The need for a disclosure law
Layers of secrecy not only conceal names of beneficiaries, jurisdictional complexities also make inquiry difficult
The writer is an author and a former interior secretary. He teaches at the Lahore University of Management Sciences
All the hullabaloo surrounding the Panama leaks, while rocking many capitals around the world, has a silver lining for a country like Pakistan. Irrespective of the raging blame game going on amongst political adversaries, it has given the country an opportunity to move forward in the quest for greater transparency, and expecting fair and open practices by our public office-holders. The government’s proposal to the Supreme Court to constitute a judicial commission has been sent back by the chief justice, who is seeking more clarity and the tightening of loose ends in the ToRs.
The recent revelations have alluded to the gaping holes in our financial and legal systems. It has, at the same time, underlined the need for effective oversight on the flow of hard-earned money going out of the system. While there may be nothing wrong in having offshore investments, the mere fact that the money trail, once it leaves the country, never figures into the national accounting system is a matter of concern. The uproar on the issue is, therefore, understandable as it calls for a more open government, requiring our political elite to play a key role as incumbents of public office. This is equally true of the members of the civil and military bureaucracies, who deal with huge procurements and contract management having enormous financial implications. The dramatic arrest of a Balochistan provincial secretary, who stashed millions of rupees and dollars at his residence, is a fairly sharp pointer towards the deepening rot.
The idea of open government is based on the premise that every citizen has a right to know about the activities and outcomes associated with the conduct and working of those who are holding public office. The main thrust behind the whole argument is that public office-holders must embark upon their role with a clean slate. They should put across all information of their businesses and ownerships, along with the manner of their acquisitions, before entering and while holding public office. The trail needs constant updating and effective oversight and monitoring. Overseas acquisitions appear to be the weak reporting area, hence the current controversy.
Requirements of holding public office are fairly demanding, where the incumbent is expected to avoid and resist conflicts of interest. This mainly underscores that his primary interest in no manner should be affected by any secondary considerations or tamper with his professional judgment. Secondary interests are seen in terms of financial gains, and desires to do favours for family and friends based on a person’s influence and position of authority. Secondary interests and their gains at times go unnoticed so long as these are not distinctly visible or do not compromise with the primary interest or till a whistleblower spills the beans. Any such indulgence, therefore, may fall within the domain of corrupt practices. A public office-holder, ideally like a judge, has to recuse from a decision where a conflict of interest exists.
In the words of renowned Nobel laureate, Amartya Sen, “Corruption flourishes in informational darkness”; it survives in an environment of social leniency and is taken as standard behaviour in such circumstances. If the threat of sanctions against the menace is either weak or ineffective, the rot spreads. In such an environment, political figures and members of professional bureaucracies, on occasion, use their power and influence with impunity for undue private gains. They show no qualms in doling out undue favours to their favoured ones. Bribery, kickbacks, influence peddling, bending or defying rules and at times changing rules of the game are some of the chronic manifestations of this malaise. Tampering with the rule of law ultimately affects the quality of service as well as its delivery while adding to transactional costs for the public. In this backdrop, mega projects, especially in developing countries, are subject of wide debate, entailing a huge portfolio of procurement management with the fear of precious resources slipping out of the system.”
Coming to the current offshore scam, Raymond Baker in his seminal work, Capitalism’s Achilles heel, has underlined the multiple driving forces leading to the formation of offshore companies. Some of these shell companies may well be within the ambit of the law. Baker, however, takes pains to state that in such investments, it is difficult to distinguish between genuine and laundered money. The shell often gives cover to kickbacks and sleaze while taking advantage of the tax haven status of the place where the offshore investment is based. Veils and layers of secrecy not only conceal ownership and names of beneficiaries, the inter-jurisdictional complexities also make any inquiry difficult in view of the absence of mutual assistance agreements between the parties. The only way to track the money trail is through banking channels from the source. Transactions occurring through the ‘hundi’ system complicate the picture as these flows do not pass through formal, documented banking channels. In our case, people in business took full advantage of skewed legislation, namely the Protection of Economic Reform Act of 1992, which gave immunity from disclosing the source of money while transferring any sum in foreign currency anywhere in the world. The transferor did not have to account for any transaction to any authority. Apart from this, there is no denying the fact that non-formal channels, like hawala and personal carriers, have been used with impunity. In this raging debate, parties are indicting each other on moral grounds. It is interesting to note that we are judging the past conduct of different adversaries through the standards of propriety and legality currently in vogue. That does not mean that such acts were condonable at any stage, but there was far less sensitivity towards moral rights and wrongs in the past. It is widely known that in the past, briefcases loaded with money would exchange hands while forming and toppling governments, clubbing alliances and holding of all sorts of referendums.
This brings us to the sense of urgency that is now palpable when it comes to putting in place a comprehensive disclosure law wherein non-disclosure, or even mis-disclosure of ownership, businesses or beneficiary interests, directly or indirectly, both within and outside the country should be made a culpable offence. The law should apply across the board for public office-holders, including elected representatives and members of the civil and military bureaucracies. Declaration of assets, wealth and income tax statements, and annual returns by public office holders are some of the instruments that need to be revisited more critically. These instruments should be brought within the reach of any disclosure law that is formulated. Our parliamentarians have to provide a lead in pushing the reform agenda through a slew of legislative interventions. Whether or not they are prepared to take a proactive role in this endeavor remains to be seen.
