Out-Law / Your Daily Need-To-Know

Allegations of government bribes investigated most often in China, report says

18 Jan 2012, 4:50 pm

Chinese government officials were the subject of bribery investigations more often than officials of any other country in the past 35 years, a report by bribery analysts has said.

In its Global Enforcement Report 2011, TRACE said that 41 actions of enforcement had looked at whether Chinese officials had been bribed between1977 and July last year - three more than have been recorded for Iraq. Investigations were launched into whether payments made to Nigerian officials were illegal 31 times, whilst enforcement action for cases of alleged bribery was initiated against UK officials on 3 occasions, the report said.

TRACE said the figures were based on "a summary of all known international anti-bribery enforcement actions" since the US' Foreign Corrupt Practices Act (FCPA) came into force in 1977. Under the FCPA US-listed companies can be fined for illegal corrupt practices it is involved in abroad. The data includes all known anti-bribery investigations initiated, even if they were eventually dropped or did not lead to prosecutions. The data does not account for unknown cases that have been shrouded in "secrecy" and are not public knowledge, the report said.

The "extractive industries" were investigated on 68 occasions over alleged bribery payments made to Government officials – more often than any other sector, TRACE said. The number of cases opened in relation to alleged wrongdoing in the aerospace, defence and security industries totalled 43, whilst those in the manufacturing and services industries were investigated on 42 occasions - the same number of investigations started in relation to health care businesses.

Effective enforcement in one industry may lead other companies within the sector to disclose illegal activity, TRACE said. There has also been a recent upsurge in the number of investigations opened into alleged illegal payments by those in financial services, it said.

"Any enforcement activity in an industry raises awareness of risk within that industry and can lead to higher levels of self-disclosure. In addition, the 34-year time frame includes numerous early FCPA cases brought by the United States that may distort more recent industry-related enforcement trends. The financial services sector has been subject to a rapid increase in enforcement, with the number of actions involving the industry more than doubling over the past year from 11 to 26 cases/investigations," the TRACE Global Enforcement Report 2011 (11-page / 2.06MB PDF) said.

The vast majority of investigations into foreign bribery have been instigated by US authorities, the analysts said. Most countries did not enact laws enabling investigations into foreign bribery to be undertaken until after 2000. Authorities in the UK have initiated the second greatest number of enforcement actions in relation to foreign bribery since 1977, the report said.

"Twenty-four countries pursued 632 foreign bribery enforcement actions between 1977 and July 2011, including known matters still in the investigative stage. The United States established the strongest record in the period, undertaking nearly 75 percent of all actions [468 in total]. This record is noteworthy, even given that the United States passage of the world’s first foreign bribery law— the Foreign Corrupt Practices Act of 1977—gave the country a considerable head start on enforcement," the TRACE report said.

"The United States has accumulated over 14 times as many anti-bribery enforcement actions as the country with the next highest total, the United Kingdom [recording 32]. Many countries worldwide have not pursued a single enforcement action in the 34-year period," it said.

New anti-corruption laws came into force in the UK last year in a bid to simplify complex bribery laws previously drafted.

Under the Bribery Act foreign companies that operate in the UK can be prosecuted for bribery offences, regardless of where the alleged bribery has taken place and unless the suspect activities are permitted locally.

Under section two of the Act it is an offence if a person requests, agrees to receive, or accepts an advantage, financial or otherwise, with the intention that they or someone else perform a "relevant function or activity" improperly. Under the Act, the maximum penalty for individuals found guilty of bribery is 10 years' imprisonment and an unlimited fine.

The UK's Serious Fraud Office is chiefly responsible for bringing prosecutions under the Act. The independent Government department is responsible for investigating serious or complex fraud and corruption.