You've probably heard of terms like short squeeze and long squeeze and margin call, and for many people these are esoteric terms used by traders. But there come some moments in the market where we all get the clarity of personal experience to remind us that these terms mean something very, very down to earth, very practical. Right now, we're in a long squeeze. What does that mean? That means that if you've taken a position where you hold a lot of Bitcoin and the price goes down rapidly, you run out of money to pay your electricity bill or your rent. Basically, your landlord is putting a margin call and you are feeling the long squeeze. That's what we'll talk about in this episode of Speaking of Bitcoin. I'm Andreas Amantanopoulos, and on this episode, I'm joined by the other co-host, Adam B. Levine, Jonathan Mohan, and Dr. Stephanie Murphy. Hi. So, one of us here has actually experienced the margin call, but I'm certainly getting a lot of emails and messages from people saying, I'm under pressure. Price has gone down. I've run out of cash, cash meaning US dollar or fiat, and I've got to pay bills. What can I do other than be forced to sell my Bitcoin at a time when the market prices down and it's going to really hurt to sell my Bitcoin? We also got some listener messages that kind of relate to this topic. One person was asking us, they said they're currently looking for a new house to buy. Could you talk about the current situation, inflation and store value alternatives? Why it might be a good or bad decision to get a mortgage loan of around 500,000 euros right now? Obviously, we can't advise your personal situation, but I assume they're talking about this in relation to crypto because this person probably has crypto and they're wondering, okay, should they sell it when it's down? Should they take out a collateralized loan? We just found out that crypto-backed mortgages are now a thing, and there certainly has been, for a while, a lot of these products that let people put up cryptocurrency as collateral to back the loan. Without a credit check, without looking at your credit history, all they care about is if you have the collateral.  If you can't pay it back or if the value of the collateral drops, they're going to liquidate your collateral or you have to come up with the money to pay it back so they don't liquidate it. These collateralized loans, basically, you want to get cash.  Yeah, there's many reasons people might not want to sell their crypto. One is that it's cool and you want to hodl. You believe in hodling and you believe that it's going to go up in the future and it's good to just never sell it, right? It's kind of like the best way to lose weight is never to gain it in the first place or maybe the opposite of that, but the best way to hodl Bitcoin is never to sell it in the first place. But that's a counterproductive strategy because we've talked about this on this show, which is the idea that actually the best way to hodl is to have a little cushion of fiat that you can spend to weather a down market so that you don't have to sell the worst possible time. Now, collateralized loans didn't always exist. Even if they do exist now, not all of them are good. Not all of them may give you the terms you want, and some of them have some unanticipated risks. Maybe, maybe the best strategy to hodl is to settle a bit at the top, take some profits and have a cushion of fiat. The best way to hodl is to settle a little. So these collateralized loan products wind up getting popular every time you see kind of one of these bull market runs. And what happens is that people are like, wow, I have a lot of money, but it's actually just still stuck in Bitcoin and I don't want to sell my Bitcoin in order to get at that money. So you use your Bitcoin as collateral and then you get money, you pay, I don't know what interest rates are, maybe 7%, 9% somewhere in kind of that range. So it's definitely not nothing, but compared to paying 20% capital gains or something like that. Or 20% on a credit card, APR. Well, yeah, of course. So it's not a terrible option from like a kind of baseline perspective. But the challenge is that people take these loans typically when the price of a currency is going up. And so that means that if you think that the price of the currency is going to go up, well, you can't figure out when to take profits against this thing. And I see many people who just ideologically decide that I'm not going to take profits. I'm going to use this as the vehicle. Now, that actually is an okay strategy. So long as you have sufficient collateral, which is to say, so long as you are borrowing money that you already have in larger proportions held in whatever you're providing as collateral. And so when markets turn around, as we've seen in the last two months, I mean, that's where that math that really helps you going up that seems like, wow, this is a great value going up turns into, wow, this is incredibly painful. I wonder when Bitcoin or whatever is going to stop falling in value. Like what can I do about this? Because it goes from being a thing that allows you to get liquidity without sacrificing any of your potential upside exposure, to now you need to repay that liquidity. You need to put that money back into the system, but you have to do it at the worst possible time.  It's now worse. The gift that keeps on giving. The funny thing to me is that this is not a new thing. In fact, what we're doing here is reinventing the wheel, if you like, or re-envisioning something that's been done for many years. If you go and watch finance advisors and secrets of the rich and famous and all of that, you'll see that one of the key ways the rich people avoid paying taxes and get to live is not by generating income, but basically using their stock, their securities as security to a loan and borrowing against their stock portfolios and then paying interest on that loan and deduct big chunks of that interest depending on how they do that loan exactly and basically don't pay taxes, of course, on any of that. So this is the same trick. The only difference is we're now doing it with, I don't know, 10 times the volatility and excitement and a lot more risk. I think that there are perfectly good reasons why people do this. And I think that from an instinctual, how do we feel as emotional market participants, it definitely does make sense. In some situations, it can be a really great decision. Well, it's great for people who don't have access to traditional credit. Just speaking for my personal situation, I'm self-employed and trying to get a mortgage is difficult when you're self-employed and that could be a good option for someone like me or someone who is maybe retired or living on investments or something like that. It's like, if you have the collateral, you could get a loan and no questions asked, almost. It doesn't matter about your credit history or whatever. Yeah. And it's funny because in the past, you couldn't use Bitcoin or anything else as collateral that wasn't a traditional financial instrument. And I've experienced that myself trying to refinance a mortgage at a time when I had enough Bitcoin to basically buy the house cash. It was a good year. And a cheap house. Let's put it in context. And they wouldn't approve me. They were like, you have insufficient income because, look, your business has a bunch of deductions and doesn't show a lot of profit on paper because that's not the kind of business it is. And we don't accept any of your assets as collateral. So I was unbankable.  And even now, I have a bit of financial security. I'm still unbankable. I have a friend or someone I know who tried to get a crypto collateralized loan and they asked, okay, where did you get these Bitcoins from? Well, this person mined the Bitcoins in 2009 on a laptop that he bought at a garage sale. They were asking, okay, send us a receipt for the mining equipment. Okay, I bought it at a garage sale I didn't ever receive.  He was able to do it eventually, but it was a paperwork nightmare.  Sometimes proving and tracing back these coins, you know, people lose records of their wallets. I couldn't tell you where, you know, some of my crypto comes from probably because I don't know because I lost the records. So, you know, keeping records for 10 years required to get a loan that might be one of the costs, the hidden costs. Well, especially when you're talking about something like, you know, Bitcoin in 2009 back when like there was nothing, like nothing at all. I mean, there is the blockchain. You always have the blockchain, but it doesn't tell you certain details that might be needed to prove the source of your funds and that it was legit. In this person's case, it was completely legit. It was like, you know, the most virginal innocent way to obtain Bitcoin ever. But, you know, he had trouble proving it. So, a company called Milo recently announced that they are providing or will soon be providing Americans with Bitcoin collateralized mortgages, which if you've been in Bitcoin for a while, you know that, you know, one of the largest instances of I need to sell my stack is I need to get my home or, you know, how do I get a house? No one acknowledges my assets. That's Andreas was talking about. And there are, you know, distinct differences between a mortgage and every other form of debt. And so we're kind of in the world where not only will a bank not acknowledge your assets as an asset, but if you took a loan out against your Bitcoin and then bought a house in full, that would be considered a loan. It wouldn't be considered a mortgage. And the difference is that when you take a mortgage out on your primary residence, you're actually able to adjust your income against the interest that you pay for your primary residence mortgage. But because your collateralized loan is against your Bitcoin and not against the house, that wouldn't be a mortgage, which would, you know, significantly impact your financial situation. And we're talking about a higher interest rate than you would get with a conventional mortgage if it's a crypto mortgage, correct? Yeah, incredibly so. And so this company Milo, we're not endorsing it, we're not promoting it, but we're just describing it as the first company we can think of that is claiming that they will allow you to collateralize your Bitcoin and collateralize the down payment that you put into the home equity loan. And then I'm hoping waterfall the payments so that it's home equity and then Bitcoin. And so you would need to effectively adjust your payments into the mortgage or adjust your Bitcoin in the contract contingent on the real estate and or Bitcoin price. But I'm enough of a Bitcoiner that if my Bitcoin goes down, I'd rather lose my house. Like I'd rather get a victim out of my house than I would have my Bitcoin be so old. Yeah, I know you can eat Bitcoin, right? That's what all the preppers say. I'm gonna live in my car and run an Antminer as my heater. Yeah. Hey, Satoshi suggested it, didn't he? Well, I think this is actually a good thing because it provides options, like I said before, for people who don't look good on paper to get a mortgage, but could actually afford to pay for a house and to pay the mortgage. Well, let's be clear, Stephanie. I don't think most hardcore Bitcoiners look good in person, either. Yeah, we're talking about a different kind of looking good, right? If you look good to the mortgage company, you're like a