Anti-corruption module for the Masters of Economic Governance programme at the OSCE Academy

1. Corruption
OSCE, • Murod Khusanov
OSCE Bishkek Academy – 2022
osce.org

2. What is corruption?
What are the grey zones?
osce.org

3. • From over $7.5 trillion estimated global spending on
corruption 500bln lost to corruption (TI).
• In 17 countries surveyed in 2013, over 70% of the public
believed medical and health services to be corrupt or
extremely corrupt
these are Serbia; Albania; Tanzania; Bulgaria; Kyrgyzstan; Morocco; Ukraine; Bosnia and
Herzegovina; Russia; Egypt; Greece; Lithuania; Mongolia; Kosovo; Malawi; Moldova;
Mozambique
(The Global Corruption Barometer 2013)
• It’s estimated that 140,000 children die every year as a
result of corruption in healthcare (TI)
osce.org

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Bribery
Grand
Corruption
(Large
bribes) Facilitation
payments
Gifts
Hospitality
Political
donations
Charitable
donations
Agents
Enhanced
commissio
ns
In-kind
help &
support
Education
& Training
Projects
Employing
of
Relatives
Benefits &
Perks to
Relatives
Offsets
How Does Bribe Paying Happen?
Copyright Transparency International UK 2011

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Corruption and Bribery
What is corruption?
“The abuse of entrusted power for private gain”
What is bribery?
“The offering, promising, giving, accepting or soliciting of an advantage
as an inducement for an action which is illegal, unethical or a breach of
trust.”

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The scale of corruption
Every 1 in 4 in the world ever paid a bribe*
*Transparency International

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% of respondents who report having paid
bribes* *Transparency International
<5%
Australia, Belgium,
Canada, Croatia,
Denmark, Finland,
Gerogia, Japan, South
Korea, Malaysia,
Maldives, New Zealand,
Norway, Portugal, Spain,
Urugay
5-9.9%
Bulgaria, Estonia, Italy,
Slovenia, Switzerland,
United Kingdom, United
States
10-14.9%
Argentina, Chile, el
Salvador, Hungary,
Israel, Jamaica,
Palestine, Philippines,
Rwanda, Vanuatu
15-19.9%
Armenia, Cyprus, Czech
Republic, Kosovo, Latvia,
Macedonia (FYR),
Romania, Sri Lanka,
Sudan, Thailand, Tunisia
20-29.9%
Bosnia and Herzegovina,
Colombia, Greece, Iraq,
Lithuania, Madagascar,
Moldova, Papua New
Guinea, Paraguay, Peru,
Serbia, Slovakia, Turkey,
Venezuela
30-39.9%
Bangladesh, Bolivia, Egypt,
Indonesia, Jordan,
Kazakhstan, Mexico, Nepal,
Pakistan, Solomon Islands,
South Sudan, Taiwan,
Ukraine, Vietnam
40-49.9%
Afghanistan, Algeria,
Democratic Republic of the
Congo, Ethiopia,
Kyrgyzstan, Mongolia,
Morocco, Nigeria, South
Africa
50-74.9%
Cambodia, Cameroon,
Ghana, India, Kenya, Libya,
Mozambique, Senegal,
Tanzania, Uganda, Yemen,
Zimbabwe
>75%
Liberia, Sierra Leone

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Corruption around the world in 2021

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Tops and downs
TI
Rank
Country
Economic
freedom*
HDI
Democrac
y Index***
GII
1 Denmark 10 6 6 1
1 Finland 9 11 3 6
1 New Zealand 5 13 2 25
4 Norway 14 2 1 2
4 Singapore 1 12 66 7
*http://www.heritage.org
**http://hdr.undp.org
***https://www.eiu.com
TI
Rank
Country
Economic
freedom*
HDI
Democrac
y Index***
GII
174 Yemen n/a 183 154 170
177 Venezuela 176 120 151 123
178 Somalia n/a n/a n/a n/a
178 Syria n/a 150 162 119
180 South Sudan n/a 191 n/a 150

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Definitions of corruption

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Grand Corruption

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Petty Corruption

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Political Corruption

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Perfect conditions for flourishing corruption

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Corruption is not a
disease it is a
symptom

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Ferdinand Marcos
11.09.1917 – 28.09.1989
President of the Philippines from 1965
to 1986
Estimated wealth ~ $ 5-10 billion

