Despite vigorous efforts by regulators in the United States and Europe to punish bribery, it still plagues many parts of the world
By Joseph McCafferty
11 February 2017
Together, the agencies concluded 26 enforcement actions against companies and individuals—including three cases where regulators declined to prosecute but enforced strict reforms—through the first half of 2016, according to the FCPA Blog, which tracks such cases. That's more than the 20 enforcement actions the DoJ and SEC jointly concluded in all of 2015, including nine declinations. And most experts expect the second half to be just as active in terms of corruption enforcement.
The list of offenders in recent months includes such high-profile companies as Las Vegas Sands, Goodyear, BHP Billiton, Novartis, SAP, Qualcomm, and so many others. Cases against Walmart and international soccer's governing body, FIFA, are still playing out. A series of corruption scandals even ousted Brazil's first female president, Dilma Rousseff, who was impeached in August.
While the United States is at the center of the push to prosecute bribery and corruption around the world, it is, of course, not the only country taking action. An anti-corruption campaign that began in China in 2013 has reportedly resulted in the arrest of thousands of government officials so far and has been severe enough that it has resulted in the declining performance of premium products, such as Swiss watches, jewelry, and premium wines and spirits. In the United Kingdom, enforcement of the 2010 U.K. Bribery Act is starting to pick up after a slow start. Last year, Britain opened the International Corruption Unit to assist the Serious Fraud Office in bringing Bribery Act cases.
Despite the emphasis on enforcement by a growing group of nations around the world, there doesn't appear to be a material decline in the level of bribery and corruption around the world and in many countries a culture of corruption still persists at government entities and private companies alike. In fact, compliance officers and risk managers are preparing for the increased threat of corruption problems this year. According to the 2016 annual Kroll Anti-Bribery and Corruption Report, 40 percent of those surveyed say their bribery and corruption risks will increase this year and 52 percent expect them to stay the same. Only 8 percent are preparing for a decline.
In the following sections, we'll look at the bribery and corruption risks and developments in a few regions of the world where it is the highest.
If you want to know how the fight against corruption is going in Africa, consider this: Kenya's Ethics and Anti-Corruption Commission chairman, Philip Kinisu, resigned in August after allegations surfaced that his family business was involved in improper dealings with a government ministry, and he became the subject of an investigation into his role in the potential graft. A poll conducted last year found that 58 percent of the 43,143 respondents in 28 African countries say corruption has increased in the prior 12 months.
According to the latest iteration of the Corruption Perceptions Index, a country-by-country ranking of the perceived level of corruption conducted by global corruption watchdog Transparency International, Africa was home to six of the bottom 10 performers. Those countries include Guinea-Bissau (158 of 168), Libya (161 of 168), Angola and South Sudan (tied at 163 of 168), Sudan (165 of 168), and Somalia, which ranks dead last at 168. "Corruption creates and increases poverty and exclusion. While corrupt individuals with political power enjoy a lavish life, millions of Africans are deprived of their basic needs like food, health, education, housing, access to clean water, and sanitation," said Transparency International chairman, José Ugaz.
That's not to say that there are not those who are working to fight corruption in Africa. During the Audit, Risk, and Governance Africa conference held in August in Ghana, auditors and risk managers voiced frustration over the level of corruption that plagues the continent and shared strategies to combat it. "I have seen a number of instances in many countries where oversight institutions are created and then immediately undermined," said Ludovick Utouh, former controller and auditor general at WAJIBU – Institute of Public Accountability in Tanzania. "They are a showcase only." According to Utouh, auditors at public entities need to do more to bring audit findings, especially those that detail instances of corruption and wrongdoing, directly to the people to put more pressure on governments to reform. "We need to transform the way audit findings are reported," he said. "They end up being stuffed in boxes and nothing is done."
That transformation has been slow in coming. "From Ebola to terrorism, we've seen corruption exacerbate crises during 2015 in Sub-Saharan Africa," says Chantal Uwimana, Director for Sub-Saharan Africa at Transparency International. "Forty out of the region's forty-six countries show a serious corruption problem and there's no improvement for continent powerhouses Nigeria and South Africa. If corruption and impunity are to 'be a thing of the past' as the African Union stated, governments need to take bold steps to ensure rule of law is the reality for everyone."
