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8.1 IntroductionSmall bribes, commonly termed ‘facilitation payments’, are typically demanded in everyday transactions, for example at border crossings. There is growing international recognition that facilitation payments are not easily separated from other forms of bribe and increasingly, companies are following a zero-tolerance policy throughout their global operations, with no exemptions for facilitation payments. Characteristics of Small Bribes
8.1.1 TerminologySmall bribes are given various names depending on context and country; for example, ‘tea money’ in Kenya or ‘baksheesh’ in Egypt. The term facilitation payment originates from the FCPA and usually covers payments made to officials to obtain or speed up routine services which the officials are required to provide. It does not include payments made directly to obtain or retain business. Facilitation payments are allowed as an exception in the bribery laws of only four countries: Australia, New Zealand, South Korea and the USA. These laws apply only when they are made abroad and paradoxically, remain illegal in their own domestic laws. It should be noted that as facilitation payments are often hidden in the books, they can lead to a books and records offence under the FCPA. The UK Bribery Act makes no exception:
Transparency International UK uses the term small bribes rather than facilitation payments as this expresses the true nature of such transaction, provides a precision of definition and gives a basis for countering this form of bribery transaction. 8.2 The Risk of Small BribesThe guidance that follows is based on TI-UK’s publication Countering Small Bribes: Principles and good practice guidance for dealing with small bribes including facilitation payments. Countering small bribes can be exceptionally challenging for companies. Resisting these bribes can have costs for the business and demands for small bribes are often made at times of operational vulnerability. The factors which create demands for small bribes are often entrenched and pervasive and the payments can be hard for management to detect, especially when they are made by third parties and deliberately concealed. Often, small bribes are made systemically and business operations are dependent on them being made. However, consequences of not addressing the challenge can be substantial. The company may face the following risks:
8.3 The Damage from Small BribesAt a broad level, making small bribes feeds a climate of corruption, creating an unstable operating environment for companies. It destroys trust in government and public administration, undermines the rule of law, impacts human rights and distorts business transactions. Small bribes are not confined to demands made to companies, as there are no boundaries for officials and others who demand bribes. The effects in countries with high levels of corruption can be widespread. In such circumstances, businesses and citizens may face daily demands for payments for essential transactions, increasing the costs of living to citizens and adding costs and uncertainties to business, often the smaller and vulnerable SMEs. Small bribes are part of a cycle of bribery that corrodes public and business standards and provides a climate for larger public sector bribery and state theft. Although many companies ask how they can be expected to operate in certain markets without paying small bribes, growing numbers are adopting a policies and strategies to eliminate the practice. They are now finding that their reputation for not paying bribes means they are no longer asked; whereas those that pay small bribes can be subject to an ever-increasing spiral of demands. 8.4 How Small Bribes are DemandedTypically, a bribe demander will use explicit or implied threats of delay, inconvenience, business cost or some other undesirable outcome. Bribes can also be solicited by an official with the inducement of a faster service, overlooking incomplete paperwork, or some other benefit, and may also be offered by the bribe payer to obtain such benefit. Payments made in response to genuine threats to life, limb or liberty are payments made under duress, and this may provide a legal defence for the payment. Economic or other coercion such as travel delay, however costly or inconvenient, may appear valid reasons for making a payment but are not legal grounds for paying a small bribe. What constitutes ‘small’ is clearly relative. A bribe of $20 paid to a passport official may seem small to the business traveller, but the average daily wage in the country may be only $2. A bribe of $200 in a developed country may be relatively small. A single bribe may be small in itself, but – very often – small bribes are paid regularly and over time the amounts can be considerable and amount to large-scale systemic bribery. A company might easily discover that it is paying hundreds of thousands of pounds each year in so-called facilitation payments or small bribes. Case study: Small bribes were systemic and aggregated to U.S. $2 million over 2.5 years. Click here. 8.5 Eight Challenges of Small Bribes
Case Studies: Caugh Unawares. Click here to read. 8.6 Countering Small BribesSee the TI-UK guidance Countering Small Bribes for the full description of the topics summarised below. 8.6.1 Assess the RisksThrough risk assessment, the company can identify and prioritise the risks from small bribes, and then design and implement mitigating controls. The next step in the risk assessment is to gather information to identify where small bribes are happening or could happen, and finds out how employees and third parties are dealing with demands when made. It will be important to use the knowledge of front-line employees who are encountering the demands for small bribes. The risk assessment process could be assigned to the country business unit to carry out. This can have the benefit of not only bringing local knowledge, but also bringing the local management into the process for developing the controls. Surveys and questionnaires can be supplemented by face-to-face interviews which will also bring out areas which people may be reluctant to put into print. 8.6.2 Develop a Strategy and PlanHaving assessed the scale and nature of the issue, a strategy and plan should be developed for countering and, where possible, eliminating small bribes. This may involve changing routes to market, supply chains or even business processes. The strategy should be supported by a long-term commitment to countering small bribes, from the board and senior management and with the provision of adequate resources. Employees should be encouraged to resist bribes so that responsibility is embedded across the company. The leadership should make clear they will not penalise employees who resist bribes and thereby incur delay or losses in operations. An implementation plan should be prepared and then rolled-out which will provide for:
