports and the action plans agreed with the FATF. 
The OSCE has been assisting Kyrgyzstan in increasing the capacity of 
the country's financial bodies to adopt modern investigative and 
countering methods, and implement legislation that addresses the 
recommendations of the FATF. Moreover, in March 2013, the OSCE Centre 
in Bishkek opened a new Training Centre of the State Financial 
Intelligence Service, and held several training courses for officers 
from the Service. More than 400 officers from various ministries and 
agencies have been trained on modern methods of AML.

                    Civil society and private sector

                      challenges for civil society
    Effective anti-corruption measures require a participatory approach 
among governments, civil society, business communities and academia to 
foster citizens' trust and create a social consensus on non-tolerance 
of corruption. Monitoring the implementation of reforms, engaging in 
the development of new policies and regulations, evaluating the 
effectiveness of those already in place, and providing a barometer of 
public opinion for the government are the main fields of action for 
civil society actors in corruption prevention. However, non-government 
organizations across the entire OSCE region still face significant 
challenges in building a sustainable and balanced dialogue with the 
government and acquiring access to government information. This 
prevents civil society to fully play its monitoring and evaluating role 
vis-a-vis government institutions.
    Moreover, it is critical to mainstream a gender-balanced approach 
when promoting good governance measures as all-inclusive and requiring 
accountability from state institutions. Persistent gender disparities 
limit women's ability to fully participate in the decision-making 
processes in social, economic, and political life. Such gender-based 
exclusion compromises the prospects for good governance, as well as 
economic growth and prosperity. Therefore, if not already launched, 
legal reforms are required to promote gender equality that would enable 
women, individually or collectively, to participate in the decision-
making processes thus contributing to building more equal and inclusive 
societies. Women participation in civil society activities is an 
essential component to ensure civic engagement, participatory 
development and good governance.
    Further training of civil society on such issues as conducting 
statistical surveys, public awareness campaigns, issuing `shadow 
reports' and participating in budget making processes is needed to make 
it a viable and constructive partner to government. Also, many 
governments require further support in identifying ways in which civil 
society, the private sector and the public may contribute to their 
anti-corruption policy measures. Public-private partnerships should be 
further developed on environmental, humanitarian and other issues, 
including trade and investment policies. Moreover, business 
communities, academia and civil society may be involved in awareness 
raising campaigns and surveys on ease of doing business matters and 
economic growth policies.
                     challenges for private sector
    According to the OECD Istanbul Anti-Corruption Action Plan that 
includes Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, 
Tajikistan, Ukraine and Uzbekistan, ``legal gaps remain in many 
countries with regard to bribery and trading in influence''.\17\ In 
addition, ``business integrity'' is a relatively new issue in the 
region. The governments are yet to implement systematic measures to 
promote business integrity while the private sector has a potential to 
become a strong participant in the fight against corruption.
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    \17\ http://www.oecd.org/corruption/acn/istanbulactionplan/
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    Bribery, as a basic form of corporate corruption, has detrimental 
effects on political, economic, social and environmental areas. To 
address bribery more effectively, legislation should include provisions 
of criminal liability for bribing public officials, corporate liability 
for failure to prevent bribery, differentiation between notions of 
offering, promising, giving, requesting, agreeing to receive and 
accepting a bribe, as well as envisaging a requirement for corporate 
entities concerning implementation of ``adequate procedures'' in order 
to prevent bribery.
    There are many useful resources available to help businesses manage 
internal and external corruption risks and implementing anti-corruption 
policies, including Transparency International's Business Principles 
and the International Chamber of Commerce's Rules of Conduct. A number 
of industry sectors have also developed sector specific guides, 
specialist codes of practice and transparent procurement agreements. In 
addition specialized anti-corruption risk management frameworks have 
been established to help mitigate against bribe solicitation and 
demands for `facilitation payments', including international 
initiatives such as RESIST (Resisting Extortion and Solicitation in 
International Transactions) and international legal instruments such as 
the OECD Convention on Combating Bribery of Foreign Public Officials in 
International Business Transactions.
            successes: civil society and the private sector
Civil society and government partnership in Kazakhstan
    In 2012, the OSCE Centre in Astana, in co-operation with the 
Ministry of Transport and Communications, the NGO ``Azamatyk Kuryltay'' 
(People's Convention), as well as with construction companies, local 
authorities, the World Bank office and Soros Foundation in Kazakhstan 
began supporting civil society participation in the national and local 
Transparency and Sustainable Development Expert Councils (TSDECs) for 
monitoring the ``Western Europe--Western China'' international road 
construction project, which crosses five of Kazakhstan's regions and 
connects Europe and Asia. Through this project, in 2013 a platform for 
dialogue and co-operation was created for stakeholders involved in or 
affected by the construction works along the road. This work helped 
build the foundations of permanent, self-sustainable TSDEC multi-
stakeholders' structures in the five regions. In 2014 TSDECs were 
introduced in two additional regions where new road construction 
projects are envisaged.
