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Insight

OECD report shines light into bribery in international business

Written by James Thomas on Wednesday December 10, 2014


The OECD Foreign Bribery Report, released earlier this month, provides some interesting insights into corruption within international business. Not surprisingly, it highlights the usual sectors as hotspots for bribery and corruption activity. Drawing on data from the 427 foreign bribery cases that have been concluded since 1999 (when the OECD Anti-Bribery Convention first entered into force) the report finds that the extractive sector accounted for 19% of these, construction 15%, and transportation and storage a further 15%.

Moreover, its findings confirm the well-documented bribery risk presented by intermediaries (see inCOMPLIANCE Issue 15, pp.26-28), highlighting the importance to firms of conducting thorough due diligence on any local third parties acting on their behalf. Intermediaries were involved in a staggering three out of four foreign bribery cases. Such intermediaries include agents (in 41% of cases) such as marketing agents, distributors or brokers; and corporate vehicles (35%) including subsidiary companies, local consulting firms, and companies located in offshore financial centres.

Perhaps more interestingly, the report’s findings challenge the common perception that transnational corruption risk is centred around the bribery of thepublic officials of developing economies rather than those of wealthier nations. Indeed, it emerges that “almost half of the cases involved bribery of public officials from countries with high (22%) to very high (21%) levels of human development.”

The report added that this figure may not be entirely representative as “countries with higher levels of human development may have greater capacity to cooperate in foreign bribery investigations” and may also “be more inclined to share information” than less developed jurisdictions. Nevertheless, it is still a significant finding from the perspective of those seeking to implement a risk-based approach in the development of anti-bribery and corruption procedures. Central to any risk assessment process is an appreciation of the extent of bribery and corruption risk prevalent within the jurisdictions in which a firm operates, and these results perhaps serve as a reminder to guard against complacency when operating within jurisdictions typically regarded as “safe” from a bribery and corruption perspective.

 


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