dependable person who has a steady job and gets paid the exact same amount every month and only utilizes a certain fraction of your credit and you're in the system and that's not any of us on the show and it's not a lot of people out there. And for those people to have another option that they could use to finance a purchase of a home, which is a really important thing in a lot of people's lives, that's a good thing. I'm not saying it's perfect, but maybe it'll get better as time goes on and there's even more competition and more options. So the question I would have in all of this is who has the keys? And to me, that's the critical question with all of these lending, collateralized loan, and mortgage solutions. Because it's not just mortgages, mortgages basically. As Jonathan said, you know, it's one of the things that secures the loan in addition to the house itself. If you're just taking out a personal loan, then all of the security is presumably in crypto. If you're using it as an over collateralized loan, then the Bitcoin is securing that loan. But the question becomes, how does that work with custody? I would assume that people are not just going to give you a loan if they have no way to seize or enforce a lien. Like how do you put a lien on Bitcoin? And the answer in most cases that I've seen is you give them the keys. You transfer the Bitcoin and they hold them. And you know what they say about that, Andreas? Right. Not your keys. Not your coins anymore. So you haven't collateralized the loan. You've effectively accepted counterparty risk in that case. And a lot of these loans have to be significantly over collateralized, especially if you want to get the best interest rates. Sometimes they want two or four times the amount of the loan in collateral. Right. So I wouldn't feel comfortable with that. Now, that's not the only way. The other way to do this is to have a collateralized loan that's based on a smart contract where you still have custody. And that's, for example, the way that you do it if you were using a lending platform based on a smart contract system, whether that's decentralized stablecoin loans like DAI on Ethereum, or it's something equivalent on any of the other blockchains. In that case, you're not taking counterparty risk. You're still taking risk. You're taking platform risk, smart contract bug risk, EVM execution risk, fee management risk, and all of those other risks, but they're different. They're not counterparty risk. So maybe that's more of your appetite. However, at the moment, as far as I know, there's no way to do that on Bitcoin. One proposed mechanism to do this is a technology called Discrete Log Contracts. Very interesting technology. If you want to look at that, proposed by Tad Stryja, one of the co-authors of the Lightning paper. The other phrase to look up would be Bitcoin Covenants, which is the same topic from a different take. If you're going to be looking more into the topic. Yes, and it's a hot and somewhat controversial topic on the Bitcoin developer mailing list at the moment because that's being discussed quite a lot. So with that format, you could do a collateralized Bitcoin loan where you don't give up custody, but the custody is essentially in a smart contract, which can be liquidated, adversely liquidated, margin called, if you like, based on the USD to BTC exchange rate that is provided by the centralized Oracle. That's how die loans work as well. And I've been on that side of the experience where you have a loan and then the price drops and the collateral isn't sufficient and you have to recolateralize it. I've also been on the other side of the experience where I've collateralized the loan that way instead of selling. And then the price has shot up. And because I didn't sell, when I rebalanced that loan and pay it back, I end up with a very, very nice profit on top of that, a very nice capital gains, which I wouldn't have made otherwise. And that's the appeal of doing a collateralized loan instead of selling. One of the things to keep in mind here is that on Bitcoin, at least for now, you have to give up custody in order to do that. Now, what about the other side of this? There's a flip side that I see, which is that a lot of these same companies that are offering crypto backed loans are also offering a crypto interest product where you invest or you let them hold your crypto. They lend it out to other people, I guess, to provide liquidity to exchanges, to let people trade on margin, I guess.  And usually it's paid in kind, but then a lot of these platforms also have their own platform token where you can get even more of an interest rate if you accept the payment of interest in their platform token and stuff like that. And so we actually got a question about this too. This person said, I've been involved with crypto for a few years now, but I have a hard time understanding the whole interest movement. They said centralized finance interests like Nexo are clear for what they let you see, staking for proof of stake protocols like ETH2 also okay, but all these new protocols providing absurd APY to provide liquidity, getting paid to lend and sometimes borrow at 10, 30, 50% or higher APY. Could you share your thoughts about it? And to me, I'm not sure if I understood correctly, but it sounds like the person is asking, how do these companies pay this kind of APY? Like, where is this money coming from? Who are they lending it to? And how are they able to offer this kind of yield? Well, in some cases, when these are decentralized markets, the dark truth of the matter is that these things are loan sharked to people who have no other way of getting loans. So if they're open on a decentralized market, there are people out there who will pay 30% because that's better than what they would get otherwise, which is 30% a day or your kneecaps type lending, still prevalent even in the United States. Yeah, this is like the pay day lending industry or the check cashing. Right, minus the kneecaps or plus the kneecaps. I don't know, my kneecap harassment take is rusty. Yeah, I mean, a lot of this stuff winds up being secret sauce, right? Like on the one hand, like these companies oftentimes are a little bit of a black box. Well, some of them are funding it with investors, like some of them are taking investor money and using it to bump up promotional rates to get people to invest in their platform, pay them a higher interest rate, and then they drop it down. And actually, you know, I've been watching this space a little bit. And a lot of these companies like over the last year have been just kind of dropping and dropping and dropping their interest rates that they offer. They're saying, you know, in response to market conditions, and as more companies enter the space and there's more competition and there's more liquidity being provided to whoever needs it, the competition is going to get stiff and it's going to drive the rates they can pay their customers down. A lot of them also have these limits of, you know, you can get a special interest rate, but only on up to a certain amount of capital. And, you know, that's one way of doing it. I don't know if they're using investor money to finance those or if that's just part of their mission because they want to make sure that small investors can get in and that it's not just like huge institutional whales that are putting their coins in there and then getting interest. Yeah, this is a tricky situation because you don't know how many of these are straight-up pyramid schemes. And at the same time, it's cynical to think that they're only pyramid schemes because for those who remember when PayPal started, they offered 20 bucks referral fee to you if you referred someone and to the person you referred. And in the first couple of months of operation, they spent 60 or 70 million dollars. But as a result, they acquired, I don't know how many 100,000 customers and managed to bootstrap that operation really, really fast by doing that. That's a standard Silicon Valley model for financing. So is that a pyramid scheme? Kind of. They're certainly using investor money to pay for all of that. And, you know, one of the things that I'm cognizant of is a lot of these things work really, really well when the price is going up two or three or four percent a month or a week. And then they stop working altogether. So we may not only see interest rates being squeezed by the decline in the price, we may see a lot of these things blowing up because turns out, yeah, they were pyramid schemes. And then, of course, they can't operate unless the market is always up. Yeah. And they have varying degrees of how transparent they are about their finances and how they actually custody these assets. You know, do they contract with someone else? Do they do it themselves? Or how do they prove that they have reserves or are they audited? Do they have insurance in case they have a theft or a loss or something? And some of them have run into trouble with regulatory authorities. And it seems to be especially the case that if they pay out the interest payments in their own platform token, that's something that, you know, they don't do in the U.S. because it would be considered a security offering or something like that. It's a regulatory no-no. Yeah. There have been a lot of challenges from the regulatory perspective. And it seems like these companies are still trying to struggle through and figure out how to make these types of products work without actually becoming banks themselves. And of course, some of these companies probably will become banks or be acquired by banks or acquire banks themselves and kind of get around it. But until then, it's a little bit of a tricky thing in the U.S. They've been trying to acquire banks. The old AOL buys Time Warner model of disruptive innovation. But they've been stopped from doing so. In many cases, many of these organizations have tried to buy banks and the regulators won't even let them do that. Which is interesting. You know, nobody stopped AOL from buying Time Warner, but this is a new world where in banking, things don't work that way. When times are good, sometimes it's good to take profits. Yeah, caveat depth. The funny thing is that while there's a lot of cautionary tales and I emphasized previously that the custody issue is critical, not your keys, not your coins. But then again, if this is a matter of a choice between collateralizing some of your Bitcoin or other cryptocurrency to pay rent and selling it, well, if you sell it, then they're definitely not your coins. Whereas if you collateralize them, there's a possibility they might not be your coins. You have counterparty risk, but it's not a certainty. If you sell it, it's a certainty. So this may be a better than nothing solution in some circumstances. But as with everything else, don't go all in. Yes, and paradoxically, you may have to settle a little to... Huffle a lot. I'll take it. That should be on a T-shirt. So folks, that's all the time we have for this episode of Speaking of Bitcoin. Thank you very much for listening. Today's show featured Andreas M. Antonopoulos, Stephanie Murphy, Jonathan Mohan, and myself, Adam B. Levine. This episode was edited by Jonas. Our theme song is from Jared Rubins, and our other music is from Gertie Beats, Straight From the Street. If you have any questions or comments, you can send us an email at Adam at speakingofbitcoin.show, and we'll see you next week.


