Jonathan Rugman, interviewer (JR) Well, good afternoon from Paris from this International Bar Association live webcast and, indeed, web chat because we will be taking your questions. We’re at the headquarters of the OECD after an extraordinary year of corruption and bribery dominating the news agenda. The 1MDB scandal in Malaysia for example, the Petrobras scandal in Brazil, the Panama Papers, of course, and the FIFA football scandal which, of course, is increasingly appearing to be worldwide.
And our guest this afternoon is Drago Kos. He is Chair of the OECD Working Group on Bribery in International Business. He was once head of the Organised Crime Section of the Slovenian Police. In 2012, he conducted a public enquiry into the Kabul Bank scandal in Afghanistan, naming every beneficiary of the $800 million Ponzi scheme there. And he’s now responsible for the implementation of the OECD Anti-Bribery Convention which came into force in 1999.
Drago, let’s start with the Convention, the great success being that this Convention means that bribery is now a crime in 41 countries. But how do you balance that with the fact that 24 of those countries have yet to conclude a single foreign bribery enforcement action?
Drago Kos (DK) Well, good afternoon, first. And we are obviously starting with a question which also burdens me all the time. This is simply a consequence of the fact that some countries do not take the Convention and our work seriously enough. You could understand that some smaller countries are still without any meaningful investigation on cases of foreign bribery, but if you have countries like Japan, Russia, Argentina, Brazil, without any investigation into foreign bribery cases, then this for sure means that they are not taking the task and their obligations seriously.
I must say though, that things are changing for the better and I really hope that the next report on the implementation of the Convention will be a bit better.
JR How do you measure success? You came into the job with 24 countries yet to conclude an enforcement action. How do you say, well, now we’re getting somewhere?
DK Well, first of all, every year the international organisation Transparency International (TI) assesses our work. We trust them because they’re a non-governmental organisation, so they don’t have any reasons to be at all partial.
And they are simply running through the cases which are being investigated, prosecuted or adjudicated by our member states and they give us their report which clearly shows how many countries are doing what. And we see that not only investigations but the number of prosecutions or also number of adjudications is going up, and hopefully it will go up even more this year.
JR And it’s 390 investigations, I think, at the moment; ongoing prosecutions against 142 individuals and 14 companies.
DK Yes. And they simply have to result in outcomes. Either the settlements between prosecutors or courts and the defendants, defending companies, or in sentences.
JR And when you hear in the news some of the scandals which I mentioned at the beginning, does it annoy you? Does it make you think, we’re just not on top of this? Or do you think, well, all publicity is good publicity?
DK I think it’s rather the first thing, because although I know this is a never-ending story – we will never get rid of all corruption in the world – seeing new cases emerging all the time, especially major cases like you mentioned yourself, simply means that, first of all, we’re not running out of jobs and, second, that whatever we do is not good enough to prevent such things from happening. And we really are trying to get on top of those cases.
JR Do you feel under pressure to soften your standards, from individual countries? When you have Argentina, Brazil, Russia and South Africa as being party to this convention... their reputation in particular isn’t good.
DK Well, we cannot talk about softening our standards because this simply cannot happen. Because in principle, our member states know very well what their tasks are and what our task is. And we are making them implement the Convention. So even if we get satisfied with ourselves, we have some countries in the room which are very keen on really strict enforcement and this watering down simply does not come in question. Objectively, of course, these countries do soften the standards but in their own area of work.
JR But how do you get these cases and these convictions if the onus of the Convention is on self-referral and self-monitoring? Do you have any law enforcement capability of your own? How are you going to get these convictions and cases to start going up?
DK No, we don’t have our own law enforcement. What we do is have our very capable secretariat here in Paris looking through the world media, and they’re collecting all the information on all possible foreign bribery cases.
JR So the journalists are quite useful.
DK Journalists – you are very, very useful in our area of work. And then we put all the information in the book which we call the matrix which comprises all registered, known foreign bribery cases in the world. And there, those cases are registered under the countries. And we ask countries to tell us what they are doing with those cases.
JR You’re starting something called Phase Four which is the latest phase of trying to make the Convention work and produce results. Can you tell us what is different now, as of March 2016, with Phase Four? If you are a lawyer and you are worried about being involved inadvertently or possibly even deliberately in corruption, what is now about to change in terms of what the OECD is likely to do?
DK Well, one thing will definitely change and this is that we are trying to engage the private sector more in the fight against bribery, especially foreign bribery. And we know that we can do this in two different ways. First, through increasing the pressure, which will continue. But the second part, which is even more important, is we will try to engage them as partners.
And this means that lawyers in big companies will be getting more and more engaged in what they would have to be doing already in establishing compliance systems, underlining the basic principles which they have to follow. But this time, not under the threat of being sanctioned if they’re not doing it, but being under the positive motivation, hopefully, that their companies – if they will develop effective compliance systems, if they will engage properly with law enforcement authorities – will get rewarded in some way.
