Anti-bribery enforcement actions increased dramatically on a global scale over the past year, with the extractive industry facing the brunt of that activity.
Those are just a couple of findings from the 2016 Global Enforcement Report (GER) conducted by anti-bribery watchdog TRACE International. TRACE’s GER report provides an updated summary of global anti-bribery enforcement trends, based primarily on cases and investigations tracked in the TRACE Compendium, an online database of cross-border corruption cases.
Neither the TRACE Compendium nor the 2016 GER include matters involving domestic companies bribing domestic government officials. The alleged bribe must have a cross-border component and must involve a government official.
According to the report, from 2006 through 2016, the United States continued to bring the highest number of enforcement actions over the last decade. Of the global total of 325 enforcement actions concerning the alleged bribery of foreign officials from 1977 to 2016, the United States brought 225 of those enforcement actions.
Furthermore, U.S. enforcement efforts more than doubled since last year, with 30 total bribery cases in 2016. Each year, the enforcement pipeline will get larger, and then a whole series of cases will come out all at once. “We certainly saw that in 2016,” says Alexandra Wrage, president and founder of TRACE.
“The one message that is very current is whether the pace of the enforcement will stay the same in the United States under the current administration,” Wrage says. Even if anti-bribery enforcement in the United States were to slow down a bit, the rest of the world is stepping up in a dramatic fashion, she says.
According to the report, non-U.S. enforcement actions more than doubled last year. “We are seeing more expertise and more of an appetite to go after these cases, and that’s a trend that’s going to continue,” Wrage says. “They know where to look and how to proceed with these cases. We’ve seen that happen in the United States now for over a decade, and it’s beginning to happen elsewhere.”
Between the level of international cooperation, the sharing of documentation, and the sharing of tips, “this is truly a global regime now,” Wrage says. “I don’t think that should give companies that are not serious about compliance any reason to relax.”
Foreign bribery investigations. In addition to enforcement actions, the United States also continues to dominate foreign bribery investigations over all other countries by a wide margin. Specifically, the United States was conducting 118 out of a global total of 255 active bribery investigations in 29 countries as of the end of 2016, according to the report.
In comparison, the United Kingdom was conducting 29 active investigations—the second highest number after the United States. Europe as a whole, however, represented 106 investigations—approximately 42 percent of all ongoing investigations, closer in line with the United States.
“We are seeing more expertise and more of an appetite to go after these cases, and that’s a trend that’s going to continue.”
Alexandra Wrage, President, TRACE International
Below those leading nations, countries in the Asia-Pacific and the Americas (excluding the United States) trailed far behind, with 8 percent and 3 percent of active bribery investigations, respectively. Africa and the Middle East represented less than 1 percent each.
Domestic bribery. Outside the United States, multiple countries increasingly are focused on investigating bribery of their own government officials, rather than on investigating possible bribery of foreign officials. On a practical level, this means multinational companies are more likely to be prosecuted in multiple countries for violating various anti-bribery laws.
The results of the report indicate that this trend may be on the rise, given that twice as many countries are conducting investigations as have brought enforcement actions last year for the alleged bribery of domestic officials. Brazil is leading the way by far, with 22 ongoing investigations, as of the end of 2016, followed by India (13), China (12), and Nigeria (10).
Region-by-region, Asia-Pacific countries were conducting the most investigations (29 percent); followed by the Americas (26 percent); Europe (24 percent); Africa (18 percent); and the Middle East (3 percent).
From an enforcement standpoint, Algeria brought the most, with nine actions, followed by China (8) and Nigeria (7). African countries have undertaken 29 percent of the 78 enforcement actions concerning alleged bribery of domestic officials, followed by Asia Pacific (27 percent); the Americas (23 percent); Europe (12 percent); and the Middle East (9 percent).
Bribery country-by-country. Chinese officials were the alleged recipients of bribes in almost 100 different enforcement events, more than any other country in the report. Iraq had the next highest number of enforcement events, followed by Brazil, Nigeria, India, and Russia.
FOREIGN & DOMESTIC BRIBERY STATS
Officials in Asia Pacific were the alleged recipients of bribes in approximately 32 percent of enforcement events, followed by Africa with approximately 22 percent, the Americas (including the U.S.) with approximately 18 percent, the Middle East with approximately 15 percent, and Europe with 14 percent.
In the United States, among the 38 countries where U.S. companies and individuals faced a bribery investigation, Chinese officials were the alleged recipients of bribes in 27 investigations, followed by Brazil and India, each with 12.
Among the 96 total countries where U.S. companies and individuals were subject to a bribery enforcement action between 1977 and 2016, Chinese officials were the alleged recipients of bribes in 43 enforcement actions, followed by Nigeria (18); Iraq (16); Mexico (14); India (11); and Russia (11).
Enforcement by industry. According to the report, the extractive industry experienced the highest number of investigations, as well as the highest number of enforcement actions (excluding those conducted or brought by the United States) for alleged bribery of foreign or domestic officials. Specifically, the extractive industry represented 19 percent of all non-U.S. investigations and 27 percent of all non-U.S. bribery enforcement actions.
In total, 33 investigations in the extractive industry were the result of domestic bribery and 30 were from foreign bribery. With enforcement actions, 34 resulted from foreign bribery and 12 were from domestic bribery.
The extractive industry has always been vulnerable to bribery and corruption risk, because the countries that are rich in natural resources also tend to be hot bed areas for bribery and corruption. Heightening the risk of bribery is that many of these countries are dominated by state-owned entities, where interactions with foreign government officials are commonplace.
Trailing not far behind the extractive industry, the engineering and construction industry represented 18 percent of all non-U.S. investigations, and 17 percent of all non-U.S. bribery enforcement actions. In total, 36 investigations in the engineering and construction industry were the result of domestic bribery, and 30 from foreign bribery. With enforcement actions, 18 resulted from foreign bribery, and 11 from domestic bribery.
Trailing not far behind the extractive industry and engineering/construction industry, manufacturing providers represented 14 percent of all non-U.S. investigations and 14 percent of all non-U.S. bribery enforcement actions, according to the TRACE report. In total, 32 investigations resulted from domestic bribery and 15 from foreign bribery. With enforcement actions, 13 resulted from foreign bribery and 12 from domestic bribery.
Many other industries—such as technology, agriculture, retail, entertainment, and real estate—experienced bribery investigations and enforcement actions, as well. “No industry should imagine that they’re exempt from enforcement,” Wrage says.
What’s also important for the compliance profession to keep in mind is that investigations and enforcement actions often come in waves, so if one company is involved in a scheme, enforcement agencies likely will examine that industry to see if others are engaging in the same practices. A more recent example of that is the handful of companies—Bank of New York Mellon, JPMorgan, Qualcomm—that faced enforcement actions for hiring the relatives of foreign government officials.
One of the main lessons from the report on a practical level is that compliance professionals should ensure they have the right team and have a presence in that countries where they are doing business. Even if you don’t have employees on the ground and you’re working through agents, make sure you still go to that country and talk to people on the ground and really understand the risks. “It still surprises me when I meet compliance officers who don’t have a passport,” Wrage says. “You need to get out there and talk to the people who are working in those challenging markets.”
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