Tag Archives: Supply-side Enforcement

The Fishrot Files: Clean Countries and Fishy Business

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The Nordic countries are often seen as world leaders when it comes to anticorruption, ranking at the top of Transparency International’s Corruption Perceptions Index (CPI). Yet critics have pointed out that while the Nordic countries have a sterling reputation for suppressing corruption at home, they have a much spottier record when it comes to dealing with exported corruption. This has been the case in Sweden and Denmark, and most recently, in Iceland, which has been widely criticized for its handling of the country’s first high-profile foreign bribery scandal.

The case in question was first exposed in November 2019 when three media outlets published joint investigative findings alleging that an Icelandic fishing company had paid millions of dollars in bribes to Namibian officials in order to gain access to the country’s valuable fishing zones (see here, here, and here). The reporting relied on thousands of leaked documents, which were dubbed the “Fishrot Files,” as well as first-hand testimony provided by a whistleblower, a former manager of the company’s operations in Namibia who admitted that he himself had played a role in bribing Namibian officials.

Though the scandal triggered public protests by Icelandic citizens, senior government officials in Iceland have sought to shift the blame to Namibia’s “weak” and “corrupt government.” Yet whatever governance weaknesses in Namibia may have contributed to the wrongdoing in the first place, it is notable that Namibian authorities moved swiftly to prosecute officials implicated in the scandal, including two high-level government ministers. These ministers were forced to resign and were subsequently arrested; they and eight other defendants now face charges of corruption, fraud, money laundering and tax evasion. In contrast, Icelandic authorities have yet to make any arrests or issue indictments in the case, more than three years after the initial revelations. To date, the executives implicated in the scandal have escaped official sanctions and have remained in their roles at the company.

In this instance, then, we see something rather unusual in foreign bribery cases: A strong response by a demand-side country in the global South (in this case Namibia), and a weak response by the supply-side country. Better understanding Namibia’s unusually strong response to the scandal is important in its own right, but for now, let’s focus on the question of why Iceland—which was one of the first signatories to the OECD Anti-Bribery Convention in 1998 and has readily available the legal framework necessary to handle the matter adequately—has been so ineffective in enforcing its laws against foreign bribery offences. Consider several possible explanations: Continue reading →

Taking on the Demand Side of Foreign Bribery: How U.S. FCPA Settlements Can Facilitate Foreign Prosecutions

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Laws like the U.S. Foreign Corrupt Practices Act (FCPA) target what is sometimes referred to as the “supply side” of transnational bribery transactions—the firms and individuals of offer or pay bribes to foreign officials in order to secure a business advantage. But what about the demand side? All too often, the government officials who demand or receive these bribes escape accountability—even when the bribe-paying firms are forced to pay substantial penalties for FCPA violations. Years ago, some U.S. Department of Justice (DOJ) prosecutors floated the theory that bribe-taking officials could be charged as abettors to, or co-conspirators in, FCPA violations, but that theory, though legally plausible, failed to gain traction in the courts. On occasion, the DOJ has prosecuted bribe-taking foreign officials for money laundering. And more recently, Members of the U.S. Congress have introduced a new bill, the Foreign Extortion Prevention Act (FEPA), which would make it a crime under U.S. law for a foreign public official to seek, demand, or accept a bribe. FEPA’s chances of enactment are uncertain (the vast majority of bills fail, after all); moreover, even if enacted, FEPA’s impact may be circumscribed by the practical and political difficulties of arresting and trying foreign public officials, particularly those that do not have any contact with U.S. territory.

What about the bribe-taking public official’s own government? Shouldn’t that government take the lead in prosecuting its own public officials when they behave corruptly? There would be a nice symmetry—and a great deal of practical advantage—to a system in which the supply-side government (say, the United States) goes after the bribe-paying company, while the demand-side government goes after the bribe-taking public official. But often this doesn’t happen: In the majority of cases where the U.S. government imposes FCPA sanctions on a company for paying bribes in a given country, there is no parallel or subsequent prosecution by that country’s government of the corrupt officials involved.

Sometimes the explanation is political: the public officials involved are sufficiently powerful and well-connected to escape domestic accountability in their home countries, even when their misconduct is known. That’s a big problem, and one that statutes like FEPA are designed to address. But there’s another reason that demand-side governments often fail to hold their own officials accountable: a lack of capacity and an associated lack of evidence. In a great many cases, even when a bribe-paying firm settles an FCPA case with the US government, and in doing so admits to certain facts and provides evidence about the misconduct to the DOJ, the demand-side country government does not receive sufficient evidence to identify, let along prosecute, the corrupt officials involved—either because the company did not supply that information to the DOJ, or the DOJ did not turn that information over to the demand-side official’s government. True, FCPA settlement agreements are usually public, but the official statements of facts in these agreements are often not sufficiently precise and detailed to give a foreign enforcement agency what it needs to make out a case.

The U.S. government can and should fix this problem. Doing so would not require new legislation. Rather, it could be accomplished through a straightforward and easily implementable change in DOJ policy. Continue reading →