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Thursday
Oct232014

OECD enforcement grades are in (and still aren't pretty)

For the tenth year in a row, Transparency International (TI) has assessed enforcement of the OECD Anti-Bribery Convention (the Convention) and the results are disheartening.

The Convention is important for curbing foreign bribery because its forty one signatory countries collectively account for approximately two-thirds of world exports. TI’s annual Progress Report, issued today, presents an independent assessment of the status of enforcement of the Convention by 40 of the 41 Parties.

The Progress Report ranks Parties’ enforcement efforts into four enforcement categories  -- active, moderate, limited, and little or no enforcement, based on each country’s enforcement actions from 2010 to 2013. Only four countries rank as “active” enforcers, with the United States topping the list with the highest number of investigations and cases. The other active enforcers are Germany, the U.K, and Switzerland. Five countries rank as moderate enforcers -- Italy, Canada, Australia, Austria, and Finland.

The remaining Parties fall into the categories of limited and little or no enforcement, which means there is no deterrence to foreign bribery in countries which make up 34.6% of the world’s exports.

Across the G20, the results are equally sobering. Four G20 countries (China, India, Indonesia, and Saudi Arabia) are not yet parties to the Convention. Of the other G20 countries, nine are in the little or no enforcement category, despite the fact that the G20 countries have repeatedly, including in their 2013-2014 Anti Corruption Action Plan, recognized that effective enforcement of legislation against foreign bribery is critical to tackling corruption.

The overall level of enforcement remains inadequate and there is little improvement since last year. Only Canada improved its ranking; it significantly amended the Corruption of Foreign Public Officials Act in 2013 and criminally charged a former senior SNC-Lavalin Group Inc. executive who oversaw the company’s bid to supervise the construction of the Padma Bridge in Bangladesh.

TI’s Progress Report, available here, makes recommendations for both Governments and the OECD Working Group on Bribery, including providing adequate funding and support for enforcement, continuing the rigorous OECD monitoring program, and collecting and publishing data on mutual legal assistance requests relating to foreign bribery. In addition, TI recommends that joint civil society and business sector advocacy programs should be conducted in countries with lagging enforcement.

In addition to statistics on enforcement, the Progress Report includes country assessment reports, recent developments in national legal frameworks and enforcement systems, and recommendations for priority actions. 

TI-USA recommended that the U.S. Department of Justice and the U.S. Securities and Exchange Commission provide regular information regarding the number of all investigations commenced, ongoing, and concluded without enforcement action, and their reasons for declinations. Provision of such information on declinations by the enforcement authorities would provide valuable guidance as to what types of preventative and/or remedial behavior may give rise to a declination. In addition, it would be valuable for the U.S. enforcement agencies to provide information regarding the number of referrals provided to and received from other countries.

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Shruti J. Shah is a contributing editor of the FCPA Blog. She's a Senior Policy Director at Transparency International-USA, responsible for the promotion of TI-USA's anti-corruption law and regulation policy agenda. She can be contacted here.

Reader Comments (1)

Hi:

I think the outcome is probably a result of many factors:

l) TI is increasingly aware that the concept of corruption is far more complex than merely the paying of receiving bribes to individuals to obtain or retain business. It is VERY fact specific, and varies by industry/sector, region within a country, societal attitudes, regulatory framework, punishment of wrongdoing, etc.

One has to take a systematic approach to the study of corruption. In many cases, the wolves are guarding the hen house -- the revolving door and the politicization of the judicial/regulatory process is disturbing. The power of economic and/or political elites should not be underestimated. I would recommend the works of Susan Rose-Ackerman, Robert Klitgaard, and Janine Wedel.

2) The global economic situation, as noted by the IMF, does not look favorable. With the exceptions of certain sectors, it often seems as if only the investment banks are earning high profits.

3) Globalization and technological change present a management and regulatory challenge for both the private sectors (who are reluctant to spend money in non-profit generating activities) and public sectors (where governments are notoriously underfunded as a result of the allergy of most individuals to pay taxes. The wealthiest individuals and corporations prevent the change of the system.

At the risk of seeming provincial, I note that giving the IRS a larger budget, is highly cost effective. The IRS has had its share of scandals, but overall has done a good job. I don't understand why its budget has not been increased,

Finally, the rate of technological change has made the management of information very difficult as the volume of data generated is huge and controlling its dissemination is difficult, unless making the need to know requirements overly restrictive or difficult to use.

Furthermore, there is an over-reliance of technology searching for "patterns" of wrongdoing, rather and an undervaluing of intelligence and regulatory analysts.

Regards.
October 23, 2014 | Unregistered CommenterEthan S. Burger
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