The threat posed by transnational political corruption to global commercial and development banking

Abstract

Purpose

This paper explores the threat that transnational political corruption poses to both the world's development banking and commercial banking sectors.

Design/methodology/approach

This paper was written from the perspective of someone who has served as a financial fraud prosecutor, an investigator for the World Bank, and currently as a banking supervisor and regulator. The paper uses three case studies to demonstrate how corrupt actors, using various fraudulent and corrupt schemes, steal funds from development banks, and then launder the illicit proceeds from these schemes into legitimate commercial banking systems around the world.

Findings

The paper describes the reputational and financial risks posed to the commercial and development banking sectors from transnational political corruption, and predicts that these risks will grow as more signatory nations to various anti‐corruption treaties and conventions criminalize the bribery of foreign public officials.

Research limitations/implications

Left unchecked, both commercial and development banks face growing political, legal, and economic risks from political corruption.

Practical implications

Drawing on the lessons learned from the case studies analyzed in the paper, the author offers a number of practical recommendations aimed at reducing the threat posed to commercial and development banks from public corruption.

Originality/value

The paper establishes a common threat posed by transnational political corruption to both the commercial and development banking sectors.

Citation

McCormick, J.T. and Paterson, N. (2006), "The threat posed by transnational political corruption to global commercial and development banking", Journal of Financial Crime, Vol. 13 No. 2, pp. 183-194. https://doi.org/10.1108/13590790610660890