According to the United Nations2):
Although the definition of corruption by Transparency International is not perfect and not legal, it encapsulates three core elements of corruption: Abuse, Entrusted Power, and Private Gain. See Table 1.
|Type of Corruption||Description|
Corruption involves a violation of norms of conduct or professional obligations – explicit or implicit – arising from formal or other entrusted duties. The notion implies decision-making without due impartiality; counter to public policies; or more broadly against the public interest.
Corruption arises when a person misuses the authority derived from all kinds of formal or professional roles, but also informal or traditional ones.
This phrasing covers not only public officials but also individuals working in the private sector, media, civil society actors, and religious leaders. It also covers people such as community elders who hold customary authority.
A company employee selling commercial secrets to a competitor is an example of private sector corruption.
The gain realized through corruption is private because it does not benefit the entity or the collective that the official is entrusted to represent or serve. Private gain expresses the opposite of public good. But the gain need not go directly to the official in question: it may also benefit a designated family member, friend, associate, or political party.
Also note that anything of value can constitute a benefit: it’s not only money and material goods, but also power and influence, and other advantages – even sexual favors.
Another way to define corruption at a high level is that it is a form of dishonesty that is undertaken by an individual or organization in a position of authority in order to gain benefits, including personal gain.
Under the umbrella of Corruption, there is a taxonomy of the elements that are useful for differentiating the kinds of Corruption (i.e., Taxonomy). These elements can be used to categorize corruption; these terms are often additive in nature. For example, the Conflict of Interest leads to Bribery of an Administrative Corruption nature.
Active bribery refers to the act of promising or giving a bribe, as opposed to the act of receiving a bribe (passive bribery). The term does not mean the active briber has taken the initiative, since the bribe may have been demanded by the receiving party (who commits “passive bribery”). When a citizen reluctantly makes an informal payment in order to receive medical care, which would be refused otherwise, she is nevertheless committing active bribery. The distinction between active and passive bribery is primarily made in legal definitions, which need to be precise and allow for the possibility to sanction either side of the transaction, as appropriate. The classification is similar to the distinction between supply-side and demand-side corruption, which is used in analyzing the patterns of incentives or drivers of corrupt practices.
Corruption occurs at the interface between the state, represented by public officials/bureaucrats in decision-making positions, and the public/citizens when they need a service. For example, when a citizen coming to take out an ID card is only provided this service if he/she pays the bureaucrat an unofficial payment in addition to the official fee.
The offer or exchange of money, services, or other valuables to influence the judgment or conduct of a person in a position of entrusted power. The benefit does not need to go to the official in question directly – it can go to a spouse, a child, another relative, a friend, or even to the official's political party as a donation. A bribe is sometimes paid after the fact – for instance, in monthly installments to the official issuing permits to street vendors as long as they are allowed to operate. This form of bribery is called a kickback. Bribery is widely criminalized, and both the party paying the bribe and the party receiving may be liable (see active bribery/ passive bribery). However, in practice, certain forms of bribery are often exempt from prosecution (see facilitation payments).
An informal exploitative system of exchanges (of resources, services, favors) between a wealthier and/or more powerful “patron” or “boss” and less wealthy/weaker “clients” or “followers.” Such systems are typically found in settings where formal governance structures fail to provide adequate resources (including protection), leaving poor and/or marginalized members of society to seek assistance from powerful figures that can deliver them. The corruption dimension is clear when the “patron” is an elected official who distributes resources under his/her control inequitably (abusing his/her entrusted power), as a reward for electoral support (private benefit). Similar informal systems may not involve elected officials directly, but may nevertheless undermine formal rules and institutions, including efforts to combat corruption.
|Conflict of Interest||
A conflict of interest is a conflict between an entrusted duty on the one hand and the private interest of the duty-bearer on the other hand. For example, a parliamentarian sitting on the committee for healthcare reform might own stock in a major pharmaceutical company. The existence of this private interest could improperly influence the performance of entrusted responsibilities. Because conflicts of interest create opportunities for corruption to take place, they should be avoided or managed.
The demand side of the bribe (also known as “passive” bribery) focuses on the person or entity soliciting or receiving the bribe.
The misappropriation of property or funds legally entrusted to someone in their formal position as an agent or guardian. Accountants and financial managers typically have access to an agency's funds and so are in a position to embezzle them. Other forms of embezzlement include the taking of supplies, equipment, etc.
