Transparency International Score Card on Enforcing Corruption Abroad

Even when companies play by the rules at home, when operating abroad, it can be a different situation. Particularly when doing business in countries where bribing public officials is endemic, foreign companies may join in, adding to the global problem of corruption.

In 1997, the Organization for Economic Co-operation and Development (OECD) created the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, committing signatories to make foreign bribery a crime. Thirty-nine countries have signed on to the convention, together accounting for two-thirds of world exports and three-quarters of foreign investment.

Despite their obligations, however, global corruption watchdog Transparency International (TI), said in its annual report released Wednesday, that compliance measures remain largely inadequate.

“Governments don’t take steps to strengthen and provide resources to enforcement because they do not regard it as a priority to punish companies for criminal behavior outside their own borders,” said Gillian Dell, conventions program manager at TI.

Gillian Dell says the phenomenon is widespread across industries. One notable recent case involves Wal-Mart’s Mexican subsidiary, which allegedly paid over $24 million to local officials, but Dell also mentioned oil and gas, defense and telecom, as well as major banks.

According to Dell, bribing can happen in many different ways, but often involves intermediaries, agents or joint venture partners acting on behalf of the foreign company, making arrangements in order to facilitate various things. Methods can vary from cash filled envelopes to regular bank transfers. Anecdotal evidence suggests that the initiative can come from any side, says Dell.

“Companies claim there is a lot of solicitation taking place in certain countries but this is no excuse for participating in corruption,” she added.

Positive Signs

There are some positive trends, however, according to TI. Enforcement, in terms of bringing companies to justice, is on the rise.

“The growing momentum behind anti-bribery enforcement is making it harder to get away with the use of graft to win business,” said TI Chair Huguette Labelle said in a press release.

Since 1999 when the convention went into force, to the end of 2011, over 250 individuals and almost 100 companies have been sanctioned; 66 individuals have been jailed. In 2011 alone, however, 144 new cases were prosecuted worldwide.

TI has put together a training tool, called RESIST, with the aid of over 20 companies and organizations, based on their actual experiences, which aims at helping companies train their staff to counter solicitation and extortion demands in an efficient and ethical manner.

In its report, TI has classified countries in four categories, with regard to their level of enforcement of the convention.

There are seven countries in the best category, “Active,” with the United States named as the leading enforcer. After that comes Denmark, Germany, Italy, Norway, Switzerland, and the U.K. Together they account for 28 percent of the world’s exports.

Countries with Moderate Enforcement, representing 25 percent of world exports include Argentina, Australia, Austria, Belgium, Canada, Finland, France, Japan, Korea (South), Netherlands, Spain, and Sweden.

On the Little Enforcement list are 10 countries with 6 percent of world exports: Brazil, Bulgaria, Chile, Hungary, Luxembourg, Mexico, Portugal, Slovak Republic, Slovenia, and Turkey.

In the lowest category, No Enforcement, are Czech Republic, Estonia, Greece, Ireland, Israel, New Zealand, Poland, and South Africa, but these only make up 4 percent of the world’s exports.

Two nonsignatories that TI would like to see join the convention are China and India. Countries must also not be tempted to backslide because of the economic crisis, and more resources and government support is needed, to put this issue higher on the agenda.

“Joining this collective action requires thinking beyond borders and beyond the short term. This is not necessarily popular or understood well and thus not given importance by government officials,” Gillian Dell said.

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