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From Iraqi American Chamber of Commerce & Industry Business Ethics
Many may see corruption mainly as a domestic problem--a policeman trading in parking tickets,a revenue officer trading in reduced tax assessments, local government officials trading inlicences for market stalls. Not so apparent, however, is the much deeper international corruption,which usually does not take place as openly and as unashamedly as does petty corruption.[2]But how can "international actors" have so much relevance to a country's domesticnational integrity system as to be a significant part of it? Part of the answer lies in the fact that a country must on occasions look to other countries,and institutions, for appropriate cooperation or intervention when enforcing its anti-corruptionlaws. Particularly is this so when it wants to extradite public officials or private sectorbribers who have fled abroad, or, to recover the proceeds of corruption hidden off-shore. Even once a wanted criminal is located abroad, the country that seeks thecriminal must consider its options. Even where there is an extraditionarrangement in force, the country where the criminal is wanted will generallyhave to establish to the satisfaction of the foreign administration orcourts that the necessary preconditions for the return of the fugitive havebeen met. These conditions will be prescribed in the formal arrangementsbetween the two countries. But how are the charges going to be proved? In some cases, all the evidencewill be located in the country where the person is wanted. With an increasingnumber of multi-national offences, how are the police in one countryexpected to conduct investigations with an international element? In the past, the answer has been quite simple: frequently they have just givenup. National police forces have no legal authority to go into another countryand conduct searches or peruse official records. Nor do they have any rightto arrest a suspect should they find one. In fact, quite the opposite is true.Countries are generally opposed to foreign police operations taking place ontheir own territory. Mutual international assistance arrangementsThe fight against large-scale, international corruption in particular must involve more than thesuccessful detection and prosecution of offenders in one's own country.Why? Because, frequently, the corrupt official has partners in crime in industrialisedcountries who, as a general rule, consider themselves to be beyondthe reach of local authorities. The proceeds of corruption are stashed in bankaccounts in industrialised countries, and the techniques of money-laundering(perfected mainly by the accountants, lawyers and bankers who service drugtraffickers) are brought in to play. Therefore, deterrence, no less than justice,dictates that a country should try to put itself in a position where it can successfullybring criminal or other proceedings against such persons throughinternational assistance arrangements. In the arena of international legal assistance, it is also important for lawenforcement officials to stay abreast of recent international developments,and abandon the conviction that if moneys have fled the country, there is noone outside the country who can or will help recover them. Increasingly,forms of assistance are now being offered by some banking centres.[3]Forexample, the Swiss Government will now provide assistance where there is acourt finding that moneys have been stolen. The limits on obtaining international legal assistanceIt is not normally possible for a state to provide assistance to another state which would nototherwise be available to its own investigation and prosecution authorities. Thus, special proceduresor rights of investigation (such a compulsory interrogation) may not be available in aforeign country, even if they are at home. Before most states can extend co-operation, a court or an administration in the country beingasked to provide assistance needs to be satisfied "that the standards of justice and penaladministration in the requesting state are such that it would be in the interests of justice tosurrender a fugitive."[4]Certain matters of process must also be addressed, including: whetherthe courts of the country in question have a legitimate claim to jurisdiction over the eventswhich have taken place; whether the investigation or prosecution of the crime is politicallymotivated; whether the ordinary court process is being used (i.e., not ad hoc military or otherspecial tribunals); whether the offence being prosecuted was actually an offence at the time;and whether the Rule of Law is being observed. A number of countries also require assurancesthat the death penalty will not be imposed, or that corporal punishment will not be inflicted. In addition, if a particular case is to warrant the provision of mutual legal assistance, thealleged misconduct must usually be recognised as constituting an offence in both of the countriesconcerned (the "dual criminality" test), and also be liable to attract punishment of a prescribedlevel, usually at least one or two years' imprisonment. Organisational requirementsExpertise must be developed within the field of international mutual legal assistance. Clearly,there may be a role for a country's diplomatic service in the making and processing of suchrequests. Usually, police budgets and the institutional