JR How will they be rewarded for being cooperative in that way?
DK Well, there are different aspects. Unfortunately, until now, the companies are being rewarded only when the problem is already there. So in the US you have federal sentencing guidelines according to which companies will be sanctioned mildly if they do cooperate. UK, Italy – an effective compliance system and cooperation are a full-fledged defence.
But this is when the problems are there already. What you want to achieve, what you want to develop is the positive motivation which is basically that companies would be rewarded even before there are possible cases of corruption identified in themselves. Meaning, for example, that having an effective compliance system would be a condition to take part in public procurement in the countries.
Secondly, having an effective compliance system would be something earning additional points in the tenders. So without being involved in problems already, this is something which has to be positively rewarded.
JR So I saw that somebody at the summit on corruption in London last month described lawyers as professional enablers of corruption. You’re a lawyer yourself by background, but do you recognise that description?
DK No, I don’t. Of course, there are lawyers who are doing some very bad things. But you also have lawyers, hopefully including me, who are doing some very, very good things. So of course you need professional knowledge to do both bad and good things. But I would not agree with the statement that all lawyers are doing bad things.
JR But if you are treading a fine line and you are, for example, a lawyer who is on the board of a shell company, is there anything you can say to me today that might make that lawyer a bit more nervous this year than last year?
DK Oh yes. Oh yes. So the efforts in the last year, especially after the London summit, go in the direction that all the beneficial owners in the world – the world, speaking generally – will be publicised somewhere; if not for the general public, at least for the professional public. Registries on real beneficial owners will be developed and appropriate authorities will have full access to them. This is number one.
Number two, the efforts in the area of anti-money laundering and tax evasions are advancing into the next stage where the exchange of data between countries is reaching completely new dimensions.
JR Well, we’ll come onto that and we’ll come on to the outcome from the London summit. And of course there is a summit in Paris as well this week. But let’s talk, first of all, about the Panama Papers which seems a natural place to go. The Secretary General of the OECD has described them as showing how much progress has been made. Whereas a lot of people watching the story unfold will think, well, there’s one rule for the rich, one rule for the poor, and this just exposes how bad the problem is.
DK Well, it’s always a question. When the problem appears, we all have a problem, what to say. Should we praise the fact that it has been discovered? Or should we be concerned about the fact that it has happened? We discussed the Panama Papers today in the working group which I’m chairing. And having everything else aside, we already identified four major foreign bribery cases in the Panama Papers. And two of them – which is interesting – we already had in our list of cases before but we didn’t know that they were linked to Panama. So…
JR Are you talking about the Bank Rossiya case, the Russian case?
DK Well, I cannot mention cases now because we have very strict rules on confidentiality. But this one was not among the cases which I’m mentioning. So it is obvious that in addition to everything else – tax evasion, hiding the real owners of companies – we are also dealing with foreign bribery cases here. And that’s why we today decided to take some extraordinary measures which will hopefully help us to dig in the papers to find out which cases…
JR So it’s given you ammunition, the Panama Papers.
DK Oh. First of all, it gives us a lot of work and, of course, a lot of ammunition.
JR And your view on the offshore world in general in the fight against corruption – is it a particular focus for you, these offshore entities? Or does it get a lot of publicity but actually, in your world, is only a small part of the problem?
DK It is part of the problem. I would not say it is a small one because these offshore companies can be easily used for bribery too and this is what we see in the Panama Papers. The original idea of the Panama Papers was not for them to be used for cover-up for bribery. But – let’s call them bad guys – when they realised how well this can be used also for different illegal things in addition to, let’s say, tax evasion, money laundering, hiding the real owners of the companies, they started to misuse offshore companies also for foreign bribery. And this is just adding another layer to the level of the problems we are facing.
JR But many of these offshore jurisdictions are kept thriving by law firms, which puts them in a very difficult position, doesn’t it? They would say, well, we’re not breaking the law – not knowingly breaking the law; we’re just using the jurisdiction as it is.
DK Yes, of course. And I think this was clear from the beginning, that the whole thing which is now known by the name of 'Panama Papers' is not about being illegal. It was simply using the existing legal systems, which, of course, in the second step were misused by some individuals or many companies which realised how well those structures can be used for other purposes which are not always strictly legal.
JR So, four investigations launched by the OECD on the basis of the Panama Papers?
DK No, we have four which we have already identified. We are putting a lot of emphasis on the investigations and we will have more for sure. Because from now on, every three months we will discuss the issue. And countries coming to Paris will be invited to share with us their knowledge about the cases. Of course, foreign bribery cases only. And then we will see what the real extent of the problem is.
JR But do you feel any sympathy for an offshore island which may have no other major source of revenue which is using its tax status and its banking secrecy to keep itself afloat?
DK Well, we’re not talking about only the islands, you know. We can talk about Luxembourg. The Luxleaks case has proven this also.