Published in The Express Tribune, May 17th, 2016.
The recent revelations have alluded to the gaping holes in our financial and legal systems. It has, at the same time, underlined the need for effective oversight on the flow of hard-earned money going out of the system. While there may be nothing wrong in having offshore investments, the mere fact that the money trail, once it leaves the country, never figures into the national accounting system is a matter of concern. The uproar on the issue is, therefore, understandable as it calls for a more open government, requiring our political elite to play a key role as incumbents of public office. This is equally true of the members of the civil and military bureaucracies, who deal with huge procurements and contract management having enormous financial implications. The dramatic arrest of a Balochistan provincial secretary, who stashed millions of rupees and dollars at his residence, is a fairly sharp pointer towards the deepening rot.
The idea of open government is based on the premise that every citizen has a right to know about the activities and outcomes associated with the conduct and working of those who are holding public office. The main thrust behind the whole argument is that public office-holders must embark upon their role with a clean slate. They should put across all information of their businesses and ownerships, along with the manner of their acquisitions, before entering and while holding public office. The trail needs constant updating and effective oversight and monitoring. Overseas acquisitions appear to be the weak reporting area, hence the current controversy.
Requirements of holding public office are fairly demanding, where the incumbent is expected to avoid and resist conflicts of interest. This mainly underscores that his primary interest in no manner should be affected by any secondary considerations or tamper with his professional judgment. Secondary interests are seen in terms of financial gains, and desires to do favours for family and friends based on a person’s influence and position of authority. Secondary interests and their gains at times go unnoticed so long as these are not distinctly visible or do not compromise with the primary interest or till a whistleblower spills the beans. Any such indulgence, therefore, may fall within the domain of corrupt practices. A public office-holder, ideally like a judge, has to recuse from a decision where a conflict of interest exists.
In the words of renowned Nobel laureate, Amartya Sen, “Corruption flourishes in informational darkness”; it survives in an environment of social leniency and is taken as standard behaviour in such circumstances. If the threat of sanctions against the menace is either weak or ineffective, the rot spreads. In such an environment, political figures and members of professional bureaucracies, on occasion, use their power and influence with impunity for undue private gains. They show no qualms in doling out undue favours to their favoured ones. Bribery, kickbacks, influence peddling, bending or defying rules and at times changing rules of the game are some of the chronic manifestations of this malaise. Tampering with the rule of law ultimately affects the quality of service as well as its delivery while adding to transactional costs for the public. In this backdrop, mega projects, especially in developing countries, are subject of wide debate, entailing a huge portfolio of procurement management with the fear of precious resources slipping out of the system.”
Coming to the current offshore scam, Raymond Baker in his seminal work, Capitalism’s Achilles heel, has underlined the multiple driving forces leading to the formation of offshore companies. Some of these shell companies may well be within the ambit of the law. Baker, however, takes pains to state that in such investments, it is difficult to distinguish between genuine and laundered money. The shell often gives cover to kickbacks and sleaze while taking advantage of the tax haven status of the place where the offshore investment is based. Veils and layers of secrecy not only conceal ownership and names of beneficiaries, the inter-jurisdictional complexities also make any inquiry difficult in view of the absence of mutual assistance agreements between the parties. The only way to track the money trail is through banking channels from the source. Transactions occurring through the ‘hundi’ system complicate the picture as these flows do not pass through formal, documented banking channels. In our case, people in business took full advantage of skewed legislation, namely the Protection of Economic Reform Act of 1992, which gave immunity from disclosing the source of money while transferring any sum in foreign currency anywhere in the world. The transferor did not have to account for any transaction to any authority. Apart from this, there is no denying the fact that non-formal channels, like hawala and personal carriers, have been used with impunity. In this raging debate, parties are indicting each other on moral grounds. It is interesting to note that we are judging the past conduct of different adversaries through the standards of propriety and legality currently in vogue. That does not mean that such acts were condonable at any stage, but there was far less sensitivity towards moral rights and wrongs in the past. It is widely known that in the past, briefcases loaded with money would exchange hands while forming and toppling governments, clubbing alliances and holding of all sorts of referendums.
This brings us to the sense of urgency that is now palpable when it comes to putting in place a comprehensive disclosure law wherein non-disclosure, or even mis-disclosure of ownership, businesses or beneficiary interests, directly or indirectly, both within and outside the country should be made a culpable offence. The law should apply across the board for public office-holders, including elected representatives and members of the civil and military bureaucracies. Declaration of assets, wealth and income tax statements, and annual returns by public office holders are some of the instruments that need to be revisited more critically. These instruments should be brought within the reach of any disclosure law that is formulated. Our parliamentarians have to provide a lead in pushing the reform agenda through a slew of legislative interventions. Whether or not they are prepared to take a proactive role in this endeavor remains to be seen.
Published in The Express Tribune, May 17th, 2016.