Corruption and Fraud in International Projects

LEGAL AND ADMINISTRATIVE REMEDIES IN INTERNATIONAL CASES

Referrals for Prosecution under the U.S. Foreign Corrupt Practices Act

Adopted in 1977, the U.S. Foreign Corrupt Practices Act (FCPA) prohibits the bribery of a foreign public official by U.S. nationals, businesses and other persons who commit acts in the U.S. The books and records provision of the FCPA requires certain companies to keep accurate accounting records to make it more difficult to hide bribes. Recent amendments added a provision prohibiting the bribery of an official of an international aid organization, such as the World Bank

Referral for Investigation and Prosecution in another Country under Various International Anti-Corruption Treaties

More than sixty countries in Europe, Latin America, Asia and elsewhere have outlawed foreign bribery through a variety of international agreements. The treaties commit the signatories to cooperate in the gathering of evidence (including agreeing not to raise bank secrecy laws as an objection), extradition of witnesses and seizure of assets. A referral for investigation and prosecution under the domestic fraud laws of a country also might be possible

The Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention

The OECD Convention entered into force in 1999. A majority of the European and other treaty countries have passed implementing legislation, making it a criminal offense in each country to bribe a foreign public official similar to the provisions of the US FCPA.

The OECD Convention also provides that the parties penalize the omission and falsifications of records by companies. Auditors are now required to assess compliance with these provisions

Organization of American States (OAS) Inter-American Convention Against Corruption

The OAS convention entered into force in 1996 and requires the signatories to criminalize domestic as well as foreign bribery. The convention also provides that each state that is permitted to do so under its constitution establish the offense of "illicit enrichment." This is defined as:

… a significant increase in the assets of a government official that he cannot reasonably explain in relation to his lawful earnings during the performance of his functions

Council of Europe (CE) Criminal Law Convention on Corruption

The CE Convention, which opened for signatures in January 1999, is the first convention to require the signatories to introduce legislation making private sector (commercial) bribery a criminal offense, as well as the bribery of foreign public officials

The CE Convention also is the first to prohibit what it terms "trading in influence," requiring each state to outlaw paying anyone to use his or her influence over a public official. This language seems to refer to the local "agents," loan brokers and information brokers that are ubiquitous in international projects

The CE also:

• Makes the creation or use of false invoices or accounting records, or unlawfully omitting to record a payment, a criminal offense,
• Imposes criminal liability on corporations as well as their employees for illegal payments, and for failing to exercise adequate supervision or control, leading to a corrupt practice.

The UN Convention against Corruption.

On December 11, 2003, more than 90 countries signed the UN Convention on Anti-Corruption in Merida, Mexico.

The Convention will enter into force when ratified by a minimum of 30 states. It requires countries to criminalize a range of corrupt activities and take action to promote integrity and prevent corruption. It also establishes for the first time legal mechanisms for the return of looted assets that have been transferred to other countries.

In particular, countries who ratify the Convention must:

• establish criminal offences to punish acts of corruption;
• cooperate internationally to prevent, investigate and prosecute corruption through gathering evidence, extradition and tracing, freezing, seizing and confiscating the proceeds of corruption;
• aid in asset recovery through the prevention and detection of transfers and the recovery and return of assets, and;
• establish anticorruption bodies, enhanced transparency and accountability, and due diligence programs.

Private Civil Actions

A victim of fraud or corruption can file a civil action for damages in the U.S. or other country where corrupt acts occurred or the parties are located. Civil actions provide the opportunity to issue subpoenas or other requests for documents and to compel testimony under oath

In the UK and other jurisdictions, court orders to freeze assets and accounts and seize evidence can be obtained even before a suit is filed. The plaintiff must show substantial evidence of wrongdoing and the need for quick action to prevent the removal of assets or evidence.

Administrative Actions

The World Bank, the U.S. Agency for International Development (USAID), the Asia Development Bank and other international lenders and aid organizations have rules that provide for the debarment of contractors and the sanctioning of employees who engage in fraudulent or corrupt practices.

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