Commercial bribery of foreign persons

 
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Russia has an obligation to eliminate the possibility of corruption of foreign officials in the commission of transnational transactions and beyond. They were adopted as a consequence of joining the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. So far, the fight against "export of corruption" in the country has been conducted with varying success.

International legal prerequisites

There are several international agreements governing the fight against corruption, domestic and transnational. But in the fight against commercial bribery, the leading role is played by the OECD convention, which has absorbed the best of American lawmaking and law enforcement practice. The OECD, or Organization for Economic Co-operation and Development, was created after World War II, in 1948, to implement the Marshall Plan to rebuild a devastated Europe. It is now the leading organization in the world setting the standards for economic governance that most countries and economic actors try to follow.

In 2018, 35 countries joined the OECD, accounting for more than 60% of world GDP. Russia has long and unsuccessfully been trying to become a full-fledged member of the organization, but until this happens, it is becoming a member of the conventions it has developed.

Almost all European countries, the USA and a number of Latin American states have become parties to the OECD Convention. In 2012, Russia formulated its anti-corruption commitments with an international element and submitted them to the OECD. This became the basis for admitting the country to participate in the Convention, which happened on April 17, 2012, Russia became the 39th state party to the international agreement. It was assumed that the signing of the agreement would help harmonize the national legal system and international practice of combating corruption and illegal remuneration of foreign officials. The ultimate goal of joining the Convention was to join the OECD. It was planned to achieve this goal by 2013, but this has not been achieved so far. The Russian Federation needs to join 160 more conventions that regulate relations in 22 areas of political and economic activity. In addition, a stumbling block was the requirement of the OECD Convention to introduce criminal liability of legal entities into national legislation, which is impossible from the point of view of the national legal system. To introduce this norm, the entire concept of Russian criminal law would have to be revised.

The document is about material incentives specifically for officials working in the government or executive bodies of foreign states, or employees of international organizations.

The Convention applies to:

  • cases of bribing foreign officials working for a company within Russia or abroad and concluding transnational trade deals with Russian companies, if foreign corporations have a significant share in the capital of the authorities of another state;
  • cases of corruption of foreigners by Russian companies operating abroad ("export of corruption").

For a number of reasons, the norms of the Convention were adopted and transferred into national legislation, but they were hardly implemented in practice. In addition to the norms of the OECD Convention, national legislation has been changed in accordance with the requirements of the UN Convention against Corruption.

OECD convention

The OECD Convention, adopted in 1997, presupposes a complex of criminal, organizational, accounting and financial measures aimed at combating corruption-related crimes of an international nature.

Among the criminal law measures, she names the following:

  • Corruption of foreign officials should be punished criminally, taking into account that foreign persons guilty of material incentives for officials should be punished in the same way as officials of another country. If a criminal penalty is applied, it should be sufficient to ensure the implementation of the extradition and extradition agreement. The Convention insists that the corruption of a foreign official should be classified as an offense for which extradition is contemplated;
  • legal entities must also face criminal penalties. If the legal system of a country makes it unacceptable to apply criminal penalties to companies, there must be a proportionate administrative and other penalties, including substantial fines;
  • amounts equivalent to the income from a corrupt transaction should be withdrawn to the respective budgets;
  • in addition to the main ones, it is necessary to consider the possibility of applying additional sanctions.

The Convention mandatorily requires that the practice of applying the rules against transnational corruption be linked with the fight against money-laundering. The specificity of the Convention is that it is aimed at combating the so-called “active bribery”, or the party offering bribes. The logic of the norm is aimed at combating an active element that tempts officials from developing countries to bribe. It practically does not apply to "passive crime", or taking a bribe. At the same time, she considers the very fact of offering a bribe of a property nature or of another type, for example, the provision of non-property benefits, as a crime, regardless of whether it was given and received in reality by an official of a foreign state.