OSCE supports anti-corruption efforts in Tajikistan
    The OSCE Office in Tajikistan brought together international 
expertise, key state representatives and civil society to increase 
knowledge of international anti-corruption standards needed to 
strengthen economic growth and security. The Office conducted workshops 
on the essentials of the UNCAC and worked with Transparency 
International to further support state representatives and civil 
society organizations. Under the Development Co-ordination Council, 
which is composed of international organizations and donors in 
Tajikistan, the Office has been selected to chair the newly established 
Anti-Corruption Working Group. The goals of this Working Group are to: 
(i) support the integration of anti-corruption measures in joint 
development initiatives between development partners and the 
government, (ii) provide forum to engage in dialogue between the 
international community and the government on progress towards meeting 
the obligations of international anti-corruption treaties and 
initiatives to which Tajikistan is committed, including, but not 
limited to UNCAC, FATF, the OECD Istanbul Action Plan, (ii) provide 
structured coordination mechanism with civil society and other public 
bodies on anti-corruption issues and initiatives.
                     working together for progress
    There is still a strong need in the OSCE region for technical 
support in drafting and revising current normative frameworks that 
complies with international standards on anti-corruption, AML and CFT. 
Capacity building measures are also needed to allow the effective 
enforcement of such standards and norms as well as enhance co-operation 
at national and international levels.
    It is paramount to avoid fragmentation of efforts in preventive and 
repressive measures to combat corruption, money laundering and the 
financing of terrorism. In particular, there is a strong need to 
enhance trans-national co-operation among participating States as well 
as other international actors, as well as co-ordinate at national level 
between relevant agencies, central and local authorities.
    The OSCE/OCEEA and the OSCE Field Operations have pursued co-
ordinated efforts aimed at delivering training activities, raising 
awareness through national, regional and international events, and 
providing technical advice and support to drafting and implementing 
legislation in line with the Dublin Declaration principles. The 
challenge is to avoid duplication and complement the mandates and on-
going activities of other international actors, through joint 
programming, agreements, and collaborations. Indeed the field presence 
and the long-standing OSCE confidence-building expertise and platform 
will continue representing the added value of the Organization vis-a-
vis its current and future partners, such as the UN, OECD, Council of 
Europe, World Bank and others.
    Particular attention will be devoted to the promotion of national 
risk assessment mechanisms among pS to identify vulnerabilities and 
threats of money-laundering (ML) and financing of terrorism (FT) and 
strengthen the capacities of Financial Intelligence Units to undertake 
financial crime investigations on ML/FT and corruption. The OSCE/OCEEA 
will also continue supporting training activities to develop increased 
awareness, professional capacity and knowledge in prevention and 
repression of corruption and ML/FT. The training activities will be 
designed for public officials and representatives of the private sector 
and the civil society.
    The OCEEA will also continue supporting its partner organizations 
in awareness raising activities and delivery of training programmes, 
building upon established contacts, local presence and relevant 
expertise.
    Furthermore, the OCEEA will endeavour to mainstream good governance 
in its economic and environmental activities by incorporating 
transparency, anti-corruption and AML/CFT elements where relevant. Good 
governance aspects, already introduced in the field of cross-border 
trade and transport facilitation and border management, will also be 
available in the areas of gender-sensitive labour migration and women 
economic empowerment. The OCEEA will also devote particular 
programmatic attention to the activities in the area of corruption 
prevention, thus also recognizing the importance of the Chapter II of 
UNCAC on ``Preventive Measures''.
    Also, the OCEEA will continue to work with the OSCE's 15 Field 
Operations as the latter support their host countries in implementing 
their good governance commitments, including rendering support in 
developing anti-corruption and anti-money laundering legislation and 
guidance.
                Prepared Statement of Khadija Ismayilova

    Dear Mr. Chairman, I am grateful to the U.S. Helsinki Commission 
for holding this very important hearing and for giving me the 
opportunity to speak about corruption in Azerbaijan.
    I am a contributor to Radio Free Europe/Radio Liberty, which is a 
leading source for independent news for Azerbaijanis, despite being 
banned on local broadcast frequencies in Azerbaijan. The radio has the 
leading role in uncovering corruption in the country.
    Azerbaijan has joined the Open Government Partnership, initiated by 
U.S. President Obama and Brazilian President Rousseff in 2012. In a 
letter of intent in October 2011, Azeri Foreign Minister Mammadyarov 
informed his American counterpart U.S. Secretary of State Hillary 
Clinton about Azerbaijan's long history of combatting corruption. 
