IBA Defining corruption - United Nations Office on Drugs ...

3. Defining corruption

The origin of ‘corruption’ comes from the Latin terms corruptus, or corrumpere which mean
spoiled or break into pieces, accordingly. Corruption occurs at all levels of society and at all
forms – public, private, locally, nationally and internationally. In an age of globalisation,
transactions often transcend national boundaries, which increase the opportunities for
corruption. Nonetheless, an international definition of ‘corruption’ does not exist, as this
would raise legal and political complications. Consequently, different interpretations of
‘corruption’ are given by multiple jurisdictions according to their own cultural conceptions.

The leading norms that deal with ‘corruption’ are the UN Convention against Corruption
(UNCAC), the Convention on Combating Bribery of Foreign Public Officials (OECD Anti-
bribery Convention)), Council of Europe Conventions and EU Instruments. The Council of
Europe and the UN Conventions do not define ‘corruption’, but establish various forms of
corrupt offences in order to tackle the problem of ‘corruption’:

1. Bribery
2. Extortion
3. Facilitation Payment
4. Collusion
5. Fraud
6. Obstruction of Justice
7. Embezzlement, misappropriation or other diversions of property by a public official
8. Trading Influence
9. Abuse of function
10. Illicit enrichment
11. Money laundering

Definitions

It is essential to note that the definitions given below acknowledge that ‘corruption’ takes
many forms and is not limited to ‘the bribing of a judge or public official’.

1

OECD explains corruption as “the abuse of a public or private office for personal gain. The
active or passive misuse of the powers of Public officials (appointed or elected) for private
financial or other benefits”.1

The World Bank defines corruption as “the abuse of public office for private gain”.2

Transparency International (TI) defines it as the “misuse of entrusted power for private gain.
It hurts everyone who depends on the integrity of people in a position of authority”.3

The UN Global Compact suggests participants to consider the following three elements when
fighting corruption and implementing the 10th principle:4

“1. Internal: As a first and basic step, introduce anti-corruption policies and programs within
their organizations and their business operations;
2. External: Report on the work against corruption in the annual Communication on Progress;
and share experiences and best practices through the submission of examples and case
stories;
3. Collective: Join forces with industry peers and with other stakeholders”.5

Corruption has both a ‘demand’ and ‘supply’ side. The demand side involves persons or
entities that facilitate corruption, which have the means to provide undue advantages in many
forms. To fight corruption effectively, policies aimed at both the demand and supply sides are
required. Consequently, it is not enough to condemn persons who receive the bribes. It is
essential that the supply side is prevented and deterred from, and punished for, providing the
undue advantages to obtain or retain business.

1 OECD Glossaries, [2008], “Corruption”, A Glossary of International Standards in Criminal Law, OECD
Publishing
2 V. Bhargava, [2006], “Curing the Cancer of Corruption”, p.1, Available online at:
http://siteresources.worldbank.org/EXTABOUTUS/Resources/Ch18.pdf
3 http://www.transparency.org/whatwedo?gclid=CI34t8yS4LICFaTJtAodRS0A2g
4 http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/principle10.html, See also UN Convention
against Corruption in English www. undc.org/pdf/crime/convention_corruption/signing/Convention-e.pdf,
UNODC (2006), Legislative Guide for the Implementation of the UN Convention against Corruption
www.unod.org/pdf/corruption/CoC_LegislativeGuide.p.df.
5 Ibid

2

Main types of Corruption

1. Bribery

Transparency International’s Business Principles for Countering Bribery define bribery as
“an offer or receipt of any gift, loan, fee, reward or other advantage to or from any person as
an inducement to do something which is dishonest, illegal or a breach of trust, in the conduct
of the enterprise’s business”. It is considered a criminal offence for individuals (natural
persons) in most jurisdictions. In an increasing number of jurisdictions, corporations (legal
persons) can also be held criminally liable for bribery, or are otherwise subject to civil or
administrative penalties.

Transparency International’s Business Principles for Countering Bribery cited by the UN
Global Compact is a product of the collaborative effort of the multi-stakeholder Steering
Committee, which provides a framework for companies to develop comprehensive anti-
bribery programmes. The 2009 version placed greater emphasis on public reporting of anti-
bribery systems and in recommending that enterprises commission external verification or
assurance of their anti-bribery programme.

