What Works in Anti-Corruption: A Podcast with Alina Mungiu-Pippidi

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Photo Credit: CIPE

During the 2018 spring meetings at the International Monetary Fund (IMF), Managing Director, Christine Lagarde announced the IMF’s commitment to anti-corruption and governance reforms, potentially a marked change from the IMF’s long-standing policy of staying apolitical in matters that do not appear to directly affect macroeconomic stability – scandals from Moldova to Venezuela suggest that corruption does, and always has.

There is plenty of skepticism around this announcement and how the IMF might enforce governance reforms. Many will be watching the impact of the ongoing pressure the IMF has placed on Ukraine to establish an independent anti-corruption court. This nudge from the Bank is a powerful motivator where anti-corruption standards have failed, yet it still may not be enough for all of the country’s officials to embrace reform and reject lucrative personal payoffs. Top-down approaches to fighting corruption are one piece of this complex puzzle however they tend to have serious limitations, especially in state-owned sectorsRead More...

Integrated Compliance: Companies Need to Think Holistically and Act Globally

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Photo Credit: CIPE

In recent years, compliance has become an increasingly complex landscape. The need for strong anti-corruption controls, both in multinationals’ own operations and extending to their suppliers, distributors, and agents in emerging markets, has been clearly evident. Significant enforcement actions under the U.S. Foreign Corrupt Practices Act (FCPA), the great majority of which involved violations through third parties, sent a clear message to the global business community that corruption is no longer an acceptable part of conducting business. Similar laws passed by other countries, such as the UK Bribery Act (UKBA) or Brazil’s Clean Company Act, further emphasize this point. There is also a growing trend of regulators either requiring companies to put in place compliance programs – such as France’s Sapin II law – or providing what UKBA calls “adequate procedures” defense in hope of a reduced penalty.

Another important trend has to do with the authorities paying greater attention to other aspects of compliance such as human rights, labor, and environmental standards.  Read More...

Tipping Points for Successful Collective Action Expansion

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Corruption is one of the most challenging problems facing countries all over the world. It is difficult to imagine what successful eradication of this issue might look like, but we have learned it cannot be achieved by government alone. It requires an orchestrated effort by all stakeholders, including the local private sector to address the supply side of bribery.

Effectively tackling corruption and creating a clean business ecosystem requires the commitment by numerous companies to opt into a collective action campaign or coalition. Convincing companies to join anti-graft initiatives can be difficult, however Thailand’s private sector Collective Action Coalition against Corruption (CAC) has tips for persuading companies to step up and make pledges against corruption. There have been three major ‘tipping points’ that triggered the healthy growth of this anti-corruption network:

Sectoral approach:

In addition to traditional recruitment efforts, CAC adopted a sectoral approach by reaching out to business membership organizations with the aim of convincing them to bring all their members together to sign onto the CAC pledge at the same time.  Read More...

Politicizing Anti-Corruption Campaigns

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Photo Credit: FARS News Agency

Across the globe, countries have taken varying approaches to combat the problem of corruption. In South Africa, the Parliament finally took steps to hold President Jacob Zuma accountable for his unethical dealings, resulting in his resignation in February 2018. While in Bangladesh, the head of the Bangladesh Nationalist Party Khaleda Zia was recently sentenced to five years in prison for corruption and embezzlement, thus eliminating her from running for Prime Minister.

In recent years, Thailand’s private sector has united to tackle their corruption issue through collective action, while in Brazil open data platforms are becoming a popular tool for reducing misconduct in the country in recent years. While it is clear that fighting corruption should be a main priority for every country, not every anti-corruption campaign is what it appears to be on the surface. At times, these initiatives are executed in a manner that does more harm than good.  Read More...

Managing Supply Chain Risks and Opportunities

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Around the world, legislators and consumers alike are paying greater attention to supply chains these days. The Rana Plaza factory collapse in Bangladesh, alleged use of child labor by Samsung suppliers, or numerous eye-popping fines for foreign bribery involving companies in various industries (GSK, Alstom, or Telia to name just a few) drive home an important point. While global supply chains provide unprecedented opportunities for business growth, they are also a large source of compliance risks.

At a recent event on supply chain risks and rewards in emerging markets, organized by Baker McKenzie in Washington, DC, speakers highlighted the need for greater integration between the various aspects of legal, regulatory, and ethical business compliance. The regulators’ focus on corruption has been well established through enforcement of the U.S. Foreign Corrupt Practices Act (FCPA) and similar laws. Bribery is now only one such area requiring renewed focus.  Read More...