Azerbaijan has undertaken number of commitments within the context of 
its participation in OGP, including access to information. However, in 
the very same 2012, Azerbaijan has changed its legislation to restrict 
access to information.
    Since June 2012, when the laws ``On state registration and state 
registry of legal entities'' and ``On commercial secrets'' have been 
amended, information about the founders of commercial legal entities 
and their shares in the charter capital is considered confidential.
    With the same legislative move the law ``On the right to obtain 
information'' had been changed. The new version of the law states that 
information deemed contrary to the purposes of the protection of 
political, economic, military, financial and credit and monetary 
interests of the Republic of Azerbaijan, to the protection of public 
order, health and morality, protection of rights and freedoms, 
commercial and other economic interests of other individuals, ensuring 
the prestige and impartiality of the court, shall not be released even 
following information requests.
    These legislative actions were the government's response to a 
series of journalistic investigations revealing high level corruption 
and conflicts of interest, including involving the president's family.
    The facts cited in those investigations show that the families of 
the Azerbaijani president and several ministers are beneficiaries of 
monopolies in most of the non-oil sector of the economy. Thus, the 
president's daughters control more than 70 percent of mobile 
communications and one of two backbone internet providers, control 
assets in the three biggest holding companies (AzEnCo, Pasha Holding 
and Ata Holding) and several banks. The holdings and companies 
controlled or linked to the president's family enjoy biggest public 
contracts. In most of the cases the ownership of the companies has been 
hidden behind a chain of offshore companies registered in Panama and 
British Virgin Islands.
    Most high-profile visitors to Baku, including members and staffers 
of the U.S. Congress, stay in the Four Seasons Hotel, which is part of 
the president's family's company. Over 30 architectural sites, 
including part of the ancient city wall, were destroyed during the 
construction of the hotel. This and several other business endeavors of 
the president's family have cost many ordinary Azerbaijanis their 
property. The citizens have failed to restore their property rights in 
the courts of Azerbaijan. Those whom the government has failed to 
intimidate have sought justice in the European Court of Human Rights.
    Even the construction of the National Flag square, which was 
presented as a symbol of pride for Azerbaijanis, has become an 
unfortunate example of corrupt practices. The government allocated 30 
million AZN ($38,5 millions) to build ``the highest flagpole in the 
world.'' The 162 meter-high flagpole kept its supremacy only for 
several months, as Tajikistan, another OSCE member country also leading 
in corrupt listings, has built one that is higher by two meters. The 
contract for building the flag square was granted to AzEnCo, a company 
owned by President Aliyev's daughters.
    Azerbaijan is a part of the Extractive Industry Transparency 
Initiative since 2004. As in many other global initiatives, the 
Azerbaijani government uses the membership as an argument against 
criticisms of corruption. The country is currently under scrutiny by 
EITI, as one of the main parts of the Initiative--civil society--is 
paralyzed and cannot serve as a watchdog. In non-oil extractive 
industries government-linked monopolies have a huge stake. In 2007 the 
government of Azerbaijan signed a contract to develop six gold and 
copper mines with a consortium that is co-owned by President Aliyev's 
daughters.
    The oil-related extractive industry is partly under oligarchic 
control as well. Offshore companies, hiding Azerbaijani names and 
linked to the State Oil Company's management or the president's 
family's businesses, appear as partners in joint ventures, winning oil 
production and trade contracts.
    Investigations also reveal that the transportation minister's son 
and his business partners enjoy exclusive opportunities in the public 
transportation sector of Azerbaijan. The money, the source of which is 
highly questionable, is being invested by Mr. Anar Mammadov in lobbying 
activities in the United States through the Azerbaijan-America 
Alliance. The lobbying events are attended by number of the U.S. 
Congress.
    Unlike U.S. officials and members of Congress, Azerbaijani 
officials and members of parliament do not file asset declarations. The 
Azerbaijani president signed a decree requiring to do so, but none of 
the officials, including the president himself, has ever filed a 
declaration, referring to the fact that the Cabinet of Ministers has 
neglected to create a template for such a document.
    The candidates for the presidency and parliament are required to 
fill in a form declaring their assets, however, this information is not 
provided. I sued the Central Election Commission for refusing to 
provide this information.
    Investigations reveal that some members of the Azerbaijani 
parliament own businesses. A constitutional requirement to stop their 
mandate in case of a conflict of interest is neglected.
    Corruption in Azerbaijan undermines not only the well-being of the 
country's citizens but also endangers the country's independence. 
Corruption in education and healthcare puts people's lives at risk, and 
as a solution, they seek remedy in neighboring countries.
