Working toward a global anti-corruption framework

Compliance departments need to get to grips with a new world order in which the national level anti-corruption agenda is key

Government and public scrutiny of corporate corruption is at an all-time high. The Foreign Corrupt Practices Act (FCPA) has been aggressively enforced by the U.S. over the last decade, generating unprecedented investigations into bribes paid by corporations, along with significant government revenue. The scale and scope of U.S. government activity has proved inspirational to other countries. It has generated regulatory frameworks in nations that include Canada, Brazil and the U.K., and it has driven aggressive national enforcement that uses existing laws and government agencies, notably in China.

Concurrently, member-funded NGO’s such as the Organization for Economic Cooperation and Development (OECD) and private watchdog organizations including Transparency International and TRACE have issued extensive guidance for governments and companies alike on best practices for anti-corruption compliance and legal frameworks. Global financial institutions such as the World Bank and IMF have promulgated their own guidance, bolstered by a zero-tolerance approach for graft and corruption with far-reaching penalties that include cross-debarment accords. 

It would be natural to assume that we are moving gradually toward a comprehensive international standard on anti-corruption enforcement — at least where the ‘sell side’ of corporate behavior is concerned. After all, fighting corruption, like tackling climate change or tax evasion, represents a classic collective action problem. Pursuing a company for paying bribes can involve tracking transactions across borders, gaining cooperation of numerous regulatory bodies, and penetrating opaque ownership structures in tax havens. Anti-corruption laws need to be extra-territorial in scope, and international coordination is often essential for evidence gathering. It is therefore understandable for other countries to question why the U.S. government should benefit financially from legal action taken against a European company that paid bribes in Nigeria—and to introduce initiatives of its own. Anti-corruption laws enable governments to get a piece of the enforcement revenue, gain credit on the international stage, engage their general public, and scapegoat particular entities where needed.

An international standard could build on the emerging consensus around the prevention measures that companies need to have in place. The global reach of most national corruption laws means that multinationals need to pay attention to them all, so the bar is set high. The U.K. currently has the most draconian anti-bribery law in place, notwithstanding its unimpressive enforcement record, and has generated a corporate prevention (‘adequate procedures’) framework, echoed in the U.S. government’s 2012 FCPA Resource Guide. There are clear compliance themes around the role of executive management, third party due diligence, risk assessment, and internal controls that can be used globally.

For all the local regulatory complexity, it might still seem that a de facto global standard is emerging. One would be welcomed by increasingly beleaguered inside counsel and compliance officers, who now need to understand and monitor the implications of every new law and initiative. It appears to be in everyone’s interest.

However, a review of existing global initiatives paints a far less rosy picture of the prospects for an international anti-corruption standard. Critically, initiatives to establish one have all been led by Western governments or organizations, and they have failed to gain traction among critical emerging market players. The 1997 OECD anti-bribery convention, which requires signatories to criminalize bribery of foreign public officials and which monitors national enforcement, still lacks signatures from India, China, Indonesia and Saudi Arabia — some of the world’s most significant economies. The move to create an international standard via the International Organization for Standardization (ISO) has gained limited traction. The idea of an international anti-corruption court has only just been pitched, late in July, in the Washington Post.

A growing consensus by Western multinationals around standards of corporate behavior accompanies an increasingly commercial and risk-focused approach to the allocation of compliance budgets. Viewed through another lens, though, we are entering an era of greater fragmentation in the anti-corruption field. The BRICS countries and Southern powerhouses are implicitly questioning the premise of existing corruption laws, which focus on paying bribes to secure commercial advantage and are responsive to internal corporate controls. When the definition of corruption is widened from paying bribes for contracts or services to encompass the abuse of power for personal gain, the issue looks rather different. Western cultures with strong legal systems and good government capacity tend to subject their citizens to fewer demands for bribes by government officials, but they arguably use equally insidious techniques to drive competitive advantage. The U.S. lobbying system and the British education system are only two examples of systemic and privileged access to power. American public opinion about the level of corruption in political parties is at a level similar to those in Pakistan and the Democratic Republic of the Congo. It is no coincidence that an anti-corruption crackdown is focused on pharmaceuticals in China, where rising healthcare and medicine costs, driven by multinational drug companies, have become a major source of public anger. From a Western standpoint, it easy to see China’s anti-corruption crackdown as more politically motivated than the investigation of FCPA violations in the U.S. However, every government makes political choices about which aspects of corruption are important, and which cases to pursue.

Corruption is about the abuse of power. It is by nature highly mutable, open to interpretation, and subject to political risk. The past decade has seen the emergence of a procedural framework to measure and tackle the payment of bribes to government officials by corporate employees. This framework is useful and overdue, but it will not form the basis of an international anti-corruption standard in the foreseeable future. Instead, compliance departments need to get to grips with a new world order in which the national level anti-corruption agenda is key. Understanding corruption risk now requires a deeper dive into strategic, commercial and political considerations. Compliance needs to move out of the compliance department and become central to the corporate agenda.

Contributing Author

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Greg Esslinger

Greg Esslinger is Senior Managing Director focusing on compliance, investigations and technology at Control Risks, a global risk consultancy.

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Alison Taylor

Alison Taylor is Senior Managing Director for Investigations at Control Risks where she focuses on anti-corruption and strategic intelligence.

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