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WORK TITLE: International Order in Diversity
WORK NOTES: with Andrew Phillips
PSEUDONYM(S): Sharman, Jason Campbell
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https://polisci.barnard.edu/sites/default/files/sharman_cv.pdf * http://www.polis.cam.ac.uk/Staff_and_Students/professor-jason-sharman * http://www.ipdutexas.org/jason-sharman.html
RESEARCHER NOTES:
PERSONAL
Born April 2, 1973.
EDUCATION:University of Western Australia, B.A. (first class honours), 1995; University of Illinois at Urbana-Champaign, M.A., 1997, Ph.D., 1999.
ADDRESS
CAREER
American University in Bulgaria, Blagoevgrad, Bulgaria, assistant professor, 1999-2001; University of Sydney. Sydney, Australia, lecturer in Government and International Relations, 2003-05, senior lecturer, 2003-05; Griffith University, Nathan, Australia, associate professor, 2007-09, professor, beginning 2009, Queen Elizabeth II Fellow, 2007-11, director, Centre for Governance and Public Policy, 2012; Cambridge University, Department of Politics and International Studies, Cambridge, England, Sir Patrick Sheehy Professor of International Relations, 2016–. Visiting professor, St Petersburg State University, Barnard College, Columbia University, and London School of Economics.
AWARDS:Yale H. Ferguson Award, International Studies Association, 2015, for Global Shell Game; Jervis-Schroeder Award, American Political Science Association, 2016, and Francesco Guicciardini Prize, International Studies Association, 2017, both for International Order in Diversity; Outstanding Article Award in international history and politics, American Political Science Association, 2016.
WRITINGS
Contributor to books, including Money Laundering, edited by Navin Beekarry, Edward Elgar (Cheltenham, England), 2012. Contributor to professional journals and other periodicals, including Accounting Forum, American Journal of Political Science, Australian Journal of International Affairs, Australian Journal of Political Science, Central Asian Survey, Comparative Politics, European Journal of International Relations, European Journal of Political Research, European Union Politics, Governance, International Organization, International Politics, International Studies Quarterly, Journal of Common Market Studies, Journal of Economic Perspectives, Journal of International Business Studies, Minnesota Law Review, New Political Economy, Osteuropa, Pacific Review, Policy Studies, Political Studies, PS: Political Science and Politics, Public Administration, Review of International Political Economy, Social Science History, Soviet and Post-Soviet Review, and University of Pennsylvania Law Review.
SIDELIGHTS
“Jason Sharman,” wrote the contributor of a biographical blurb to the University of Cambridge Department of Politics and International Studies Web site, “is the Sir Patrick Sheehy Professor of International Relations in the Department of Politics and International Studies at Cambridge.” “Sharman’s research interests,” the University of Cambridge Department of Politics and International Studies Web site contributor continued, “range from the study of international corruption, money laundering and tax havens, to the global politics of the early modern world.” He is the coauthor of Considering the Consequences: The Development Implications of Initiatives on Taxation, Anti-money Laundering and Combating the Financing of Terrorism, Corruption and Money Laundering: A Symbiotic Relationship, The Puppet Masters: How the Corrupt Use Legal Structures to Hide their Stolen Assets and What to do About It, Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism, and International Order in Diversity: War, Trade, and Rule in the Indian Ocean, and the sole author of Repression and Resistance in Communist Europe, Havens in a Storm: The Struggle for Global Tax Regulation, The Despot’s Guide to Wealth Management: On the International Campaign against Grand Corruption, Chasing Kleptocrats’ Loot: The International Campaign against Grand Corruption, and The Money Laundry: Regulating Criminal Finance in the Global Economy.
Much of Sharman’s work focuses on the question of money, politics, and the intricate relationship between the two. Global shell games In The Despots Guide to Wealth Management, for instance, the Cambridge University professor explores what, according to a reviewer in the Economist, he calls “`grand corruption’: the theft of national wealth by kleptocratic leaders and their cronies, often in poor (albeit resource-rich) countries. It is a subject he knows well, having spent over a decade studying the offshore centres and vehicles–shell companies, for example–that are used to hide ill-gotten gains. The list of light-fingered leaders who feature in `The Despot’s Guide to Wealth Management’ is long. It includes various dead ones, such as Nigeria’s Sani Abacha, Mobutu Sese Seko of Zaire, Indonesia’s Suharto and Ferdinand Marcos of the Philippines (whose shoe-loving wife, Imelda, graces the book’s cover).”
Global Shell Games
In Global Shell Games, Sharman and his coauthors Michael Findley and Daniel L. Nielson test the compliance of nations to international agreements designed to eliminate the secret movement of money (often for illegal purposes) around the world. “What makes this book important,” stated J.R. Strand in Choice: Current Reviews for Academic Libraries, “is not just the innovative research design but also the readability of the methodology discussion.” “The research reported in this book,” explained Mathieu Deflem, in the Law and Politics Book Review, “involved field experiments whereby offers were made for prohibited anonymous shell corporations, in which the identity of those involved remains untraceable.” “The authors’ approach,” Deflem said, “is considered the first field experiment in international relations that is conducted on a global scale, involves multiple nations, and is capable of testing theories concerning international regulatory regimes.” In order to conduct the experiments, Deflem continued, “the researchers and their team members posed as customers with more or less questionable motives, involving money laundering, corruption, and terrorist financing…. Generally, the research found that a large number of private firms routinely violate international standards.” “Given the patchy overall level of compliance, the easy availability of formally prohibited untraceable shell companies, and the willingness of hundreds of businesses to supply obvious criminal risks with the corporate anonymity,” concluded Findley and Sharman in the IFC Review, “the existing system seems to be very compromised. Many of these failings can be laid at the door of large, rich countries, especially the English-speaking OECD members and the United States above all, who conspicuously fail to apply standards that they have so energetically imposed on others.”
Critics found Global Shell Games and its conclusions to be an important step and measuring and hopefully eliminating money laundering and other means that enable criminal organizations to thrive in the twenty-first century. “Global Shell Games is an impressive undertaking that provides new insights into international financial transparency and the challenges of compliance,” opined H. Richard Friman in Political Science Quarterly. “The authors call renewed attention to the importance of nonstate actors and demonstrate the potential for randomized field experiments in revealing the insights and limitations of prominent IR theories.” “This study, by far the most thorough of its kind,” declared an Economist reviewer, “makes sobering reading for anyone who worries about the link between financial crime and corporate secrecy. OECD countries show little willingness to tackle their own weaknesses and end their hypocrisy.”
The Money Laundry
Sharman’s The Money Laundry deals specifically with the problem of making illegally obtained wealth legal. The attempts to create a worldwide standard of behavior began in the late 80s, explained Richard N. Cooper, writing in Foreign Affairs, when “the G-7 summit of 1989 established a global system of rules and regulations to prevent money laundering.” Instead, what happened, said Frank Dobbin in the American Journal of Sociology, was that “money laundering experts used the threat of exclusion from global financial markets to convince governments in the developing world to adopt regulations. He shows that while countries hoped to achieve legitimacy and status in the global financial order, politicians and bureaucrats were acutely concerned about being left out of the game. Their concern with legitimacy was at base a concern about competition for resources from powerful financial agents. Yes, politicians without anti–money laundering programs feared they would appear to be backward, but what motivated them was the fear that they would be excluded from the global economy.”
“Sharman argues that antimoney laundering policy is not only ineffectual,” stated Ethan Wagner in the Journal of International Affairs, “but has frequently been driven more by pressure to conform to the wishes of outside interests … rather than to solve actual problems.” He “describes multiple attempts to create secret vehicles and clandestine accounts,” declared I. Walter in Choice, “which are successful despite the best efforts of governments.”
International Order in Diversity
In International Order in Diversity, Sharman and Phillips trace the ways in which the advent of a Western presence into the seas between Australia and Africa helped maintain existing states in the region. “The book explores the case of the Indian Ocean region between 1500-1750 and beyond,” stated Nathan Sears in E-International Relations, “where the authors’ principal finding is that interaction reinforced the heterogeneity of the region’s principal political units, especially sovereign states (e.g, the Portuguese Estado da India), sovereign companies (e.g., the Dutch and English East India Companies), and empires (e.g., the Mughal and Ottoman Empires).” “The authors,” said Sears, “challenge what they see as the conventional assumption in International Relation (IR) theory that interaction leads to the homogeneity of political units, explaining that this was not the case.” Phillips and Sharman, said S. R. Silverburg in Choice, “point out that diverse political units are the norm … and call for reevaluating the basis of Western imperialism.”