    You might have heard many times from Azerbaijani interlocutors that 
the country exists in very difficult geography: it is sandwiched 
between Russia and Iran. These are the two main destinations for people 
who fail to find healthcare and jobs in Azerbaijan. Monopolies and 
corruption in Azerbaijan have created a huge problem with the 
availability of basic services. According to WHO data, Azerbaijanis pay 
70 percent of their healthcare expenses, even though the country claims 
to provide medical care for free.
    The country has failed to establish an insurance system. The Soviet 
style healthcare management is corrupt, and the failure of the 
education system and drug monopolies make it impossible for 
Azerbaijanis to receive even basic medical services in the country. The 
solution is right there, next door, in Iran. Azerbaijani citizens enjoy 
healthcare services there at far more affordable prices than in their 
own country. Iranian government and private clinics attract more 
Azerbaijanis by providing special promotion packages. According to the 
Iranian embassy in Baku, every year 800,000 citizens out of a 
population of ten million Azerbaijanis travel to Iran for healthcare.
    Millions of Azerbaijanis still depend on remittances coming from 
guest workers in Russia--those Azerbaijanis who could not find 
opportunities in their own oil-rich country and have left to earn their 
living on the territory of their northern neighbor.
    Azerbaijanis will feel the full impact of corruption and 
mismanagement when the oil money runs out. A devastated economy and 
environment, in addition to the lack of savings for the future, may 
become a cause of societal unrest in foreseeable future. Seventy 
percent of Azerbaijan's budget comes from oil production. Oil is the 
main commodity of Azerbaijan, making up 92 percent of its exports.
    Oil fuels corrupt construction projects, which create temporary 
employment. The so-called ``white elephant'' projects like the concert 
halls for Eurovision or stadiums for the Euro Olympics will hardly 
return investments and help Azerbaijanis earn a living in the post-oil 
period.
    The state procurement system has become more transparent in the 
past two years, however it still fails to allow access to information 
enabling citizens to monitor procurement procedures. Even with minimum 
access to information, using public sources, journalists have revealed 
facts of corruption.
    Azerbaijani journalists and NGOs combatting corruption pay a 
personal price for these efforts. The country's broadcast media is 
under state control, Azadliq newspaper, the only newspaper that 
publishes investigative reports about the president's family, is barred 
from nationwide distribution and faces financial difficulties, and RFE/
RL, BBC and VOA are banned on local broadcast frequencies. Online 
penetration is not good enough for the internet to become a substitute 
for TV. Weekly satellite TV programs from abroad are being jammed. The 
individual journalists who investigate corruption are being punished by 
intrusion into their privacy and smear campaigns in pro-government and 
the ruling party's media, and they are labeled enemies of the state. In 
some cases the journalists are being subject to enormous libel fines, 
even in cases when their story was not libelous.
    The latest wave of pressure on NGOs has targeted the remnants of 
the research centers and media support institutions. The bank accounts 
of those NGOs are frozen, and leaders have had to leave the country or 
hide.
    With the downgrading of the OSCE's mandate inside the country, most 
of the projects related to media and combatting corruption have 
stopped. The government of Azerbaijan has not approved any of the 
media-related proposals of the Baku project coordinator's office.
    Investigative journalists in Azerbaijan have done their best to 
show the government where the problems are. In fact, the system of 
corruption in Azerbaijan is managed from the top, and top government 
officials are the main beneficiaries of corruption. Recent reforms made 
the corruption even more centralized, leaving less room for low-level 
officials to participate in corruption schemes.
    And here I want to mention a positive part of the story. I want to 
single out the partial reform of the public service, in particular the 
establishment of so-called ASAN (easy) services. ASAN is an agency of 
the Azerbaijani government which provides a variety of public services 
to citizens. Services are made available at public service halls 
throughout the country. Currently, ASAN endeavors to provide over 50 
services at the main location in Baku.
    These islands of good governance show that the Byzantine style of 
business is not a destiny for Azerbaijanis, and that public servants 
can be professional and effective when they wish. Although there are 
some open questions related to ASAN procurements, the agency has 
decreased petty corruption in many areas of service. However, the 
service is yet to become a nationwide provider of public services and 
lacks authority in key areas like custom clearances, NGO registration, 
etc.