The OECD’s Anti-Bribery Convention establishes legally binding standards to criminalise
bribery of foreign public officials in international business transactions and provides for a
host of related measures that make this effective. The Convention is “the first and only
international anti-corruption instrument focused on the ‘supply side’ of the bribery
transaction”. 6 All OECD member countries as well as the five non-member countries
(Argentina, Brazil, Bulgaria, Russia, and South Africa) have adopted this vital Convention.

Forms of bribery

Active bribery
OECD Glossary defines it as “paying or promising to pay a bribe”.

6 http://www.oecd.org/daf/briberyininternationalbusiness/anti-
briberyconvention/oecdconventiononcombatingbriberyofforeignpublicofficialsininternationalbusinesstransactio
ns.htm

3

Passive bribery
OECD Glossary defines it as “the offence committed by the official receiving the bribe”.7

Bribery of national or foreign public officials
Article 15 of the UNAC provides the criminalisation requirements of ‘bribery of national
public officials’ and Article 16 refers to ‘bribery of foreign public officials and officials of
public international organisations’.8

Domestic and international
The 39 States Parties to the OECD Anti-bribery Convention make it a crime for their citizens
and companies “to offer, promise or give a briber to freeing public officials in international
business, regardless of where the crime takes place”.

Bribery in the private sector
Article 21 of the UNCAC explains it as “(a) the promise, offering or giving, directly or
indirectly, of an undue advantage to any person who directs or works, in any capacity, for a
private sector entity, for the person himself or herself or for another person, in order that he
or she, in breach of his or her duties, act or refrain from acting; (b) the solicitation or
acceptance, directly or indirectly, of an undue advantage by any person who directs or works,
in any capacity, for a private sector entity, for the person himself or herself or for another
person, in order that he or she in breach of his or her duties, act or refrain from acting”.

Moreover, civil society organisations have been supporters of the adoption of the OECD anti-
bribery instruments and were key players in mobilising 37 countries to become parties to the
OECD Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions. These civil societies are the following: 1) the Business and Industry
Advisory Committee to the OECD (BIAC), 2) the Trade Union Advisory Committee to the
OECD (TUAC), 3) the International Chamber of Commerce (ICC) and 4) Transparency
International (TI).9

7 Colombia’s 1474 Law does not criminalize the foreign official’s acceptance of the bribe.
8 http://www.oecd.org/site/adboecdanti-corruptioninitiative/regionalseminars/35167663.pdf
9 http://www.oecd.org/daf/briberyininternationalbusiness/anti-briberyconvention/privatesectorcivilsociety.htm

4

The BIAC is recognized as representing business and industry views in the OECD
consultation process. In other words, it acts as a “contact point between business and
government, and has developed a role for the private sector in the monitoring procedure”.10
This role is based on the belief that the private sector is motivated, experienced and able to
make a valuable contribution. The BIAC recommends both international and domestic
measures to assist companies that are solicited for bribes.11

A comparative approach between two different legal systems

UK - common law country
Bribery Act 2010 came into force on July 1st, 2011. The OECD Working Group expressed its
concerns as to the delayed enforcement of the Act. A controversial debate arose regarding the
strict rules introduced (e.g. much of the Act comes from criminalizing private sector bribery,
which results to an increased competitiveness risk of UK businesses. It is worth noting that
the Act is similar to the US Foreign Corrupt Practices Act (FCPA) as both of them also apply
to bribery conduct occurring beyond their domestic boarders.

Colombia - civil law country
Colombian Law 1474 was enforced on July 12th, 2011, and focuses on public contract process
and corrupt transactions between Colombian (or foreign) individuals and companies.

On the one hand, the Colombian and the UK legal system have the same offence as to ‘the
bribery of foreign public officials’. On the other, the UK Act focuses on foreign public
officials, while Colombia’s law focuses on domestic public officials and it occasionally
extends to private bodies and individuals.

2. Extortion

Is a form of blackmail where one party makes threats against another party of adverse
consequences unless the demands, usually for payment, are met. Sometimes the threats may
involve threats of physical harm. It is a criminal offence in most jurisdictions.

