International Politics of Anti-Money-Laundering Regulations and Enforcement

One way to view the web of international agreements and arrangements governing anti-money-laundering (AML) regulations is to consider the international political overlay. This is best done by considering the international regulatory and enforcement agreements and arrangements on the universal and regional levels developed to construct AML regulatory and enforcement regimes.

A. Universal Organizations

Universal organizations refer to international organizations whose membership is universally based.

The United Nations

The United Nations pioneered international AML cooperation with the 1988 Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, which requires signatories to criminalize money laundering and immobilize the assets of persons involved in illegal narcotics trafficking. Because this convention was an initial effort and the participating governments were so diverse, there are differences in each country's criminalization of money laundering, extent of scienter required, enforcement methods, number of convictions, and range of punishments. Nevertheless, subsequent efforts have drawn from the Vienna Convention and wherever possible use the same terminology and systematic approach.

The 1999 International Convention for the Suppression of the Financing of Terrorism prohibits direct involvement or complicity in the international and unlawful provision or collection of funds, attempted or actual, with the intent or knowledge that any part of the funds may be used to carry out any of the offenses described in the convention, such as acts intended to cause death or serious bodily injury to any person not actively involved in armed conflict in order to intimidate a population, and any act intended to compel a government or international organization to take action or abstain from taking action. Offenses are deemed to be extraditable crimes, and signatories must establish their jurisdiction over the offenses, make them punishable by appropriate penalties, take alleged offenders into custody, prosecute or extradite violators, cooperate in preventive measures and countermeasures, and exchange information and evidence needed in related criminal proceedings.

Introduction

Organized crime is difficult to define. In 1919, the Chicago Crime Commission began referring to certain patterns of behavior as “organized crime,” and in 1929, U.S. President Herbert Hoover talked about the concept.

In 1975, the United Nations Crime Prevention and Criminal Justice Branch invoked the term “transnational crime” to identify certain criminal phenomena transcending international borders, transgressing laws of several states, or having an international impact. Until the 2000 passage of the Palermo Convention, “transnational crime” and “transnational organized crime” (TOC) were largely criminological terms used to discuss a crime with different definitions in different states, but that transcended the jurisdiction of a given state.

In 1994, the UN Secretariat, as part of the Fourth UN Survey of Crime Trends and Operations of Criminal Justice Systems, identified eighteen categories of transnational – and mostly organized – criminality: money laundering; illicit drug trafficking and corruption and bribery of public officials; infiltration of legal business; bankruptcy fraud; insurance fraud; computer crime; theft of intellectual property; illicit traffic in arms; terrorist activities; aircraft hijacking; sea piracy; hijacking on land; trafficking in persons; trade in human body parts; theft of art and cultural objects; environmental crime; and other offenses committed by organized criminal groups.

On December 15, 2000, the U.S. National Security Council issued a report outlining the impact of transnational crime on U.S. and international strategic interests. According to the report, international criminal networks – including traditional organized crime groups and drug traffickers – have exploited dramatic changes in technology, international politics, and the global economy to operate in a more sophisticated, flexible fashion. Globalization has given rise to more professional criminals who quickly adapt to market changes. Criminal organizations are networking and cooperating, merging their expertise, and widening the scope of their activities. By cooperating, many criminal organizations reduce the risks and costs of pursuing criminal opportunities.

Extraterritorial Jurisdiction

A. The U.S. Jurisdiction to Tax

The limitations on the U.S. government's power to tax are contained in the Internal Revenue Code, which reflects the policy decisions of the U.S. Congress. These decisions are influenced by the need for revenue, administrative convenience, international politics, and macroeconomic policies.

Article I, § 8 of the Constitution of the United States delegates to Congress the “power to lay and collect taxes.” The extent of Congress's power is “exhaustive,” embracing “every conceivable power of taxation.”

Under the broad taxation powers of Congress, the U.S. Supreme Court has confirmed congressional authority to tax on various grounds, including citizenship, residence, situs of property, and source of income.

For instance, the U.S. Internal Revenue Code imposes tax on the foreign source income of a U.S. citizen, even if he or she has resided in a foreign country for the last ten or fifteen years and only receives dividends and interest from foreign income.

