Our Trouble at the Top series for the 2020 Corruption Perceptions Index, includes a list of the top 25 countries on the CPI and their corruption challenges, an overarching analysis of the root causes of corruption in top countries and five high-profile corruption cases in otherwise "clean" countries.
Shocking headlines and bombshell news reveal that even during a global pandemic, huge corruption scandals persist. Much of this corruption, however, is not captured on the 2020 Corruption Perceptions Index (CPI), which measures only public sector corruption.
Specifically, over the last several years, multi-national companies based in “clean” or seemingly corruption-free countries have been implicated in high-profile cases of money laundering, foreign bribery and other private sector corruption.
It turns out those countries that perform best on the CPI are often the very same that enable high levels of illicit private sector activity, money laundering and foreign bribery.
How top CPI countries perpetuate corruption
Countries at the top of the CPI play a major role in both fuelling corruption through foreign bribery and enabling corruption by allowing for opaque company ownership; weak enforcement of gatekeepers, like bankers or lawyers who may serve as professional enablers; and allowing for opaque asset ownership, including real estate, luxury goods, etc.
In some cases, private companies in top performing countries bribe officials in lower performing countries, perpetuating a cycle of corruption that often helps keep those lower performing countries at the bottom of the index.
Unfortunately, high marks on the CPI don’t necessarily translate into high marks for enforcement against foreign bribery, as shown by our recent Exporting Corruption report. In those countries at the top of the CPI, where public sectors score among the cleanest in the world, corruption still exists.
Five corruption cases from top CPI scorers
Below, we revisit five cases of foreign bribery and money laundering that make even the "cleanest" countries dirty:
In February 2020, Airbus, a global provider of civilian and military aircraft based in France, agreed to pay nearly US$4 billion in combined penalties to the US, France and UK to resolve foreign bribery charges.
The issue: In one of the world’s largest resolutions of a foreign bribery case to date, the investigation found that for more than a decade, the company spent tens of millions to bribe officials and decision-makers in 16 countries for business deals. This was done through third-party intermediaries and an internal marketing office at the company.
What’s at stake: Despite the massive cost of the settlement, it failed to include admissions of guilt; provide for the possibility of further prosecution of responsible individuals; or offer any compensation to the real victims of corruption in the Airbus case – ordinary citizens.
Governments that accept foreign bribes often pay higher prices for lower quality goods and services, sometimes wasting millions on unnecessary procurements. This means other essential services, like education and health care, lack necessary funds.
It’s note-worthy that France played a huge role in holding the company to account, thanks to a recent law that helped reform their anti-corruption legal framework. While there are still some questions of whether the settlement reflected greater accountability, the law has allowed for tougher enforcement by French legal authorities, Parquet National Financier.
Since the settlement precludes any further prosecution, the company avoided a criminal conviction, preserved multi-billion-dollar government contracts in the US and EU and may continue to compete for future procurement contracts. Intermediaries, however, can still be prosecuted, and the UK Serious Fraud Office recently charged an Airbus subsidiary with corruption in connection with a contract with the Saudi military.
Settlements should only occur in cases of strong public interest that meet high standards of transparency, accountability, and due process.
Semlex, a Belgian company that manufactures passports, licenses and other biometric documents, is currently embroiled in a long-running corruption and money-laundering investigation involving several countries in Africa, including DRC and Madagascar. The company is also linked to investigations in Kyrgyzstan and stands accused of arming the Côte d'Ivoire civil war in 2010.
The issue: In 2020, media reports revealed that the DRC would not renew its contract with the company, which allegedly siphoned some of the money from its high-priced passports to an obscure Gulf company owned by a close relative of the DRC President.
Further allegations of foreign bribery surfaced in Madagascar, where leaked electronic correspondence implicated a top government official and prompted calls for an investigation from Transparency International Madagascar.
What’s at stake: Investigations into Semlex began in 2017 by Belgian enforcement authorities and have been slow to progress. The case highlights a lack of resources and funding for combatting corruption, a greater need for international cooperation of transnational investigations, and the important role of victims in foreign bribery cases.