    Even these islands of good governance though cannot reduce all the 
risks. Does the Azerbaijani government understand the risks of 
corruption? It probably does, although the overall system is based on 
every citizen's contribution to corruption and lies. As Alexander 
Solzhenitsyn has described in his essay, ``Live Not By Lies,'' the 
system, designed by the Soviet KGB, depends on everyone's 
participation. Azerbaijanis are tempted to pay bribes to ease their 
lives on many occasions every day. The country has failed to complete 
the land and property registry of the capital city, leaving up to 
500,000 households outside the law. Doctors and teachers, who receive 
$150 monthly salary, are forced to demand bribes. An analysis of cross-
border trade statistics of neighboring countries shows that Azerbaijani 
customs have hid imported goods worth billions of dollars. The non-
registered goods end up in the black market and create illegal 
businesses. Hundreds of thousands of Azerbaijanis have become forced 
accomplices of the corrupt system, thus becoming vulnerable and silent, 
making it easier for the government to suppress and rule.
    Here I want to speak on how the global powers of the international 
community can help Azerbaijanis to stop living by lies.
    International institutions must pay more attention to the 
development of investigative journalism. Bad guys know how important 
investigative journalism is, and they invest a lot of money in buying 
out the broadcasters and silencing journalists. Good guys should know 
its importance as well.
    The Azerbaijani government had been successful in jamming hour-long 
satellite TV programs, but it will be impossible for them to jam 24/7 
programming. Azerbaijanis should receive 24/7 TV broadcasts of 
independent content which will not only inform the citizens on what is 
going on inside the country, but also become an alternative source of 
news to what is coming from Russia.
    Azerbaijan needs to be held accountable to the Open Government 
Partnership and fulfill its commitments by granting access to 
information and by stopping harassment of journalists.
                 Prepared Statement of Shaazka Beyerle

    Thank you Chairman Cardin and Co-Chairman Smith for your leadership 
in drawing attention to the threats and injustice caused by corruption, 
in particular in OSCE participating States. It's a deep honor to 
participate in this hearing and a pleasure to share with you 
conclusions and recommendations from new research on the positive role 
of citizens in impacting corruption, including in the OSCE region.\18\
---------------------------------------------------------------------------
    \18\ My testimony is presented in a personal capacity. It does not 
reflect the views of the entities to which I am professionally 
affiliated.
---------------------------------------------------------------------------
    Today the U.S. Congress will commemorate the 25th anniversary of 
the nonviolent Velvet Revolution and will honor the late Vaclav Havel 
by unveiling a bust of him in the Freedom Foyer. Since the sound of 
shaking keys rang through the air in Prague, citizens continue to fight 
and impact impunity. Over the past 17 years, around the world and in 
some OSCE countries, literally millions of people have wielded 
nonviolent power to gain freedom--freedom from corruption.
    During this testimony, I will cover three points: (1) the role of 
citizens and civil society in the anti-corruption equation; (2) 
recommendations on how the U.S., EU and the OSCE can assist 
participating States to help create an enabling environment for civic 
anti-corruption initiatives; and (3) what the broader anti-corruption 
struggle in the OSCE region can learn from organized civic initiatives 
targeting graft and impunity. I hope that this brief overview will 
stimulate your interest and prompt questions.
    The following testimony is based on an international, evidence-
based, research project I conducted to identify, document and distill 
general lessons from organized, sustained civic initiatives wielding 
people power to fight graft and abuse, gain accountability and win 
rights and justice. It examined the skills, strategies, objectives and 
demands of such civic initiatives, rather than the phenomenon of 
corruption itself. The focus was on what civic actors and citizens--
together exerting their collective power--did or are doing to curb 
corruption as they themselves define and experience it. Sixteen cases 
were documented and analyzed in-depth from among the following 
countries: Afghanistan, Bangladesh, Brazil, Egypt, Guatemala, India, 
Indonesia, Kenya, Mexico, Philippines, South Korea, Uganda, and the 
OSCE member countries, Bosnia and Herzegovina, Italy, Russia, and 
Turkey. Please refer to the Appendix for a summary of the cases and 
their outcomes.
    The good news is that citizens--organized in nonviolent campaigns, 
movements and community initiatives--are vital protagonists in 
combatting corruption. As importantly, these are homegrown efforts that 
do not involve huge financial outlays. Most don't seek financial 
support from external sources. It's the ingenuity, courage, resources, 
and voluntary participation of ordinary people that provide the 
foundation for action. They have achieved notable outcomes, for example 
in the OSCE region:
    Resignation of Nedzad Brankovic, the Prime Minister of the 
Federation of Bosnia and Herzegovina halfway through his term (2009);
    Over 1000 businesses to date publicly refusing to pay extortion 
money to the Cosa Nostra mafia in Palermo, Italy (ongoing);
    Judicial investigations, trials and verdicts to undermine the links 
between the state, organized crime, elements of the police, gladios 
(paramilitary groups linked to state security institutions), and parts 
of the private sector in Turkey (1997);
    Targeting corruption and impunity in Russia to prevent the 
bisection of an old-growth, state-protected woodland outside Moscow for 
a large highway and illegal development involving the French firm, 
Vinci (ongoing).