Among large, industrialize nations, none have a poorer record on corruption than Russia. It has languished toward the back of Transparency International's ranking since the corruption index was devised in 1995. Earlier this year, a New York Times headline declared, "Why Putin Tolerates Corruption." The article went on to explain that the Russian president has little interest in reforming a culture of corruption in the world's 14th largest economy.
Transparency International ranked Russia 119 of 168 countries in 2015 with a score of 29 on a scale of 100, up slightly from its score of 27 in 2014. A survey of Russian citizens completed in 2014 by the Levada Center in Moscow, a non-governmental research agency, noted reasons for its history of corruption: it found that over a third of Russians believe it would be impossible to eradicate corruption. "More than a third (38 percent) think that the Russian authorities will continue their crackdown on corruption but will have little success because 'corruption is indestructible,'" the report reads.
Part of the problem of fighting corruption in Russia is that it has become engrained in the fabric of society there, say observers. "Corruption in Russia has become institutionalized and is invisible to most, but it weighs on the price of almost everything, from apples to subway tickets to medical care," wrote Associated Press reporter, Nataliya Vasilyeva, earlier this year.
CHINA AND EAST ASIA
A coordinated crackdown on corruption of government officials initiated by President Xi Jinping in 2013 has so far not shown much progress. Transparency International rated China 83 out of 168 countries last year, nearly unchanged from its 2012 ranking of 80 out of 174. The effort has, however, done much to change the perception of the world's second largest economy from that of not enforcing the corruption laws on its books to that of a country that is joining with other economic powers to fight corruption. As the Transparency International rankings show, reform will not come quickly to China, but it appears to be heading in the right direction. (For more on the corruption environment in China, see "Global Anti-Corruption Programs, the FCPA and China's Anti-Corruption Drive.")
Among other large countries in Far East, there is a mixed record on corruption. Japan, for example, has a good record, ranking 18th on TI's index. Meanwhile, the region is home to several laggards in anti-corruption efforts, including Cambodia (150 of 167), Myanmar (147 of 167), and the regions worst performer, North Korea, which checks in at 167 of 167, tying Somalia for last. While not a lot is known about the mostly shuttered nation, its reputation as a cauldron for bribery and corruption is well established. "Gift politics have greased the wheels of industry since the country's foundation," wrote Jonathan Corrado in The Diplomat, a publication that specializes in Asia-Pacific politics and government. "On face value, corruption might be considered a purely negative force. And it's true that corruption remains pervasive in North Korea. Indeed, it seems to be growing in scale, frequency, and distribution."
Another region with a spotty record on reining in bribery and corruption is South America. Like the Far East, there are leaders and poor performers across the continent. Chili, for example, does well, ranking 23 out of 168, tied with France. Meanwhile, its neighbor to the east, Argentina, ranks 107.
Brazil, which has centered itself on the world stage with its hosting of the Olympics this summer and the World Cup international soccer tournament in 2014, has garnered the most attention on the corruption front. Including the scandal that outed its president in August, mentioned earlier, corruption and bribery have been constant sources of pain and public attention in the continent's biggest economic power.
"We've witnessed two remarkable trends in the Americas in 2015: the uncovering of grand corruption networks and the mass mobilization of citizens against corruption," says Alejandro Salas, Transparency International Director for the Americas. "The Petrobras and La Línea scandals are testament to these trends in the two biggest regional decliners: Brazil and Guatemala. The challenge now is to tackle the underlying causes and reduce impunity for corruption."
Don't expect much progress in these regions anytime soon. But as Western economies continue to pursue companies listed on their exchanges for bribery and corruption in any part of the world, we may see some progress down the line. Global companies like Siemens and Halliburton have found out the hard way that they have too much at stake not to crack down more on bribery and increase their anti-corruption and compliance practices.
"The most recent Corruption Perceptions Index clearly shows that corruption remains a blight around the world," says TI chairman Ugaz. "But 2015 was also a year when people again took to the streets to protest corruption. People across the globe sent a strong signal to those in power: it is time to tackle grand corruption."