CC BY
38Mamanov Sardorjon,
Specialist of Anti-Corruption Agency of the Republic of Uzbekistan
ORCID: 0000-0001-5058-6984 E-mail: sardormamanov@mail.ru
FOREIGN EXPERIENCE OF COMBATING CORRUPTION IN
THE PRIVATE SECTOR
Abstract: The article examines the experience of Uzbekistan in preventing corruption in the private sector. It is determined that the negative factors of the spread of corruption among companies lead to a decrease in the competitiveness of the national economy, the quality of public administration, undermines the foundations of free competition, creates threats to the political stability and security of the country. With the spread of corruption, the business climate and the quality of corporate governance deteriorate, the reputation of companies is undermined, and their investment attractiveness decreases. In the markets of goods, works, services, negative selection is taking place, monopoly and protectionism are increasing. It was revealed that corruption in the private sector undermines democratic values, contributes to the spread of legal nihilism, permissiveness, money-grubbing, impunity, etc., causing significant harm to the interests of both society and the state, and the rights of citizens. The thesis is substantiated that the most effective means of preventing corruption in the private sector is the introduction of anti-corruption compliance systems and the corresponding methods of their certification into its subjects.
It is determined that international universal, regional, and special standards have a significant impact on the development of law enforcement's national legislation and practice in this area. The thesis is about the need to improve the legal foundations of the anti-corruption compliance system and introduce institutions of responsibility for legal entities in Uzbekistan, prevent illegal lobbying activities, and others.
Keywords: public and private sector, anti-corruption policy, anti-corruption compliance control system, liability of legal entities, illegal lobbying, corruption scandals.
Anti-corruption issues, especially in the private sector, acquire particular relevance in the face of increased competition in world markets, the intensification of transnational crime, and increased damage from corruption crimes.
Corruption distorts market mechanisms, causes significant economic damage to states, negatively affects the development of competition and complicates the conditions for doing business. At the same time, it is present in all countries, regardless of the political, economic systems, and other features, only the types of corruption offenses and approaches to their prevention differ.
Corruption negatively affects the activities of business structures. According to experts from Deloitte (an international network of consulting and auditing companies - ed.), about 30 percent of corruption offenses occur in the private sector; on average, each business entity loses five percent of the annual proceeds from corruption crimes. Thus, the average
losses incurred due to exceeding the official powers of the owners / senior management are estimated at 573 thousand dollars, committed by the management of companies - 180 thousand and committed by employees - 60 thousand.
Corruption in the private sector: harms the interests of both society and the state, as well as the lives and health of citizens;
undermines the foundations of free competition; deteriorates the business climate, the quality of corporate governance, the reputation of companies, and their investment attractiveness;
increases negative selection in the markets for goods, works, services, monopoly, and protectionism;
forms the competitiveness of the national economy, sharply reduces the quality of state management of the economy, threats to political stability and security;
undermines democratic values, occurs cultivation of the ideals of permissiveness, acquisitiveness, impunity, etc.;
decreases the quality of goods and services, increases its cost, expands the sphere of the "shadow economy";
decreases the income received by shareholders and owners of companies, the number of the company's counterparties, their orders, and contracts;
provokes the growth of official and organized crime, increases the risk of money laundering abroad.
Not only business structures are indirectly affected by corruption in the private sector; the damage is done to the interests of shareholders, counterparties, and clients as well
In order to prevent corruption in the private sector, both the international community and a number of states are taking measures to improve the legal, organizational and institutional mechanisms in this area.
With the adoption of the UN Convention against Corruption on October 31, 2003, this requirement began to be implemented in an imperative manner everywhere. In accordance with Art. 12. "Each state party shall take measures, in accordance with the fundamental principles of its domestic legislation, prevent corruption in the private sector, strengthen accounting and auditing standards in the private sector and, where appropriate, establish effective, proportionate and dissuasive civil, administrative or criminal sanctions for non-compliance with such measures" [1].
Conventionally, the fight against corruption in the private sector can be divided into several main areas.
The first direction is the development of anticorruption measures in the private sector.
We are talking about the introduction of effective mechanisms to identify and analyze corruption-dangerous areas of activity, assess and manage legal and financial risks in the event of corruption relations, ensure comprehensive protection of business from various legal, tax, economic, reputational, sanctions and other threats, called anti-corruption compliance (compliance - literally means acting in accordance with the requirements of the law) [2].
