Edited by Fritz Heimann and François Vincke

Edited by Fritz Heimann and François Vincke

This text is the work of independent authors and does not necessarily represent the views of ICC. No legal imputations should be attached to the text and no legal responsibility is accepted for any errors, omissions or misleading statements caused by negligence or otherwise. First edition, Fighting Bribery, published April 1999. Second edition, Fighting Corruption, published April 2003. Copyright 2008 International Chamber of Commerce All rights reserved. This collective work was initiated by ICC which holds all rights as defined by the French Code of Intellectual Property. No part of this work may be reproduced or copied in any form or by any means graphic, electronic, or mechanical, including photocopying, scanning, recording, taping, or information retrieval systems without the written permission of ICC SERVICES, Publications. ICC Publication No. 678 ISBN: 978-92-842-0013-9 38, Cours Albert 1er 75008 Paris France www.iccbooks.com

Table of Contents Foreword 5 Introduction 7 Part I: Historical and Legal Perspectives Chapter 1 ICC Rules of Conduct and the OECD Convention 11 Chapter 2 UNCAC: Anti-Corruption s Expanding Frontier 23 Chapter 3 Prohibiting Bribery and Extortion: 37 Narrowing the problem areas Chapter 4 The Role of agents and other Intermediaries 53 Part II: Management Initiatives Chapter 5 Responsibilities of Enterprises 67 Chapter 6 Accounting, Auditing and Financial Controls 85 Chapter 7 Whistleblowing 101 Chapter 8 Compliance by Small and Medium-Sized Enterprises 117 Part III: Problem Areas Chapter 9 Money Laundering 127 Chapter 10 Political and charitable Contributions 153 and Sponsorships Chapter 11 Private to Private Bribery 167 Chapter 12 Preventing Extortion 183 Chapter 13 Overcoming Corruption on Customs 195 Chapter 14 Moving Anti-Corruption to the Next Level 209 3

Appendices Appendix 1 ICC Rules of Conduct and Recommendations: 219 Combating Extortion and Bribery (2005 edition) Appendix 2 ICC Guidelines on Whistleblowing 231 Appendix 3 OECD Convention on Combating Bribery of 237 Foreign Public Officials in International Business Transactions Appendix 4 United Nations Convention against Corruption 251 Appendix 5 Council of Europe Civil Law Convention on Corruption 299 Appendix 6 About the authors 301 ICC at a Glance 305 4

Foreword Corruption whether in the form of bribes, extortion, money laundering or other illegal acts is the scourge of international commerce, costing untold billions of dollars in losses and distorting trade. For more than two decades, the International Chamber of Commerce (ICC), has taken the lead among business organizations in denouncing corruption and developing rules of conduct to combat it. As early as 1977, ICC issued its Rules of Conduct and Recommendations for Combating Extortion and Bribery, which broke new ground in setting forth practical ways in which companies should conduct themselves when dealing with bribery, both public and private, and when confronted with demands for illegal payments (extortion). The Rules, which have been revised twice since they were first issued, were followed by ICC guidelines on whistleblowing; publication, along with other organizations, of the Business Case Against Corruption ; and active cooperation with OECD, the UN and other international organizations that have developed anti-corruption conventions. In 1999, to reinforce its anti-corruption drive, ICC published a corporate practices handbook, in which ICC experts from the Anti-Corruption Commission examined diverse forms of corruption and made precise recommendations to combat them. The present handbook is the third edition of that publication, expanded to cover new issues and updated to take account of the latest developments in the field. In these pages, readers will find expert commentary and recommendations concerning bribery and its many forms, as well as other fields in which corruption often distorts trade and governance corporate gifts, political contributions, accounting and the insidious facilitation payments that have long plagued international commerce. Compliance officers, managers, lawyers, accountants, bankers, customs officials and everyone concerned with stamping out corruption in all its forms would do well to follow the recommendations in this classic text. Victor Fung ICC Chairman

Introduction By François Vincke and Fritz Heimann This is the third edition of ICC s handbook on anti-corruption. Most of the authors are members of the Anti-Corruption Commission of the International Chamber of Commerce. This handbook is written by experts from the business community for members of the business community. Our aim is to give concrete, practical help to those on the frontline combating extortion and bribery. Our goal is to help achieve at last a corruption-free, level playing field so that executives will no longer offer a bribe because of their suspicion that their competitors will do so or because corrupt officials will be demanding it. Our hope is that, by following our recommendations, companies will be able to compete on the quality of their products and services. The pace of change in anti-corruption has continued to accelerate. Thus, every chapter of this handbook has been substantially revised and updated, and a new chapter on the UN Convention Against Corruption has been added. The handbook has been divided into three parts. Part I describes the international legal framework within which corporate self-regulation must operate, including the development of the OECD and UN Conventions and of ICC Rules of Conduct, and the evolving prohibitions of direct and indirect corruption. Part II covers management initiatives, including the responsibilities of top officers; accounting, auditing and financial controls; dealing with whistleblowing; and compliance by SMEs. Part III deals with specialized problem areas, including money laundering, political contributions, private-to-private bribery, extortion, and compliance with Customs regulations. The concluding chapter, Moving Anti-corruption to the Next Level, looks ahead at the priorities for the next five or more years. Combating corruption requires strong top-management commitment, high-quality human resources and systematic organization to ensure that anti-corruption becomes part of the corporate culture at all levels. This handbook proposes straightforward answers to the question of how to best organize the prevention of extortion and bribery. We have addressed difficult matters, including how to deal with whistleblowing, facilitation payments and gifts and entertainment in different cultural environments. While self-regulation is key to corporate ethics, it is also clear that combating corruption requires strong government and international action. The OECD Convention on Combating Bribery of Foreign Public Officials, adopted in 1997, signaled a turning point in anti-corruption. All signatory states have passed laws 7

Fighting Corruption prohibiting foreign bribery. The OECD actively monitors national enforcement, and the authors stress the need for continuing rigorous follow-up. ICC has developed a long-term advocacy relationship with the OECD and has urged that the scope of its anti-corruption instruments be broadened. The United Nations Convention Against Corruption (UNCAC) of 2003 is an equally important milestone because of its worldwide participation and comprehensive scope. The principle of monitoring the national implementation of UNCAC s provisions has been agreed, but the necessary monitoring mechanism has not yet been established. This obviously troubles the business community, as the executives of ICC s member companies regularly report that companies from non-oecd countries still have not aligned their practices to the new anti-corruption norms. ICC will, therefore, continue to press for a strong, efficient and sustainable monitoring system for UNCAC, coordinated with the monitoring programs of other existing anti-corruption treaties, including those of the Organization of American States, the Council of Europe, the European Union and the African Union, all of which contribute to the fight against corruption. This edition of the handbook is appearing in the midst of a massive financial crisis. It will take years to analyze its causes. However, it is already clear that there will be strong pressure for reforms, including greater transparency and accountability, as well as greater international cooperation. These are issues that the ICC has long supported. We are convinced that combating corruption is crucial to corporate integrity. Companies cannot engage in corruptive practices without disabling their management control systems, thereby undermining their integrity. It should be recognized that the authors are writing as individual experts. Their views do not necessarily represent the position of ICC or of the other organizations with which they are affiliated. We wish to express our appreciation for the numerous contributions to the preparation of this handbook made by Ron Katz, Rachelle Bijou and Viviane Schiavi of the ICC Secretariat in Paris. 8