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OECD Foreign Bribery Report: Leveraging The How, Where And Why Of Bribery To Bolster Your Ethics And Compliance Training Program

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OECD Foreign Bribery Report: Leveraging The How, Where And Why Of Bribery To Bolster Your Ethics And Compliance Training Program

In my last blog post, “The OECD Foreign Bribery Report: 7 Insights To Improve Your Ethics And Compliance Training Program,” I identified the seven bribery trends covered in OECD’s Foreign Bribery Report. The report listed seven questions to ask when looking at bribery, and in that post , I took a closer look at what the answers to the first three questions can tell us not only about the state of corruption, but about how to improve our ethics and compliance programs to combat bribery and corruption.

View Infographic: A Profile Of Bribery

Today’s post will delve into the final four questions:

4. How are bribes being paid?
5. Where are bribes being paid?
6. Where are the bribers being punished?
7. Why are the bribes being paid?

Examining the how, where and why of bribery is just as important as the who and what. Here is a summary of the report’s findings regarding these questions, as well as some key takeaways to bolster the effectiveness of your ethics and compliance training program.

4. How are bribes being paid?

oecd-figure-16
The majority of bribes are facilitated by an agent or intermediary. The report defines an intermediary is a “conduit for goods or services offered by a supplier to a consumer… the intermediary can act as a conduit for legitimate economic activities, illegitimate bribery payments, or a combination of both… Both natural and legal persons, such as consulting firms or joint ventures are included.” 71% of bribery cases reviewed for the report involved an intermediary. OECD Figure 16 provides a breakdown of each type of intermediary, included to the right.

As you can see from Figure 16, agents and corporate vehicles are the most likely conduits for bribery. Agents are defined as “sales and marketing agents, distributors and brokers.” Corporate vehicles include subsidiaries, local consulting firms, companies with offshore financial ventures or tax havens and companies established by either the person receiving or giving the bribe. Netflix is one company that is currently experiencing the pains of a rogue, now-former employee, Michael Kail, former vice president of IT operations, who set up a consulting company called Unix Mercenary to funnel kickbacks he received from vendors.

5. Where are bribes being paid?

oecd-figure-17
It might come as a surprise, but of the 427 cases of bribery examined in the OECD Foreign Bribery Report, nearly half were paid to public officials in countries ranking “very high” and “high” on human development – not to officials in developing countries. Some of the countries ranking “very high” and “high” on human development might already be on our radar as bribery hot spots – like Qatar and China. But what about Norway, Germany, Canada, France and Spain? These countries also fall into the “very high” and “high” categories of human development on the UN’s Human Development Index.

We need to reassess which countries we consider high risk for bribery and corruption, as the OECD Foreign Bribery Report findings show that bribes might be occurring in places we wouldn’t have initially considered high risk.

6. Where are the bribers being punished?

Currently the U.S. holds the most sanctions for bribery schemes at 128; Germany is a distant second at 26. Does this mean that the U.S. and Germany are countries with high bribery risks? Not necessarily – just because sanctions are carried out in a country does not mean the parties involved are citizens and/or companies native to that country. Expansive jurisdiction allows countries to investigate and prosecute both foreigners and nationals guilty of bribery.

oecd-figure-19

7. Why are the bribes being paid?

Based on the cases of bribery reviewed for the OECD Foreign Bribery Report, 57% of all bribes were paid to obtain public contracts. This was followed by customs clearance at 12%, favorable tax treatment at 6% and other preferential treatment at 7%.

This probably isn’t new or comforting information for you. Paying bribes to win contracts is not a new concept – and facilitation payments to clear customs? It’s the same story. However, these findings reinforce that because these scenarios are common, we need to highlight them in our ethics and compliance training. While it may be clear to the compliance department why bribes are being paid, employees in the field, if not trained on likely situations, may not know how to react to potential business partners or public officials soliciting bribes. Providing these statistics to employees, as well as providing anti-bribery training that covers how to respond to bribe solicitations, will help mitigate your risk of unethical conduct and litigation.

Final Takeaways

Now that we’ve reviewed all seven questions answered by the OECD Foreign Bribery Report we know the who, what, how, where and why of bribery. We know that we need to be cognizant of who we hire and promote to levels of high authority in our companies, because those are the individuals that are paying and authorizing bribes. Also, now that we know that bribes aren’t necessarily paid from developed countries to developing countries, OECD recommends focusing risk assessments on the context of the transaction instead of the country of the transaction. Interested in reading the full report and OECD recommendations? Check it out here.

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