Critics appreciated the collaboration between the two scholars. “The book,” Sears declared, “represents an excellent example of theory-informed, puzzle-driven research in the IR discipline. It also provides a rich historical description of war, trade, and order that is likely to be usefully new for IR scholars unfamiliar with international history beyond that of modern Western Europe.” “Take the time to read this book; it is worth the effort,” wrote Alastair Cooper in a review on the Web site of the Australian Naval Institute. “If necessary, fake it until you make it. It is well written by two Australian scholars who should be invited to a conference or symposium to talk about what they have learnt about the interaction of international relations, commerce and the Indian Ocean.” “There are many things that are theoretically and empirically interesting about International Order in Diversity,” Sears concluded, “and the book was a genuinely enjoyable read from start to finish.”
BIOCRIT
PERIODICALS
American Journal of Sociology, January, 2012, Frank Dobbin, review of The Money Laundry: Regulating Criminal Finance in the Global Economy, p. 850.
Choice, May, 2012, I. Walter, review of The Money Laundry, p. 1706; December, 2015, J.R. Strand, review of Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism, p. 641; April, 2016, S.R. Silverburg, review of International Order in Diversity: War, Trade, and Rule in the Indian Ocean, p. 1237.
Economist, September 22, 2012, “Launderers Anonymous”; February 25, 2017, “Despots’ Jackpots; Corruption,” p. 71.
Foreign Affairs, May-June, 2012, Richard N. Cooper, review of The Money Laundry, p. 174.
Journal of International Affairs, fall-winter, 2012, Ethan Wagner, review of The Money Laundry, p. 241.
Law and Politics Book Review, June, 2014, Mathieu Deflem, review of Global Shell Games, p. 275.
Political Science Quarterly, summer, 2015, H. Richard Friman, review of Global Shell Games, p. 383.
ONLINE
Barnard College Web site, https://polisci.barnard.edu/ (April 5, 2017), author profile.
Cambridge University Department of Politics and International Studies Web site, http://www.polis.cam.ac.uk/ (April 5, 2017), author profile.
IFC Review, http://www.ifcreview.com/ (January 12, 2012), Michael Findley and J.C. Sharman, “Global Shell Games: A Mystery Shopping Experiment in Know Your Customer Standards.”
Innovations for Peace and Development Web site, http://www.ipdutexas.org/ (April 5, 2017), author profile.*
Sir Patrick Sheehy
Professor of International Relations
Email: jcs207@cam.ac.uk
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Biography:
Jason Sharman is the Sir Patrick Sheehy Professor of International Relations in the Department of Politics and International Studies at Cambridge. He received his Ph.D. in political science from the University of Illinois at Urbana-Champaign in 1999, and his undergraduate degree in history and politics from the University of Western Australia. Previously, Sharman worked at American University in Bulgaria, the University of Sydney and Griffith University, and he has spent shorter periods as a visitor at St Petersburg State University, Columbia University and the London School of Economics.
CV
Research Interests
Sharman’s research interests range from the study of international corruption, money laundering and tax havens, to the global politics of the early modern world.
Key Publications
Books:
J.C. Sharman, The Despot’s Guide to Wealth Management: On the International Campaign against Grand Corruption (Ithaca: Cornell University Press, 2017), 265 pages.
J.C. Sharman and Andrew Phillips, International Order in Diversity: War, Trade and Rule in the Indian Ocean (Cambridge: Cambridge University Press, 2015), 276 pages (Winner 2016 Jervis-Schroeder Award, American Political Science Association; Winner 2017 Francesco Guicciardini Prize for Best Book in Historical International Relations, International Studies Association).
J.C. Sharman, Michael G. Findley and Daniel L. Nielson, Global Shell Games: Experiments in Transnational Relations, Crime and Terrorism (Cambridge: Cambridge University Press, 2014), 250 pages (Winner 2015 Yale H. Ferguson Award, International Studies Association).
J.C. Sharman, The Money Laundry: Regulating Criminal Finance in the Global Economy (Ithaca: Cornell University Press, 2011), 224 pages.
J.C. Sharman, Emile van der Does de Willebois, Emily Halter, Robert A. Harrison and Ji Won Park. The Puppet Masters: How the Corrupt Use Legal Structures to Hide their Stolen Assets and What to do About It (Washington D.C.: World Bank, 2011), 268 pages.
J.C. Sharman and David Chaikin, Corruption and Money Laundering: A Symbiotic Relationship (New York: Palgrave, 2009), 234 pages.
J.C. Sharman and Percy S. Mistry, Considering the Consequences: The Development Implications of Initiatives on Taxation, Anti-Money Laundering and Combating the Financing of Terrorism (London: Commonwealth, 2008), 202 pages.
J.C. Sharman, Havens in a Storm: The Struggle for Global Tax Regulation (Ithaca: Cornell University Press, 2006), 211 pages.
J.C. Sharman, Repression and Resistance in Communist Europe (London: Routledge Curzon, 2003), 173 pages.
Other Publications
Refereed Articles:
J.C. Sharman, Brent Allred, Daniel Nielson and Michael Findley, “Anonymous Shell Companies: A Global Audit Study and Field Experiment in 176 Countries,” Journal of International Business Studies (forthcoming 2017).
J.C. Sharman, “Sovereignty at the Extremes: Micro-States in World Politics,” Political Studies (forthcoming 2017).
J.C. Sharman, Michael Findley, Brock Laney and Daniel Nielson, “External Validity in Parallel Global Field and Survey Experiments on Anonymous Incorporation,” Journal of Politics (forthcoming 2017).
J.C. Sharman, “Illicit Global Wealth Chains after the Financial Crisis: Micro-States and an Unusual Suspect,” Review of International Political Economy (forthcoming 2016).
J.C. Sharman and Jo-Anne Gilbert, “Turning a Blind Eye to Bribery: Explaining Failures to Comply with the International Anti-Corruption Regime,” Political Studies 64 (March 2016), 74-89.
J.C. Sharman and Andrew Phillips, “Explaining Durable Diversity in International Systems: State, Company and Empire in the Indian Ocean,” International Studies Quarterly 59 (September 2015), 436-448 (Winner 2016 Outstanding Article Award in International History and Politics, American Political Science Association).
J.C. Sharman and Carolin Liss, “Global Corporate Crime-Fighters: Private Transnational Responses to Piracy and Money Laundering,” Review of International Political Economy 22 (No.4 2015), 693-718.
J.C. Sharman, “War, Selection, and Micro-States: Economic and Sociological Perspectives on the International System,” European Journal of International Relations 21 (March 2015), 194-214.
J.C. Sharman, Michael G. Findley and Daniel L. Nielson, “Causes of Non-Compliance with International Law: A Field Experiment in Anonymous Incorporation,” American Journal of Political Science 59 (January 2015), 146-161.
J.C. Sharman and Alexander Cooley, “Blurring the Line between Licit and Illicit:
Transnational Corruption Networks in Central Asia and Beyond,” Central Asian Survey 34 (No.1 2015), 11-28.
J.C. Sharman and Hun Joon Kim, “Accounts and Accountability: Corruption, Human Rights
and Individual Accountability Norms,” International Organization 68 (May 2014), 417-448.
J.C. Sharman, Shima Baradaran, Michael G. Findley, and Daniel L. Nielson, “Funding Terror,” University of Pennsylvania Law Review 162 (February 2014), 477-536.
J.C. Sharman and Catherine Weaver, “RIPE, the American School, and Global Diversity in IPE,” Review of International Political Economy 20 (December 2013), 1082-1100.
J.C. Sharman, Michael G. Findley, and Daniel L. Nielson, “Using Field Experiments in International Relations: A Randomized Study of Anonymous Incorporation,” International Organization 67 (October 2013), 657-693.
J.C. Sharman, “International Hierarchy and Contemporary Imperial Governance: A Tale of Three Kingdoms,” European Journal of International Relations 19 (June 2013), 189-207.
J.C. Sharman, Shima Baradaran, Michael G. Findley, and Daniel L. Nielson, “Does International Law Matter?” Minnesota Law Review 97 (February 2013), 745-837.
J.C. Sharman and Catherine Weaver, “Between the Covers: International Relations in Books,” PS: Political Science and Politics 46 (January 2013), 124-128.
J.C. Sharman, “Canaries in the Coal Mine: Tax Havens, the Decline of the West and the Rise of the Rest,” New Political Economy 17 (October 2012), 493-513.
J.C. Sharman, “Chinese Capital Flows and Offshore Financial Centres,” Pacific Review 25 (July 2012), 317-337.
J.C. Sharman, “Seeing Like the OECD on Tax,” New Political Economy 17 (February 2012), 17-33.
J.C. Sharman, “Testing the Global Financial Transparency Regime,” International Studies Quarterly 54 (December 2011), 981-1001.
J.C. Sharman and Jacqui True, “Anglo-American Followers or Antipodean Iconoclasts? The 2008 TRIP Survey of Australia and New Zealand,” Australian Journal of International Affairs 65 (April 2011), 143-161.
J.C. Sharman, “Shopping for Anonymous Shell Companies: An Audit Study of Financial Anonymity and Crime,” Journal of Economic Perspectives 24 (Fall 2010), 127-140.