So temperature tells us how much the atoms in some substance are jiggling around at random. But how can we actually put a number to it? Well, you can measure a temperature in any way you like, but the way it's used by physicists is the Kelvin scale. Now to have a nice scale that's useful for physicists, you'd like two things. One is that you'd really like the temperature to be zero when the atoms are not jiggling at all, when it's so cold that all the motion has stopped. And experimentally that happens at a temperature called absolute zero. And absolute zero is minus 273.15 degrees centigrade Celsius. So the Kelvin scale starts there. Zero Kelvin is minus 273.15 Celsius, and zero Celsius is plus 273.15 Kelvin. So the temperature as measured in Kelvin equals the temperature as measured in Celsius plus 273.15. So Kelvin has that nice property that when the Kelvin temperature is zero, the atoms are not moving. You can never actually reach that, as we'll see later, but you can get pretty close. And now we want what is actually happening when the temperature increases. Temperature could be a measure of the average speed, but in practice what we use is that temperature is a measure of the average kinetic energy of the particle. Particularly, you can define temperature by the equation that the kinetic energy, this is the average kinetic energy of all an atom. Some atoms are going fast and slow at any particular moment, but the average kinetic energy is equal to 3 halves, a constant K, a Boltzmann constant, times the temperature as measured in Kelvin. So K is the Boltzmann constant. It has a value of 1.38 by 10 to the minus 23 joules per Kelvin. So with that equation, if you know the temperature, you can look at the average kinetic energy of a particle. Now that's not all the energy that is in a hot object. A hot object might also have some energy stored in the bonds. It might also have some energy stored in the rotation and vibration of molecules. But the kinetic energy alone is given by that. How cold can you actually get something? When it turns out the answer to that is in a lab just down the corridor, I'm recording this. Let's have a look. Hello, I'm Kyle Hardman and we are in the Quantum Sensors Lab at the Australian National University. Inside this machine here, we have the coldest place in Canberra and possibly the coldest place in the universe. So in this apparatus, we cool down a gas of rubidium atoms and we're able to cool them down to about a billionth of a degree above absolute zero. At this point in time, we actually have go through a phase transition in which we make a new state of matter, an exotic state of matter called the Bose-Einstein condensate. How do you get it this cold? So we have two methods of making the atoms very cold. The first is we slow down the kinetic energy of the atoms through collisions and interactions with photons, which are light particles. The other method is we use evaporative cooling, which is similar to how a pot of coffee cools. Essentially, you let the hot atoms leave the collection and the rest re-thermalize at a colder temperature. And what do you actually use this for? Why do you do this experiment? The cold atoms in this experiment are used for the precision measurement of gravitational acceleration. So we actually make the cold atoms, then we drop them and we measure their position as they're falling. For measuring the position, we can find the exact value of the gravitational acceleration at this point in space.


Financial News Network, TFNN, headline news update. Welcome folks. We had the Dow Industrial's finish up 27, Nasdaq up 37, S&P's up 5.5, Gold contract up $11.30 straight and it's $14.79 an ounce. We had Silver up 21 cents, $16.92 an ounce, both all the metal markets folks basically got caught a bit up here today. Copper, copper which is going up for quite some time right now, we're up 2.5 pennies at 279 a pound. Light Sweet Crew down 44 cents, trading $58.80 a barrel, notes and bonds. They also caught a bid. We had the 10-year up 10 ticks, trading out at a price point of $129.08, the 30 year. The 30 year was up 21 ticks at $158.23. Let's go over to the 30 year for a second and take a look at this because what we had in both cases, you had the Federal Reserve come out, Paul had his news conference out here, status quo's in, no change of interest rate structure, but if you were listening to that news conference folks, it was a very diverse news conference, meaning the questions that were asked, each and every one of those questions that were asked, Paul was saying that, hey listen man, the Fed is going to be out here, the Fed is going to be out here on the repo market, the Fed is going to be out here in the market in general and guess what folks, you're kicking into 2020 next year, you get an election year, it's real possible that these interest rates won't go up or down the whole year, which would be pretty intense folks because that would be a very dovish occurrence. What that did out here today, it took $king dollar, we were looking for $king dollar to get down, test the lower end of the consolidation and guess what, it ripped it apart folks, 9709, 9701 was lower end of consolidation, that's saying the king dollar is now going to get down into this 95, 843 area, what king dollar has done out here is this, king dollar has been going, has had an uptrend since February of 2018, it broke that uptrend out here today. Now the question is going to be at the end of this week really because today on a weekly base, I'm looking at a weekly chart, that's how basically it broke it, so I want to see how it ends up at the end of the week. It's a decisive break though, it's a decisive break and that's saying the king dollar will now make its way down to the 89 area. Have a great night folks, have a safe night, come visit back here tomorrow morning, 9 o'clock, Larry Pesavento kicks us off, great program, have a great one folks.


