The Current View of Global Anti-Corruption and Bribery
 
 
 The Current View of Global Anti-Corruption and Bribery
 
 

In today's world, bribery and corruption unfairly help to accelerate the growth of individual businesses. Even though it is illegal, many corporations stand to benefit from corrupt practices that give their companies an advantage in national and global markets. However, the widespread and long-term effects of corruption and bribery on business, nations, and the world are anything but positive.

That is not to say corruption and bribery are good for individual businesses either. Even though it can accelerate growth in the short term, it hurts businesses in the long-term. Investors are hesitant to become involved with businesses suspected of corruption. Once corruption is exposed, consumers and others lose faith in the business. The company is left to pay heavy fines and legal fees, all the while trying to insure investors and consumers that the company is still viable and trustworthy.

It is not only in business. Corruption and bribery feed and fuel organized crime and terrorism as well. It can lead to an increase in crime, as well as crime-fighting government agencies. Corruption and bribery feed the black market and ends up supporting organized crime. Just look at third world countries where bribery and corruption is widespread to see the effects it has on organized crime. In these countries, crime and terrorism can reign.

The Textbook Definition of Bribery
 

Since this article focuses on bribery and corruption, it may be helpful to start out by learning the definition of each of these words. The definition of bribery is the act or practice of offering a bribe, although the legal definition varies slightly from country to country. A bribe can be tangible or intangible. It can be money, rewards, promotion, and gifts. It can also be travel, entertainment, or hospitality. Once again, the legal definition of bribery varies from country to country, but bribery - no matter where you are in the world - is offering incentive to someone to act or not act in a certain way in order to gain unfair advantage.

The Textbook Definition of Corruption
 
 

The definition of corruption is illegal behaviour, especially by those who hold some kind of power. If a public official can be bribed, then it can be said that the public official has been corrupted or is corrupt. If a company or other legal entity bribes a public official or legal entity, it can be said that company is using the power of their resources (the bribe) to corrupt an official or legal entity. That company engages in corrupt business practices. The company is guilty of corruption and is corrupt. Bribery is the main form of corruption in business and governments.

Fighting Corruption and Bribery in Business
 
 

For many years, many businesses considered bribery as part of the culture - or the cost of doing business. It gave them an advantage over the competition, even if it was an unfair advantage. There was not a big enough deterrent not to engage in this shady business practice. Even when the United States enacted the Foreign Corrupt Practices Act of 1977 - or FCPA - many businesses did not know about it or disregarded it because enforcement was a rare thing. Plus, many associated FCPA laws with large payments to foreign governments. They did not associate it with their business where they perhaps only bribed a customs officer.

That all has begun to change in recent years. Enforcement is not rare anymore, and corporate compliance programs have started to turn the act of bribery from "the cost of doing business" to a risk that companies want to avoid and eliminate. The billions of dollars in fines, penalties, and confiscation of profits shows that the U.S. and the world intend to combat bribery and corruption - and enforce the laws against it. In fact, you will be hard pressed to find a nation in the world that does not have laws against bribery and corruption, although some are more stringent than others. It does not mean bribery and corruption do not exist. It always will. It simply means that the world has shifted its focus to shrinking it.

Enforcing Anti-Corruption and Bribery Laws and Regulations
 
 

As previously stated, when the FCPA was enacted in 1977, enforcement was rare. The FCPA dealt with the bribery and corruption by businesses to foreign officials and governments. While the regulations might have acted as a deterrent, the lack of enforcement did not make it a big enough deterrent for businesses. In fact, it was not a statute that the Department of Justice aggressively prosecuted. That means the risk was not high enough for businesses to fear the FCPA or the consequences.

However, that has changed in recent years. In 2004, the Department of Justice (or the DOJ) only prosecuted a few cases. This had been the norm since the FCPA was enacted. But by 2010, that had increased to over 70 cases with over $1 billion in penalties collected over one 12-month period. The Department of Justice has stated that the trend of prosecuting cases of bribery and corruption will continue to grow. FCPA enforcement is stronger than ever, and it is only going to continue to get stronger.

With increasing enforcement, global businesses must now face the challenge of competing in countries where the standard practice is to make or offer bribes - while staying compliant with the FCPA. This is true regardless of what industry the company is in. Regulators are focusing on all industries, not just those that have to do with national security or defense. The FCPA is being enforced with oil and gas, tobacco, medical devices, and all other industries.

Compliance Programs

The question is how does a company compete in other countries while staying compliant with the FCPA? Companies cannot always control what employees do. One corrupt employee can cause a company to face heavy fines, have its profits revoked, and could even mean jail time for individuals within the company. The answer is an anti-corruption compliance program.
 