In an effort to reclaim some of the proceeds of corruption, in May 2020, Congolese citizens filed a petition for recognition as a “civil party” in the ongoing investigation to receive victims’ compensation.
The case highlights the power of citizens and their potential to achieve results in a long-running case based on their intervention. Citizens, who are often the victims of corruption, have an important role to play and victims’ compensation should be built into case outcomes.
In 2019, Gunvor, a Swiss commodities trading company was condemned by Swiss authorities to pay approximately US$96.7 million for failing to put adequate measures in place to prevent the bribery of foreign government officials in Cote d’Ivoire and the Republic of Congo in exchange for lucrative oil deals.
The issue: As one of the world’s largest oil traders, Gunvor secured a three-year oil supply contract from the Congo state oil firm in June 2010 and signed two deals for oil cargoes worth a total of US$625 million in July 2011. The firm also received Cote d’Ivoire oil cargoes between 2009 and 2010.
In 2018, a Gunvor employee charged with foreign bribery admitted guilt under accelerated proceedings and received an 18-month suspended prison term.
What’s at stake: Many Swiss companies are confronted with corruption in their global business. In Switzerland, however, only a few are held liable for failing to take all necessary and reasonable measures to prevent serious offenses committed in the course of their business activities. The enforcement in the Gunvor case is a rare exception.
No stranger to suspect or questionable business transactions, including those that appear to involve trading oil for arms, the company’s settlement for foreign bribery required it to pay back part of its gross profits plus interest to the Swiss government. This was the first time that a major trading firm was found guilty of such charges in Switzerland.
Bombardier, one of the world’s leading plane and train manufacturers based in Canada, is currently under investigation for foreign bribery in Indonesia, only a few years after similar charges of foreign bribery were brought against the Swedish branch of the company in Azerbaijan.
The issue: In 2020, the UK Serious Fraud Office opened an investigation into Bombardier for suspected bribery and corruption over contracts with Garuda Indonesia, the second largest airline in Indonesia.
This investigation follows a previous case in 2017, where Swedish officials charged an employee of Bombardier’s rail division in Sweden with bribing a public servant in Azerbaijan to win a procurement for a new rail signalling system, with a contract value of approximately US$350 million. The case ended with an acquittal in 2017, which was reportedly appealed by the Swedish prosecutor.
What’s at stake: The Swedish case highlighted two contracts that showed Bombardier Sweden sold equipment to a third-party subsidiary, Multiserv Overseas, which then sold the same equipment back to Bombardier’s Azerbaijan affiliate, making a profit of US$85.8 million in the deal.
In 2019, Bombardier disclosed that it had received a show-cause letter from the World Bank's investigative unit to provide an explanation of its actions in connection with the financial institution’s audit of the Azerbaijan contract. The project, which was awarded to a consortium led by Bombardier, was heavily financed by the World Bank.
Bombardier is also currently approximately US$9 billion in debt.
5) San Faustin
San Faustin, a financial holding company based in Luxembourg, is currently under investigation in Italy, Argentina and Brazil for foreign bribery and money laundering.
The issue: In February 2020, Italian authorities brought foreign bribery charges against San Faustin for alleged bribery in Brazil. San Faustin has 450 companies worldwide and revenues of more than US$90 billion (2009-2012). One of its companies, Techint, controls the pipe-manufacturer Tenaris. All three companies are officially headquartered in Luxembourg.
In 2017, Argentinian authorities opened a foreign bribery investigation relating to Tenaris, while Brazilian authorities from the Lava Jato Taskforce are reportedly investigating Techint for bribery, money laundering and cartel formation.
What’s at stake: During the investigations, requests for mutual legal assistance (MLA) were sent by Italian authorities to countries including Argentina, Brazil, the Netherlands, Panama, Switzerland and the United States. This process highlights the importance of cross-border cooperation between multiple countries on corruption cases and the need for greater inter-agency collaboration for faster and more effective information-sharing.
Although charges have been brought against San Faustin in Italy, the company and its subsidiaries argue that since they are registered in Luxembourg, Italy does not have jurisdiction over them. While the company is actively under investigation in countries in Latin America, there are no reports of an investigation of these companies in Luxembourg.
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