The United States asserts jurisdiction to tax the income of a foreign person only if there is some reasonable connection between the United States and that foreign taxpayer's source of income or his or her status. In this regard, citizens, resident aliens, and domestic corporations are subject to tax on their worldwide income, I.R.C. §§ 1 and 11(a). In addition, I.R.C. §§ 1(c), (d), and 11(a) impose an income tax on “every” individual and “every” corporation, respectively. I.R.C. §§ 2(d) and 11(d) exempt nonresident aliens and foreign corporations from that tax except to the extent of the tax imposed on U.S. source income by I.R.C. §§ 871, 877, and 882.

a. Cook v. Tait, 265 U.S. 47, 53 (1924)

The question in the case, and which was presented by the demurrer to the declaration is, as expressed by plaintiff, whether Congress has power to impose a tax upon income received by a native citizen of the United States who, at the time the income was received, was permanently resident and domiciled in the city of Mexico, the income being from real and personal property located in Mexico.

Introduction

Over the past several decades, modern securities markets, and many market participants have become globalized. Their operations cross borders and draw on investment capital around the world. They look for investment opportunities in many different countries. Simultaneously and for the foreseeable future, market oversight remains a local affair, with national or provincial-level regulators implementing legislation enacted by their jurisdictions’ legislatures.

Legislatures and financial regulators worldwide have recommitted themselves to strengthening their financial regulatory systems to correct the weaknesses that the 2008 financial crisis has uncovered. However, in many cases, the global nature of many market participants (large investment banks, credit rating agencies, investment advisers, hedge funds et al.) will likely make purely domestic responses to regulatory weaknesses less than fully effective. Globally active market participants often have significant portions of their operations, data, staff, capital and assets in multiple jurisdictions. Regulators often respond by requiring that a regulated entity's overseas operations must comply with domestic standards and oversight requirements prior to being allowed to engage in domestic business. Still, confirmation and enforcement of these requirements can prove challenging.

Even where securities regulators have in place enforcement cooperation mechanisms, such as bilateral and the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (IOSCO MMOU), the day-to-day information outside of an enforcement context that a regulator needs in order to exercise effective oversight may be difficult to access, without the assistance and cooperation of the relevant counterpart. Although regulators have different supervisory approaches and laws, each has a common interest in information-sharing and cooperation based on earned trust in each other's regulatory and supervisory systems.

This chapter discusses the United States approach to securities enforcement cooperation and the international approach as contained in the initiatives and activities of the International Organization of Securities Commissions (IOSCO).

Introduction

This book discusses the rise of international economic crime and recent U.S. and international strategies to combat such crime. It is organized into three main sections. The first discusses substantive crimes, particularly tax, money laundering and counterterrorism financial enforcement, transnational corruption, transnational organized crime, and export control and economic sanctions. The second part discusses procedural aspects of international white collar crime, namely extraterritorial jurisdiction, evidence gathering, extradition, and international prisoner transfer. The third part discusses the role of international organizations, including the United Nations, the World Bank Group, INTERPOL, and economic integration groups.

Although there is no recognized category of “business crimes” or white collar crimes, this book includes within substantive white collar crimes those mentioned earlier. The term “white collar crime” was coined by Edwin Sutherland in a speech to the American Sociological Society in 1939. Subsequently, he stated that it “may be defined approximately as a crime committed by a person of respectability and high social status in the course of his occupation.” Thereafter, a variety of definitions have been applied to white collar crime.

Environment Giving Rise to International Economic Crimes

Contemporary transnational criminals take advantage of globalization, trade liberalization, and emerging technologies to commit a diverse range of crimes and to move money, goods, services, and people instantaneously for purposes of pure economic gain, political violence, or both. A key component facilitating international white collar or economic crime is trade liberalization, especially free trade agreements (FTAs). The problem is that the leadership of trade liberalization or FTAs and the politics (surrounding them,) do not allow negotiators to provide for comprehensive enforcement mechanisms. The politics of FTAs make ratification difficult, especially if costly regulatory or enforcement mechanisms are added since they are perceived politically as underserving sovereignty. Instead, such comprehensive enforcement mechanisms are completely omitted, or else only isolated criminal subjects are treated.

Introduction

This chapter discusses international instruments, principles, and theories applying criminal consequences to conduct that results in serious harm to vital or scarce natural resources, and the ways in which economic integration groups and countries, especially the United States, have enacted and enforcement criminal laws against international environmental crimes.

International environmental crime results from several causes.

1. (1) Differing values and costs occur when illegal activities arise from regulations that produce cost differentials between legal and illegal products, by differential compliance costs or different consumer prices, by demand in different countries for scarce products for which substitutes are either not available or accepted, and by indifference to the environment.

2. (2) Regulatory breakdown occurs when illegal activities result from a deficiency of appropriate regulation, including failures to determine and/or protect property rights.

