Today, TRACE launched The TRACE Compendium, the only online, fully-searchable database containing summaries and analyses of international anti-bribery enforcement actions and investigations in the U.S. and throughout the world. Users can quickly bring themselves up-to-speed on the latest enforcement trends by pulling up summaries based on categories, such as cases involving gifts and hospitality, cases resulting in the imposition of a compliance monitor or all cases involving a specific country.

The TRACE Compendium contains summaries of all U.S. Foreign Corrupt Practices Act (FCPA) enforcement actions, as well as summaries of cases and ongoing investigations by authorities outside of the U.S. The TRACE Compendium will initially contain summaries of hundreds of enforcement actions by agencies such as the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the United Kingdom’s Serious Fraud Office, the Munich Public Prosecutor’s Office, the Swedish Prosecution Authority and the Public Prosecutor’s Office of Japan. The TRACE Compendium will be kept current, with new summaries published as soon as the latest developments are announced.

In creating the TRACE Compendium, TRACE collaborated with many different partners, including international law firms and many of the companies involved in particular bribery investigations. The goal is to produce and maintain the most accurate and thorough review of international anti-bribery enforcement activity available.

Visit the TRACE Compendium to stay on top of the latest international anti-bribery enforcement activity.

Questioning Canada’s Commitment to Combating the Corruption of Foreign Public Officials: Watching Bill C-31 2

Christa Wessel, a partner in Gowlings’ Toronto office, provides this update on the Canadian anti-bribery law, the CFPOA:

“Bill C-31, An Act to amend the Criminal Code, the Corruption of Foreign Public Officials Act and the Identification of Criminals Act, was introduced to Canadian Parliament on May 15, 2009.  The timing of the bill’s first reading was clearly tied to the June 2009 release of Transparency International’s Progress Report on the Enforcement of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.  The TI Report criticized Canada, calling Canada a laggard, and listing it as one of 21 countries making little or no effort to enforce its anti-corruption laws.  Bill C-31 would amend the Corruption of Foreign Public Officials Act (Canada) (CFPOA), eliminating one of the obstacles to enforcement by applying nationality jurisdiction to Canadians who engage in bribery or other forms of corruption involving foreign public officials outside of Canada.

Bill C-31 was scheduled to receive second reading in the House of Commons in October and on both occasions was delayed.  On Friday November 6th, 2009, Minister of Justice, Rob Nicholson, addressed a luncheon on the topic of white collar crime.  When I asked him about the government’s plans for a second reading of Bill C-31, Minister Nicholson was non-committal.  He was also not prepared to comment on the priority placed by the Canadian government on the bill.

The fall 2008 federal election put a Conservative minority government in place.  This means that the government requires the support of at least one of the opposition parties to pass a bill.  This support rarely comes without a price.  In his response to my question, Minister Nicholson also noted that a minority government should not be used as an excuse to get out of passing this very important legislation.

 The world is watching Canada and its commitment, or lack thereof, to combating the corruption of foreign public officials.  Let’s hope the “laggard” label doesn’t stick to Canada when it comes to making Bill C-31 law.”

Why They Do What They Do: Deterring the Corrupt Reply

As United Nations member states convene in Doha this week to discuss, among other things, the need for a meaningful review mechanism for the UN Convention Against Corruption, it’s worth reviewing some of the initiatives that have had an impact to date.

“It’s bad enough to corrupt others, but even worse to use your official position to steal. Across the globe, we see government officials on the take with staggering reliability. In rapid succession earlier this year, we saw the British scandal unfold as Members of Parliament admitted to cleaning their moats and sheltering their ducks at taxpayers’ expense, the suicide of former South Korean president Roh Moo-hyun in the midst of a bribery investigation and the trial of William Jefferson, the former congressman with the infamously well-stocked freezer, accused of both paying and receiving bribes.

The compliance community invests a great deal trying to cut-off the supply of bribes. The goal of any sound corporate policy is to limit the opportunity for the offer or payment of bribes. But many are left wondering how much real improvement can be made if the demand-side isn’t being tackled with comparable rigor. The resignation of a few over-reaching MPs and the untimely death of a South Korean statesman get the headlines all too briefly.

Those in a position to demand bribes are scattered both within countries and across borders, answerable to legal systems of variable efficacy, or none at all. They may pay-off those above or below themselves to maintain their positions through an elaborate pyramid scheme or they may be truly entrepreneurial and work alone.

