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Prevention Is Better Than Cure - anti-Corruption In The Region

The legislative battle against anti-corruption in the region began in the 1980's. Mamoon Ashraf and Edouard Salwan of Bin Shabib and Associates look at how it has becoame a priority in the last 12 months.
What’s been happening?
The battle against bribery and corruption in GCC countries and their regional neighbours began in the 1980s, although Bahrain was a front runner with Bahrain Legislative Decree No. 15/1976. The late 1980s and 1990s saw a raft of legislation including the anti-bribery and anti-corruption provisions found in the UAE Penal Code (Federal Law No. 3/1987) and Saudi Arabia Royal Decree No. M36/1992 which criminalised bribery. There is also now an Anti-Corruption Law on the books in Egypt and anti-bribery and corruption legislation in Kuwait, Qatar and Oman,” Mamoon Ashraf says.

“However, in the past twelve months there has been a flurry of activity in this area across the GCC. In October 2014, Oman announced it was going to amend its anti-bribery and corruption legislation, although no timescales for this have been given yet. Over in Saudi Arabia, authorities have also called on the Kingdom’s Anti-Corruption Authority to improve transparency. Meanwhile in Kuwait, so-called Financial Observation Units have been set up in some Government departments, including the Capital Markets Authority and Anti-Corruption Authority. Kuwait's National Assembly, also approved an Anti-Corruption and Wealth Disclosure Decree in 2013, which requires the Prime Minister, MPs and Senior Bureaucrats to submit a wealth disclosure before and after taking office," Ashraf says.

"It is not just the GCC where this is happening. In Jordan too, the Anti-Corruption Commission Law has been amended but it’s not just legislation which is changing. There has also been an increase in firms being accused of these activities. For example, there have been allegations of anti-corruption against companies like GlaxoSmithKline and bribery allegations in Qatar, which have been found to be unfounded. All these things put the issue higher up the agenda,” Ashraf explains.

“Oman is one example of more being done. Despite the existence of Oman Sultani Decree No. 112/2011, the 'Anti-Corruption Law' we are likely to see proposed legislative amendments to the anti-corruption regime approved and those convicted of bribery or corruption facing tougher penalties and the private sector being targeted. The race to commit to transparent and non-corrupt administration has become a GCC public policy matter. Just last year Saudi Arabia Ministerial Decision No. 405/1435 was passed to pave the way for big international companies to participate in Government tenders. In the UAE, a draft law is also under discussion which will establish a new body called the Federal Authority for Combating Corruption, based in Abu Dhabi but covering all Emirates which will have the necessary powers to combat corruption,” Ashraf says.
“These changes are arguably being driven by various factors - economics, political and social instability and the region’s increasing global profile. According to groups like the Red Flag Group and Transparency International, GCC countries and their neighbours rank consistently low in terms of their anti-corruption efforts. However, as Dubai is hosting the Expo in 2020 and Qatar the 2022 World Cup, the world’s attention is focused on their efforts to tackle these issues."

"With such events, foreign direct investment is expected to increase and investors will want guarantees the legal regime and integral processes, like tendering, are robust. However, tackling bribery and corruption is in everyone’s interest as it ensures there is not a corrosive impact from breaches on the wider economy. Tackling this area also helps general business and governance,” Ashraf says.
“However, the key challenge is not introducing legislation, but that relevant authorities must also take steps to implement and enforce it. Where bodies have overlapping responsibilities, as in Saudi Arabia efforts can arguably be hampered. The key bodies enforcing bribery and corruption legislation in the region are the National Anti-Corruption Commission in Saudi Arabia, the anti-corruption unit and State Audit Commission in Dubai and the National Transparency and Integrity Committee in Qatar."

"There can also be an issue around who is covered by the legislation as most of the regional legislation only applies to public sector not private sector employees. Political instability in some countries has also created problems. For example, in Egypt, recent political upheaval has led to Government steps to tackle anticorruption taking a back seat,” Ashraf notes.
Non-compliance penalties
“There are two main penalties for non-compliance with legislation in this area - fines and jail sentences. For example in Oman, jail terms vary between a month and three years of imprisonment with a fine at least equal to the amount proposed for the bribery.

"However in the UAE, those convicted of bribery can be jailed for up to five years or fined between 1,000 AED and 10,000 AED. Fines have also generally been increasing as further regulations and revisions are made to existing legislation. In the UAE for example, public officials found guilty of accepting bribes face a fine up to the benefit they accepted (provided it is not below 1,000 AED), confiscation of the actual benefit accepted and they can be jailed for five to ten years. Individuals guilty of accepting a bribe in exchange for exerting their influence over public officials are also subject to a fine not exceeding 10,000 AED and can be jailed for up to a year. In Saudi Arabia, penalties include fines not exceeding 1 million Riyals, jail for up to ten years or both. These penalties can be imposed on either or both the person offering or making the bribe and the person requesting or accepting it. Bribing a Government official on matters not within the remit of their official duties is punishable by, either or both, a fine not exceeding 200,000 Riyals and/or imprisonment for up to two years. In both cases, the penalties include the seizure of the bribe,” Ashraf says.
What can companies do?
“Whilst the legislation in the GCC countries and elsewhere regionally primarily focuses on public sector employees and organisations, private institutions should not think they are above the law." "All companies, should carry out compliance programmes, audits and implement solutions to tackle areas of concern. They should also carry out risk assessments and awareness campaigns to reduce risk,” Edouard Salwan says.
What’s next?
“Looking ahead we are likely to see the United Nations Convention on Anti-corruption ratified by all the GCC countries. In fact, Oman has effectively ratified it through Oman Sultani Decree No. 64/2013. Saudi Arabia, Egypt and Jordan have also joined the Austrian-based International Anti-Corruption Academy (IACA) established by the United Nations Office on Drugs and Crime (UNODC), the European Anti-Fraud Office (OLAF) and a GCC-wide anti-corruption body is to be established soon to tackle anti-corruption at a regional level and regulate these areas," Salwan concludes.

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Published: March2015
Publication: LexisNexis
Title: Prevention is better than cure
Practice: Corporate and M&A
Authors: Mamoon Ashraf, Edouard Salwan
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