Global Investigations Review - The law and practice of international investigations

The European, Middle Eastern and African Investigations Review 2015

Foreword

02 February 2015

The scale of international bribery is mentioned so often that the figures can cease to have the power to shock. The World Bank’s estimate of worldwide bribery is US$1 trillion each year – a number so large it is difficult to grasp. Likewise, the familiar phrases about the effects of corruption: its power to distort markets, damage economic growth and undermine the rule of law. None of us has difficulty in concluding that bribery is bad. But therein lies the dichotomy – if bribery were a phenomenon that took place entirely within the criminal underworld we might feel more comfortable. The unappealing reality, however, is that its roots are often much closer to home. The OECD’s recent Foreign Bribery Report (prepared by Leah Ambler, legal analyst at the OECD and secretary of the IBA Anti-Corruption Committee) shines light on aspects of the problem that have to date been less well explored.

The report analyses international bribery enforcement action by the 41 signatories of the OECD Convention. Even though heavily skewed towards the United States, given its much higher enforcement levels, aspects of it make for uncomfortable and surprising reading, for example:

  • corruption is often known of and indeed approved at a senior level within organisations; in over 40 per cent of cases ‘management’ was involved; and
  • larger companies were involved in 60 per cent of enforcement cases (with only 4 per cent of offenders being identified as SMEs).

In combating corruption, there are very few quick wins – it requires a combination of:

  • effective international anti-corruption laws;
  • enforcement of those laws by properly equipped and properly funded authorities;
  • effective cooperation across borders by those authorities; and
  • effective action by companies:
    • putting in place their own systems and controls; and
    • working together to tackle industry-wide structural problems.

The past year has seen steps forward in all these areas. Enforcement activity in Europe has increased, and a number of high-profile cases are currently being investigated by member state authorities: Rolls Royce, Alstom, GPT, GSK and ENRC (UK); ENI and Municipality of Rome (the ‘Capital Mafia’ case) (Italy); EADS (Germany); and Sarkozy (France) are a few notable examples. In addition, there have been important legislative developments in a number of member states: for example, new anti-corruption legislation was introduced in France in the form of a conflicts of interest law and a law against tax fraud and large-scale economic and financial crime. A new anti-corruption office (the Central Office Against Corruption, Financial and Fiscal Offences) was also established. Italy has seen a reform of the corruption offence, as well as the introduction of new measures aimed at preventing corruption within public bodies and in the context of public procurement. In November 2014, the Spanish prime minister announced a set of anti-corruption law reforms, aimed at improving transparency within the political system following bribery allegations involving members of his party. In addition, a compliance defence, allowing companies to avoid criminal liability for corruption offences where adequate procedures are in place, has been introduced in Spain, with effect from 1 July 2015. A bill introducing a Corporate Penal Code has been presented to the German Federal Council by the Department of Justice of the state of North Rhine-Westphalia, reigniting a contentious debate as to whether corporate criminal liability should be recognised in Germany. At present, a company may be held administratively, but not criminally, liable for offences committed by its representatives.

Given the stagnation of developed economies, multinationals have increased their participation in emerging markets. Alongside the prospects they offer, these markets often carry a high corruption risk, and business opportunities frequently lie within vulnerable sectors, such as construction, mining and energy. Public rejection of corruption is rising, manifesting in calls for increased transparency in a number of jurisdictions, such as Turkey, Israel, Brazil, China and India. Newly empowered national anti-corruption authorities, keen to take visible action in response, may subject foreign companies to a level of scrutiny above and beyond that which is applied to local market players.

It should also be borne in mind that enforcement action may not necessarily be driven by a national authority. Multilateral development banks (MDBs) have become major players in the international anti-corruption landscape, given their keen interest in ensuring that corporate or individual misconduct does not lead to the misdirection of the financing they provide. MDBs have their own powers of enforcement, and can impose periods of debarment from participating in development bank financed projects against both companies and individuals. Enforcement action by the World Bank in particular is increasing, with its approach to sanctioning misconduct ever more sophisticated. With five African countries within the top 10 recipients of World Bank funding in 2014 (Nigeria, Ethiopia, Uganda, Tanzania and Kenya), it is more important than ever that businesses that are invested in these markets keep a careful eye on this developing enforcement trend, and factor it into their existing compliance efforts.

It is all too easy to conclude that bribery is too big a problem, too complex and too ingrained, or that the responses to it are destined to fail. Yet progress is clearly being made – the number of international anti-corruption laws is increasing; there are new anti-corruption bodies and increasing cooperation between those bodies; there is increasing enforcement by a wider range of authorities and anti-corruption compliance is now right at the top of the risk agenda of most large companies operating in international markets.

At the heart of it all lies the importance of effective investigation. The scale and complexity of corruption mean that identifying and investigating it poses significant challenges both for enforcement authorities and for companies seeking to identify wrongdoing by employees or by entities with whom they work. In this GIR special report, those challenges are considered.

Previous Chapter:United Kingdom: new powers for the UK white-collar fantastic four

Next Chapter:Cross-border overview: data privacy and transfer