Why do these government officials do what they do? Why do they steal what they are entrusted to protect? Why do they place so little value on the integrity of their office? Answers range from the most charitable to the most obvious. They steal in order to pay off those around them, to keep their position, and to provide for their families in countries that don’t pay their government officials a living wage. Or they steal because the opportunity presents itself; they convince themselves that the company offering the bribe can afford to share the wealth and that their little crime has no real victim. Or they steal because of exuberant greed, the sort of greed that enables record-holding kleptocrats in places like Indonesia, Nigeria, Russia and the Philippines to amass off-shore fortunes totaling billions of dollars.

The point, for many corrupt government officials, is to steal or extort enough money to fund shopping trips to Paris, medical treatment in London, university educations for their children in the United States and enough diversity of investments to ensure a secure retirement if they’re tossed out of their own country. Although they get too little attention, there are a number of initiatives designed to make enjoying the loot more difficult.

“No Safe Haven” Policy or “There’s no place to go”

In January 2004, President George W. Bush issued Presidential Proclamation 7750 creating legal authority for the United States to deny entry to individuals involved in public corruption. The Proclamation was issued under the Immigration and Nationality Act of 1952, which allows the President to suspend the entry of all aliens or any class of aliens into the United States whenever their entry “would be detrimental to the interests of the United States.” It provides specific legal authority for the Secretary of State to identify people who should be denied entry because they are involved in public corruption that has serious adverse effects on the national interests of the United States, including the international economic activity of U.S. businesses.

It’s difficult to assess this initiative’s success to date as the names of those denied visas are not published. Nevertheless, the very threat of this travel ban introduces more cost to corrupt acts than most government officials would otherwise face.

National Strategy to Internationalize Efforts Against Kleptocracy or “Less Money to Spend”

In August 2006, President Bush launched the National Strategy to Internationalize Efforts Against Kleptocracy, designed to focus international attention on confronting corruption by public officials. The strategy builds upon commitments to combat corruption made by world leaders and combines the policy and law enforcement tools of several federal agencies, including the Departments of State, Treasury, Homeland Security, and Justice. The strategy is a combination of efforts to build and improve inter-agency mechanisms to deny corrupt actors access to the U.S. financial system and physical safe haven within U.S. borders and efforts to provide U.S. Government expertise and assistance to help countries develop effective governmental approaches to preventing, detecting, and prosecuting corruption.

The initiative brings together major financial centers to develop best practices to deny financial haven to illicit funds and assets, enhances information sharing with foreign partners and financial institutions regarding corrupt individuals and ensures greater accountability of development assistance programs around the world. This strategy also complements U.S. efforts in support of the ratification and implementation of the United Nations Convention Against Corruption (“UNCAC”). The UNCAC is the only truly global anti-corruption convention and this effort should help to ensure that it eventually has teeth.

Extractive Industries Transparency Initiative or “More Accountability”

The Extractive Industries Transparency Initiative (“EITI”) is a coalition of governments, companies, civil society groups, investors and others that seek to improve transparency with respect to payments by companies to governments and to government-linked entities for natural resource revenue. The coalition was launched in October 2002 at the World Summit for Sustainable Development in Johannesburg. In May 2005, an International Advisory Group (“IAG”) was established. Thirty resource-rich countries are currently implementing the EITI principles, although only one country, Azerbaijan, has completed the EITI “validation” process.

The opacity of accounts is part of the dilemma in resource-rich countries. If citizens don’t know how much their governments are collecting, they can’t hold them accountable when the money goes missing. EITI aims to standardize these accounts and make them readily available.

Stolen Assets Recovery Initiative or “You Have to Hand it Back”

In September 2007, the World Bank, in partnership with the United Nations Office on Drugs and Crime, launched the Stolen Asset Recovery (“StAR”) Initiative to help developing countries recover assets stolen by corrupt leaders. According to StAR, estimates of the cross-border flow of global proceeds from criminal activities, corruption, and tax evasion are between $1 trillion and $1.6 trillion per year, and corrupt money associated with bribes received by public officials from developing and transition countries is conservatively estimated at $20 billion to $40 billion per year. StAR emphasizes the joint responsibility that developed and developing countries share in tackling corruption and that international collaboration and collective action are necessary in order to prevent asset theft and facilitate asset recovery.

On January 19, 2009, INTERPOL’s Anti-Corruption Sub-Directorate, in partnership with StAR, launched a Focal Point database. The database should enable better coordination within the international law enforcement community on efforts to investigate and prosecute individuals involved in the theft of public funds. The goal is to ensure that designated national officials know who to contact in case of emergency, such as when they suspect that a corrupt official has transferred funds to a particular jurisdiction and they fear they may lose the trail. The database includes a 24-hour StAR Focal Point Contact List of officials in countries who can respond to emergency requests for assistance.

