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5 key trends in global anti-bribery enforcement
This piece was originally published in TRACE Trends, a version of which was originally published by Alexandra Wrage in The Compliance & Ethics Blog . It seems the headlines this year have been dominated by one corruption scandal after another, and the resulting enforcement actions. The Global Enforcement Report the “GER” , published annually by TRACE, summarises worldwide trends in anti-bribery enforcement. The information is based primarily on investigations and cases tracked in the TRACE Compendium, an online database of cross-border anti-bribery cases. Below are five key trends reflected in the GER that have practical implications for compliance professionals. 1\. Enforcement of anti-bribery laws remains a priority across the globe, not just in the U.S --------------------------------------------------------------------------------------------- Companies face the risk of prosecution from U.S. and non-U.S. authorities for violation of anti-bribery laws. While the U.S. leads the world in total number of investigations and enforcement actions, more and more countries are beginning to take action against companies and individuals who have bribed foreign officials. Non-U.S. enforcement actions have more than doubled in the past few years. In fact, in 2014 the number of non-U.S. enforcement actions 15 surpassed the number of U.S. enforcement actions 13 . 2\. An increasing number of countries are focusing on bribery of their own government officials ----------------------------------------------------------------------------------------------- Companies also face the risk of prosecution for violating local anti-bribery laws. Almost twice as many countries are investigating bribery of their own officials compared to bribery of foreign officials. This may be an upward trend. Countries have brought a number of enforcement actions in the past for bribery of domestic officials; however, according to the GER, there were twice as many ongoing investigations as of December 31, 2014 than those past enforcement actions. Even if only a portion of these investigations results in enforcement actions, the next few years could far exceed the prior rate. 3\. U.S. regulators continue to have non-U.S. companies in their sights ----------------------------------------------------------------------- Companies headquartered outside of the U.S. should not overlook their risk of prosecution under the FCPA. As of December 31, 2014, approximately 40% of investigations by U.S. authorities involved non-U.S. companies, and of those the majority were European. Non-U.S. companies account for almost all of the top 10 largest FCPA enforcement actions, with only two U.S. companies making the list France now has three companies in the top 10, with the addition of Alstom’s $772 million settlement in 2014 . 4\. Anti-bribery enforcement actions are highest in China, Iraq, Nigeria, India, Russia, Brazil and Indonesia ------------------------------------------------------------------------------------------------------------- Virtually every country in the world has been impacted by bribery. But operating or doing business in certain countries comes with an increased risk of prosecution for bribery. China, Iraq, Nigeria, India, Russia, Brazil, and Indonesia have seen the highest level of enforcement activity. China took the top spot with Chinese officials having allegedly received bribes in 90 separate enforcement actions. This type of information from the GER and tools like the TRACE Matrix can help companies more accurately assess risk when thinking of expanding business to a foreign country. 5\. The extractive industries continue to have the highest number of anti-bribery enforcement actions worldwide --------------------------------------------------------------------------------------------------------------- The extractive industries remain the focus of enforcement activity throughout the world followed by engineering, manufacturing, and aerospace and defense industries . In addition to the extractive industries, the U.S. has seen a higher number of investigations in the technology, financial services, and entertainment and film industries. The trends identified in the GER highlight the challenges facing companies in the current enforcement environment, but also provide compliance professionals an opportunity to strengthen compliance programs. With this information, companies can tailor their compliance programs and avoid becoming another enforcement statistic.