DK I would say I am trying to stay neutral. As much as I can understand, those things are perfectly legal. I’m also dealing with the fact that those legal things have been heavily misused by some individuals and companies which really didn’t have any sincere intentions to improve the functioning of their companies or the life of their countries.
JR I think that brings us on quite nicely to the anti-corruption summit in London where the offshore tax havens, the British ones, were notable by their absence. I think I saw the Premier of the Cayman Islands there. But I didn’t see any others. Isn’t a crucial question in that case whether the British government is applying enough pressure on these territories and dependencies to disclose more information? It seems to want to embarrass them into being more open, but not actually applying very much pressure.
DK Well, as much as the London summit was really a positive thing, a positive development, I tend to agree with what you are saying. But I think now the gap is narrowing. The UK government, if not before but simply now after organising such a hell of an event, will simply have to do something to prove that it meant it seriously by the organisation of such a summit. And we could hear some of the experts there clearly saying to Prime Minister Cameron, why are you criticising other countries if you have a problem in your backyard?
JR So the Nigerians and the Afghans who were there, for example, detect some hypocrisy.
DK Not only them. There were experts taking part in the panels, world-known experts such as Eva Joly, the famous French judge. She was quite critical about the UK efforts in this area. So the UK will simply have to do something.
JR You sounded more cynical or sceptical perhaps about the summit than I thought you would be, because I was there; it appeared to offer some kind of breakthrough, but you don’t see it that way.
DK I do. It was a major breakthrough. But, you see, the problem is that if a country which has its own problems is organising this, everything else which was planned…
And it was then described in the communiqué following the summit in London that everything would be looked through – the real efforts of the country which was organising it, how it is dealing with its own problems. So if the problems will be solved, then everything else will be much easier to achieve.
JR But there is going to be a beneficial ownership public register in the UK, is there not? And an anti-corruption coordination centre being set up in the UK.
DK There have been many, many positive things – many, many positive developments. And this is all fine. There have been many other things. But when some other countries come under pressure, considering publicising or establishing registries, so for beneficial ownerships, if the UK is not very consistent in doing it, not only for the UK itself but also for their territories, you can trust me that those countries would say, well, they didn’t do it, why should we do it? Because they will always look on somebody else.
JR So you’re saying countries apart from the UK will simply say, we don’t have to do anything.
DK If the UK is not doing it, yes, of course.
JR Are you thinking about the United States when you say that? Because, of course, people like the Cayman Islands would say, well, look at Delaware, look at various places where regulation can be seen to be quite light.
DK They said it already, during the summit and before. And of course then also Washington, United States. No, this is an area of work where, when countries don’t want to do something or they don’t know how to do it, they’re always looking for excuses. And it’s never their fault. They always look at somebody else saying, well, if they don’t do it, why should we do it?
JR But the breakthrough would appear to be that 29 countries, including the Cayman Islands, Jersey, Bermuda, the United Arab Emirates, have agreed to share information on beneficial owners between their governments.
DK See, that’s the problem with me. I’m always looking what to do next, what to do more. So as I said, the London summit was a major breakthrough because for years we didn’t see any meaningful initiatives from any country in the world, especially not such an important country as the UK in the area of anti-corruption. So this is worthy of our respect. But I’m just looking forward to seeing what else we have to do, and since I know that after the pledges, the critical time comes which is implementation and fulfilment of promises which doesn’t always go so smoothly or as easily as making the pledges.
JR Well, then you have the pledges but then you also have people like the British Virgin Islands who didn’t sign up to anything, as far as I can see.
DK Yes. And this is another area of concern. We have a tool now to push, to press them, telling them, listen, 29 countries have done it – why don’t you do it too? But I’m sure they will wait for the implementation of the pledges too and maybe they will take the same step also.
JR Why do you think there isn’t more pressure from the UK on those territories, given that, as you say, if they don’t apply the pressure, if things don’t change, then other countries will just carry on as usual?
DK Well, here I don’t know. I simply don’t know. Now maybe the tools which the UK have had at its disposal do not suffice enough to push, to press those countries or territories to do something. Because I can remember in my previous functions we wanted the UK to extend the enforcement of other conventions to some territories and it was simply no-go.
JR I’m going to take some questions now from viewers. And we’ve got one here from Priscilla, who’s watching from Brazil, an interesting place to be watching a summit on corruption. How can we control the flow of illegal money to offshore jurisdictions, she says. Well, we’ve talked about registers of beneficial ownership, sharing them. What else can be done?
DK Well, in the anti-money laundering system in all countries of the world, thanks to the Financial Action Task Force at the moment which is the operational side of it, it is already organised in a way that all such transactions would have to be registered. But registering something is one part of a thing; controlling it in a way which basically means monitoring the real, substantial reason is different.