 

A compliance program is defined as a formal program that makes clear a company's policies, procedures, and processes to help to deter and prevent employees and officers of the company from breaking laws and regulations. An anti-corruption compliance program is created to try to prevent corruption by any employees and officers. It serves as an operational program, as well as a code of ethics.

A compliance program applies rules, policies, and procedures to prevent corruption within the company. However, it also addresses risks and how the company handles and manages those risks. Although a compliance program takes into account government regulations on fraud and corruption to make sure the company stays complaint, it also creates internal regulations and rules for internal compliance to further reduce the risk for fraud or corruption.

It is important that you recognize that a compliance program is a formal program used to prevent and combat corruption inside companies.

The Purpose of Anti-Corruption and Bribery Regulations

It is important to remember the purpose of government anti-corruption regulations. It is to promote transparency in business and to create a level playing field for all businesses. Believe it or not, businesses fare better when there is less corruption.

Instead of worrying about making bribes in order to be successful, businesses can focus their efforts and resources on their products and services. They can also offer those products and services at better prices while lowering their bottom line.

Real World Examples of Bribery and Corruption

If you are new to the concept of bribery and corruption in business and government, a lot of this may seem foreign to you, especially if you have never done business on a global scale.

You may be asking?

1. Why do companies offer bribes?

2. What do they want in return?

3. What advantages do they gain?

4. How does this truly affect businesses who will not open themselves up to this illegal way of doing business?

Let's try to answer your questions by giving real world examples. The retail giant Wal-Mart is the perfect example. It has been accused in the past of bribing Mexican officials. Why? To gain permits to open stores quickly. Instead of going through what may be a lengthy process to get a permit, it's not an uncommon practice to bribe an official to get the necessary permits quickly. This can happen with foreign officials, as with the alleged Wal-Mart case, but it can also happen with public officials in the U.S., either on a national or local level.

Here are some more real world examples of bribery or suspected bribery by companies to officials:

-          A Morgan Stanley executive was accused of bribing an official at a state-owned Chinese company. Why? To get business for the firm and to gain an unfair advantage.

-          In April of 2010, Daimler agreed to pay $185 million in penalties. Why? Daimler gave commissions to foreign officials in 22 countries to obtain government contracts for their cars. This gave them an unfair advantage.

-          Alcatel was implicated for bribing officials in Costa Rica. Why? To gain cell phone contracts - or gain an unfair advantage

-          The government took a look at Hewlett Packard to determine if former employees engaged in bribery to help a Germany subsidiary land a contract in Russia. Again, this would have been to gain an unfair advantage.

As you can see by these examples, companies offer bribes to gain some sort of an advantage over their competitors. What they want in return varies based on the company. Some want contracts while others want expediency. There is no one reason for offering bribes or corrupting officials.

There is something else you can see by looking at these real world examples. You can see what they may have gained, but you can see what it cost them as well. Those who are convicted get levied with heavy fines. But even if only suspicion exists, the public relations nightmare that comes with media coverage can cost them investors and customers.

But what does bribery and corruption cost other companies? What does it cost the companies who remain compliant with laws and regulations? If their competitors - either in the U.S. or abroad - regularly engage in bribes, it can make it harder for that company to gain contracts, sales, and etc. Lakeland Industries said that its inability to pay bribes because it follows U.S. laws has resulted in lower sales.

Think of it this way. Company A does not offer bribes, because they follow regulations and laws. Company B regularly offers bribes to officials to secure contracts for their company. Company B simply "greases the palm" of the right official to make sure the contract they want is awarded to them. Company A cannot compete with that. Company A may offer a better product or service, but because they choose to do business legally and ethically, their sales and profits suffer. In short, bribery and corruption gives those companies who offer bribes an unfair advantage over ethical companies that do not.

 The Evolution of Organized Crime and Its Connection to Terrorism
 
 

Corruption does not only exist in businesses who seek to gain unfair advantage of competitors. Organized crime would not exist without corruption, and it operates in the same way as when a business executive "greases a palm" to get an overseas contract. Someone who holds a position of power is influenced by a bribe to act or not act within their powers - or to use their powers to give an undue advantage to another individual or group.

The Definition of Organized Crime

Organized crime is defined as illegal activity to gain profit. It happens in cities, states, and internationally. Most organized crime operations keep their operations a secret, and their operations are only discussed by word-of-mouth. The act of participating in an organized crime group in the United States is called racketeering.