Compliance control was introduced in 1906 when the United States established the Agency for Verifying the Compliance of the Pharmaceutical and Food Industry with Generally Obligatory Anti-Corruption Rules [3].
The scandals of the 60-70s of the twentieth century, and, in particular, the Watergate scandal, which revealed numerous cases of corruption, including in private companies, initiated the rapid development of compliance in the United States. The result of these scandals was the adoption of the FCPA, the Foreign Corrupt Practices Act of 1977, which established strict control rules for the maintenance of accounting and
financial records, as well as rules for relations with government officials.
In the early 90s the United States has adopted the Federal Sentencing Guidelines, which provide clear guidelines for creating an effective compliance program, including ethical rules, and were amended in 2004 with provisions on the need for management to know the basic conditions of compliance programs.
With the adoption of the SOX, Sarbanes-Oxley Act of 2002, the requirements for the financial reporting of organizations have been seriously tightened. The obligation has been established for companies to adopt codes of corporate conduct along with submitting reports to American regulators. Since 2002, any company listed on the New York Stock Exchange is subject to U.S. law, in accordance with being obliged to implement a corporate compliance system (CSS) [4]. Following laws, regulations and standards in the area of compliance usually deals with issues such as adhering to appropriate standards of market conduct, managing conflicts of interest, treating clients fairly and ensuring fair consultation with them, due diligence of counterparties, the prohibition of illegal actions against government officials, and declaration of interests, income and expenses.
According to the laws, regulations and standards in the area of compliance are usually concerned with issues such as adhering to appropriate standards of market conduct, managing conflicts of interest, treating clients fairly, and ensuring conscientiousness in advising clients.
Compliance also includes specific areas such as: counteraction to the legalization of proceeds from crime and financing of terrorism;
ensuring the ability to identify and resolve conflicts of interest, including potential ones;
the inevitability of the application of disciplinary measures in case of violation by employees of compliance standards;
providing employees and third parties with the opportunity to confidentially and, if desired, anonymously report possible violations of compliance standards via the hotline or by e-mail;
development of documents and procedures to ensure the compliance of the company's activities with current legislation;
protection of information flows, anti-fraud and corruption, the establishment of ethical standards of conduct for employees, etc.
Compliance control is institutionally a structure consisting of highly qualified specialists, which creates an attractive perception of the company's activities
and its top management. The correct attitude of the company's management to the compliance control function creates conditions for effective control of the risks on profit loss and reduces the potential probability of losses of intentional or unintentional nature.
In connection with the financial scandals that took place in the United States in 2008, the Dodd-Frank Act of 2010 established a number of additional measures aimed at strengthening the fight against corruption and ensuring transparency in transactions in financial markets [5].
Currently, almost all foreign corporations listed on the US financial market have implemented compliance services.
In 2010, the UK adopted the Anti-Corruption Act (The UK Bribery Act, 2010) aimed at combating corruption both within the country and abroad.
In more than 150 countries around the world, the implementation of corporate compliance control is mandatory.
The second direction of countering corruption in the private sector is establishing liability to legal entities for the failure to take measures and the inducement of government officials to commit corruption crimes.
In the legal doctrine of common law countries, the institution of liability of legal entities, including for corruption offenses, has been operating for more than two hundred years. In 1909, the US Supreme Court recognized the constitutionality of legal entities' criminal liability [6].
The process of introducing legal entities into the sphere of influence of criminal law in civil law countries intensified in the 80s of the twentieth century, especially in the 90s, connected with the adoption of new criminal codes. For example, in 1976, the criminal liability of legal entities was established in the Netherlands, in 1982 - in Portugal, in 1992 - in France, in 1995 - in Finland, in 1997 such liability was introduced by the PRC.
Introducing the institution of liability of legal entities in countries the EU was preceded by the adoption of Recommendation No. (88) 18 of the Committee of Ministers of the Council of Europe member states on liability of legal entities for offenses committed in the course of their business activities, Civil Law Convention on Corruption of the Council of Europe, on the criminalization of corruption (CoE, 1999), the Convention for the Protection of the Financial Interests of the European Community and its Protocols 2002 etc.