arrangements governing the conduct offoreign relations will not permit investigators to make requests for assistance from a foreigncountry without any form of check. Generally, a "Central Authority" will be needed in eachcountry, a desk in an appropriate department which handles all requests, both inwards andoutwards, in order to ensure that the details being provided in support of requests are asrequired by the relevant laws, both local and foreign. Although such an "Authority" mayalready exist to service requests made under other treaties, its staff will, in most cases, requirea significant level of training if the mutual legal assistance arrangements are to work asquickly and as effectively as they should. Mutual assistance and combating money-launderingThe particular connection between money laundering schemes, under-regulated financial systems,and corruption has moved to the centre of the international community's attention. Thisis because the relevance of international actors to a country's national integrity system is alsofelt in circumstances when a foreign country has policies and practices which impact negativelyon other countries--policies such as allowing tax deductibility for bribes paid abroad,or refusing to regard the corrupting of foreign public officials by their own nationals as constitutinga criminal act. Likewise, a foreign country can, by establishing itself as a "financial centre", position itself tofacilitate the laundering of moneys stolen by public officials in other countries. Such centreshave secrecy laws which make it difficult, if not impossible, to trace, the funds, and therebycreate a safe haven for corrupt individuals in other countries. The spectre of numbered Swissbanks accounts has loomed large for several decades. More recently, with a proliferation of socalled"off-shore banking centres", the number of parking places for illicit money has multiplied,but to its credit the Swiss government has made some efforts (not always with thewholehearted support of its banking sector) to remedy some of the more flagrant abuses of theSwiss system, and to demystify its elements. Increasingly, Switzerland is being seen by the corruptas being a less than completely secure corner in which to hide their illicit wealth. All countries have bank secrecy laws, so that the legitimate privacy interests of individuals areprotected. In many societies people like to keep the amount of their savings and their financialpositions personal to themselves. These laws are not designed to enable the bank's customersto avoid, let alone evade, tax collectors, and the accounts are generally subject toinspection by local revenue authorities. However, these laws can be ruthlessly exploited by professional advisers to drug traffickersand corrupt high-ranking officials. They capitalise on a long-standing international consensusthat it is not for one country to help another to collect its taxation revenue. Tax-havenregimes have exploited this weakness in international cooperation, and even try to blockknowledge of the beneficial ownership of accounts. At its extreme, the claim is made that,because e.g. a share register may be "secret" in a tax haven and disclosures of it subject tocriminal sanctions, such a register cannot be demanded by the authorities of a second country(where a copy of register details may be) on the grounds that for the individual summonsedto do so, would give rise to self-incrimination.[5] Money laundering methods are not only being used in a phase post delictum (after the crime),but also during, and even before, the bribe-money is actually paid. In order to camouflage theorigin and destination of bribe money, the financial flows are directed through countries thatdo not possess a comprehensive and effective system to detect money laundering and similarillegal transactions. Financial sectors in these countries, are generally inadequately regulatedand supervised, their legislation does not guarantee access by judicial authorities to information,and their company law allows the founding of shell companies and trusts, to conceal thetrue identity of the beneficiaries of transactions and the actual owners of funds.[6]Bearer shares(whereby ownership of company shares passes by delivery of share script, like money) andbearer savings books (and where possession of the account passbook and a numbered accesscode carry with them ownership of the account), are frequently used. Since the establishment of the Financial Action Task Force Initiative of theG7[7]in 1989, a series of international measures has been undertaken to makethe "laundering" of funds which have their origins in drug trafficking "orother criminal activities" a criminal offence. As a result, at least forty countries,including nearly all members of the OECD, have implemented legislationand other administrative arrangements to trace the flow of such fundsthrough their banking systems. These arrangements require commercial banks to report the receipt ofdeposits, which may have criminal origins, to the Central Bank or to anational criminal intelligence office. In the case of the EU, these arrangementshave been embodied in a directive which is binding on all memberstates. However, there remain countries who have not yet made money-launderinga predicate offence, and so are unable (or unwilling) to provide mutuallegal assistance where money-laundering charges are being brought inanother country. Principles have been developed to counter these activities in the context ofpreventing money-laundering.[8]These principles, however, pursue the muchbroader agenda of establishing a paper trail for all (including all legitimate)business, and creating "structures of global control" in the financial sector. The principlesinclude:
However, money laundering continues, seemingly unabated, not least because there is competitionamongst the private banks to attract business, although there is increasing unease in thebanking community about the handling of accounts for senior public officials and membersof their families. There is a need for additional measures. Possible actions include:
It is not clear whether these legislative and administrative measures to combatmoney laundering will actually sweep up the proceeds of bribery. Countrieswho are not party to the present arrangements, and who may be a link(perhaps unknowingly) in the money-laundering chain, must introduce comparablelegislation and couch it in such a way that it specifically encompassesthe proceeds of bribery. The fact that drug trafficking is now affectingcountries in the south which previously had no connection with the trade,confirms that almost any state can find itself used for the purpose of the temporarytransfer of both goods and funds. There is a likelihood that an international convention against transnational bribery will beintroduced in the course of the next few years. Work on such a convention has begun at theUN office in Vienna. It would, of course, have much more rapid impact once it is concludedwere as many countries as possible already to have enacted facilitating legislation. International police cooperation and INTERPOLINTERPOL (the International Police Organization), now based in Lyons, France, is popularlyregarded as having international powers of law enforcement. This is not so. INTERPOL is firstand foremost a communications network which enables national police forces to contact eachother quickly, exchange information, and notify each other of wanted persons. INTERPOL relies on its member countries' police forces to set up National Central Bureaux(NCB) to act as points of reference for international enquiries and provide swift and effectiveassistance to other police forces. INTERPOL does not provide the assistance itself, though itdoes provide a liaison service and is currently developing databases which the various NCBxcan feed or draw on. The system is not wholly centralised, as the NCBx are free to communicateand liase directly among themselves. From time to time, there are complaints from INTERPOL that some of its member countries areinefficient and ineffectual in providing assistance. Clearly, such a state of affairs is intolerable.The first step for any country combating corruption should be to check the efficiency andeffectiveness of its NCB. If this link in the chain is weak, then new links forged with other anti-corruptionforces will also be weakened. "Red Notices" and extraditionOne of the most conspicuous anti-corruption tools in the INTERPOL process is the "RedNotice". It is used by police forces to notify INTERPOL headquarters that a suspect is wantedand that, upon apprehension, an application will be made to extradite the suspect to facecharges. Once the suspect is apprehended, the normal rules of extradition between the countriesin question come into play. If there is no arrangement for extradition--and if an ad hocarrangement cannot be made--the suspect will be released. It is therefore essential that, in theinitial stages of the anti-corruption effort, a country review the adequacy of its extraditionarrangements, bearing in mind the effectiveness of denying "safe havens" to wanted criminals. International conventions and other arrangementsToday, it is widely accepted that the internationalisation of crime (including drug trafficking,financial fraud and terrorism) dictates that nation states modify their traditional reluctance toenforce the criminal laws of other countries, and extend mutual legal assistance to each otherin appropriate cases.[11]Such co-operation should be provided for by either treaty or by parallellegislation which reflects best international practice, including a compliance with internationalhuman rights norms.[12] Many countries are moving towards the development of formalised international assistanceagreements which can further tighten the noose on international corruption. For example, theCouncil of Europe introduced a framework for mutual legal assistance which was recast intoa global setting by the Commonwealth in 1986. Under the Commonwealth arrangements, procedures are provided which still respect the rightof the accused, but greatly ease the task of prosecution authorities in cases where a witness orcrucial evidence are in another Commonwealth country. The Commonwealth countries haveagreed to assist each other in identifying persons, searching for and seizing evidence, andarranging for witnesses to give evidence either in their own countries or in the country wherea trial takes place. In terms of combating corruption, provisions concerning the internationalfreezing, seizing, and forfeiture of the proceeds of crime are incorporated into the arrangements.Commonwealth extradition arrangements were also streamlined under this new systemof multi-national assistance.