Call it fragmented supply-side enforcement. It’s where we are now in the historical development of anti-bribery enforcement. If you believe that anti-bribery enforcement should reduce global corruption, then this is a major problem. And the now-pending CROOK Act is part of the solution.
Some capital exporters enforce FCPA-type laws, while many others do not. We all know this. And in too many host countries that now attract foreign investment, domestic anti-bribery laws are not effectively enforced. So anti-bribery enforcement is incomplete, or imbalanced, along two distinct dimensions: it focuses far more on the supply of bribes than on the demand, and supply-side enforcement is itself quite uneven.
Imagine that a U.S. company, a Brazilian company, and a Chinese company are all competing for the same contract in a developing country with high bribery risk. The U.S. and Brazilian companies may be tempted, but understand they face consequences because their home countries are active anti-bribery enforcers. The Chinese company knows it faces no such consequences: neither the home country, nor the host country, is enforcing. This is the problem of fragmented supply-side enforcement. You can imagine the harm. And evidence of it abounds: anti-corruption professionals across Asia, Africa, and Latin America speak to me about this on a regular basis.
So how do we get at the problem of fragmented supply-side enforcement? You correct either or both of the two imbalances. First, you work to make supply-side enforcement more uniform, and we are most certainly doing so. The OECD Convention was designed to do precisely this, and the major enforcement actions coming out of the UK, France, and Brazil are evidence that slowly but surely, it is working.
But pressuring and supporting fellow OECD countries to enforce FCPA-type laws cannot be the sole answer. Why not? Because this is the 21st century and major global exporters, especially China, aren’t part of the OECD. China adopted a very simple foreign bribery law pursuant to its obligations under the UN Convention Against Corruption, but isn’t enforcing and faces no effective pressure to do so. Railing against China is politically fashionable right now, but let’s put that aside. The simple fact is that we have very little leverage over Chinese enforcement of laws governing foreign direct investment.
That brings us to the second solution: demand-side enforcement. Help to build cultural and institutional support around the world for domestic anti-bribery enforcement. Enter the CROOK Act. This bill, now pending in the U.S. Congress, would use FCPA enforcement proceeds to fund overseas anti-corruption initiatives. It proposes taking five percent of FCPA enforcement proceeds to fund overseas anti-corruption programs, under the supervision of the State Department and an Interagency Task Force. The funding can support governmental or non-governmental organizations, and would go to countries that are well-positioned to effectuate meaningful reform.
If law enforcement agencies, NGOs, and the media are monitoring what’s happening in their own countries – if they can deter corruption among their own officials, not to mention the foreign companies doing business with them — then fragmented supply-side enforcement won’t do the harm it’s doing now.
Whatever laws the in-bound companies may or may not be subject to, when they come to our country they may not bribe. That’s the vision. If they offer bribes, and if our officials accept them, there will be consequences for both.
Of course, host-country enforcement will never be perfect; there will always be a role for robust supply-side enforcement. But then again, supply-side enforcement will never be perfect either. The two must work in tandem. And in using FCPA enforcement proceeds to fund anti-corruption programs abroad, the CROOK Act understands this truth. It’s the next stage of anti-bribery enforcement. It’s what the world needs now.