J.C. Sharman, “Dysfunctional Policy Transfer and National Tax Blacklists,” Governance 23 (October 2010), 623-639.
J.C. Sharman, “Offshore and the New Political Economy,” Review of International Political Economy 17 (January 2010), 1-19.
J.C. Sharman, “Privacy as Roguery: Personal Financial Information in an Age of Transparency,” Public Administration 87 (December 2009), 717-731.
J.C. Sharman, “The Bark is the Bite: International Organizations and Blacklisting,” Review of International Political Economy 16 (December 2009), 573-596. [Republished in Money Laundering edited by Navin Beekarry (Cheltenham: Edward Elgar, 2012)].
J.C. Sharman and Patrick Weller, “Where is the Quality? Political Science Scholarship in Australia,” Australian Journal of Political Science 44 (December 2009) 597-612.
J.C. Sharman and David Marsh, “Policy Diffusion and Policy Transfer,” Policy Studies 30 (June 2009), 269-289.
J.C. Sharman and David Chaikin, “Corruption and Anti-Money Laundering Systems: Putting a Luxury Good to Work,” Governance 22 (January 2009), 27-45.
J.C. Sharman, “Benchmarking Australian IR: Low Impact, a Bookish Lot, or a Very British Affair?” Australian Journal of International Affairs 62 (December 2008), 529-540.
J.C. Sharman, “Regional Deals and the Global Imperative: The External Dimension of the European Union Savings Tax Directive,” Journal of Common Market Studies 46 (November 2008), 1049-1069.
J.C. Sharman, “Power, Discourse and Policy Diffusion: Anti-Money Laundering in Developing States,” International Studies Quarterly 52 (September 2008), 635-656.
J.C. Sharman and Carla Wilshire, “Fighting Plagiarism in Australian Universities: Why Bother?” Australian Journal of Political Science 42 (September 2007), 503-508.
J.C. Sharman, “Rationalist and Constructivist Perspectives on Reputation,” Political Studies 55 (March 2007), 20-37.
J.C. Sharman, “Norms, Coercion and Contracting in the Struggle against ‘Harmful’ Tax Competition,” Australian Journal of International Affairs 60 (March 2006), 143-169.
J.C. Sharman, “South Pacific Tax Havens: Leaders in the Race to the Bottom or Laggards in the Race to the Top?” Accounting Forum 29 (September 2005), 311-323.
J.C. Sharman and John M. Hobson, “The Enduring Place of Hierarchy in World Politics: Tracing the Social Logics of Hierarchy and Political Change,” European Journal of International Relations 11 (March 2005), 63-98.
J.C. Sharman, “Who Pays for Entering Europe? Sectoral Politics and European Union Accession,” European Journal of Political Research 43 (October 2004), 797-821.
J.C. Sharman and Robert Phillips, Jr, “An Internalist Perspective on Party Consolidation and the Bulgarian Union of Democratic Forces,” European Journal of Political Research 43 (May 2004), 397-420.
J.C. Sharman, “Agrarian Politics in Eastern Europe in the Shadow of EU Accession,” European Union Politics 4 (December 2003), 447-472.
J.C. Sharman, “Culture, Strategy and State-Centered Explanations of Revolution, 1789 and 1989,” Social Science History 27 (Spring 2003), 1-24.
J.C. Sharman and Dexter S. Boniface, “An Analytic Revolution in Comparative Politics?” Comparative Politics 33 (July 2001), 475-495.
J.C. Sharman, “New Conceptions of Peasant Resistance to Collectivization,” Soviet and Post-Soviet Review 27:2 (2000), 241-259.
J.C. Sharman and Roger E. Kanet, “The Challenge of Democratic Consolidation in Post-Communist Europe,” International Politics 35 (September 1998), 333-351.
J.C. Sharman, “Vorhersage und Vergleich. Zur Osteuropaforschung in den USA [Prediction and Comparison in the Study of Eastern Europe in the USA],” Osteuropa 48 (August-September 1998), 821-837.
J.C. Sharman, “Post-Communist State Building and the Nagorno-Karabakh Conflict,” Soviet and Post-Soviet Review 23:3 (1996), 329-347.
CV: https://polisci.barnard.edu/sites/default/files/sharman_cv.pdf
LC control no.: n 2003092357
Descriptive conventions:
rda
Personal name heading:
Sharman, J. C. (Jason Campbell), 1973-
Variant(s): Sharman, Jason Campbell, 1973-
Birth date: 1973-04-02
Fuller form of name
Jason Campbell
Found in: Sharman, J. C. Repression and resistance in Communist
Europe, 2003: CIP t.p. (J.C. Sharman) galley (lecturer
in Government and International Relations at the
University of Sydney) data sheet (Sharman, Jason
Campbell; b. April 2, 1973)
Global shell games, ©2014: t.p. (J.C. Sharman, Griffith
University)
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Faculty Affiliate Dr. Jason Sharmon
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Professor Jason Sharman graduated with his Ph.D. in Political Science from the University of Illinois at Urbana-Champaign in 1999, before going on to work at American University in Bulgaria and the University of Sydney. In 2007 he took up a position at Griffith University in Brisbane, Australia, while in 2017 he becomes the Sir Patrick Sheehy Professor of International Relations at Cambridge. Sharman's research is currently focused on corruption, money laundering and tax havens, as well as the historical development of the international system in the early modern period. Aside from his academic research, Sharman has also performed consultancy work for a range of international organisations and private sector groups.
In December 2016, Dr. Sharman will join the faculty at Cambridge University in the UK as Professor of Politics.
Dr. Sharman.s website and CV
Email: j.sharman@griffith.edu.au
Selected Recent Publications:
J.C. Sharman, Chasing Kleptocrats’ Loot: The International Campaign Against Grand Corruption (Ithaca: Cornell University Press, forthcoming 2016).
J.C. Sharman and Andrew Phillips, International Order in Diversity: War, Trade and Rule in the Indian Ocean (Cambridge: Cambridge University Press, 2015), 251 pages.
J.C. Sharman, Michael Findley and Daniel Nielson, Global Shell Games: Experiments in Transnational Relations, Crime and Terrorism (Cambridge: Cambridge University Press, 2014), 250 pages.
J.C. Sharman and Andrew Phillips, “Explaining Durable Diversity in International Systems: State, Company and Empire in the Indian Ocean,” International Studies Quarterly 59 (September 2015), 436-448.
J.C. Sharman and Carolin Liss, “Global Corporate Crime-Fighters: Private Transnational Responses to Piracy and Money Laundering,” Review of International Political Economy 22 (No.4 2015), 693-718.
J.C. Sharman, “War, Selection, and Micro-States: Economic and Sociological Perspectives on the International System,”European Journal of International Relations 21 (March 2015), 194-214.
J.C. Sharman, Michael G. Findley and Daniel L. Nielson, “Causes of Non-Compliance with International Law: A Field Experiment in Anonymous Incorporation,” American Journal of Political Science 59 (January 2015), 146-161.
J.C. Sharman and Alexander Cooley, “Blurring the Line between Licit and Illicit: Transnational Corruption Networks in Central Asia and Beyond,” Central Asian Survey 34 (No.1 2015), 11-28.
J.C. Sharman and Hun Joon Kim, “Accounts and Accountability: Corruption, Human Rights and Individual Accountability Norms,” International Organization 68 (May 2014), 417-448.
J.C. Sharman, Shima Baradaran, Michael G. Findley, and Daniel L. Nielson, “Funding Terror,” University of Pennsylvania Law Review 162 (February 2014), 477-536.
J. C. Sharman is a Professor in the Centre for Governance and Public Policy at Griffith University.
Despots' jackpots; Corruption
422.9029 (Feb. 25, 2017): p71(US).
Copyright: COPYRIGHT 2017 Economist Intelligence Unit N.A. Incorporated
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Why it is so difficult to hold kleptocrats accountable
The Despots Guide to Wealth Management: On the International Campaign against Grand Corruption. By J.C. Sharman. Cornell University Press; 261 pages.
CORRUPTION is never far from the front page. In recent weeks, thousands of Romanians protested against plans to decriminalise low-level graft, and Rolls-Royce was hit with a [pounds sterling]671m ($835m) penalty for alleged bribery. Meanwhile, long-running corruption scandals continue to roil political and corporate leaders in Brazil and Malaysia. The growing attention has spurred governments to pledge action, as dozens did at a global anti-corruption summit in London last year.
Jason Sharman, professor of international relations at Cambridge University, is particularly interested in "grand corruption": the theft of national wealth by kleptocratic leaders and their cronies, often in poor (albeit resource-rich) countries. It is a subject he knows well, having spent over a decade studying the offshore centres and vehicles--shell companies, for example--that are used to hide ill-gotten gains.