[13]This work was adapted by the United Nations to provide thecentrepiece for the 1989 United Nations Convention Against Illicit Trafficking in NarcoticDrugs and Psychotropic Substances. Since then, under the auspices of the Organisation of American States, the Inter-AmericanConvention Against Corruption was adopted in 1996 and signed by 21 countries to battleagainst domestic and transnational acts of corruption. This treaty instrument not only facilitatesthe return of stolen moneys but also declares that corruption offences shall not beregarded as being "political" in character. Therefore those charged with them are subject toextradition to their home countries, without being able to shelter behind the familiar shield of"political persecution". Corruption has been identified as an impediment for the enlargement of the European Union,and so has been an added factor in pan-European efforts to tackle corruption. These haveresulted in a series of conventions within the Council of Europe, namely the:
Under the Criminal Law Convention on Corruption, each party agrees to enact a range ofmeasures at the national level to counter corruption in public life, in public administration andin the private sector. Corporations are to be rendered subject to the criminal law and measuresintroduced to facilitate the gathering of evidence and the confiscation of proceeds. Althoughthese are essentially matters of national law, they will greatly facilitate the enforcement ofcriminal law internationally. The Criminal Law Convention's implementation is to be monitoredby members of the Group of States Against Corruption (GRECO), who will monitor notonly this Convention but also other measures developed by the Council of Europe as part ofits action plan against corruption. The Civil Law Convention on Corruption is a unique attempt to deal with questions relatingto the civil law, providing remedies for victims through the civil process. It deals with suchquestions as compensation for damage and loss sustained by victims; liability (including stateliability) for acts of corruption committed by public officials; validity of contracts; protectionof employees who report corruption; and the clarity and accuracy of accounts and audits.[14] In the US, a conference initiated by Vice-President Al Gore, held in Washington in February,1999, has established a framework for governments to regularly monitor the implementationof their international obligations. The conference is planned as a biennial event, and is nextto be held in The Netherlands in 2001. The OECD Convention Against the Bribing of Foreign Public Officials in International Business TransactionsThe industrialised countries have special roles to play in assisting in maintenance of thenational integrity in a large number of developing countries and countries in transition. Thisis particularly so in the context of transnational bribery and in the related field of export creditguarantees. What should their attitude be when their own nationals have been bribing toobtain export orders? During the 1980s, as business became increasingly global, it became more and more unrealisticto regard the bribery problem as being the preserve of developing countries. US business,in particular, became increasingly restive under the shadow of their country's Foreign CorruptPractices Act of 1977. By 1990, the US government was pressing hard within the OECD forother member governments to take comparable action. In May 1994, a non-binding OECD"recommendation"[15]was reached, which asked for member states to take a series of specificsteps to "deter, prevent and combat the bribery of foreign public officials in connection withinternational business transactions", and to report back to each other on the "concrete andmeaningful steps" which they have taken in reviewing or reforming the following:
Since then there has been an historic agreement leading to the coming into force of the 1997OECD Convention Against the Bribing of Foreign Public Officials in International BusinessTransactions.[16] This landmark Convention requires signatory states to criminalise the bribing of foreign publicofficials, and to provide mutual legal assistance to facilitate inquiries into suspectedbreaches. As well, the tax deductibility of such bribes (hitherto standard practice in most OECDcountries) was to be ended. In these ways, for the first time the problem of corruption is being addressed on the "supplyside". As well as all member states of the OECD, a growing number of other countries arebecoming party to the Convention, so broadening its reach. The Convention is accompaniedby a highly intrusive and critical "evaluation" process, designed to ensure that countries donot sign the Convention and then continue to permit their exporters to act in their old, traditionalways. The stakes are obviously extremely high. The Convention applies to the bulk ofworld trade, and so it is essential that all the major players feel comfortable with the newarrangement. In others words, that they do not fell that they are not conceding advantages toless scrupulous competitors. Although the response of the major industrial and exporting countries to this initiative will beimportant as the basis for meaningful action, the reactions of smaller national economies inthe south and in the countries in transition, are also crucial. Without a strong matchingresponse from countries where the negative impact of transnational bribery is