The Transparency International Report on Corruption Enforcement

Transparency International issued its ninth annual progress report on OECD Anti-Bribery Convention Enforcement. “Exporting Corruption, Progress Report 2013: Assessing Enforcement of the OECD Convention on Combating Foreign Bribery” (here). The Report reviews the enforcement efforts by countries who are parties to the anti-bribery convention. It thus provides insight into global enforcement efforts. While 40 countries are parties to the Convention, the Report makes it clear that global enforcement is quite uneven.

Member countries are grouped in the Report into one of four categories based on their enforcement efforts: 1) Active enforcement; 2) moderate enforcement; 3) Limited enforcement; and 4) Little or now enforcement. Only four countries are included in the “active enforcement” category: the U.S., Germany, the U.K. and Switzerland. Collectively those countries commenced 62 active investigations in 2012, down from 86 in the prior year. During 2012 the U.S. opened 24 investigations, Germany 13, the U.K. 8 and Switzerland 19. That compares to 27 in the U.S., 32 in Germany, 11 in the U.K. and 16 in Switzerland during 2011.

Italy, Australia, Austria and Finland were included in the “moderate enforcement” category. Collectively these countries opened 11 investigations in 2012 and in 2011. In 2012 Australia opened 10 inquires followed by Italy with 8 and Austria with 2 while Finland did not open an investigation last year.

The final two categories – limited and little or now enforcement – include, respectively, 10 and 20 countries. In 2012 the 10 countries rated as conducting limited enforcement opened a total of 16 investigations compared to the 9 inquiries initiated by the 20 countries grouped in the little or no enforcement. Overall the four countries rated as conducting active enforcement opened 62 investigations in 2012 compared to the 36 initiated by all of the other countries that executed the Convention.

The same patterns are evident in statistics regarding cases concluded last year. Here the four countries included in the active enforcement category resolved 37 cases with sanctions last year compared to 38 in the prior year. At the same time the moderate enforcement group only concluded 1 case with sanctions in 2012. The limited enforcement group concluded 2 such actions while the little to no enforcement group did not resolve any actions with sanctions. Overall the four countries which actively enforce the Convention concluded 37 actions in which sanctions were imposed while all of the remaining parties to the Convention resolved 3 such actions.

Based on these statistics the Report makes three recommendations: 1) Government leaders must be asked to commit sufficient resources to enforcement; 2) The OECD Ministerial Meeting in the second quarter of 2014 should review enforcement; and 3) A meeting should be held with leaders of multinational enterprises and civil society organizations to enlist their support to overcome lagging enforcement.

The final sections of the Report review enforcement programs in specific counties. Generally these sections review basis statistics and cases for the particular country an includes recommendations. In the section discussing the U.K., the Report notes that there is increasing use of civil recovery orders to resolve foreign bribery-related cases. This involves less judicial oversight and transparency compared to criminal plea agreements. There is also a willingness of the SFO to enter into confidentiality agreements which prohibits key information from being disclosed after cases are settled, according to the Report. The section concluded by expressing concern regarding future budget cuts at the SFO and the possible impact on enforcement.

Finally, the Report notes that “the U.S. maintains the most developed and active foreign bribery legal and enforcement regime in the OECD (and the world).” Although last year there was a smaller number of actions against companies and individuals than in the prior year that does not represent a “de-emphasis of FCPA enforcement or a change in the legal or enforcement framework but rather the multi-year character of FCPA cases,” according to the Report.

The Report also raised two points regarding U.S. enforcement. First, the U.S. has not made “sufficient progress” on the recommendation that the U.S. clarify its policy on dealing with claims for tax deductions for facilitation payments, and give guidance to help tax auditors identify payments claimed as facilitation payments that are in fact in violation of the FCPA . . .”

The second recommendation focuses on the use of NPAs and DPAs. It notes that when resolving cases with these agreements the SEC and the DOJ should “make public detailed reasons on the choice of a particular type of agreement, the choice of the agreement’s terms and duration, and how a company has met the agreement’s terms.”

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