The convention goes to decriminalize "small incentive payments", paid not for the purpose of obtaining illegal benefits, for example, a license to which a party was not entitled, but with the aim of slightly speeding up administrative regulations. In this case, the Convention invites the member states to combat these problems by improving corporate governance. An official of a foreign state in the document refers to an employee of any company or corporation if it has a state participation in the capital, and it receives any preferences or targeted subsidies.

National legislation

Russian criminal law prosecutes corruption with an international element, regardless of whether a particular crime falls within the scope of the OECD Convention. Certain norms, not as elaborate as in the OECD Convention on combating corruption with a transnational element, are contained in United Nations documents.

But changes in the Criminal Code of the Russian Federation were made precisely on the wave of its ratification and intention to join the organization. One of the first decisions related to the implementation by Russia of the requirements of the Anti-Corruption Convention were changes in national legislation, according to which amendments were made to the Criminal Code of the Russian Federation, providing for:

  • the introduction of penalties in the form of fines, multiples of the amounts of bribes;
  • introduction of a separate responsibility for mediation.

Article 291 of the Criminal Code of the Russian Federation introduced norms on liability for bribery of foreign officials and officials of international organizations.

They were aimed at excluding:

  • conclusion of contracts with international companies with a corruption component;
  • corruption of any foreign officials or officials of international organizations.

Unlike Art. 290 of the Criminal Code of the Russian Federation, which speaks only of officials, the norms of Article 204 of the Criminal Code of the Russian Federation "Commercial Bribery" apply to one degree or another to persons performing managerial functions in foreign companies. For their corruption, a Russian citizen should be punished in the same way as for providing remuneration to employees of foreign companies operating in the Russian Federation. For the application of measures of criminal liability, it is only necessary that a foreign company has a direct connection with the governments of other countries, for example, in the form of participation in the authorized capital or in the form of providing subsidies.

Some of the requirements of the Convention have entered into national legislation. The norms arising from the Convention, which presuppose:

  • the criminalization of offering and promising a bribe to a foreign official;
  • refusal to release the bribe giver from criminal liability who reported the crime after its completion.

At the same time, the norms already introduced into the legislation did not receive practical application: from 2013 to 2017, not a single person was prosecuted for exporting corruption and corrupting a foreign official, creating problems with the investment climate, denying the equal rights of participants in economic turnover, creating unreasonable advantages for criminals who offered material incentives. Vivid episodes related to the prosecution of foreign persons for this type of crime are practically not published. One of the few was the prosecution of a Russian company in Uzbekistan in connection with a bribe given to the daughter of President Karimov, offered to her by the head of a subsidiary of the telecom operator MTS. The amount of remuneration for helping and patronizing businesses, the right to enter the Uzbek market and receive frequencies for the operator amounted to $ 865 million.

Experts note that the norm providing for the conviction of persons guilty of mediation in bribery turned out to be sleeping. The number of those convicted under it was 12 times less than the number of those convicted for bribes. This suggests that the mediators have professionally mastered the ability to disguise activities, and the difficulty of investigating such acts. Experts also note the practical impracticability of applying the norms of the Convention on Cross-Border Corruption.

The main problem was the lack of clarity in the concept of a foreign official or an official of an international organization. It was not specified whether such an official should be a full-time employee, or whether they include employees working on a temporary contract, including residents of Russia. If we talk only about the employees of international organizations, then legal scholars working on improving the legislation on “exporting corruption” have identified signs of an official of an international organization, in the presence of which the transfer of remuneration to him will become the basis for prosecution under corruption articles:

  • work in an international organization on the basis of a contract or a similar document;
  • a certain status of an employee, obtained from the moment of entering work or the international civil service, due to which his powers are expanded;
  • subordination in his activities to the requirements of the charters and regulations of the organization in which he works or serves;
  • the existence of privileges and immunities accorded to the employees of a particular international organization.