clearly significant,the impact of the OECD initiative can only be modest. The co-operation of developingcountries and the former centrally-planned economies through parallel initiatives is critical tocurbing transnational bribery. The OECD Convention requires criminal legislation to be extended to "extra-territorial"bribery. The US already had specific legislation (the 1977 Foreign Corrupt Practices Act), andother OECD members have begun to amend their legislation. For example, there is a precedentin countries with "civil code" laws (the majority of the EU states) to extend their provisionsoutside their frontiers. In the case of "common law" countries, such as the UK and Australia,there are also precedents for amending existing legislation to make it a conspiracy to commitan offence which would be criminal in the domestic context, regardless of where in the worldthe act actually took place.[17]Australia has now applied this to extra-territorial bribery. However,in both civil code and common law countries, it will be necessary to prove that theoffence was also a criminal act in the country where the bribe or act of fraud actually occurred.It is therefore highly desirable that national legislation be introduced, in as many countries aspossible, which criminalises bribery planned within national boundaries, but executed elsewhere.Similarly, there is a good case for introducing legislation which specifies that any personoffering a bribe to a public official, or his agent, while the official is outside his country,is also committing a criminal act in that country. The anti-bribery legislation of Hong Kongmakes explicit provision for this.[18] Export credit insurance guaranteesIndustrialised countries often provide insurance for their exporters where transactions arelarge, there is a degree of political risk, and it is in the public interest that these be underwrittenby the tax-payer. What, then, should the position be where a contract has been wonthrough corruption, and is thus tainted by illegality? The German Government, for one, after representations by Transparency International, hasintroduced a number of systematic changes in the administration of the Hermes Export CreditInsurance scheme which goes a long way toward meeting TI's demands. Germany has also(jointly with Belgium) introduced a specific proposal at the OECD Working Group to addressthis issue. Domestically, the rationale for the changes is the effectiveness of the OECD Convention inGermany. Under existing "General Conditions", there is no obligation on behalf of the Governmentto cover insured losses if the payment claim under the export contract has no legalgrounds.[19]However, after the criminalisation of bribery of foreign officials under the OECDConvention, and if during the claim process it transpires that criminal acts contributed to thewinning of the export contract, the contract itself becomes null and void. To meet this new situation, the existing Hermes rules have been expanded. From the outset,the applicant has to declare that the export contract has not been obtained through a criminalact, in particular through bribery. If the applicant is unable to submit such a declaration,the application will be rejected. If the applicant does submit such a declaration, but the declarationlater turns out to be false, this would constitute a violation of the "truthfulness obligation"in the application process, and so result in the lapsing of the Government's obligationsand the forfeiture of the fees already paid. In cases of insurance coverage of a financial credit, the document stipulating the obligations ofthe Government will in future contain a clause that the Government will be freed of its obligationsvis-à-vis the exporter, if the conclusion of the export contract has been obtained bycriminal bribery. A similar clause will be inserted in the rules for revolving insurance coverage. In all cases, where the Government is freed of its obligations, the fees paid are forfeited. Inaddition the beneficiary of the insurance coverage must assume that the Government will passthe facts leading to the lapse of the obligations to the State Prosecutors Office, and for repeatedviolations it will take additional measures. This approach, if widely implemented beyond Germany, will go some way towardsdiminishing the role that exporting countries have been playing in activating international"grand corruption". The role of donor agenciesFor countries in receipt of significant flows of aid, the donors have a specialrole to play. In the past, some of these agencies were less than scrupulous inthe way they went about their business. Just as it was for the private sector,pay-offs to government officials were the norm, and part of the cost of doingbusiness. The international financial institutions, also, were none too fussyabout where some of their money went, and saw "corruption" as being a"political" issue, and a hot potato that was fortunately off their particularmenu. These agencies have in the past been very much a part of the problem. True,their motives have been genuine--inspired by a desire to help ordinary peopledespite the predatory nature of their rulers--though this hardly hasapplied where aid was used as a lever to win business contracts[20]. However,the actions of the agencies can be seen, in retrospective, as feeding andenlarging the rapacious appetites of those officials who were more