Recession dampens effort to stem corporate corruption

Last year, prosecutors in the US, Germany, Switzerland and the UK continued to crack down on companies that bribe foreign public officials to get lucrative contracts abroad, the global watchdog group Transparency International reported. But most of the 39 countries that have joined the Organisation for Economic Co-operation and Development’s anti-corruption effort in the past 15 years did nothing or not enough to stop corruption in international business transactions last year, according to Transparency International’s 2012 progress report.

The number of wealthy nations that adequately pursue and prosecute foreign corruption among companies doing business abroad has not changed from seven, while advanced economies have struggled with financial crises the past three years, according to the report. And emerging markets whose exports have thrived, such as China, India or Singapore, have yet to join the OECD anti-corruption effort.

“At a time when most OECD countries are beset by the global recession, it has become more difficult to get political leaders to provide strong support to combating foreign bribery,” Transparency International says in the report. As a result, the watchdog group finds that “the overall level of enforcement remains inadequate.”

The seven countries that adequately pursued foreign corruption in 2011 were the US, Germany, the UK, Italy, Switzerland, Norway and Denmark.

The report credits the US with leading enforcement with 275 cases and 113 investigations, more than in any previous year. Among the cases were lawsuits against seven former Siemens executives in a $100 million foreign bribery scheme and an investigation of Wal-Mart’s Mexican subsidiary in an alleged widespread bribery campaign, according to the report.

Other wealthy countries stepping up enforcement in 2011 included Canada, Austria and Australia, which each filed at least one case of alleged bribery of a senior foreign official in 2011.

Countries that weren’t doing enough to crack down on corruption, according to Transparency International, included France and Japan. Anti-bribery cases in France took extremely long to prosecute. In Japan, enforcement of foreign bribery offences was lacking, according to the report.

Countries that had joined the OECD anti-corruption effort but were not pursuing enforcement included Ireland, Poland, the Czech Republic, Greece, South Africa and New Zealand.

Additional CGMA Magazine resources:

• “To prevent fraud, offer a hotline, train employees on fraud prevention, report says”: The typical business loses 5% of its revenue to fraud, a global Association of Certified Fraud Examiners report estimates. See which sectors are most vulnerable to fraud risk, what types of schemes are most common and most costly, and get tips for detecting and preventing fraud.

• “Pay to play? Survey shows increased risks of bribery, corruption”: An erosion of ethical standards amongst decision-makers leaves companies increasingly vulnerable to corruption, a recent fraud report shows.

• “Bridging the ethical divide”: More organisations are voicing a commitment to ethical performance, but their proclamations do not appear to be matched by action—a disconnect that is emerging as financial professionals are facing more pressure to act unethically.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.