Based on these criteria, it can be understood that the term “official of an international organization” does not apply to all of its employees. An employee of the UN Secretariat will meet this definition, but a volunteer working in an African hospital will not. It is not entirely clear for what purpose, in most cases, a businessman is to corrupt an official of an international organization, but one can imagine a situation when, for example, UN peacekeepers guard the border between Turkish and Greek Cyprus and receive a bribe for allowing smuggling to pass. There may be other similar situations. So, in one of the scientific articles on this issue, it is discussed whether it is a commercial bribery of a foreign person to transfer remuneration to a UN employee who is issuing passes to the General Assembly. Due to the fact that the norm remains dormant, practice has not yet given an answer.

Similar problems when applying the article arise with the interpretation of the term “foreign official”. In Art. 290 of the Criminal Code, the legislator literally used the norms of the OECD Convention against Corruption, but did not check the possibility of their application with domestic practice. There is a UN Legislative Guide on the Implementation of the UN Convention against Corruption No. R.06 / V.16. It was developed by the UN Office on Drugs and Crime and recommends the creation of terminology in national legislation so that it does not contradict any of the international conventions against corruption, and there is no need to directly repeat the definitions given in one of them.

Literal repetition of the term Convention has led to interesting results. The OECD Convention is based on the provisions of the United States Federal Anti-Corruption Act of 1977. It gives such a broad definition of the term "official of a foreign state" that an employee of any international corporation, for example, General Motors, can be equated with it, based on the fact that part of its activities is financed from the state budget. In the United States, employees of any government-owned company are treated as officers. If at first it was assumed that the state's share should be the controlling one (51%), then recently this criterion has been decreasing and a precedent has arisen of bringing an employee of the French company Alcatel to responsibility for corruption, where the state's share did not exceed 43%.

A paradoxical situation has developed. National legislation in its current form cannot be held liable for giving a bribe with a foreign element, and the United States can at any time bring to criminal liability under American law any Russian merchant who has offered a reward to an employee of an international company. In Russia, it is theoretically possible to attract such a merchant under Art. 204 of the Criminal Code of the Russian Federation, for the corruption of a foreign businessman, in practice, none of these cases were initiated.

Complicated enforcement issues

In the archives of Russian courts, there are few cases related to the prosecution of persons for a bribe with a foreign element. So, in 2012, one of the employees of the rental group of the IKEA MOS company, a citizen of Turkey Okan Yunalan, who was arrested for aiding in the organization of commercial corruption, which his head should have received for providing premises in the Mega Teply Stan shopping center, was brought to criminal responsibility for the Adidas store. But in this case, a citizen of a foreign state acts as an intermediary, and not as a person with a different citizenship, in whose favor the offer of property benefits is made. The foreigner who should have actually received a bribe is not indicated in the verdict.

Even if such cases arise in the work of law enforcement officers, they do not seek to be superfluous in a dispute between two foreign companies or involved in an international scandal involving consulates and embassies, therefore, cases on material incentives for foreign persons, even if they arise, do not reach the court. In this case, the introduction of a chain of two or more intermediaries into the case completely excluded the possibility of proving the real guilt of a foreign citizen - an employee of IKEA MOS. The chain of intermediaries becomes the main means of avoiding criminal liability.

When investigating cases of this kind, an additional issue often arises - the protection of witnesses who report known facts of commercial corruption of foreign persons. Usually, when concluding contracts with an international element, especially large bribes appear, and the risk for the person who voluntarily reported a corrupt transaction is real. The witness protection program is not well developed in Russia and one cannot count on its capabilities.

Organizational aspects of the application of the norms of the Convention

Despite the difficulties that arise in the work of law enforcement agencies, work is steadily being carried out to inform Russian merchants about the enactment of the norms of the Convention and their responsibility for bribery of foreign persons. EXIAR, the Russian Agency for Export Credit and Investment Insurance, regularly takes measures to combat bribery of foreign persons in its field. Before deciding whether to insure a transaction or issue an export credit, the Agency asks a participant in foreign trade to confirm that:

  • the company has been notified of criminal liability for the corruption of officials of another country;
  • a system of measures to counter the organization of bribery has been implemented in the company's internal organizational documents;
  • none of the parties to the transaction was previously involved and in the course of the transaction will not be involved in corrupt practices with an international element;
  • none of the parties to the transaction is included in the lists of organizations whose activities are recognized as inconsistent with international law. Such lists are compiled by the World Bank, Asian Development Bank, European Bank for Reconstruction and Development and other financial institutions.

