The number of sanctions brought against companies and individuals for the bribery of foreign government officials appears to be on the decline, but that could be because these cases are taking much longer to resolve, according to a groundbreaking new report published today by the Organization for Economic Co-operation and Development.

The OECD Foreign Bribery Report presents an analysis of all foreign bribery enforcement actions that have been completed since the OECD Anti-Bribery Convention entered into force in 1999. It further details how bribes are paid, where they are paid, and to whom, as well as who is being sanctioned for bribery.

According to the report, a total of 42 foreign bribery cases concluded last year, compared to 43 in 2012. Those numbers are significantly lower than the record 78 foreign bribery cases resolved in 2011, and 68 cases resolved in 2010.

The sharp decline in enforcement actions compared to 2011 numbers may be explained by the fact that the average number of years to conclude foreign bribery cases has steadily increased over time. For example, it took an average of 7.3 years to conclude the 42 foreign bribery cases resolved last year, compared to 5.5 years and 4.3 years in 2012 and 2011, respectively. Almost half of all cases (46 percent) took between five to ten years to resolve.

“The fact that cases are taking longer to bring to a close could be attributable to a number of factors, including the time taken to lodge and hear appeals of convictions or acquittals in foreign bribery cases or increased sophistication of bribery techniques, requiring more resources and time-intensive investigations,” the report stated.  “This increase could also corroborate anecdotal evidence that companies and individuals are less willing to settle foreign bribery cases and that settlement procedures are taking longer as a result.”

As of December 2013, 17 of the signatory countries have sanctioned 263 individuals and 164 companies for foreign bribery, bringing the total to 427 enforcement actions concluded from 1999 to June 2014. Additionally, 390 investigations are underway in 24 of the 41 parties to the OECD Anti-Bribery Convention.

The United States resolved the most foreign bribery cases by far, bringing sanctions in connection with 128 separate foreign bribery cases since the OECD Anti-Bribery Convention entered into force. With the second highest number of enforcement actions, Germany has sanctioned individuals and companies for foreign bribery in connection with 26 separate cases. With the third highest number, Korea resolved 11 foreign bribery cases.

According to the analysis, sanctions were imposed in 69 percent of foreign bribery cases by way of settlements, including through the use of non-prosecution agreements and deferred prosecution agreements.

The report also looked at the size of the company involved in the bribery. In 60 percent of the cases, the sanctioned company had more than 250 employees, while only four percent were small and mid-sized companies. In another 36 percent of cases, the size of the company involved was not known.

Most foreign bribery enforcement actions spanned four sectors: extractive (19 percent); construction (15 percent); transportation and storage (15 percent); and information and communication (10 percent).

Culpable Individuals

More than half the cases involved senior management. In 41 percent of the cases, specifically, management was aware of and endorsed the bribery, whereas the CEO was aware of and endorsed the bribery in 12 percent of cases.

The report also detailed the role that intermediaries play in these cases. Of the 304 cases in which intermediaries were used, 41 percent involved agents—such as sales and marketing agents, distributors and brokers based either locally in the country where the bribes were paid, or elsewhere.

Another 35 percent of intermediaries were corporate vehicles. These include subsidiary companies, local consulting firms, companies located in offshore financial centers or tax havens, or companies established under the beneficial ownership of the public official who received the bribes.

“The overwhelming use of intermediaries in foreign bribery cases demonstrates the need for enhanced and effective due diligence, oversight and application of the company’s compliance programs to third parties, whether individuals or companies,  in international business transactions,” the report stated. “Compliance programs should focus specifically on due diligence with respect to agents and on verifying the rationale and beneficial ownership of other companies involved in the transaction.”

Bribes were promised, offered, or given most frequently to employees of state-owned or state-controlled companies (27 percent), followed by customs officials (11 percent), health officials (7 percent) and defense officials (6 percent). In the majority of cases, bribes were paid to obtain public procurement contracts (57 percent), followed by clearance of customs procedures (12 percent).

Reporting Practices

In most cases, foreign bribery was brought to the attention of authorities through self-reporting by defendant companies or individuals. Companies that self-reported became aware of the foreign bribery in their international operations primarily through internal audits (31 percent) and merger and acquisition due diligence procedures (28 percent).

The second most common source of foreign bribery cases were investigations initiated directly by law enforcement authorities (13 percent) and foreign bribery cases that came to light in the context of formal or informal mutual legal assistance between countries (13 percent). Whistleblower reports and media coverage rarely instigated a foreign bribery investigation (2 percent and 5 percent, respectively).