Financial Transparency Coalition

The Organisation for Economic Cooperation and Development (OECD) recently evaluated the United States on its effectiveness in implementing the goals and standards outlined by the Anti-Bribery Convention.  The sizeable OECD report overall applauds the U.S. for its current efforts and offers a few areas for improvement.

First, some background.  The U.S. foreign anti-bribery laws are outlined by the Foreign Corrupt Practices Act (FCPA), which Jimmy Carter signed into law on December 19, 1977.  The FCPA makes it unlawful for persons and entities to “make payments to foreign government officials to assist in obtaining or retaining business.”  The legislation also gave both the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) jurisdiction over the FCPA.  Though it remained unique worldwide for almost 20 years, the U.S. began negotiations with the OECD in 1988, seeking agreement from major trading partners to enact legislation similar to the FCPA.  In 1997, almost ten years later, thirty-four countries signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, committing to put in place legislation that criminalizes the act of bribing a public official.

So back to the report card.  The recent OECD report points out many areas where the U.S. is exceeding expectations and a few areas where the U.S. could improve.  Though I won’t go into all the details, here is a rundown of a few important points.

Exceeds Expectations

• The U.S. has substantial enforcement: “The evaluators commend the United States for its substantial enforcement, which has increased steadily…These cases involve various business sectors, and various modes of bribing foreign public officials.”

As the report notes, between 1998 and 2010 the U.S. criminally convicted 50 individuals and 28 companies for foreign bribery.  For obvious reasons, enforcement is a critical component of maintaining a law.  Without the appropriate enforcement of any law—whether that’s speeding in an automobile or bribing a foreign government official—there is no fear of penalization and criminals will have no incentive not to offend.

• The FCPA has commitment from the highest levels of the U.S. Government: “The evaluators were encouraged by the strong degree of commitment across the U.S. Government to raising awareness of the FCPA.”

Any law or rule must have commitment from senior managmenet, or those tasked with carrying it out will not have the proper incentives—either explicit or implicit—to perform their duties effectively.

As one article points out there is a “tone from the top,” with regard to the FCPA, in particular from the U.S. Attorney General office and from the White House as well.  President Obama has expressed several times his commitment to combating foreign corruption and has noted the damaging role corruption plays in development.  For example, in a speech at the University of Nairobi in 2006, then Senator-Obama noted:

Corruption is not a new problem. It’s not just a Kenyan problem, or an African problem. It’s a human problem, and it has existed in some form in almost every society. My own city of Chicago has been the home of some of the most corrupt local politics in American history, from patronage machines to questionable elections. In just the last year, our own U.S. Congress has seen a representative resign after taking bribes, and several others fall under investigation for using their public office for private gain.

Needs Improvement

• Increase transparency, make public information on the use of Non-Prosecution Agreements (NPA) and Deferred Prosecution Agreements (DPA): “The DOJ and the SEC, where appropriate, [should] make public in each case in which a DPA or NPA is used, more detailed reasons on the choice of a particular type of agreement, and the choice of the agreement’s terms and duration; and the basis for imposing monitors.”

The Department of Justice resolves many, indeed most, cases of foreign bribery through NPAs and DPAs.  Under a NPA or DPA, prosecutors will agree not to criminally prosecute a corporation suspected of bribery in exchange for fines, cooperation, monitors and changes in the corporate structure.

Domestically these practices are somewhat contentious.  Charles Intraigo, an expert on money-laundering, noted to the New York Times that seemingly “huge penalties, like the $65 million fine for American Express Bank International in 2007, were ‘peanuts’ compared with the damage posed by a criminal conviction.”

The OECD report does not seem to find fault with the standard practice, noting that “DPAs [and] NPAs…are an innovative method for resolving cases, and has evolved into an important feature of the U.S. criminal justice system, which has helped to enable a high level of enforcement activity.”

I think this report is very encouraging, indeed.  Though improvements can always be made, particularly in the ever-changing landscape of corruption, it seems the U.S. is doing an admiral job in this arena and continues to be the world’s leader on combating foreign corruption.