The list of light-fingered leaders who feature in "The Despot's Guide to Wealth Management" is long. It includes various dead ones, such as Nigeria's Sani Abacha, Mobutu Sese Seko of Zaire, Indonesia's Suharto and Ferdinand Marcos of the Philippines (whose shoe-loving wife, Imelda, graces the book's cover). These four alone ran off with an estimated $55bn. More recent examples include the pre-Arab spring leaders of Egypt, Libya and Tunisia, and Viktor Yanukovych of Ukraine. The overall amount that has been pilfered is anyone's guess, given the murkiness of offshore finance. Estimates for Egypt under Hosni Mubarak range from $1bn to $70bn. One complicating factor is that much of the money is siphoned off through "legal corruption", in business ventures that comply with local laws, often because of legislative tinkering by pliant parliaments.
For a long time governments, even in the rich world, seemed uninterested in bringing kleptocrats to book. That began to change in the 1990s, as a result of two things. The end of the cold war took away a reason to turn a blind eye to theft by heads of client states. That coincided with a shift in thinking among makers of development policy, who began to view corruption as one of the main causes of poverty. Mr Sharman also credits the rise of anti-corruption NGOs and institutions that offer practical help to track down former leaders' loot, such as the Stolen Asset Recovery Initiative, a joint UN-World Bank project.
America has pushed the anti-corruption agenda hardest, with strong laws (such as the Foreign Corrupt Practices Act and the Patriot Act), a determination to enforce them--with help from a special anti-kleptocracy unit in the Justice Department--and congressional backing. Senate investigations have highlighted the role of banks, lawyers and other "gatekeepers" in enabling grand corruption. America, Britain and Switzerland are especially attractive destinations for foreign wealth because of their sophisticated financial centres. All three have made strides in tackling corruption, but many gaps remain.
Anonymous shell companies, dubbed the getaway cars of financial crime, are legion in America. Britain also maintains a network of opaque offshore satellites, including the British Virgin Islands. Police and regulators are keen to know more about them, but lack funding. Switzerland has shed some of its secrecy and passed laws to ease asset recovery and repatriation, but implementation tends to be patchy; Mr Sharman thinks weak laws and strong enforcement do more good than strong laws and weak enforcement. He also includes a chapter on his native Australia which, he concludes (with help from a private investigator hired to sift through corporate records), is "able but unwilling" to stop inflows of iffy money from China and Papua New Guinea.
Many of the difficulties in recovering stolen assets relate to the border-crossing nature of the theft. The "mutual legal assistance" process, used by governments to request or share information about bank accounts and company ownership, is clunky and unreliable. Mr Sharman laments the "inherent difficulty of international legal action in a world of sovereign states".
Investigations become more challenging when the country where the alleged corruption took place refuses to co-operate (usually because those under suspicion still wield power). American prosecutors made only limited headway in their high-profile case against the free-spending son of Teodoro Obiang Nguema Mbasogo, president of Equatorial Guinea since 1979. To their credit, America and Switzerland seem undeterred by such blocking tactics as they probe the still-unfolding 1MDB scandal in Malaysia.
Even when both sides are willing, difficulties abound. Mr Sharman describes a host of problems afflicting asset-recovery efforts after the Arab revolutions in 2011, from basic transliteration headaches to proving under the laws of the host country that funds in a particular account were acquired through corruption (which, given money's fungibility, is especially difficult if the account-holder also has legitimate businesses). Egypt found itself in a frustrating situation. It needed to find "the specific location and nature of stolen assets abroad to recover them", yet countries holding them would co-operate only once Egyptians had located these assets. The authorities in Cairo became so frustrated that in 2012 the government sued the British Treasury after it had denied 15 of Egypt's requests for legal assistance.
So far, little money has been returned to Cairo. This fits in with the broader pattern. As of 2014, the worldwide amount of looted state wealth that had been repatriated stood at just $4.5bn, compared with hundreds of billions believed stolen. Even seizures of criminal proceeds in America are a mere "pin prick", according to an official. But although the extra anti-corruption efforts have not translated into a big increase in recoveries, they may still have a deterrent effect--just as speed limits make a difference to people's driving, even though only a few drivers are fined.
Mr Sharman ends with some suggestions for strengthening the fight against the mega-thieves: tougher penalties for firms that help them, especially banks (fines are paltry, except in America); blacklisting of the worst kleptocracies, with their officials denied physical or financial access to the West; and greater use of tax policy, especially in light of the recent wave of international tax-transparency agreements. Like Al Capone, most corrupt officials are also guilty of a tax crime. The fact that these are still only proposals shows just how far there is to go.
The Despot's Guide to Wealth Management: On the International Campaign against Grand Corruption.
By J.C. Sharman.
Source Citation (MLA 8th Edition)
"Despots' jackpots; Corruption." The Economist, 25 Feb. 2017, p. 71(US). General OneFile, go.galegroup.com/ps/i.do?p=ITOF&sw=w&u=schlager&v=2.1&id=GALE%7CA482226768&it=r&asid=4e096ef61f237bf4f283b1ed6eaf0877. Accessed 3 Mar. 2017.
Gale Document Number: GALE|A482226768
The Money Laundry: Regulating Criminal Finance in the Global Economy
Richard N. Cooper
91.3 (May-June 2012): p174.
Copyright: COPYRIGHT 2012 Council on Foreign Relations, Inc.
http://www.foreignaffairs.org
The Money Laundry: Regulating Criminal Finance in the Global Economy. By J. C. Sharman. Cornell University Press, 2011, 216 pp. $29.95.
The G-7 summit of 1989 established a global system of rules and regulations to prevent money laundering. Sadly, there is no compelling evidence that more than two decades of multilateral cooperation have stymied money laundering or reduced the prevalence of the other crimes it supports, such as drug trafficking and terrorism financing. Sharman boldly tested the international anti-money-laundering rules by breaking them, setting up shell companies and bank accounts without providing the kinds of documentation required by law. This proved easier to do in the United States and other rich countries than in well-known offshore financial havens, such as the Cayman Islands and Panama. But if the rules are so demonstrably ineffective, why have so many countries implemented them, often at considerable expense? Sharman's answer is that countries fear that if they fail to do so, the Organization for Economic Cooperation and Development's Financial Action Task Force will effectively blacklist them, making it difficult for them to conduct transactions with the world's leading banks. The evidence suggests that the U.S. federal government ought to apply a similar form of soft coercion to some U.S. states, such as Nevada and Wyoming, where it is all too easy to break the international rules and get away with it.
Cooper, Richard N.
Source Citation (MLA 8th Edition)
Cooper, Richard N. "The Money Laundry: Regulating Criminal Finance in the Global Economy." Foreign Affairs, May-June 2012, p. 174. General OneFile, go.galegroup.com/ps/i.do?p=ITOF&sw=w&u=schlager&v=2.1&id=GALE%7CA289216921&it=r&asid=c367fd29108b19085f75971f2bc5aed6. Accessed 3 Mar. 2017.
Gale Document Number: GALE|A289216921
Phillips, Andrew. International order in diversity: war, trade and rule in the Indian Ocean
S.R. Silverburg
53.8 (Apr. 2016): p1237.
Copyright: COPYRIGHT 2016 American Library Association CHOICE
http://www.ala.org/acrl/choice/about
Phillips, Andrew. International order in diversity: war, trade and rule in the Indian Ocean, by Andrew Phillips and J. C. Sharman. Cambridge, 2015. 251 p bibl index (Cambridge studies In international relations, 137) ISBN 9781107084834 cloth, $99.99; ISBN 9781107446823 pbk, $34.99; ISBN 9781316310007 ebook, $28.00
53-3719
DS341
2014-44743 CIP
This outstanding contribution to international relations theory challenges the general acceptance of the idea that political communities tend to resemble one another, revolving around the Western Westphalian system. Rather Phillips (Univ. of Queensland, Australia) and Sharman (Griffith Univ., Australia) argue, with extensive support, that numerous political forms reflecting diversity have appeared in non-Western regions of the world. The authors focus on the Indian Ocean region from 1500 to the contemporary period and look at the Portuguese Estado da India, the Mughal Empire, the Dutch East India Company, and the English East India Company, covering European trade patterns and establishing patterns of control and competition. The authors argue persuasively that the diverse nature of political communities led to a structured order, an early example of globalization that challenges the Eurocentric approach many international relations theorists have focused upon. The authors point out that diverse political units are the norm, unlike a homogeneous universal system, and call for reevaluating the basis of Western imperialism, looking at the institutional means by which European powers established their presence in South Asia and the Far East. Summing Up: *** Highly recommended. Upper-division undergraduates and above.--S. R. Silverburg, Catawba College
Source Citation (MLA 8th Edition)
Silverburg, S.R. "Phillips, Andrew. International order in diversity: war, trade and rule in the Indian Ocean." CHOICE: Current Reviews for Academic Libraries, Apr. 2016, p. 1237. General OneFile, go.galegroup.com/ps/i.do?p=ITOF&sw=w&u=schlager&v=2.1&id=GALE%7CA449661850&it=r&asid=3a30e1c27441b0a61c9381230b9ef645. Accessed 3 Mar. 2017.
