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2.1 Introduction
the literature review. There are three purposes that are served by the literature review.
First of all, the review of literature serves as the starting point of the research by
the research subject because the literature review provides the existing knowledge on
the research.25 Next, it helps the researcher to find out the best research practices and
materials.26 Finally, it helps the researcher to differentiate the research from the rest of
the studies, thus declaring it an original contribution in the research area by fitting the
research in the appropriate context. In this regard, the present chapter covers extent
literature previously conducted in the research context which provides the premise for
measures serves as the goal of this review of theliterature. This chapter provides a
conceptual framework of corruption for the thesis, corruption from the perspectives of
corruption, previous work, and framework. The study findings can be seen through
24
D. N. Boote and P. Beile, “Scholars Before Researchers: On the Centrality of the Dissertation
Literature Review in Research Preparation”Educational Researcher. 34.6 (2005): 3–15, Available:
http://edr.sagepub.com/cgi/doi/10.3102/0013189X034006003.
25
David Thomas and Ian Hodges, Doing a Literature Review in Designing and Managing your
Research Project, vols. (London: Sage, 2010).105
26
Ibid.105
13
the analytical lenses provided by this chapter. Thus, the base for this research is laid
2.2 Corruption
perspectives.
corruption likely and assessing the impact of corruption on economic efficiency.” The
relationship. This theory states that there are a supervisory principal and an agent. The
principal who can be a government auditor or a senior civil servant oversees the duties
of the agent who can be a junior civil servant. The corruption can arise in this setup
when the agent has more privilege of access to critical administrative information than
the principal, and the agent tries to get the pay-offs by illegally providing the critical
data to those outside the setup or administration without the knowledge of the
individuals”.30,31 With respect to the domain taken for the analysis, the agent and
27
M. Granovetter, “The Social Construction of Corruption”in On Capitalism. Ed. V. Nee and R.
Swedberg, vols. (Stanford University Press, 2004), 152–172. p.152
28
S Rose-Ackerman, Corruption: A Study in Political Econom, vols. (London: Academic Press, INC,
1978).
29
Granovetter, “The Social Construction of Corruption.” p.152
30
Rose-Ackerman, Corruption: A Study in Political Econom.
31
Granovetter, “The Social Construction of Corruption.” p.152
14
principal can be different. For instance, the principal can be the government or voters
The principal’s interest may not be interfered by the agent’s action of getting a
payoff for the personal use, as put forward by the supporters of agency theory.
and see that the interests are fulfilled, the principal is left with three choices. They are
providing directives, incentives either positive or negative and saving the costs
incurred with regard to supervision or monitoring.34 The agent may try to defeat the
according to Groenendijk35, the agent will earn the incentives set up by the principal
and still the concealment costs will be incurred. The agent will be advantaged by the
seeker) who influences the agent by offering the payoff is left out in the agency theory
by focussing only on principal and agent. The researchers say that the third party may
act in such a way that can provide him/her with the advantage.
This agency theory explains the corruption done by the agents alone, and this
does not explain the public services that are affected by such corruption and other
32
Rose-Ackerman, Corruption: A Study in Political Econom.
33
Toke Aidt, “Economic Analysis of Corruption: Asurvey”The Economic Journal. 113.11 (2003): 632
– 652.
34
Nico Groenendijk, “A principal-agent model of corruption”Crime, Law and Social Change. 27.3/4
(1997): 207–229, Available: http://link.springer.com/10.1023/A:1008267601329.
35
Ibid.
36
J. M. M Mbaku, Corruption in Africa: Causes, Consequences, and Cleanups, vols. (United Kingdom:
Lexington Books, 2007).
37
Rose-Ackerman, Corruption: A Study in Political Econom.
15
informal payoffs. In order to realise the corruption existing in the public-sector
perhaps it would be more efficient to have customers hire the agents to deal with their
old principals.” Rose-Ackerman39defines that the informal payoffs that the principal
does not receive as illegal and this is the problem with this analysis. However,
does not exist in practice. Also, there are probabilities that principal may be corrupt
corrupt, according to Wade42, the agent and third party may become corrupt;
otherwise, they may lose their positions. Hence, there could be a vicious cycle of
38
S. Rose-Ackerman, Corruption and Government: Causes, Consequences and Reform, vols. (United
Kingdom: Cambridge University Press, 1999).P.94
39
Rose-Ackerman, Corruption: A Study in Political Econom.
40
Granovetter, “The Social Construction of Corruption.”
41
Aidt, “Economic Analysis of Corruption: Asurvey.”
42
Wade, “The system of administrative and political corruption: Canal irrigation in South India.”
43
D. W. Brinkerhoff and A.A. Goldsmith, Clientelism, Patrimonialism and Democratic Governance:
An Overview and Framework for Assessment and Programming, vols. (USA, U.S: Agency for
International Development Office of Democracy and Governance, 2002).
44
G. Lewal, “Corruption and Development in Africa: Challenges for Political and Economic
Change”Humanity & Social Sciences Journal. 2.1 (2007): 1–07.
