TRACE: Bribery enforcement down in 2019

Those are just a few key findings from the 2019 Global Enforcement Report conducted by anti-bribery group TRACE International. The report is a helpful resource for compliance, risk, and legal professionals that want to better understand which countries are enforcing anti-bribery laws or where bribery and corruption are prevalent to guide their risk management efforts.

The report provides a global glimpse into all known enforcement activity—investigations, enforcement actions, and declinations—starting with the first U.S. prosecutions of bribery cases in 1977, following enactment of the Foreign Corrupt Practices Act. The latest data covers enforcement activity through Dec. 31, 2019, and is based primarily on cases and investigations tracked in the TRACE Compendium, an online database of cross-border corruption cases.

The report assesses two types of bribery: the bribery of foreign officials (improper payments made by a foreign company to a government official who is not a citizen of the government initiating the enforcement event) and the bribery of domestic officials (improper payments made by a foreign company to a government official who is a citizen of the government initiating the enforcement event).

The findings, broken down by country and industry, are analyzed in more detail below.

Investigations by industry. According to the latest report, and consistent with previous years, the extractive industries experienced the highest number of investigations of alleged bribery of foreign or domestic officials, excluding investigations being conducted by the United States. They made up 20 percent of all non-U.S. investigations, with 49 non-U.S. foreign investigations and 46 non-U.S. domestic investigations.

This finding is not surprising, given that countries rich in natural resources also tend to be hotbed areas for bribery and corruption. Heightening this risk is that many countries rich in natural resources also are dominated by state-owned entities, where interactions with foreign government officials are commonplace.

Following the extractives industry was the engineering/construction industry, with 34 non-U.S. foreign investigations and 49 non-U.S. domestic investigations (18 percent of all investigations), and then aerospace/defense/security industry, with 40 non-U.S. foreign investigations and 32 non-U.S. domestic investigations (15 percent of all investigations).

Enforcement by industry. From an enforcement action standpoint, excluding those brought by the United States, the extractives industry, too, has experienced the most for alleged bribery of domestic or foreign officials, with 42 non-U.S. foreign enforcement actions and 18 non-U.S. domestic enforcement actions (25 percent of all non-U.S. bribery enforcement actions).

Behind the extractive industry, engineering and construction companies represented the second highest number of all non-U.S. enforcement actions globally, with 24 resulting from domestic bribery and 19 resulting from foreign bribery, according to TRACE. Additionally, manufacturers and services providers saw 16 enforcement actions resulting from domestic bribery and 18 from foreign bribery. These industries were followed by aerospace/defense/security and financial services.

Among U.S. investigations of alleged bribery of domestic and foreign officials, the extractive industries represented 19 percent of all U.S. investigations, followed by financial services with 16 percent, and manufacturers/service providers with 12 percent. The extractive industries also saw the most U.S. enforcement actions, with 18 percent of all such U.S. enforcement actions, followed by manufacturers/service providers with approximately 15 percent and aerospace/defense/security with approximately 12 percent.

Investigations globally. According to TRACE, there were 328 investigations in total concerning alleged bribery of foreign officials being conducted by authorities in 37 countries as of the end of 2019. The United States was conducting 121 investigations, representing 37 percent of all ongoing investigations concerning alleged bribery of foreign officials. European countries currently account for more than half of all investigations—a total of 165—while the Asia Pacific region accounts for 8 percent of ongoing investigations, followed by the Americas (excluding the United States) with approximately 3 percent, the Middle East with approximately 1 percent, and Africa with fewer than 1 percent.

Enforcement actions globally. As of last year, 23 countries concluded 420 enforcement actions concerning alleged bribery of foreign officials. The United States maintained the strongest enforcement record during this period with 279 enforcement actions, representing approximately 66 percent of all foreign bribery cases.

Countries in Europe undertook 115 enforcement actions, approximately 27 percent. Countries in the Asia Pacific region were responsible for approximately 3 percent of the total enforcement actions concerning the alleged bribery of foreign officials, followed by the Americas (excluding the United States) with 2 percent, and the Middle East with fewer than 1 percent.

Overall, the number of global and U.S. enforcement cases involving bribery of foreign officials dropped in 2019, with a 19 percent decrease in U.S. enforcement actions and a 45 percent decrease in non-U.S. enforcement actions. “While 2019 saw a decrease in transnational anti-bribery enforcement actions, the trends are not out of line with fluctuations we have seen in the past,” said TRACE President Alexandra Wrage. “The record-setting Airbus settlement in January makes it clear that the risk of very substantial penalties for companies that don’t take compliance seriously remains real.”