    For your information, the latter Movement to Defend Khimki Forest 
in Russia is employing both nonviolent action and legal measures. The 
European Bank for Reconstruction and Development (EBRD) and the 
European Investment Bank (EIB) pulled out of the project. In June 2013, 
Sherpa, the French human rights lawyers' group, along with other 
European NGOs, filed a formal complaint of corruption against Vinci 
with the Paris Prosecutor. In October 2013, the Prosecutor announced 
the opening of a preliminary enquiry into financial crimes. While it's 
not possible at this juncture to know the outcome, as a result of this 
movement, earlier this year most of the forest has not been destroyed 
(1700 hectares out of 2000 hectares) and felling came to a standstill.
    And recently in Hungary--thousands mobilized against a corrupt, 
increasingly authoritarian government and an internet tax designed to 
thwart the free flow of information.
    During my research, I asked some civic actors what they needed from 
external actors. Here are a few of their replies. First, the 
international community (of course including the U.S., EU and OSCE) 
should look beyond formal NGOs and pay attention to civil society 
organizations and informal civic groups leading nonviolent campaigns 
and movements against corruption. They have valuable input about top-
down efforts to combat corruption as well as insights about what is 
actually happening on the ground. On a positive note, Evgenia 
Chirikova, the leader of the Movement to Defend Khimki Forest, has 
testified before the U.S. Congress and European Parliament.
    Second, be open to engaging with civil society and homegrown 
movements and campaigns in capital cities and diplomatic missions on 
the ground (when such contact is sought by them). Grass-roots civil 
society leaders can be included in government-sponsored international 
forums and received in capitals, while embassies and missions can 
genuinely interact with them.\19\ For example, the Czech Ministry of 
Foreign Affairs created the ``Transformation Policy Unit'' to ``enable 
embassies to support democratization, human rights and transition-
related projects in countries with repressive regimes.'' \20\
---------------------------------------------------------------------------
    \19\ Two excellent resources for such engagement are: A Diplomat's 
Handbook for Democracy Development Support, 2nd ed. (Washington, DC: 
Council for a Community of Democracies, 2010) Veronique Duduouet and 
Howard Clark, Nonviolent Civic Action in Support of Human Rights and 
Democracy (Brussels: Directorate-General for External Policies, Policy 
Department, European Parliament, May 2009)
    \20\ A Diplomat's Handbook for Democracy Development Support, 29.
---------------------------------------------------------------------------
    Third, civic anti-corruption actors implore the international 
community to provide protection and solidarity (when they request it). 
Threats and repression are the norm rather than the exception. 
Moreover, there are wider strategic benefits to international attention 
and condemnation of crackdowns. Protecting civic actors can potentially 
empower many more citizens. Solidarity can make repression backfire. It 
thwarts corruptors' objectives to paralyze civic dissent; create public 
fear, despair and apathy; prevent unity among anti-corruption networks 
and organizations; and obstruct alliances with other nonviolent 
struggles, for example, for democracy, gender equality, minority 
rights, and land rights.
    Based on my research, allow me to also offer these additional 
recommendations. Some are not new, but reinforce good practices already 
under way. In cases where civil society initiatives seek external 
funding, provide donor support for self-organization and capacity-
building in the civic realm that supports home-grown approaches and 
taps pre-existing social networks and relationships. The worst thing 
international actors can do is throw large sums of money at homegrown, 
grass-roots civic initiatives and encourage their institutionalization 
into formal, conventional NGOs. What can be of help in some 
circumstances are flexible, small grants that enable experimentation, 
pilot efforts, an expansion of outreach and activities, and peer-to-
peer learning exchanges among civil society actors in-country and 
across borders.
    When it is wanted, provide solidarity, legal and technical support, 
and access to information that civil society may not be able to acquire 
in-country. Information is often a critical asset for anti-corruption 
civic initiatives. For example, attention from global personalities, as 
well as legal measures and beneficial ownership investigations carried 
out by international civil society organizations were invaluable for 
the Movement to Defend Khimki Forest.
    Amplify civil society voices through various outlets. For instance, 
where in-country civic entities investigating corruption are blocked 
from the media, and provide support for alternative modes of 
communication, such as online civil society information and news 
outlets, satellite television programming, and multi-lingual 
international outlets such as Radio Free Europe/Radio Liberty and 
Deutsche Welle. I understand there is hope for a bill to revamp RFE/RL 
that cleared the House of Representatives and is now in the Senate.