16
(b) Moralists versus Functionalists’ Perspectives
paper prepared for TI Bangladesh), moralists view corruption as “an immoral and
unethical phenomenon that contains a set of moral aberrations from moral standards
of society, causing loss of respect for and confidence in duly constituted authority.”
Moralists observe that corrupt practice “stems from the social norms that emphasize
gift-giving and loyalty to family or clan, rather than the rule of law”.46
corruption. They say that corruption plays an important role in the operation of public
sector establishments in such a way that it can boost the activities of the establishment
up cumbersome procedures, buy political access for the excluded, and perhaps even
produce de facto policies more effective than those emerging from legitimate
channels.” The prevalent political system or the structure of the institution is taken as
the base for the analysis of corruption by the functionalists. They look at the other
side of the coin by seeing the efficiency in the delivery of services offered by the
45
M.M Khan, “Political and Administrative Corruption: Concepts, Comparative Experiences and
Bangladesh Case”A paper for Transparency Intentional –Bangladesh Chapter. (n.d.), Available:
http://www.tibangladesh.org.
46
Gabriella R. Montinola and Robert W. Jackman, “Sources of Corruption: A Cross-Country
Study”British Journal of Political Science. 32.01 (2002): 147–170, Available:
http://www.journals.cambridge.org/abstract_S0007123402000066.p. 148
47
Mushtaq H. Khan, “The efficiency implications of corruption”Journal of International Development.
8.5 (1996): 683–696, Available: http://doi.wiley.com/10.1002/%28SICI%291099-
1328%28199609%298%3A5%3C683%3A%3AAID-JID411%3E3.0.CO%3B2-4.
48
M Johnston, “The Political Consequences of Corruption: A Reassessment” (1986): (459–477.p. 459
49
V. Tanzi, “Corruption around the World Causes Consequences, Scope, and Cures, IMF Staff
Papers”International Monetary Fund. 45.4 (1998): 559–594.
17
functionalists also concur that weak establishments have much of corruption.
Functionalists are of the view that corruption is not as grave as the moralists perceive.
is another popular theory. This theory analyses the corruption by exploring the nature
of the political system and the role of administration in the emerging economies. This
this theory, the functionality of the public-sector establishments and related systems in
between the patron and the client51. According to Khan, M. H. (1998, the
opportunities (like jobs) and resources are created by the patron (who can be a civil
servant or politician) who expects the cooperation or support (for example, in the
form of attendance at the meetings or votes). This paves the way for the creation of
a particular social context because certain corrupt practices like bribery are “morally
loaded terms” in the settings of socioeconomics and politics. Like any other political
50
Odd-Helge Fjeldstad, The pursuit of integrity in customs: Experiences from sub-Saharan Africa,
vols., CMI Working Paper, 2009, Available: https://www.cmi.no/publications/3473-the-pursuit-of-
integrity-in-customs.
51
Ibid.
G Hyden, African Politics in Comparative Perspective, vols. (Cambridge: Cambridge University Press,
2006).
52
Thomas D. Lancaster and Gabriella R. Montinola, “Comparative political corruption: Issues of
operationalization and measurement”Studies in Comparative International Development. 36.3 (2001):
3–28, Available: http://link.springer.com/10.1007/BF02686202.p.93
18
or socio-economic practices, corruption is a part of stakes in the system, societal
power relations, interests, and norms practiced by the group of people53, 54, 55 , 56, 57, 58.
About the corruption in West Bengal villages (in India), Ruud59 comments that
“…in the wider context of social life, the simple act of corruption (for the moment
understood as an illicit deal involving the holder of a public position) is only one
among many outcomes of habitual practices”. Researching the corrupt practices as the
social problem and the corrupt people should take into account the “contextual
information on [actors’] social positions, interests and stakes in the system as well as
on the political, economic and social conditions within which they function.”
Pavarala60: The role of non-elite groups in the creation and resolution of social
53
V Pavarala, Interpreting Corruption: Elite Perspectives in India, vols., Working Paper (New Delhi,
1996).
54
Arild Engelsen Ruud, “Corruption as Everyday Practice. The Public—Private Divide in Local Indian
Society”Forum for Development Studies. 27.2 (2000): 271–294, Available:
http://www.tandfonline.com/doi/abs/10.1080/08039410.2000.9666142.
55
Daniel Jordan Smith, “Kinship and Corruption in Contemporary Nigeria”Ethnos. 66.3 (2001): 344–
364, Available: http://www.tandfonline.com/doi/abs/10.1080/00141840120095131.
56
Giorgio Blundo and Jean-Pierre Olivier de Sardan, Everyday corruption and the state, vols. (United
Kingdom: Zed Books, 2006).
57
Joseph C.A. Agbakoba, Developing Appropriate Administrative Instruments For The African
Cultural Environment, vols. (AEGIS European Conference on African Studies, 2007), Available:
http://www.culturaldiplomacy.org/academy/content/pdf/participant-papers/africa/Joseph-Agbakoba-
Developing-Appropriate-Administrative-Instruments-For-The-African-Cultural-Environment.pdf.