10 http://www.oecd.org/daf/briberyininternationalbusiness/privatesectoranti-corruptioninitiatives.htm
11 Ibid

5

If the victim of extortion provides the payment of other benefit, then allegations of bribery
may arise. On the other hand, the party making the extorted payment may rely on the defence
of imminent death or personal injury.

The OECD Guidelines for Multinational Enterprises explains the distinction between bribery
and extortion. This definition has been cited with approval by the UN Global Compact.
According to the OECD, the “solicitation of bribers is the act of asking or enticing another to
commit bribery. It becomes extortion when this demand is accompanied by threats that
endanger the personal integrity or the life of the private actors involved”.

It has been pointed out that “if a company reports a bribe solicitation/extortion or a series of
such, by a foreign public official in a weak government zone, there is little at present that
home state agencies can do (assuming that reliable channels are absent in-country) to support
that company. In other words, the company or its agents must pay a bribe for home state
agencies to take action”. It thus seems that there is a lack of a coherent government and
international political policy to prevent efficiently this form of bribery.

3. Facilitation Payments

‘Facilitation payments’ are also known as ‘grease payments’ or ‘expediting payments’. They
are bribes paid to induce foreign officials to perform routine functions they are otherwise
obligated to perform.12

In 2010 the OECD celebrated its ‘International Anti-Corruption Day’ and the Tenth
Anniversary of the ‘Entry into Force of the OECD Anti-Bribery Convention’, at which it
added a new recommendation regarding the ‘facilitation payments’.13

This is a debatable and controversial area of law as there are major jurisdictions such as the
U.S., Canada, Australia, New Zealand and South Korea, which do not consider ‘grease
payments’ a criminal offence. In fact, the OECD has been critical on the U.S.’s approach and

12 Thomas Fox, [2010], “End of Grease Payments Coming”, Corporate Compliance Insights, available online at:
http://www.corporatecomplianceinsights.com/end-of-grease-payments/
13 TRACE International, [2009], “Facilitation Payments Benchmark Survey”

6

could go a step further in placing it as a Member State which is in violation of the Anti-
Bribery Convention.14

4. Collusion

According to the OECD, most authorities view collusion between firms to raise or fix prices
and reduce output as the single most serious violation of competition laws. The OECD
Glossary of Statistical Terms defines ‘collusion’ as combinations, conspiracies of agreements
among sellers to raise or fix prices and to reduce output in order to increase profits. It occurs
when two or more parties co-operate to defraud or deceive another party. It is often described
as a ‘cartel’, ‘anti-trust’ or ‘anti-competitive’ offence. Collusion is an offence in most
jurisdictions.

Although the economic effects of collusion and a cartel are the same and often the terms are
used interchangeably. The OECD Glossary of Statistical Terms definition, clarifies that
collusion, as distinct from the term cartel, does not necessarily require a formal explicit
agreement or communication (whether public or private) between members. Coordinated
behaviour, without a formal agreement is often referred to as tacit collusion or conscious
parallelism. For example, in oligopolistic industries, firms tend to be interdependent in their
pricing and output decisions. In these circumstances, they may take their rivals’ actions into
account and coordinate their actions as if they were a cartel without an explicit or overt
agreement.

5. Fraud

Fraud usually involves one person (or group of persons) deceiving another person in order to
gain some financial or other advantage. Accordingly, the OECD Glossary of Statistical Terms
defines ‘fraud’ as the acquisition of another person’s property by deception. Fraud is a
criminal offence in most jurisdictions.

14 See also, Jon Jordan, [2011], “the OECD’s Call for an End to ‘Corrosive’ Facilitation Payments and the
International Focus on the Facilitation Payments Exception Under the Foreign Corrupt Practice Act”, University
of Pennsylvania Journal of Business Law

7

Parties may be liable for the offence of fraud, where they deliberately undertake the
fraudulent action with full knowledge of the circumstances. Alternatively, it is possible for a
party to be liable for fraud due to recklessness.