Glenn Clark back here after a 68-61 win for Stevenson over FTA Florm and joined now by John Y. Curry Are you good with chef? Does that work? Can we go can we go with chef Curry? Is that okay? Sure? I get that a lot You look like chef Curry on that late jumper game still very much in the balance It was a one-point game at that point. What's going through your mind when the ball pops out to you? Um, I just think in practice They've been working a lot of my confidence and I think I got comfortable taking that shot And I think the game was going well for everyone so I just thought it was time to take it And I knew we needed to get ahead real quick at the end So you know you say the game was going well for everyone you end up you ended up with 12 You had three of your teammates all with 13 like it's just an unbelievable balance. How do you all manage to do that? We've just been working hard and trying to get everyone involved and I think it's showing both offensively and defensively We're going in and out kickouts. Everyone's rebounding for kickouts. We're just hitting open shot So it's really working well coach was talking about some of the soul-searching you did after the loss earlier this week You know, how good does it feel to get that out of your system come back out here play a good team and come up with a big victory? Yeah, it feels great after you's really really good and we're just happy we got we worked hard in practice these past few days and Just knew we had to pick it up. It's hard to let down at Salisbury But we're glad that we got back in and to look forward to tomorrow and the rest of our conference games You don't get to enjoy it for very long. Do you know not at all. We're ready for Marymount. It should be a good game So John yeah, congratulations on a big win and best of luck moving forward. Thanks so much. Have a good one I'm Glenn Clark for go mustang sports calm


Morning ladies and gentlemen. Thank you for joining us for this event. We've been looking forward to Honoring Frank Vogel and the book that he has Produced Frank is an economics journalist former director of Information and public affairs at the World Bank and a founding Member of Transparency International together with Peter Eigen and served as vice chairman of Transparency International for many years and continues to serve on the Advisory panel of Transparency International Frank has seen this organization develop a worldwide presence over Just a few years and has seen it make an enormous Impact waging war on corruption is Frank's third Book and it is a stunner. I recommend it in the highest Way possible it's full of stories of Corruption and those who fight corruption Frank writes about the heroes in this struggle He is One of the great heroes in this struggle and doesn't include himself and very well could do so I particularly like the two chapters on villains the political and commercial villains that That Frank writes about you have to have a sense of humor in this in this business After Frank has made some comments our other two Panelists will speak for three or four minutes, and then we will throw it open to Questions which I will ask and finally Questions from the audience Ted Greenberg served in the US Justice Department for 30 years He was a member of delegations to the financial action task force in Paris the global anti-money laundering standard center And he was senior counsel in the legal vice presidency Office of the World Bank, and he now continues his work on these kinds of issues With his own firm tg global based here in Washington Jean Pym is coordinator of the World Bank's star initiative the stolen assets recovery initiative This is many of you know is an effort to help countries recover Resources that have been stolen and shipped abroad This has become especially important in the Arab Spring as we look for and hopefully find some of the assets of the Gaddafi family the Ben Ali's and the Mubarak family Frank I am a long time admirer of yours, and it's my great pleasure to introduce you this morning Thank you very very much Raymond Good morning Thank you so much for having me. Thank you for hosting this Raymond and his colleagues have done a tremendous job and Raymond is featured in the book several times I won't give you the page references but Because global financial integrity and the work that Raymond and his colleagues have pioneered Has made a tremendous difference in shaping an international debate and from that shaping we get international action and This book is very much about action. It is about People it is about challenges and it is about hope It is dedicated to the colleagues who I've had the great privilege to work with in two organizations One is Transparency International that you've heard about and the other is the partnership for transparency fund We will gladly give you the brand new annual report PDF is based here in Washington and supports individual projects done by civil society organizations right across the developing world Let me instead of getting into the deep substance because it's a rainy Morning and you're still got your heads full of last night's debate. So let me instead of getting into the deep substance Let me present to you some of the themes of this book in a different way. Let me talk about my anger my passion and Also about my great joy Today our focus is on the listed financial flows But to understand that you have to understand the broader context in which it plays out. Let me start with anger couple of years ago, I was at a dinner of the leaders of the largest banks in Latin America and The guest speaker that night was the Nobel laureate Mario Vargas loja Who decided rather to the surprise of the bankers to talk about corruption? and he said to them the biggest one of the biggest problems in Latin America is complacency About the problem of corruption People took it for granted people weren't doing enough about it and he berated the bankers. It was a it was a marvelous evening Let me translate your complacency a bit This town is full of people who like to write about corruption and once they've finished the manuscript They think they've solved the problem We need activists This town is full of people Including some obviously not those present some at aid agencies Who are involved in putting out? enormous sums of money in the name of Improving quotes good governance, but don't really look further to see how much of that money has actually been stolen This town is full of political pundits who watched last night's Presidential debate a Debate where the word corruption wasn't mentioned and you're gonna say well Why should it have been mentioned and the answer is very simple There was a Gallup poll a couple of months ago that said Americans are more concerned about corruption in the federal government than about anything else except for job creation They're more concerned about corruption in the government than social security Terrorism even the budget it wasn't a word last night about it How do we clean up our corrupt political system that's created so much distrust and cynicism? There's nothing you'll find I'm sure and the commentary in the pundits this morning about it We seem to just take it for granted Even though people are extraordinarily upset about it. I'm angry about the villains that Ray just Raymond just mentioned in the book because in Afghanistan in Iraq Billions of dollars of your taxpayer money US taxpayer money has simply been stolen and far too little has been done about it. I'm Annoyed about the villains Engaged in every aspect of illicit financial flows who have created as a result an enormous amount of international insecurity I could go on about my anger, but let me talk also about my passion I'm passionate and comes through in the book about the victims of corruption For every single Penny that is stolen by somebody in government as they abuse their office for their personal gain There is a victim For every bribe that is paid by a corporation to a foreign government to get a contract There is a victim You know if you look at the FCPA Settlements of many corporate Many of the cases in this country you won't find a single word about the victims Can you imagine a murder trial where they don't mention the name of the person who was murdered? But FCPA cases. Oh, they forget about the victims judges make rulings on those cases They don't even consider the victims, but there are always victims There are children who don't go to school because of the corruption of their government There are families who don't have sanitation because of the corruption of their officials In a survey done by transparency international of over a hundred thousand people in a hundred countries Top of the list came corruption or extortion by the police I'm very angry about these villains and that was one of the main reasons for writing this book I'm passionate to support the victims of corruption And I hope all of you by the time we finish this morning will be equally passionate Let us also not forget the officials and the bankers in money center banks These people who have signed all sorts of nice agreements about how they're gonna impose You know know your customer rules how they are going to clamp down on offshore centers and all the rest of it What have they really done? They know the problem, but they've done far far too little Let's think about all these cases recently about money laundering by major banks Can any of you mention a single CEO of a major international bank that has paid hundreds of millions of dollars and fines that has even lost his job Most of those CEOs are not even mentioned in the cases themselves So I am passionate about getting justice for the victims of corruption But let me also tell you about my joy About this whole situation. Why am I a happy guy as a result of telling you about my anger and telling you about the passion that I have relatives of the victims It's because we have across the world in A large number of people particularly civil society activists public prosecutors and investigative journalists Who are risking their lives every single day to try to speak truth to power to mobilize public opinion to get mass movements going My joy at seeing the enormous courage of thousands of people in Tunisia and in Egypt in January of last year Who face the brutality and the guns of the security police in their countries to go out in the street To demonstrate for their dignity for their self-respect and against illicit illegitimate corrupt governments There is a tremendous sense of joy when you look at how much these people have achieved Now many people are not adequately aware of the record. So let me go back to Let's say that period from the fall of the Berlin Wall to the rise of the Arab Spring about 20 years 20 years ago There wasn't a single international civil society movement engaged in corruption And when a group of us sat around a small table to say we are going to create an organization transparency international We were depicted by some as sort of rather silly dreamers there was a cartoon in the Economist of Don Quixote and Sancho Panza and We were thought of as you know, just just being idealistic Today, there are a hundred national chapters of transparency international around the world There are thousands of people who are engaged in the movement and that's the tip of the iceberg Because ptf has given over 200 grants to civil society organizations in many countries In fact, there are today hundreds of civil society organizations engaged in fighting corruption 20 years ago. There was hardly an academic in this field. You could have counted them on a couple of hands Today the transparency international research network has 5,000 subscribers We've created a growth industry 20 years ago. There was not a single anti-corruption international convention and there were very few national laws in the developed OECD countries Today, there's a whole host of those conventions and there is an increasing pressure to get them enforced It's a slow process, but there is movement 20 years ago. There was not a single