58
Fjeldstad, The pursuit of integrity in customs: Experiences from sub-Saharan Africa.
59
Ruud, “Corruption as Everyday Practice. The Public—Private Divide in Local Indian Society.” p.271
60
Pavarala, Interpreting Corruption: Elite Perspectives in India. P.25
61
Onyango Gedion, “Administrative And Political Grassroots Corruption In Rural Kenya: It Takes Two
To Tango”University of Bergen, 2012, Available:
http://bora.uib.no/bitstream/handle/1956/5998/97214908.pdf?sequence=1.
19
2.2.2 Concept and Definition of Corruption
its usage and understanding as essentially negative and detrimental to progress. The
exhaustively its causes, effects, and role in the economic, political, social, and cultural
milieu in general and in specific regions and countries. As Paul Heywood observes,
‘By the mid-1990s, it appeared that no nation was immune to the corrosive impact of
related publications’62.
years, the political scientists and sociologists have researched the corruption.
Corruption is defined as the wielding of power for the preference, earning aprofit,
thebenefit of a group, or prestige which breaks the moral conducts or breaches the
explains nepotism, bribery, graft, etc. However, there is no common theory to explain
the corruption. Moreover, the studies are scattered. At the end of the 1990s, Robin
62
Paul Heywood, “Political Corruption: Problems and Perspectives”Political Studies. 45.3 (1997): 417–
435, Available: http://journals.sagepub.com/doi/10.1111/1467-9248.00089. p.1
63
Elizabeth Harrison, “Corruption”Development in Practice. 17.4-5 (2007): 672–678, Available:
http://www.tandfonline.com/doi/abs/10.1080/09614520701469971.p. 676
64
Robert Klitga, International Cooperation Against Corruption, vols., 1997, Available:
http://www.icgg.org/downloads/contribution02_klitgaard.pdf.
65
Julius Gould and William Lester Kolb, A Dictionary of the Social Sciences, vols. (New York: Free
Press of Glencoe, 1964).p.142
66
Edward Van Roy, “On the Theory of Corruption”Economic Development and Cultural Change. 19.1
(1970): 86–110, Available: http://www.journals.uchicago.edu/doi/10.1086/450469. P.86
20
Williams observed that “the 1990s have been the decade of corruption as an academic
and policy topic and there is no indication that popular, academic, professional or
political interest is beginning to flag. The literature is voluminous and varied, but
most accounts share a common characteristic: a reluctance to say what they mean by
fashion.”67
A few major trends can be elicited by the brief overview of the available
literature. Many definitions highlight focus on the private interest and public
establishment. These definitions mean that in order to achieve the private gain, the
political office is abused. This definition needed a rethinking when the private firms
like World com and Enron involved in the scandals. Hence, corruption was defined by
trusted authority for the sake of public gain68. Secondly, ethnocentrism, functionalism,
and evolutionism are the three categories in which the theory of corruption falls into.
view, the ends or purposes served by the specific institutions are focussed; moreover,
the social science research forms the basis for functionalism. Evolutionism sees the
corruption as the centre of social and economic change (Van Roy, 1970: 88–90).
Thirdly, the donor development discourse initiated by World Bank along with the
67
Robert Williams, “New Concepts for Old?”Third World Quarterly. 20.3 (1999): 503–513, Available:
https://www.jstor.org/stable/3993318?seq=1#page_scan_tab_contents. P. 503
68
Harrison, “Corruption.” P. 674
21
corruption in many third world nations has led to various concepts and definitions of
governance and development. As per the comment from69, as long as the mechanism,
causes, scope and effects of corruption are not clearly realised, it is difficult to know
complex issue in our country. The definition given for corruption in simple terms is
“the abuse of entrusted power for private gain” (Transparency International India
[TII]).
on depending on the amounts of money lost and the sector where it occurs.
system; corruption has been remaining integrated into all these areas thereby gets a
of a situation, where major institutions and processes of the state remain used by
corrupt individuals and groups. Thus, people don’t have any option to deal with
corrupt officials.
69
Philip Oldenburg, “Middlemen in Third-World Corruption: Implications of an Indian Case”World
Politics. 39.04 (1987): 508–535, Available:
http://www.journals.cambridge.org/abstract_S0043887100014477. P. 509
70
World Bank, Helping Countries Combat Corruption The Role of the World Bank, vols. (New Yeak:
The World Bank, 1997). P. 9-10
22
(b) Sporadic (individual) corruption
control in this type of corruption. However, it might cripple the resources of the
economy.
