Despite high risk, CEE sees few bribery investigations

Corruption romania

Anti-bribery enforcement is increasingly an international affair as agencies around the world continue to coordinate across borders in the investigation and resolution of large-scale bribery cases.

However, 2019 was a relatively slow year for enforcement in transnational bribery cases, a recent report published by TRACE International has found.

According to the anti bribery business association’s Global Enforcement Report for 2019, both global and US enforcement numbers in cases involving the bribery of foreign officials dropped: a 19 per cent decrease in US enforcement actions and a 45 per cent decrease in non-US enforcement. As of the end of 2019, Brazil was conducting the most investigations concerning the alleged bribery of domestic officials by foreign companies, followed by India and China.

Globally, the largest share of all investigations concerning alleged bribery of either domestic or foreign officials was registered in the extractive industries, engineering and construction, as well as the aerospace and security sectors.

The highest number of investigations concerning the foreign bribery of domestic officials occurred in the Asia Pacific region (29 per cent), followed by the Americas (27 per cent) and Europe (23 per cent). Among the more than 60 investigations in European countries, 34 were conducted in emerging Europe: Poland (nine cases), Hungary (six cases), Croatia (four cases), Czechia (two cases), Latvia (two cases), North Macedonia (two cases), as well as Armenia, Bulgaria, Lithuania, Montenegro, Serbia, Slovakia and Slovenia (one case in each country).

In 2019, only Czechia, Hungary, Romania and Ukraine reported investigations concerning the bribery of foreign officials.

“Most of the Central and Eastern European countries mentioned have only a few investigations or enforcement actions, a stark contrast with the high bribery risk indicated by indexes such as the TRACE Bribery Risk Matrix,” Alexandra Wrage, the president of TRACE International tells Emerging Europe, adding that a partial explanation for this may be that some Central and Eastern European economies are not significantly exposed to western business, as in the examples of Belarus and Moldova, countries that do not appear at all in the Global Enforcement Report.

“However, we suspect there is another factor at play,” Ms Wrage continues, noting that some Central and Eastern European countries – as former republics of the USSR – find themselves in the crosshairs of the confrontation between the West and Russia—and to a lesser extent, the United States and China.

“These countries share a corrupt Soviet past, with their planned economies and post-Soviet wild capitalism. Russia has a history of using corruption as a geopolitical tool to help itself claim this region as its sphere of influence,” she adds.

TRACE International suspects that there may be significant geopolitical motivations and considerations for the pervasive corruption in this region on the one hand, and an underwhelming external anti-corruption response on the other.

Sustained, principled anti-corruption action from the outside against corrupt elites may push a country in limbo toward Russia, as happened in Ukraine in 2013. This approach could also stir up uncontrolled anti-corruption public sentiment, inviting Russia’s covert involvement or even outright military intervention, and undermining the modestly corrupt but pro-western governments.

“As in the case of Ukraine, a less direct approach we have seen is an attempt by western governments to boost local anti-corruption laws, rather than applying the sometimes blunt tool of US anti-bribery enforcement. Anti-corruption efforts will also continue to materialise in the form of trade leverage, as well as requirements for loans from development banks,” Ms Wrage concludes.