More Nations Bringing Bribery And Corruption Enforcement Actions

Monday, December 1, 2008 - 01:00

Multi-national corporations and individuals doing business globally have reason to be more concerned and vigilant than ever about their business practices in foreign jurisdictions.For nearly 25 years, the U.S. enforcement of the Foreign Corrupt Practices Act (FCPA) was the primary, if not exclusive, effort to investigate and prosecute bribes of foreign government officials by corporations. However, over the past five years, we have begun to see an ever-increasing global trend in which more and more countries are taking the initiative to investigate and prosecute corruption. This has largely been the result of the 1997 Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in which 37 countries agreed to pass laws making the bribing of foreign government officials illegal.

In 2008, according to the Transparency International (TI) report, 263 investigations were launched and 256 cases were brought in 19 OECD countries, with what it termed "significant enforcement'' in 16 countries, including Argentina, Australia, Belgium, Denmark, Finland, France, Germany, Hungary, Italy, South Korea, the Netherlands, Norway, Spain, Sweden, Switzerland and the United States.Cases include prosecutions, judicial investigations and civil actions; investigations exclude judicial investigations. When compared to the 51 investigations and 50 cases in eight countries in 2005, this year's level serves as a reminder of how seriously anti-bribery and corruption enforcement has become around the world. In 2005, only four OECD countries had more than one foreign bribery case underway. In 2008, multiple investigations were underway in 13 countries.

The 2008 TI report indicates "major cases'' are being conducted in Australia, Argentina, Belgium, Denmark, France, Germany, Italy, Norway, Spain, Switzerland and the United States. "Major investigations (but not major cases)'' are underway in Finland, Sweden, Turkey and the United Kingdom. The report includes details of selected cases, including those where one instance of bribery or corruption spawned simultaneous investigations in as many as 15 countries.

Those figures bring into sharp focus the idea that, for those in multinational corporations with risk management responsibilities around anti-bribery and corruption, a global perspective on prevention, detection and response is critical. Furthermore, organizations must not only have the capability to react promptly and appropriately across multiple jurisdictions when the time comes, but they must possess the capability to understand and work within the cultures, customs, laws, regulations and ethical standards in myriad countries.

For many organizations, that is a tall order, given how rapidly the anti-bribery and corruption sentiment has grown in the past several years and how widely dispersed their organizations have become in this greatly expanded global economy, where there is great reliance upon new business relationships, such as strategic alliances, joint ventures, mergers and acquisitions. It raises the important questions: How well do you know your partners, and how well do they understand the importance your organization places on managing the risk of violations of anti-bribery and corruption laws and regulations?

As regulations continue to proliferate across borders, and as businesses expand to new and emerging markets, organizations increasingly are exposed to multiple regulatory frameworks and legal systems. The question remains at many such organizations whether the design of their existing compliance programs can be effective in such an environment. In a recent survey of global executives, 78 percent said at least some of their organization's production takes place outside its geographic home market.1Also, the number of multinational companies doubled from 35,000 to 70,000 between 1990 and 2005,2and the typical multinational corporation now operates in 10 countries, compared to just four in 1990.

Although TI believes there has been significant progress in the global fight against bribery and corruption, it also says many nations are only paying lip service to prosecutions. In fact, TI reports that there has been no real enforcement of the OECD's "Convention on Combating Bribery of Foreign Public Officials in International Business Transactions'' in more than half of the 37 countries that have signed the treaty. TI promises to keep exerting pressure on the remaining countries, particularly Austria, Brazil, Bulgaria, Canada, the Czech Republic, Estonia, Greece, Ireland, Japan, Mexico, New Zealand, Poland, Portugal, Slovakia, Slovenia, Turkey and the United Kingdom.

Businesses operating around the world and across borders can expect the anti-bribery and corruption sentiment to grow. In its annual report, TI recommends that China, India and Russia join those who already have agreed to the Convention, although all three of those countries, according to TI, score poorly in its annual anti-bribery and corruption rankings.

TI calls on the OECD leadership to "develop an action programme to ensure enforcement by lagging governments. This should include (a) publication of a watch list of countries where there is little or no enforcement; (b) high-level missions, led by the Secretary-General, meeting with the Justice Minister, or equivalent, of lagging governments, and (c) suspension from the Working Group if the high level visit fails to produce timely results.''

What all of this means is that, going forward, global business operations will be under increasing pressure to assess their exposure to the risk of corrupt business practices and that they have effective anti-bribery and corruption compliance programs in place to help prevent, detect and, as appropriate, respond to incidents when they occur. 1 Economist Intelligence Unit."Future Planning:Meeting the Challenges of Globalization."2008.

2 IBM Institute for Business Value."Economic Development in a Rubik's Cube World:How to Turn Global Trends into Local Prosperity." 2008.

Richard Girgenti is KPMG LLP National Practice Leader, Forensic Services.

Please email the author at rgirgenti@kpmg.com with questions about this article.