international official Organization that was willing to even acknowledge the problem of corruption one of the reasons we started transparency international Was because Peter Eigan and I came from the World Bank, which absolutely refused to deal with the issue Today the World Bank, the United Nations, the OECD and a whole set of the major international organizations All have policies that they claim are priorities and in some cases They really are priorities to do something about corruption 20 years ago the amount of public awareness of this issue Compared to today was really very very small. We've seen an incredible increase in media attention on the problem Spread through the internet threads spread through social media We've seen organizations like global witness pro-publica global integrity all Moving out there Increasing of the public attention on this if you put all of these things together and you see how mass movements are being Created if you look at the tens of thousands people who camp who are now going to Demonstrations in India you look at the brave people even who are demonstrating in Belarus of all places You look at all of that and you put it all together and you can see why I believe That there is reason to be very hopeful that we can in fact win this war against corruption Let me just say to you that we're gonna win it because The heroes of this book are so so important You know, I get the inspiration. Why did I write this book? Well, I was inspired by people like Jose August who was one of the prosecutors of Fujimori in Peru And when I sent to the manuscript and said could you review this please Jose and perhaps? Write an endorsement which he did he wrote back and he said I Love to do it, but I'm quite occupied at the moment because they've just found a bomb under my car He still reviewed the book. I wrote to Elena Pamphilova in Moscow a dear friend Who is regularly followed by security police whose computers are constantly hacked Who knows of friends who have been beaten up and in some cases murdered in Russia? And yet she continues to fight for transparency to national Russia and lead it very very courageously You cannot look at what these people are trying to do in their countries and Believe that nothing really is going to change the complacency is in order So this book is largely about that. Let me Finally talk briefly about illicit financial flows Which after all is the central theme of global financial integrity, you know There's a lot of detail in the book not nearly enough of course on this subject But let me just instead of getting into detail because we've got this brilliantly expert panel Let me just mention a general subject One of the incredible changes In recent years has been that the group of 20 at their summits has also looked at the issue of corruption Something that us dreamers 20 years ago would never have imagined and they have produced in the last two summits anti-corruption action plans those plans include Significant detail on illicit financial flows they talk about the offshore money Offshore money sensors They talk about all about retribution of stolen assets They talk about many of the things that are on the lists that Raymond Baker and global financial integrity have been Putting together promoting and developing and pushing That rhetoric is fascinating. It's terrific. It's a milestone People like Rick Portman sitting at the very back who was fortunately our deputy managing director at TI for a few years Was very involved with it helping us to get a group together to push for this sort of thing but The rhetoric is far ahead of the action These governments of the G20 are not yet walking the walk They talk greatly, but what is really happening? Mr. Mubarak's family still controls its assets in London Despite everything that has happened The abacha family of Nigeria still managed to keep a huge amount of money of That Sonya bachelor the former president Nigeria stole even though everybody knew about the situation The Swiss Authorities seem only to discover that there are stolen assets by heads of government after those heads of government have been thrown out of office I Could go on but the point I'm trying to make is we know what needs to be done on illicit financial flows We have fantastic research Thanks to Raymond and to others and his colleagues. We have the lists of the action plans We have the institutions and yet we don't yet have sufficient willpower on the part of governments That is going to change that is part of our challenge This is only an interim book the next volume is going to not simply say waging war and corruption But how we won the war on corruption? We have reached base camp But we still have an Everest of correction I want to just end with one very simple quote if I can find it in my My papers here. It is from James Baldwin who wrote after the civil rights movements about how To quote him the people that once walked in darkness are no longer prepared to do so I think that's very apt for talking about those who were in The Arab Spring those who are demonstrating across the world those who are confronting in legitimate governments Those who are fighting today for freedom for justice for transparency for government accountability Those who are fighting for the dignity of the individual for self-respect and against thuggish official corrupt governments Who coerce and extort Those people ladies and gentlemen, and I hope you too are on the right side of history. Thank you very much Thank you very much Frank for those inspiring words and thank you for drawing attention to the victims of corruption which we too often Elide over and fail to to recognize the formative experience for me was 15 years that I lived in Nigeria I Call Nigeria in my own book the most corrupt country in the world and I go on to explain how I can possibly make such a bold statement but In the analysis that we do of illicit financial flows out of Africa We estimate that half of it comes out of Nigeria alone I know people in Nigeria who are living at a lower standard today Then they were when I met them in 1961 victims of the huge resources stolen through corrupt Practices and taken out of the country Ted Please give us three or four minutes of comments and then we'll go on to Jean Thank you. I I Wanted to just brought up Nigeria. Let me just to mention, you know the former managing director of Nigeria Mrs. Akonjo O'Aila in goes he'll come to O'Aila who John will talk about in the context of starting the star initiative at the bank is now the Finance Minister she previously was the finance minister as well as the foreign minister of Nigeria She was the one task by President Obasan Joe almost alone to go chase the abacha money that had been stolen and We have to thank her and very brave other people as you talk about Frank for getting some of this started Where it will end we don't know I give you one quick example of a prosecutor in Uganda One of 12 children only one ever to have gone to college serves in the prosecutor's office Tries to prosecute some fraud cases involving senior government officials Who receive bribes and I'm talking with them one day and I'm pushing them Why don't you do more do more prosecute these people and he said wait a minute. You don't understand We're still in there still finding bodies from the killing fields of Idi Amin and places. I can otherwise. I'm dead This is in Uganda He says I'm dead. They'll kill me and then they'll kill my family We sitting in the United States have a little bit of a different perspective When I was a prosecutor for many years when I got death threats, I called the FBI or the Secret Service of the US Marshals and Inveloped in the protective umbrella. I didn't have all I had to do is worry about my job doing my job I didn't have to worry about the car exploding in the morning And I think these are very important issues because when we we talk about governments Question is you know, what are governments doing a lot of things have changed but a lot of things remain the same The windows of political opportunity open and close on Corruption they were closed for quite a bit as the world dealt post 9-11 With the effects of terrorist financing and terrorism and during that period of time at least sitting in my perspective In the US government in other places Nobody was interested to deal with corruption because they had other priorities It is now a priority to be dealt with and we have that support from the G 20 And it's very interesting that it's broadened from the G 7 and the GA now the moving force Is the G 20 and hopefully that will expand to others. I take your point Action plans, you know the sea island summit. I think that was Carter Everybody comes out with action plans the g8 the g7 had lots of action plans And then when we turned around to implement some of the action plans We couldn't because not all of the g8 countries trusted each other That now that is somewhat dated question is now I Don't I don't like the analogies to war because But where are the boots on the ground? Where are the people on the ground? I want to come to some specific things, but you mentioned Obama they've taken some very specific steps at the Justice Department Attorney General Holder announced a kleptocracy initiative to go after sitting heads of state and senior officials Who are moving money through the United States which are the proceeds of corruption and other crimes? Where he spoke recently at the Arab forum run by put together by the G7 and the G20 and the World Bank and he said he's is now assigning Prosecutors to work in the region The United Kingdom is also putting somebody to work there in the region These are the kinds of things that I think can be very helpful. I already got one minute That's how long I've talked. Oh Okay, then I'll come back to other things later I Want to talk about social media for a second or a couple seconds 60 if I may Because I think that it's extraordinarily important and if bankers aren't scared now They ought to be If the corrupt officials aren't scared at what happened in Terrier Square and what happened in the other countries They ought to be quaking in their boots Many of you saw I'm sure the Joseph Coney 2012 tape that came up on Twitter about that whack job that calls what he has the Lord's Resistance Army a so-called Liberation movement, which is really a terrorist organization that takes children and uses them and as soldiers or as child slaves 16,000 hits on YouTube on the first day five days later 100 million viewers why did it go viral? Oprah Winfrey tweeted something Facebook has 901 million monthly active users How does this kind of thing? Twitter has a billion active users How does this fit into into the world? Let me just try and put it in the context of population China has a billion three hundred and thirty six million 718 or thereabouts India people India a billion one hundred and eighty nine thousand one hundred and seventy two Twitter has a billion Active users they have power They have power of the electronic Media to move things instantly around the world Facebook if you're looking at numbers Facebook is the is the next down at 901 million users YouTube at 800 million users and then comes the United States If you are ranking countries of population at three hundred and thirteen odd million people this the anti-banker sentiment That arose after the financial crisis. We've seen some of it in the In the demonstrations what have you in the United States? I know from friends in Europe that it is much greater there. There is a tremendous resentment Because where is all the corrupt money banked as you say in the banks? And the big problem is we keep going to the old stock of cases Mubarak is the old guys like Marcos. We're the new dictators putting their money. Are they in the same banks? They got to be so But the problem we have and I'll close on this because my minutes Opening according to the Economist intelligence unit. We only have 25 full democracies in the United in the world today. We've got a long way to go To fight the corruption, but it's got to