3. (3) Enforcement failure occurs when illegal activities arise from enforcement problems, such as suitability of regulations, the costs of compliance (e.g., detection of environmental contraband may be difficult), lack of resources and expertise, corruption, and political and economic disruption.

Transnational environmental crimes can be classified in two broad categories: anthropocentric and bio- or ecocentric. The first category focuses on the human environment, or the elements of nature directly concerning human survival and welfare. The second category concerns the entire natural environment, without regard to whether the environmental element in question relates to human life.

Trade liberalization and deregulation make enforcing border controls more difficult. The rise of transnational organized crime and the growth of transnational environmental crime in developing countries, which lack capacity, political will, governance, and institutional frameworks to properly implement environmental enforcement, all contribute to the increase of transnational environmental crime.

Policies to combat international environmental crime include: controlling the illegal trade, including enhanced cooperation between environment and enforcement agencies at the international, regional, and national levels; the establishment of national environmental crime units or working parties; and improved means of tracking and identifying illegal products.

Introduction

When suspects flee a country to avoid prosecution, that country's authorities must gain custody of them before they can be tried and convicted. The most common way to gain custody is through extradition, whereby one state – the requested state – transfers custody of a fugitive or accused person, known as the relator, to another state – the requesting state – for criminal prosecution. During the process the relator can choose to return voluntarily, waiving extradition. States can also gain custody over a relator through legal tools like exclusion and deportation or through abduction by fraud (“luring”) or by force.

The number of extradition cases has risen dramatically over the past fifty years, both in the United States and abroad. According to the Department of State, U.S. courts certified 137 extradition requests between 1945 and 1960 – an average of only 9 per year. In 1995, in contrast, the United States extradited 79 people to other countries and received custody of 131.

Several factors discussed throughout this book have contributed to this enormous increase, including globalization, the expansion of free trade, and broadened access to international communication and travel. Many states, including the United States, have concluded extradition treaties and related enforcement mechanisms and devoted increasing resources to investigating and prosecuting transnational crime.

A Hypothetical

You represent Anne Celtic, a dual national of Belize and the Netherlands. Celtic is a well-known entrepreneur in Belize, with extensive connections to the country's business elite and government. The former minority owner of a bank, she now spends most of her time running a hotel and an Internet gaming business that she owns. In responding to this hypothetical, you should review the U.S.-Belize extradition treaty and the list of extraditable offenses in the U.S.-Netherlands extradition treaty, both of which are included in this chapter.

A prosecutor in Louisiana has brought criminal charges against Celtic for violating Louisiana criminal laws prohibiting Internet gaming and for tax crimes arising from her failure to declare and pay taxes on the gains from the profits earned from the business.

Introduction

Export controls and related rules and restrictions, especially those imposed by the United States, create a “frightful labyrinth” for practitioners. In the United States, several agencies issue regulations and licenses to control exports based on different statutes. These regulations then interact with numerous free-standing pieces of legislation, many of which are not enacted as amendments to basic statutes or codified. As a result, it can be hard to find and understand the various applicable laws. In addition, the objectivity and transparency one finds in other regulatory areas are often missing from the export control area. Finally, practitioners working in the export control field often find that limitations on judicial review and judicial deference to the executive branch on matters related to foreign policy or national security result in relatively little oversight of official actions.

Economic sanctions are even broader than export controls, encompassing the imposition by governmental or international organizations of economic sanctions for noneconomic foreign policy reasons. Examples include a variety of trade and investment sanctions against apartheid-era South Africa; financial and other sanctions against Panama; measures against Libya, especially after the bombing of Pan Am Flight 103; UN sanctions against Sudanese leaders and against former Liberian head of state Charles Taylor; U.S. sanctions targeting narcotics traffickers and kingpins; and U.S. and international sanctions against persons engaged in transnational terrorism.

Sanctioning parties have three possible mechanisms by which to inflict costs on targeted countries: limiting exports, restricting imports, and impeding finances, including reducing aid. Trade sanctions involve costs to the target country in terms of lost export markets, denial of critical imports, lower prices for embargoed exports, and higher domestic prices for substitute imports. In cases where only export or import controls have been invoked, the targeting countries generally prefer export controls to restrictions on imports.

Introduction

Economic integration plays an important role with respect to transnational white collar crimes, although for the most part, governments concluding free trade agreements (FTAs) and economic integration agreements have seen that element as an afterthought. Persuading legislatures to overcome nationalist sentiments and limit sovereignty in order to support the negotiation and ratification of FTAs or single markets consumes significant political capital. The decision to include regulatory – let alone criminal and quasi-criminal measures – within an FTA or single market arrangement is not taken lightly.

