U.S. Ambassador to the OECD Karen Kornbluh
Fighting Corruption with the OECD
At the Forum for EU-U.S. Legal-Economic Affairs
April 20, 2010
Thank you, Mr. Murray. Good afternoon and thank you all for attending.
Anti-corruption is a priority for the U.S. As President Obama has said: "The struggle against corruption is one of the great struggles of our time. Repression can take many forms, and too many nations, even those that have elections, are plagued by problems that condemn their people to poverty. No country is going to create wealth if its leaders exploit the economy to enrich themselves. And now is the time for that style of governance to end."
Strong words, but with reason. This is not just about corporate bottom lines. Corruption is a crime with a very human face and very human victims. And the breadth of the problem is breathtaking.
The World Bank 2009 Annual Report estimates that corrupt payments in Bank-financed procurement alone equal 5-20 percent of contract amounts. Imagine the cost to development if 5-20% of the Bank's $66 billion in lending in '09 were lost to corruption. That's $3.3-13.2 billion lost in 2009 alone! Transnational bribery distorts outcomes, the allocation of resources, and the function of government institutions. It sets back development efforts, and dashes the hope of the world's impoverished as they seek lives of greater prosperity.
Corruption is a conduit for other crimes, because money from corruption doesn't just end up in the hands of corrupt officials. Whether it be money laundering, human trafficking, or terrorism - "following the money" reveals how corruption can destroy lives and cripple society, ultimately impacting developed as well as developing nations.
For these reasons, The United States is committed to working with other countries to combat bribery and other corrupt practices. President Obama has made this a focal point of leaders' discussion, including in the G-20 context. Last fall, G-20 leaders stressed the importance of adopting and enforcing laws against bribery, including the OECD Anti-Bribery convention.
Anti-corruption is a priority for U.S. efforts at the OECD.
- U.S. efforts to encourage other countries to outlaw foreign bribery (as we had with our 1977 Foreign Corrupt Practices Act) ultimately achieved success at the OECD. The Anti-Bribery Convention was signed in 1997 and entered into force in February, 1999.
- Today 38 countries, including Brazil, Argentina and South Africa, are signatories to the convention, binding themselves to criminalize foreign bribery and participating in its rigorous enforcement monitoring mechanism. It is our strongest supply-side instrument to combat foreign bribery.
- Over the years, the U.S. has devoted substantial resources - from four separate agencies - to supporting the OECD's Working Group on Bribery. The U.S. has played an active role in the Convention's rigorous and transparent peer review process. We have also offered proposals to enhance enforcement efforts, and encouraged new major exporting countries that do not have foreign bribery laws to sign the Convention. In addition, the U.S. has led the charge on enforcement of its own law, as noted by Mr. Duross, with well over a hundred resolved cases of foreign bribery.
- We are now extremely fortunate to have not only a Secretary of State committed to these issues but a new Assistant Secretary of State for Economic, Energy and Business Affairs, Jose Fernandez, equally invested, with a keen interest and background in these issues. We also have the General Counsel of the Commerce Department, Cam Kerry, who along with Commerce Secretary Gary Locke is committed to combating bribery especially in emerging markets. Of course we enjoy ongoing commitment from the Department of Justice where Attorney General Eric Holder started his career prosecuting public corruption and where Mark Mendelsohn - and now Chuck Duross - Deputy Chief of the Fraud Section, have been tireless in pursuing this agenda. And we have the Securities and Exchange Commission, which has a long involvement with the Convention and where Chair Mary Shapiro has made enforcement a focus.
Successes over the past year
- The United States worked closely with a number of other countries to elaborate the recently adopted OECD Recommendation on Further Combating Bribery and the Draft Annex II - Good Practice Guidance on Internal Controls, Ethics, and Compliance. The Good Practice Guidance is a great new product that provides guidance for companies on how to prevent and detect bribery with anti-bribery codes, and how to strengthen compliance programs.
- The Recommendation will greatly enhance Parties' enforcement of the Convention so that we can better fight bribery and corruption of foreign officials in international business, and uphold the rule of law around the globe.
Let me give you a few examples of why this Recommendation is so important:
- It provides guidance to Parties on the basic offense, corporate liability, outreach and training, and enforcement.
- It establishes agreement for regular meetings of prosecutors.
- It identifies international cooperation as a critical area for further work by the Working Group on Bribery.
- It strengthens cooperation with international organizations, by recommending that enforcement authorities accept referrals of bribery cases from such organizations.
- It requires Parties, and encourages companies, to have easily accessible reporting channels, as well as whistle blowing provisions, to encourage bribery reporting and protect those who do the right thing and report.
- The guidance is a tool for companies to prevent and detect bribery, and to assist them in complying with Parties' legislation. It provides companies with state of the art guidance on creating effective internal controls, ethics, and compliance programs, and measures for preventing and detecting the bribery of foreign public officials in their international business transactions.
Additional success over the past year
Now that the Parties to the Antibribery Convention have enhanced their political commitment, it is time to get even better results. And we are seeing these already.
We are extremely pleased that the UK has recently adopted historic anti-bribery legislation. This historic Act creates a legal framework under which bribery prosecutions can be taken forward. It sets out exactly what constitutes a bribe - both bribery payment and receipt - and creates the offense of "bribing a foreign official." The Act also creates a new offense of "corporate failure to prevent bribery," under which companies will have to show that they have adequate corporate training and guidelines in place to prevent bribery. We look forward to working with the UK as they assume a leadership role on anti-bribery.