be done by brave Individual people Working with champions in each government and then banding together because there is no corruption case today That doesn't have an international aspect to it Thank You Ted Jean three minutes Thanks, Raymond, and thank you very much for the invitation and quite honored to be Associated to this event. I've been knowing Ted for 12 years and he's always been a long speaker So I try to stick to my three minutes Firstly, it's going to be a bit difficult not to seem a bit lame after such passionate statement by Frank and Ted And I would try also with more bureaucratic perspective to convey a bit of that passion Three things to begin with first what you said at the outset that corruption is not a victimless crime is extremely important And we continue to hear that all this fashion show crime is victimless And we need to be put a public face on all this and I think what has happened over the last year and The Arab Spring is a very very strong way to show that there is and direct impact and they are big teams to corruption That's one of the reasons why every morning we're waking up and going to work to try to do something and make a difference Now at the same time reading the book sometimes you're a bit overwhelmed by the challenge I mean, I think you use the image of the Everest of anti-corruption. We are just at spade camp It's a Sisyphean effort. I think we all feel that every day and it's extremely Downing sometimes, but that's why we also need that passion and we need to bring all the pieces together The push from civil society more demand sometime Yeah, there may be a bit too ambitious But it's very important to have that pressure and I think looking at the book and the perspective that you do also I mean been working on that for 12 years having seen that from other sides There are a couple of things that come out the first one is that is a Really strong and powerful demand for good governance and anti-corruption And I think the way it has expressed itself in the Arab Spring was particularly compelling that this is something that existed before That's need to be sustained. I think it's going to drive things going forward Very interesting and important way. The second element is the leadership by key individuals and organization I mean you need people to be championed and to push and the last element and that's where things come together in a Very important way is there are structural changes and systemic changes that sustain that I mean if it's only a couple of individuals It not it's not going to to be sustainable and I think making sure that all these pieces come together is one of the key challenges going forward If I made two two comments on two elements first We talked a little bit about the Salinas recovery initiative and and as an example of how we are trying to get things together And as Ted mentioned goes he from from Nigeria was at the genesis of that Interestingly, it brings together two of the organization that Frank is mentioning his book trying to work together in a more Down-to-earth and practical way on anti-corruption issue the UN and the World Bank and what we are trying to do is a mixed of knowledge There is a little underestimation sometimes of how difficult it is to go from the international instruments to practice on the ground I mean you can go and see a prosecutor in Tunisia saying you have uncock. They don't care about uncock because uncock is not a tool They need to know how to do it and it's very down to earth and it's how you trace assets What kind of evidence do you need and get people to be able to do it by themselves and push the envelope? And this is what we are trying to do every day so that they have the capacity by themselves to do it and not just We want to do it, but we don't know it and that we hope that it's going to make a difference Even though it's going to be extremely long now if I take the example of what's happening in the Arab Region the Arab from that had mentioned that the G8 and the Dovid partnership with our support organized two weeks ago I think we saw there's something very interesting which is very strong political momentum But at the same time in a way that can be used to all them to account what have you done you promised What have you done bring together policy people and practitioners? These are two different words that do not work together enough and therefore the practitioners say I've Impediments what can I do about it? But if the practice if the policy people are not in the room It's not going to change on the other hand what we see is policy people making claims and promising things But not making sure that the practitioners have the tools and the resources So really bringing these people together in the same room was very important and the last piece which is very down to earth And that's our day-to-day work is building trust between people a UK Prosecutor is not going to have an informal discussion and help an Egyptian practitioners if they have not met if they Don't know each other if they are not been able to have a discussion So I mean in Doha we organize more than 30 bilateral discussion between those countries and those Practitioners just to earn build that momentum and have the people be able to take pick up their phone and say listen I've got a problem. I need your help What's the best way for me to send your request so that it works? And I think that's that mixed of policy practitioners and momentum and providing the tools That is very important now the other element of star that we are trying to promote And that's where from a bank perspective is a bit unusual We're also going back to the financial centers and say guys You're not doing your job and you have promised to do that you have made commitments Please deliver and usually our counterpart are the developing countries and suddenly we are making it also a financial center Develop countries issue and I think that's very important to continue in that respect a lot needs to be done I mean clearly we have a huge agenda in front of us But I think having that Authorizing environment to be able to do that and to push the envelope was very important the G20 I mean I'm what you said about the G20 was extremely interesting and important and in the book including the fact that it's been a bit Underestimated in particular by the media and the outside world how much this could be meant made meaningful I mean it could stay words on a piece of paper But if there is really a call to the D20, what have you delivered? Okay? You had an action plan You have your self-monitoring question it. Is it really providing? evidence That things are moving in the right direction would be very important And I think the other benefit of the G20 happened to sit in the technical working group of the G20 working on this Is that bring in the same room? practitioners and policymaker from both the former G7 and Developing countries and the big one the emerging markets is absolutely critical because they are also the challenge of tomorrow Having Russia having China really adhering to these instruments is extremely important So you can have that on the piece of paper But having the discussion between the practitioners on how what does that mean in practice? How would you do it? How do you measure your impact and how do you do monitoring reports that are meaningful is important? So just pick up an example at Los Cabos the issue they made public asset tracing review country by country We were instrumental in trying to get that done and and and I think having China Russia Saudi Arabia some of these countries accepting the public scrutiny of this is these are the tools We have and how we use them or not is very important last point you said action I think one of the critical element of all this it's very nice to have the International Convention it's very nice to have the the the rules on the books Do you use them? enforcement is absolutely critical and I think on this there is a lot of progress being made thanks to the OECD and Now they are trying to push the envelope on the bribery convention on the asset recovery We have set up a website asset recovery watch where we put all the cases that are publicly known About asset recovery as a way for everybody all of you to have access to that and to be able to measure progress But I think continue it to push on enforcement What's happening in practice and make sure that in front of a systemic issue you have more than Individual cases but something that begins to make a critical mass remains a challenge. Thank you Thank you, John The financial crisis over the last several years has result it resulted in Efforts to increase regulations on the financial industry the the major banks in particular A lot of us regard that as an effort that did not produce The kinds of results that we would like to have seen produced Minimal regulations on the banks certainly the banks themselves think that they have won their fight against Excessive regulation the optimism that we felt in the Arab Spring produced a similar amount of Hope that we were going to be able to make a major Thrust into the business of fighting corruption. I'd like to ask Frank and Jean was that optimism justified or has it Disappointed That's a bit unfair I would say class FMT I think a couple of things in the countries themselves in Tunisia in Libya in Egypt I mean in other countries beyond the Arab Spring the Underground demand for action is huge and remains as mobilized as we saw them a year ago And I think that's really important and for those who followed what happened in Doha I mean there was a really good speech by the president of Tunisia for instance really expressing frustration Expressing why it was so important to them, but not just blaming the other part which is okay We also recognize that we have our things to play So I think there is still a momentum that deserves to be sustained and that is a source of hope I think there is also big expectation on we want results and not just words now on the other side I think some of the developed countries. I mean as you mentioned I mean Switzerland acted on the assets of Ben Ali and Mubarak just the day after they could have acted before maybe but the fact That they acted just after at least is a huge improvement compared to the past So again, I think we are putting the bar much higher I think what some of the jurisdiction are doing the UK financial services authority for instance has done horizontal review of What the banks are not doing actually on the peps is a huge improvement that would not have happened before One can say well that already happened by through a Basha nothing change, but at least they are doing that I think there is still an opportunity. It's not lost the momentum is to there, but it will require much more Not doing business as usual than what we've seen so far and I think we need to continue collectively to push there I'm more optimistic There is a two-page Big spread about the book and about corruption in a major Tunisian newspaper this morning Two years ago that wouldn't have been the case There is more discussion about corruption in the Middle East and North Africa today and about illegitimate governments and accountability of governments That that than ever before and you saw it coming. I start the book by talking about my visit to Cairo in Two years before the Arab Spring to a seminar that was supposed to be on the financial crisis But of course everybody only wanted to talk about corruption It's been building so much of what we saw from Occupy Wall Street to the huge demonstrations in India to many many other places Result from the energies that came out of what people saw the brave people of Egypt and Tunisia were doing and there's much more we have Privileged this morning that Lex Rearfield is here Lex wrote to me a couple of years ago and it's in the book About how we ought to start watching what was going on in Myanmar He was there at the time and he saw the stirrings And he saw that there was even change in the country that comes Almost at the very very bottom of the