Advice on preventing bribery for companies operating abroad D:
What is meant by bribery? Direzione Generale per la Cooperazione
Economica e Finanziaria Multilaterale Coordinamento OCSE-Corruzione
R: The offence of bribery is committed in relation to conduct by a
public official who requests or accepts money or other undue
benefits in order to perform an action relating to or contrary to
his official duties. The offence may also take the form of
attempted bribery when the public official has indicated that he is
willing, for a reward, to perform an action relating to his
official duties (Art. 318 of the Criminal Code) or contrary to
these duties (Art. 319 of the Criminal Code) and negotiations for
this purpose have been initiated. Bribery takes many forms at many
different levels, ranging from more or less valuable gifts to
officials in order to obtain advantages of all kinds, to enormous
sums paid to government ministers. Slide 2 Advice on preventing
bribery for companies operating abroad D: What is the OECD
Anti-bribery Convention? Direzione Generale per la Cooperazione
Economica e Finanziaria Multilaterale Coordinamento OCSE-Corruzione
R: Until the 1990s, bribery of public officials was only prosecuted
domestically, while bribery of foreign public officials was
considered necessary to remain competitive, and money spent on
bribes was even tax deductible in many countries legislation. In
1997, the OECD Member countries and other countries, aware of the
enormous economic and social costs of bribery, adopted a convention
to combat bribery abroad. Slide 3 Advice on preventing bribery for
companies operating abroad D: What are the risks involved in
failing to comply with the Convention? Direzione Generale per la
Cooperazione Economica e Finanziaria Multilaterale Coordinamento
OCSE-Corruzione R: Bribery in international economic transactions,
by distorting competition, is a factor that lowers civil and
political standards within countries. Consequently, measures to
combat bribery are being implemented at a number of levels
criminal, commercial and fiscal. The criminal aspects are
undoubtedly predominant in all States that have adopted the
Convention. Slide 4 Advice on preventing bribery for companies
operating abroad D: Why is bribery also being combated abroad? (1)
Direzione Generale per la Cooperazione Economica e Finanziaria
Multilaterale Coordinamento OCSE-Corruzione R: For a number of
different reasons of an economic, social and business-related
nature. Some of the economic reasons for combating bribery are: It
wastes resources that should be used to ensure public welfare (for
example, when unnecessary and/or unprofitable infrastructure is
built); It distorts competition, resulting in an inefficient
allocation of resources (for example, when decisions are not based
on the value for money of bids submitted, but on political
favours); Companies listed on a stock exchange see the value of
their shares fall because of investors lack of confidence when this
illegal activity becomes known and are sometimes excluded from the
stock exchange. Slide 5 Advice on preventing bribery for companies
operating abroad D: Why is bribery also being combated abroad? (2)
Direzione Generale per la Cooperazione Economica e Finanziaria
Multilaterale Coordinamento OCSE-Corruzione R: Among the social
reasons, the following can be mentioned: The damage caused by a
conception of the public sphere as something private belonging to
public officials and used by them illegally for their own personal
enrichment; Citizens loss of trust in government based on rule of
law, leading to attitudes of indifference and cynicism that
undermine the democratic conception of government; Illegal
activities fuelled by the proceeds of bribery and which are often
managed by organised crime. Slide 6 Advice on preventing bribery
for companies operating abroad D: Why is bribery also being
combated abroad? (3) Direzione Generale per la Cooperazione
Economica e Finanziaria Multilaterale Coordinamento OCSE-Corruzione
R: Some of the business-related reasons for combating bribery are:
Italian companies must assume criminal and administrative liability
not only in the country in which they are operating but also in
Italy; Companies reputations are damaged in the eyes of their
business partners and public opinion; Companies themselves also
consider that employees who engage in bribery are untrustworthy (as
they may be likely to embezzle money or accept bribes themselves).
Slide 7 Advice on preventing bribery for companies operating abroad
D: Are bribes tax deductible if the payment is made in connection
with a normal commercial transaction and is correctly shown in the
accounts? Direzione Generale per la Cooperazione Economica e
Finanziaria Multilaterale Coordinamento OCSE-Corruzione R: In 1996,
the OECD had already recommended that Member States not consider
amounts paid to foreign public officials (of any country) as tax
deductible. In fact, the possibility of considering bribes as
deductible costs encourages bribery and is tantamount to
recognising it as a legitimate practice. In Italy, bribes and costs
related to illegal activities are not included among the elements
qualifying for deduction from corporate income and do not meet the
requirement of being essential to the activity performed. Law No.