As a result of political decisions to minimize criminal and enforcement institutions and mechanisms when sovereign states enter into an FTA, common market, or an economic integration arrangement, criminals are often quick to identify and exploit opportunities to enlarge their illicit operations. The lowered barriers allow them to conduct crime transnationally.

In some cases signatories include criminal and enforcement provisions and mechanisms relating to one or two economic sectors in FTAs and single market arrangements. For instance, as noted later, due to intense and successful lobbying by U.S. intellectual property interests, NAFTA provisions cover intellectual property and customs enforcement.

The relationship among economic integration, international criminal and enforcement cooperation, and criminal justice integration is thus ambiguous and complex. Yet, all involve state responses to increases in transnational interactions among nonstate actors and try to mitigate the tensions and frictions that hamper efficient cross-border interactions.

Successful criminal justice systems require three elements: information, evidence, and the accused or convicted person. The more dispersed these elements are and the less they exist within the physical jurisdiction of the investigating government, the greater the obstacles for law enforcement. The main barrier impeding international law enforcement efforts is the sovereignty that some countries assert, because normally a national government without the agreement of another government cannot perform criminal justice activities in the other government's territory. To do so would violate the territorial sovereignty of the other government. Additionally, sovereign states have distinctive political, social, economic, and legal systems and cultures. Criminals can and do take advantage of the distinctions that prevent effective international enforcement cooperation (e.g., requirements of dual criminality in order to extradite or provide mutual assistance in criminal matters). National and subnational law enforcement officials try to nullify the advantages criminals derive from operating across borders and reduce, circumvent, or transcend the frictions that impede international law enforcement.

The United Nations

A. Making and Implementing Treaties

The United Nations has fundamentally changed the classic mode of international lawmaking by reshaping the negotiation and conclusion of treaties. International conventions no longer limit membership to state parties; they have grown to include international organizations such as the European Union. In the context of international white collar crime, the UN's changes to modern, multilateral treaty making encompass many aspects of transnational crime. In a given year, the UN holds approximately 3500 meetings and to date has participated in the conclusion of hundreds of multilateral agreements.

Specific provisions of the UN Charter, as well as those governing the work of its specialized agencies, address the conclusion and approval of multilateral legal instruments. For example, Article 92(3) of the UN Charter provides that United Nations Economic and Social Council (ECOSOC) may “prepare draft conventions for submission to the General Assembly, with respect to matters falling within its competence.” Today, the UN addresses a diverse range of subjects based on the needs of a variety of sponsoring international organizations. It has helped facilitate the negotiation and implementation of significant multilateral treaties dealing with the prevention, investigation, and prosecution of transnational white collar crime.

During the past century the scope of treaties has grown to include conflict prevention and peacekeeping and to codify a broad array of transnational criminal issues. Increasingly, as we see in later chapters, the number of participants has also increased. The UN provides an appropriate forum and host for the discussion of strategies to prevent and combat transnational crime, including treaty making. In addition, the work has spawned the establishment of specialized UN agencies, such as the UN Crime Prevention and Criminal Justice Program and the UN Office on Drugs and Crime, both based in Vienna.

The UN increasingly serves as a forum for the negotiation of treaties against illicit trade. As mentioned in the chapter on transnational organized crime, the 1998 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, which took effect in 2000, provided precedents for a number of actions and concepts that subsequent treaties against transnational crime would emulate. In particular, the convention requires signatory countries to criminalize various drug trafficking crimes, including money laundering, and to adopt detailed laws with respect to the instrumentalities and proceeds of crime, including tracing, freezing, confiscating, and forfeiting such instrumentalities and proceeds.

Hypotheticals

A. Your law firm is asked to represent Mr. X. In 1988, the U.S. Attorney charged him with tax crimes, wire and mail fraud, and embezzlement from a privately held firm where he was a principal. A few months after the indictment, a publicly held firm was acquired. However, in the previous year, Mr. X. had become a national of the Netherlands and began living in that country. In 1998, the United States commenced extradition proceedings, and finally, in 2004, a Netherlands court ruled that Mr. X. was extraditable. His counsel appealed, but Mr. X. fled the country.

In 2006, Mr. X., now approximately fifty years old, is arrested in Spain and accused of using a false identity. Spanish authorities are also investigating Mr. X. on potential money laundering charges. When his family consults you, Spanish authorities are not yet aware of Mr. X.'s identity. However, they have seized his briefcase, which contains a diary and phone book, and customs officials have noted his American accent.

