OECD Anti-Bribery Convention at 25: Time to step up enforcement

Bribery of foreign public officials is a common and pernicious practice in international trade and investment, used to illicitly win large government contracts and lucrative concessions across major sectors. The multinational companies, financial institutions and networks of professionals involved in these crooked deals play a part in diverting public resources and weakening public institutions in targeted countries.

This has huge negative consequences for sustainable development, democracy, rule of law and human rights in those countries, frequently resulting in tremendous suffering. But too often, the justice institutions in those countries are unable to hold the bribe payers and recipients accountable.

So, it was a major achievement in 1997 when the member countries of the Organisation for Economic Co-operation and Development (OECD) signed the OECD Anti-Bribery Convention, committing to criminalising the ‘supply side’ of bribery of foreign public officials in international business transactions. At the time, the United States stood alone in criminalising bribes paid to foreign officials to obtain business abroad through the Foreign Corrupt Practices Act. Transparency International, then led by Chair Peter Eigen, played a major role in rallying countries to support and sign the Convention.

In 1999, the Convention entered into force. The 25th anniversary of this milestone will be celebrated at the OECD's Global Anti-Corruption and Integrity Forum this week. This occasion offers an important opportunity for the 46 signatory countries to renew and reinforce their collective commitment to tackling foreign bribery and the money laundering that goes with it.

It stands to reason that if bribery at home is a criminal offence, the same should be true of bribery abroad. Yet, prior to 1997, most major exporting countries did not follow this compelling logic; in many, foreign bribe payments were tax deductible. With the Convention, OECD countries acknowledged their responsibility for sanctioning cross-border corruption involving the companies and enablers that they host.

Under the Convention, signatory states must criminalise foreign bribery and comply with additional requirements on issues like liability of legal persons, sanctions, jurisdiction, accounting, and mutual legal assistance. Article 5 states that investigation and prosecution of the offence “shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons.” In other words, it sets out that the rule of law must be respected without fear or favour, acknowledging the potential temptations to refrain from enforcing and reminding states of the overriding commitment to act together for the collective good.

The Convention has had impact. By 2010, peer pressure from the rigorous monitoring process of the OECD Working Group on Bribery (WGB), combined with civil society advocacy, could be credited with significant legal reforms, including the landmark UK Bribery Act passed that year. Increasingly, major companies like Alstom, BAE Systems, Siemens and Halliburton were being held to account. By the time of Transparency International’s 2014 report on the enforcement of the Convention, four countries were classified as actively enforcing and by 2018 there were seven countries in that category. Major companies had also increasingly introduced compliance programmes.

However, since then, waning commitment and the pandemic appear to have contributed to a steady decline in enforcement. Our 2020 report identified only four active enforcers, a number that dwindled to only two in the 2022 report. This means shrinking deterrence of foreign bribery.

While the dip in enforcement against bribe-paying companies is a major concern, it is also troubling that enforcement has seldom been directed at financial institutions and service providers – or “enablers” – who knowingly or negligently facilitate foreign bribery and the laundering of its proceeds. The formation of anonymous companies and the use of secrecy jurisdictions are usually part of the package provided. Some of the same actors are also involved in assisting tax evasion and laundering the proceeds of other crimes, including laundering drug money for organised criminal groups. For example, based on reported cases, HSBC falls into that category.

In a few notable cases, banks and/or their employees have been held accountable for direct involvement in massive foreign bribery schemes, as with Société Générale, Goldman Sachs and Credit Suisse. However, enforcement against laundering of bribery proceeds is not common in OECD Convention countries, and is more likely where there is also enforcement in the countries where the bribes are paid or where civil society organisations and investigative journalists initiate cases and expose malfeasance.

In another handful of cases, significant fines have been imposed on banks for failure to prevent money laundering related to foreign bribery, as seen with ABN Amro and the ING Group in the Netherlands, as well as DNB bank in Norway. A number of Swiss banks have also faced criminal proceedings arising from major bribery cases in Brazil and Malaysia. However, penalties are very low in Switzerland.

Currently, the Swiss Office of the Attorney General (OAG) is investigating charges against UBS, following a complaint filed by civil society organisations Public Eye and PLAAF, accusing the bank of laundering Congolese public funds, some allegedly linked to bribery. The OAG is also investigating civil society complaints alleging that Swiss banks laundered hundreds of millions of funds embezzled by the former Governor of the Bank of Lebanon.

As for the professionals in the non-financial sector – such as lawyers, accountants, auditors, real estate agents, trust and company formation agents – they are generally untouched by foreign bribery enforcement. In fact, not all major economies adequately regulate these types of enablers. For example, the US and Switzerland do not require them to undertake anti-money laundering checks, and the OECD WGB has called this out in monitoring reports.

The few cases brought against these professionals show the kind of role they play. In 2013, in one of the few known foreign bribery proceedings against a “Big Four” accounting firm, KPMG paid 7 million euros in the Netherlands to settle charges involving three former audit partners accused of helping a company to conceal bribe payments. At the same time, PwC has been implicated in various scandals and Deloitte and EY faced Malaysian state claims in 1MDB-related proceedings which they settled. In notable 2020 civil case against EY in the UK, significant compensation was awarded to a former EY partner and whistleblower who made adverse findings in a sustainability audit of a Dubai precious metals dealer and alleged an EY cover-up, combined with pressure and intimidation that led to his resignation.

As for lawyers and company formation agents, one enforcement example concerns the law firm Mossack Fonseca, made notorious by the Panama Papers expose in 2016. Soon thereafter, there were reports that the firm had been charged in Brazil in relation to the Petrobras case and that prosecutors in Panama were investigating allegations that the firm facilitated the creation of shell companies used by clients to pay bribes in Brazil. In 2022, Panamanian prosecutors charged the law firm’s founders, among others, but a Panamanian Supreme Court decision that year exonerating one of the law firm’s attorneys has cast doubts about the outcome of the pending case.

The enforcement gap against banks and other relevant service providers needs to be addressed. They should all be subject to due diligence and reporting obligations that are rigorously applied. The liability of service providers should be based on a failure-to-prevent standard and/or a presumption of money laundering. In a recent report, Transparency International made a set of recommendations for closing policy and regulatory loopholes that allow enablers to facilitate financial crime.

In addition, to improve enforcement results, regulatory, oversight and enforcement agencies should be endowed with sufficient independence, resources, capacity and powers.

It is also key to raise standards for non-trial resolutions if enforcement is to have a real deterrent effect. The new guidance in the 2021 OECD Anti-Bribery Recommendation falls short of civil society recommendations to the OECD back in 2016 and 2018 on issues like transparency, judicial review, keeping prosecution as an option, senior-level individual accountability, admission of guilt or responsibility, inclusion of victims of corruption in the discussion and providing for reparation of their harm.

These and other challenges must be addressed by major exporting and foreign-investing countries. This includes countries not party to the OECD Anti-Bribery Convention but bound by similar obligations under the UN Convention against Corruption – countries such as China, India and Singapore that are classified in the “little or no enforcement” category in successive Transparency International Exporting Corruption reports.

The 25th anniversary of the OECD Anti-Bribery Convention is an occasion to celebrate a remarkable milestone and all that has been achieved to date. It is also a time for signatories to commit to stepping up its enforcement, so as to realise the great promise that it holds.