The George Santos Effect and the Corruption Perception Index

International Anti-Corruption day on December 9, 2022, hailed a three-year run of stagnating corruption scores worldwide. Transparency International met at Columbia University in New York to consider how the US could better tackle money laundering, bring the public interest back into political leadership, stop global corruption, and empower citizen investigators.

Elsewhere the twists and turns of the newly elected New York congressman George Santos began to attract national coverage. The North Shore Leader, Washington Post, and New York Times led with stories of Santos’ late and inconsistent financial filings, past employment with a company accused of Ponzi-type schemes, huge swings in personal wealth, and millions of dollars of campaign donations and investments from the relative of a Russian oligarch whose biggest client was the oligarch himself.

These alleged activities share many characteristics of the white-collar crimes that pose the most serious threat to the global order in decades, according to Transparency International. White-collar crimes include money laundering, dark money transactions, and tax evasion via networked structures that steal vital public resources – to the detriment of communities and the people who live in them. The line between politics and business can be blurred through campaign donations, opaque lobbying, and the revolving doors between industries and political benefactors.

The Pandora Papers Investigations identified high-level officials, oligarchs, and billionaires from around the world who were shielded with the help of attorneys, commercial real estate brokers, title companies, banks, and company formation agents who were able to act anonymously and, in turn, obscure the identity of their clients. Corrupt overseas corporate investors operate through virtually unidentifiable shell companies and trusts, unrecorded real estate and company formation transactions, and offshore accounts. The service providers who facilitate corruption also escape regulation, supervision, and accountability.

When corruption and money laundering schemes are exposed, this anonymity makes it difficult for law enforcement agencies to track the criminals and for Transparency International’s Corruption Perceptions Index (CPI) to measure the corruption even when they are facilitated by service providers in countries that score best on the CPI.

The punishment that doesn't fit the crime

If law enforcement agencies manage to track and charge these dark money schemes, justice systems and legislation fail to levy punishments commensurate with the effect of the crimes. In the United States, although white-collar crime steals as much as $1.7 trillion annually, 35 times as much as personal and household robbery combined, the average white-collar theft sentence in 2019 was 23 months of incarceration compared to 13.5 years for personal and household robbery.

Santos and his associates have admitted to no crime. However, the question of whether he can be trusted to represent the best interests of the people in his district above his own can lead to a loss of faith in the integrity of the government. For this reason, in some jurisdictions, for public officials, even the appearance of fraud or dishonesty, or what might have happened, whether or not it occurred, constitutes a crime. It is this perception of corruption that Transparency International measures via the Corruption Perceptions Index. Since 2019 worldwide corruption perception scores have stagnated. The United States has lost a statistically significant nine points since 2015 and its position among the top 25 best-performing countries on the CPI. According to Transparency International, "this backsliding offers a cautionary tale about complacency, which is detrimental not only to global anti-corruption efforts but also to top-scoring countries’ affairs."

Insight from the countries best at fighting corruption

The Anti-Corruption Resource Center (CMI) in Bergen, Norway, a team of anti-corruption advisors from several of the world’s least corrupt nations (UN World Happiness Study), may be able to shed some light on how remaining in office will impact Santos and the people of the United States. They have published a study of the micro-level psychology of corruption. Authors Kendra Dupuy, a political economist, and Siri Neset, a CMI political psychologist focusing on perceptions, drew upon research from the fields of psychology, political science, political psychology, economics, business, and organizations to understand the micro-level psychology of corruption.

Thirteen studies confirmed that individuals holding power are more likely to act corruptly, seek rewards, experience less guilt and embarrassment, feel less empathy for others, and act more out of self-interest. They defined power in relation to corruption, per Klitgaard, as individuals holding accountable degrees of power or authority over decision-making processes that create lucrative windows of opportunity for unethical behavior. One of the strongest findings from their review is that holding power seems to change cognitive processes in ways that make people more likely to behave unethically. They found that power can result in overconfidence, greater risk acceptance, a focus on rewards (Yap 2013), and that power holders pursue actions that benefit themselves and (Djawadi and Fahr (2015)) may be highly willing to cheat (lie) for personal gain.

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As for the national effect of corrupt leaders, they note that corruption thwarts economic growth, trust in government, the quality of public service provision, environmental outcomes, foreign investment and trade, and levels of equality. The handling of the George Santos case has the potential to move the country in a better – or worse direction in 2023 when the citizens of the USA rate their performance on the CPI.