Mr. X. has two former wives, one of whom resides in the United States with a child they had together. Mr. X's second wife resides in the Netherlands, with two children she had with him. Over the last three years, Mr. X. has had a relationship with a Dutch national, and they want to marry.

Mr. X. says that his goals are to avoid extradition to the United States. If that proves impossible, he wants to ensure that he can serve out any sentence, if convicted, in the Netherlands. How can he accomplish this goal? In particular, what are the pros and cons of (1) returning to the Netherlands to face the false identity charges or (2) returning to the United States from Spain? What about resisting extradition to the United States or vigorously contesting the U.S. charges? Please advise Mr. X.

Would it make any difference if Mr. X. was an opposition party leader, the charges occurred three months before a presidential election, and instead of embezzlement he was accused of fraud in his political commercials? What if he was charged with immigration violations?

Mr. X.'s counsel decides to disclose his identity and advise the U.S. prosecutor that he is willing to surrender voluntarily. However, the U.S. prosecutor advises defense counsel that he is in no hurry to bring Mr. X. back to the United States.

Introduction

In September 1923, police chiefs from twenty countries met in Vienna, Austria, without diplomatic authority or instructions from their government, and formed the organization now known as the International Criminal Police Organization, or INTERPOL. The organization was established without the normal formality of a treaty ratified by member states. Although the absence of a treaty may make INTERPOL unconventional, police organizations and governments throughout the world have broadly participated in INTERPOL since its inception. As of May 1, 2009, 187 countries participate in INTERPOL, making it a truly universal organization in terms of its membership.

INTERPOL's mandate includes the investigation and suppression of drug trafficking, money laundering, bank fraud, smuggling, trafficking in illicit arms and stolen works of art, financial fraud, illicit electronic fund transfers, piracy of cassettes and videotapes, hijacking of planes and ships, theft, arson, and terrorism, as well as the tracking of fugitives from such offenses. INTERPOL assists in transmitting information about individual cases and fugitives as well as trends in crimes, but it does not actually conduct arrests. On white collar crime issues INTERPOL helps in the investigation and prosecution of cases, and it collects and disseminates data on crime trends and new police techniques. It also provides technical assistance, especially to developing countries, both on general police techniques and on responding to specific crimes.

Hypotheticals

1. Country X and Country Y do not have diplomatic relations. Country X has evidence that Mr. A, one of its nationals, in cooperation with Z entity, which has close relations with the government of Country Y, has been counterfeiting its currency and also trafficking drugs into Country X. Both Country X and Y are members of INTERPOL. Please advise Country X on what, if anything, INTERPOL may do to assist in preventing further criminal activities and helping arrest and prosecute Mr. A. and the Z entity. Would your advice differ if Country X had evidence that nationals of Country Y's navy crossed into its territorial waters to perform a security operation? In that situation, Country X has arrested them and is considering prosecuting them, but Country Y vigorously disputes that the action occurred in the territorial waters of Country X. Country X wants to prosecute agents, both governmental and nongovernmental, of Country Y that organized and assisted in the naval operation.

Introduction

In 1977, Congress enacted the Foreign Corrupt Practices Act (FCPA). For many years, as a result of the FCPA, the United States was the only country with laws actively prohibiting its citizens, nationals, businesses, and, in some circumstances, foreign companies that participate in its capital markets from bribing foreign officials.

Since the passage of the FCPA, a number of international initiatives and conventions have resulted in widespread laws prohibiting bribery and improper inducement of foreign officials in connection with business transactions. Beginning in 1995, several international conventions addressing transnational corruption have entered into force. As a result, the hard law requirements preventing and criminalizing participation in transnational corruption have greatly multiplied. In addition, international organizations and civil society groups have joined to require corporate governance initiatives focusing on antibribery and anticorruption measures.

In recent years, corruption scandals have contributed to the downfall of governments in Ecuador, Brazil, Italy, Trinidad and Tobago, and India. They have weakened long-entrenched ruling parties, including Japan's Liberal Democratic Party and Mexico's Institutional Revolutionary Party. In the United States, two decades after the Watergate scandals prompted new rules concerning political contributions and the enactment of FCPA, campaign finance reform has reemerged as a major political issue.