Gale Document Number: GALE|A449661850
Findley, Michael G.: Global shell games: experiments in transnational relations, crime, and terrorism
J.R. Strand
53.04 (Dec. 2015): p641.
Copyright: COPYRIGHT 2015 American Library Association CHOICE
http://www.ala.org/acrl/choice/about
Findley, Michael G. Global shell games: experiments in transnational relations, crime, and terrorism, by Michael G. Findley, Daniel L. Nielson, and J. C. Sharman. Cambridge, 2014. 250p bibl index (Cambridge studies in international relations, 128) ISBN 9781107043145 cloth, $90.00; ISBN 9781107638839 pbk, $32.99; ISBN 9781107723290 ebook, $26.00
53-1959
HV6252
2013-29431 CIP
Over the past 20 years political scientists have rediscovered the utility of experimental research designs. New technologies and fresh approaches to identifying causal inference have led scholars to seek novel means to engage in randomized experiments. In this important book, Findley (Univ. of Texas at Austin), Nielson (Brigham Young Univ.), and Sharman (Griffith Univ., Australia) explore whether anonymous shell corporations circumvent regulations on various criminal activities such as money laundering and conducting business with possible terrorist organizations. Their experimental design randomly assigned shell corporations to various treatments to gauge the level of compliance with international regulations. One of the more interesting findings is that corporations in countries viewed as tax havens were more likely to be in compliance than firms in developed countries. What makes this book important is not just the innovative research design but also the readability of the methodology discussion and the case studies. While some may question the generalizability of this study, it will convince many of the efficacy of using experimental research designs in international relations research. The authors also make a significant contribution to the study of non-state actors in world politics. Summing Up: *** Highly recommended. Upper-division undergraduate, graduate, research, and professional collections.--J. R. Strand, University of Nevada, Las Vegas
Strand, J.R.
Source Citation (MLA 8th Edition)
Strand, J.R. "Findley, Michael G.: Global shell games: experiments in transnational relations, crime, and terrorism." CHOICE: Current Reviews for Academic Libraries, Dec. 2015, p. 641. General OneFile, go.galegroup.com/ps/i.do?p=ITOF&sw=w&u=schlager&v=2.1&id=GALE%7CA437506145&it=r&asid=f42f8f05d98c8ed89213c73b917fabc4. Accessed 3 Mar. 2017.
Gale Document Number: GALE|A437506145
Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism
H. Richard Friman
130.2 (Summer 2015): p383.
Copyright: COPYRIGHT 2015 Academy of Political Science
http://www.psqonline.org/History.cfm
Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism by Michael G. Findley, Daniel L. Nielson, and J.C. Sharman. New York, Cambridge University Press, 2014. 271 pp. Cloth, $90.00; paper, $32.99.
Scholars and policymakers often describe the illicit global economy and efforts to control it as the search for needles in haystacks or drops in an ocean, with successes bedeviled by balloon and Whac-A-Mole effects. The authors of Global Shell Games introduce and unpack a new metaphor and, through an innovative global field experiment, demonstrate the importance of nonstate actors in implementing--and, more importantly, failing to implement--the compliance obligations agreed to by states.
The book focuses on the "corporate service providers" that "establish, sell and maintain" shell companies (p. 38). Regulatory efforts at transparency lie at the heart of international efforts against money laundering, terrorist financing, and corruption. However, focusing on the state as the "locus of compliance" with "international financial transparency standards" misses the central role of service providers (pp. 2-3). The authors reach out to service providers to assess the "availability of anonymous shell corporations globally" and, in turn, the extent to which state parties to international control efforts have been able to effectively "encourage compliance" with international standards (pp. xiii, 7). Despite such standards, the book reveals that there is no shortage of service providers who are willing and eager to assist in the creation of nontransparent shell companies.
The authors' findings are based on 7,456 e-mail requests for assistance made to "3,771 firms in 181 countries" (p. 7). The book's exercise in "experimental transnational relations" mixes "placebo" inquiries with randomized "treatments," including altering the identity of the requestor, adding "markers" that suggest ties with terrorism or corruption, treatments that point to international laws and normative standards, potential penalties, and offers of "premiums" for evasion (pp. 88-89, 97, 109). These treatments are derived from prominent international relations (IR) theories, real-world examples, and the "simple intuitions" of the project team (p. 145). The experiment enables the authors to test contending IR theories as to "when and why actors comply with international rules" and bridge the divide between IR scholars, policymakers, and practitioners (p. 5).
Yet aspects of the experiment and interpretations of the corporate service provider responses and nonresponses merit further discussion. For example, the authors struggle with the overall low response rate to their e-mail inquiries, shifting back and forth across and within the substantive chapters between rejecting and partially accepting nonresponse as a form of "soft compliance" (p. 61). As patterns of nonresponse change with the use of treatments, again the authors are inconsistent in interpreting the results. The ways in which service providers might be interpreting the wording of the treatments also merits further discussion. For example, among the project's critical findings is the limited impact of reference to Financial Action Task Force standards compared to e-mails that note those of the Association of Certified Money Laundering Specialists (ACAMS), leading the authors to point to the relative power of private standards on compliance. But with the project's follow-up surveys revealing little familiarity with either organization, the results may simply be an artifact of the inclusion of the words "money laundering" in the ACAMS email and the failure to use the full name of the Financial Action Task Force on Money Laundering.
These points aside, Global Shell Games is an impressive undertaking that provides new insights into international financial transparency and the challenges of compliance. The authors call renewed attention to the importance of nonstate actors and demonstrate the potential for randomized field experiments in revealing the insights and limitations of prominent IR theories.
H. RICHARD FRIMAN
Marquette University
Friman, H. Richard
Source Citation (MLA 8th Edition)
Friman, H. Richard. "Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism." Political Science Quarterly, vol. 130, no. 2, 2015, p. 383+. General OneFile, go.galegroup.com/ps/i.do?p=ITOF&sw=w&u=schlager&v=2.1&id=GALE%7CA420050292&it=r&asid=1cd699b3e78bb0e87a2648d27364c67a. Accessed 3 Mar. 2017.
Gale Document Number: GALE|A420050292
The Money Laundry: Regulating Criminal Finance in the Global Economy
Ethan Wagner
66.1 (Fall-Winter 2012): p241.
Copyright: COPYRIGHT 2012 Columbia University School of International Public Affairs
http://jia.sipa.columbia.edu/
THE MONEY LAUNDRY: REGULATING CRIMINAL FINANCE IN THE GLOBAL ECONOMY
J.C. Sharman
(Ithaca: Cornel1 University Press), 224 pages.
Those inclined to believe that financial malfeasance is widespread will find abundant evidence in this past summer's headlines alone. Standard Chartered, ING, and HSBC--three of the world's largest banks--agreed to pay hundreds of millions in fines to settle charges of helping pariah states subvert international sanctions. Walmart, under pressure from regulators, launched an internal investigation into allegations of bribery and money laundering by its Latin American affiliate. And in the U.S. presidential campaign, accusations about offshore financial havens and Swiss bank accounts have flooded the airwaves.
In The Money Laundry, J.C. Sharman of Australia's Griffith University raises his acutely cocked eyebrow not at the prevalence of money laundering (which he concedes is rampant) but at the ability of existing policies to halt its spread. Sharman has gathered data not only through meticulous research and experience consulting for international organizations but--with a dash of brio in a field that can otherwise seem dry--by posing "as a would-be money launderer, soliciting offers for prohibited anonymous shell companies and bank accounts."
Sharman argues that antimoney laundering policy is not only ineffectual but has frequently been driven more by pressure to conform to the wishes of outside interests--powerful countries, organizations, and companies--rather than to solve actual problems. Highlighting the reduction ad absurdum case of Nauru, he questions why an eight-square-mile Pacific atoll with a population of 11,000 would focus a quarter of its legislation passed in the last decade on money laundering when faced with so many more pressing needs. It seems a persuasive case, considering as how Nauru has not a single bank, no currency, and lacks any sign of a financial sector to speak of.
Ultimately, the author proves this point, though it is not necessarily novel to observe that small states must often heed the wishes of larger powers to safeguard their own diplomatic and economic interests. However, given Sharman's considerable expertise on the subject--demonstrated amply throughout the book--readers may wish the author spent more time prescribing ways to remedy the flaws of the current approach.
Wagner, Ethan
Source Citation (MLA 8th Edition)
Wagner, Ethan. "The Money Laundry: Regulating Criminal Finance in the Global Economy." Journal of International Affairs, vol. 66, no. 1, 2012, p. 241+. General OneFile, go.galegroup.com/ps/i.do?p=ITOF&sw=w&u=schlager&v=2.1&id=GALE%7CA312509623&it=r&asid=5727c864784b70e1c9d3c04ea9fe8c6a. Accessed 3 Mar. 2017.
Gale Document Number: GALE|A312509623
Sharman, J.C.: The money laundry: regulating criminal finance in the global economy
I. Walter
49.9 (May 2012): p1706.