Before funding is provided, EXIAR checks the exporter for compliance with the requirements. If the Agency has received information about the presence of corruption in the transaction, it has the right to refuse to finance it. If EXIAR can directly influence exporting companies, forcing them to abandon their corrupt intentions on pain of refusal to finance, Russian organizations of entrepreneurs - the Chamber of Commerce and Industry, the Russian Union of Industrialists and Entrepreneurs, Opora Rossii, Delovaya Rossiya - are ready to provide them with methodological assistance. They introduce them to the main provisions of the Convention and the OECD Best Practices Guidelines in Internal Control, Ethics and Compliance. In 2012, the Chamber of Commerce and Industry adopted the Anti-Corruption Charter of Russian Business, which contains rules aimed at preventing corruption of foreign persons.

As part of the fight against corruption, the Charter envisages:

  • introduce a management system in participating companies based on anti-corruption programs;
  • introduce constant monitoring and evaluation of the effectiveness of anti-corruption programs;
  • establish effective financial control, allowing you to see the spending of companies' resources on organizing the corruption of foreign officials;
  • develop a training program for personnel in anti-corruption practices and conduct constant monitoring of compliance with corporate ethics;
  • unite the efforts of the business community and make their anti-corruption measures public;
  • refuse to receive illegal benefits.

In terms of countering the corruption of foreign persons, companies, by signing the Charter, declare that they refrain from promising or providing any foreign official with an unlawful advantage, both property and non-property, in order for this official to help them retain their entrepreneurial or other illegal business advantage. ... The signing of the Charter and the observance of its norms raise the status of the business organization and give it more opportunities to benefit from the CCI. The company's image advantage is the positioning of the company as a respectable organization that sets the "anti-corruption tone" from above. The tendency to create a system of social responsibility of entrepreneurs plays a role, which must build ethical standards for the country as a whole.

In 2017, at the direction of the Ministry of Economic Development, all business associations of the country held conferences and round tables aimed at clarifying the need to comply with the requirements of the OECD Convention. For the events, the ministry prepared and sent the necessary methodological materials. Advocacy and the creation of a corporate culture that excludes corruption of foreign persons as an inappropriate way of doing business is often an effective tool in the fight against international corruption. The inadmissibility of this method of obtaining benefits is often confirmed by the imposition of international sanctions against companies involved in corruption.

External analysis of the application of the provisions of the Convention

The international organization Transparency International regularly analyzes the implementation of the provisions of the Convention in different member states and publishes reports. The first report was prepared a year after the ratification of the Convention, in 2013. The authoritative international organization considered that the struggle was being conducted ineffectively. Weak enforcement was recorded, the norms of national legislation have not yet begun to work in full force. This could be due to the fact that the investigation of corruption crimes is difficult, it lasts a long time, and not all cases started under the amended articles of the Criminal Code of the Russian Federation managed to reach the court.

But Transparency International drew attention to the fact that practically not a single incident of corruption with an international element at that time in Russia had been investigated and brought to court.
The international organization conducts its assessment of the quality of the application of the norms of the Convention and the prosecution of commercial corruption of foreign persons on the following parameters:

  • the adequacy of the adopted norms of national legislation to the requirements of the Convention;
  • quality of enforcement;
  • availability of open access to information on cases;
  • dynamics of work to improve legal regulation on the basis of an analysis of already conducted cases.

For all these parameters, Russia took one of the last places in the list of 39 countries.

