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Anti-corruption

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Corruption is illegal but it nonetheless occurs to a great extent throughout the world. Many people associate corruption with democratically weak countries, but unfortunately corruption occurs in various forms, even in openly democratic countries. Transparency International’s perceptions index ranks the nations of the world according to the perception of corruption levels in the country. While the index is pertinent, it is important to keep in mind that it is based on opinions and does not necessarily reflect reality.


Definition of corruption

No universally agreed definition of the term ‘corruption’ exists, however, Transparency International’s definition is: “the abuse of entrusted power for private gain”.

Actions that come under the term corruption include the following:

  • Bribes
  • Extortion
  • Fraud
  • Money laundering
  • Tax evasion
  • Nepotism
  • Conflict of interests
  • Illegal money channels

For further information on corruption and how it is manifested, read through Transparency International’s glossary.

What corruption can lead to

Even if corruption involves smaller sums of money, the socio-economic consequences can be enormous. Corruption also tends to begin with minor incidents that grow and multiply. When discovered, corruption may appear well-organised and well-planned, but for individuals caught in the middle of it, it may be hard to see the consequences of their actions, and they may well be a relatively small part of a major corruption scandal. Some of the most serious consequences of corruption in society are:

  • Compromises legal certainty, democracy and human rights
  • Leads to rebellion and conflict
  • Has a detrimental effect on trust in public institutions
  • Distorts competition and destroys confidence in the market economy
  • Hinders investment

You will find more information on how society is affected by corruption on the Transparency International website.

Over and above its socio-economic consequences, corruption may also entail legal penalties for the individual or persons carrying out criminal offences.

Businesses play an important role in the fight against corruption. Many companies have, unfortunately, adopted an attitude that corruption in some countries is an integral part of business culture and so they protect themselves by using intermediaries. Such action is not in accordance with international guidelines and is something that businesses should distance themselves from. Below, we highlight business situations where there is an inherent risk of corruption. Please note that the list is not exhaustive.

Risks in various business situations

Risk for corruption can arise in many different business situations, both in Sweden and in other countries. Swedish companies are often unaware of the risks to which their business is exposed to. The operations of Swedish businesses outside of Sweden are also subject to control by foreign authorities. Payments in currencies other than SEK are often made from bank accounts in other countries, and in such cases, the authorities in that country may claim jurisdiction. For this reason, it is important to keep an eye out for corruption in all aspects of export business and foreign operations. Below are some examples to be watchful for. For further examples, see Transparency International’s risk list.

Greasing the wheels for faster processing
It may well transpire that officials or agents ask for a ‘lubricating’ sum of money to help speed up a routine process, for example when handling import documents, credentials and certificates. In reality, this is a bribe and something to distance oneself from. If you encounter this, you should contact Business Sweden’s local market office.

Bribes and gifts
You need to be aware about gifts and representation. In many countries, it is customary to give gifts and have guests for dinner to cement relationships and favourably influence business transactions. However, in most of these countries, it is now forbidden to give or receive gifts above a certain value, and this is something companies must pay attention to. In some countries, another common practice is the so-called ‘kickback’, a form of commission paid to the counterparty when conducting business, but this is a bribe and something to avoid completely.

Counterfeit credentials and certification                                                                                            
Sales of falsified credentials and certification are often available, but genuine certificates are also obtainable without involving proper certification or examination. Ultimately, this can have devastating consequences if the product does not actually meet proper standards. If you discover this, you should contact Business Sweden’s local market office.  

Procurement
One of the greatest risk areas for corruption is public procurement. The requirements can be set out so that they only apply to one supplier and there may also be bribes and extortion involved. There may also be conflicts of interest and other forms of fraud. 

Embezzlement
Within every sector there may be risks of embezzlement and breach of trust. This may involve employees embezzling the company’s property, or employees of suppliers or customers who modify invoices and supply bogus account numbers for their own gain. Companies need to be vigilant and responsive to detect this promptly.

Agents and third parties
Be watchful when choosing agents and third parties as there may conflicts of interest or risks of fraud. Agents can have a solid and competent contact network, but it can also consist of close friends or relatives who may not necessarily contribute in the most beneficial way to your business.