Singapore bribery case reveals corruption risks in shipping industry
This piece was originally published by the TRACE International Blog on 8 May 2015. Republished here with permission. Last week’s ed: 28 April 2015 decision by the Chief Justice of Singapore’s Supreme Court entitled Public Prosecutor v Syed Mostofa Romel is important for shipping companies operating in Singapore. The decision regards bribery charges against a local vessel surveyor who on three occasions solicited bribes from ship masters for issuing favorable inspection reports that would allow the ships to enter an oil terminal. Chief Justice Sundaresh Menon disagreed with a district judge that had sentenced the respondent, Syed Mostofa Romel, to a two-month imprisonment and instead argued that given the circumstances the jail time should be extended to at least six months per charge, at least 12 months . Chief Justice Menon’s explanation may be used in future maritime-related bribery cases in Singapore. Singapore’s 1960 Prevention of Corruption Act PCA applies to both the supply and demand side of a bribery transaction including agents, and is punishable by a fine of up to SGD$100,000 or imprisonment up to five years, or both. The PCA does not contain any exceptions for “customary” payments, including facilitation payments. Any person who is suspected of bribery can be arrested and searched without a warrant by the Corrupt Practices Investigation Bureau CPIB . The CPIB can also investigate any bank account or safe deposit box belonging to a suspect of a bribery offence. Given the growing international cooperation in bribery investigations, it is plausible to assume that non-Singapore citizens or residents could be implicated in national investigations with the information being subsequently shared with other national authorities. The decision contains three main takeaway lessons for those operating in the shipping industry. First, punishment for private sector bribery is just as harsh as that for public sector bribery. Chief Justice Menon argues against the presumption of predominantly non-jail sentences in cases of private sector corruption and refers to the PCA’s enforcement practice, according to which the public interest and the gravity of the offence, among other considerations, determine the sentencing decisions. Chief Justice Menon points out that even though the PCA largely focuses on private sector bribery, it also applies to bribery by “private agents, trustees and others in a fiduciary capacity.” In this particular case the vessel surveyor was a private sector agent without any regulatory and oversight functions that could justify the application of a “public service rationale.” Regardless of whether bribery is related to a private or public sector, the severity of the offence due to its potential threat to safety of people and facilities should justify a longer prison term for the offender, argues the chief justice. Second, bribery in port can cause severe safety risks. In the case at hand, the vessel surveyor was supposed to have ensured that the vessels had no high-risk defects before entering the oil terminal. If such defects were identified during the inspection, the vessels would have undergone rectifications before being permitted to enter the terminal. On two occasions, the surveyor exaggerated his findings by indicating some non-existing high-risk defects to elicit bribes–US$3,000 in each incident–from the ship masters in exchange for the accurate inspection reports he should have produced. On a third occasion, which was in reality a sting operation organized by the CPIB, the surveyor attempted to elicit a bribe from a ship master in exchange for a report that would not mention the high-risk defects that the inspection identified. Those defects were intentionally created for the purposes of the sting operation. Chief Justice Menon argues that a bribery incident that allows a vessel with high-risk defects to enter an oil terminal poses a grave threat to both people working in the terminal and the terminal itself, and therefore should be regarded as an aggravating factor in considering the type and degree of punishment. Third, acquiescence to extortion demands are also considered bribes. Even though there is no information available as to whether either or both ship masters were accused of bribery, the main international anti-bribery laws prohibit giving a bribe, unless there is imminent threat of physical harm. In this particular case, it appears that no threat of death or serious bodily injury was present, and therefore both ship masters could safely walk away without making a payment. As the U.S. Congress noted when it enacted the 1977 U.S. Foreign Corrupt Practices Act, the fact that the payment was “first proposed by the recipient… does not alter the corrupt purpose of the part of the person paying the bribe.” Finally, bribery in the maritime industry as a whole—not just in ports – may be regarded as an aggravating factor in sentencing considerations. Chief Justice Menon maintains in his opinion that the maritime industry is a strategic industry in Singapore that accounts for up to 7% of GDP and provides employment to 170,000 people. Since the ramifications of increased corruption perceptions in Singapore’s shipping industry could have significant detrimental effect on the nation’s economy, one can expect that any bribery incidents involving shipping will be strictly punished, including through longer prison terms for offenders. This Singapore bribery case, along with other recent legislative, enforcement, and collective action initiatives in the shipping industry worldwide, strongly suggests that anti-bribery compliance is gaining ground. The most challenging perhaps would be to change long-established attitudes towards bribery in the industry that “things are just done that way.” No longer.