Organized crime depends on corruption within the society it exists to be successful. Crime organizations sometimes have connections with or compromise people in power, such as police officers, judges, lawmakers, and legitimate businesses in order to gain the opportunity or advantage they need. To gain the opportunity or advantage, they use bribery and blackmail.

The History of Organized Crime

Organized crime as we know it today got its start back in the 1800's with street gangs. Street gangs were groups of people, such as immigrants, who banded together for their own protection and to improve their lives. However, these were not peace-loving people with the goals of equal pay or opportunities in mind.These gangs used violence and illegal methods to get the protection and better lives they wanted.

One of the most notorious groups like this was the Forty Thieves in New York who found protection from corrupt police officers. The Forty Thieves was an Irish-American group who lived in poverty and only had low paying jobs - if they had a job. The members of the group were given crimes to commit. Members even received quotas for the number of crimes they had to commit as part of the group.While they may have started out as a small group, they grew large. They even got involved in politics. William "Boss" Tweed became a public official, then a U.S. senator before going to prison for corruption.

The Three Ways Organized Crime Groups Form
 
 

There are three ways that organized crime groups tend to form in the United States. There is family, business, and through gangs. When an organized crime group forms within a family, it is called a mafia. A mafia runs on a hierarchy within related families. They train family members and use religion, culture, and traditions to build strength and loyalty.

The second way an organized crime group can form is through business. Legal corporations begin illegal activities in order to make more money. They may get involved in drug trafficking, insider trading, or money laundering. Corrupt officials are utilized to help move shipments or move money.

The third way is through gangs, something we already briefly touched upon. Gang members are often recruited on the streets. The gangs grow in numbers by recruiting those with a history of crime and through connections made in prison.Gangs may get involved with illegal activities such as prostitution, drug trafficking, firearms, or sex trafficking. Those who join gangs are usually looking for power or a place to belong. Examples of gangs in the United States are the Aryan Brotherhood, Latin Kings, and Hells Angels.

The Evolution of Organized Crime

In the past, the greatest organized crime group was the Italian-American Mafia, or the La Coca Nostra (LCN). The LCN's corruptive influence spread through several sectors of the American economy and society before its existence was ever recognized. If it was recognized, the threat it posed was not - or was not taken nearly as seriously as it should have been. It was not until the 1951 hearings by Senator Estes Kefauver, Chairman of the Senate Select Committee to Investigate Organized Crime in Interstate Commerce that more was brought to the problem of organized crime in the United States.

In 1957, the New York State Troopers' raid of a mob leaders meeting in New York further revealed the threat presented by the mafia and led the way to creating new strategies to combat organized crime. The Department's Organized Crime Strike Forces was created in 1961 by then Attorney General Robert F. Kennedy. In 1969, Congress found that the LCN posed a threat to the American economic system, because it had infiltrated legitimate business. In 1984, the President's Commission on Organized Crime - or PCOC -- revealed that the money laundering schemes of the LCN and other organized crime groups were allowing these groups to thrive.

All of this brought about new tools and strategies that give authorities new ways to fight organized crime. These tools and strategies include money laundering statues, electronic surveillance, witness protection, and the Racketeer Influenced and Corrupt Organizations statutes. What is more, prosecutors started to shift their focus from breaking up organized crime groups to confiscating their illegally-gained profits.

Although the LCN still exists today, the United States government has now recognized the seriousness and danger of threats from international organized crime groups that participate in transnational crimes, or crimes that extend across national boundaries. Most of the international organized crime groups that exist in the world have a presence in the United States.

These crime groups are growing in size, not getting smaller. They are also growing in power and influence. This means they pose a threat to national security. They operate with the help of corrupt government officials and threaten U.S. interests by undermining competition in world markets, committing cybercrimes and fraud, and growing their trafficking and smuggling networks. They are also ties between international organized crime groups and terrorist organizations because the terrorists need the organized crime networks for money and support.

The Connection Between Organized Crime and Terrorism
 
 

At first glance, organized crime and terrorists are a world apart. Organized crime groups want money and power. Terrorist groups want death and destruction to those they deem their enemies. While crime organizations focus on their greed, terrorists focus on their ideology. Yet, these two groups are increasingly working together to both of their benefits.

Below are some examples:

1.       The Indian criminal Aftab Ansari is suspected to have used ransom money from kidnappings to fund the September 11th terrorist attacks.

2.       Nuclear transfers from Pakistan to North Korea and Iran happened with the help of Pakistani scientist Abdul Qadeer Khan. He used government cargo planes to make the transfer, as well as false papers and front companies to help make the transfer possible.

