A new report by TRACE International finds that enforcement actions against bribing government officials are rising globally. In its 2016 Global Enforcement Report, the anti-bribery organization observes a doubling in US enforcements last year and non-US actions doubled since 2015.
“2016 was a record year for global anti-bribery enforcement,” said Alexandra Wrage, president of TRACE International. “The United States has been concluding enforcement actions at an unprecedented rate, other jurisdictions have been stepping up their prosecution rates as well, and new anti-corruption laws continue to be passed worldwide.”
The US has been the historic standard-bearer for anti-corruption actions. American prosecutors have been penalizing companies for bribery offences for 30 years. It appears from this report that they are not slowing down. US enforcement actions doubled in 2016. Since the FCPA’s passing in 1977, TRACE calculates that 70% of all enforcements were made in the USA. Of these, 46% concerned bribes paid to Asian officials and a quarter to civil servants in the Americas.
Another stand-out statistic reveals the rising number of prosecutions within China. As demonstrated by TRACE’s heat map, bribes to Chinese public officials were the most likely penalized. Although this is partly a consequence of economic scale – the world’s most populous state attracts significant corporate investment – but also the finding demonstrates the payoff from its recent anti-corruption efforts.
Source: Trace International
The country has recently outlined intentions to shake up its anti-corruption system. Since President Xi Jinping rose to prominence in 2012, he has sought to uproot the networks of corruption that have ensnared the country since the revolution. The campaign has targeted both the ‘tigers’ (those high level officials that commit grand corruption) and ‘flies’ (more junior officials, whose petty theft saps the political system of moral strength).
There is a general view within the compliance profession that corruption overseas is becoming increasingly harder to conceal. Instances such as the Petrobras affair in Brazil and the FIFA scandal in Switzerland added more anecdotal evidence to this perspective. However, TRACE substantiates this view with clear evidence of intensifying legal attention counter-acting corruption.
This more energetic enforcement is partly facilitated by the rising cooperation of national prosecutors. Episodes of fraud are notoriously hard to detect. This problem is amplified by a party that is deliberately concealing key evidence: payments are off book or obfuscated, agreements undocumented and illicit dealings buried underneath a complex layers of shell companies.
Consequently, investigating fraud is costly. Prosecutors are oft under-resourced and must allocate their staff’s time to investigate an array of criminal activities. Indeed, man-for-man, the corporate targets of a corruption investigation may sport a larger legal team than the prosecutor’s office. Few countries can match the vigor and expertise of the US Department of Justice, the result of which has been yeas of corporations bribing officials with apparent immunity.
This short-fall in resource is being countered, in TRACE’s view, with increased bi-lateral contacts between national authorities. “The levels of cooperation allow these cases to be more easily brought,” says Wrage. Previously, prosecutors observed slow international legal instruments to conduct investigations, “now they’re just picking up the phone and talking to other prosecutors.”
There is clear evidence that prosecuting authorities are growing hotter in enforcing anticorruption laws. No longer can corporations consider corruption as merely ‘the cost of doing business’ overseas. The greater international cooperation by enforcement agencies are tightening the net around crocked companies. The risk of detection has never been higher and if enforcement rates continue to rise, the price of bribery will inflate dramatically in the future.