Written by Jason Morris on 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 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 Germany
I want to now focus on Germany and look at how its anti-corruption measures are perceived in the country itself. Firstly, let’s look at the legislation in place. German anti-corruption provisions are contained in the Criminal Code and the Administrative Offences Act. The Criminal Code’s provisions apply to persons, while companies face civil responsibility under the Administrative Offences Act. Corruption offences committed abroad can be enforced in Germany.
The Criminal Code (Strafgesetzbuch) makes it a criminal offence for a person to offer, pay or accept a bribe in domestic or foreign transactions, and it provides no exception for facilitation payments. Active and passive bribery of employees or agents of a company is criminal even if it does not involve a distortion of competition. Executive managers can be held responsible for offences committed by company representatives where they actively support or fail to stop the offence. Persons convicted of bribery offences face up to 10 years’ imprisonment, a criminal fine and confiscation of revenue obtained as a result of the offence. The Criminal Code applies to offences committed abroad and can be enforced in Germany. While the criminal provisions apply to persons, companies are potentially civilly responsible under the Administrative Offences Act.
The Administrative Offences Act (Ordnungswidrigkeitengesetz) holds companies civilly responsible for corruption offences committed on behalf of the company. The owners and management can be held responsible for intentionally or negligently omitting necessary supervisory measures for preventing criminal offences. The maximum fine is €10 million for each intentional criminal offence and €5 million for each negligent criminal offence. The penalty can exceed those amounts without limitation to allow authorities to confiscate benefits obtained from the corruption offences.
Pretty comprehensive, I’m sure you’ll agree. So, how do the German people feel this works in practice?
Corruption Perceptions Index
The 2015 Corruption Perceptions Index (CPI) produced by Transparency International ranks Germany at number 10 (out of 168), with an overall score of 81 out of a possible 100. This shows an increase from a score of 79 in 2014 and 78 in 2013. This may suggest that Germany have a reasonably effective anti-corruption regime which is slowly becoming more effective. Pretty good.
However, this contrasts somewhat with the most recent Global Corruption Barometer (GCB), which was conducted in 2013. This found that:
What these statistics suggest is that, despite being ranked highly on the CPI, there is still considerable work to be done by the German Government to demonstrate to its people that corruption is under control.
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.
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.
Help and support
Alternatively contact us on: +44(0)121 362 7534 / firstname.lastname@example.org (Qualifications)
or +44(0)121 362 7747 / email@example.com (Membership)
or +44(0)121 362 7657 / firstname.lastname@example.org (Assessment)
or +44 (0) 121 362 7503 / email@example.com (End Point Assessment)