The Convention on the Protection of the European Communities’ Financial Interest (OJ No
C316, 27.11.1995) was formed in order to tackle fraud affecting the financial interests of the
European Communities. The convention was entered into force the 17th October, 2002 and a
second protocol was enforced in May 2009. According to the Convention “fraud affecting
both expenditure and revenue must be punishable by effective, proportionate and dissuasive
criminal penalties in every EU country”.15 The definition’s core elements are that it requires
an intentional act or omission to have an irregularity defined as a fraud. This must be
punishable by Court proceedings (all other acts can therefore only be sanctioned through
administrative measures as fines and denial of further funding, etc.)

An interesting and expanding area where fraud is continuously being detected is the Internet.
Due to the growing problems of cross-border fraud, the OECD governments have provided
guidelines on international co-operation to protect consumers on this matter.16

Also another interesting initiative is that of the Anti-Fraud Hotline Project which was formed
by the U.S. Agency for International Development (USAID) and Transparency International
Pakistan (TIP) aiming at preventing fraud.17 The project allows individuals to report
allegations of fraud in a multi-lingual hotline, which is then transferred to the USAID’s
Office for review, investigation and if necessary for appropriate measures to be taken.

6. Obstruction of justice

Article 25 of the UNCAC includes two sections on the criminal offence of ‘obstruction of
justice’. First, it refers to “the use of physical force, threats or intimidation to induce false
testimony or to interfere in the giving of testimony of the production evidence”. Second, it
refers to “the use of physical force, threats or intimidation to interfere with the exercise of

15http://europa.eu/legislation_summaries/fight_against_fraud/protecting_european_communitys_financial_intere
sts/l33019_en.htm
16 http://www.oecd.org/sti/interneteconomy/pressrelease-oecdguidelinesoncross-borderfraud.htm
17 https://www.anti-fraudhotline.com/

8

official duties by a justice or law enforcement official in relation to the commission of
offences established in accordance with this Convention”. Accordingly, it refers “to interfere
with the exercise of official duties by a justice or law enforcement official”.

7. Embezzlement, misappropriation or other diversions of property by a public official

Article 17 of the UNCAC states that “each state Party shall adopt such legislative and other
measures when committed intentionally, the embezzlement, misappropriation or other
diversion by a public official for his or her benefit or for the benefit of another person or
entity, of any property, public or private funds or securities or any other thing of value
entrusted to the public official by virtue of his or her position”.18

8. Trading influence

The OECD, the Council of Europe and the UN Convention establish a range of corrupt
offences in order to assist in defining ‘corruption.’ Trading in Influence is one of the
corruption offences in the Council of Europe Criminal Law Convention on Corruption and
the UN Convention against Corruption (Articles 12 and 18, respectively).

Trading in influence occurs when a person with either real or perceived authority over the
decision making authority of a public official trades his or her influence for an undue
advantage. The recipient may or may not be a public official.

The Council of Europe Convention and UN Convention against Corruption both define it as
the intentional promising, giving or offering, directly or indirectly of any undue advantage to:
a) A public official or any other person’ (UN Convention); or
b) Anyone who asserts or confirms that he or she is able to exert an improper influence over
the decision-making of any person referred to in Articles 2, 4-6, 9-11 (EU Convention)

This applies whether the undue advantage is for themselves or for anyone else. The
definition encompasses, the solicitation, or acceptance of the undue advantage, in order that

18 Article 22 of the UNCAC refers to the embezzlement of property in the private sector.

9

the public official or the person abuse his or her real or supposed influence, whether or not
the influence is exerted or whether or not the supposed influence leads to the intended result.

Unlike bribery, the recipient of the advantage is not the decision-maker; rather, this offense is
aimed at “background corruption”, targeting individuals in the “neighbourhood power” who
try to use their position as a means of gaining an undue advantage. As stated in the
explanatory report to the Council of Europe Criminal Law Convention on Corruption (para
64), the inclusion of this offence in domestic legislation serves to close the gap on those
involved in corruption. It seeks to reach the close circle of the official or his political party to
tackle the corrupt behaviours that contribute to the atmosphere of corruption.

It can be difficult to differentiate between illegal trading in influence and legal lobbying,
particularly in countries with established lobbying systems. The Council of Europe
Convention criminalises trading of “improper influence”, i.e., there must be corrupt intent. In
contrast, the UN Convention only covers people who “abuse” their influence. The glossary
notes that international definitions of corruption for policy purposes are common, and cites
“abuse of public or private office for personal gain” as a useful example for policy
development.