The number and variety of countries facing corruption scandals highlight the complexity and prominence of corruption as a global issue. Pervasive and uncontrolled corruption thwarts economic development and undermines political legitimacy. Less pervasive corruption results in wasted resources, increased inequity in resource distribution, diminished political competition, and greater distrust of government. Establishing and exploiting opportunities for bribery at high levels of government can also increase the cost of government, distort the allocation of government spending, and dangerously lower the quality of infrastructure. Even relatively petty or routine corruption can deprive a government of revenues, distort economic decision making, and impose negative externalities such as increased pollution on society. Increasingly anticorruption interacts with many other international white collar crime subject areas, such as money laundering, taxation, and organized crime.

A Hypothetical

Over the last five years, Joseph Borodillo (JB) has developed a successful financial empire, which in recent months has gained “high tech” capabilities. In particular, it has expanded from waste disposal and restaurants and night clubs to counterfeit computer software.

As part of his business enterprises, JB has established a company called SW Ltd. (SW) in Country ABC to import and distribute counterfeit software in the United States. SW buys counterfeit software from CopyIT, a small company in the Commonwealth of Lavadoria. Instead of paying CopyIT for the counterfeit software directly, SW buys computer hardware for the company.

The SW-CopyIT scheme operates as follows:

1. 1. JB sells the counterfeit software and transfers the proceeds to offshore accounts.

2. 2. JB then has SW use its existing account with Grande Verde in Lavadoria to order large quantities of computer equipment.

3. 3. Grande Verde Lavadoria is a wholly owned subsidiary of Grande Verde, a large corporation and major government contractor. Grande Verde actually fills the contract order and receives copies of the purchase order.

4. 4. JB pays Grande Verde for the computer equipment with cashier's checks drawn on several offshore banks. Some, but not all, Grande Verde executives are knowingly involved in these schemes.

5. 5. Grande Verde ships the computer equipment to CopyIT's offices in Lavadoria.

JB pays for counterfeit software imports with the proceeds of the sale of a U.S. company, using money from suspicious sources shipped to a third party in suspicious amounts. In essence, the payments suggest the use of the Black Market Peso Exchange.

Jane Laing, Grande Verde's compliance counsel, reports her concerns about the sales in Lavadoria to Mike Smith, Grande Verde's outside counsel. Mike then decides to make a voluntary disclosure to the U.S. Attorney's Office.

To what extent can Grande Verde cooperate with the government? Can it make anyone available for interviews? Can it turn over records? Can it waive financial privacy rights for its bank accounts?

From the perspective of the U.S. government and the U.S. Attorney's Office, what is the best way to proceed? Can they obtain documents from Grande Verde and CopyIT? Can the U.S. Attorney issue subpoenas to Grande Verde for its records? What if Lavadoria has a blocking statute? What are the effects of bank secrecy? Are there any dual criminality issues?

Overview and History

The World Bank Group (WBG) is an umbrella group of international financial institutions charged with promoting free market development to combat poverty. Established in 1944 during the famed Bretton Woods conference, the WBG includes two institutions – the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) – and three affiliated institutions: the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency, and the International Centre for Settlement of Investment Disputes (ICSID). Based in Washington, D.C., the WBG is run by a board of directors representing 185 stakeholder countries.

The World Bank Group (WBG) includes the International Monetary Fund (IMF), the World Bank (WB), and the other constituent entities. To fulfill its overall mission of fighting poverty, it helps countries strengthen development efforts by providing loans and technical assistance for institutional capacity building, as well as loans for infrastructure and environmental improvements. It provides resources, shares knowledge, and facilitates the development of partnerships in the public and private sectors.

The IMF's overall mission is macroeconomic and involves financial surveillance throughout the world. Through its activities, the IMF works to promote international monetary cooperation; facilitate the expansion and balanced growth of international trade; promote foreign currency exchange stability; and assist in the establishment of multilateral systems of payment. The IMF promotes international monetary stability by making loans to countries to allow them to correct maladjustments in their balance of payments without resorting to measures that may negatively affect national or international prosperity.

The IMF sets standards through its operational policies. For example, since the 1950s, it has attached conditions to loans made to states in need of economic assistance. These conditions allow recipients to obtain fund financing beyond the IMF member's Article IV commitment to meet their declared exchange rate parity with gold or the United States dollar referred to as the (automatic the “gold tranche”) if they implement economic and financial adjustment programs that the IMF considers satisfactory. In 1997, the IMF followed the World Bank and broadened these conditions to include general good governance. The IMF and World Bank have conditioned loans and projects on whether public policies are in place to avoid bribery, corruption, and fraudulent activity in the management of public resources.