Are wealth disclosures dangerous?

On April 15, French ministers posted their asset disclosures online for the first time ever. A week later, Obama reversed a 2012 law that required Congress and other officials to post their disclosures online.

On April 15, French ministers posted their asset disclosures online for the first time ever. On the same day, Obama reversed a 2012 law that required officials to post their disclosures online.

About a third of all countries in the world now require officials to publicly disclose their assets. Institutions like the World Bank and the OECD see this as a good thing. Asset declarations, they say, are crucial tools for fighting corruption and holding officials accountable. As an investigative journalist in the Philippines, I found asset statements vital to digging into conflicts of interest and the illegal accumulation of wealth by those in public office. Asset statements are mother lodes of information – and journalists in Russia, South Africa, Bosnia and Thailand, to name only a few, have found them crucial to their investigations of official wrongdoing.

There is as yet no global consensus on the merits of asset transparency. Last week, Chinese authorities detained six anticorruption activists who had been demanding that senior Communist Party officials declare their wealth. The demands come in the wake of exposés in the U.S. press, including a report that recently won the Pulitzer Prize, on the billions – yes, billions – illegally amassed by the so-called Red Nobility.

But the pushback on official disclosures comes from an unlikely quarter as well. Last Monday On April 15, President Obama signed a law that reversed a provision in The STOCK Act of 2012, which required members of Congress, legislative staff and senior officials of the executive branch to post their financial disclosures online. As my former student Sasha Chavkin pointed out in an informative piece for the Columbia Journalism Review, the 2012 law also came on the heels of scandal – a 60 Minutes exposé on insider trading by congressmen.

For some time now, critics of asset transparency have been saying that wealth disclosures are unnecessary violations of privacy. Rather than disincentivizing corruption, they say, disclosures only provide fodder for “asset porn.” More importantly, the National Academy of Public Administration (NAPA) in Washington, DC said in a recent study that these disclosures, if posted in online databases, pose dangers to law enforcement and national security. NAPA also asserted that asset disclosures have “limited value” in terms of detecting conflicts of interest or insider trading.

On April 15, for the first time ever, French government ministers were required to publicly declare what they own, in what has been called a historic Great Revelation or Le Grand Déballage. Like elsewhere, the demand for wealth disclosure was stoked by scandal.

First, an exposé on the French muckraking site Mediapart, that alleged that the budget minister, Jerome Cahuzac, had an undisclosed – and untaxed – account in the Swiss bank UBS. In March, the minister was forced to resign and is now facing tax fraud charges. Then, just weeks later, Le Monde and the International Consortium of Investigative Journalists revealed that President Francois Hollande’s close friend and campaign treasurer, Jean-Jacques Augier, had secret investments in two offshore companies in the Cayman Islands.

The asset declarations, posted on a government website, were seen as an attempt by Hollande to repair the damage from the scandals. The French president is now proposing to extend the mandatory disclosures to the entire parliament and other elected officials. This is quite revolutionary. France has so far bucked the transparency tide, even if most EU and OECD countries now require public disclosures of official wealth and the World Bank preaches the virtues of asset transparency to its clients in the developing world. As the BBC reported, French resistance remains fierce:

For Claude Bartolone, speaker of the National Assembly and a left-wing socialist, the initiative amounts to “pure voyeurism”.

Its effect, he says, will be not to diminish but to increase public contempt for politicians, while making no difference at all to those – like Jerome Cahuzac – who choose to cheat.

Mr Cahuzac, the former budget minister, lied for four months about a secret foreign bank account and resigned late last month.

“But if we had asked him to publish details of his personal wealth, would it have made the slightest difference?,” asked Mr Bartolone.

Many fear that the publication of their details will create a simplistic world in which “poor” politicians are seen as more honourable than “rich” ones.

In the U.S., the reversal was not on the idea of public disclosure itself, but on posting the wealth disclosures of bureaucrats in online, searchable databases. This provision was amended even before it was actually implemented. Currently, asset filings by members of the House and Senate are posted online, but as PDFs, and the new rules would still require Congress and senior executive officials to post their disclosures on the web. Before the STOCK Act, asset disclosures for most nonelective officials were available only to members of the public who made a formal written request for them. Requesters had to provide their name, address and occupation, and officials were given access to information on the requesters.  [This paragraph has been amended from a previous version.]

In the study that paved the way for amending the STOCK Act, NAPA reported:

Virtually all cybersecurity, national security, and law-enforcement experts interviewed during this study noted that making [asset] information available [online] fundamentally transforms the ability (and the likelihood) of others – individuals, organizations, nation-states – to exploit that information for criminal intelligence, and other purposes. Posting this information online in a searchable, exploitable database adds an important new element to the equation: specific, verified personal information about individual assets and holdings – high value information – which, coupled with existing information on the Internet, can be used to develop powerful profiles of individuals and organizations that can be reused and repurposed in damaging ways.

