During the last several years, the United States has pursued global corporate bribery and corruption cases with vigor. Now, many other countries are getting into the act, with new corruption laws and added enforcement muscle.
According to a report by TRACE International, an anti-bribery group, 15 countries initiated their first-ever bribery enforcement action last year, including Guinea, Kenya, Iraq, the Philippines, and Tunisia—solid proof that more cops are on the global anti-corruption beat than ever before.
Other anti-bribery organizations are also noticing a rise in anti-corruption enforcement on a global scale. Since the Organization for Economic Co-operation and Development convened its Convention on Combating Bribery of Foreign Public Officials in International Business Transactions in 1999, 14 of the 40 countries that have joined the Convention have sanctioned 221 individuals and 90 entities for foreign bribery, according to new anti-bribery data released this week by the OECD.
According to the TRACE report, 25 countries and two public international organizations—the United Nations and the World Bank—have pursued 468 foreign bribery enforcement actions since 1977, when the United States passed the Foreign Corrupt Practices Act and first made such bribery illegal. Additionally, 64 countries have pursued enforcement of domestic bribery laws, with considerable overlap in the countries that have pursued enforcement of both.
To some critics, this figure is still far too low, but enforcement actions continue to rise and more countries are feeling pressure, “so that they continue to increase their anti-bribery enforcement,” says Patrick Moulette, head of the anti-corruption division of the OECD.
The United States holds the strongest enforcement record, with 2.5 times as many enforcement actions as all other countries combined since 2002. Specifically, the Department of Justice and the Securities and Exchange Commission pursued 302 foreign bribery enforcement actions (65 percent of all foreign bribery cases). This figure includes eight times as many actions as the United Kingdom, which brought the second highest number of cases, with 38 enforcement actions.
“The level of attention and degree of priority given to fighting bribery varies widely, depending on the risks relative to each country's economy,” notes Moulette. For example, how involved is the country in the extractive industry? Is the country a major economy with strong export sectors? Does the country have a lot of foreign investments? “Those are important factors to keep in mind when we look at enforcement carried out in each country,” he says.
In the United States, for example, many of the enforcement actions brought by the Justice Department and SEC focus on companies and individuals that violate the FCPA by paying bribes to foreign government officials. By comparison, other countries—such as South Korea, Nigeria, and China—place particular emphasis on prosecuting corruption within their own governments.
U.S. enforcement agencies are not only pursuing U.S. companies for FCPA violations. For companies that face formal charges by the Justice Department or the SEC or are the subject of ongoing investigations, 25 percent involved companies headquartered outside the United States. Most were headquartered in the United Kingdom, the Netherlands, and Germany, followed by Switzerland and Japan.
“The harsh penalties associated with the Bribery Act have greatly increased the incentives for corporates to self-report, rather than risk being caught out by a hostile SFO investigation.”
—Barry Vitou,
Partner,
Pinsent Masons
The TRACE report also found that, when it comes to enforcement actions for “inbound” bribery—bribes that a country's government officials take from foreign companies—South Korea and Nigeria lead the world in enforcing their national prohibitions. South Korea recorded 17 of the 164 total inbound global enforcements recorded, while Nigeria had 15, followed by China with 11.
How successful a country will be at enforcing bribery and corruption is “a question not only of budget and number of staff,” says Moulette, “it's a question of specialized expertise.”
Because many of these bribery cases are labor-intensive and often involve a high-level of forensic accounting, the more cases a country takes on, the more adept it becomes at handling such matters, says Alexandra Wrage, president of TRACE.
She cites the aftermath of the Siemens case as an example. “It's no coincidence after the Siemens case that Germany brought a whole series of other cases in rapid succession,” Wrage says. “They already had a sophisticated legal system, but now they have prosecutorial experience with pursuing a bribery case.”
More Fessing Up
For the first time this year, the report also included data on how many times countries declined to take formal enforcement actions or closed official inquiries related to bribery. With 22 declinations since 1977, the United States showed the highest number by a significant margin.
FOREIGN BRIBERY ENFORCEMENT ACTIVITY
The following chart details the United States' enforcement of foreign entities from 1977 through 2012.
Source: TRACE.
Six other countries also declined to pursue formal bribery enforcement actions in that period. The United Kingdom had the second highest number with three declinations, while South Africa, Russia, Norway, New Zealand, and Khazakstan all had one declination.
Wrage says the number of declinations observed by the report is not surprising. A company has to self-disclose in order to get a declination. “The United States certainly, without any question at all, has the highest level of voluntary disclosures,” she says.
The number of U.K. companies to voluntary self-disclose potential wrongdoing to the Serious Fraud Office continues to rise, nearly doubling in the last fiscal year, according to analysis conducted by law firm Pinsent Masons. Twelve companies have self-reported white-collar crime to the SFO in the year ending March 31, compared with just seven during the two preceding years.
“The Bribery Act is already having a big impact on corporate attitudes toward rooting out and self-reporting white-collar crime,” Barry Vitou, a partner at Pinsent Masons, stated in a client alert. “The harsh penalties associated with the Bribery Act have greatly increased the incentives for corporates to self-report, rather than risk being caught out by a hostile SFO investigation.”
Wrage says more companies would be willing to self-disclose if they knew the odds of receiving a declination. Historically, information pertaining to declinations has been “shrouded in secrecy,” and even now is difficult to come by unless companies make their declinations public, she says.
While enforcement has increased overall, much more work needs to be done. For one, the OECD is still missing a few major economies, including China, India, and Indonesia, says Moulette. And still other countries have yet to bring a single conviction, prosecution, or investigation, he says.
It's true, too, that the actual number of global enforcement actions actually declined last year. The United States experienced the sharpest decline, dropping from 42 enforcement actions in 2011 to 20 last year (excluding ongoing investigations). In comparison, all other countries' foreign bribery enforcement actions declined by 42 percent, from 12 in 2011 to seven last year.
Although the numbers are down, anti-corruption trackers say that is likely a temporary lull, rather than a developing trend. “Based on what we hear about cases in the pipeline and based on we're seeing about growing international interest in enforcement,” says Wrage, “everyone should assume the trend is going to continue up.”
Many anti-bribery cases in the pipeline take a long time to resolve and have a way of skewing enforcement numbers, says Wrage. Looking at the overall picture, the real message is that “anti-bribery enforcement is here to stay and trending upward,” she says.
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