Foreign laws can be applied to your business
Companies operating in or linked to a specific country may be impacted by that nation’s corruption legislation. Pay particular attention to the fact that the national regulations may differ for domestic and foreign companies. Both the United States and Great Britain have extraterritorial legislation in this area, which means that in certain cases, even Swedish companies may be affected by these far-reaching laws.

One of the hardest anti-corruption laws is the extraterritorial UK Bribery Act of 2010. This law applies to UK companies worldwide, but may also apply to non-British companies if they operate in the UK, for example through a subsidiary. The United States extraterritorial law within the Foreign Corruption Practices Act, FCPA, was adopted in order to mitigate the problem of corrupt payments to foreign countries. It regulates two areas – bribery and rules on accounting and internal control.

Every individual, company, public official, manager, employee or agent of a company in the United States, as well as any shareholder who negotiates for a company may become subject to the FCPA. In certain cases, the FCPA applies to non-US companies handing out bribes to foreign government officials. These payments can be made in such a way that they impact the United States, for example, by sending a fax or an email from US territory. Non-US companies with public shares, bonds or American depository receipts listed in the United States are called exhibitors and are always subject to the FCPA.

Grey areas
Many companies today have zero tolerance against corruption and are completely insulated from bribery and other irregularities. The problem, however, is that much that falls within the realm of corruption lies in a grey area. People are often unaware of the acceptable limits are, so it is important that you conduct an open dialogue with your employees and that you give clear and detailed guidelines.

Preventive measures

To reduce the risk of corruption in your business and value chain, your company should take the following actions:

  • Follow laws and international guidelines. Ensure that you understand the meaning of national laws relating to corruption in the countries in which you operate and extraterritorial legislation that you may be affected by. At the very least, you should always follow international guidelines. This is particularly important where legislation is inadequate or non-compliant.
  • Add corruption to your risk analysis. Review your company to determine whether there is a risk of corruption, and if so, identify high-risk business situations. Step into the mind of the “thief” when conducting risk analysis. Identify the situations where corruptoion is a risk and pay extra attention to them.
  • Make use of national and international guidance tools (refer to the guideline documents on the right). On the GAN Business Anti-Corruption Portal, you will be able to view even more detailed information.
  • Establish a clear anti-corruption policy, detailing how the company views and acts on corruption if and when it is encounter. See, for example, the Business Code (Swedish) for support. Read more about this in step 2  and 3.
  • Communicate the policy in the company's code of conduct and educate all employees on the topic. A good training exercise will contain simulated examples of corruption that consolidate the understanding of what it involves in specific scenarios. From this, your employees can build an understanding of what constitutes corruption offences and relate more easily if they come across ambiguous situations. Read more about in step 3  and 4.
  • Be transparent and open in order to safeguard a corporate culture where employees can question different decisions.
  • Deal with diversity at both board level and amongst employees. This will reduce the risk of nepotism and conflicts of interest.
  • Collaborate and discuss with organisations and NGOs in the markets within which the company operates, such as Transparency International. This is particularly important in high-risk countries.
  • Using ‘due dilligence’, carry out a thorough business inspection of your potential business partners before making critical business decisions. Look beyond their official policies and analyse their business culture, work processes and above all, examine their business executives. Attitudes based on the assumption that means justify the ends are an indication of a corrupt organisation and taints the company's entire business approach. The attitudes of corporate executives’ function as internal norms and, therefore, attitudes is an important benchmark to be mindful of.
  • Educate and inform your partners about laws, risks and the company’s code of conduct. Read more about this in step 4.
  • Stipulate your suppliers’ requirements and request them to do the same with their subcontractors. Read more about this in step 4.
  • Implement a whistle-blower function where employees and partners can report any suspected shortcomings. Read more about this in step 4.
  • Carry out audits of your business and of your partners with the help of qualified experts. Read more about this in step 4.
  • Contact Business Sweden if you have general questions about sustainability or if you want to know more about the risks and opportunities in a particular market