Political corruption takes place at the higher echelons of the political system,
wherepoliticians and state agents at the helm ofenforcing the laws use theirauthority
resources but distorts the decision-making process.When the laws and regulationsof
of the state are subjected to misuse by the rulers to meet their interests, it is known as
political corruption. This clearly indicates about violation of law and are subjected
who abuse their position to sustain their power, status and wealth, voting
irregularities, nepotism and cronyism, rule of a few false political promises paying
journalists for favorable coverage of candidates and parties influencing voters by the
23
distribution of money, food and drink, holding on to power against the will of the
people 71.
government that alter the laws and the functions of the respective state which allows
the political officials to gain profit at the expense of the public.At the time of
implementation of policy, high level or “grand” corruption takes place.It doesn’t give
much indication of the amount of money syphoned off, rather formulation of rules and
midlevel public officials in their interactions with ordinary citizens, who often are
trying to access basic goods or services in places like hospitals, schools, police
from the implementation aspect, lic officials meet the public on a daily basis. Petty
corruption involves bribery related to the implementation of existing laws, rules and
regulations, thereby it differs. Usually, the modest sum is involved in this type of
corruption and has also been called “low level” and “street level”. This petty
71
Upender Kandukuri, “Corruption in India”International Journal of Multidisciplinary Research. 1.5
(2015): 1–10.
24
(f) Legal and moral corruption
The word corruption is originated from rumpere, means to break. As per this
approach, corruption means clear infringement of thelaw. Thus, there is a need to state
all the laws in brief without any doubt on meaning and discretion to the public
and what is not. Suppose an act of an official comes under theprohibition of laws,
Corruption is one of the biggest menaces that go against the welfare of society.
campaigns, sports etc. There are so many probable reasons that lead to increasing in
corruption. Those could be low pay scales/ wages, inadequate job opportunities, lack
of strict and fast punishments, lack of transparency in affairs and deals, lack of
independent investigating agency, lack of ample powers to the judicial system, lack of
positions. Their pressure on senior government officials, especially at the level of the
secretary, is certainly a factor. Moreover, the obnoxious part is that some of this
personnel join with the ministers in power to get their share of spoils. Like these,
various aspects of corruption exists at each and every level of people working in
72
Elaine Byrne, “Definitions and Types of Corruption,” 2009, online, Internet, 10 Oct. 2017. ,
Available: http://elaine.ie/2009/07/31/definitions-and-types-of-corruption/.
73
N R Ranga, “Causes of Corruption|10 Main Reasons in India & Developing countries”Mind
Controversy. , 2017, online, Internet, 3 Oct. 2017. , Available:
http://www.mindcontroversy.com/causes-of-corruption-in-india/.
25
74
governmental organizations . Thus, the need is to curb corruption by means of
and large scale. Due to the presence of corruption in all the walks of life, the civil
service in India which is known as steel frame gets another terminology, i.e. the ‘steel
doesn’t make any serious impact on the population78. For instance, in January 2008,
the revelation bythe World Bank investigation relatedto fraud and corruption in five
74
The Hindu, “The stained steel frame”The Hindu. , 2016, online, Internet, 7 Oct. 2017. , Available:
http://www.thehindu.com/todays-paper/tp-opinion/The-stained-steel-frame/article14024139.ece.
75
Arnold J. Heidenheimer and Michael Johnston, Political Corruption: A Handbook, vols., 2nd ed.
(New York: Transaction Publishers, 1989).
76
United Nations Development Program, “Fighting Corruption to Improve Governance”United Nations
Development Program. , 2017, online, Internet, 3 Oct. 2017. , Available:
http://webcache.googleusercontent.com/search?q=cache:HLN9_baVdhgJ:www.mk.undp.org/content/th
e_former_yugoslav_republic_of_macedonia/en/home/ourwork/democraticgovernance/successstories/Fi
ghting-corruption-improve-governance-FYROM.html+&cd=1&hl=en&ct=clnk&g. p.7
77
Kamala Prasad, Indian Administration: Politics, Policies, and Prospects, vols. (New York: Pearson
Education India, 2006). p. 311
78
Laurence E Larry and Laurence E. “Larry” Lipsher, The Tax Analects of Li Fei Lao, vols.
(eBookIt.com, 2013).
26
Indian healthcare projects financed by US$568 million in loans, where it didn’t make
much impact79.
the accused in corruption. Thus, the perception of the public is that indulging
corruption activities in public services will remain undetected or hardly there will be
any punishment. Alexander81stated on the corruption in the Indian Civil Service,as the
corrupt officials get away easily without getting punished for their offences82.
The significant factor for any corrupting activity gets the initiative fromthe
human being. The tendency of people is to enjoy all the luxuries and comfort in their
lives. Thus, to fulfil this aspect, people indulge in various kind of corrupting activities
that would yield monetary or material benefits. In our education system, there is
hardly any importance onmoral and spiritual values. As a result, the value of society
corruption and lead a luxurious life without any concernabout the society. People
79
Ibid
80
Leslie H. Palmier, The control of bureaucratic corruption: case studies in Asia, vols. (United State:
Allied Publishers, 1985). p. 280
81
P.C Alexander, The Perils of Democracy, vols. (Bombay: Somaiya Publications, 1995).
82
Jon S.T. Quah, “Curbing Corruption in India: An Impossible Dream?”Asian Journal of Political
Science. 16.3 (2008): 240–259, Available:
http://www.tandfonline.com/doi/abs/10.1080/02185370802504266.