While terrorists and organized crime groups work together for logistical reasons, they also work together for tactical reasons. Terrorist groups get weaponry and munitions from organized crime groups who procure them, as well as funding.They also use routes established by organized crime groups to transfer goods.Terrorist groups resort to organized crime themselves to help fund their activities.

That is not to say organized crime groups do not get help from terrorist organizations. Terrorist groups provide training to criminal groups on using guns and explosives. They can also provide passage through territory controlled by terrorists.

Together, they are growing in power. In the past, they helped each other to acquire conventional weapons. In today's world, they also join forces to get their hands on nuclear weapons and weapons of mass destruction.

The link between criminal and terrorist groups are giving terrorist groups the power to expand and orchestrate large attacks. They use criminal sources, money, and travel routes. In order to combat terrorism, the United States government must also tackle organized crime and corruption. It will be increasingly difficult to disable terrorist networks if we do not also tackle the criminal networks that help support them.

Types of International Organized Crime

International crime organizations commit crimes to make money. Greed is their motivation. Listed below are some of the types of crimes that international crime organizations commit:

1.       Drug trafficking

2.       Human trafficking

3.       Migrant smuggling

4.       Terrorist financing

5.       Financial fraud

6.       Money Laundering

7.       Weapons Trafficking

8.       Cybercrime

The Definition of Terrorism

When most of us think of terrorism, we think of Islamic extremists. However, not all terrorists are Muslim and not all terrorists commit acts of terrorism based on their religious ideology. Terrorism, by definition, is premeditated acts that are motivated by either a social or political agenda. They usually target citizens, not other combatants or militaries. In addition, terrorists are not typically affiliated with a national government. Instead, they are sub-national groups.

The Five Types of Terrorism

As we stated in the last section, not all terrorist groups are Islamic extremists.There are different kinds of terrorism; therefore, there are terrorist groups with different ideologies and purposes. There are five types of terrorism. The five different types are listed below.

1.       Dissent terrorism is when a terrorist group rebels against its own country.

2.       Religious terrorism is when terrorist groups are motivated by their religion

3.       State-sponsored terrorism is when terrorist groups act on behalf of a state or government

4.       Terrorists and the Left and Right are groups that operate by their political ideology.

5.       Criminal terrorism is when terrorists commit acts to aid in criminal profit. An organized crime group can commit an act of terrorism.

Combating International Organized Crime and Terrorism through Anti-Corruption Legislation
 
 

The increasing amount of anti-corruption legislation, as well as an increased focus on organized crime, may well be the keys to successfully combating both organized crime and terrorism. After all, terrorists rely on corruption as much as violence, because that is how they get protection and state sponsorship.

Just think about the state the world is in. Iran sponsors terrorism and performs cyberattacks. Syria is in a civil war. North Korea is posing a bigger threat every day it seems. Although sanctions and export controls can be put into place with these countries, these controls are a challenge to sustain because of evasion, jurisdiction, and competing policies. Authorities are discovering that using tools such as the FCPA and the UK's Anti-Bribery Act are a useful supplement in combating the transnational threats these nations pose.

After all, corruption runs rampant in countries that are viewed as global security threats. Iran, Syria, and North Korea rank at the bottom of the "Transparency International's Esteemed Corruption Perceptions Index". The trading partners of these countries are known for corruption as well, such as Venezuela, Somalia, Yemen, Sudan, and Pakistan. Some of these nations are also known for state-sponsored terrorism.

Anti-corruption enforcement helps authorities to enforce sanctions and export control laws. The FCPA gives prosecutors a way to reach beyond our national boundaries and target foreign issuers of U.S. securities, as well as individuals (and companies) with just the smallest connection to America. The threat of significant fines and jail time under the FCPA can be a deterrent for individuals and nations to do business with corrupt regimes.

Let's look at a few real-world examples:

1.       The Swiss-based company Tyco International had to pay more than $26 million in penalties. The penalties were for bribes its subsidiaries paid to Middle Eastern officials, including in Iran and Syria, over a 10-year period.

2.       A Norwegian oil company named Statoil had to pay more than $20 million in fines. They spent millions on remediation as well. This was for bribes made to high-ranking officials in Iran.

3.       The French oil and gas conglomerate Total SA cooperated with authorities. Even though they cooperated, they still set aside $500 million for bribes that were allegedly given to government officials in Iran.

Using the FCPA, the United States authorities can also target known organized crime groups. Since the FCPA gives them the power to seize their profits from illegal activity, as well as levy fines and lengthy prison sentences, they can disrupt the flow of money from crime groups to terror organizations, as well as disrupt terror groups involved in organized crime.

 

 
 
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