Democracy in the Dark: It’s time to regulate digital campaigning

Sam Power, Lecturer at the Centre for the Study of Corruption, has recently co-authored a report for the Electoral Reform Society titled ‘Democracy in the Dark: Digital Campaigning in the 2019 General Election and Beyond’ with Dr Katharine Dommett, University of Sheffield. The full report can be found here – an extract from the Executive Summary is below. 

Over the last few years, calls for the regulation of digital campaigning have been growing in the UK. Committees in the House of Commons and Lords, groups of MPs, regulators, think tanks, charities and campaign groups have been stressing the need for urgent electoral reform.  

Yet nearly a year on from the 2019 general election campaign, the only concerted action taken by the government has been to launch a consultation on digital imprints. This change, first recommended by the Electoral Commission back in 2003, is long overdue, but it also only scratches the surface of the problem. And at a time when the Electoral Commission is more important than ever – needing new powers and competencies – we have witnessed growing threats to its future.  

In this report, we look at the case for strengthening – not stymying – democratic oversight by examining what we know about the use of digital technology at the 2019 general election. Posing five questions, we show why there is a need for urgent action that extends far beyond digital imprints.  

Specifically, we ask: 

  • What was being spent? 
  • Who was campaigning? 
  • Who was seeing what? 
  • How was data being used? 
  • What was being said? 

Looking at examples from the 2019 general election, and presenting new analysis of Facebook and Google’s advertising archives, we demonstrate the case for reform. We also review the recommendations from a series of reports and inquiries to outline what has so far been proposed to address these trends. Through this report, we shed fresh light on the need for urgent action and the demand for far-reaching reform. 

You can read the full report and findings here: ‘Democracy in the Dark: digital campaigning in the 2019 General Election and beyond.’ 

FinCEN money laundering files raise questions for UK

With the publication of the latest set of leaked papers revealing global money laundering on a grand scale, known as the FinCEN Files, Professor Robert Barrington of the Centre for the Study of Corruption looks at some of the implications for the UK.

Like so many of the global money laundering scandals, the UK plays a disproportionately prominent role in the FinCEN Files.  There are apparently more UK-registered companies in the Files than those from any other jurisdiction.  We do not learn much that is new about the UK, but this is a timely reminder that the UK still has a big problem to fix.

The Files highlight some awkward issues for the UK: whether the political will really exists to prevent the UK being a safe haven for dirty money; the risks when that money enters British politics; the complicity of the UK’s Overseas Territories and Crown Dependencies; the involvement of an army of lawyers, accountants and other professionals who are cogs in the system; and the central role of British banks, to whom the government has contracted out much of the nation’s anti-money laundering defences.

This ‘privatisation’ of the UK’s AML defences is particularly troubling.  The FinCEN Files suggest that banks too often turn a blind eye to money laundering, presumably because the institutions as a matter of culture, or a sufficient number of individuals within the banks, believe the financial gains outweigh the risks of being caught.  Giving those banks a central role in the nation’s anti-money laundering defences thus places a huge conflict of interest at the core of the system.  It might not matter if we could be confident everyone is on the same side: but leaks like the FinCEN Files reveal that is not always the case.

There is a reasonable argument in favour of a ‘partnership’ that exchanges information, but this has recently been extended into formalising the banks’ role in helping to set the national economic crime strategy.  The Economic Crime Strategic Board contains government Ministers, law enforcement officials, banks – and no independent participants, let alone civil society.  It is poor governance and undermines public confidence in the system, as well as potentially having the Economic Crime Strategy directed by those who are themselves implicated in serious economic crimes. 

What should be done? The government’s own Economic Crime Plan and Anti-Corruption Strategy lay out the threats of money laundering, and the benefits to the UK of tackling money laundering.  They contain many good ideas, as do other government announcements since the Anti-Corruption Summit of 2016.  But in several key areas there has been slow implementation and weak enforcement.

This latest scandal is brought into sharp relief by Brexit and the UK’s need to work out what it stands for: willing to attract suspicious money as part of its economic planning, or operating to high standards backed up by adequate regulation and enforcement.  The UK will very soon no longer be bound by the EU’s rules, and has some major decisions to make about its new direction.

Public spending must be regulated, even in an emergency: reflections from the Philippines

In times of crisis, rules regulating the procurement process and the disbursement of public funds are often discarded, to speed up the acquisition of necessary goods and the provision of services. But, argues Nelia Lagura Prieto, anti-corruption lawyer and CSC alumnus, this makes it far too easy to divert emergency funds away from the intended beneficiaries and into the hands of a few opportunistic entities.  