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Ferdinand Marcos and state capture
• Economic rise, fight against poverty and corruption
• Support of US and allies for his fight against communists
• Massive financial loans to support his programme including
large infrastructure projects
• Introduction of martial law and following repressions against
opposition and suppression of free media
• State capture by family members and cronies and
systematic corruption
• As a result economy stagnated due to mismanagement and
corruption
• Further this led to public unrest and overthrow of the regime

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Forms of corruption

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Bribery
The offering, promising, giving, accepting or soliciting of
an advantage as an inducement for an action which is
illegal, unethical or a breach of trust. Inducements can
take the form of gifts, loans, fees, rewards or other
advantages (taxes, services, donations, favours etc.).

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Facilitation payments
A small bribe, also called a ‘facilitating’, ‘speed’ or
‘grease’ payment; made to secure or expedite the
performance of a routine or necessary action to which
the payer has legal or other entitlement.

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Solicitation
The act of a person asking, ordering or enticing
someone else to commit bribery or another crime.

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Nepotism
Form of favouritism based on acquaintances and familiar
relationships whereby someone in an official position
exploits his or her power and authority to provide a job
or favour to a family member or friend, even though he
or she may not be qualified or deserving.

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Embezzlement
Theft/larceny of assets (money or property) by a person
in a position of trust or responsibility over those assets.
Embezzlement typically occurs in the employment and
corporate settings.

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Lobbying
Any activity carried out to influence a government or
institution’s policies and decisions in favour of a specific
cause or outcome. Even when allowed by law, these
acts can become distortive if disproportionate levels of
influence exist – by companies, associations,
organisations and individuals

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Political Contribution
Any contribution, made in cash or in kind, to support a
political cause. Examples include gifts of property or
services, advertising or promotional activities endorsing
a political party, and the purchase of tickets to
fundraising events.

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State capture
A situation where powerful individuals, institutions,
companies or groups within or outside a country use
corruption to influence a nation’s policies, legal
environment and economy to benefit their own private
interests.

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So, what has international community has
to do with it?

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United Nations Convention against
Corruption

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UNCAC, Prevention
Art.5
Implement
Effective and
Coordinated Anti-
Corruption Policies
Art.6
Ensure the Existence
of Anti-Corruption
Bodies

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UNCAC, Prevention
Transparency
Integrity
Accountability
Public Sector
(Art.7-10)
Private Sector
and
Civil Society
(Art.12-13)
Integrity of
Judiciary and
Prosecution
Service
(Art.11)
Prevention of
Money-
Laundering
(Art.14)

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UNCAC, Criminalization
• Bribery of National Public Officials (Art.15)
• Active Bribery of Foreign Public Officials
(Art.16)
• Embezzlement, Misappropriation and Other
Diversion
• of Property (Art.17)
• Money Laundering (Art.23)
• Obstruction of Justice (Art.25)
Mandatory
Offences
• Passive Bribery of Foreign Public Official
(Art.16)
• Trading in Influence (Art.18)
• Abuse of Function (Art.19)
• Illicit Enrichment (Art.20)
• Bribery in Public Sector (Art.21)
• Embezzlement in Public Sector (Art.22)
Other
Offences

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UNCAC, Law-enforcement
Prosecution,
adjudication
and sanctions
Art.30
Freezing,
seizure and
confiscation
Art.31
Co-operation
with authorities
and protection
of witnesses,
experts,
victims and
reporting
persons
Art.32-33,37
Co-operation
between
authorities and
private sector
Art.38-39

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UNCAC, International Co-operation
Extradition
• Extradition (Art. 44)
• Transfer (Art.45)
Mutual Legal
Assistance
• Evidence and
statements
• Effecting service of
judicial documents
• Searches, seizures
and freezing
• Examining objects
and sites
• Providing documents
• Tracing proceeds of
crime
• Voluntary appearance
of persons
Joint investigations
• Law-enforcement co-
operation
• Joint investigations
and special
investigative
techniques

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UNCAC, Assets Recovery
Return of Assets as
Fundamental
Principle
(Art.51)
Measures to
Prevent and
Detect
Transfer of
Proceeds
(Art.52)
Measures for
Direct
Recovery of
Property
(Art.53)
Measures for
Return and
Disposal of
Assets
(Art.57)
Recovery of
Property
through
International
Cooperation
(Art.54 - 55)

