In March 2014, Brazilian federal police began investigating a money-laundering scheme run partly through a gas station in Brasília that had a car wash. The name of the investigation, Operação Lava Jato or Operation Car Wash, stuck long after it had reached the presidential palace, the boardrooms of Latin America's largest construction firms and the governments of a dozen countries.

Bribery goes global

Grand corruption often crosses borders, and for a long time the law did not. In the mid-1970s, investigations in the United States produced revelations that hundreds of US firms paid foreign bribes, including the aircraft maker Lockheed, whose payments helped bring down a former Japanese prime minister. Congress responded with the Foreign Corrupt Practices Act of 1977, the first law to make bribing foreign officials a crime for a country's own companies. American firms complained that rivals faced no such rule. Some countries even let companies deduct foreign bribes from their taxes as business expenses; Germany did until 1999. The OECD Anti-Bribery Convention of 1997 changed that: it made bribing foreign officials a crime in signatory states, which now include most large exporting economies. Enforcement remains uneven.

Operation Car Wash

Investigators following the laundered money found a much larger system. At its core was a construction cartel bribing Petrobras officials and politicians. Petrobras, Brazil's state-controlled oil company, awarded inflated contracts to a group of construction companies that divided the work among themselves. A slice of each contract, often reported as 1 to 3 percent, went to Petrobras executives and to the parties and politicians who had appointed them.

The case was led by a task force of prosecutors in the city of Curitiba and the federal judge Sérgio Moro. Their main tool was a 2013 law that expanded plea deals trading testimony for lighter sentences. Each arrested executive had reason to name others, and the cooperation spread up and outward. In December 2016, the construction giant Odebrecht reached a settlement with authorities in the United States, Brazil and Switzerland, admitting it had paid about 788 million dollars in bribes across 12 countries. In Peru alone, the fallout reached several former presidents.

Triumph and backlash

Supporters saw Car Wash as proof that the powerful could be held to account in a country where they had long seemed untouchable. Billionaires and senior politicians went to prison, and large sums were recovered. The most famous defendant was the former president Luiz Inácio Lula da Silva, convicted of corruption in 2017 and jailed in 2018, which kept him out of that year's presidential election.

Then the story turned. In 2019, Moro became justice minister under the new president, Jair Bolsonaro, the main beneficiary of Lula's absence. Later that year, leaked messages published by The Intercept Brasil suggested that Moro had advised the prosecutors whose cases he was supposed to judge neutrally. In 2021 Brazil's Supreme Federal Court annulled Lula's convictions, ruling that the Curitiba court lacked jurisdiction over the cases, and separately found Moro biased in one of them. Lula won the presidency again in 2022. Critics argued that Car Wash had become "lawfare," prosecution used as a political weapon, and that it badly damaged Brazil's construction industry. Defenders replied that the underlying bribery was real and well documented. Both can be true. The lasting lesson is that accountability needs due process as well as zeal.

1MDB

Malaysia's 1Malaysia Development Berhad, a state investment fund launched in 2009 under Prime Minister Najib Razak, became the center of one of the largest thefts on record. The US Justice Department alleged that more than 4.5 billion dollars was diverted between 2009 and 2015, much of it by the financier Jho Low and his associates, and spent on luxury property, art, a superyacht and even the financing of a Hollywood film. Hundreds of millions of dollars reached Najib's personal accounts; he said the money was a donation from Saudi Arabia. Reporting by The Wall Street Journal and the website Sarawak Report brought the scheme to light in 2015.

The political consequence came in 2018, when Najib's coalition lost power for the first time since independence. He was convicted in 2020 in the first of several 1MDB-related cases and began serving his sentence in 2022. Goldman Sachs, which had raised billions for the fund, agreed in 2020 to pay more than 2.9 billion dollars to settle investigations around the world. Jho Low remained a fugitive.

Worked example

Suppose a construction firm based in one country bribes a minister in a second country, through a bank account in a third, to win a road contract. Under older rules, the home country might have ignored the bribe or even allowed a tax deduction for it. Today the firm may face prosecution at home under a law based on the OECD convention, in the United States if it used American banks or sold shares there, and in the country where the bribe was paid. Banks in the third country may be required to report suspicious transfers. As Car Wash and 1MDB show, cross-border cooperation and the money trail through foreign banks often crack cases that domestic authorities could not or would not pursue alone.