This Is How Companies Organise A Bribe To Win New Business

Paul Hawthorne/Getty Images

Most bribes are paid by large companies and usually with the knowledge of senior management, according to an OECD (Organisation for Economic Co-operation and Development) analysis of the cost of corruption.

Bribes in the cases studied equalled 10.9% of the total transaction value on average, and 34.5% of the profits, or equal to $US13.8 million per bribe.

But given the complexity and concealed nature of corrupt transactions, this is without doubt just the tip of the iceberg, says the OECD.

Bribes are generally paid to win contracts from state-owned or controlled companies in advanced economies, rather than in the developing world, and most bribe payers and takers are from wealthy countries.

The OECD Foreign Bribery Report analyses more than 400 cases worldwide involving companies or individuals from the 41 signatory countries to the OECD Anti-Bribery Convention who were involved in bribing foreign public officials. The cases took place between February 1999, when the Convention came into force, and June this year.

Bribes were promised, offered or given most frequently to employees of state-owned enterprises (27%), followed by customs officials (11%), health officials (7%) and defence officials (6%). Heads of state and ministers were bribed in 5% of cases but received 11% of total bribes.

In most cases, bribes were paid to obtain public procurement contracts (57%), followed by clearance of customs procedures (12%). And 6% were to gain preferential tax treatment.

In 41% of cases management-level employees paid or authorised the bribe, whereas the company CEO was involved in 12% of cases.

Intermediaries were involved in 3 out of 4 foreign bribery cases. In 41% of cases these intermediaries were agents, such as local sales and marketing agents, distributors and brokers.

Another 35% of intermediaries were corporate vehicles, such as subsidiary companies, companies located in offshore financial centres or tax havens, or companies established under the beneficial ownership of the public official who received the bribes.

This chart shows the percentage of cases where intermediaries were involved in at least one bribe payment.

An “agent” was used in 41% of cases, including sales and marketing agents, distributors and brokers based either locally in the country where the bribes were paid, or elsewhere.

The second largest category of intermediaries, used in 35% of cases, is that of the “corporate vehicle”. This includes subsidiary companies, local consulting firms, companies located in offshore financial centres or tax havens, or companies established under the beneficial ownership of either the public official who received the bribes or the individual or entity paying the bribes.

Lawyers were used as intermediaries in 6% of cases. Family members of the public official were used as intermediaries in 3% of cases.

Accountants and associates (including advisors) of the public official were used in 1% and 2% of cases respectively.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.