27
even if aware of the corrupt activities don’t raise their voicesagainst anti-social
elements83.
The apex court has done a commendable job in upholding rule of law in the
administration of criminal justice, where it has given enough authority to the top
bureaucrats and public men. However, the wheels of criminal justice have got struck
up by legal luminaries as they defend the anti-social elements. As a result, the trial
procedure gets affected as the proceedings remain stayed in one way or the other. At
times, there is a backtracking that takes the situation back to the square one. Most of
the trial proceedings are without any conclusion like in scams and bribery cases. This
reflects about delay in delivering verdict through the provision in the constitutional
warrants speedy justice. There are certain reasons behind the ineffectiveness of anti-
powerful accused for winning over the witnesses and browbeating the prosecuting.85
The Act so far has been failed to provide justice even in the petty cases of
investigation of corruption cases is conducted by a senior police officer 86 and the case
are tried by a senior-judicial officer having long experience. In this regard, the anti-
corruption Act, 1988 is counted as the strong arm of criminal law that has been
reduced to the status of ineffective legislation which gets infringed by the mafia
having high clout patronizing corruption through the influence it wields in all the
83
Civil Service India, “Corruption In India”Civil Service India. , 2017, online, Internet, 4 Oct. 2017. ,
Available: https://www.civilserviceindia.com/subject/Essay/corruption-in-india1.html.
84
The Supreme Court has now given free hand to C.B.I. in corruption cases
85
Section 20 of the Prevention of Corruption Act, 1988
86
Section 17 of the Act
28
aspects of life due to nexus among politicians, bureaucrats and influenced public men.
However, Supreme Court’s directions regarding successful working of the Act have
The main aim of the Integrity pact is to decrease the level of corruption at the
procurement level by the agreement formed between the bidder and the government
opposition parties will also avoid bribe and the external agencies dealing with licenses
and the government agency’s procurement will overhead to eradicate corruption with
To enable the government agencies by diminishing the costs and the effect of
corruption on the public acquisitions and licensing. Thus, a powerful tool called
Integrity Pact paves way for transparency in bidding process, licensing process and
public acquisitions by all public and private agencies. It results in efficiency and also
develops trust among the public with respect to government and private agencies.88
by other complications. It is unfruitful to analyse with examples. It is not the fact that
only poor countries are overhead with corruption, also the developed countries also
87
Law mantra, “Adequacy of Legal and Regulatory Framework to Combat Corruption in India”Law
mantra. , 2017, online, Internet, 3 Oct. 2017. , Available: http://lawmantra.co.in/adequacy-of-legal-
and-regulatory-framework-to-combat-corruption-in-india/.
88
Transparency India, “Integrity Pact”Transparency India. , 2017, online, Internet, 3 Oct. 2017. ,
Available: http://www.transparencyindia.org/page.php?pid=23.
29
face the problem of corruption. Many examples are beyond the scope to define at this
stage. A few examples can be mentioned due to the type of corruption and considered
Many of the grand corruption prevail with more destruction and damage
countries. The process of creating agreements voluntarily among the bidders and the
government prevents the corruption into a particular project. This process is known as
“Islands of integrity”. In 1990, as a base of this process, the Integrity Pact (IP) was
formed by the Transparency International to secure the public from corruption. Any
After the "group of twenty" meetings in London in early April 2009, the
oil its blacklist of uncooperative tax havens made up of four countries: the
Philippines, Malaysia, Costa Rica and Uruguay, these countries became willing to
cooperate on illegal fund banking secrecy, and to make a disclosure. But the OECD-
includes its founding member Switzerland among a host of small island economies
individuals and companies to avoid the tax obligations of their home countries thereby
89
Financial Transparency, “Transparency International: 2011 Corruption Perceptions Index
Released”Financial Transparency. , 2017, online, Internet, 3 Oct. 2017. , Available:
https://financialtransparency.org/transparency-international-2011-corruption-perceptions-index-
released/.
30
depriving those governments of revenue that could go to building schools, hospitals
and other public services. But it is the size of "lost" revenues that is starling estimates
put the value of assets held in tax havens as much as $11.5 trillion!
Today there are more than 70 tax haven nations worldwide. Furthermore,
about forty countries openly advertise themselves as tax havens to woo depositors.
criminals, to those who invest sufficient funds. They permit the formation of
connections. Such extremes are however found in those emerging nations where the
stability and security of the financial, legal, political systems are questionable.