The reasons for the lag, according to the authors of the report, were:

  • cuts in law enforcement budgets;
  • refusal to create specialized services that exclusively investigate commercial bribery of foreign persons;
  • inability to use objective and social factors that restrain corruption with an international element.

The 2019 report showed that the situation has not changed significantly, Russia practically does not fight the export of corruption. From the data of the report:

  • from 2014 to 2017, not a single criminal case was initiated for commercial corruption of foreign officials;
  • Russian legislation does not introduce responsibility for offering or promising a bribe to an official of another country;
  • there is practically no interaction between the Ministry of Internal Affairs, the Investigative Committee and foreign similar organizations to investigate episodes of corruption with an international element.

But, despite the general results, there are also achievements in terms of openness and transparency. The experts of the international organization noted that Russia publishes data on court cases on the Internet, which many other countries do not. In addition to the norms of state coercion, the measures of the Convention are implemented in other ways, and in the first place, in addition to the issues of regulation of foreign trade by EXIAR, the practice of auditing comes out.

Auditing standards

Audit organizations are becoming the conductors for the implementation of international anti-corruption standards. The standards regulating their activities recommend identifying cases that are similar in their features to the corruption of foreign officials, and reflecting them in audit reports. In this area, in 2017, the Auditing Council adopted and is operating Methodological Recommendations for audit organizations and individual auditors on the topic of combating bribery of foreign officials in international commercial transactions. The recommendations are based on International Auditing Standard 250, which prescribes to consider the accuracy of compliance by the audited company with laws and other legal acts, one of the most important are anti-corruption acts. In this case, audit organizations act as mediators showing that respectable counterparties should not deal with this or that company.

Among the main provisions of the Recommendations:

  • bribery of foreign officials leads to distorted reporting, both in terms of changing the business environment and in terms of hiding the true origin of the bribery resources. The Convention expressly prohibits the accounting of funds aimed at bribing foreign officials as expenses and deduction from taxable profit;
  • upon revealing the facts of commercial corruption of foreign officials, the audit firm or an independent auditor is obliged to respond in accordance with the rules reflected in Standard 250: to obtain additional information and documents disclosing the issue; discuss the problem with the executive management of the company; convey it to shareholders and other persons responsible for the corporate governance of the organization; reflect the revealed facts in the report. Requirements to report data to law enforcement agencies. Recommendations do not put forward.

The recommendations reasonably assume that it is the responsibility of the audit organization to verify the accuracy of accounting and financial statements, and not to qualify certain actions as commercial corruption with an international element.

The document explains that when analyzing reports on material incentives for foreign officials, the following factors may signal in documents:

  • fictitious expenses and deductions, namely, transfers of funds to a real or fictitious organization for allegedly rendered consulting services with the aim of further cashing out and using it as a subject of corruption;
  • payment of expenses for holding an event organized in honor of a foreign official;
  • indirect payments to foreign persons, often through legal services firms, national or international;
  • overpayment for any professional services, especially in a country in which a doubtful contract has been concluded;
  • hiring fictitious workers or placing their employees at the disposal of a foreign official;
  • manipulation of accounting records, inaccurate reflection of the facts of economic life;
  • secretive or aggressive behavior of the client's employees, refusal to answer the auditor's questions, refusal to clarify relations with a person performing managerial functions in a foreign state;
  • attempts to corrupt the auditor;
  • unusual transactions, for example, transactions with offshore companies or with firms that are blacklisted by international organizations.

The risk of mentioning in the report the likelihood that the company is involved in commercial material incentives for foreign persons significantly reduces the likelihood of corruption. This will be especially important for public companies that list their shares on stock exchanges. The existing system of combating commercial bribery with an international element consists of measures of criminal coercion and measures of indirect control, financial and organizational. But the high degree of latency of this type of acts does not make it possible to understand the dynamics of changes in their number. It is not known whether the measures have affected or decreased the number of episodes of international bribery since the ratification of the OECD Convention.

08.12.2020