June 25 was the International Day of the Seafarer. The International Maritime Organization introduced this holiday five years ago to thank seafarers “for their contribution to the world economy and the civil society, and for the risks and personal costs they bear while on their jobs.”
Risks in the maritime industry are usually associated with security vulnerabilities and environmental hazards. This post will examine another kind of risk that can be equally problematic, and even life-threatening -- bribery.
Surprisingly, bribery in shipping rarely makes headlines despite its pervasiveness and frequency. The routine nature of bribing in many ports worldwide seems to have desensitized many in the industry to its illegal nature. Bribing is seen by some as “part of doing business” and the allegedly small amounts of inappropriate payments -- a pack of cigarettes here, a handful of dollars there -- make the practice seem more acceptable.
While these small payments may appear harmless to some, they can quickly add up. In the case of the global logistics company Panalpina, such small payments amounted to “thousands of bribes” and at least $27 million over five years, ranging from $5,000 to $75,000 per transaction.
Given that 90% of world trade is transported by the maritime industry there will not be many supply chains that are not impacted -- directly or through their third parties by the activities that occur on a regular basis in ports.
Addressing bribery in shipping requires a combination of standard best practices and industry specific measures. First, both industry players and the compliance community must begin to openly discuss the problem of bribery in ports, at customs and other junctures where corrupt exchanges usually take place and work collectively with external stakeholders to help establish sustainable solutions.
A recent maritime initiative called the Maritime Anti-Corruption Network (MACN), which has already attracted more than sixty members, is an example of such efforts.
Second, investors and financial institutions can play an important role in encouraging clean business practices in the industry by supporting those committed to transparency and anti-bribery compliance. With increased global anti-bribery enforcement and a growing awareness of the social, economic and environmental effects of bribery, investors may seek ways to reward compliance.
Third, shipping companies should proactively take steps to tackle bribery in their operations. They can do this by following compliance program guidelines offered by the U.S. Department of Justice (DOJ), UK Ministry of Justice, and other enforcement authorities.
Finally, shipowners, charterers, ship managers and port agents should consider completing a compliance certification or due diligence review. TRACEcertification, an internationally accepted compliance credential, offers port agents and shipping entities an opportunity to keep compliance costs low while meeting a high international standard and gaining a competitive advantage. The certification produces a due diligence report which is owned by the shipping entity and can be shared with an unlimited number of global partners.
With leading maritime jurisdictions, such as Singapore, India, China, Brazil and the Philippines, increasing their enforcement efforts, as well as more rigorous due diligence requirements, the space for continuing maritime business “as usual” is rapidly narrowing.
Jake Storey is the vice chairman of the Maritime Anti-Corruption Network (MACN), a leading industry anti-corruption collective action organization. MACN is comprised of vessel owning companies within the main sectors of the maritime industry and other companies in the maritime industry including cargo owners and service providers. He can be contacted here.