Transparency to National Corruption Perception Index So in many many countries, I think the spirit of the brave people are in the streets of Egypt and Tunisia is Percolating is continuing is adding to momentum and is helping to create Move the anti-corruption movement as it were from a somewhat elite To a mass public movement. This is a phenomenal change. I think it is a will look back in 20 30 years time or those of you who read that and say hey, this was an incredible change and therefore the Arab Spring was a Let me go out and limb a little bit in our work and Frank I don't know if you've had the similar experience, but in our work focusing on illicit financial flows resulting from all sources corruption criminality and Tax commercial tax evasion in our work. We find that the foreign policy communities and the national security communities Tend to think that that is somebody else's problem. That's treasuries problem. That's FBI's problem That that's not our problem. We deal in the hard realities of of policy concerns and and Weapons and so forth. I think that's very short-sighted and have and have said so a number of times But I I find it difficult to crack through To to get people to understand that what we're talking about is a systemic problem that affects everything that you're doing as well In the foreign policy and security arenas Frank and Ted I Write it wrong. What's your experience? Well, let me just go first to refer to the book a Consensual amount of this book is about international security issues I'll consider about but there's a couple of chapters in this book The book deals with a lot of the challenges of corrupt fighting corruption and deals with a number of issues from Development assistance to illicit financial flows to corporate bribery but it also deals with the issue that you've mentioned because We've had a paradigm for far too long in the strategic international For a policy community that says to win friends overseas We turn a blind eye to the corruption in their own governments, whether it's Karzai whether it was Iraq And this go this this really has its origin what it has origin hundreds of years ago But but it really came into the fore during the Cold War We have not found a new paradigm to replace that So therefore I think the foreign policy establishment rather ignores the problem because it doesn't have an answer. I Don't have a good answer and one of the major Points I try to make in the book is it is time for the debate. It is time for us to open it up It's time for us to look at security and natural resources It's time for us to look at security and the sales of weapon systems across the world with all those Complicated offset agreements that amount in many cases to ways in which governments can steal money It's time to look at security and in Relationships and how western governments are culpable here and what they need to do in a new debate Which I'm suggesting here without saying I have the answers because I think this is very complicated But I think we have to find answers yeah, I Don't agree with you on the premise that the foreign policy and national security Institutions have ignored corruption What you may not see Is the fact that they work very hard every day on Anti-corruption Activities within their own countries within the countries where they're posting It may not be that the results of those things are directly In the newspapers same thing with the national security and the intelligence gathering it wouldn't surprise you I'm sure that Electronic and other means of intelligence constantly collect information About corruption. We don't know we see what's done part of the Technique that is used to go after corrupt officials much like it is in the drug arena is to disrupt and deter their activities Now as I mentioned to you earlier the last ten years and fortunately in my view has been focused only on Terrorist financing. I don't say that it's not important because It speaks for itself But there's a lot been going on the For example, there's several initiatives on using anti-money-wandering to fight Corruption in wildlife crime so logging Animals the extinction of several species all of those take place only because of Corruption at the ministerial and presidential levels of certain countries A small step, you know a small step There was a case filed by the United States in the district court of DC against mr. Teodoro Obi-Wan of Equatorial Guinea the minister of environment he has Oh 35 or 40 million dollars worth of assets in the United States including the Michael Jackson crystal-gover covered Bad tour glove That money has been moved to be seized. Okay, but Ted what said, you know you read the inspector general's report on Iraq and it's I highlighted in the book Billions of dollars of US taxpayer money went straight Into the secret bank accounts of government officials there We knew about it. The Pentagon did nothing about it. The White House did nothing about it Vice president Cheney even said well, that's fine. Let's let's just carry on. We've got other priorities We've done exactly the same in Afghanistan Right now American taxpayer money on a huge scale is being shipped from Kabul to Dubai It's being regularly reported the inspector general is also saying that he's finding it difficult to get accounts These we're talking billions in the central countries of our off that have been central to our foreign policy in the last couple of years And this issue hasn't come up. I must say though and just to just to sort of even this out a little bit Hillary Clinton and in fact President Obama get enormous Praise from me also in the book for what they've done to encourage civil society around the world to speak truth to power The efforts that they have made it is a travesty that the Kremlin is now cutting off us aid support in Russia but But let's not confuse all of these nice things since the patreon act of 2011 with the reality of what's happened in Afghanistan and Iraq and in these other major geopolitical things Where the White House and the Pentagon have allowed? Vast amounts of our money to be stolen. I think that is a terrible tragedy that really Dwarfs many of these other things Well, no like the presidential debate I get her I get her I get a response Two things one how would you have stopped it? I haven't seen anybody put forward criticism is reasonable amount of money stolen outrageous Shouldn't be allowed. How are you gonna stop it tomorrow? I wouldn't have gone into Iraq. That's a separate issue Don't know right we knew that Karzai was corrupt from the very beginning The question you can ask is why does why the country's governments allow corrupt officials to rise in the first place? Let me ask One further question and then we'll open it up to the audience and it's an extension of this discussion We've had a huge number of banking scandals standard chartered by covia HSPC Bank of America UBS It goes all and yet No banker goes to jail Why are we talking about? Just regulatory capture are we talking about the impact of money in politics? Why why do no bankers ever go to jail on these things? Well, first of all, I have to make a disclaimer Emily Vogel who's here and I for the last 20 odd years of represented in PR since the Institute of International Finance and therefore the bankers so Just so there's no conflict of interest here. Why because time and time again, I believe people Have miss have failed to recognize that these are not victimless crimes. We come back to your comment and my comment earlier So long as these are looked at it's just pure sort of white collar crimes that that that have some sort of financial Effect or very technical or something like that The punishment will never fit the crime Once you start looking at the huge damage done to the countries and to the peoples Who suffer who are the victims as a result of these crimes? Then I think you will have a quantum change in the way justice is Done. It's quite interesting. You know if you look at some of the cases in the last few years in the state of Illinois Where the governor is now serving a 14-year sentence the largest the longest sentence ever for a US politician in that kind of situation for corruption It only in the last couple of years have you heard the judges in those cases Start to talk about how the punishment needs to fit the crime because people have suffered That's a real change. I think we need that in the banking Thank you Gary as well. Let me mention I want to mention something because there there are powers To do things about these banks that have been there for a long time. The question is who has the political will to do it I'm in I think was 1986 the Money Laundering Act was amended in the United States to provide for what we call death penalty for banks Bank convicted of Money Laundering offense could lose its license or its FDIC insurance Which makes it impossible to operate? Why hasn't that been done? Why haven't cases you don't have to prosecute the individual? You prosecute the the institution now Why hasn't that been done in some of these cases is a very good is a very good question The answers are not satisfactory It seems that now banks as a result of the crisis the banks are too big not only to prosecute but too big to fail and and but On the problem of the individuals see the why the bank has a Manual is I forget which one of it did on how to strip out or information about Iran Transactions from its Swift wire transfers or Swift messages That's one of the most outrageous things in the world and in my view should have resulted in a case against the institution The institution says in its defense, so you'd be the judge Institution says in its in its defense, but that happened ten years ago or eight years ago We didn't know about it then as soon as we found out about it We told the government and we threw everybody out That had done the problem now. Do we take down city? I forget whether a city or what? Do we take down city bank or J.P. Morgan Chase or whatever the case may be it might be we had this problem in In the savings and loan crisis of the early 90s. You had a small bank in a town There was insider trading the bank collapsed. Do you do destroy the bank? and hey, and then people who need their access to finance don't have it in a little town in Omaha What you know, I think those questions because when you you can talk about civil regulation and How to make it impossible as Dodd Dodd Frank may be started to do for these banks to carry on what they do Criminal aspect needs to be pushed by Pete officials who are politically willing to do it Let's move on to audience questions. You're first Thank you talking about solutions as in from the the FCPA Perspective don't you think that the DOJ always settles these cases and that the fact that sort of say The one thing that we can target is actually us-based corporations and that the fact that the DOJ always settles these cases Basically means there is no serious incentive to stop the behavior and then in the case of say BAE systems They were given a free pass by the Prime Minister of Great Britain when the actual corruption was found and then the last case is Shouldn't possibly if these companies were actually too big to despair if they're actually debarred from Contracts then there might be some real incentive But at the end of the day a two hundred million dollar fine to BAE systems is nothing So basically is there any kind of answer there? Let me ask Frank alone to respond to that. Yes Yes, I I write about that at some like and and the point was that the settlement with BAE Just as an example in the United States was so crafted That they could continue to be a contractor to the defense department right after paying a record size fine It's a We should set that against the fact that today there are more investigations by the Justice Department than ever before The number is increasing Significantly, there's also more in Germany today than ever before So the pressure is mounting But there's a story in the Financial Times this morning that says One out of every four British corporate