interestedin becoming rich than in serving their people. Today, the role of donors has changed. Corruption is high on the politicalagenda; it features in the discussions that donors have with government leadersat the highest levels. This is new. Until recently, the subject was taboo.Much greater use is being made of non-governmental organisations todeliver assistance to communities, often as a way of circumventing untrustworthyadministrations, but not always, let it be said, with NGOs who are any more reliable. Novel, too, is the fact that donors are having to move away from their traditional (and notalways successful) mode of providing "expert" advice, becoming, instead, low-key facilitatorsand partners in containing corruption. The development banks are actively seeking complaintsabout corruption in the projects they are financing. The World Bank, for one, now not onlymaintains a global "hot-line" for this purpose but has created the office of Compliance Advi-sor/Ombudsman (CAO) to handle complaints and to engender confidence among all stake-holdersthat projects are planned and implemented within known, monitorable and enforceableguidelines, and to approved standards.[21] No society is free from corruption, and each has to fine-tune its integrity system continuouslyto keep the menace in check. Now it is coming to be recognised that only those who live in aparticular society can truly appreciate its nuances, and only they are in a position to judge bothwhat is possible, and what may or may not be workable.[22]The donors' role should therefore belimited to facilitating internal discussions and assisting in building internal ownership of well-informedreform programmes. Donors should not attempt to dictate these from outside, or toimpose conditionalities that are unrealistic or which are not supported by significant internalactors. This concept of partnership is now being embodied in multi-lateral agreements. One example is the way in which this new spirit of partnership has been translated into legallanguage by the European Union and the African, Caribbean and Pacific (ACP) states. Ties withthe ACP countries, governed since 1975 by the Lomé Convention, are a particularly importantaspect of the EU's development cooperation policy and, more widely, of its external action. After major upheavals on the international stage, socio-economic and political changes in theACP countries, and the deepening of poverty, a rethinking of cooperation became necessary.The expiration of the Lomé Convention in February 2000, provided an ideal opportunity for athorough review of the future of EU-ACP relations. The new agreements, signed on 23 June2000 in Cotonou, Benin, includes the following: "... Respect for human rights, democratic principles and the rule of law, which underpinthe ACP-EU Partnership, shall underpin the domestic and international policies ofthe Parties and constitute the essential elements of this Agreement. In the context of a political and institutional environment that upholds human rights,democratic principles and the rule of law, good governance is the transparent andaccountable management of human, natural, economic and financial resources for thepurposes of equitable and sustainable development. It entails clear decision-makingprocedures at the level of public authorities, transparent and accountable institutions,the primacy of law in the management and distribution of resources and capacity buildingfor elaborating and implementing measures aiming in particular at preventing andcombating corruption."[23] Donors should also ensure as best as they can, and as many now are, that their aid is untaintedby corruption, whether in procurement on their home market, or in the countries of execution.Suppliers who act corruptly to obtain or execute aid projects should be named, shamed and publiclyblacklisted. In the field, their own staff should be scrupulous in their conduct. Their agencies,too, should "walk the talk", and role model the conduct they expect from their beneficiaries.Where institutions are seen as being lax with their own arrangements to curtail corruptionby their staff, they are clearly in no position to tell others how they should be behaving. There is, however, the situation of emergency humanitarian aid. Situationswhere help is desperately needed and time is short. In such situations, officialsin the affected country can be very well placed to extract enormousbribes in order to hasten supplies on their way--to get them cleared throughcustoms, to provide over-flying and landing rights for aircraft, and so on.Humanitarian agencies can be held to ransom by such blackmailers. This is aclear point of vulnerability, and imaginative approaches are still required tofind ways and means of circumventing the bottle-necks that create opportunitiesfor such grand corruption. The international private sectorThe international private sector is a further major player. Its primary body,the Paris-based International Chamber of Commerce (ICC), has been pursuingthe issue of containing international bribery for 25 years, and has developedits own Rules to combat bribery and extortion. As discussed in the chapteron the private corporate sector, it continues to work to this end with the OECD and otherinterested parties. Some indicators for assessing the role of international actors as integrity pillars
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