Later, this requirement was enshrined in the UN Convention against Corruption, Art. 26 states: "A State Party shall take such measures as, subject to its legal
principles, may be necessary to establish the liability of legal persons for participation in the offenses established in accordance with the Convention. The liability of legal entities can be criminal, civil or administrative" [1].
Currently, the institution of criminal liability of legal entities exists in the legislation of more than 50 countries. In particular, Australia, England, Belgium, Hungary (since 2001), Denmark, Israel, Ireland, Iceland (since 1998), Canada, China (since 1997), the Netherlands (since 1976), Norway (since 1991), Poland (since 2002), Romania (since 2004), Slovenia (since 1999), USA, Finland (since 1995), France (since 1992), Switzerland (since 2003) and other countries, including the former USSR.
The corruption scandals of the 2000s contributed to the implementation of liability of legal entities in foreign countries years with the participation of top managers of several large companies. As an example, we can cite scandals with BAE Systems, Great Britain (2006 the amount of bribes was £ 2 billion), Hyundai Motor, Korea ($ 130 million, 2007), Baker Hughes Inc. ($ 219 million, 2007), Siemens, Germany ($ 1.4 billion, 2008), Samsung Group, Korea (43.3 billion won, 2017), Volkswagen, Germany (750 thousand euros, 2019) and others [7].
In 2019, Ericsson paid $ 520.6 million to the Justice Department,$ 458.4 million to the US Securities Commission, and $ 81.5 million in interest for out-of-court settlement. In 2019, the Munich prosecutor's office charged Airbus with over 100 bribes to officials.
In the United States, corporations can be punished with various criminal sanctions, including liquidation, fines, probation (a trial period), etc.
In 2005, the Criminal Code of the Republic of Latvia included Chapter VIII-1 "Compulsory measures applied to legal entities" containing Article 70.2, which established that the following types of necessary compulsory measures can be applied to legal entities: liquidation; limitation of rights; confiscation of property; monetary recovery, as well as the following types of additional coercive measures: confiscation of property and compensation for damage.
In accordance with Article 107-3 of the Criminal Code of Georgia, the types of punishments imposed on legal entities are liquidation, deprivation of the right to engage in activities, fine, and deprivation of property.
The third area of countering corruption in the private sector is the suppression of illegal lobbying activities in promoting the interests of business structures in government institutions.
The term Lobby (lobbyism) (from the English "Lobbi" corridor, covered area) [8] in its modern
interpretation came into wide use in the United States in the twentieth century [9] when this term began to denote the purchase of votes of deputies in Congress. In 1946, the United States passed the Lobbying Act, which defined the concept of lobbyism and obliged lobbyists and lobbyist organizations to register in the prescribed manner.
In accordance with Art. 5 of the UN Convention against Corruption "Everyone ... develops and implements or conducts an effective and coordinated anti-corruption policy that promotes public participation and reflects the principles of law and order, good governance of public affairs and public property, honesty and integrity, transparency and accountability". In recent years, there has been an increase in the number of international recommendations and standards in the field of legal regulation of lobbying activities [1].
An example is the Recommendation Lobbying in Europe - Hidden Influence, Special Access 2015 by Transparency International, Parliamentary Assembly of the Council of Europe Recommendation 1908 (2010) on lobbying in a democratic society, 1744 (2010) [10], on extra-institutional participants in the democratic system, Venice Commission Reports CDL-DEM (2011) 002 on the legal framework for lobbying in Council of Europe member states [11], CDL-AD (2013) 011 on the role of non-institutional participants in the democratic system (lobbying) [10]. In 2010, OECD member countries adopted the "10 principles of transparency and integrity in lobbying activities" [12].
In the publication Legislative Lobbying Toolkit, prepared under the Program Concept of Cooperation (PCC) within the framework of the Eastern Partnership initiative of the Council of Europe and the European Union, lobbying refers to direct or indirect communication with a public official with the aim of influencing a legislative, executive or administrative decision [13].
