Large exporting countries failing to stop rampant bribery in global trade
Many of the world’s largest exporting countries are failing to punish their companies for taking part in bribery overseas.
New research shows that despite the OECD introducing its Anti-Bribery Convention 20 years ago, there has been “little change in the overall enforcement level”.
The study from Transparency International finds that in the past three years, four major exporting hubs in Asia: China, Hong Kong, India and Singapore, have fallen into the lowest possible category in terms of anti-bribery enforcement.
These countries are not signatories of the convention, but their rise to prominence in the two decades since its inception shows the extent of its limitation.
World merchandise trade more than quadrupled in volume between 1980 and 2011, while competition for markets has intensified. This has, Transparency International says, increased the risk of cross-border bribery and corruption, which has enormous negative consequences for people in affected countries by threatening foreign investment, diverting resources and undermining the rule of law.
Just over one quarter of world exports come from signatory countries with active law enforcement against companies bribing abroad. Seven nations covering 27% of global exports are praised for having active enforcement measures: the US, Germany, the UK, Italy, Switzerland, Norway and Israel.
However 39.6% of exports come from signatory countries with little or no enforcement (for illustrative purposes China, Hong Kong, India and Singapore have been added to this field). Among these nations which have signed the convention are Japan, Spain, Mexico, Russia, Ireland, Turkey, Colombia and Poland.
The authors call for countries party to the convention, as well as other major exporting nations, to publish annual statistics on foreign bribery enforcement.
Commenting on the research, Tom Cardamone, managing director of Global Financial Integrity, a US-based non-profit organisation that researches illicit financial flows, tells GTR: “While it is heartening to see some countries are taking anti-bribery enforcement seriously, huge gaps remain. What this means is that many companies can continue to bribe with impunity because many governments simple don’t seem to take the necessary steps to curtail this practice. This is not an issue of technical capacity, it is one of political will. And in far too many places this is sorely lacking.”
This lack of political will is evident in some of the high-profile cases of overseas bribery to have happened in recent years.
The French company Airbus – a national champion that has in the past been heavily backed by the French export credit agency, Coface – was fined €81.25mn by German prosecutors in March this year, in relation to suspected bribery in the sale of 18 Eurofighter Typhoon fighter jets to Austria.
“Prosecutors alleged that Airbus was unable to account for over €100mn in payments connected to the compensation transactions made to two shell companies in the UK. These payments bypassed internal controls and were used for ‘unclear purposes’, ultimately leading to the charge of negligent breach of duty,” the authors write.
Brazilian engineering giant Odebrecht has been hit with a series of fines by authorities at home and abroad, including a US$2.6bn fine by Brazilian authorities. The company’s petrochemical subsidiary is the subject of enforcement actions termed by the US Department of Justice as “a massive and unparalleled bribery and bid-rigging scheme”.
It is accused of paying US$788mn in bribes to government officials in Angola, Argentina, Brazil, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru and Venezuela in order to win business in these countries.
The world’s second largest mining company, Rio Tinto (headquartered in both Australia and the UK), has come under investigation for bribery in Guinea, West Africa. The case centred on a US$10.5mn payment to a consultant providing services on an iron ore project in the country. A Guinean public official has been jailed for seven years in a related case.
The list goes on and the message is clear: the OECD Anti-Bribery Convention is doing little to limit rampant corruption connected to global trade.
The Hong Kong-based chair of law firm Baker McKenzie’s global compliance and investigations group, Mini vandePol, tells GTR that while she is seeing increased co-operation between authorities around the world, “no one is immune from this risk and companies need to prioritise their management and mitigation of this risk urgently or face very serious consequences”.
She adds: “The key is for companies to avoid falling into the trap of agreeing to improper demands by foreign officials in new markets just to win opportunities, develop important relationships or take short cuts to avoid red tape. Once you start down the path, it becomes the norm and will erode business culture very quickly.”
You can read the full Transparency International report here.take me back