Tag Archives: corruption

Introducing Corporate Compliance Trends, a Website for Anti-Corruption Compliance in Emerging and Frontier Markets

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The need for anti-corruption compliance programs in companies of all sizes in global value chains has never been greater. Since 2006, the U.S. government has settled or prosecuted nearly 300 corruption cases against companies from around the world, including many where the corrupt conduct originated from multinational corporations’ suppliers, vendors, and agents. The average cost of resolving these enforcement actions now tops $80 million.

Beyond the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, new anti-corruption laws with international reach are hitting the books, such as Brazil’s Clean Companies Act, introduced earlier this year. Similarly, many international bodies, including the Organisation for Economic Co-operation and Development (OECD) and the International Chamber of Commerce, have introduced conventions and norms meant to combat bribery of foreign officials. Few doubt that this growing global trend toward rooting corruption out of international business conduct is here to stay.

Still, as a recent study found, the number of global companies with anti-corruption policies has increased by only 1 percent over the past two years, and a sizable minority of these companies have yet to implement even the most basic of compliance programs. Nearly 60 percent of global companies surveyed said they never train third parties despite the fact that many compliance actions have resulted from conduct by agents or intermediaries.

While governments and international organizations set anti-corruption rules and standards, and while law enforcement agencies around the world aggressively pursue potential violations, many companies simply lack sufficient practical knowledge on how to comply with these new global norms. Understanding what effective anti-corruption compliance looks like and how to set up internal compliance programs that mitigate the risk of corruption is an especially daunting challenge for firms operating in emerging and frontier markets, where the Center for International Private Enterprise (CIPE) has worked since 1983 with local partners such as chambers of commerce, business associations, and economic think tanks.

To share our experiences from supporting private sector-focused anti-corruption programs in high-risk countries around the globe, and to help advance international best practices on anti-corruption compliance in these countries, CIPE is launching this new website, Corporate Compliance Trends.

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Citizens Work Together to Fight Corruption in Lebanon

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A lab technician went to the office of a public official to renew her work contract with a municipal laboratory in northern Lebanon. Several days after submitting her request, the official’s secretary invited her to come to his office. Hoping to finally receive his signature on her contract renewal, the young woman arrived at the office only to find that he wanted to get her alone behind closed doors, where he allegedly proceeded to make verbal and physical sexual advances on her.

She fled the scene and tried to see if she could get her contract renewed through another government department, which only referred her back to the same official. Having no other alternative, the young woman went back to the official’s office in January 2014, but this time she was prepared with a hidden camera to capture his behavior on video.

In the mountains of Chouf, residents of Brih and neighboring villages were displaced during the 1975-1990 Lebanese civil war. Their lands were subsequently occupied by other families and, rather than evacuating the lands and returning them to their original owners, the Ministry of Displaced Persons in Lebanon ran a program to offer compensation to the displaced.

But in 2014, although other villages had been paid, the former people of Brih still had not received their compensation. When they submitted a complaint to the Ministry, it claimed that the payment had been issued. But with residents presenting evidence that they had never received compensation, the question arose: where had the funds gone?

These are the types of cases that Lebanese citizens report to the Lebanese Advocacy and Legal Advice Center (LALAC), an initiative launched by the Lebanese Transparency Association (LTA) as part of its program with CIPE to combat corruption in Lebanon. Through LALAC, citizens can report corruption by calling the LALAC hotline, writing a letter or e-mail, or visiting one of three centers in person. LALAC provides clients with legal advice on the process of vindicating their rights (short of providing representation in court) and tracks the progress of their cases.

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Businesses in Eastern Ukraine Threatened by Instability

(Photo: Kyiv Post)

(Photo: Kyiv Post)

When protesters first took to the streets in Ukraine’s largest cities in 2013, economic concerns were at the top of the agenda. As the geopolitical situation in eastern Ukraine has heated up, economic prospects in the contested regions of the country have only gotten worse. Yet average Ukrainians are still working for a more prosperous and democratic future.

Since the Maidan protests, the business climate in the Donbass, the easternmost, coal-mining region of the country, has taken a turn for the worse. Amid the turmoil, local businesses – in particular small and medium-sized firms – have suffered.  Many have been shaken down for so-called “donations,” and in some cases have been looted and ransacked.

A recent article in the local press has documented fines, bribery, and other abuses committed against local businesses by police departments and government officials. Many people have even left the region, heading either for Western Ukraine or even Russia. The owners of small businesses have left their homes and their enterprises behind. They are unsure when they can return, or whether they will find their businesses in the same condition.