Podcast: Changing the Global Compliance Environment

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Photo Credit: SCCE “Compliance & Ethics Blog”

A new podcast from the Society of Corporate Compliance & Ethics (SCCE) features CIPE’s global anti-corruption work at a time when more and more countries are enacting legislation designed to restrict bribe-making and bribe-taking. In this edition of the weekly “Compliance Perspectives” podcast, host Adam Turteltaub, an SCCE vice president, and Frank Brown, Director of CIPE’s new Anti-Corruption and Governance Center, offer listeners an overview of CIPE’s mission in those emerging market countries where new laws make the business community increasingly sensitive to corruption risk.

In one such country, Indonesia, a recent Supreme Court ruling found that companies are subject to corporate criminal liability for corrupt practices. Overnight, this caught business leaders’ attention as they strove to understand the implications for their own operations and to discern which Indonesian law enforcement body would take the lead in the new environment. The development also illustrated the sort of opportunity that CIPE looks for in deciding where to deploy limited anti-corruption resources.  Read More...

Zuma Ousted as South Africa Aims to Move Ahead

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Since his election as President of South Africa in 2009, Jacob Zuma has been a controversial figure, mired in numerous corruption scandals. Even before Zuma took office, corruption plagued him. In 1999, an associate of his was arrested and convicted of bribing him in a $5 billion dollar arms deal. Zuma, the “people’s president,” got a pass for his role in the scandal. It took seventeen years for the Supreme Court to rule that the 18 counts of corruption pertaining to the arms deal would be reinstated.

Similarly, in 2016, the Court declared that Zuma had used government funds to renovate a private housing compound for himself, called Nkandla. The fact that Zuma used taxpayer money and was ordered to repay the government, which he did, should have been evidence enough that he was not fit to serve, but Zuma carried on as president for two more years.  Read More...

Fixing the System: Government/Business Relationship in South Korea

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Photo Credit: Panarmenian 

On February 5, Samsung’s Jae-yong Lee, vice-chairman and the heir to Samsung, was released on probation by an appellate court, avoiding a five-year prison sentence handed down from a previous ruling. The court could not find any “evidence of typical government-business corruption”, but instead ruled that Samsung was a political victim of former President Park Geun-hye, who coerced Samsung to support horse-riding lessons for Yoo-ra Jung, the daughter of Park’s closest confidant, Soon-sil Choi.

The court has admitted that 3.6 billion was paid (US$3.3 million) in bribes – far short of the 43.3 billion (US$39.4 million) alleged in the indictment. It’s not hard to imagine that if any other company in Korea gave or received a bribe of similar size, someone would certainly be sent to prison. Unsurprisingly, the “free pass” given to Lee and Samsung demonstrates the cozy relationship the conglomerate has with the government and its ability to ride out a scandal that brought down a president.  Read More...

Turning Pledge into Action: Lessons in Collective Action

Photo Credit: Thailand’s Private Sector Collective Action Coalition against Corruption

Collective action is a common method adopted by the private sector for anti-corruption initiatives around the world. It behooves companies to join together as a group that refuses to pay bribes. Uniting companies in the same industry and gathering key players in the larger business community can make collective action campaigns even stronger.

It is not an easy task to convince the private sector to join forces to push back against public officials and drive change. Thailand’s Private Sector Collective Action Coalition against Corruption (CAC) has attracted as many as 881 companies to sign up for the initiative, including 416 listed companies that control over 80% of the Thai bourse’s market capitalization.

Founded with crucial CIPE financial support and expertise in 2010 by eight prominent business organizations, the CAC is set up to become a main platform for companies in Thailand to take part in tackling corruption through collective action.  Read More...

Zero Tolerance = Mission Impossible? Rethinking AB/C strategies in high risk economies

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A recent Foreign Affairs article by Chris Miller highlighted how “the three-pronged strategy of Putinomics” has worked to keep the current resident of the Kremlin in power:

“First, it focused on macroeconomic stability—keeping debt levels and inflation low—above all else. Second, it prevented popular discontent by guaranteeing low unemployment and steady pensions, even at the expense of higher wages or economic growth. Third, it let the private sector improve efficiency, but only where it did not conflict with political goals.”

Those in the field of anti-corruption should pay close attention to this playbook, especially the third-prong, and consider how it could be used by other autocratic states to appease the population while resisting efforts to hold the corrupt accountable.

This disturbing trend of repressive statecraft should give pause to groups working to make their governments more transparent and accountable, particularly here in Asia, where governments are more and more leaning towards “guardianship” states or worse mimicking the heavy handed styles of Russia and China.  Read More...