On 23rd March 2020, in view of the threats to public health brought about by the coronavirus pandemic, the Philippine Congress placed the entire country under a state of national emergency through Republic Act No. 11469 (R.A. 11469). The said law granted the President emergency powers necessary to carry out the declared national policy (R.A. 11469, Section 4).  Among those powers are: 

1)  the power to discontinue appropriated programs or projects of any agency of the Executive Department and utilize the savings generated to augment the allocation for any items necessary to address the CoVid19 emergency; and 

2) the power to procure said items (e.g. personal protective equipment (PPEs), laboratory equipment and their reagents, medical equipment and devices, and medical supplies) in the most expeditious manner, exempt from the country’s procurement law.   Resolution 06-2020 of the Philippine Procurement Policy Board (GPPB) reveals that these emergency procurements do not need to undergo competitive bidding. Written formal offers are not even necessary.  Under the interim rules, verbal agreement on the price and compliance or commitment to comply with legal, technical and financial requirements of the project are sufficient bases to recommend award to a supplier, manufacturer, contractor or consultant (section 3.3 of GPPB Resolution 06-2020).

With the suspension of bidding requirements, relevant government agencies immediately awarded contracts for much-needed medical and laboratory equipment and supplies through the so-called emergency procurement mechanism.  Several of these contracts and transactions have become controversial.

Overpriced Personal Protective Equipment (PPE)

The Department of Health (DOH) purchased 1 million sets of PPE worth 1.8 billion pesos at 1800 pesos (around USD37) per set.  A Senate inquiry on the alleged overpriced PPE and test kits revealed that locally sourced PPE would have cost as little as 400 pesos (around USD8.25).  It was also disclosed that the Office of the Vice President (OVP) who, as of March had already distributed 32,000 full sets of PPE, acquired them at only 397 pesos per set from a local supplier.  

One senator has therefore claimed that the government could have saved 1.4 billion pesos had DOH contracted with local suppliers.  The DOH purchase is an anomaly even under the emergency rules, since procurements are still subject to a requirement to negotiate the most advantageous price to the government based on existing price data of the agency or on prevailing market prices, even in emergencies. 

In addition to the unconscionable price difference between those purchased by DOH and by the OVP, it was also reported during the Senate hearing that 727 million pesos’ worth of contracts for PPE and vitamins were awarded to one company despite it having been blacklisted.  

Release of Covid-19 Funds to Health Care Institutions (HCI) under the Interim Reimbursement Mechanism (IRM) 

In early 2020, when the world started to panic about CoVid19, the Philippine Health Insurance Corporation (PhilHealth), a state-run agency under the DOH, began providing funds for HCIs through its IRM. While called a reimbursement, IRM is really a cash advance scheme to provide available funds to HCIs in times of emergency.  

The Senate inquiry revealed that as of April and prior to the dissemination of standard operating procedures for the release of funds through IRM, PhilHealth had already  released 9.29 billion pesos of the 30 billion pesos allocated to 279 HCIs for hospital assistance.  The initial release of funds to several HCIs did not correspond with the prevalence of Covid19 in the areas covered.  Two hospitals from Davao in Mindanao received the first and third-largest sums: 326 million pesos for Southern Medical Center and 209 million pesos for Davao Regional Medical Center.  The allocation raised questions since Davao had only 2,600 cases compared to 144,000 in the National Capital Region (NCR)  and 20,829 in Central Visayas.

PhilHealth chief, retired general Ricardo Morales, explained that when they started releasing funds through IRM prior to the guidelines, there were as yet no established  concentration areas of Covid19 cases.  They instead used the 90-day historical claims of HCI beneficiaries to determine the amount to be released.  He also stressed that the cash advances were subject to liquidations.  However, only 1 billion pesos have been liquidated and there is no evidence that unused cash advances have been returned or should be returned.

It appears that PhilHealth officials responsible for the release of the funds prior to the guidelines exercised an almost unrestricted discretion in deciding which hospitals should receive funding and how much.  As a result, funds allocated for Covid-19 response were disbursed to HCIs that until now have yet to deal with Covid-19-positive patients. Among them is B. Braun Avitum (a dialysis center) which received 45 million pesos from PhilHealth’s IRM. B. Braun Avitum despite not admitting Covid-19 patients. 

The release of funds in such a highly discretionary manner has led to an outcome which largely defeated the intended purpose of the funds.  While HCIs with no, or just a few, Covid-19 cases have plenty of response resources, those with patients in excess of their bed capacity have to make do with what they have. Many patients are denied hospitalization because of this flawed allocation of resources.

Even in times of emergencies, government spending must still be governed by reasonable rules that balance urgency and propriety.  In countries like the Philippines where national emergencies brought about by calamities such as typhoons and earthquakes are common, laws should be put firmly in place to avoid recurring fund wastage due to negligence, lack of wisdom or outright corruption.

Sri Lanka election result paves way for state capture

Recent elections in Sri Lanka open the way for major constitutional reform by a party and President that have already indicated their plans to remove key checks on power. Sankhitha Gunaratne, Senior Manager – Advocacy at Transparency International Sri Lanka, currently taking our Master’s in Corruption and Governance, analyses the risks of state capture.

The 5th of August saw the Parliamentary Election held in Sri Lanka with a 70% voter turnout even amidst fears of COVID-19 transmission. Twice postponed due to the pandemic, this was a critical election that would enable President Gotabaya Rajapaksa to form a government after his victory in November last year. The elections were largely peaceful, in spite of many abuses of State resources taking place during the campaign, constituting election violations.