289/2002 has formally specified that costs and expenditures related
to actions that can be qualified as illegal are not deductible.
Slide 8 Advice on preventing bribery for companies operating abroad
A concrete case (1): Direzione Generale per la Cooperazione
Economica e Finanziaria Multilaterale Coordinamento OCSE-Corruzione
The Italian company ABC is competing to build a hospital for the
Health Ministry of country XXXX. Its export director has learned
that the person in charge of the department that will assign the
work is willing to award the contract to the best bidder willing to
deposit on his behalf in a bank account in country YYYY (a tax
haven) an amount ranging between 10 and 15% of the value of the bid
submitted. The representative of the Italian firm knows that its
competitors are willing to offer between 10 and 12%. Slide 9 Advice
on preventing bribery for companies operating abroad A concrete
case (2): Direzione Generale per la Cooperazione Economica e
Finanziaria Multilaterale Coordinamento OCSE-Corruzione The Italian
company has set up a joint venture with a local firm in country
XXXX that is commissioning the construction of the hospital in
order to compete for the contract to provide supplies. In addition,
if it decides to pay the amount demanded by the person in charge of
the department that will assign the work, the Italian company
believes that it can make the payment through a company that it
will set up in country YYYY (the tax haven), which is not an OECD
Member or even a signatory to the Convention, showing the foreign
partner as payer. Slide 10 Advice on preventing bribery for
companies operating abroad D: What action can the Italian company
and its representative take to prevent the offence? Direzione
Generale per la Cooperazione Economica e Finanziaria Multilaterale
Coordinamento OCSE-Corruzione R: Under the Convention, the companys
legal representative can immediately contact our consular or
diplomatic authorities (or those of another signatory country to
the OECD Convention) or trade associations (Confindustria or
others) to present the situation and ask that action be taken to
re-establish the proper tendering procedure. Slide 11 Advice on
preventing bribery for companies operating abroad D: What are the
risks for the Italian company and its representative if they accept
the proposal? Direzione Generale per la Cooperazione Economica e
Finanziaria Multilaterale Coordinamento OCSE-Corruzione R: If the
legal representative, or anyone acting on his behalf, were to
accept the proposal, he would be an accessory to the offence of
bribery, which in addition to exposing him to serious criminal
penalties (imprisonment for up to three years or longer in the
event of aggravating circumstances), would engage the liability of
the company that he represents. The company might then be liable
not only for a fine proportional to the seriousness of the offence,
but also for disqualifying penalties, such as a ban on doing
business, suspension or withdrawal of permits, licences and
concessions, a ban on competing for government contracts and
ineligibility for tax relief and financing or loss of any such
relief or financing already granted. For the offence of ATTEMPTED
bribery, the penalty is reduced by one-third to two-thirds. Slide
12 Advice on preventing bribery for companies operating abroad D:
If an agreement is reached on the basis of the proposal made by the
foreign official in the ministry awarding the contract, what are
the risks for the Italian company and its representative? Direzione
Generale per la Cooperazione Economica e Finanziaria Multilaterale
Coordinamento OCSE-Corruzione R: The person who has acted on behalf
of the company, if he meets the conditions defined in Art. 9 of the
Criminal Code a criminal offence by a citizen abroad would be
liable for the offence of bribery, irrespective of the fact that
the payment was made to a tax haven that is not an OECD Member and
that the amount was paid by a foreign partner. The company would
also be liable for the offence under Art. 4 of Legislative Decree
231/2001 if the relevant conditions are met. Slide 13 Advice on
preventing bribery for companies operating abroad D: What measures
can be taken by individual companies to ensure that they do not
become involved in corrupt practices? Direzione Generale per la
Cooperazione Economica e Finanziaria Multilaterale Coordinamento
OCSE-Corruzione R: The strategy for combating possible practices of
bribery includes organisational measures, measures concerning
corporate management and staff and, very importantly, monitoring
measures adapted to the size of the company and the markets and/or
sectors in which it is operating. Slide 14 Advice on preventing
bribery for companies operating abroad D: What are some of the
organisational measures? Direzione Generale per la Cooperazione
Economica e Finanziaria Multilaterale Coordinamento OCSE-Corruzione
R: An initial general measure is based on identifying at-risk
activities and introducing a system of double monitoring of the
commitments undertaken. A second measure consists of defining
clearly the responsibilities of staff involved in negotiations. A
last measure is to ensure transparency in business processes by
requiring a detailed report on negotiations and the persons
involved. Slide 15 Advice on preventing bribery for companies
operating abroad D: What are some of the management measures?
