The Organization for Economic Cooperation and Development (OECD) on December 2, 2014 released its first-ever analysis of anti-bribery on a global scale. 427 transnational bribery cases that occurred between February 1999 and June 2014 were reviewed. The key findings are:
- Almost two-thirds of cases occurred in four sectors: mining (19%); construction (15%); transportation and storage (15%); and information and communications (10%).
- Intermediaries were involved in three out of four cases. In 41 percent of the cases, the intermediaries were agents, distributors or brokers. In another 35 percent of the cases, the intermediaries were corporate vehicles, such as subsidiaries or companies established under the beneficial ownership of the foreign official being bribed.
- More than a quarter of the bribes were promised or given to employees of state-owned companies and a further 11% involved customs officials. Heads of state and ministers were bribed in 5% of cases but received 11% of total bribes.
- In most cases (57%), bribes were paid to win public procurement contracts, followed by clearance of customs (6%) and attempts to gain preferential tax treatment (6%).
- In 41% of cases, management-level employees paid or authorised the bribe, whereas chief executives were involved in 12% of cases.
- Nearly 70% of the cases studied were resolved by way of a settlement, often involving a civil or a criminal fine. The combined corporate penalty was 1.8 billion Euros. Prison sentences were handed down on 80 individuals.
- Bribes in the analysed cases equalled 10.9% of the total transaction value on average, and 34.5% of the profits – equal to USD 13.8 million per bribe.
- One in three cases were instigated by self-reporting by the defendant companies or individuals. 13% of cases were instigated by investigations initiated directly from law enforcement authorities.
- Self reporting companies became aware of foreign bribery in their business operations mainly due to internal audits (31%) and M&A due diligence (28%)
- 7.3 years is the average duration of foreign bribery cases to be concluded, some cases even continued for up to 15 years after the last corrupt act to reach a final sentence.
The “overwhelming” role of intermediaries in foreign bribery cases demonstrates “the need for enhanced and effective due diligence, oversight and application” of corporate compliance programs to third parties (whether individuals or entities) in international business dealings, the report states. Compliance programs should focus specifically on due diligence with respect to agents and on verifying the rationale and beneficial ownership of other companies involved in the transaction.” The high level of involvement by senior executives indicates the continuing need for companies to set the right tone at the top, the report outlines. And even though small- and medium-size enterprises accounted for only 4 percent of the companies sanctioned, corporations of all sizes with global businesses should implement measures to detect and prevent the risk of foreign bribery, according to the report. The fact that cases are taking longer to a close could be attributed to increased sophistication in bribery techniques but also to time taken to lodge and hear appeals, according to the report. The report also presents “ideas to reinforce efforts and combat this crime”, for example making the data behind the report public in an online data-base to be maintained by the OECD. A further suggestion is to focus on senior executives or public companies as both bribe givers and takers. You can find the full report here. By Dr. Stephan Spehl and Isabell Gernand (Baker & McKenzie Munich)