Fighting Foreign Corruption

Thanks in large part to the internet connecting the world like never before, the first decade of the third millennium saw unconditional convergence. The poorer countries didn't have to become significantly less corrupt in order to approach the technological frontier, they just had to let their citizens get online and connect with the world.  This naturally resulted in an increase in outsourcing and trade as global coordination was made possible. 

With all of the growth coming from emerging markets, multinational corporations based on developed countries are very eager to do business there.  The problem they have is that they have to follow the Foreign Corrupt Practices Act while their competition does not. Not only do corporations have to contend with connected local businessmen, they also have to worry about emerging market companies who have fewer scruples and no significant consequences for their actions. If they are caught red handed in corruption, their businesses in the developed world might be at risk of civil penalties but it is very simple to avoid those issues - they just stay under the radar and avoid doing business in jurisdictions where they are liable.

One tool that can be used is to go after the corrupt officials themselves. The Magnitsky Act was designed to go after corrupt Russian officials who were involved in the torture and death of Sergei Magnitsky after he uncovered hundreds of millions of dollars being stolen by Russian tax officials. They are not allowed to enter the United States or use the banking system.

One of the police officers tried to challenge the law in UK libel court and had his case thrown out. This takes away one of the key tools that targets of these sanctions can use to fight back.

This act by itself and others in the future won't solve the problem of corruption, but it should help on the margin. If individuals think that acting in corrupt manner will close off their access to safe havens in the developed world, they might think twice.