Thursday March 24, 2016
Thursday March 24, 2016
‘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 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 allocating 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 explains the punishment you will have to face for committing the offence: a fine, penalty points on your licence, perhaps a driving ban if the offence is serious enough.
He also 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 go 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 life. But that does not make it right and in many ways it’s the worst type of corruption because it affects millions of innocent people every single day.
Let’s look at another example. I read an article recently comparing the earthquakes that took place in Haiti and Chile in 2010 and illustrating the wider consequences of a corrupt regime. The Haiti earthquake was measured at a magnitude of 7 on the Moment Magnitude Scale (MMS), and an estimated 200,000 people died. The Chile earthquake was 500 times stronger, measuring 8.8 MMS, but the death toll was in the hundreds. How can a much stronger earthquake result in such a reduced loss of life (in comparative terms)? It can’t be just down to chance – the disparity between the numbers is too great.
The conclusion 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, poorly constructed buildings collapsed much more easily, killing many more people. In Chile, well-constructed buildings fared much better when the earthquake struck, effectively saving many thousands of lives. This is a really stark example of how corruption can have devastating and far-reaching consequences.
In support of these conclusions, Haiti is ranked at number 158 out of 168 countries on Transparency International’s Corruption Perceptions Index 2015, and Chile is at number 23. The Corruption Perceptions Index (CPI) is an annual survey, ranking countries by perceived levels of corruption, as determined by expert assessments and opinion surveys. Conducted every year since 1995, it is considered by many as a fundamental measure of corruption levels in the world today.
Focus on France
Let’s look at the anti-corruption picture in France. Criminal offences include the active and passive corruption of national and foreign officials, with penalties of up to 10 years in prison and fines of €1 million for individuals and €5 million for legal entities. Penalties can be increased where the proceeds of the offence exceed the maximum fine. Private sector corruption is also criminalised and other offences include influence peddling – activities designed to favourably influence decisions, such as awarding contracts, made by public bodies – and favouritism in public procurement.
The legislation also law applies to offences committed by French nationals outside France, if the offence would be punishable under the law of the country where it was committed.
However, France has faced criticism over its tackling of corruption relating to overseas business transactions and in October 2014 the Organisation for Economic Co-operation and Development’s (OECD) Working Group on Bribery urged France to intensify efforts to combat the bribery of foreign public officials after finding it was ‘insufficiently in compliance’ with the OECD Anti-Bribery Convention.
The situation is changing. In March 2015, anti-corruption body the Service Central de Prévention de la Corruption, part of the Ministère de la Justice, published non-binding guidelines for preventing corruption in commercial transactions, saying: ‘In France there is currently no legal requirement for businesses, regardless of their size, to adopt internal measures to prevent corruption…the aim of the guidelines is to provide recommendations…to prevent and detect corruption at both national and transnational levels.’
And more formal measures are on the way, with new legislation – the Sapin II Bill – on transparency and modernisation of the economy is expected to go before the French Parliament very soon. The far-reaching legislation will introduce an obligation to prevent risks of corruption for companies with at least 500 employees, or groups with at least 500 employees and a yearly turnover of more than €100 million. Requirements will include an anti-corruption compliance programme and an internal whistle-blowing mechanism.
It will also create a new national agency to prevent and detect corruption, to replace the Service Central de Prévention de la Corruption, with extensive powers and introduce a new concept in French law, with legal entities able to enter into settlements involving payments and compliance monitoring instead of facing prosecution on corruption charges.
Perceptions of corruption
The 2015 CPI ranked France 23rd out of 168 countries, with a score of 70 out of 100, maintaining a score and position that has remained very consistent over the last four years.
What’s the view of corruption in France itself? According to the European Commission’s 2013 Eurobarometer public opinion survey on corruption, 68% of respondents in the general population thought corruption was widespread in France, a few points below the EU average; however, only 6% of French respondents felt personally affected by corruption in their daily lives, far below the EU average of 26%.
In a 2015 Eurobarometer survey of businesses’ attitudes towards corruption, 58% of French respondents thought it was widespread; favouring family and friends in business was rated top of the practices considered most common. Almost half (44%) thought corruption had prevented their company from winning a public tender or public procurement contract in the last three years.
So the new Bill soon to start its legislative journey seems a timely step by the French government to reinforce its anti-corruption stance and send out the message that it will not be tolerated.
The global picture
The impact of corruption at a global level is devastating, and the human cost 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, 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.
Four of the top five countries are from Northern Europe – Denmark, Finland, Sweden, Netherlands and Norway. The fact that these countries, (and most others in Northern Europe that performed well) are not experiencing conflict, 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, needs make their contribution. Only then can we hope to see real change.
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!
Thank you. Your comment is awaiting moderation and should appear on the site shortly.
Required fields are not completed, please ensure all required fields (*) have been filled in properly.
You can leave the name empty should you wish to remain Anonymous.
You are replying to post:
MAILING LIST SIGN-UP
Complete this form to join the ICA Mailing List
*These updates may come from us or our training partners.
© International Compliance Association I Company registration 4429302 I Registered office 6-14 Underwood St, London N1 7JQ, United Kingdom