Scale of International Bribery Laid Bare
Most international bribes are paid by large companies, usually with the knowledge of senior management, according to new OECD analysis of the cost of foreign bribery and corruption.
Bribes in the analyzed cases equaled 10.9 percent of the total transaction value on average, and 34.5% of the profits – equal to USD 13.8 million per bribe. But given the complexity and concealed nature of corrupt transactions, this is without doubt the mere tip of the iceberg, says the OECD.
Bribes are generally paid to win contracts from state-owned or controlled companies in advanced economies, rather than in the developing world, and most bribe payers and takers are from wealthy countries.
The OECD Foreign Bribery Report analyses more than 400 cases worldwide involving companies or individuals from the 41 signatory countries to the OECD Anti-Bribery Convention who were involved in bribing foreign public officials. The cases took place between February 1999, when the Convention came into force, and June 2014.
Almost two-thirds of cases occurred in just four sectors: extractive (19 percent); construction (15 percent); transportation and storage (15 percent); and information and communication (10 percent).
Bribes were promised, offered or given most frequently to employees of state-owned enterprises (27 percent), followed by customs officials (11 percent), health officials (7 percent) and defence officials (6 percent). Maritime officials made up 2 percent of the total. Heads of state and ministers were bribed in 5 percent of cases but received 11 percent of total bribes.
In most cases, bribes were paid to obtain public procurement contracts (57 percent), followed by clearance of customs procedures (12 percent). 6 percent of bribes were to gain preferential tax treatment.
“Corruption undermines growth and development. The corrupt must be brought to justice,” said OECD Secretary-General Angel Gurría. “The prevention of business crime should be at the centre of corporate governance. At the same time, public procurement needs to become synonymous with integrity, transparency and accountability.”
The report also reveals that the time needed to conclude cases has increased over time, from around two years on average for cases concluded in 1999 to just over seven today. This may reflect the increasing sophistication of bribers, the complexity for law enforcement agencies to investigate cases in several countries or that companies and individuals are less willing to settle than in the past.
In 41percent of cases management-level employees paid or authorized the bribe, whereas the company CEO was involved in 12 percent of cases.
Intermediaries were involved in three out of four foreign bribery cases. These intermediaries were agents, such as local sales and marketing agents, distributors and brokers, in 41 percent of cases. Another 35 percent of intermediaries were corporate vehicles, such as subsidiary companies, companies located in offshore financial centers or tax havens, or companies established under the beneficial ownership of the public official who received the bribes.
Governments around the world should strengthen sanctions, make settlements public and reinforce protection of whistleblowers as part of greater efforts to tackle bribery and corruption, says the OECD. The overwhelming use of intermediaries also demonstrates the need for more effective due diligence and oversight of corporate compliance programs, and for company executives to lead by example in fighting foreign bribery.
The full report is available here.