Corruption, and the perception of corruption, erodes trust in governments, businesses and markets, undermining growth and development. By ending impunity and holding corrupt people to account, we can begin to restore faith in our institutions and industries, says a new report published by the Organization of Economic Cooperation and Development (OECD).

The report titled ‘OECD Foreign Bribery Report: an analysis of the crime of bribery of foreign public officials’ endeavors to measure, and describe, transnational corruption within the 34-nation Organization and by citizens and entities in the international market. The report is based on data from the 427 foreign bribery cases concluded until June 2014 and spans a 15-year period since the entry into force of the OECD Anti-Bribery Convention in February 1999.

The statistics published in the report analyses information contained in enforcement of actions against 263 individuals and 164 entities and reveals that most international bribes are paid by large transnational companies, usually with the knowledge of senior management. Contrary to prevalent views, bribes are generally paid to win contracts from state-owned or controlled companies in advanced economies, rather than in the developing world. Over 67 percent of bribe payers and takers are from wealthy countries.

The total amount of bribes paid in the 224 cases for which monetary value was available amounted to $3.1 billion. The highest total amount offered in bribe in a single scheme was $1.4 billion while the smallest was only $13.17; yes, thirteen dollars. The bribes in the analyzed cases equaled 10.9 percent of the total transaction value on average, and 34.5 percent of the profits – and equaled to US$13.8 million per bribe.

In this context it is important to note that the average of 10.9 percent of transaction value spent on bribes meant that the bribing individual or company had to recover or offset those costs. This was found to have been achieved primarily by inflating the quote for goods or services provided, thereby requiring the public to pay more for the project; or by cutting expenses through providing lower quality goods or services, or paying lower wages to employees.
The cases of bribery brought against individuals and entities were instigated in 31 percent of cases by self-reporting and in 29 percent by disclosure from unknown sources; law enforcement brought to light another 13 percent of the cases, while five percent where uncovered by the media and two percent were instigated by whistleblowers.

Following investigation, 69 percent of the analyzed cases were settled with sanctions, 261 fines were imposed on individuals and companies, and 80 individuals were imprisoned after a foreign bribery conviction. The highest amount in combined monetary sanctions imposed in a foreign bribery case against a company was $2.23 billion and against a single individual was $149 million.

The United States has sanctioned individuals and entities in connection with 128 separate foreign bribery schemes; Germany in connection with 26 separate schemes; Korea in connection with 11; Italy, Switzerland and the UK in connection with six separate schemes each. A total of 390 investigations are ongoing in 24 of the 41 countries that have signed on to the OECD Anti-Bribery Convention.

Bribes were promised, offered or given most frequently to employees of state-owned enterprises (SOE) (27%), followed by customs officials (11%), health officials (7%) and defense officials (6%). In most cases, bribes were paid to obtain public procurement contracts (57%), followed by clearance of customs procedures (12%), while 6 percent of bribes were to gain preferential tax treatment.

Almost two-thirds of bribery cases occurred in just four sectors: extractive (19%); construction (15%); transportation and storage (15%); and information and communication (10%). And, of the total bribe amounts paid out, the main beneficiaries were SOE officials, who received 80.11 percent of the total kick-backs; heads of state who received 6.97 percent; and, ministers and elected officials who together took 5.63 percent of the total bribes paid.

In 41 percent of cases management-level employees paid or authorized the bribe, whereas the company CEO was involved in 12 percent of cases. Intermediaries were involved in three out of four foreign bribery cases. These intermediaries were agents, such as local sales and marketing agents, distributors and brokers, in 41 percent of cases. Another 35 percent of intermediaries were corporate vehicles, such as subsidiary companies, companies located in offshore financial centers or tax havens, or companies established under the beneficial ownership of the public official who received the bribes.

The OECD Anti-Bribery Convention requires its signatories to hold their citizens and companies liable for the crime of bribing foreign public officials in international business transactions. The new report reiterates the call for criminalizing bribery in international business, promoting responsible business conduct, encouraging and protecting whistleblowers and insisting on integrity and transparency in public procurement processes.

Governments around the world should strengthen sanctions, make settlements public and reinforce protection of whistleblowers as part of greater efforts to tackle bribery and corruption, says the OECD. The overwhelming use of intermediaries also demonstrates the need for more effective due diligence and oversight of corporate compliance programs, and for company executives to lead by example in fighting foreign bribery.

Challenging governments, business and society to change the incentives, OECD Secretary-General Angel Gurría said: “The corrupt mustSource: KUNA be brought to justice; the prevention of business crime should be at the center of corporate governance policies; and public procurement needs to be synonymous with integrity, transparency and accountability