I have been involved in corruption (a long time ago) and in anti-corruption for a good number of years now. I have signed the Integrity Pledge of the Integrity Initiative Inc. and I am living up to the commitments laid down in the Pledge.
Having said this, I am still amazed that a lot of people still have difficulties to understand what corrupt practices are. Allow me to highlight a number of the bad practices:
Abuse of functions
Abuse of functions occurs when an employee or office holder uses his or her position to perform an illegal act, or an act that he/she has no legal
authority to do, to pursue a private gain. One form of abuse of functions is the misuse of information (e.g., when an employee or official acts on private information acquired by virtue of her/his position to speculate or help another on the basis of this information).
Agent
An agent is a person (natural or legal) with the authority to act for or represent another person or party. Companies can be held liable for their agents’ acts of corruption, including for channeling bribes, for not reacting to corrupt acts, or for acts the agent should have known about given the presence of clear signs of the acts taking place.
Bid rigging
Bid rigging is a form of collusion in which bidders on a contract decide between themselves which bidder should be successful in the tender, and then draft their bids accordingly. Forms of bid rigging include bid rotation, complementary bidding and cover pricing. Bid rigging can constitute a cartel or antitrust offense, which is also regulated by the Philippine Competition Commission (PCC).
Bribery
Bribery is, according to Transparency International “the offering, promising, giving, accepting or soliciting of an advantage as an inducement for an action which is illegal, unethical or a breach of trust. Inducements can take the form of gifts, loans, fees, rewards or other advantages [taxes, services, donations, favors etc.].” Bribery occurs during an interaction between two parties. Usually, both the giving and the receiving parties of the bribe commit a crime.
Cartel
A cartel is an agreement (formal or informal) among competing companies to coordinate prices, marketing or production of a good or service. Cartel members may agree on matters, such as prices, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, the division of profits or a combination of these. The PCC is “hunting” cartels.
Collusion
Collusion is a noncompetitive agreement, usually secretive, between two or more persons or businesses to limit open competition, typically by defrauding or gaining an unfair advantage. It can involve an agreement among companies to divide the market, to set prices, to limit production or to share private information. It may also involve bid rigging. The aim of collusion is to increase individual members’ profits. The PCC will be right behind you.
Conflict of interest
A conflict of interest exists when an individual has competing professional obligations or personal or financial interests that have the potential to influence the exercise of her/his duties. Private or personal interests include family and other relatives, personal friends, the clubs and societies to which an individual belongs, private business interests, investments and shareholdings and any person to whom a favor is owed.
Corruption
There is no single globally accepted definition of corruption. Transparency International, the leading international NGO in curbing corruption, defines it as “the abuse of entrusted power for personal gain.” The main forms of corruption are bribery, embezzlement, fraud and extortion.
Cronyism
Cronyism is a form of favoritism shown to close friends. A typical situation of cronyism would be the political appointment to office of a friend without regard to the person’s qualifications.
Demand side/passive bribery
Demand side or passive bribery entails an individual or entity asking for or accepting an advantage in return for acting or not acting in relation to one’s official duties. A typical form of demand side bribery is the denial of goods or services.
Donations
A donation is understood as a monetary or nonmonetary gift to a fund or cause, typically for charitable reasons. If a donation is given with the purpose of giving a company an undue advantage, it will likely be considered bribery. Many companies address the use of political donations in their code of conduct.
Embezzlement
Embezzlement is the fraudulent appropriation of money or property for personal gain by an individual entrusted to safeguard assets in another’s interests (e.g., governments, organizations or companies). Embezzlement can be committed by a person entrusted with private or public resources.
Extortion
Extortion is the unlawful use of one’s position or office to obtain money through coercion or threats. One example would be when Customs officials request undue “Customs duties” from importers as a condition to clear their goods.
Facilitation payments
Facilitation payments (also known as “grease payments”) are a form of bribery made with the purpose of expediting or securing the performance of a routine action to which the payer is legally entitled to. Facilitation payments are typically demanded by low-level and low-income officials. In some countries, it is sometimes customary to provide small unofficial payments, but the practice is illegal in most countries.
Fraud
Fraud involves the use of deception, trickery and a breach of trust to gain an unfair or unlawful advantage. Occupational fraud entails the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the company’s resources or assets.
Gifts and hospitality
Gifts and hospitality (including travel and entertainment) are legitimate expenses and common business practices to build relationships or to express appreciation. Disproportional gifts and hospitality are sometimes offered, given, solicited, or received with an obligation or expectation to provide a benefit in return. Accordingly, gifts and hospitality may be corruption offenses, may be used to facilitate corruption, or may give the appearance of corruption.
Graft
Graft is a form of political corruption in which an official acquires financial gain by dishonest or unfair means, especially through the abuse of one’s position. Unlike bribery, graft does not require the official to provide an undue advantage; it is enough that she/he gains something of value apart from her/his official pay when working.
Kickbacks
Kickbacks are a form of bribery where one party obtains an undue advantage, and a portion of the undue advantage is “kicked back” to the individual who gave or will give the undue advantage. It differs from other forms of bribery in that it implies a form of collusion between the two parties.
Money laundering
Money laundering is a process in which the ownership, destination and origin of illegally obtained money is concealed or disguised. The objective of money laundering is to make illegally obtained money appear to originate from a legitimate source.
Patronage
Patronage is a system in which a number of organizations, companies and/or individuals bestow support or financial benefits upon one another. Political patronage occurs when political supporters are rewarded for their support (e.g., by being appointed to public office or receiving contracts, subsidies or other benefits), regardless of merits.
Price-fixing
Price-fixing is an agreement between competing businesses to buy or sell a product, service, or commodity at an agreed upon price. It can also entail maintaining the market conditions so that the price is kept at a given level by controlling supply and demand. Price-fixing seeks to coordinate pricing for the mutual benefit of the traders. The group of “market shapers” involved in price-fixing is sometimes referred to as a cartel. Antitrust laws commonly criminalize price-fixing and the PCC is watching you closely.
Supply side/active bribery
Supply side/active bribery entails the promise, offering or giving of an undue advantage (directly or indirectly) as an inducement for an official, a person or an entity to act (or fail to act) in a manner inconsistent with her/his official duties. Common forms of supply side bribery are direct payments, gifts, hospitality, and donations or contributions to political parties.
The “Corruption Directory” is much longer, but the main areas I have tried to cover. I would appreciate, however, if you could comment and give additional examples of corruption. Please e-mail me at schumacher@eitsc.com