Financial Transparency Coalition

Denmark, Italy and United Kingdom Advance Toward Active Enforcement; 20 of 36 Signatories Doing Little to Nothing to Enforce Ban on Foreign Bribery

Transparency International released its 2010 report on enforcement of the OECD Anti-Bribery Convention yesterday.

A number of countries were applauded for their efforts to enforce a ban on foreign bribery in a report released yesterday by Transparency International (TI). Yet many countries are still not doing enough, if anything at all. The report looks at how well the 32 OECD member countries and non-members are complying with the OECD Anti-Bribery Convention, which establishes legally binding standards and measures to deter foreign bribery of officials through international business transactions.

The report classifies countries into three categories: active, moderate and little to no enforcement. Placement is based on the number and importance of criminal prosecutions, civil actions and judicial investigations that have been carried out by each country.

Seven countries, which represent about 30 percent of world exports, are reported as having substantially deterred foreign bribery. Denmark, Germany, Italy, Norway, Switzerland, the United Kingdom and the United States make up this group, which increased by three countries from the previous year.

Nine countries are considered moderate enforcers and represent about 21 percent of world exports. This group, which includes G8 members France and Japan, is doing some, but still not enough, to deter foreign bribes from taking place.

However, the main concern is that 20 countries are still classified as having little to no enforcement. This is the largest of the three groups. The report found this to be the “most disappointing finding,” especially with G8 member Canada falling into this cluster. These countries, which represent 15 percent of world exports, have shown little progress over the past five years, threatening the Convention’s future.

“This is deeply disturbing because companies in these countries will feel little or no constraint about foreign bribery, and many are not even aware of the OECD Convention,” the report states. “Governments in these countries have failed to meet the Convention’s commitment for collective action against foreign bribery.”

Like similar agreements, the Anti-Bribery Convention’s effectiveness heavily depends on the ability of all parties to pull their weight. The efforts of the seven countries who are successfully curtailing foreign bribery (or at least more so than the others) can only accomplish so much if bribery can still go on unhampered in more than 20 countries. The current economic situation is not helping either. “The risk of backsliding is particularly acute during a time of recession, when competition for limited orders is intense,” reports TI.

The progress report came to a rather bleak conclusion. The lackluster progress by most members is putting the success of the entire Convention in jeopardy. Only 7 of the 38 parties are actively enforcing deterrent measures, which is far from the goals set forth by the Convention. The current situation is “unstable,” and the Convention risks losing the momentum it does have “unless enforcement is sharply increased.”

TI identified political will, or lack thereof, as the primary factor threatening the Convention’s continued success. Practices that cause this, such as failure to provide funding or political obstruction of investigations, must be “forcefully confronted,” and soon.

Some in the NGO community feel the convention is only one  part of the solution to curtailing corruption in the international arena.  Raymond Baker, director of Global Financial Integrity, a Washington, DC-based research and advocacy group promoting financial transparency, said “for too long, the international community has ham-strung itself in the battle against corruption – adopting the single-pronged approach of prosecution as deterrent. If the OECD and world leaders want to get serious about addressing this issue, they’ll adopt transparency measures intended to prevent corruption before it ever happens.”  Baker and his allies are pressuring the G20 Working Group on Corruption to highlight prevention in addition to prosecution in the lead-up to November’s G20 Summit in Seoul.

TI’s report put forth a series of recommendations for continuing improvement. These include:

• Specialized staffs should handle foreign bribery cases. Investigating and prosecuting these cases are hard and time-consuming, so it is unrealistic to place the burden on local prosecutors.
• All major exporters, such as China, India and Russia, need to be heavily encouraged by the Secretary-General and the Ministerial Council.
• Efforts to raise public awareness about foreign bribery should focus on those countries categorized as having little to no enforcement. Industry sectors, such as defense procurement and extractive industries, which are overrun with corruption also, need to be targeted.

Despite signs of improvement in some of the world’s largest economies, there is a considerable imbalance in effective enforcement of the Anti-Bribery Convention. Those countries that are lagging behind with complying to the Convention must be pressured to do better. A strong stance needs to be taken against foreign bribery, and the collapse of the Convention would not be sending that message.