The concessions and benefits may come in different forms. It may be a zero
income tax for all (British Virgin Islands Business Companies), a complete tax
(Seychelles Special License Companies, pay 1.5% tax), local tax exemption for non-
residents of that jurisdiction (Gibraltar, Channel Islands); zero tax on receipt and
holidays for certain types of investments (Portugal, Iceland); favorable tax treatment
through treaties and agreements with the investor's home country (Cyprus,
The Swiss Bankers Association (SBA), quoting Swiss National Bank figures,
said the value of securities in custody accounts of the country's bank stood at 3.82
trillion Swiss francs (about US$3.35 trillion) in 2008. Founded in 1912, SBA has
nearly 363 institutional members and about 16,000 individual members, Swiss
31
National Bank, which is the nation's central bank, does not reveal the country-by-
country breakdown of these figures, the SBA spokesperson said. Of the total,
securities held on behalf of foreign institutional, corporate and private clients touched
more than 2.19 trillion Swiss francs (about US$ 1.92 trillion). The Swiss Federal
Department of Justice and Police (FDJP) said in a report that the number of
from 795 in 2007 to 851 in 2008. This included nine related to suspected terror
financing and involved assets worth over one million Swiss francs (US$ 884,600).
countries, the world can hope for more and more money and valuables stashed away
in tax havens to see the light of the day, sooner than later, thanks to the concern over
terrorist funding globally. In addition, some countries offer superior legal protection
from creditors and potential litigants who might attempt to seize an individual's
wealth. This is the other most important reason why offshore jurisdictions are so
popular-asset protection.
For those who face prosecution and imprisonment in their home country.
OECD suggests $11.5 trillion in all tax havens. In 2006, the most recent year
$858.6 billion to $1.06 trillion in illicit financial outflows. Even at the lower end of
the range of estimates, the volume of illicit financial flows coming out of developing
countries increased at a compound rate of 18.2 per cent over the 5 year period
analyzed for the study. ON average, for the five-year period of this study, Asia
accounts for approximately 50 per cent of overall illicit financial flows from all
developing countries.
32
Financial flows in the context of this report includes the proceeds from both
criminal activity, and the proceeds of licit business that become illicit when
frameworks. In the study illicit financial flows from developing countries: 2002-06 of
the Global Financial Integrity [GFI], authors Dev Kar and Devan Castwright Smith
estimate that the average amount stashed away from India annually during 2002-06 is
$27.3 billion. This means that during that 5 year period, the amount stashed away was
27.3 x 5 = 13.6 billion. It is not as if that all these amounts had gone to Swiss banks
but also has gone to different tax and secret shelters. Since the share of Swiss banks in
dirty money is estimated at being a third of the global aggregate some $45 billion out
of the 136.5 billion stashed away from India could have been hoarded in these years
Financial Crimes [March 2009 US Department of State] suggests that 30-40 per cent
of the inflows may be by "Hawala" market. The report also suggests investigating
NGO funding [nearly Rs. 65,000 crores from 1996 to 2006—Rs. 12700 crores in
200607 alone! Despite strict regulations pertaining to inflows on half of nearly 34,000
In the G-20 meet in April 2009, China forcefully argued for not disclosing the
tax haven list since it worried that Hongkong and Macao would be listed. Hence, in
the OECD list issued and noted by G-20, Hongkong and Macao were not
included!India did not argue at all against tax havens in the Meet or in the Preparatory
Meet earlier. Obviously, Indian politicians worried that names of beneficiaries may
33
come out. Financial Intelligence Unit-India (FIU-IND) has been admitted as the
member of the Egmont Group as its recent Penary Session at Hamilton, Bermuda.
requirement of the Financial Action Task Force (FATF), will facilitate and enhance
In India the same UBS paid a paltry penalty a Rs. 55 lakhs to the SEBI for
not—yes for NOT—disclosing the names of the secret PN holders whose funds it had
invested, and settled the case, a month back!The PN is mechanism through which
unnamed investors are allowed to participate in the stock market. The G-20 Summit
the communique issued on 2 April 2009, in paragraph 15, entitled, "Strengthening the
jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our
public finances and financial systems. The era of banking secrecy is over. We note
that OECD has today published a list of countries assessed by the Global Forum
lists studies that state that between $1.7 trillion to $11.5 trillion from 185 UN member
countries are today parked in the 70 tax havens of the globe. Hence, the e-mail
circulated estimate for India at $1.5 trillion attributed to the Swiss Bank Association
the Association spokespersons said the issue has become "good election fodder" and
that the amounts being mentioned were "quite incredible." "I just don't know the
methodology on how they arrived at figures, the Association spokesman James Nason
said. The basic point however is: even if the amounts are just tens of billions of
34
dollars, and not one and a half trillion dollars, they should be brought back to India.
And the fact is that other countries, much smaller countries with none of the
pretensions of being a "super power, have already succeeded in getting their money
back. Since October 2008, when the OECCD released its paper, several countries
But the UPA government instead had allowed Ottavio Quattrochi to take his
money out of banks—where it was lying frozen on court orders. Thus, such a
Government which castrated the CBI to let him get away from Argentina with the loot
cannot be trusted to bring the billions of dollars stashed away in tax havens. It needs a
However, for five reasons why it's not going to be easy: even for a new
government:
Some Tax havens also need to relate their banking secrecy rules.
parliament.
