International Fight on Foreign Bribery Lagging

July 30, 2010 International Tax Cooperation

CoinsCountries representing an approximate 70 percent of world trade have been deemed as not having taken enough action to combat the occurrence of international bribery.

Only 7 countries in the world have been evaluated as actively enforcing anti-bribery laws and the Organization of Economic Cooperation and Development’s (OECD) ban on foreign bribery instated through its Anti-Bribery Convention. The figures were revealed in Transparency International’s 2010 Progress Report on the illicit payments and bribes made to foreign public officials in international business transactions in order to win contracts or favorable treatment. The report, which evaluated recent actions within the 38 participating countries of the Convention, claimed that there are strong signals that the international fight against foreign bribery is “far from being achieved.” With only 7 OECD member states (Denmark, Germany, Italy, Norway, Switzerland, the UK and the US) actively enforcing cross-border bribery legislation, the Convention is seriously undermined, as it was originally predicated on the full cooperation of all parties.

From the 38 countries participating in the Convention, 20 were regarded as having “little or no enforcement” of foreign bribery laws, due to inadequacies in their legal frameworks and enforcement systems. The most common deficiencies seen among “no enforcement nations” were insufficient legal definitions of the foreign bribery offenses, a lack of criminal liability for corporations, extensive jurisdictional limitations, inadequate sanctions, inadequate periods on the statutes of limitations, and inappropriate provisions for the accountability of parent companies for the actions of their subsidiaries. In regards to the enforcement of foreign bribery laws, countries were criticized for insufficiently ensuring the independent standing of the prosecutors, uncoordinated enforcement efforts, inadequate resources and training of specialized staff, inappropriate auditing and accounting standards, and a lack of protection for whistle-blowers. Due to the relatively low occurrence of foreign bribery prosecutions in countries deemed as “no enforcement nations”, it is unclear whether the specific problems are inadvertent or or an active obstruction on the part of political parties.

It was recommended that the OECD Working Group on Bribery should, at this point, dedicate significant resources to aiding lagging jurisdictions in establishing adequate staff to handle the investigation and prosecution of international bribery, and addressing shortcomings in its foreign bribery enforcement. Political pressure should also be exerted by the OECD and other Convention-member countries to compel lagging nations towards establishing appropriate legal infrastructure.

In order to create an equal and appropriate level of compliance to the Anti-Bribery Convention, Transparency International has recommended that the Working Group on Bribery should regularly report to the OECD Secretary General with notifications and updates on the actions of lagging and non-complying jurisdictions. Greater cooperation should be encouraged between participating countries to overcome commonly encountered prosecution obstacles. Efforts also need to be renewed to encourage the accession Russia, India and China to the Anti-Bribery Convention.

Despite the lack of any great overall international anti-bribery progress, some recent positive developments were noted. The upcoming, albeit delayed, overhaul to the UK’s antiquated anti-bribery laws is deemed to be crucial step for the effectiveness of the Convention, as the UK is the OECD’s fourth largest exporter. Further, the USA, Germany, and the UK have all recently settled in landmark bribery prosecutions, sending out strong messages to international businesses regarding the potential gravity of illicit payments to foreign officials.

Photo by Rodrigo_Amorim

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