So if you were to try to stop those transactions, I think the whole world economy would slow down. After those transactions have been registered, the institutions will simply have to deal with them. And this is happening already. I don’t know how much this is going on in Brazil but I know countries where those transactions are being followed and they result in some measures afterwards. But…
JR So it’s the law enforcement end that needs to change once you’ve changed the law.
DK Yes. But that’s another problem. You see, the simple fact that the money’s going to offshore territories/countries is not enough for law enforcement to start any investigations. There has to be what we call a predicate offence meaning that some illegal things would have to happen before they can start investigating things.
JR A question here from Chris from the UK who says, you say the UK government has to do something. What would your advice to the UK be, that it’s not doing?
DK Now, it is difficult to say that they’re not doing anything. My advice for the time being following the summit would be simply to follow up on the text of your communiqué. Insist on the implementation of what you have promised to do. Not only the UK government but also all other partners which are present there.
JR And we talked about Phase Four which is your implementation of the convention. Mark from Switzerland is asking, where should the focus be in the Phase Four cycle of evaluations? In other words, I suppose you’ve got detection, you’ve got enforcement, you’ve got making legal individuals responsible; where should your priority be?
DK Well, this is very simple. Three words – enforcement, enforcement, enforcement. So whatever we do, the final goal of our work is that we enforce the convention, meaning that we investigate, prosecute and adjudicate individuals who are breaching the convention. And this is our final goal and we’ll invest major efforts in this area.
JR A question from Lira from Brazil, following on from that, who says, how many people at the OECD will be engaged in these local visits to issue reports on Phase Four verification? So how many people have you got who can actually, not enforce, but at least monitor verification?
DK What we do is, first, we send out the questionnaire which is then filled in by countries. The questionnaire comes back and then we have two – we call them – lead examining countries. So two countries which are sending their representatives to, let’s say in this case, Brazil, accompanied by members of our secretariat. So we’re talking about groups of people ranging between five and maybe eight in number, not more.
Then the report is produced and the report is adopted here in the plenary working group where 41 countries discuss it. And all the countries have the right to agree on the text of the report or disagree, but not Brazil because we have a consensus-minus-one rule. So Brazil doesn’t have a say when we are adopting the report, which also includes recommendations.
JR So you’re saying that’s a safeguard against any one country trying to wriggle out of being monitored closely.
JR And is it working?
DK It is working because countries know that they have to convince other countries that their positions are valid and substantial. So they have to engage or they have to invest a lot of effort to prove that what they are saying is valid and it’s accepted by other countries.
JR But countries have been doing that about all sorts of issues like human rights at the UN for years. They do deals with each other – you give me this, I’ll give you that. Isn’t that going to go on here as well?
DK It happens but it happens maybe once in three years. So I took over the group in 2014. So to date, I have only seen this in one case. And I reacted. I spoke to the head of the delegation. I told him that everybody realises what is going on so please start to behave. The next day, everything was fine.
JR You say that everything was fine the next day. When you look at the news, you think to yourself, this problem appears to be getting worse, the number of corruption cases that are reported. Are you just saying, well, it’s as old as the hills and it hasn’t got worse and it’s just that I hadn’t noticed? Or are you saying, yes, you’ve probably got a point there – yes, it is getting worse?
DK Well, we’re back to the same problem. Is it getting worse? Is this bad, that we are registering more cases, or is this good? We are discovering more cases, so then we can work on them. I try not to take any position here because otherwise I would be taking this too personally and then really I would suffer a lot. What I try to do is – in each of the cases – ensure that the countries which are involved do what they can do, their best. This means investigation and so on. And we are really pushing them hard to do the investigations.
JR I see that TI gave the summit in London a pretty good rating – they were pretty pleased with it – but they do say that registers of beneficial ownership need to be public. And I think what’s happening with the offshore jurisdictions is that those registers will not be public; they will be open to the police. A bit like what we were talking about, about the press exposure. Is the public disclosure of beneficial ownership something that you insist on as well?
DK Yes. But we have to realise that we live in the real and practical world. So we cannot jump from nothing into a bright future without any problems. So things are changing, as I tend to say, by millimetres. So already this development is a good one. Of course, TI is saying registers have to be published and accessible to the general public. But I simply know that this will not happen today or tomorrow. There are some countries which have published completely public registers, but not all of them. But now, we are slowly progressing and we’re slowly bringing them there. This is our goal, which will not be reached in a very short period of time but this is the final goal.
JR And an anti-corruption coordination centre, which David Cameron announced – are you worried that’s just going to replicate what you do? That’s what you do; you monitor and you coordinate on anti-corruption here in Paris.
DK No, it will not be duplication because we’re not so much a coordinating body. What we do is monitoring.
So this centre in London will be extremely important because it will be coordinating the anti-corruption efforts of countries on a general level but also, I hope, doing more and more work on the operational level. Because what we need in the world is a sort of switchboard where, if nothing else, countries engaged in the investigation of one joint corruption case will be able to get information in a very short period of time with qualified interlocutors on the other side. And I see the advantage of the centre in this way.
