This article was republished with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.
Last month, the OECD published its first Foreign Bribery Report, measuring transnational corruption based on data from the 427 foreign bribery cases that have been investigated, prosecuted and concluded since the entry into force of the OECD Anti-Bribery Convention in 1999. In a panel discussion on December 10th, 2014, hosted by the OECD, International Bar Association and The World Bank, James Tillen, the Vice Chair of Miller & Chevalier’s International Department, discussed how Chief Compliance Officers (CCOs) can put this report to use.
Certain sectors are more prone to risk. CCOs can use data from the report when conducting their own corruption risk assessments. Two-thirds of the foreign bribery cases occurred in four sectors: extractive (19 percent), construction (15 percent), transportation and storage (15 percent) and information and communication (10 percent). CCOs in these sectors can also use this data to promote the importance of investing in compliance in their own companies.
Training senior management is essential. In 41 percent of the cases, management-level employees paid or authorized the bribe. In 12 percent of the cases, the CEO was involved. These findings suggest to CCOs that training senior management is pivotal. Moreover, the report found that 80 individuals have been imprisoned, a data point that can be used to send a strong message to senior executives during trainings.
Third parties are undoubtedly high-risk. Third parties were involved in three out of four cases. These intermediaries include agents, distributors, brokers, local consulting firms and corporate vehicles such as subsidiary companies. This statistic reinforces prior statements by FCPA enforcement officials that almost 70 percent of FCPA actions have involved indirect payments through third parties. It also underscores the high importance of third-party due diligence.
Lawyers pay bribes, too. Oftentimes, there is a perception that lawyers are lower risk for making indirect payments to foreign officials than other third parties, perhaps because they usually must follow higher ethical standards in their jurisdictions. But, in the OECD report, 6 percent of cases involved lawyers. This finding adds support to the IBA’s study on corruption in the legal profession from 2010, in which half of respondents stated that corruption was an issue in the legal profession. Accordingly, CCOs need to ensure they vet and monitor their company’s lawyers, too.
Public procurement is not the only area of corruption concern. In most of the cases that make up the OECD report, bribes were promised, offered or given to obtain contracts through public procurement (57 percent). But over one-third of the cases involved payments for other reasons. For example, customs created risk in 11 percent of the cases and tax issues created risk in 4 percent. CCOs can use this data to show that public contracting is not the only area of corruption risk.
Cases are taking longer to conclude. The average time (in years) to conclude foreign bribery cases has increased substantially, from 2.0 years in 1999 to 7.3 years in 2013. Time required to hear appeals and increased sophistication of bribery techniques are among the reasons for that increase. The longest time taken to reach a final sentence in a foreign bribery case was 15 years. These time durations have cost and disruption implications for companies. For example, FCPAméricas has discussed why investigations take so long and are so expensive. CCOs can use this data point to emphasize the importance of investing in compliance efforts on the front end, to help avoid lengthy investigations on the back end.
Bribes are being paid to officials from developed countries. Compliance programs should not only be focused on risk in developing countries. The OECD report shows that corruption risk frequently arises in developed countries, too. In fact, the majority of the bribes paid abroad (67 percent) were paid to officials in countries that are considered “medium” to “very high” on the UN Human Development Index (HDI). Forty-three percent of the cases involved officials from countries with “high” to “very high” HDI levels, including the United States and European countries. CCOs can use this data point to stress that employees must be vigilant wherever they operate.
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