As of 2020, special laws on lobbying at the national level operate in more than 20 countries worldwide. Their exact number depends on what criteria to use when attributing a document to the law. The depth and content of the laws vary widely. Lobbying activity is normatively
regulated in Germany (Bundestag Regulations, 1972,), in Georgia (Law of Georgia on Lobbying Activity, 1998), in Brazil (a Law on Lobbying Activity was adopted in 1985,), in Lithuania (Law no. VIII-1749 on lobbying, 2000), in Israel (Law on Lobbying, 2008) in Austria (Law on Transparency of Lobbying and Representation of Interests, 2012, Lobbying Code of Conduct, 2013), in Ireland (Law on the Regulation of Lobbying, 2015), in Poland (Law on Lobbying in the Legislative Process, 2005), in Slovenia (Law on Integrity and prevention of corruption, 2010).
An important requirement of the legislation on lobbying is to determine the maximum amount spent on lobbying. Thus, the Law of the US State of Hawaii defines that "A lobbyist is any individual who, in any reporting period, spends more than $ 750 on lobbying.
Under the laws of the US State of Maryland, a lobbyist is one who "in connection with or for the purpose of exerting influence on any act of the executive branch, spends at least US $ 100 for gifts, including food, drinks and special events for one or more officials or employees of the executive branch, spends at least US $ 2,000, including in the form of costs for salaries, payment for work under the contract, postal services, communication services, electronic services, advertising, printing and delivery services, with the direct purpose of agitating others to appeal to an official with the aim of influencing a legislative or executive act, or spends at least $ 2,500 to pay compensation to one or several organizations with mandatory registration.
As we can see, the fight against corruption and its manifestations in the world has long assumed a systemic character. Our country has its own unique path of development, but the legislators of the republic, together with the regulatory authorities, we think, have something to consider, choosing the optimal solutions for the national mentality.
We believe that the widespread implementation of compliance control systems in economic entities of our country will vastly minimize the risks of corruption, enhance the business reputation of national companies, provide access for domestic producers to world markets, enhance the country's investment attractiveness, and prevent negative manifestations in the economy.
References
1. United Nations Convention against Corruption. Available at https://www.unodc.org/documents/brussels/ UN_Convention_Against_Corruption.pdf .
2. M. Johnston. Syndromes of compliance, Colgate University, New York, Cambridge University Press; September 2009. Available at: https://www.cambridge.org
3. E.Ivanov. Antikorrupcionnyj komplaens-kontrol' v stranah BRIKS [Anti-corruption compliance in BRICS countrie] Monografija.-М.: Jurisprudencija 2015
4. Martin Kling. History of Compliance-Part one, from Adam to Sarbanes Oxley, 2017 - P. 54. Available at: https://www.ariscommunity.com.
5. The Dodd-Frank Wall Street Reform and Consumer Protection Act 2010// As Amended Through P.L.115-61, Enacted 2010. Available at: https://www.govinfo.gov.
6. Reshenie Verhovnogo Suda po delu New York Cent. &H.R.R. V. United States [Supreme Court decision in the case New York Cent. &H.R.R. V. United States. 212 U.S. 481, P. 29 S. Ct. 304,53 L. Ed. 613 (1909)
7. Ismailov B.I., Nasriev I.I. Protivodejstvie korrupcii v chastnom sektore: mezhdunarodnye standarty i zarubezhnaja pravoprimenitel'naja [Anti-Corruption in the Private Sector: International Standards and Foreign Law Enforcement]. Monografija. -T. The General Prosecutor's Office of the Republic of Uzbekistan, LTC, 2020. - 290 p.;
8. Titman E. The lobby: Jew. polit. power a. Amer. foreign policy - N.J.: Simon a Schuster. 1987.- P. 304 Ind,-P. 290- 304.
9. Binetskiy A.E. Lobbizm v sovremennom mire [Lobbying in the modern world]. M., 2004. - 197 p.
10. Doklad, doc. 12278 [Report Doc. 12278], Available at: https://assembly.coe.int. (accessed 31.08.2016).
11. Doklad CDL-DEM(2011)002 [Report CDL-DEM(2011)002]. Available at: https://www.venice.coe.int. (accessed 31.08.2016).
12. 10 principov [10 Principles]. Available at: https://acts.oecd.org. (accessed 31.08.2016)
13. Tilman Hoppe, Paul Zubkov, Valts Kalnins. Bor'ba s korrupciej i sodejstvie nadlezhashhemu gosudarstvennomu upravleniju/Bor'ba s otmyvaniem [Anti-corruption and promotion of good governance / Anti-money laundering] (EaP-2)