JR So we’re talking about the British government not applying enough pressure in your view. Would it surprise you to know that a week after there was a summit in the Commonwealth headquarters as well – a week after that – the Malaysian Prime Minister was the guest speaker in the very same venue? It does illustrate, doesn’t it, that a capital like London or Singapore, for that matter, is not going to deter foreign investment and is not going to let a corruption scandal stop it.
DK Well, this always has two sides. As your Prime Minister has unfortunately publicly said, we had the leaders of the two most corrupt countries during the London summit too – Nigeria and Afghanistan.
JR Yes, fantastically corrupt, David Cameron famously said.
DK Yes. So it’s always the question, is this good or bad? But when I say that the UK is not doing enough, there is also a question, can the UK do more? We should not forget that the UK is the only country I can remember that in the last few years, on its own initiative, has organised such a summit, enabling some really important steps in the right direction. So they have to be praised.
JR We’ve focused a lot on government though. What about business, which wasn’t really represented at that summit? Did they miss a trick there? If you’re going to engage business, you’ve got to engage business.
DK Well, this is the part of the summit which I still don’t understand. We were not only missing the private sector; we were also missing some very important countries of the world there. They were simply not invited. But the response to our question is very simple. We cannot fight corruption any more without engaging the private sector. We had the ministerial conference in March here in Paris. We said that the private sector was our indispensable partner in the fight against foreign bribery. So there’s no future without engaging them.
JR You said that some people weren’t invited. Who should have been invited?
DK Well, if this is the anti-corruption global summit, I would expect that, not saying which countries, but at least more countries would’ve been invited. Of course, the summit was organised on premises which simply did not allow more people to be invited because it was crowded already.
But there will be the follow-up on the summit next year – New York, I think – so hopefully next year the number of world leaders will increase. Which is good because then we will have more countries pledging that they will do similar things.
JR What pledges have the Nigerians made recently? Because if you’re an international lawyer and you’re operating on behalf of Nigerian companies, are things about to change? It was notable that the Nigerian President did appear at the summit.
DK Some countries have issued their own pledges, what they will do. I don’t know if Nigeria has done so. But at least Nigeria has also…
JR I think it’s pledged to produce a beneficial ownership register, but I don’t think that will be public.
DK Well, that simply underlines the fact that Nigeria is also one of the countries which were launching the general communiqué afterwards which is asking for registries. It will not be public but it will be a register, which has never existed in Nigeria, so we have to be satisfied with that for the moment. This is the first step which the following steps will have to follow.
JR You must, in your job, meet a lot of world leaders and think to yourself, well, it’s great they’re here but everything must be in the delivery, not just in the language.
DK Yes. Not only that. You see, it’s very simple if you want to pretend that you’re doing something. And we have some countries in the world which are pretending that they are fighting corruption. It’s very simple to change your legislation. It’s very easy to establish institutions saying they will fight corruption. But when it comes to the deeds, this is the real proof that their intentions are real, serious and genuine. And this is sometimes missing.
JR Well, we’ve got a question here from Begum in Turkey addressing just that, the lack of political will. What can countries, where politicians do not wish to address the issue, do? So if you’re a citizen of a country where you feel that those in charge don’t want to engage with this, what can you do?
DK Oh. Well, not specifically for Turkey.
JR I don’t think we’re suggesting that the Turkish government is enabling corruption, no. But I think it’s an interesting question; if you’re in a country where the standards aren’t perhaps as high as you’d like them to be, perhaps you feel a bit powerless.
DK Of course the citizens feel powerless. And especially when they see that, as I said, the rule of law is not applied equally to everybody. If they have trust in their institutions then it’s easy – they just have to work with them, they have to give them information, they have to help them in doing their job. But if they don’t have any trust in their institutions, then of course there are always the NGOs. If nobody else, TI are willing to bring on board everybody who thinks that corruption should be fought. And TI…
JR Yes. And the press, as you said.
DK And the press. But sometimes it’s difficult. Actually in Turkey two months ago, the Turkish chapter of TI published the first-ever, we call it, National Integrity System report on Turkey. And believe it or not, TI had some difficulties in finding speakers. So I had to travel from Slovenia to Turkey to support the launch of the report because people were simply afraid of doing it. But this is the way forward. We will always find courageous people, also in countries where government have absolutely no will.
JR You talk about courageous people but the statistics are pretty worrying. I think 2 per cent of all reported instances of cross-border bribery and corruption have come from whistle-blowers which means very, very few people – if they are speaking out – it’s leading to very, very few cases.
DK Two reasons for that and this fact is a bit troublesome. Two reasons for that. First, while whistle-blowing in the developed part of the world is something which is heavily anchored in the consciousness of the people as something good, for the rest of the world, whistle-blowing is something bad because it used to be that blowing the whistle meant cooperating with, say, secret services for political reasons, it meant snitching. So first we’ll have to change the perception of people in those countries.
