SUPPLY CHAIN RESILIENCE
Corruption has long pervaded transport operations. A 2014 Organisation for Economic Co-operation and Development (OECD) study found that the transportation and storage sector tied with the construction sector for the second-most foreign bribery cases. Of bribes involving public officials, 11% were paid to customs officials.
A combination of factors make transport operations particularly susceptible to bribery. Frequent port calls, border crossings and customs checks involve routine and sometimes one-on-one interactions with government officials who have broad discretionary authority and may demand bribes. Transportation companies are often under strict time constraints, and delays can trigger penalties, drive up operational costs and compromise future business. Distance from the public eye can create an atmosphere where bribery seems like the simplest solution to address regulatory issues or expedite government formalities.
The COVID-19 pandemic amplifies opportunities for corruption, putting transportation companies and their clients at greater risk. As some companies are forced to pause operations, trade barriers are introduced, and established supply chains break down, the logistics industry must be agile and adapt quickly. Vigilance is essential in times of crisis, and the impact of COVID-19 on supply chains makes anti-corruption measures particularly important for companies that employ asset transportation services.
TYPES OF BRIBES
Corruption in transport operations may range from a truck driver carrying perishable goods who pays off a border official to skip the queue, to a third-party agent who pays a bribe to a foreign official to help secure a long-term multimillion-dollar contract. Bribes come in many forms and are not always cash. Under the U.S. Foreign Corrupt Practices Act
(FCPA) - which is known for the long arm of its extraterritorial jurisdiction - and most other transnational anti-bribery laws, a bribe is defined, in part, as “anything of value” offered to a public official.
In the transportation industry, the shipment of often valuable commodities raises the possibility that part of the cargo itself will serve as the bribe. For example, a government official might ask a truck driver carrying high- value electronics to “lose” a portion of the load to expedite customs clearance at a border crossing, passing the cost and potential liability onto his employer and possibly the client.
There is an exception for facilitation payments under the FCPA. These are typically small- value “grease payments” made to low-level government officials with the goal of expediting a service the payer is otherwise entitled to, but they are prohibited under all but a handful of anti-bribery laws. Few companies rely on the FCPA’s facilitation payments exception. Most recognize that the risk of violating local law in the country they are paid, as well as strong anecdotal evidence that paying only invites more and larger demands, is not a sound compliance strategy. Clear guidance around facilitation payments should be conveyed to all employees and third parties in the supply chain, especially to those directly interacting with government officials, such as truck drivers and ship crew. Aside from the legal, financial and
‘Bribery also enables piracy, theft and extortion. At its worst, this can lead to armed robbery, loss of cargo, kidnapping and hostage-taking. While this activity occurs mostly out of the control of commercial transport companies, there are precautions that may help.’
reputational risks, bribery undermines commercial and government relationships, employee morale, and public trust.
Bribery also enables piracy, theft and extortion. In the Gulf of Guinea, for example, which has the highest prevalence of piracy in the world, armed groups are believed to pay off police and other officials to share port schedules or look the other way. At its worst, this can lead to armed robbery, loss of cargo, kidnapping and hostage-taking. While this activity occurs mostly out of the control of commercial transport companies, there are precautions that may help, which are outlined later in this article.
RISK CONSIDERATIONS WHEN ENTERING A NEW MARKET
A high-level risk assessment undertaken prior to entering a new market or opening a new route can identify where a company is most vulnerable to corruption, ultimately informing detection and monitoring processes:
Geographic risk: Some countries and regions present a greater likelihood that bribes will be demanded, and the nature of the risk can vary by locale. A good starting point for a geographical risk assessment is a corruption index such as the publicly available TRACE Bribery Risk Matrix. Decisions around compliance resource allocation can be informed by an examination of underlying factors that contribute to a higher-risk environment, such as the frequency and nature of government interactions, societal attitudes toward bribery, the government’s willingness and ability to deter and prosecute corruption offenses, governmental transparency, and the role of civil society and the press. Monitoring insurgent or terrorist groups operating in the area is also useful, as they often supplement their income through “shakedowns” for protection money that can pose a threat to transport.
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