    Recognize that top-down multilateral instruments (including the 
United Nations Convention Against Corruption) and democratic mechanisms 
in third-party countries can both directly and indirectly support civil 
society movements and campaigns targeting corruption and impunity. For 
example, the Paris Prosecutor investigation of Vinci, hearings in 
legislative bodies such as the one today and others in the European 
Parliament, and decisions taken by multilateral institutions (including 
the European Investment Bank and European Bank for Reconstruction and 
Development) can disrupt and expose corruption targeted by grass-roots 
civic initiatives, protect civil society, and undermine malfeasance.
    Target global financial corruption. Legislative and institutional 
measures to curb illicit financial transactions, money laundering and 
the conversion of ill-gotten gains into legitimate businesses and 
luxury properties can disrupt the overall system of corruption that 
civil society is combatting in OSCE participating States. Voices from 
civil society herald the Magnitsky Act. They call for the Act's 
application to be rigorous and wish it would be extended both in terms 
of scope and countries. I'd like to thank you, Senator Cardin, and also 
Senator John McCain, for your efforts to extend the law's reach through 
the Global Magnitsky Human Rights Accountability Act. I was present in 
the hall when Sergei Magnitsky's mother, Natalia, received the 2011 
Transparency International Integrity Award, given to her son 
posthumously. I'll never forget the sorrow etched in her face, in spite 
of her composure and dignity.
    In conclusion, allow me to summarize what we can learn from grass-
roots, civil society campaigns and movements impacting corruption. 
First, citizens can add extra-institutional pressure to push for 
change--when powerholders are corrupt and/or unaccountable and 
institutional channels are blocked or ineffective. Traditional top-down 
approaches were based on a flawed assumption that once anti-corruption 
structures are put in place, illicit practices will change. Those who 
are benefitting from corruption are expected to be the ones to curb it. 
This helps us to understand why, in spite of so many top-down efforts, 
success is often elusive. Even when political will exists, it can be 
thwarted, because too many people inside the corrupt system have a 
stake in the crooked status quo.
    Second, we can learn new strategies from citizen engagement and 
action that go beyond the traditional carrot versus stick approach. 
Graft and abuse function in systems. They are not simply a collection 
of random dishonest transactions.\21\ I found that citizen movements 
and campaigns developed strategies and actions that: (1) disrupted 
systems of corruption (2) empowered and protected reformers and 
integrity champions inside the state who inevitably faced corrupt, 
often hostile, vested interests; (3) empowered honest individuals 
caught in venal systems to say no, that is, to avoid engaging in 
corruption. At the same time, these civil society initiatives often 
pursued longer-term goals of changing behaviors, practices and general 
norms regarding corruption.
---------------------------------------------------------------------------
    \21\ My preferred definition of corruption is: a system of abuse of 
entrusted power for private, collective, or political gain--often 
involving a complex, intertwined set of relationships, some obvious, 
others hidden, with established vested interests, that can operate 
vertically within an institution or hortizontally cut across political, 
economic and social spheres in a society or transnationally. This 
systemic definition was developed by the author, who wishes to credit 
for inspiration, points made by Maria Gonzalez de Asis, World Bank, in 
an unpublished, working paper.
---------------------------------------------------------------------------
    Third, top-down and bottom-up approaches are complementary (not 
mutually exclusive). Both are needed and together, they create 
synergies. Citizen engagement and action can:
          Empower and protect honest powerholders and integrity 
        champions pursuing accountability, reform and change from 
        within the system;
          Empower and protect honest state officials caught in a system 
        of corruption to refuse to go along with it, i.e., 
        noncooperation with corruption;
          Create political will to enact policies, laws and 
        administrative mechanisms to curb illicit financial flows and/
        or to implement them;
          Contribute to changing behaviors, practices and general norms 
        regarding corruption and, potentially, illicit financial flows.
    Fourth, citizens do not fight corruption in the abstract. Rather, 
it's linked to widely shared grievances and venal practices that 
produce collective outrage or harm regular people in their everyday 
lives. Fifth, citizen action targeting corruption is most often found 
in societies enduring poor governance, poverty, low levels of literacy, 
and severe repression, the latter perpetrated by the state, 
paramilitary groups, or organized crime. This finding, corroborated by 
research from the nonviolent resistance, democracy and development 
realms, overturns the misconception that citizen engagement is 
dependent on various conditions, such as civil liberties, a functioning 
democracy, relatively sound levels of social and economic development, 
political space for dissent, etc.
    In conclusion, I'd like to honor the leaders, organizers and 
regular citizens who are combatting corruption in spite of intimidation 
and repression. They prove that while corruption brings out the worst 
in people, fighting it can bring out the best. Thank you, Chairman 
Cardin and Co-Chairman Smith.