35
The Swiss Ambassador to India, Dreyer addressing a press conference in 2007
was accused of giving shelter to black money and there has been a lot of inflow of
such wealth from India and other countries of the world. He added: "I would not say it
would be stopped 100 per cent (under a new law). But through this measure, it would
referring to an agreement that Switzerland had signed with the World Bank and the
UN-led global initiative to money deposited by corrupt persons in Swiss Banks, and
The Liechtenstein tax haven came into focus recently Germany's intelligence
agency paid an unnamed informer more than USD 6 million for confidential and
secret data about clients of LGT group a bank owned by the Liechtenstein royalty.The
revelations therefrom have already led to the resignation of the head of Deutsche
logistics company in world. The Lichtensteing leaders are furious and have focused
all their ire at the theft of the data rather than on the facts of the case.
The German Government has also announced that it would share information
on accounts held in the tax havens with any Government that wanted it. They had a
list of 1400 clients of whom 600 only Germans. The spokesman for the German
Finance ministry Thorsteing Albig has indicated that they would respondent to such
request without charging any fees for the information Finland, Sweden and Norway
have expressed interest in the data obtained by the Berlin intelligent agency.
Even where foreign governments offer to help, the Indian government has
fought shy of availing the offer. In may 2008, the German Government offered to
36
share information relating to illegal Indian bank account in Lechstein, which
information had tumbled out while Germany was investigating their own citizens'
(see p. 26), nothing to date has been done despite pious noises of the Government.
There has been a burgeoning field of law-making at both the national and
international levels on the subject of corruption. The United Nations, the World Bank,
the International Monetary Fund (IMF), the Council of Europe, the European Union
(E.U.), the Organisation of American States (OAS), the Organisation for Economic
Co-operation and Development (OECD), the Global Coalition for Africa (GCA), and
together constitute the current international legal regime to combat corruption. Such
enthusiastic law-making activity began with the 1995 European Union Convention on
the Protection of the European Communities’ Financial Interests and its two
additional protocols.
Transactions in 1997 and finally during 1999 Council of Europe Criminal Law
Convention on Corruption was initiated. Here, the European Union forms the main
basis for the law-making process. Francois Mitterrand, Helmut Kohl, Jacques Chirac
and even Tony Blair are all under the cloud of graft allegations and inquiries.
37
These processes stated above paved a pathway globally to battle against
corruption at national level. But, this law-making process is not stronger enough to
tackle the universal issue of corruption. In accordance to this process, a basic human
right to a corruption less society was proposed and concurrently an argument was
law.90
The present section analyses the previous literature conducted on the topic
facilitates the researcher to identify the strengths and weakness of the present studies
In the research article published by Simon Weschle 91, the personal and
electoral corruption in India has been dealt with. This article takes into account the
politicians who indulge in the corruption with different welfare consequences and for
several reasons. This research uses the survey experiment method. This research
recommends that when the voters have to decide on the wrong politicians, the overall
welfare consequences play a role. This study concludes that if the fruits of corrupt
practices are shared with the voters, they are less willing to punish the corrupt
politicians.
90
Puja Mondal, “An International Legal Regime to Combat Corruption”Your Article Library. , 2017,
online, Internet, 3 Oct. 2017. , Available: http://www.yourarticlelibrary.com/corruption/an-
international-legal-regime-to-combat-corruption/24978/.
91
Simon Weschle, “Punishing personal and electoral corruption: Experimental evidence from
India”Research & Politics. 3.2 (2016): 205316801664513, Available:
http://journals.sagepub.com/doi/10.1177/2053168016645136.
38
In the research done by V K Borooah92, a quantitative approach has been
employed to measure the size of the corrupt practices of various officials in rural
India. This research assigned a rating for the corrupt officials (with regard to bribery),
when they were approached for a variety of purposes. This research concludes that
when the households approached the officials for their works, bribes had to be paid in
18% of the cases, averaging a bribe of Rs. 147. Moreover this research concludes that
Anthropological and fictional accounts of the Indian state”, the ethnographic approach
was undertaken. This study considers the data from the researcher’s fieldwork, a
anthropologist. This study concludes that narratives dealing with corruption and
actions of the agencies and bureaucrats related to these narratives are quite
fundamental.
corruption in election in India. This research says that the election is the starting point
of corruption and regulative ideal should be in place when it comes to election related
expenditure and the stakeholders’ accountability. This study concludes that the
Election Commission of India (ECI) has done its role well in the elections and also
ECI will fight the corruption and cleanse the elections in India.
92
Vani K. Borooah, “Deconstructing Corruption”Journal of South Asian Development. 11.1 (2016): 1–
37, Available: http://journals.sagepub.com/doi/10.1177/0973174115624773.
93
Akhil Gupta, “Narratives of corruption”Ethnography. 6.1 (2005): 5–34, Available:
http://journals.sagepub.com/doi/10.1177/1466138105055663.
94
S. Y. Quraishi, “Controlling Electoral Corruption in India”Indian Journal of Public Administration.
57.3 (2011): 422–428, Available: http://journals.sagepub.com/doi/10.1177/0019556120110304.
