How Ethiopia Can Repatriate Billions of Looted Dollars

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    In a 1991 letter to President Meles that was sent through the Ethiopian Embassy, I rang a warning bell: “The political seduction of the law and the economy begets a bastardized system with no rational foundation in either economic, political or judicial logic. Consequently, kleptocracy (government by armed looters) becomes the most dominant form of government. More frightening is, sir, under a kleptocracy, kakistocracy necessarily predominates.” Kakistocracy represents governments run by the worst and most unscrupulous souls. አለቃ ገብረሃና የመሰሪዎች መሰሪ ይሉዋቸዋል.

    In 2011, Global Financial Integrity found “Ethiopia, which has a per-capita GDP of just US$365, lost US$11.7 billion to illicit financial outflows between 2000 and 2009.  More worrying is that the study showed Ethiopia’s losses due to illicit capital flows are on the rise. In 2009, illicit money leaving the economy totaled US$3.26 billion, which is double the amount in each of the two previous years.”

    On May 9, 2016, the Addis Standard carried an article by J. Bonsa (Ph.D.) titled “Rush for the Exit: Why is Ethiopia’s Capital Flight Accelerating?” Bonsa noted, “According to estimates reported by the World Bank, the amount of official development assistance (ODA) Ethiopia received in 2010 was $4 billion but the total amount of IFFs during that year was $5.6 billion.” IFF stands for Illicit Financial Flow or capital flight.

    In 2007, capital flight out of Ethiopia was registered at $1.5 billion. In 2009, it jumped to $3.26 billion in one year. In 2010, it was $5.6 billion. These are estimates by the World Bank and Global Financial Integrity.

    We do not know who the culprits may be by name. But we know Ethiopia has been sucked dry by an organized criminal entity that makes the notorious Italian mafia salivate with envy, enough perhaps to entertain the idea of moving its headquarters from Apulia in Southern Italy to Addis Ababa in East Africa.

    The question now is how can we repatriate these resources? Following the traditional process of finding out where the money is stashed, getting the cooperation of foreign banks that have vested interest in keeping the money in their portfolio, and going through the international legal process is a long and arduous undertaking. Furthermore, the success rate is low. Ask the current government of Nigeria. So what to do?

    GIVE THE LOOTERS AND THEIR PARTNERS INCENTIVES

    Anyone who returned the looted money will get to keep 15% to 20% of it and will be granted full amnesty. Ethiopia will be better off getting 80 to 85% of a large sum of money than getting nothing at all.

    In the meantime, offer a substantial reward to whistleblowers. Anyone who gives the government actionable information about looted money will get 15 to 20% of the loot.

    In most cases the looted money is stashed in a third party’s name – cousins, children, sisters, close relatives or even trusted friends. Looters often buy properties in their relative’s names. A reward of 15 to 20% of the loot to the people in whose name the looted money is stashed will be tempting to throw the looters under the proverbial bus.

    The sister may not turn in her brother, but her husband will. A child may not spill the beans on his/her father, but the child’s girlfriend/boyfriend and circles of close friends will. There are enough people in the know to be tempted.

    For those who may not respond to a positive incentive, the government should make it clear that anyone who has helped, and continues to help, the looter hide his loot will be held accountable, including imprisonment and stiff fines.

    This puts the looter and his collaborator in what philosophers call “trolley problems.” Social scientists call it a prisoner’s dilemma. In both cases, it is a moral cum self-interest conundrum of making a choice that is based on minimizing the damage to oneself by throwing one’s partner under the bus.

    The looter understands his collaborators have serious financial incentives to turn him in. He also knows that they are under legal jeopardy if they do not. If they turn him in he will face not only losing 100% of his loot, but also be thrown in the slam (prison).

    He is also confronted with a moral conundrum. If he reported his loot and get to keep 15 to 20% of it, he will expose his trusted friends and relatives to legal jeopardy.

    On the other side of the equation, the looter’s collaborators fear that he may return the money to keep 15 to 20% of it. If he does that they can be persecuted as collaborators. They know or should know that his amnesty will not cover them.

    Their choice sets are between saving themselves and, in the meantime, getting a large sum of money by turning the looter or risking legal jeopardy if he betrays them first. So, the game is who is the first to move.

    Remember there are also other third parties. For example, assume Looters A, B, C, and D know about each other’s activities. Person A may not know how much persons B, C, and D have looted, but he may know where they have stashed their loot. Such peoples share information about reliable banks and systems to move looted resources offshore. Sometimes they may have looted government resources and split it. So, they know.

    If person a decides to take the government’s incentive and turn in not only himself but also his friends, he will get 15 to 20% of what he had looted plus 15 to 20% of the loot from each of persons B, C, and D.

    Remember also that Person A understands that his friends may turn him in first. So he has the incentive to do it before they betray him.

    Do not forget that Person A does not know how much his friends have looted. If each of them turns to have more than his loot, his total whistle-blower award from the government may be more than the money he has looted and hidden in foreign banks. In this scenario, a looter may end up with more money than what he has stashed offshore.

    This is the marvel of what economists and psychologists call game theory – the calculus of prisoners’ dilemma. Since 1970, 12 economists and mathematicians have won Nobel Prize applying Game Theory to different areas of personal and social lives. Remember the movie “A Beautiful Mind” about John Nash? John Nash was a mathematical genius and a Nobel Laureate who popularized game theory.

    Give the participating looters and other informants anonymity. People are more likely to participate in the government’s amnesty and reward incentives if they are given anonymity. For example, if Person A has his money in several people’s name, he will not know which one betrayed him. This will make it easier for one of them to betray him.

    Another alternative is to use international law firms. They will have billions of reasons to go after the looters. Such law firms have contacts with government officials and lawmakers. They will be potent instruments to bring the looted money to Ethiopia.

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    Koki Abesolome (Ph.D.) is a blogger. Her blogs are posted on her Facebook https://www.facebook.com/koki.abesolome.3/followers