StAR built on some early asset recovery victories. After an 18-year saga which ended in January 2004, the Philippines were able to repatriate $624 million of Ferdinand Marcos money held in Swiss Bank accounts. By 2004, Peru had recovered nearly $180 million stolen by Vladimiro Montesinos from several jurisdictions, including Switzerland, Cayman Islands and the United States. Between late 2005 and early 2006, Nigeria recovered $505 million of the Sani Abacha money frozen and forfeited by Swiss authorities. In July 2006, British authorities returned $1.9 million of the allegedly illicit gains of Diepreye Alamieyeseigha, governor of the oil-rich Bayelsa state in Nigeria. In May 2007, an agreement between the governments of the United States, Switzerland and Kazakhstan allowed for the repatriation of $84 million.

In February 2009, the World Bank Group’s Managing Director, Ngozi Okonjo-Iweala, lauded the Swiss order for the return to Haiti of $6 million of assets looted by former president Jean-Claude Duvalier. Ms. Okonjo-Iweala noted that “Haiti’s success should encourage the victims of corruption to launch asset recovery programs”.

There is no way to know what portion of the total amount stolen has been recovered in these cases. Kleptocrats are skilled in an elaborate financial shell game. Nevertheless, requiring them to work harder to hide their haul and worry more about losing it is a step in the right direction.

Each of these initiatives endeavor to shine new light on where the money is, on the one hand, and to make it difficult to spend or retain what is looted, on the other. While these efforts may not deter the customs official in Manila with his hand out, they may discourage in some small way the government officials now shipping their countries’ plundered wealth offshore. It may, in short, make the corrupt reconsider what they do.”

Originally published by Alexandra Wrage in Ethisphere magazine.

Commercial (Private) Bribery in the Spotlight 1

Carolyn Lindsey with TRACE has been leading a benchmarking project on commercial (private) bribery and provides this update:

“Anti-bribery compliance programs, including gifts and hospitality policies, have typically focused on conduct when interacting with government officials. However, recently companies are becoming increasingly aware of the risks associated with bribing private sector customers. Indeed, several recent enforcement actions in the United States have included charges of commercial (private) bribery and a number of countries and international conventions criminalize this conduct.

To determine how companies are handling this issue, TRACE recently conducted a benchmarking survey. Out of a total of 78 respondents, the majority, 90.2 percent, indicated that their anti-bribery compliance policies cover bribery of both private sector and public sector customers. However, companies take varying approaches to providing gifts and hospitality to private sector customers. 52.8 percent of respondents indicated that they have the same gifts and hospitality policy for both the private sector, while 47.2 percent responded that their policies have different standards for private sector customers.

Gifts and hospitality has always been a gray area of anti-bribery compliance and, based on the results of the recent TRACE survey, this is especially true when it comes to dealing with private sector customers. The survey results, and anecdotal information that TRACE has received from companies, led us to wonder what best practices should be when it comes to providing gifts, hospitality and entertainment to private sector customers. To answer this question, TRACE launched a follow-up working group to create guidelines in this area, specifically posing the question whether a company’s gifts and entertainment policy needs to be as restrictive for private sector customers as it does for public sector customers.

Those involved in the working group expressed a strong preference for creating a standard, uniform gifts and hospitality policy for all customers and vendors, regardless of whether they have any ties to the government. This was driven in part by the difficulty in determining who actually is a government official in some countries and the ease of administering a single, uniform policy. The proposed TRACE guidelines for providing gifts and hospitality to private sector customers are as follows:

• Companies should consider enacting the same gifts and hospitality policy for both private sector customers and government customers.
• Companies should consider implementing similar approval processes and/or reporting for all gifts and hospitality requests. Approval processes will vary depending on the size and structure of the company and can include dollar thresholds.
• All gifts and hospitality must be reasonable and customary.
• All hospitality and travel must be provided in connection with a bona fide and legitimate business purpose.
• Companies should comply with local laws and regulations when providing gifts and hospitality to private sector customers.

So, does this mean that the days of client entertainment purely for relationship building are coming to an end? Certainly, few companies would allow their employees to take a procurement official out for a game of golf simply to create goodwill. A number of companies have said that regardless of their official policies, their corporate practice of giving gifts and providing hospitality to private sector customers has changed over the past five years to become more restrictive.

TRACE welcomes thoughts from the compliance community as to what best practices in this area should be. Should companies have a single standard for both the private and public sectors, or can companies engage in a different type of relationship building with their private sector customers?”