The President’s party, the Sri Lanka Podujana Peramuna (SLPP), secured 145 out of 225 total seats in Parliament, leaving it in a strong position to form alliances that would result in two-thirds support in Parliament. This is especially significant as it provides the necessary majority for the government to amend provisions of the Constitution. The SLPP has already indicated that it would repeal the 19th Amendment to the Constitution, which re-introduced the two-term limit for the Presidency and strengthened the Constitutional Council that recommends and approves appointments to independent commissions, the higher courts and other key posts – aspects that Mahinda Rajapaksa’s 2005-15 government had removed and weakened. The 19th amendment also enshrined the right of access to information as a fundamental right, a key accountability tool that citizens across the country have availed themselves of in relation to varied issues ranging from access to water to accessing draft laws. Key officials have, however, indicated that the independent commissions and the right to information will not be affected – though these undertakings are yet to be proven right.

President Gotabaya Rajapaksa has now appointed his brother former President Mahinda Rajapaska as the Prime Minister, leading to the interesting dynamic of two members of the same family – not for the first time in Sri Lanka – heading the executive and legislative branches of government. The appointment does not violate any law, as former President Mahinda Rajapaksa ran and was elected for his parliamentary seat in both subsequent general elections(after being defeated for a third-term presidency in 2015). The Constitution empowers the President to appoint as Prime Minister, the person who, in the opinion of the President, is most likely to command the confidence of Parliament.

The Prime Minister also holds the portfolios of Finance, Buddhasasana, Religious & Cultural Affairs and of Urban Development, Water Supply and Housing Facilities. His son Namal Rajapaksa is the Minster of Youth & Sports, and his brother Chamal Rajapakse holds the position of Minister of Irrigation.

Markers of State Capture?

State capture is defined as “A situation where powerful individuals, institutions, companies or groups within or outside a country use corruption to shape a nation’s policies, legal environment and economy to benefit their own private interests”. The plans for Constitutional amendments combined with the neutralisation of dissenting voices bodes ill for Sri Lanka, foreshadowing a future as a captured state.

A two-thirds majority in Parliament that allows virtually unfettered Constitutional amendments to remove checks and balances, on top of the threat to the separation of powers caused by two brothers heading the executive and the legislature combined with close family members in key positions of power, makes a dangerous cocktail that raises red flags for state capture. The electoral victory also comes against a background of increasing militarisation of the State where key public positions have been filled with military personnel (see examples here, and here) and a Presidential Task Force has been appointed ‘to build a secure country, disciplined, virtuous and lawful society’ consisting entirely of military and police personnel, with a broad mandate that even allows the provision of instructions to public officials. Dissenters including lawyers, journalists, civil society and activists have come under threat, scrutiny and arrest in an alarming trend recognised by Human Rights Watch and others in its statement on 29th July this year.

While they do not necessarily act of one accord, the Rajapaksa family and their close contacts have been implicated in many corruption scandals during their last stint in power (see here, here and here and here) giving credence to a general perception in Sri Lanka that politicians run for office with the specific intention of benefiting from public funds. However, these scandals do not seem to have discouraged voters from electing to office those implicated. It is almost an expectation among citizens that government contracts will be awarded based on what are colloquially named ‘komis’ (commissions). It is particularly concerning therefore, that the resounding mandate given by the people almost seems to endorse a level of state capture. Government procurement therefore will continue to be an at-risk area for potential grand corruption that must be subject to scrutiny especially in the context of potential state capture.

The former government that was in power in 2015-19 was originally elected on a ‘good governance’ mandate. It lost its credibility in the Central Bank Bond Scam case where the son-in-law of the then Governor of the Central Bank was alleged to have benefited from insider information about an unprecedented issue of government bonds, at a major loss to the public purse.

The track record of that government was somewhat mixed, however. In addition to promulgating the 19th Amendment to the Constitution, some strides towards accountability were made when the then Finance Minister – also implicated in the bond scandal – was forced to step down. During the same period, special High Courts were set up to deal with corruption. The Chief of Staff of President Maithripala Sirisena was arrested and subsequently convicted for accepting a bribe of Rs. 20 million. All these factors demonstrated a certain level of accountability. Yet, that party and its successor party suffered a resounding defeat in this election.

This leads us to ask whether issues relating to corruption have ceased to swing votes in Sri Lanka, at least for the moment. As Robert Barrington points out, could it be that the ‘currency’ of corruption as an electoral issue is eroding, leading to voters making their choices on other issues, since they assume that anyone who gains power will inevitably be corrupt?

While the judiciary as the third arm of government has also been the target of political ire in the past, a robust judiciary could still act as the last bastion of hope for Sri Lanka. Anti-corruption tools such as asset declarations and the right to information must still be used and defended. Independent critical voices will be more important than ever, to call out any attempts to roll back the measures put in place to protect citizens’ freedoms and public resources – the Constitution of Sri Lanka being prime among many.