In the prior post and this one, I’m looking at big events and trends since the FCPA Blog started publishing 11 years ago, and their impact on corruption, enforcement, and compliance.
I started with the Arab Spring — the anti-corruption movement that’s still echoing across Europe and Latin America.
In this post I continue, first with . . .
The role of international organizations. On December 17, 1997 the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions was agreed at the OECD. The Convention was designed to require signatories to implement anti-corruption laws in relation to public officials which addressed the supply side of corruption — essentially to replicate the FCPA.
Forty-three countries, including eight non OECD countries, have since ratified the treaty.
It came into force on February 15, 1999. Since that date the OECD, through its review process, has forced, and continues to force, signatories to live up to their treaty obligations.
For example, over a period of years the initially recalcitrant UK was cajoled, pressured and shamed into creating and then implementing the Bribery Act 2010. That legislation, with its reversal of proof requirement, has since become a model for other legislatures in addition to enabling UK prosecutors to become “effective enforcers.” There are many other examples of the OECD’s persuasive abilities to effect change — including the legislative developments in France and Canada.
More recently the OECD, together with other agencies, has been working with the IMF to address what has been perceived as the IMF’s reluctance to engage with corruption at state level. Long criticized for looking the other way, last year Christine Lagarde announced that the Board of the IMF considered corruption to be a potential risk to macro economic stability thereby allowing it, pursuant to its mandate, to intervene and comment.
In April the IMF announced its framework for engaging with countries on corruption and governance issues.
Addressing the supply side of bribes in the last ten years multilateral funders have worked individually and collectively to identify corruption at project level and, when discovered, to act as one in debarment processes.
All material changes have had, and will continue to have, positive effect.
Pressure from corporations. While in the last 11 years there has been a material increase in prosecutions, fines, and disgorgements, there are simply not the resources available to identify and prosecute all cases where bribery of foreign government officials is suspected.
That is why statutory tools were designed to transfer the policing of markets to corporations through the Bribery Act, Sapin II, and other legislative and procedural processes such as the U.S. Federal Sentencing Guidelines and the U.S. Attorney’s Manual.
But beyond the statutory requirement, through my work I have seen a material shift in engagement with, and a willing acceptance of the responsibility not to pay bribes to secure contracts or government action.
Companies have acted individually — through codes of conduct, training, policies and procedures and contractual terms and due diligence investigations on supply chains, intermediaries and merger and acquisition targets, to reduce corruption risk.
Investment banks and private equity houses similarly have these issues at the forefront of their mind when supporting or evaluating transactions.
Companies have also acted collectively to bring concerns to their own governments and host governments where demands for bribes are made by foreign government officials.
These force multipliers have impact far beyond the DOJ’s Yates Memo and more generally the prosecution of corporations, and, as with the pressure from the multilaterals and international organizations, are not subject to change as a consequence of election results in individual countries.
XY and Z generations are good. I do not believe there is any statistical data to support the following contention but it is based on my experience of working with successful companies. People from all generations get it, and, in a way not seen 10 years ago, articulate their desire to work for companies and other organizations which have and demonstrate adherence to ethical standards. It is and should be a recruiting tool. Where individuals are sold a pup they vote both with their feet and social media!
Challenges to come. While the past 11 years have seen many positive changes, there are three concerns which I have.
The first is the risk of recidivism — not by those who are corrupt but by the politicians who drive the prosecutors. The FCPA came into force in the United States in 1977. It lay nearly dormant for pretty much a quarter of a century before it was picked up, dusted off and used by prosecutors. Having picked up the ball the Department of Justice has certainly run with it. But in 2012, Donald Trump — then a businessman and not a politician — declared the FCPA “a horrible law.” Since his inauguration as president many posts at the Department of Justice have remained unfilled and my friends in DC tell me that there are more declinations coming out of the DOJ than they have ever seen before. I do not believe that one administration can derail the progress that has undoubtedly been made in the last 11 years. I do believe leadership is critical and it would be unfortunate if that leadership was not preserved and enabled.
My second concern is more fundamental. In 2011 Wikileaks published a number of diplomatic cables from the U.S. ambassador to Tunisia, William Hudson, written in 2006. Taken together they identify the corruption and the concentration and abuse of power by Ben Ali and his family.
Ambassador Hudson reported: “People are now convinced that the first family is an insatiable economic animal bent on gratuitous enrichment and unchecked influence wielding.”
Shortly after, Donald Rumsfeld visited Tunisia and publicly praised “the social and economic progress of the regime.” I can understand why Rumsfeld said what he said but his statements did nothing to deal with, rather than encourage the problems. Consistency is fundamental to success.
Finally, we need to be vigilant and carefully assess whether the criminal justice systems are or might be being undermined — directly by governments concocting cases against the innocent for political purposes or indirectly by over assertive prosecutors using the power of prosecution to undermine fundamental rights such as privilege. Not to reflect through this optic risks allowing a critical pillar of anti-corruption to itself become corrupted.
Bill Waite, pictured above, is a contributing editor of the FCPA Blog. He’s one of the founders of The Risk Advisory Group, established in 1997 with the objective of building Europe’s leading independent risk management consultancy. He serves as the group’s CEO and general counsel. He formerly practiced as a criminal barrister before joining the UK Serious Fraud Office in 1991 as a prosecutor. He can be contacted here.