NAPA concedes that there was no empirical evidence to bolster this finding, but it cites the defense department, where 30 percent of asset disclosure filers work in intelligence positions. “Revealing publicly their public finances, family relationships, and outside activities, would grant easy access to those seeking to undermine national security,” the DoD said in a letter to NAPA. “DoD personnel may be vulnerable to identity theft or even physical harm, including kidnapping, robber, or extortion, as a result of Internet posting of their financial assets.”

Thus far, these threats are more hypothetical than real. But then again, there may in fact be potential dangers for DoD personnel. The fact is we don’t know. But certainly, for elected officials, whose financial dealings should be – and have been – open to public scrutiny for some time, the dangers have not proven to be  imminent or real. The financial disclosures of Russian MPs are published online – and they have not be held hostage by criminal gangs or foreign government as a result.  The amended law still requires online disclosures for  Congress and Cabinet members. But surely one can also ask: What is the danger of online posting for diplomats or defense personnel if a determined criminal can get hold of their information with a little bit more effort?  [NOTE:  This paragraph was amended from an earlier version in order to correct factual errors.]

As far as I can see, the only danger faced by South African, Romanian or Filipino officials whose asset declarations are public is the risk of exposure for corruption or malfeasance. The truth is that the worldwide trend supports openness – and for good reason. A 2010 Harvard study examined asset disclosures in 175 countries. It found that public asset disclosures by officials are positively related to government quality, including lower corruption.

Public policy is often a matter of trade-offs. Secrecy may keep officials safe from criminals and terrorists. It may even preserve whatever public illusions there are about the behavior of officials. But secrecy also protects politicians from scrutiny and exposure – as well as public outrage.

6 Comments on “Are wealth disclosures dangerous?”

  1. Rick Messick says:

    The U.S. Congress’ unfortunate overreach in the STOCK Act followed by its hasty back peddling may be used by opponents of income and asset disclosure schemes in developing countries. As Shelia shows, it shouldn’t. A couple of points to amplify on what she says:

    1) The focus on a disclosure regime should be elected officials and senior career employees, the individuals where the risk of corruption is greatest and the security concerns raised by disclosure the least.

    2) As with the STOCK Act, in many countries disclosure regimes cover far too many employees. In some developing countries every civil servant is required to disclose — from cleaners and drivers to ministers. This not only puts a needless burden on low level employees but, in systems where disclosures are not public, can take resources away from verifying the disclosures of senior officials.

    3) In countries where security issues are significant, and policymakers are not simply raising them to avoid public disclosure, ways can be found to accommodate reasonable concerns. The rules need not treat all officials the same way. Whereas full disclosure by high profile individuals — president, prime minister, cabinet officials — is unlikely to put these officials at any greater risk, lower profile officials might be treated differently. Home addresses might only be disclosed in response to a request by media or a civil society organization.

    • scoronel says:

      These are very good points, Rick, and from the asset disclosure guru himself. You’re right – there may be reasonable safety and security concerns, and these can be creative ways to accommodate these without compromising the public’s need for asset transparency. I agree with you that the focus should be on elected officials and senior career employees, and that the burden of too many disclosures may be too much for many countries to bear.

  2. In order to come down on corruption, transparency must be obtained. The Criminals will find information regardless of what is posted. THe law is put in place to protect companies and individuals from financial fraud that leads to an unsteady economy. This law has been used in many Countries and has been successful. The ones that cry the loudest usually are the one’s conducting the criminal activity. I would like to point out it is not much extra work when you are in a government position requiring a clearance. You should expect it or don’t be in that position.DoD employees know thye go thru a back ground and they know they are expected to disclose their financials. This law just insures they maintain financial integrity.

  3. jimmy t says:

    it is definitely NOT a simplistic world that holds that “poor” politicians are seen as more honorable than “rich” ones. It is the world that most of us live in.
    Nice try, though…

  4. In India the assets of public servants are available online. These include- All electoral candidates of parliament and state assemblies, union ministers, almost all senior bureaucrats, ministers and officials of various state governments. also for all Supreme COurt judges and judges of some High Courts. In fact, the provision for ministers asset declaration was made in 1964 but it was only implemented in 2009 after repeated appeals from RTI activists like me. Judges passed resolution for the disclosure of assets in 1997 but they disclosed it only in 2009 due to many RTI appeals. RTI has created a transparency wave in India and it is making public servants accountable and transparent, but only to some extent.

  5. […] Wealth disclosure of public servants […]

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