directors would pay a bribe if it if that helped them win a contract So we have to do a lot of education here. It's not just the fines It's not just the disbarment. We have to go much further deeper down and that's maybe a subject for another day Let me go here. I'm just a brief. I mean and on purpose with the known US perspective I mean around the settlement there is also broader discussion Which is between the way the US systems works in terms of settling against going to the full trial and there are many Legal and cultural differences in that respect. So we need to adapt our reading of that from that perspective But I think what is really interesting in some cases and my guess it was on purpose is how the US DOJ I used the settlement to put pressure on third-party jurisdictions so that they go after their own companies And if you look at the implementation of the OCD and the bribery convention ten years ago It was almost zip except the US some countries were beginning to do something But now the US DOJ has used some pressure through settlement and joint settlement to get the others to begin to act is also an Interesting perspective. So then is it enough? I don't know But I think we need to look at it also from a broader perspective than just the US Another question for me. There's an effort underway Led by the US Chamber of Commerce to weaken the foreign corrupt practices act My father used to be a director of the US Chamber of Commerce I also made him a director of my businesses in Nigeria and I jury and diversified investments and We talked about he flew many times to Nigeria and we talked about corruption problems all the time I'm quite sure my father's turning over in his grave at At prospects of weakening the foreign corrupt practices act led by the institution of which he was a director for many years Frank does that exercise you as much as it exercises me? Not really because it's gonna fail, but but but I Got into this I got interested in this whole subject When I came to this country in 1974 in the final months of President Nixon I came here as a foreign correspondent for the times of London and for the next couple of years one of the stories that I followed Hugely was the post watergate investigations into foreign corrupt bribery which led to the FCPA and which is a must read It's chapter 10 of my book. It's called it started with Watergate I think anybody who recalls what happened there and the hearings and what some Very strongly conservative members of Congress and the administration including William Simon Who was then Secretary of Energy at one point and and Secretary of the Treasury had to say about how a rages corporate bribery was Anybody who looks back at that record will say wait a second What's going on now needs to be stops because there is absolutely because the Dangers of this kind of practice are too great. It's all there on the record from the 70s Dan you got a question Comment and then a question, but I'll make the comment short You I used to be at the Department of Justice in the bank fraud unit I can only describe and this was in the late 90s what I would call an institutional timidity when it came to Prosecuting and investigating these cases and a satisfaction of getting a fine But I think for the reason for this you have to look at our campaign finance laws Which are now going to become even worse in light of Citizen United and the amount of money given by large financial institutions to both parties Okay, actually in the 1996 election. I think more went to the Democrats than the Republicans So you have to look there. What does that mean? It means that those who are really prosecuting These cases or investigating them are people like Preep Bahara in the Southern District of New York who is not beholden at least two campaign contributions It it wasn't until Mark Mendelsohn really came over and took over the the FCPA unit that that unit started becoming aggressive So so there's not really a lot of incentive from the top Unfortunately to really prosecute these cases and go after the individuals So I don't think we're going to make much progress here until there's a fundamental change in the way our campaigns are financed I wonder if any of you want to comment on that Another question and for gender balance we'll go back here Jasmine Huggins from church will service. First of all, thank you very much Frank for your anger and your passion, which I very much share. I Came to Washington maybe 19 months ago and Unsecondment from Christian aid in Britain which has been doing some work on corruption particularly the UN Convention Uncac and As I work specifically on Haiti Which has ratified the convention we have been trying to look at how we can work with Within that framework considering especially that the peer review for Haiti comes up Next year So you mentioned complacency. I'd like to suggest that based on my experience as more than complacency. There's actually ideological resistance particularly here I've found it absolutely staggering and have not always been able to come up with a response and so maybe this is a question to you How do you deal with that kind of resistance? particularly among progressives who feel that they only villains that can exist are in the north and How do you deal with the resistance with the the acknowledgment from? conservatives and moderates who Go the other way and say well, maybe this is a Justification for cutting off of funds or for excessive Conditionality in in in the use of international funding How can you so the question is how can you address corruption without it being captured? excessively either by the progressives who disagree with you or the moderates and the conservatives and how do you How do you weigh through this very complicated political environment? Thank you Frank? Can I ask you to address both of those questions? Okay? I'll be extremely brief because they're huge subjects so that I can't do either of them justice I agree with you about the United States. I think we've got it since citizens United ruling We've got a very serious situation. I try to highlight that a little bit in the book America too many Americans think In the sort of in the Washington circle think corruption there's something that happens over there. It's happening here at home and Then he's I'm sure there'll be a backlash here actually because I think public outrage about this is huge It's going to take time. It's going to be very very difficult I Think the answer to your question, which is that there is not a simple answer But one part of the answer is people need to recognize Far more particularly in many parts of the world how important civil society is as Playing an absolutely central role in Helping to build institutions in helping to monitor public expenditure and so forth. I mean I am quite radical by some people's I'm sure Some people will think I am with regard for example to the World Bank. I worked for the World Bank for nine years I was its chief spokesman. I passionately believe in the values of the World Bank and its mission But they live in Alice in Wonderland world when it comes to good governance lending They're pushing out money to corrupt governments to cook so that those corrupt governments reform themselves There is something fundamentally nuts about that Civil society has to be recognized to play a much much bigger role as a partner and as a monitor in All aspects of this work and if it isn't then I think the pace of reform will be slower I believe however that that Gradually is actually happening and we need to do a lot more the partnership for transparency find it's so important here We need to do a lot lot more to push that PTF has written a terrific book about this subject on the demand for good governance I think it's important. We're down to our last five minutes or an awful lot of questions You sir Please keep your questions short and I will try to keep the answer short You've got a bank in 69 and was also advised that the USA ID and then left about 10 years ago I've seen all the corruption my time, but I want to really say Frank. Thank you very much You and Peter have set up a On your own an organization that is done more good with so little and all these other beltway outfits, so good. I might My there's a piece of the financials of the economists about India and how the corruption works 80% ever reaches the Desiglettes and it's all skimmed out, but I think what we really have a very powerful Weapon a new touch is a social media now. I'm 70 you guys over 40 or I so So what are you gonna do is mobilize the information that's being generated all the time bring it here Not the top-down approach keep the world bank out of this Bring it here and then names are named and named okay named given out I think that that is something that is the most part and that the Arab Spring showed how good it is I was one of the biggest funds in the bank in Pakistan and It is so corrupt there I actually protect myself made a list of all the shanty goes are going on and I was attacked by the Pakistani government As a whistleblower typical whistleblower thing and the guys on top of it didn't want to get involved because the wolf was said Thou shalt be client sensitive which opened the door for corruption the bank and Finally I was working in with the senior minister in Afghanistan to doubt him in our cellar was with me the bank and he's already furious at the Accusation it's all the Afghans were at fault. He said where's the money coming from? He said all these contractors of the idea and the defense department. They're the skimmers like crazy so Let's get one more question back there the lady. Yeah, right there. Yes Thank you. My name is Melissa. I come from Mexico. I consider myself as an activist So this all victims addressing part of the corruption agenda Do you think? We are in the moment to cross the human rights agenda and the corruption agenda in order to address correctly all this issue That will be one question and Regarding civil society. Do you think the open government partnership has a future? I just addressed that question that you ask about the relationship between human rights and Corruption illicit financial flows with the minister of development in Denmark on on Monday He's he's very much coming from the same position as you are Frank There's another event following this one. We're down to two minutes the the last word goes to you Please Frank You're right, and I try to make this point as well if you look at the indices on corruption on human rights abuse on violence and security in the world as well the Rankings are almost identical the countries that come out worse in each case are almost identical so there is a tremendous amount of overlap and goes back to justice and a lack of justice and So, yes, I think there are efforts being made by civil society, but not enough We all have to work much much harder to work with people in the human rights field work with people in the free press freedom field Because journalists are getting killed and censorship is a massive issue in this that directly relates to our topic so many of these things are related but We could get very depressed We didn't continue our little debate about Pakistan another case that we should we should discuss the point though I want to the last one because Raymond. Thank you so much for doing this this morning Raymond's work and GFI's work is so important and my last point is I think we can win this for But I think it means we have to end the complacency We have to convince more people About the terrific achievements of the last words years and how we build on it and build on those building blocks and the stuff That you were talking about in order to make people understand This is not a hopeless cause quite the opposite. This is vitally important for our civilization Jean-Pim Ted Greenberg. Thank you very much for your contributions Frank What is most stunning about your book is its optimism that we can win the fight. Thank you ladies and gentlemen Thank you to everybody for coming Frank will be signing some books just down the hall