Bribery rages unchecked in over half of global trade

There are many losers and few winners when companies bribe officials to win lucrative contracts. In prioritizing profits over principles, governments in most major exporting countries fail to prosecute companies flouting laws criminalizing foreign bribery.

What is missing is active enforcement. Transparency International's new report, Exporting Corruption, finds that only 11 major exporting countries - accounting for about a third of world exports - have active or moderate law enforcement against companies bribing abroad in order to gain mining rights, contracts for major construction projects, purchases of planes and other deals.

One of the most shocking examples exposed in recent years is the massive foreign bribery scheme carried out by the Brazilian construction conglomerate Odebrecht involving about US$788 million in bribes to government officials and political parties in at least 12 countries.

Foreign bribery has huge negative consequences for the economies of the nations targeted. Money gets wasted on deals that are overpriced or do not yield real benefits. Limited resources are diverted to benefit a few individuals while citizens are denied vital public services, such as access to clean water, safe roads or basic health services.

Around the world, competitors that offer better products lose out in an unfair marketplace and this triggers a race to the bottom, with some companies choosing to engage in bribery because others are doing it.

This is why the OECD Anti-Bribery Convention requires parties to criminalize bribery of foreign public officials and introduce related measures, such as investigating suspicious cases. Its goal is to create a corruption-free level playing field for global trade.

The good news is that eight countries accounting for 7.1 per cent of world exports have improved their performance since the last report in 2015. Seven countries are now in the active enforcement category, compared with four in 2015. They are Germany, Israel, Italy, Norway, Switzerland, the United States and the United Kingdom.

The bad news is that there is still a long way to go. Four countries, accounting for 6.7 per cent of world exports, have deteriorated in their performance and a total of 33 exporters, accounting for about 52 per cent of world exports, still have limited or little to no enforcement against foreign bribery. That includes all four of the exporters not party to the Convention — China, Hong Kong, India and Singapore — all of which get the lowest rating of little or no enforcement.

The results show that we are far from bringing enforcement against foreign bribery to a tipping point. Governments must scale up their foreign bribery enforcement. This means investigating allegations and pressing charges, as well as courts convicting guilty individuals and companies, and imposing substantial sanctions where appropriate.

The enforcement gap that exists in China, Hong Kong, India and Singapore needs to be closed by joining the OECD Convention and, along with all other countries involved in global trade, stamping out foreign bribery with the necessary legislation and enforcement.

Transparency International also recommends that governments:

• address weaknesses in their legal frameworks and enforcement systems, including inadequate resources for crossborder enforcement

• ensure settlements of foreign bribery cases are reached transparently, accountably and through appropriate processes, with dissuasive and even-handed sanctions

• improve accountability and deterrence, by publishing up-to-date statistics and information on court cases

•assist cross-border investigations by sharing more information with other countries.

In addition, the OECD Working Group on Bribery should make greater use of public announcements to name and shame countries that are not enforcing against foreign bribery, just as Transparency International is doing in this report. It should also create a public database of enforcement data and case information, and conduct a cross-country study of information sharing performance across all parties.

Let me end with two incredible stories:

Anti-money laundering specialists at a German bank recommended in 2016 and 2017 that transactions connected to President Trump and his son-in-law, Jared Kushner, be reported to a federal financial crimes watchdog. But executives ignored the employees.

While international real estate deals sometimes trigger money-laundering concerns, employees saw the bank’s inaction as part of a pattern of rejecting valid reports to protect relationships with lucrative clients.

AND

Austria’s government just collapsed over a corruption issue called "The Ibiza trap".

Corruption is dead? Unfortunately not… Comments are welcome – contact me at Schumacher@ eitsc.com