8.6.3 Influence the Operating EnvironmentFactors that create demands for small bribes are likely to be deep-rooted – involving poverty, poorly paid officials, grasping senior officials and politicians and institutional corruption as well as corrupt companies seeking to gain advantage. The company should consider addressing these structural factors by working in collaboration to achieve fundamental change. Work can be at macro level – discussions with governments and addressing societal issues such as poor pay - or more commonly, at micro level; tackling an issue in depth in a particular government function or process. Most commonly, this will be done best through collective action. A key tool in collective action is obtaining changes in processes so that opportunities to extract small bribes are removed. This can be achieved in ways such as:
Implement internal financial controls: Internal controls should be designed with the aims that:
8.6.4 Give Employees the Skills and KnowledgeTailored training should be given to employees identified as being at risk of demands for small bribes to make them aware of when and where demands could happen and how to handle them. The emphasis in the training should be on providing the practical skills and knowledge to resist such demands. Case studies, scenarios, dilemmas and red flags can be used in training. Incorporating experienced employees in training groups can help to bring extra relevance and a degree of reality to the training. Emphasise to employees that they will not be penalised for refusing to pay small bribes even if this results in delay and costs. The input and comments of those taking part in training should be captured as this can be valuable in contributing to the company’s knowledge about risks and ways of tackling bribe demands. A key aspect of training is guidance on how to negotiate situations and role playing. Click here for a model approach. 8.6.5 Monitor to Check How Controls Are WorkingThis means examining expenses documentation and the books and accounts for red flags and talking to front-line employees and third parties to ask for honest feedback on the challenges they are facing. For a list of red flags, click here.The absence of evidence of payment of small bribes can be an indicator of an issue, especially where activities or transactions are taking place in countries known for risks of small bribes. Annual certifications by business units and third parties on implementation of controls with reports on any issues can be helpful to focus attention on small bribes. Internal audits can be used as a check and also audits of intermediaries’ books and records but it may be difficult to detect evidence of small bribes. Management should review the results of monitoring and make regular reports to the board as part of their reporting on the anti-bribery programme. 8.6.6 Public ReportingAs part of public reporting on the anti-bribery programme, if the company has identified that small bribes are an issue for the sector and it has adopted a strategy, it should report on progress. For an example from the maritime sector, click here. 8.7 Case Studies8.7.1 Small Bribes Aggregated Over Time to U.S. $2 MillionIn October 2016, the German authorities reached a settlement with logistics provider DB Schenker over allegations that it bribed Russian customs officials in the port of St Petersburg. Schenker agreed to a fine of €2m (U.S. $2.19 million) in settlement of the matter. The relatively low penal element was said by the prosecutor to be mostly due to the very high level of cooperation during the investigation and to the fact that the case was started by a report by DB Schenker’s parent, Deutsche Bahn, to the Public Prosecutor’s Office. As a result of the scandal, 30 Schenker executives lost their jobs in 2013. The bribery scheme allegedly involved payments made to speed up the extremely slow customs clearing process in Russia for delivery of supplies to the nearby Ford plant. It was alleged that DB Schenker paid local tax collectors a ‘service fee’ for fast clearance. The money was not handed over to the customs officers directly. Instead, Schenker paid a ‘service fee’ to a Russian agency who then transferred the funds to accounts in Switzerland and Cyprus belonging to a financial holding entity, registered in the Caribbean and owned by the Russian agency. DB Schenker was said to have transferred up to €2.25 million to the Russian agency over 2.5 years. 8.7.2 Caught Unawares
8.8 Useful Information8.8.1 Model Negotiation Steps for Resisting DemandsIf the employee feels it is safe to do so some or all of the following steps can be followed when a demand is made. If the demand is accompanied by a threat to life, limb and liberty of the employee or others working in a country then the employee should not resist the demand.
8.8.2 Red Flags for Small BribesTransactions
Evidence from outcomes
Absence
8.8.3 Example - Reporting on Small Bribes in the Maritime SectorA P Moller-Maersk: 2016 Sustainability Report “Although the risk of large-scale corruption is low, our shipping businesses constantly liaise with port authorities, customs officials and other inspectors. These encounters can carry a high risk of demands for facilitation payments.
CONTINUE READINGWhat is the meaning of grease payment?(chiefly US, idiomatic, business, law, ethics) A bribe or extorted money, usually relatively small in amount, provided to a low-level government official or business person, in order to expedite a business decision, shipment, or other transaction, especially in a country where such payments are not unusual.
What is an example of a grease payment?A sum of money, typically a bribe, paid to a government official or business person so as to facilitate or expedite some decision or transaction. Just offer the governor's aide a grease payment to move our building application to the forefront of the governor's agenda.
Is a grease payment a bribe?Definition. 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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