Yesterday Matthew noted the success of the OECD Anti-Bribery Convention in curbing the bribery of public officials by individuals or firms subject to the laws of the 40 countries that have now ratified it. The enforcement data is surely impressive. Reports by Transparency International show a steady increase in investigations and prosecutions by the parties to the convention, and the latest OECD data, from 2012, disclose that since the convention took effect in 1999 over 300 individuals and 200 enterprises have been convicted or pled guilty to bribery-related charges with cases pending against another 150 persons and 20 plus firms.
One effect of greater enforcement by so-called “supply-side” countries against bribe payers is that it should help “demand-side” governments go after the bribe taking public officials. Although investigating and prosecuting a transnational bribery case from scratch is often a costly and complex undertaking, nailing the bribe-taker is vastly simplified when the bribe payer has either been convicted or admitted guilt. Evidence showing who received what and when will have already been compiled. One would think, then, that the several hundred prosecutions of bribe payers would be matched by several hundred cases against the takers. But one would be quite wrong.
Prosecution of the bribe taker in the wake of a conviction or guilty plea by the bribe payer is a rare event; the more usual reaction is either a studied silence or outright denial by authorities in the bribe taker’s country that anything wrongful occurred. Bangladesh’s Finance Minister said there was no evidence of corruption in the award of a contract to Canadian engineering firm even though company executives were charged in Canada with paying one. Ghanaian officials went even further, refusing to accept the $1 million plus in reparations a British company was ordered to pay when it pled guilty to bribing Ghanaian public employees. The reason: acceptance would be an acknowledgement that a bribe was paid.
It’s not hard to find reasons why developing country enforcement agencies have prosecuted so few bribe recipients. One is lack of capacity. In the poorest countries, the Haitis and Southern Sudans of the world, enforcement agencies are so thinly staffed, and the staffs so poorly trained, that collecting and using the information unearthed during the bribe payer’s prosecution can still be a stretch. A second reason is political interference. In South Africa the anticorruption agency was abolished after it charged the head of the ruling party with taking bribes, while in Nigeria the chief corruption fighter was transferred for being too willing to pursue bribe takers.
That said, there have been some efforts to go after the bribe takers, including some by developed countries: the U.S. Department of Justice and the U.K.’s Serious Fraud Office have both invoked domestic money laundering laws to prosecute bribe takers in their courts, and non-governmental organizations have stimulated similar cases in France, Spain, and the United States. But this doesn’t seem like much given the interests involved and the potential gains from more systematic efforts. In subsequent posts, I will suggest what could be done and by whom.
I’ll be interested to hear your thoughts in subsequent posts about what can be done by whom. As you identified, it seems like the core problem is that many countries where corruption occurs don’t have the right incentives to prosecute bribe-takers, even when the costs of doing so are low. So who can change their incentives? One thought that occurs to me is maybe the organizations that provide financing to sovereigns are in the best position to pressure those states to prosecute bribe takers. The financial institutions/ /organizations/states making bets on the economies of capital-importing countries arguably have the strongest incentives of anyone to see the level of corruption in those countries reduced (not to mention the ability to bring pressure to bear). Thus, I’d be curious to find out if there are any states/organizations offering funds to developing countries that condition their assistance on domestic enforcement of anticorruption laws (as opposed to general corruption indicators).
I had similar questions, and I’m very much looking forward to your next post, Rick, when you’ll talk about possible solutions.
My immediate thought, on thinking about the issue you raise, was similar to Sam’s but slightly different. Going back to some of the issues I raised earlier this week about the Left Out of the Bargain report and more generally about sharing fines/penalties/recovered assets with demand-side states: perhaps it might be possible to find some way to link (formally or informally) funds in settlement agreements with the bribe-paying firms with good faith efforts by demand-side countries to prosecute the bribe-taking public officials (or to cooperate fully with efforts by supply-side countries to go after those officials using money laundering or other laws).
There are obviously some big problems with any attempt to establish such a linkage: concerns about over-incentivizing prosecutions (especially of low-level scapegoats); political sensitivity connected with deciding whether another country’s efforts in individual cases are good enough; different timelines for the different investigations/prosecutions; legal obstacles; etc. But maybe worth thinking about. Something like this occasionally happens informally anyway, as with Costa Rica in the Alcatel case and Nigeria in the Bonny Island case — in both cases the US rejected requests for a share of the settlement recovery, in part because of the requesting government’s failure to do anything serious about the officials who had participated in the bribery scheme.
To Sam’s point. This example is slightly different but the major development banks (World Bank, Asian Development Bank etc.) have internal anti-corruption “guidelines” that they write into every single one of their contracts and the Bank assistance or loan is conditioned upon the lack of corruption and fraud in the procurement process.
The problem of conditioning assistance on enforcement of anti-corruption laws is that it veers into the sphere of political interference, which is a big red flag for a lot of international organisations (the World Bank is specifically mandated not to interfere and INT’s activity in the Philippines that implicated a high level official drew a lot of criticism for the Bank.) Maybe this is a more fruitful route for USAID or other similar country-specific funding agencies?
“It’s not hard to find reasons why developing country enforcement agencies have prosecuted so few bribe recipients. One is lack of capacity. (…). A second reason is political interference.” But to experience any kind of political interference, a corruption-free enforcement agency has to be established in the first place, doesn’t it? It would be a no small miracle if an agency like that could be formed in a state where corruption is endemic. If “in Nigeria the chief corruption fighter was transferred for being too willing to pursue bribe takers”, that’s totally amazing and Nigeria is far ahead of many other developing nations. Once corruption within a state is widespread and systemic, expecting the government to launch efficient anti-corruption initiatives is equivalent to expecting them to prosecute themselves (http://24.media.tumblr.com/tumblr_m5x8llkZ6a1rqfhi2o1_250.gif), and the integrity of local law enforcement authorities cannot be taken for granted.
Thanks for the comments. Sam, if you can wait until next Wednesday my post then will suggest ways to created incentives for POON (prosecution of own nationals).
Anton, not all anti-corruption agencies are thoroughly corrupt nor are all governments. See the anticorrption page of Princeton University’s Innovations for Successful Societies program, https://www.princeton.edu/successfulsocieties/content/focusareas/AC/,for case studies of successful agencies. The challenge is how to strengthen the “good guys” and weaken the “bad ones” in governments. There are surely some countries — North Korea being the most obvious — where that is a fool’s errand. But there are many more where it is not. Will talk about in Wednesday’s post.
I’m glad you mentioned at the end of your post that the Department of Justice has taken some steps to go after demand-side bribery abroad. In my mind, these efforts parallel those of the kleptocracy initiative — they try to reach out and prevent at least some corrupt foreign officials from benefitting from their misdeeds. But you’re correct to suggest that these cases are no substitute for active demand-side enforcement by the bribe-recipient nations. As United States v. Castle, 925 F.2d 831, 836 (5th Cir. 1991), made clear, the U.S. government cannot charge foreign officials with substantive FCPA violations or conspiracy to violate the FCPA. As a result, the government must resort to charging money laundering and similar offenses. But successful prosecutions of this sort are quite rare: to establish an offense, the foreign official usually must keep the corrupt money in the United States or travel here to engage in the illicit conduct; and to successfully prosecute the official, it must be possible to either arrest them here or get them extradited to the United States. Needless the say, it’s quite rare to have all of those stars align. This entire calculation is further complicated by the fact that prosecuting a current or former foreign official can often have serious foreign policy ramifications; authorities may be unwilling to do it even when they otherwise could.
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