9. Abuse of function

Article 19 of the UNCAC defines it as “the performance of or failure to perform an act, in
violation of laws, by a public official in the discharge of his or her functions, for the purpose
of obtaining an undue advantage for himself or herself or for another person or entity”.

In Bangladesh section 5 (d) of the Prevention Code 1947 defines an abuse of power by a
public servant if he “obtains or attempts to obtain for himself or for any other person any
valuable thing or pecuniary advantage” – punishable criminal conduct.

10. Illicit enrichment

10

According to Article 20 of UNCAC, 'illicit enrichment' constitutes a criminal offence, when
committed intentionally that prohibits “a significant increase in the assets of a public official
that he or she cannot reasonably explain in relation to his or her lawful income”.

In June 2012, the Transparency and Accountability Network published a review on
Philippines’ implementation and enforcement of Chapters III and IV of the UNCAC.19
Certain areas showed good practice, but deficiencies were found in the implementation of
Article 20 (illicit enrichment) into Philippine law. It is worth noting that due to this review,
recommendations regarding the country’s legislation and enforcement policies were made. In
particular, the Report called for a priority action to pass a law criminalising illicit enrichment,
thus fully implementing Article 20 of the UNCAC.

11. Money Laundering

The OECD Glossary of Statistical Terms defines money laundering as “the attempt to
conceal or disguise the ownership or source of the proceeds of criminal activity and to
integrate them into the legitimate financial systems in such a way that they cannot be
distinguished from assets acquired by legitimate means”. It occurs where a party moves cash
or assets obtained by criminal activity from one location to another. Typically this involves
the conversion of cash-based proceeds into account-based forms of money.

In many countries bribery offences are predicate offences for money laundering. In other
words, the bribe and its proceeds are the ‘cash or assets obtained by criminal activity’ for the
purposes of money laundering offences.

OECD’s Financial Action Task Force (FATF) sets standards to promote the effective
implementation of legal, regulatory and operational measures in order to combat money
laundering. It publishes an annual Report and its latest achievements were (a) new
international standards on combating money laundering, and (b) a new mandate for a further
8 years, until 2020.20 FATF’s role is powerful and influential among its Member Parties. The

19 http://www.unodc.org/documents/treaties/UNCAC/WorkingGroups/ImplementationReviewGroup/18-

22June2012/V1254002.pdf
20 http://www.fatf-gafi.org/documents/repository/fatfannualreport2011-2012.html

11

latest Mutual Evaluation was for Timor-Leste which was published in June 2012. Timor-
Leste is a member of the Asia/Pacific Group on Money Laundering (APG).21

In 2011, the FATF gave Argentina “a deadline to demonstrate its commitment to strengthen
measures against money laundering,” by implementing FATF’s action plan.22 Thus,
Argentina’s next steps remain to be seen within late 2012-2013. More recently, in June 2012,
both Afghanistan and Albania made high-level political commitments to work with the
FATF, APG and MONEYVAL accordingly, so as to address their CTF deficiencies. The
FATF encourages both countries to address their remaining deficiencies and continue their
process towards implementing their action plans.

Moreover, UN Office on Drugs and Crime (UNODC) is responsible for carrying out the
Global Programme against Money-Laundering, Proceeds of Crime and the Financing of
Terrorism (GPML). Along with the International Monetary Fund (IMF), “model laws for
common law and civil law legal systems, assist countries in setting up their anti-laundering
legislation in full compliance with the international legal instruments”.23 The latest Model
Law was formed in 2009, but continuous processes of upgrading encompassing new
international standards are being made.

21 http://www.apgml.org/documents/docs/17/Timor-Leste%20ME1.pdf
22 Ibid, see also “Group D’Action Contre le Blanchiment d’Argent en Afrique Centrale (GABAC)”
23 http://www.unodc.org/unodc/en/money-laundering/Model-Legislation.html?ref=menuside, see also the 2005
UNDODC and IMF Model-Legislation on Money-Laundering and Financing of Terrorism, 2009 Model
Provisions for Common Law Legal Systems on Money-Laundering, Terrorist Financing, Preventive Measures
and the Proceeds of Crime.

12