39
The research done by Raj95 says that corruption is omnipresent in India in
various walks of life such as social, economic, political, and cultural milieu.
Moreover, the corruption has affected the government machinery. This research
explores the role of judiciary in curbing the corrupt practices. This research concludes
that judiciary is the only option that the public looks upon to provide justice in the
face of corruption. Judicial department is able to deal with the corruption in spite of
all the stumbling blocks. This research further concludes that the judiciary should be
In a research done by Anil Hira96, the study deals with the role of culture in
curbing the corrupt practices. This research tells that the culture has to be reformed in
corruption reforms. The research has taken into account the case studies of various
countries like Singapore, Indian, Afghanistan, Chile, etc. This research concludes that
the current measures to fight the corruption fail because these approaches tend to
ignore the role of culture. The research calls for a development of culture in the fight
Although there are several studies have been conducted in the past, but to our
approach. For instance, the research by Ganga Reddy had focused on judicial
95
A. Sridhar Raj, “Cultural Roots of Corruption: Efficacy of Judiciary in Combating Corruption in
India”Indian Journal of Public Administration. 57.3 (2011): 797–805, Available:
http://journals.sagepub.com/doi/10.1177/0019556120110337.
96
A. Hira, “Broken Windows: Why Culture Matters in Corruption Reform”Journal of Developing
Societies. 32.1 (2016): 1–16, Available: http://jds.sagepub.com/cgi/doi/10.1177/0169796X15609710.
40
aspects97, similarly there are several studies have been looked at corruption from the
of corruption.
2.5Conceptual Framework
Prevention of Corruption Act in India. In order to achieve the objective, the study
critically reviews the existing laws and acts along with cases in India. Moreover, it
explains why the phenomena are still persistent despite major anti-corruption efforts.
The thesis will look at the problem from the perspective of Socio-Legal approach. The
factor explaining it. This task, in turn, requires the creation of a relevant theoretical
concept living law and legal pluralism perspective and Marcel Mauss’ anthropological
approach to gift-giving.
law is considered in this research. The important fact is that the corruption is
encouraged by the inefficiency of the rule of law. The development is impaired by the
negative impact of corruption and this is often the topic of research.99,100,101,102 ,103
There is a lack of researches in studying the corruption from the legal point of view.
97
Reddy Y Gangi, “Role Of Judiciary In Preventing Corruption In India With Special Reference To
Political Corruption”Sri Krishnadevaraya University, 2015, Available:
http://shodhganga.inflibnet.ac.in/handle/10603/107754.
98
Gupta, “Narratives of corruption.”
99
Smith, A Culture of Corruption: Everyday Deception and Popular Discontent in Nigeria.
100
Mbaku, Corruption in Africa: Causes, Consequences, and Cleanups.
101
Kempe Ronald Hope and Bornwell Chikulo, “Decentralization, the New Public Management, and
The Changing Role of The Public Sector In Africa”Public Management Review. 2.1 (2000): 25–42,
Available: http://www.tandfonline.com/doi/abs/10.1080/14719030000000002.
41
Some of the previous literatures stated presenting corruptions have been showing lack
of legal structure, for example Brownand Shackman104. The main intention of this
study is to identify the rule of law explanation for corruption. However, literatures on
rule of law regarding corruption are very limited. Therefore, this study attempts to
connect corruption to ‘total exercise of power’, however the study will not focus on
In this regard, the present research work attempts to fill the gap existing in the
academic field in the context of India. This research is imperative in India because
the rule of law would guarantee transparency, honesty and responsibility in the field
development as public good. The present work has identified five different variables
regarding rule of law such as equality before the law; supremacy of the law;
trusteeship over public resources; restraint on executive powers and code of conduct
for public officers. The variables’ barratry would violate the policy making power of
government as upholders of public resources with unaware of power and would led to
102
R Theobald, Corruption Development and Underdevelopment, Trans. Macmillan., vols. (London,
1990).
103
Paolo Mauro, “Corruption and Growth”The Quarterly Journal of Economics. 11.3 (1995): 681–712,
Available: http://homepage.ntu.edu.tw/~kslin/macro2009/Mauro 1995.pdf.
104
Steven F. Brown and Joshua Shackman, “Corruption and Related Socioeconomic Factors: A Time
Series Study”Kyklos. 60.3 (2007): 319–347, Available: http://doi.wiley.com/10.1111/j.1467-
6435.2007.00374.x.
105
Hope and Chikulo, “Decentralization, the New Public Management, and The Changing Role of The
Public Sector In Africa.” P. 19
106
Mbaku, Corruption in Africa: Causes, Consequences, and Cleanups. P. 72-74
107
Smith, A Culture of Corruption: Everyday Deception and Popular Discontent in Nigeria. P.189
42
corruption. Therefore, this study attempts to describe the rule of law principles and
2.6 Summary
detail. The present chapter deeply analysed the significant reasons and causes of
analysed. International legal rules to control corruption are also discussed. Finally
previous works that are related to the present work are provided and by that review
43