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Tuesday
Jul172018

Compliance Alert: OECD confirms Germany as leading enforcer

John Bray of Control RisksIn Control Risks’ experience, many Germany companies operating internationally still underestimate the reach of their own country’s anti-corruption laws. A new report published by the OECD shows why this could be a dangerous mistake.

The OECD’s  Phase 4 Report on Germany was published in June, and is the latest in a series of "peer reviews" published by the OECD Working Group on Bribery whose task is to monitor and promote the implementation of the 1997 Anti-Bribery Convention. It presents an authoritative assessment of German enforcement, drawing on consultations with German government officials, as well as representatives of business and civil society during an OECD site visit in January 2018.

The Working Group points to both good practice and areas for improvement. Overall, though, it confirms Germany’s status as a leading enforcer. Since the Convention came into force in 1999, there have been a total of 67 cases that have resulted in sanctions against 328 individuals, and 18 cases resulting in legal persons being held liable. These figures place Germany behind the United States but well ahead of the UK and other European states.

Moreover, the pace of foreign bribery investigations has quickened since the OECD’s Phase 3 Report on Germany in 2011. Between 2011 and December 2017 the German authorities initiated investigations into a total of 121 foreign bribery cases. So far, 47 cases have resulted in sanctions against individuals and/or legal persons, and formal charged are pending in three cases against 13 individuals. Meanwhile, 42 cases have been terminated, and others are still under investigation.

The OECD points to several examples of good practice. For example, it commends Germany for its “pragmatic approach” in using a variety of legal instruments to combat foreign bribery. In the 257 cases leading to sanctions against individuals since 2011, only 73 people were sanctioned specifically for the legal offense of foreign bribery. By contrast, 110 were sanctioned for commercial bribery, 23 for breach of trust, six for the administrative offence of violation of supervisory duties and two for tax offences.

Germany is also unusual in the relatively large proportion of cases that came to light as result of reports from the tax authorities. The German authorities provided information on how bribery was detected in 95 cases. In more than a quarter of these cases (27), reports from the tax administration were the initial trigger to the investigation. “Anonymous reports” and “foreign sources” accounted for 16 cases each. Only 13 cases were triggered by self-reporting by companies, and only two came as a result of reports from internal whistleblowers.

While Germany’s overall enforcement record is comparatively strong, the OECD Working Group points to several areas for improvement.

First, there is a disparity between the relatively large number of cases involving individuals, and the much smaller number of cases where companies have been sanctioned. The Working Group suggests that Germany could do more to take account of existing “possibilities available in its law to trigger corporate liability”, as well as considering further legal reforms. At present corporate liability for foreign bribery is covered under Section 30 of the Administrative Offenses Act (Gesetz über Ordungswidrigkeiten).

The Germany chapter of Transparency International, the anti-corruption NGO, has called for new legislation to impose liability of legal persons under the Criminal Code. Such legislation has been considered at the federal and regional levels, but has not yet been put into effect.

Second, the OECD highlights the lack of a comprehensive framework for whistleblower protection. At present the protection of a whistleblower is subject to a court decision, and the criteria that will guide this decision are not clearly defined. As the OECD points out, a whistleblower case will come to court only after the person concerned has been penalized, for example through an unfair dismissal. Such uncertainties no doubt account for the low number of cases that come to light as a result of whistleblower reports.

A third concern relates to uneven patterns of enforcement between different Länder (states) in Germany’s federal system. Prosecutors in Bavaria have been the most active in pursuing foreign corruption cases, followed by Hesse, Baden-Württemberg and Hamburg. By contrast there have been relatively few cases in Bremen and North Rhine-Westphalia where many companies with international operations have their headquarters.

Finally, the OECD report notes that Germany’s efforts demonstrate its level of enforcement are “hampered by the lack of modern data collection tools.” Tight data protection laws mean that much of the publicly available information on corruption cases is anonymized, even when these have led to convictions. Moreover, the Länder vary in their practices for collecting and publishing information on corruption cases. Accurate, widely available information is essential if Germany is to enhance public confidence in its anti-corruption strategy. This applies particularly to cases that have been decided through administrative resolutions.

While there is clearly room for improvement, the overall message is clear. German prosecutors have an established record for pursuing corruption cases. The pace of enforcement is more likely to increase than to decrease.

German companies need to prepare their employees for the ethical challenges that they will encounter, especially in high-risk regions, as well as developing problem-solving strategies for both routine hazards and emergencies. German prosecutors have established a notable enforcement record: German companies need to demonstrate equal dedication in compliance.

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John Bray, pictured above, is a Director at the Singapore office of Control Risks, the international business risk consultancy. His particular areas of expertise include: anti-corruption strategies for the private sector, business and human rights, and private sector policy issues in conflict-affected areas. He has longstanding professional and personal connections with Germany, and continues to scan wide geographical horizons. 

Reader Comments (1)

I had the honor to serve in my capacity as Chief Compliance Officer of Siemens as a representative of the private sector during the OECD Monitorship and we had very good discussions with the Monitoring team and the German government.I am therefore quite surprised about the last comment of the author („German companies need to demonstrate equal deducation in Compliance“). If you read the Monitoring report you will note the clear statement by the OECD Monitoring team as follows „The lead examiners positively note the efforts of German companies to instil a culture of compliance in their organisations, and the autonomous initiatives undertaken by companies and business organisations. Awareness of foreign bribery risks is high, in part due to past efforts by government, business organisations and companies.“
July 17, 2018 | Unregistered CommenterKlaus Moosmayer
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