JR So you can’t just change the laws which are designed now to protect whistle-blowers. You’re saying there’s a cultural shift that hasn’t happened.
DK Yes, which will take some years. Because if something was bad, bad, bad for decades, we cannot simply change this by changing the law and saying, well, please come forward and report.
JR Let me take another question. This is Lira from Brazil again. What do you think of the current undefined scenario of leniency agreements in Brazil?
DK One hour ago we discussed this issue with the Brazilian delegation here at the OECD. We have been informed that not all of the leniency agreements are being put on hold. Some of them are still going on. And we have understood that some changes in the legislation are needed because what Brazil wants to do now is to also engage prosecutors and judges to take part in the negotiations.
So we’ll see what will come out. Brazil has to report back to us in October. Today, what we had was an extraordinary session because we wanted to know officially from Brazil what was going on. In October, they have to submit a substantial report and it will be very easy to see in which way changes are going now.
JR Would you say Brazil was top of your list of concerns at the moment, given that they are a signatory to the convention?
DK Well, similar things have happened in the past already. What is happening now in Brazil in our area can develop into something very good but also into something very, very bad. So we’re looking forward to seeing in which way things will develop.
JR I’ve got a question from Neville in Australia who asks, we all recognise that enforcement is important but how important is it that countries that are party to the convention have similar penalty regimes?
DK Oh. All the conventions are asking for penalties which have to be effective, proportionate and dissuasive. In different countries, this can vary significantly, let’s say, if you speak about years of imprisonment. But of course they have to fulfil those conditions. And what we are trying hard to do is really put a lot of emphasis on the sanction regimes of countries. And we've had many, many regulations already for countries, that they had to increase the penalties – either the imprisonment or the fines.
JR There’s a question here from José in Guatemala who says, is the long-term goal of the OECD for anti-bribery to be part of companies’ business strategy and a norm for governments rather than maintaining an endless focus on enforcement? Well, yes, that must be right, mustn’t it? That must be your dream scenario.
DK Yes. Oh, the dream scenario is that fighting bribery would be part of business strategies of all companies, part of policies of all governments, because then enforcement will slowly fade away. Of course, we’ll never get in the situation where there’ll be no need for enforcement. But at least we’ll be able to focus on more positive things. Nowadays we speak less and less about fighting corruption; we speak more and more about enhancing integrity, and this is our final goal. Companies and individuals have to understand that work or functioning for companies without bribery is better for their economic results, it’s better for their salaries, so it’s better for their lives.
JR And given that so much of what businesses do is about self-enforcement, self-referral, you talked earlier about giving companies incentives to come forward in the tendering of contracts, I think you said they might get preferential treatment. How is that going to work?
DK We cannot send a police officer or a prosecutor into every company we have in our countries. The companies can do the bulk of the work by themselves – of course, if they feel incentivised. First of all, what is the biggest incentive? If the management boards understand that honest business operations are also economically good, if they understand that if they fight corruption they will have not only economically better results but they will also have some advantages when they try to get contracts signed with governments through tendering procedures, then they will do it by themselves. And this is worth more than engaging thousands or 10,000 police officers around the world.
JR And whistle-blowing you would like to be more effective than, I think, the 2 per cent of the reported cases that I referred to. You talked about a culture change. But I think there is also a lack of clarity, isn’t there, on legislation that is supposed to protect whistle-blowers?
DK It is lack of clarity but it is also lack of knowledge. Now if the legislation is not very clear and very simple, potential whistle-blowers will not do it because they will not be sure what will happen afterwards. So they just prefer to stay on the safe side and they don’t do it because they don’t know what will happen. And that’s why we have to make it very clear, very simple, and we have to inform all our citizens on what will happen in case A, B, C, D and so on, because all of them are potential whistle-blowers.
JR I haven’t asked you about terrorism yet and I didn’t know whether that was beyond your remit. But when you think of the refugee crisis in the last year, the trafficking of people, when you think about the financing of so-called Islamic State, you are talking about bribery and you are talking about corruption in non-state entities. Have you thought what the OECD’s role in that instance should be? Or is this just something that’s off your agenda?
DK Corruption in the area of terrorism is something which France calls fil rouge [a common thread]. It happens all the time. You cannot get seriously engaged in human trafficking, in terrorism, without applying corruption because corruption makes things happen. Because if all the systems were functioning properly, we would have far less problems with human trafficking, terrorism and so on. But it is corruption which is enabling it. So…
JR So corruption at the top feeds eventually down as a cultural norm. Is that what you’re saying?
DK It’s not a cultural norm. It is how those guys can achieve other targets too. How can people bring weapons, heavy weapons, ammunition into countries? How can they cross the borders with it? Of course it can be they are very capable, they can cross the border. But I’m sure it is happening also through corruption of border services and so on.