As one CIPE partner in the Donbass noted, “Public sector bribes have grown by several times what they were prior to the strife, and not one Grivna [the Ukrainian currency] is going to the budget.” He confirmed that many business owners and heads of banks in the region are being forced to leave their businesses. “Because of roadblocks and military activities, there are just no opportunities to run a business,” he laments.

The pro-European, Kiev-based protests that led to the ouster of former President Viktor Yanukovich made Ukraine a hot topic in international news. Yet in many ways, the situation that set international media ablaze in early February is really a much older story.

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Who Would Win the World Cup if it Was Decided By Corruption Perceptions?

Sixteen teams made it through the group stage in the 2014 World Cup to the knockout round and are fighting towards international bragging rights for the next four years. What if, instead of scoring goals to advance, each country won its match-up based on who has the least amount of corruption?

Each year, Transparency International releases its Corruption Perception Index: a country or territory’s score indicates the perceived level of corruption on a scale of 0-100, where 0 means that a country is perceived as highly corrupt and 100 means that it is perceived as very clean.  Based on the Corruption Perception Index, check out which country would come out on top:

Corruption Bracket

 

Anna Dawson is a Communications Coordinator at CIPE. 

Multinationals Discuss Issues with Supply Chain Compliance in Pakistan

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“I see a great need of vendor supply chain training providers to run the show effectively. If we want growth, train the relevant person first” — Ayesha Muharram, Chief Internal Auditor and Country Compliance Officer, Glaxo Smith Kline.

Lately it has become a requirement among multinational companies to comply with international anti-corruption laws such as U.S. Foreign Corrupt Practices Act (FCPA), U.K. Bribery Act, Canadian Corruption of Foreign Public Officials Act, Brazilian Clean Companies Act. Under these laws, multinational companies need to take appropriate actions for ensuring clean business — including making sure that all of their suppliers, vendors, and subsidiaries around the world are following the rules.

To help local companies and multinationals working in Pakistan deal with this challenge, CIPE Pakistan initiated a discussion on issues related to supply chain compliance in multinational companies. In collaboration with the Overseas Investors Chamber of Commerce & Industry, CIPE conducted a first focus group meeting of the Value Chain-Unethical Practices project. This first meeting was used to conduct a gap analysis, focusing the capacity building needs and the given standards in Pakistan.

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How Does Corruption Affect the Alibaba IPO?

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Last week Chinese e-commerce giant Alibaba filed paperwork with the U.S. Securities and Exchange Commission for an initial public offering (IPO). As one of the largest companies in the world’s second largest economy, Alibaba represents an enormous opportunity for investors. They are expected to raise between $15 and $20 billion, making this IPO potentially bigger than Facebook’s.

While Alibaba already handles more sales volume than eBay and Amazon combined, there is added room for growth as internet penetration in China is only around 45 percent. Online shopping is projected to increase at a rate of 27 percent per year as the still-poor country grows richer and more connected.

Regardless of the perceived opportunities, foreign investors are not entirely convinced that Alibaba will be a good buy. The attitude toward Chinese companies in general is one of skepticism and uncertainty – perpetuated most recently by concerns about the transparency in auditing practices. Alibaba’s complex network of businesses and a lack of details surrounding partnerships with domestic logistics companies also raise some questions for potential investors.

In all the buzz surrounding Alibaba’a IPO, however, there is a missing element that could be cause for additional concern. By selling shares in the U.S., Alibaba opens itself to more exposure to the Foreign Corrupt Practices Act (FCPA), a piece of legislation that makes it illegal for companies to bribe officials of foreign governments. A number of multinational companies from around the world have already been ensnared in FCPA investigations as a result of corruption in China and the idea that Alibaba has grown within a market rife with corrupt acts could be cause for increased suspicion. Compounding this risk is the fact that the company has been the subject of investigations by domestic authorities in the past.

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2014 Global Editorial Cartoon Competition Open!

2012-2013 1st Place Winner, Democratic Governance category. By Seyedbehzad Ghafarizadeh (Iran/Canada).

2012-2013 1st Place Winner, Democratic Governance category. By Seyedbehzad Ghafarizadeh (Iran/Canada).

Can you create a picture that’s worth a thousand words?

Cartoons have an unparalleled ability to communicate universal ideas across cultures and language barriers. Cartoonists have long played a key role in the development of democracy — from the American and French revolutions through to defending media freedom and critiquing corruption in countries like Ecuador today.

CIPE’s Editorial Cartoon Competition is open to amateur and professional cartoonists of all ages from any country. First place winners in each category are eligible for a cash prize of $1,000.

Do you have something to say about Democracy, Transparency, or Corruption? Draw attention — enter your cartoons before June 2, 2014!

Jon Custer is the Social Media / Communications Coordinator at CIPE.