           RFE/RL's Coverage of Corruption in the OSCE Region

                           November 17, 2014

Azerbaijan
    RFE/RL's Azerbaijan Service has a long history of exposing 
corruption within the Azerbaijani government. RFE/RL reporter Nushabe 
Fatullayeva teamed up with contributor and investigative reporter 
Khadija Ismayilova on a series of investigative reports that linked 
family members of President Ilham Aliyev to several massive financial 
corruption schemes. Subsequently, Ismayilova has become a target of 
smear campaigns and spurious legal investigations that, most recently, 
have prevented her from testifying on corruption issues before the U.S. 
Congress and in other international fora.
    The Azerbaijani Service hosts a web portal, ``Korrupsiometr,'' that 
provides information on the latest laws and regulations in the country, 
lets Azeri lawyers respond to audience questions on anti-corruption 
issues, and serves as a discussion forum for people impacted by 
corruption.
Ukraine
    The Ukrainian Service has launched a nationally-broadcast 
television program, ``Schemes,'' that examines various deals and 
allegations of corruption that helped spark the Euromaidan movement. 
The program exposes the lavish lifestyles of former senior Ukrainian 
officials and documents various government employees receiving gifts.
    Widely-seen episodes have exposed financial misappropriations of 
former minister Mykola Zlochevsky and excessively lavish lifestyles of 
former oil and gas officials Serhiy Katsuba and Yevhen Bakulin.
Armenia
    RFE/RL's Armenian Service routinely exposes corruption, conflict of 
interest, abuse of power in the country. A Service journalist recently 
uncovered a story about Armenian oligarchs exploiting local resources 
for big gain while penalizing small farmers. Another story shed light 
on the Yerevan city government's excessive--and ultimately wasted--
expenditures that inflamed environmental and anti-corruption activists 
alike.
    In October, an RFE/RL story exposed the potentially illegal income 
of a top state Justice Ministry official, Mihran Poghosian, who has 
been the source of public criticism for questionable accumulated wealth 
while in state service.
Uzbekistan
    The Uzbek Service worked with Sweden's SVT public television 
broadcaster in 2013 to publicize documents that demonstrate alleged 
links between Gulnara Karimova, the daughter of Uzbek President Islam 
Karimov and Swedish telecoms giant TeliaSonera. In the documents, 
TeliaSonera is asked to pay hefty bribes in exchange for protection 
from government agencies and an infusion of new clients, and Karimova 
appears to be personally dictating the terms of the negotiations.
Russia
    RFE/RL's Russian Service helped uncover the massive corruption, 
environmental damage, and toll on local residents and migrant workers 
that surrounded Russia's preparations for the 2014 Winter Olympics in 
Sochi, with its ``Sochi: Outside The Arena'' investigative report.
Belarus
    RFE/RL's Belarus Service is the only media working in Belarus to 
report on corruption cases in detail--in cities such as Homel, where 
the mayor, two vice mayors and several top police officials have been 
arrested on corruption charges, and in state-owned industries such as 
the oil company ``Belneftekhim,'' a wood-processing factory in 
Babruisk, and a food plant in Minsk.
Bosnia
    RFE/RL's Sarajevo bureau launched a multimedia project that 
investigated cases of failed privatizations of state-owned enterprises 
in Sarajevo, Mostar, Banja Luka and other Bosnian cities.
    A Balkan Service report also looked into the failed privatization 
of the ``Aluminij'' plant in Mostar, one of Bosnia's biggest exporters. 
The company, which once employed several thousand workers, now only has 
several hundred employees and is facing closure.
    Another report exposed a massive customs and tax fraud case in 
Bosnia that has subsequently led to the arrest of Kemal Causevic, the 
former director of the Bosnian Indirect Taxation Authority (UIO), along 
with 39 others, mostly tax officials accused of abuse of power, tax 
evasion and money laundering.
Kosovo
    The Balkan Service has dedicated a web page, ``Monitor Corruptus'', 
to its coverage of the fight against government corruption in Kosovo. 
The page features a link that allows viewers to upload content directly 
to the site, and provides a direct link to the Kosovo Anti-Corruption 
Agency that enables users to report corruption cases directly to the 
agency.
    The Service is also working with the Center for Investigative 
Journalism (CIN) on a series of reports on issues related to corruption 
that have been featured on the Service's regional and national programs 
and re-used by other media outlets throughout the region.
Macedonia
    The Balkan Service's Macedonia Unit, in cooperation with local 
NGO's, created a series of reports as well as a special web page on 
corruption connected with the Macedonian government's ``Skopje 2014'' 
project. As a result, other media outlets in Macedonia have begun to 
report on corruption linked to the Skopje 2014 project, and the 
government has been forced to admit that the cost of the project 
exceeds the amount previously reported.



  
  
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