We encourage other countries to reaffirm their commitment to implementing fully their obligations under the OECD Anti-Bribery Convention. Leaders reaffirmed their intentions in the 2009 OECD Ministerial meeting, but we would like to see renewed emphasis on taking action, particularly in enforcing foreign bribery laws. We should work together to eradicate corruption in our own countries, and redouble our efforts to combat transnational corruption. The U.S. is prepared to work with others to achieve that goal.
In addition, we are pleased that theOECD Working Group on Bribery agreed in its new Recommendation to publish statistics concerning investigations and prosecutions of foreign bribery by signatories to the Convention. The United States has long pressed for this. We believe this will increase accountability, and it will publicly provide an official report of Signatory statistics. This builds on and complements the good work that NGOs - such as Transparency International - is already doing.
Third, we are pleased that there will now be regular prosecutorial meetings. We have long sought more prosecutorial involvement in the WGB, and will continue to do so, particularly because the involvement of prosecutors can address crossing-cutting issues that inhibit effective enforcement.
Fourth, we seek to gain the participation of emerging economies. Now more than ever, as emerging economies flex their economic muscle - particularly in developing countries - we must work to encourage them to be responsible international actors. It is important to note that the Convention has always been broader than OECD membership. Developed as well as developing countries were original parties to the Convention. Some also joined later. Currently, Russia has said it would also like to accede in connection with its accession process to the OECD. The Working Group on Bribery has reached out and included emerging economies in some of its deliberations. Ad-hoc members Indonesia and Russia participated as observers at the meeting in March. China has also been invited, as an ad hoc member.
Future OECD Committee Work
There is more that the OECD has done to address corruption in its various other committees and more that it can do to build on these efforts. These are not usually thought of as part of the anti-bribery agenda, but truly, if the goal is to stamp out corruption, we must look to other levers and to the demand side as well as the supply side.
Demand Side Activities. As Secretary Clinton mentioned in her December 9, 2009 video message for Anti-Corruption Day, all OECD countries should maintain the highest standards of transparency and accountability in our development efforts around the world. As she noted, corruption in emerging markets and fragile democracies undermines the confidence of citizens and investors alike, while responsible governance helps to foster sustainable economic development and political stability.
- The OECD is home to the Development Assistance Committee whose members are the major providers of development assistance. In addition to working with its members to establish better systems for transparency and accountability, the DAC, as it's called, has issued guidelines and an assessment tool to help strengthen procurement systems in developing countries to improve their effectiveness and transparency and safeguard against misuse and corruption.
- More accountable and effective national procurement systems are a key to achieving a level of economic governance in which citizens and businesses can have confidence. It also provides greater confidence and comfort to donors seeking to channel more resources through the developing countries rather than through costly parallel donor systems. The United States is working closely with other donors to develop specialized assessment and diagnostic tools that multiple donor aid agencies and partner governments could use.
- The OECD has been working in Africa and Latin America to help tax administrators build efficient tax systems. The right tax laws and their effective implementation can be very effective anti-corruption tools by reducing impunity and making it harder to hide the proceeds from corruption and reducing impunity. Proper tax systems can also help increase transparency and discourage black market activities.
- Additional demand side instruments that OECD members have adopted include recommendations on Enhancing Integrity in Public Procurement , on Managing Conflict of Interest in Public Service and yet another for Improving Ethical Conduct in Public Service. To this list should be added the recommendation on Public Education on the Effects of Bribery, as well as Guidance on Prevention and Detection of Bribes: Codes of Conduct.
There is more that is being done at the OECD to find new levers to go at corruption.
- Extractive industries are a key corruption opportunity. The OECD's Pilot Project in the Mining Sector is devising practical guidance on managing supply chain risks for key minerals sourced from conflict zones and fragile states. Corruption and financial crime figure prominently among the risks to be addressed. The U.S. is working to promote implementation of the new Recommendation, including actively promoting the Good Practice Guidance to give companies guidance to set up effective internal controls, and develop good practices to avoid corruption.
- The OECD launched in the last year, in conjunction with the G20, the Global Forum on Transparency and Exchange of Information for Tax Purposes, which now has 92 members and is doing its part to ensure that tax authorities worldwide share information, one important effect of which will be to eliminate safe harbors for the proceeds of corruption.
Private Sector Public Education
- The OECD has launched a Global Awareness Raising Initiative, a public education campaign that can include outreach to business schools around the world about the effects, and victims, of bribery and corruption.
- An area which deserves more attention in the context of the Global campaign is research on social costs. This could be an opportunity to spur additional research on the social costs of corruption and to publicize this crime as one that leaves the world's poorest families in poverty.
- We hope to see a greater focus on educating financial professionals who work with and perform due diligence on companies about the Recommendation and corruption issues more broadly.We are working with OECD's business advisory council to put together a conference on internal controls with the accounting and financial analyst professions.
As signatories of the Convention, there is a great deal that our countries can do to ensure clean, transparent business practices. We look forward to working with your countries at the OECD to achieve that goal.
About U.S. Engagement at the Organization for Economic Cooperation and Development
The United States is a founding member of the OECD, a global policy shop - or "GPS" of the world economy - composed of 30 democratic countries with market-based economies. Shared goals include achieving a rising standard of living in member countries, as well as engaging with non-members to contribute to the development of the world economy. Through its public policy research, ‘soft law,' and peer reviews, the OECD - which turns 50 later this year - provides the United States an opportunity for engaging with other countries on economic regulatory issues.
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