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UNCAC, Returning of assets
Embezzled Public Funds from the State
Return to the State
Proceeds of Other Offences Covered by UNCAC
Return to the State if it Establishes Ownership or Damage Recognized by
the Requested State Party as a Basis for Return
Other Cases
May be Returned to the Requesting State Party, a Prior Legitimate Owner or
Used for Compensating Victims

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Example, BOTA Foundation
Bribery
transactions
• Alleged bribery transactions from oil company to
high-level Kazakh officials
Assets
freeze
• Swiss authorities had frozen and confiscated $84
million based on legal case sanctioned by US
against James H. Giffen and Mercator Corporation
Assets
return
• MoU was signed by Kazakhstan, Switzerland and
US on transfer of assets ($115 million, incl. interest
rates) to found and operate BOTA foundation

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Example, BOTA Foundation
• The Foundation established to improve the lives of
vulnerable children and youth suffering from
poverty in Kazakhstan through investment in their
health, education, and social welfare
• Between 2009 and 2014, 632 projects were funded
• 154,241 beneficiaries from 95,000 poor
households
• 841 educational grants

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UNCAC, Technical Assistance
Art.60
Training and
technical
assistance
Art.61
Collection,
exchange and
analysis of
information

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UNCAC Review Mechanism
• 2nd cycle
2015-
2020
• 1st cycle
– 2010-
2015
Chapter III
Criminalization
and law-
enforcement
Chapter II
Preventive
Measures
Chapter V
Assets
Recovery
Chapter IV
International
Co-operation

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Are there other regulatory mechanism to
suppress international corruption?

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Other international and supranational
documents
• OECD Anti Bribery Convention (1997)
• Inter-American Convention Against Corruption
(1997)
• Foreign Corrupt Practices Act, US (1977)
• Bribery Act, UK (2010)

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Common features of anti-bribery laws
• They seek to punish bribe givers and takers
• Extra-territoriality
• Criminal offence
• Foreign public officials
• Penalties for individuals and organisations
• Corporate liability

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UK Bribery Act
• Came into force on 1 July 2011
• Several tiers of liability:
– Personal
– Corporate
– Director and Officer

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UK Bribery Act
• Applies to any British citizen or “person with a close
connection with” the UK
• Covers bribe-paying anywhere in the world
• Covers bribes of any size
• Applies to any company if it has commercial operations in
the UK
• Extends to ‘associated persons’
• Personal liability (up to 10 years in jail)
• Corporate liability (unlimited fines)
• Director & Officer liability

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US FCPA
The anti-bribery provision:
•U.S. persons and businesses are prohibited from
offering, promising, authorizing or making corrupt
payments to foreign officials to improperly obtain or
retain business or obtain an improper business
advantage.
The “books and records” provision:
•Requires accurate reporting and recording of all
transactions.
•Covers all payments to non-U.S. government officials,
regardless of why the payments were made.

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FCPA top-10 Settlements
1. Siemens (Germany): $800 million in 2008.
2. Alstom (France): $772 million in 2014.
3. KBR / Halliburton (USA): $579 million in 2009.
4. Teva Pharmaceutical (Israel): $519 million in 2016.
5. Och-Ziff (USA): $412 million in 2016.
6. BAE (UK): $400 million in 2010.
7. Total SA (France) $398 million in 2013.
8. VimpelCom (Holland) $397.6 million in 2016.
9. Alcoa (U.S.) $384 million in 2014.
10. Snamprogetti Netherlands B.V. / ENI S.p.A
(Holland/Italy): $365 million in 2010.

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Corruption trends in a business world
Primary
Schemes
Payments
through
business
partners
Treasury
Control
Deficiencies
Payroll
Gifts, Travel
and
Entertainment
Overpricing/
Kickbacks
Fictitious
vendors/
Invoices

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OSCE/Business Integrity activities
Uzbekistan
Joint project with Chamber of Commerce planned for 2018-2020
•Facilitation of collective action towards countering corruption in
business
• Development and promotion of code of business ethics
• Establishment of discussion and interaction platform between
government and business
• Establishment and operation of hot-line
• Training on compliance and corporate governance
• Promotion of zero-tolerance towards corruption

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учебных примеров
➢Сейчас доступна только на английском языке
https://www.osce.org/secretariat/232761

50. Questions