, Transparency International
‘All power tends to corrupt, and absolute power corrupts absolutely.’ – Lord Acton
Corruption is commonly defined as ‘the abuse of entrusted power for private gain’ and usually falls into three main categories: grand corruption, petty corruption and political corruption (source: Transparency International).
Grand corruption consists of acts committed at a high level of government that distort policies or the central functioning of the state, enabling leaders to benefit at the expense of the public good.
Petty corruption refers to everyday abuse of entrusted power by low and mid-level public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies.
Political corruption is a manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth.
Scales of corruption
Corruption happens in everyday life. Let’s look at a simple example – you’re caught speeding by a policeman, who talks to you about the punishment you will have to face for committing the offence – monetary fine, penalty points on your licence, maybe even a driving ban if the offence was serious enough. The policeman offers you another option – give him ‘a small payment’ in cash and he’ll rip up the ticket. You take this option, pay the money and get on your way. The policeman has his money and you’ve avoided a potential driving ban. This sort of thing happens in some countries all the time; it’s practically accepted as part of everyday life. Just because it’s accepted though, does not make it right. It’s wrong, and in many ways it’s the worst type of corruption because it impacts on millions of innocent people every single day.
Let’s look at another example showing the devastating impact of corruption. I read an article recently comparing the earthquakes that took place in Haiti and Chile in 2010, which served to illustrate the wider consequences of a corrupt regime. The Haiti earthquake was measured at a magnitude of 7.0 on the Moment Magnitude Scale (MMS), and an estimated 200,000 people lost their lives. The Chile earthquake was 500 times stronger, measuring a massive 8.8 MMS, but the death toll was significantly lower, remaining in the hundreds. How can a much stronger, potentially more destructive earthquake result in such a reduced loss of life (in comparative terms)? It can’t be put down to chance, can it? The disparity between the numbers is just too great.
The conclusion drawn was that because corruption is so rife in Haiti, the construction of buildings and infrastructure was not subjected to the required quality standards and checks, instead these are bypassed with corrupt payments to those in positions of power. In Chile, corruption is perceived to be much less prevalent, so these quality and safety checks are more likely to be completed properly. The result is that when a weaker earthquake hit Haiti, the poorly constructed buildings collapsed much more easily, killing many more people. In Chile, the stronger earthquake didn’t have the same effect on the well-constructed buildings, and this effectively saved many thousands of lives. This is a really stark example of how corruption can have much wider consequences than perhaps many imagine.
In support of these conclusions, Haiti is ranked at number 158 (out of 168) on Transparency International’s Corruption Perceptions Index 2015, and Chile is at number 23. The Corruption Perceptions Index (CPI) is an annual survey conducted by Transparency International which aims to rank countries by their perceived levels of corruption, as determined by expert assessments and opinion surveys. The CPI has been conducted every year since 1995, and is considered by many to be a fundamental measure of corruption levels in the world today.
A focus on Switzerland
I want to now focus on Switzerland and look how its anti-corruption measures are perceived. Firstly, let’s look at the legislation in place.
Switzerland’s corruption law is pretty comprehensive, governed by the Swiss Criminal Code (StGB). It is an offence to bribe a public official; both companies and individuals can be prosecuted. The Federal Law against Unfair Competition (UWG) regulates the bribery of private persons.
The law differentiates between active and passive bribery. The definition of active bribery is similar for both private persons and public officials; for public official it involves them omitting one of their duties, or carrying out a duty, in exchange for being offered, promised, or granted any undue advantage, whether for the benefit of themselves of a third party.
Passive bribery involves a person soliciting, eliciting a promise or accepting an undue advantage in return of the commission or omission of one of their duties. Essentially, Swiss law sees bribery as an exchange, or a ‘favour for a favour’.
So who can be found criminally liable? Typically this would the individual, who if found guilty of bribing a public official, whether it be at home or abroad, could face a prison term of up to five years or a fine. The prison sentence is reduced to three years when involving bribery in the private sector.
A criminal prosecution and a fine of up to five million Swiss francs can be imposed on a company where they have not taken the appropriate action to prevent the bribery of public officials or individuals in the private sector.
2015 saw the further strengthening of the anti-corruption regime following concerns over bribery and corruption within sports federations such as FIFA. Federal prosecutors can now launch their own investigation into serious cases of corruption, which could previously only take place if a complaint had been filed.
So how are Switzerland’s corruptions measures perceived?
Corruption Perceptions Index
Switzerland ranks 7th out of 168 countries in the 2015 Corruption Perceptions Index (CPI) produced by Transparency International, with a score of 86 out of a possible 100. Only six other countries are perceived as having lower levels of public sector corruption.
Switzerland has slipped one place since 2014, when it was in joint 5th place with Norway, however its score of 86 remained the same. Reading the report suggests that Switzerland has an effective ant-corruption regime in place.
It is interesting to look back at the Global Corruption Barometer (GCB), which was conducted in 2013. This found the following.
- Only 9% of respondents felt that corruption had increased a lot in Switzerland in the previous two years, 56% of respondent felt that it had stayed the same.
- 37% of respondents felt that corruption in the public sector was not really a problem in contrast to 9% felt that it was a serious problem.
- 17% of respondents felt like the Swiss Government is entirely run by a few big entities who act in their own best interest ‘to a large extent.
- A combined 17% of respondents said the Swiss Government’s actions in the fight against corruption were ‘ineffective’ or ‘very ineffective’.
- A worrying 43% of respondents in Germany felt that political parties were corrupt or extremely corrupt.
- Only 17% of respondents felt that non-governmental organisations (NGOs) in Switzerland were corrupt or extremely corrupt.
Given that FIFA is an NGO, if the same respondents were to be asked the same question today, it would be interesting to see if the responses were different.
The global picture
The impact of corruption at a global level is totally devastating, and the human cost in particular is enormous. The results from the 2015 CPI show that, broadly speaking, little significant change has occurred from a global perspective. Some countries have improved over the last few years – Greece, Senegal and the UK; and others have experienced deterioration during the same period – Australia, Brazil, Libya, Spain and Turkey. The correlation between the most corrupt and those experiencing conflict is still there though – Afghanistan, Syria, Somalia, Iraq and Libya are examples of this. Where conflict isn’t present, the levels of inequality and poverty are apparent in those countries that rank poorly. Sub-Saharan Africa continues to experience difficulties in this respect with 40 of the region’s 46 countries showing a serious corruption problem.
Northern Europe performs pretty well in the CPI, with four of the top five ranked countries coming from that area – Denmark, Finland, Sweden, Netherlands and Norway. The fact that these countries, (and most others in Northern Europe that performed well) are not experiencing any conflict and do not suffer extreme poverty or inequality issues, comes as no surprise, and perhaps gives some hope that corruption can end. It is a collective fight though, and everybody, people and countries alike, need to roll up their sleeves and make their contribution. Only then can we hope to see real change.
Find out more about ICA qualifications here
To stay updated on the latest developments in governance,risk and compliance, anti money laundering and financial crime prevention, please follow us on either LinkedIn, Facebook and Twitter where you are guaranteed to be notified when our next blog post goes live!