So we don’t put a special emphasis on terrorism in our group, but we know that by fighting bribery as such, we are also hopefully cutting some links which enable the development of terrorism.
JR Another huge global problem like climate change – do you see that as in some way connected to bribery and corruption?
DK Where does bribery happen? It always happens in the areas where companies can earn or lose a lot of money. And climate change means protection of the environment. And corruption related to environmental problems is really important because companies can really lose a lot of money.
JR So you’re talking about illegal logging.
DK Illegal logging. We are talking about disrespecting the rules. And we have cases where in some countries they have specialised law enforcement agencies dealing with environmental problems and they do mainly deal with corruption cases.
JR So it’s all linked.
DK Everything is linked. Corruption brings everything together, unfortunately.
JR Were you aware [of this], before you took this job in 2014? I know you’ve been in law enforcement for a long time but it’s almost as if the rest of us are waking up to how it really does manifest itself in all sorts of places that perhaps we hadn’t thought of before. But maybe you had.
DK Well, I was doing similar things even before, as you’ve said – in the police; also chairing a similar body in the council of Europe. So I knew, approximately. But now we have 41 member states in the group which are, some of them, the more developed countries of the world. So of course this is a completely new dimension.
But I would not say that the increased awareness is only the consequence of me being in this position. Or your increased awareness is not only the fact that things are happening in the group, or the OECD. It is also because we are facing real problems now in our refugee crisis. This hasn’t happened before. Climate change – this is simply something which is waiting for us, next door, already. So we are aware of the problems, not because we think that corruption is causing all of this but because the problems, the results, are also caused by corruption.
JR You said that no country could seek to escape censure because the other countries had the power to enforce it. But in the case of Brazil, could you imagine a case of suspension from the working group on corruption?
DK Well, we have discussed this issue. If you have a country which simply does not want to implement our recommendations, basically which means it’s not following the Convention, the question is what to do then. For sure, we cannot exclude anybody from the group. But the issue of suspension is not clear yet and I really hope that we will never get there, that we will have to discuss suspending a country. And if that was the case, I’ll be very frank, Brazil is not the first one on the list.
JR Well, which one is?
DK Oh, that I cannot tell you. But, you see, Brazil for sure is not the first one on the list.
JR Is it Russia?
DK Not even Russia. We have some countries which ratified the Convention ten, 14, 15 years ago and they still did not implement it. This is really painful. They did not even implement it in their own legislation. Now we have many countries which have…
JR And which part of the world are we talking about? If you don’t want to name the country, can you at least give the region?
DK Well, it’s one of the G8 countries – as simple as that – which is so painful.
JR What about Argentina? It was named, the President was directly implicated through the Panama Papers. What needs to change in Argentina? That must also be on your agenda.
DK Argentina is, well, very high on our agenda. And the tools we have at our disposal – how to make countries follow our recommendations – end with a so-called hell of a mission. And we did it only once and that was Argentina. It took place two months ago. We went there to warn the government of Argentina that they really had to do something.
I must say that the reaction of the government was an extremely positive one. We heard a lot of promises. Now we are waiting to see how they will implement their promises. And they really had to do some major things – adopting new legislation, changing the practical approach – so we really hope that they will stick to what they have pledged.
JR I’ve got a question here from Neville in Australia who asks, should the OECD Convention be updated? He’s suggesting that encouraging integrity in both the public and the private sectors – that there could be more wording to enforce that.
DK My personal view is yes, of course, we have to amend – well, let’s say to upgrade or to enhance – the text of the Convention. But there is always a problem if you open – we say open the Convention – if you open the Convention, there’s always a risk that you will lose what is there already.
JR So it’s a can of worms, as we say.
DK Yes, you never know what you’ll get. So right now the Secretary General of the OECD has started an initiative with the aim of making the legal framework of the OECD much clearer, which means that we can get rid of those legal texts, we will enhance them and we will develop new ones. I’m sure that once [?] we’ll have to open the Convention and start working on it. I don’t know if this is the proper moment yet, but it will happen for sure.
JR I’ve got an interesting question here from David in the USA. Do you think more countries should follow the US model? Now of course there is more than one US model because individual states do things quite differently, but that’s the question he asks.
DK Well, if the model which we are talking about is enforcement of the Convention then I would be very happy if all countries would follow it because USA are on top of our list with active enforcement. Of course, there are some issues which we are not so happy with, offshore parts of the USA. But I have to say that without the USA, there wouldn’t be a Convention, there wouldn’t be a working group which I’m chairing now, and the standards would be much more lenient than they are right now.
JR But is the difference between the USA and the UK that stark? People in the Cayman Islands could point to the Americans and have done and said, you can’t tell us to change things if you don’t change things.
DK No, the UK is in the same group of countries with active enforcement. And especially following the adoption of the anti-bribery act. UK is on the top of the countries which are really fighting it.