Direzione Generale per la Cooperazione Economica e Finanziaria
Multilaterale Coordinamento OCSE-Corruzione R: To ensure that
staff, and especially the most exposed staff, is made aware of
problems of bribery by providing specific information on the risks
and consequences of corrupt practices. To identify the critical
points in business processes where bribery is most likely to occur
and to designate an internal structure within the company to which
staff can report problems, potential dangers and persons suspected
of bribery. To adopt a code of conduct. Slide 16 Advice on
preventing bribery for companies operating abroad D: What should an
anti-bribery code of conduct entail? Direzione Generale per la
Cooperazione Economica e Finanziaria Multilaterale Coordinamento
OCSE-Corruzione R: An anti-bribery code of conduct should become
part of the corporate culture. This has the advantage of making the
companys staff aware of the problems and consequences of bribery,
enabling the staff itself to act appropriately if they encounter
corrupt practices. The anti-bribery code can either be an
independent document or be incorporated into the general rules of
the company. Slide 17 Advice on preventing bribery for companies
operating abroad D: Where can information be found on useful tools
for drafting a code of conduct? Direzione Generale per la
Cooperazione Economica e Finanziaria Multilaterale Coordinamento
OCSE-Corruzione R: The OSCE-Organisation for Security and
Co-operation in Europe has drafted a WEB page on Best Practices in
combating bribery aimed primarily at governments.The
OSCE-Organisation for Security and Co-operation in EuropeBest
Practices The U4:Anti-Corruption Resource Centre makes available
on-line a great deal of information on tools for combating bribery
in the economic field.U4:Anti-Corruption Resource Centre Slide 18
Advice on preventing bribery for companies operating abroad D:
Where can information be found on useful tools for drafting a code
of conduct? Direzione Generale per la Cooperazione Economica e
Finanziaria Multilaterale Coordinamento OCSE-Corruzione R:
Transparency International, a non-governmental organisation engaged
in combating bribery, makes available on its site an
anti-corruption handbook and business principles for countering
bribery that are useful tools for preparing corporate rules of
conduct for combating bribery.Transparency
Internationalanti-corruption handbookbusiness principles for
countering bribery These publications can act as a guide for
defining a corporate code of conduct for combating corruption.
Slide 19 Advice on preventing bribery for companies operating
abroad D: Which aspects of work activities can be treated in the
code? Direzione Generale per la Cooperazione Economica e
Finanziaria Multilaterale Coordinamento OCSE-Corruzione R: Some of
the points to be treated may concern: (a) the companys general
attitude towards bribery; (b) ethical principles in negotiations
with third parties; (c) the organisational structures responsible
for preventing corrupt practices; (c) the penalties for bribery by
company employees; (d) definition of what can be accepted as a gift
from third parties (for example, ceilings on value); (e) rules of
behaviour to prevent bribery; (f) instructions to be followed when
faced with corrupt practices. Slide 20 Advice on preventing bribery
for companies operating abroad D: What about monitoring measures?
Direzione Generale per la Cooperazione Economica e Finanziaria
Multilaterale Coordinamento OCSE-Corruzione R: The companys
business activity should be subject to monitoring, at least on a
sample basis. This means that steps must be taken to verify
compliance with negotiation guidelines and the terms of contracts
and to monitor the accounting aspects of these contracts. Another
useful tool can be to study cases of corrupt practices encountered
previously in order to assess the solutions adopted so that these
can be used as a guide for similar cases.