Copyright: COPYRIGHT 2012 American Library Association CHOICE
http://www.ala.org/acrl/choice/about
49-5186
HV6768
2011-13087 CIP
Sharman, J. C. The money laundry: regulating criminal finance in the global economy. Cornell, 2011. 200p bibl index alp ISBN 0801450187, $29.95; ISBN 9780801450181, $29.95
Money laundering is intended to conceal illegal economic transactions such as drug trafficking, bribery and corruption, and the rackets, as well as tax evasion. Consequently, the proceeds must be kept hidden both in terms of the monetary flows involved and the asset values built up, and this financial secrecy has to be maintained permanently. Money laundering meets these needs and at the same time provides the mechanism to release hidden assets into spendable forms for personal consumption. It also allows the financing of activities that are themselves illegal, such as terrorism. The bottom line is that financial secrecy has value, and there are people willing to buy it and sell it. This volume focuses on a key part of the money laundering business directly related to criminal finance, and the efforts that governments have undertaken to impede it at both the national and international levels--the latter focused especially on the OECD. Sharman (Griffith Univ., Australia) describes multiple attempts to create secret vehicles and clandestine accounts, which are successful despite the best efforts of governments. The worst offenders, according to the author, are US institutions. This primary research is the strongest aspect of the book. Extensive bibliography. Summing Up: Highly recommended. *** Upper-division undergraduate through professional collections.--I. Walter, New York University
Walter, I.
Source Citation (MLA 8th Edition)
Walter, I. "Sharman, J.C.: The money laundry: regulating criminal finance in the global economy." CHOICE: Current Reviews for Academic Libraries, May 2012, p. 1706. General OneFile, go.galegroup.com/ps/i.do?p=ITOF&sw=w&u=schlager&v=2.1&id=GALE%7CA288873072&it=r&asid=f256678635f8930f11c92ed925c54942. Accessed 3 Mar. 2017.
Gale Document Number: GALE|A288873072
GLOBAL SHELL GAMES: EXPERIMENTS IN TRANSNATIONAL RELATIONS, CRIME, AND TERRORISM
by Michael G. Findley, Daniel L. Nielson, and J.C. Sharman. Cambridge, UK: Cambridge University Press, 2014. 288pp. Cloth $90.00. ISBN: 9781107043145. Paper $32.99. ISBN: 9781107638839.
Reviewed by Mathieu Deflem, Department of Sociology, University of South Carolina. Email: deflem [at] mailbox.sc.edu.
pp.275-278
The detection of noncompliance in matters of international law and finding effective ways of enforcement are pressing problems. International legal regimes suffer from lacking a central authority with the legitimacy to coax compliance and the resources to enforce sanctions in cases of noncompliance. In this interesting book, political scientists Michael G. Findley, Daniel L. Nielson, and J.C. Sharman report from their experimental research on the behavior of so-called shell companies that provide anonymous incorporation on the international market. The authors make the strong argument that their study is especially relevant from the viewpoint of its methodological commitment to the scientific approach to an aspect of international relations. The sheer number of transnational actors, they argue, can be seen as an advantage in this respect because it enables a field experiment approach to draw from such a large universe of cases. Therefore, the method used in this book, drawing from some 7,456 contacts established with 3,771 corporate service providers in 181 countries, can provide evidence on shell companies on a global scale to test various causal theories of their behavior.
Specifically, the research reported in this book involved field experiments whereby offers were made for prohibited anonymous shell corporations, in which the identity of those involved remains untraceable. The researchers and their team members posed as customers with more or less questionable motives, involving money laundering, corruption, and terrorist financing. Requesting confidential incorporation, the researchers manipulated various conditions, such as a level of information on international standards and legal penalties, and posed as citizens of various countries that implied different levels of risk. The companies were randomly assigned to the various types of misconduct suggested in the communications, which were done by email in two or three rounds, so that the causes of (mis)conduct could be detected.
The authors’ approach is considered the first field experiment in international relations that is conducted on a global scale, involves multiple nations, and is capable of testing theories concerning international regulatory regimes. The book offers a complement to those studies in international relations that continue to give primacy to the behavior of governments when it comes to regulatory regimes and the compliance that they yield or fail to yield. Findley, Nielsen and Sharman turn radically towards the shell companies themselves to see when and why they do or do not follow international standards that [*276] mandate that it be possible they can be traced back to their owners. The lack of traceability to identity is commonly sees as a major mechanism that allows for various types of corporate misconduct.
Generally, the research found that a large number of private firms routinely violate international standards. Thus, a focus on the inter-governmental sanctions is too limited to reveal important dimensions of the problem. Instead, as the authors suggest, an experimental approach to transnational relations is needed in order to offer an adequate empirical focus alongside of a theoretical orientation that moves away from states and a methodological approach that can benefit from the known advantages of the experimental design.
Findley, Nielsen and Sharman found that firms in tax haven and poor countries generally followed international standards better than those in member countries of the Organisation for Economic Co-operation and Development and rich countries. Information on international law had little effect, while mention of the Internal Revenue Service in the USA did increase compliance. Incorporation service providers in the United States, however, are especially delinquent, although US law firms are more likely to refuse service.
Turning to the results of the experimental conditions, the research investigated if associations with corruption and terrorism would affect service providers’ willingness to offer anonymous incorporation. By example of how the researchers introduced these manipulations, the terrorism treatment involved an email request for incorporation that mentioned consultation for a number of Muslim aid organizations and specified that the request came from Pakistani citizens living in Saudi Arabia. Partially redressing an otherwise bleak picture about the general lack of compliance on a global level, the experimental conditions of corruption and terrorism significantly lowered the response rate compared to both the baseline model and other treatment conditions. However, among the companies that did respond, the results show, unidentifiable incorporation was offered significantly more often. The terrorism treatment did lead to less non-compliance than the corruption treatment. Moreover, compliance rates were found to drop significantly when an additional monetary premium was offered.
Finally, the researchers studied the impact of information on international standards and sanctions. The experimental condition involving the provision of information on international standards generally did not lead to more compliance. Especially information on intergovernmental standards, specifically a reference to the Financial Action Task Force, were weak and not much more impactful than the private standards of the Association of Certified Anti-Money Laundering Specialists. In the United States, however, mention of IRS enforcement did decrease non-compliance significantly. As to the effect of information provided on possible legal penalties and norms, the research found that under these conditions shell companies were less likely to decline service. The authors attribute this peculiar finding to the notion that under such conditions corporations suspect [*277] less-risky behavior and/or a lesser chance that illegal behavior will be reported.
Because of its exciting and novel data collection approach, this small book offers a fine addition to the literature on international relations and international regulatory regimes for both social-sciences scholars and policymakers. The experimental method has much to offer in terms of its strength to provide results of actual conduct, especially when that conduct is by definition problematic because of the implied illegalities. This approach is superior to one that can only lead to speculation on intended or assumed behavior on the basis of a study of norms and the agencies that develop and enforce them. Surely, the authors have done a great service to the study of shell companies by virtue of the specific design and execution of their empirical study alone.
I was impressed with this work for its rigor and commitment to the resolutely analytical approach in seeking to account for variation in empirical reality. Findley, Nielsen and Sharman devote much attention to the value of their methodological approach, both because of its novelty in the field of international relations as well as its advantages over other, case-based approaches and or those that focus on governments and the inter-national agreements they agree upon rather than non-state actors such as private companies. These arguments are serious and in need of some rational response from scholars not following the experimental lead of this book’s authors.
Writing as a sociologist interested in law, especially from a global and comparative-historical perspective, I note that the authors devote a lot of time to praising their experimental methodology. Perhaps the field of international relations is not known for its reliance on experiments or perhaps even more generally its methodological rigor, which would excuse some of the incessant manner in which the authors discuss their methods, both in general methodological respects as in terms of specific technique. Methodological rigor is a noble feature of scientific research, but such methods are not meaningful outside the context of a theoretical framework. In that respect, it appears to me, this book does not climb out of the lower levels of science as mere effectiveness study. This strategy may appeal well to policymakers, but it is in fact lacking in the very important respect of science as an intellectual activity that is based on questions that make sense within a specific theoretical framework of inquiry. A theory is not a regularity or established association between variables but must be able to make sense thereof. Besides, on a methodological level as well, I must question the presentation of the experimental method as scientific relative to other methods when, surely, there are methods that are not-experimental that do contribute to scientific analysis in equally valid albeit different ways.
Multiple methods can prove their merit in a scientific setting and have both their respective strengths and limitations. The present study surely can claim knowledge of many cases under precisely identifiable conditions, but it lacks a depth of knowledge over any one or more cases and the mechanisms that may account for observed regularities. In any case, what this book does not offer, but what can and should be achieved in [*278] another work following up on or complementary to the present study, is the development of a theory of compliance and/or non-compliance and an integration of method with theory, rather than the other way around. With these observations in mind, this succinct book by Findley, Nielson, and Sharman must be seen as a significant addition to our knowledge of international regulatory regimes and the conditions of compliance therewith, the kind of work which case-based approaches not only can but need to know in order to place their own investigations in a more realistic context.