JR No, but my point was that there are pockets of the USA which might mean that the USA is in no position to lecture anybody else.
DK Yes, and here I can fully agree.
JR Sarah from the UK asks, what is the OECD doing to encourage its members to protect whistle-blowers? Well, we’ve talked about law being clearer. What else can we do?
DK Parts of our reports are also what we call recommendations.
And those are not recommendations – we can easily call them instructions because countries have to follow them otherwise they face a noncompliance procedure. And we have devoted, and we will devote, a lot of attention to the issue of whistle-blowing and to really insist not only on adoption of the laws – we also insist on the practical implementation of whistle-blowers’ proceedings. And this is something which will be one of the emphases of our Phase Four too.
JR Okay. I have another question here – Rodolfo from Brazil. In Brazil, the money recovered from anti-corruption operations doesn’t go towards fighting corruption. Do you think it should? Do you think there should be a hypothecation between money collected and enforcement and protection?
DK Well, this is becoming more and more fashionable. The money seized or confiscated from corruption offenders is at least partly going to the agencies and offices which are fighting corruption. This is some sort of motivation for them. But now we have to be careful because we don’t want the money to be the sole motivation for them to do the job.
JR Does it happen in your native Slovenia?
DK Well, not yet. Not yet.
JR Perhaps you should encourage it to start there.
DK Yes. But no, if our agencies had to survive only on that money, they would starve quite soon.
JR They need proper public funding and support.
DK Of course, yes.
JR A question from Alberta in Venezuela. What do you think about cases such as the Siemens case where the company was convicted in the US but nothing happened in Venezuela where the crime was committed? In a globalised world, it seems justice delivers in one place and not in another.
DK Yes, but if my memory serves me right, Siemens was involved in bribery offences in almost 100 countries. We cannot expect all 100 countries to do something, but we have to know that Siemens was fined, I think, €1.8 billion altogether in all jurisdictions.
And Siemens turned from an ugly duckling into a very nice swan, as it looks for the moment, because it is spearheading the private interest efforts in the fight against corruption. And Siemens is still investing many millions a year to support the fight against corruption around the world.
JR It often feels, speaking as a journalist, that corruption investigations only really get going when the FBI and the Department of Justice get involved. In other words, if America thinks it is either the scene of corruption or losing out economically from corruption, it gets involved – and then everybody else has to step into line. Do you think that’s a fair description?
DK Well, it was, until recently. Now there are more and more countries doing this by themselves and they really have stepped up their enforcement efforts.
JR I was thinking of the FIFA case where the whistle-blower is in the United States; it was pressure from Washington from the Department of Justice that eventually led to the resignation of Sepp Blatter and everything else that’s happened.
DK Well, FIFA is very clear. Without US authorities, the FBI, nothing would have happened there for years. So we have to recognise that. And in particular I’m personally very happy that the FBI did it because I’m closely involved with soccer in Europe.
JR Because you were a FIFA referee, is that right?
DK I used to be a FIFA referee. I’m a FIFA referee observer now. And I really do appreciate what the FBI was doing, and still is doing, in this area.
But speaking in more general terms, countries without any doubt also encouraged by the example of the US authorities are doing more and more by themselves. And this is really the development which is making me quite happy.
JR What about the Olympus case in Japan? We haven’t talked about Japan. Was there anything that surprised you about that? Or do you feel…? Some of these cases are so shocking and so surprising, but perhaps you don’t feel that way.
DK Well, the one I think which is surprising me, and I speak now under the possibility that this might change in the near future, is that Japan hasn’t done anything by itself to help the investigation or to conduct its own investigation. Because the fact that the case has been closed in the US doesn’t mean that all possible aspects of the case have been investigated, especially not in Japan, the country of origin of the company.
JR Well, we return to our point that globalisation only goes so far, that jurisdictions remain separate and although the product may be sold all over the world, the investigations have to be separate quite often.
DK You see, we usually say that the world is turning into a very small place. When we speak about foreign bribery investigations, sometimes I have the feeling we are speaking about different universes, different spaces, because the countries are so far away from each other.
JR Right. So you feel your work is cut out, that those who benefit from free trade are less inclined to make law across borders perhaps.
DK It’s difficult – and I’m not referring to any specific country now – to convince a country where companies are earning hundreds or even billions of dollars and euros by not respecting the standards which the rest of the world has submitted to.
JR I think we should wrap up our conversation there. We’ve been speaking for about an hour. It’s been absolutely fascinating. You are in the hot seat of tackling corruption and I think you have given a fantastic demonstration of how global it is, how your work is cut out and how progress is being made, even if it’s often a case of exposure by the press and by others which forces action, given that law enforcement is financially restricted and confined to one part of the world as opposed to another part of the world when financial crime obviously crosses many borders.
Drago Kos, thank you very much indeed for talking to me this afternoon. Thanks very much for your questions and thank you for watching.