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Resisting Bribery in the NGO Sector

February 13, 2017

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Alexandra Wrage

TRACE International

Why International NGOs Should Care About Compliance and How TRACE Can Help

International non-governmental organizations (INGOs) accept enormous risks and responsibilities in their effort to deliver aid in some of the most dangerous parts of the world. In the face of war, famine, mass displacement, and human rights abuses, they carry out their work with a tremendous urgency. When that work is thwarted by entrenched corruption—when the delivery of food or other vital supplies is held up by a petty official demanding a bribe—it can be tempting to “go along to get along” for the sake of a greater good.

There are reasons to resist that temptation. For one thing, bribery of foreign officials is illegal. The U.S. Foreign Corrupt Practices Act (FCPA) prohibits “domestic concerns” (among others) from giving or offering “anything of value” to a foreign official to influence that official in the performance of his or her duties. Although by its terms the act addresses bribes that are intended to help with “obtaining or retaining business for or with . . . any person,” the U.S. Department of Justice (DOJ) has interpreted that phrase broadly, so that it includes matters such as obtaining a tax waiver or moving products through customs more quickly—pretty much anything that affects an entity’s bottom line.

But doesn’t that rule just apply to for-profit entities? According to the U.S. government, no, it doesn’t. In 2010, the DOJ issued an opinion finding that a nonprofit, U.S.-based microfinance institution qualified as a “domestic concern” and was therefore subject to the FCPA. There is no express exception for nonprofit organizations under the U.S. anti-bribery law—or under any other international anti-bribery convention: both the U.N. Convention against Corruption and the OECD’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions have been interpreted to cover the work of nonprofit organizations.

To be sure, an INGO operating for humanitarian purposes isn’t driven by the same kind of bottom-line considerations as a for-profit multinational corporation. Would the government even consider an FCPA prosecution for a payoff made to help get medicine or water to refugees? It may not have done so yet, but the possibility is far from remote. Keep this in mind: when the FCPA was enacted in 1977, the legislature wasn’t only concerned about businesses obtaining an unfair advantage through illicit payments abroad. It was also concerned about the corrupting influence of such payments—and the widespread tolerance of such payments—on the countries in which favor was sought and purchased. And bribes paid by nonprofit INGOs can have the same effect of perpetuating corruption as bribes paid by for-profit multinationals.

Alongside the risk of prosecution—and the accompanying potential for reputational damage, fines, and even prison—there is another reason for INGOs to care about compliance with antibribery laws: those who finance the INGOs’ work may themselves be preoccupied with ensuring clean use of their money. Institutions like the World Bank have expressed a strong commitment to fighting corruption, and do not hesitate to cut off recipients who are found to have acted complicitly. And private corporations are keen to protect themselves and avoid the possibility that they will be investigated if a charitable cause they have supported gets caught in a scandal.

Resisting bribery demands can be difficult—all the more so when lives may be at stake. But we should also remember that every dollar that goes into a corrupt official’s pocket is one dollar less spent helping those in need. And the appetite for bribes is limitless. As long as people are willing to pay, the demands won’t stop, and the cycle of corruption will continue. To help break that cycle—and to protect themselves in the face of increasing scrutiny—INGOs and other nonprofit institutions should take steps to ensure that they are in full compliance with anti-bribery laws. At a minimum, charitable organizations should implement anti-bribery policies, train staff on the importance of compliance and strategies for resisting extortionate demands, and conduct due diligence on their business partners. The well-being of the world’s populace is only harmed by the tolerance of corruption. Those who are committed to that well-being should embrace the opportunity to resist.

To that end, TRACE has partnered with Humentumand seven development organizations operating in Turkeyon a pilot project initiated by Mercy Corps.  We are vetting the most widely used vendors by these seven international NGOs, to establish a foundation of due diligence to be undertaken by INGOs. As Jeremiah Centrella of Mercy Corps notes, Effective due diligence on contractors and vendors is more important to INGOs now than ever, and remains a fundamental prerequisite for transparent and ethical procurement practices. Our due diligence in some of the world’s most challenging contexts must do all it can to address fake companies, collusive bidding by related companies, companies owned by government officials and companies whose unethical practices could result in damage to our reputation or liability with donors or governments.

TRACE, also a non-profit, is conducting this rigorous due diligence for INGO suppliers in Turkey at no cost—in order to develop a pool of vetted, trained suppliers available to the whole development community. TRACE-certified entities must disclose beneficial ownership, past misconduct, references, financials, and other key information. TRACE then runs independent checks, including media and sanctions screening, to ensure a full and robust portrait of each entity. The sanctions screening is refreshed every day. TRACE also administers training to ensure that local partners understand not only what is expected of them, but why. Vetted business partners are listed on a database, rewarding their commitment to transparency with more visibility in the development community.

We hope that you will take advantage of this momentum and join Humentum and TRACE in this important initiative. For those working in Turkey, we invite you to be part of the pilot project. Please contact me or Marie McNamee at Humentum for additional information.

We will be sharing the outcome of this pilot program in Turkey with the Humentum member community.  We hope that our members will take advantage of this approach to vendor due diligence and join Humentum and TRACE in upcoming discussions about next steps for this initiative.