Global Shell Games: A Mystery Shopping Experiment in Know Your Customer Standards
By Michael G Findley, Assistant Professor, University of Texas, Daniel L Nielson, Brigham Young University, and Jason Sharman, Centre for Governance and Public Policy, Griffith University (01/12/2012)
Organised crime and the financing of terrorism depend on financial secrecy. Untraceable shell companies are widely regarded as one of the most important means of providing such financial secrecy. Recognising this danger, international organisations and national governments have responded by mandating Know Your Customer (KYC) standards to enable authorities to ‘look through’ shell companies to find the real individuals in control. Yet as important as these KYC rules are, no one has really known how effective these policy measures have been in achieving their aims. While proponents trumpet the need for corporate KYC standards, critics allege that the standards are an expensive failure.
In response to this fundamental uncertainty, we designed an experiment based on impersonating 21 fictitious low- and high-risk customers and soliciting offers for shell companies from thousands of Corporate Service Providers in 182 countries to test whether and how KYC standards are actually applied in practice. Here we provide a brief summary of the design of the global mystery shopping experiment, as well as the some of the main results.
The exercise was based on creating a variety of fictitious customers who exhibited various types and levels of risk, particularly to do with corruption and the financing of terrorism. Using email approaches, we then had researchers impersonating these customers make 7466 requests for shell companies to 3773 providers. The standard email explained the customer was a consultant looking for tax savings, limited liability and confidentiality, and asked how much a company would cost, and, crucially, what identity documents were required. If providers fail to collect KYC documentation on customers forming shell companies, it is very difficult for the authorities to establish the identity of the beneficial owner further down the track, making the company effectively untraceable.
The risk profile of the customer was manipulated in several ways. The baseline approach came from a customer in one of eight small OECD countries with low levels of corruption and terrorist financing. The corruption risk profile instead had the customer come from West Africa or Central Asia, and work in government procurement, features that in combination with the standard shell company solicitation should have constituted an obvious red flag. Similarly, the terrorism financing risk had the customer being a citizen of one of four countries perceived as having a high terrorism risk, and working for an Islamic charity in Saudi Arabia. Other variations included providing more information about international KYC standards, and suggesting various penalties or inducements for breaking these rules.
Having contacted the provider with a request for a shell company, one of five things could happen. Most simply, the provider could decline to reply, either as a product of commercial logic, inattention or risk aversion. Similar reasoning might lie behind the second outcome, when the provider replied to refuse service. Third, the provider could offer to form a company, but insist on certified identification documents for KYC purposes, a response which we coded as compliant with international standards. If the response asked for some identity documents, but did not specify they had to be certified, this was classified in partially compliant. Finally, if the provider offered a company without asking for any identity documents, this was coded as non-compliant.
Given that the project was based on impersonating fictitious characters and pretending to be interested in buying shell companies, it was based on deception. Indeed, this deception gives us confidence that we did receive genuine answers from providers. But deception must be ethically justified. In line with general principles governing such research, deception can only be justified where (1) the costs are low, (2) subjects are not exposed to any physical or emotional pain, (3) there is no other way to do the research, and (4) there are significant benefits resulting from the research.
By randomly matching customers of varying risk profiles with the providers, it is possible to see how different risks influenced providers’ willingness to reply, and to comply with or violate international KYC standards on the beneficial owners of shell companies. Relative to the low-risk baseline profile, high-risk profiles like those from the corruption and terrorist financing email approaches should have decreased the proportion of providers replying and failing to perform KYC checks, while increasing the proportion insisting on certified identity documents. To what extent were these expectations fulfilled, and what evidence is there as to whether or not KYC rules are effective?
Overall, international rules that those forming shell companies must collect proof of customers’ identity are relatively ineffective. Nearly half (48 per cent) of all replies received did not ask for certified identity documentation, and 22 per cent of all replies received did not ask for any identity documents at all to form a shell company.
We explain many of the results below with reference to a ‘Dodgy Shopping Count’, which measures the average number of providers a particular type of customer would have to approach to receive a non-compliant response, ie, be offered a shell company with no need to supply any identity documents. A five per cent non-compliance rate would thus equal a Dodgy Shopping Count of 20. The lower the Dodgy Shopping Count, the easier it is to get an anonymous shell corporation.
Thus at the broadest level, of the 7,466 inquiries sent, the non-compliance level is 8.4 per cent, for an overall Dodgy Shopping Count of 12. The 8.4 per cent includes non-responses in the denominator, since conceivably some providers may fail to reply in response to risk and thus may be complying with international law in a ‘soft’ way. As a simplified measure, it is important to note that very high Dodgy Shopping Counts (ie, very low rates of non-compliance) in some cases exist alongside very high rates of compliance (eg, the Cayman Islands), very high rates of partial compliance (eg, Denmark), very high rates of refusal and non-response (eg, US law firms), or some combination of these. Thus, jurisdictions may have highly positive Dodgy Shopping Counts with very different patterns in the other categories.
Against the conventional policy wisdom, those selling shell companies from tax havens like the Cayman Islands, the Bahamas and Jersey were significantly more likely to comply with the rules than providers in OECD countries like Britain, Australia, Canada and especially the United States, which was one of the worst performers (see Tables 1 and 2). In the United States sample, the noncompliance level is 9.2 per cent and the Dodgy Shopping Count was 10.9, which was almost 10 per cent lower than the average in the international sample. Obtaining an anonymous shell company is therefore easier in the US than in the rest of the world.
Table 1: Dodgy Shopping Count by Country for Nations with at least 25 approaches. All Firms in none of the top eight countries were ever found noncompliant. Because there is no natural upper bound on the Dodgy Shopping Count, we set it to 100 for these.
jsdsct1
Figure 2: Dodgy Shopping Count by Type of Country Internationally and by Type of Firm in the United States
jsgsct2
However, two factors worsen the gap between the US and other countries. First, the US number is elevated by the much higher non-response rate from firms in US sample, which was 77.3 per cent in the US compared to 49.3 per cent in the international sample. The proportion of providers in the US sample who replied to our inquiries and required no identity documents whatsoever was 41.5 per cent, which is roughly two-and-a-half times the average of 16.5 per cent in the international sample. We followed up with firms failing to reply to any of our emails with an innocuous inquiry basically asking if the firm was still in business and assisting customers but making no mention of confidentiality, taxes, or liability. We learned that the vast majority of non-responses are not soft refusals: they failed to respond to any inquiry, even the most innocuous that we could design. Only a tiny proportion of US providers of any kind met the international standard by requiring notarized identity documents (10 of 1722 in the US sample, less than one per cent). Thus our Dodgy Shopping Count measure tends to flatter the US by equating non-response with a form of compliance.
Another surprise was that providers in poorer, developing countries were at least as compliant with global corporate KYC standards as those in rich, developed nations. For developing countries the Dodgy Shopping Count is 12, while for developed countries it is 7.8. The significance of this finding is that it does not seem to be particularly expensive to enforce the rules on shell companies, given that poor nations do better than rich countries. This suggests that the relatively lacklustre performance in rich countries reflects a simple unwillingness to enforce the rules, rather than any incapacity. These results lend support to the results of a similar study by the World Bank, The Puppet Masters, which similarly concluded that rich, developed countries are generally the worst offenders in failing to meet corporate KYC standards.
Defying the international guidelines of a ‘risk-based approach’, shell company providers were often remarkably insensitive to even obvious criminal risks. Thus, although providers were less likely to reply to clear corruption risks than to approaches for low-risk profiles, those providers that did respond were also less likely to require certified identity documents of potential customers from high-corruption countries who claim to work in government procurement, a notoriously corruption-prone area.
Corporate service providers were significantly less likely to reply to potential terrorists and were also significantly less likely to offer anonymous shell companies to customers who are possibly linked to terror. However, compared to the low-risk baseline profile, a significantly lower share of firms replying to the terrorist profile refused service.
In some ways the biggest surprise was how little difference there was between the relatively innocuous low-corruption risk email and the obviously high-risk corruption approach, despite the international guidelines specifying that these customers should be subject to enhanced scrutiny. Excluding the US, the Dodgy Shopping Count was 11.5 for the low risk email, 11.3 for corruption, and 18.5 for terrorism financing risk. The results for the United States are 9 for the low risk email, 9.9 for corruption, and 17.4 for terrorism financing.
Varying the email approach to inform providers of the KYC rules they should be following made them no more likely to do so in the US or internationally, even when penalties for non-compliance were mentioned. The exception was in the US, where telling providers that the IRS enforced Know Your Customer standards reduced non-compliance (and thus increased the Dodgy Shopping Count from 9.5 to 13.2). In contrast, when customers offered to pay providers a premium to flout international rules, the rate of demand for certified identity documentation fell compared to the low-risk customer profiles.
