Upholding Integrity — Obligations in Combating Corruption and Bribery

Bribery and corruption represent a critical nexus where ethics, governance, and societal values intersect. These issues have long been a stain on both public and private sectors, creating distrust and distorting fair competition. International bodies and conventions typically define public sector corruption as the abuse of public office or a position of public trust for private gain. Global standards criminalize specific corruption offenses or corrupt acts such as bribery, theft of public funds, trading in influence, embezzlement, extortion, or other abuses of official functions.  

Bribery is the offering, giving, accepting, or soliciting, directly or indirectly, of anything of value in exchange for influence on a government employee, public official, or individual in a position of public trust. Different forms of bribery can be subtle yet impactful in influencing decisions and outcomes. Financial institutions, as key players in the economic ecosystem, bear a profound responsibility in combatting these insidious practices and upholding integrity. 

Bribery and corruption ultimately involve the misuse of power in favor of those who can afford to pay, hindering free economic development, eroding free markets by advancing unfair competition, and resulting in economic inefficiencies. 

Legal Implications and Prevention 

Engaging in bribery and corruption carries significant legal and ethical implications. From a legal standpoint, bribery is a criminal offense in most jurisdictions, punishable by hefty fines, imprisonment, or both.  

• United States: The U.S. Foreign Corrupt Practices Act (FCPA) prohibits the bribing of foreign officials and establishes criminal and civil liabilities for payments of bribes by U.S. persons or companies to foreign government officials. The Foreign Extortion Prevention Act (FEPA) amends U.S. bribery law to make it illegal for any foreign official to demand, seek, receive, or accept a bribe from either a U.S. person or a U.S. company or from any person while in the United States, in connection with obtaining or retaining business. 
• United Kingdom: The UK Bribery Act establishes company liability for bribery acts committed by persons acting on behalf of the company. A company can be held liable in the UK for acts of corruption committed by directors, employees, agents or subsidiaries anywhere in the world. 
• European Union: The EU Convention against Corruption Involving Officials aims to ensure that each Member State takes the necessary measures to criminalize active (offering or paying a bribe) and passive (receiving the bribe) corruption involving public officials. 

In addition to national and regional regulations, financial institutions and other private-sector firms must emphasize the importance of compliance with anticorruption laws and ethical standards within their organizations. Implementing an effective robust anti-bribery and anticorruption compliance program, conducting proper due diligence on customers and business partners, and encouraging transparency and cooperation are key elements in preventing potential corruption.  

Case Study: SAP SE 

German software company SAP SE in January 2024 paid more than $220 million to settle investigations by the U.S. Justice Department and Securities and Exchange Commission (SEC) regarding violations of the Foreign Corrupt Practices Act. The investigations found that SAP paid bribes to officials in South Africa and Indonesia to secure government contracts. SAP entered a deferred prosecution agreement and will pay a criminal penalty and forfeiture. The company also agreed to ongoing cooperation and compliance measures, including restructuring and enhancing its compliance program. The case highlights international efforts to combat corruption and emphasizes the importance of corporate cooperation in investigations. 

The Biden administration in 2021 established the fight against corruption and kleptocracy as a core national security interest.  FinCEN in 2022 published an advisory to urge financial institutions to focus their efforts on detecting the proceeds of foreign public corruption. Financial institutions can decrease the risk of bribery and corruption by reporting suspicious activities, supporting anticorruption initiatives, and advocating for ethical business practices. Risks and red flags that should trigger additional scrutiny include: 

• Third-party and supply chain – Most FCPA-related enforcement actions against corporations have involved third parties, and payments through intermediaries, including individuals and organizations acting in a representative capacity such as agents, consultants, and suppliers. 
• Geography – The transaction or client is located in a country known for widespread corruption or funds are moving to and from countries with which the customer—especially a public official—does not appear to have ties. 
• Industry – Some characteristics of industries that make them inherently higher-risk for bribery and corruption include the industry’s regulatory complexity and transparency, the involvement of governments or state-controlled entities in the industry, the industry’s scale, and its complexity in terms of typical supply chain and delivery channel relationships.  
• Customer – the customer has a reputation for unethical conduct, a history of improper payment practices, or has shown a willingness to violate the law. 
• Politically Exposed Persons (PEPs) – the use of third parties to shield the identity of foreign public officials seeking to hide the origin or ownership of funds or accounts held in the name of intermediate legal entities whose beneficial owner may be tied to a kleptocrat or a family member. 

Real-Life Dangers of Corruption 

Corruption can result in not just inefficiencies, but also loss of life. For example, corruption played a significant role in Türkiye’s February 2022 earthquakes, involving connected construction companies, inadequate audits, and impunity for completed construction projects that may have not been up to code, leading to a decline in anti-corruption rankings. Despite being prone to earthquakes, the country has failed to enact crucial legal reforms and enforce building regulations effectively. The 2018 Zoning Amnesty further exacerbated the situation by legalizing unsafe constructions without proper earthquake checks. Moreover, funds allocated for earthquake prevention were diverted to unrelated projects, resulting in devastating consequences during recent earthquakes.  

The International Monetary Fund (IMF) has also written a working paper discussing the devastating effects corruption and natural disasters. The working paper assessed that corruption increases the number of disaster-related deaths by undermining the quality of public infrastructure, the effectiveness of emergency responses and healthcare services after a natural disaster, and the adherence to building codes. 

Overcoming the challenges posed by corruption and bribery demands a united front involving governments, businesses, and individuals committed to fostering transparency and upholding ethical standards. 

Visit DOLFIN’s Foundations of Anti-Bribery and Corruption chapter to read more about global standards, risks, and compliance standards.