The Organisation for Economic Co-operation and Development (OECD) has recently released its Business and Finance Outlook 2016. Chapter seven – 'Is foreign bribery an attractive investment in some countries?' – discusses the findings of bribery 'simulations' run to investigate "the patchwork of incentives and disincentives for foreign bribery" and the effectives of anti-bribery penalties and enforcement on companies operating globally. The results offer a useful tool for international organisations.
The OECD is an intergovernmental economic organisation of 35 countries designed to stimulate economic progress and world trade by conducting research and promoting policies to improve economic and social well-being globally. Chapter seven of its Business and Finance Outlook – 'Is foreign bribery an attractive investment in some countries?' – includes the results of simulations run based on sanctions data produced by the OECD Working Group on Bribery for the 41 Parties to the Anti-Bribery Convention, and on the cash flows associated with a real world bribery scenario.
The findings show that in jurisdictions with weak sanctions and ineffective enforcement capability for bribery offences – particularly those with low fines for bribery – a company may still be "willing to invest in a foreign bribery scheme even if it knew in advance that it would be caught and fined". The report concludes that in many jurisdictions fines for bribery offences are too low.
The OECD Anti-Bribery Convention was signed in 1997 and entered into force in 1999. Since then several official recommendations for new measures to reinforce it have been adopted.
The Convention establishes legally binding standards to criminalise bribery of foreign public officials in international business transactions and has been signed by the 34 OECD member countries and seven non-member countries including Argentina, Brazil, Bulgaria, Colombia, Latvia, Russia, and South Africa.
The Business and Finance Outlook 2016 simulations found that the existing maximum fines for bribery offences for 23 of the 41 Parties to the Anti-Bribery Convention were set so low they would not deter foreign companies 'investing' in bribery schemes in the country.
The results describe a clear disparity in the effectiveness of sanctions regimes across the Convention; fines are significant in some jurisdictions and minimal in many others. Many of the countries with high monetary penalties do not have effective enforcement thus reducing effectiveness.
The simulations also demonstrate the effectiveness of confiscation systems – where an authority such as a court has the power to deprive offenders of property – on the fragmentation of incentives and disincentives, and consequential effectiveness of regulator enforcement. 23 countries showed a positive return on investment when the bribery scheme simulation was run based on fines alone, but when confiscation was also present just six countries showed a positive return on investment. This suggests regulators will be more effective at tackling financial crime globally if they are given additional powers to enforce legislation beyond standalone fines.
While the report suggests that high incentive environments mean companies will be "willing" to commit bribery, companies operating in these locations have more to consider than low financial penalties and enforcement of local legislation.
While the results of the OECD simulation suggest that opportunities for bribery 'investment' may encourage companies to turn a blind eye to local legislation, international organisations that conduct any part of their operations in the United States or UK will also be subject to anti-corruption legislation that applies to actions carried out abroad. Several companies that have been convicted under the US Foreign and Corrupt Practices Act (FCPA) and the UK Bribery Act have been issued with significant fines for corrupt behaviour abroad.
In February 2016 UK-based construction company Sweett Group was fined £2.25 million for failing to prevent an act of bribery in the United Arab Emirates under the UK Bribery Act, while in 2014 French company Alstom was fined $772 million for bribery offences in Egypt and Saudi Arabia under the US FCPA.
These convictions demonstrate that, while bribery may be seen as a necessary part of business in countries where fines and enforcement are low, governments and regulators elsewhere are increasing prevention and punishment for offences carried out abroad.
Chapter seven of the OECD Business and Finance Outlook report is an objective description of the fragmented nature of anti-bribery enforcement around the world, but organisations can use the results to inform risk-based compliance efforts. Using results of reports like these, and other tools including the Transparency International Corruptions Perceptions Index, organisations can ensure due diligence and compliance resources are applied to areas of the business operating in the most high risk areas.