These results represent by far the most detailed, extensive and reliable test of KYC rules in relation to shell companies ever performed, and the pattern that emerges as a result is worrying. Given the patchy overall level of compliance, the easy availability of formally prohibited untraceable shell companies, and the willingness of hundreds of businesses to supply obvious criminal risks with the corporate anonymity, the existing system seems to be very compromised. Many of these failings can be laid at the door of large, rich countries, especially the English-speaking OECD members and the United States above all, who conspicuously fail to apply standards that they have so energetically imposed on others.
[For full results of the study, please contact Jason Sharman at j.sharman@griffith.edu.au]
Launderers Anonymous
A study highlights how easy it is to set up untraceable companies
Sep 22nd 2012 | NEW YORK
Timekeeper
SHELL companies—which exist on paper only, with no real employees or offices—have legitimate uses. But the untraceable shell also happens to be the vehicle of choice for money launderers, bribe givers and takers, sanctions busters, tax evaders and financiers of terrorism. The trail has gone cold in many a criminal probe because law enforcers were unable to pierce a shell’s corporate veil.
The international standard governing shells, set by the inter-governmental Financial Action Task Force (FATF), is clear-cut. It says countries should take all necessary measures to prevent their misuse, such as ensuring that accurate information on the real (or “beneficial”) owner is available to “competent authorities”. More than 180 countries have pledged to follow it. A study* scrutinises the level of compliance worldwide. The results are depressing.
In this section
Posing as consultants, the authors asked 3,700 incorporation agents in 182 countries to form companies for them. Overall, 48% of the agents who replied failed to ask for proper identification; almost half of these did not want any documents at all. Contrary to conventional wisdom, providers in tax havens, such as Jersey and the Cayman Islands, were much more likely to comply with the standards than those from the OECD, a club of mostly rich countries. Even poor countries had a better compliance rate, suggesting the problem in the rich world is not cost but unwillingness to follow the rules (see chart). Only ten out of 1,722 providers in America required notarised documents in line with the FATF standard.
Providers were often strikingly insensitive even to clear criminal risks. The authors sent three main types of e-mail: the first from a low-risk alias from a country such as Norway or Australia; the second from a high-corruption-risk individual purporting to work in government procurement in such places as Kyrgyzstan and Equatorial Guinea; the third a terror-financing risk, working for a Muslim charity in Saudi Arabia. Providers were less likely to respond to the corruption category than the low-risk one, but also less likely to ask for identification when they did reply. Finding takers for the terrorist financier was harder, but not impossible: one in every 17 providers was willing to set up an anonymous shell for him.
Informing the incorporators of the international rules they should be following made them no more likely to do so, even when penalties were mentioned. When the undercover authors offered to pay a premium to flout the rules, the rate of demand for identity documents fell precipitously. “Your stated purpose could well be a front for funding terrorism,” one American provider replied—and then indicated he would consider establishing and administering the shell for $5,000 per month.
This study, by far the most thorough of its kind, makes sobering reading for anyone who worries about the link between financial crime and corporate secrecy. OECD countries show little willingness to tackle their own weaknesses and end their hypocrisy. In America, by some measures the least compliant of all, the incorporation-friendly states and business groups opposing reform continue to have the upper hand, despite valiant attempts by Senator Carl Levin to push through legislation that would require the registration of beneficial owners. Movers of dirty money know where the best shells are to be had, and it is not on a Caribbean island.
* “Global Shell Games: Testing Money Launderers’ and Terrorist Financiers’ Access to Shell Companies”, by Michael Findley, Daniel Nielson and Jason Sharman, 2012.
Dobbin, F. 2012. “Review of J.C. Sharman, The Money Laundry: Regulating Criminal Finance in the Global Economy”. American Journal of Sociology 118 (3):850-852.
Dobbin, F. 2012. “Review of J.C. Sharman, The Money Laundry: Regulating Criminal Finance in the Global Economy”. American Journal of Sociology 118(3).
The Money Laundry: Regulating Criminal Finance in the Global Economy. By J. C. Sharman. Ithaca, N.Y.: Cornell University Press, 2011. Pp. xiv+200. $29.95.
Frank Dobbin
Harvard University
Why have 180 countries around the world, including the tiny Pacific island nation of Nauru, with a population of 11,000, no financial institutions, 90% unemployment, and a national debt 16 times its GDP, adopted anti–money laundering policies? Why, when the world’s financial elites suspect that these policies are ineffective, and cost more in regulatory and compliance effort than they save by preventing money laundering, would so many countries jump on the bandwagon?
In The Money Laundry, J. C. Sharman builds on his earlier books exploring tax havens, corruption, and concealment of ill-gotten gains to examine the spread of anti–money laundering laws around the world. He pushes forward the world polity agenda of by John Meyer and associates, arguing that money-laundering regulations spread to countries hoping to seem modern, efficient, and transparent. These regulations signal that a country doesn’t put up with the sort of criminal financial transactions thought to be commonplace in the backwaters. They are a sure way to show that the eras of Noriega and Gadhafi are over. But countries do not always go down this pathway willingly, as world polity theorists might predict. Financial
professionals in the developed world who have built careers engineering anti–money laundering regulations blacklist countries that don’t join the bandwagon and this brings countries on board without fail.
This lively and engaging book is divided into two parts, the first showing that anti–money laundering policies are ineffective, the second showing why they diffuse. Sharman not only posits that the policy innovation he studies is worthless, as world polity theorists are wont to do; he goes to considerable trouble to prove that these policies may be harmful. To explore the efficacy of anti–money laundering regulations, Sharman uses two techniques, one conventional, the other novel. The conventional method is to review studies of the efficacy of the regulation, interview key players in the game, and attend closed-door meetings of regional groups overseeing national anti–money laundering programs. Previous studies show that regulations don’t work, experts don’t think they work, they impose significant costs on financial institutions in the form of reporting requirements, and villains can still launder money. Regional associations are not sanguine but carry on, trying to promote higher standards.
The second technique for examining the efficacy of anti–money laundering rules is ingenious, and involves a “direct test,” or audit, of the regulations in countries around the world. Sharman solicited offers for anonymous shell companies, with associated bank accounts, which provide the means to launder money. Such offers break the first rule of anti–money laundering regulations: know your customer. This approach is akin to that reported by Nicholas Kristof and Sheryl WuDunn in Half the Sky, in which antislavery laws are shown to be a sham through successful efforts to buy slaves. It turns out to be easy to set up an anonymous shell corporation for the purpose of laundering money. Sharman received responses to 102 requests to establish shell corporations, and in 41 cases, was not required to provide proof of identity. He would be
able to launder cash without being identified. Those 41 offers were disproportionately in the United States and other OECD countries. Most contacts in developing countries, and tax havens, required proof of identity in conformity with anti–money laundering laws. It appears that in those nations, the risk of losing legitimacy either stimulates officials to enforce regulations or leads agents to heed them. The bottom line is that should you want to launder money, you have a lot of options and don’t have to go to Bolivia. Academics will appreciate this chapter for its method, and aspiring international criminals will appreciate it as a practical guide.
We don’t really need to be convinced that anti–money laundering regulations are ineffective to be interested in why they have spread to countries like Nauru, but knowing that they don’t work certainly makes that question more interesting. Not only is it easy to set up the apparatus to launder money, but the developed world that built the standards doesn’t abide by them. Why do countries use scarce resources on such regulations, creating regulatory bureaucracies and making legitimate firms document compliance? The world polity camp suggests that developing countries copy developed countries in order to gain access to global financial markets, and gain legitimacy beyond their borders. They would be partly right, but in this case, developing nations were coerced. Once the developed world put anti–money laundering regulations into place, led in the 1990s by the Financial Action Task Force, professionals created a blacklist to get developing countries to join. In the process, they expanded their scope of professional influence, and of course, got to travel to Barbados and Guyana to help craft laws and build compliance systems.
The second half of the book, exploring why developing countries adopt anti–money laundering regulations, offers a primer on the role of power in the world polity. Sharman argues that money laundering experts used the threat of exclusion from global financial markets to convince governments in the developing world to adopt regulations. He shows that while countries hoped to achieve legitimacy and status in the global financial order, politicians and bureaucrats were acutely concerned about being left out of the game. Their concern with legitimacy was at base a concern about competition for resources from powerful financial agents. Yes, politicians without anti–money laundering programs feared they would appear to be backward, but what motivated them was the fear that they would be excluded from the global economy.
While The Money Laundry speaks directly to world polity theorists, its author relies not on an event study of diffusion, which is the norm, but on an audit of regulatory efficacy, interviews, and analytic narrative. By broadening both the world polity paradigm’s theoretical toolkit, with his theory of power, and its methodological palette, with experimental and process-tracing techniques, Sharman helps to open up world polity theory to new insights and research strategies.