The practice of obtaining something (money, favors, property) through the use of threats or force. For example, extortion takes place when armed guards exact money for passage through a roadblock. Withholding life-saving medical attention unless a bribe is paid could also be considered an act of extortion. See also sextortion, which involves threats or force to obtain sexual benefits.
Refer to relatively small, individual amounts paid beyond the official fees to speed up services such as customs clearance, work permits, border crossings, etc. Technically, these are a bribe. In many countries, however, facilitation payments by companies doing business abroad are exempt from prosecution for bribery in their home countries as long as they are used to speed up legal processes, rather than to avoid regulations. This exception recognizes the fact that in certain settings, it is impossible to operate a business without conceding to such payments.
An economic crime involving deceit, trickery, or false pretenses by which someone gains unlawfully. Fraud often accompanies corrupt acts, in particular embezzlement, where it is typically used to falsify records to hide stolen resources.
In contrast to “petty corruption”, high-level or “grand” corruption is perpetrated at the highest levels of government and usually involves both substantial benefits for the officials involved and significant losses for the state and its citizens. It can refer to specific acts such as ministers taking multi-million dollar bribes to award lucrative government concessions or embezzling millions from state coffers into a secret bank account. But it also refers to illicit exchanges in the realm of policy formation (see also state capture). Though large sums of money may be involved, other benefits like high-level appointments, inside information, and policy influence can be the currency of grand corruption. Corruption at this level is also sometimes referred to as political corruption.
A bribe is paid after the fact for an undue favor or service. For instance, a company that receives a government contract might send the responsible official regular payoffs for the duration of the contract. Street vendors may pay the permission-granting authority a small sum each month as long as they are allowed to operate.
A Greek word meaning “rule by thieves”, kleptocracy refers to a system of government in which leaders use their position for private gain at the expense of the governed. It is typically correlated with autocratic regimes with no meaningful accountability mechanism, effectively allowing the leader to plunder the state and its citizens for personal enrichment and to entrench his hold on power. Some well-known former kleptocrats include Francois Duvalier (“Papa Doc”) of Haiti, Mobutu of Zaire, and Suharto of Indonesia.
A form of favoritism involving family relationships, in which someone exploits his or her authority to procure jobs or other favors for relatives. When this treatment is extended to friends and associates, the appropriate term is cronyism.
Refers to the act of receiving the bribe. This does not mean the passive briber has taken no initiative – in many cases, he or she may have demanded the bribe in the first place.
The support or sponsorship of a patron (wealthy or influential guardian). Patronage is used to make appointments to government jobs, promotions, contracts for work, etc. The desire to gain power, wealth, and status through their behavior motivates most patrons. Patronage violates the boundaries of legitimate political influence and the principles of merit.
Alternatively called “administrative” or “bureaucratic” corruption, the term refers to the everyday corruption that takes place when bureaucrats meet the public. While the sums of money involved tend to be small, they are far from “petty” for the people concerned. Examples include paying bribes to get an ID; enrolling in school; or having a phone line installed.
The term is both narrowly used to designate the manipulation of policies, institutions, and rules in the financing of political parties and in electoral campaigns, and also more broadly as a synonym for “grand corruption”, or corruption taking place at the highest levels of government where policies and rules are formulated and executive decisions are made.
The abuse of power to obtain a sexual benefit or advantage. Related to the concept of extortion.
Sporadic corruption is the opposite of systemic corruption. Because it occurs irregularly, it does not threaten the mechanisms of control or the economy as such. It is not crippling, but can seriously undermine morale and sap the economy of resources.
Coined by the World Bank in the early 2000s, state capture refers to a type of systemic political corruption in which private interests significantly influence a state's decision-making processes to their own advantage. For example, businesses can improperly influence legislators to pass favorable laws.
Supply-side refers to the person or entities who offer or provide the illicit benefit in corrupt transactions. The officials with entrusted authority who received illicit benefits constitute the demand side. The distinction is similar to that between active and passive bribery, which is used primarily for legislative purposes. Also similar is the fact that the term “demand-side” does not imply that it is the official on the receiving end who proactively solicited the bribe. The distinction between supply and demand can be useful in analyzing the different sets of incentives that contribute to corruption.
(Also known as endemic corruption). A situation when corruption is an integral part of a state's economic, social and political system, and where most people have no alternatives to dealing with corrupt officials. Sporadic corruption, in contrast, occurs irregularly and does not compromise the mechanisms of governance in the same crippling way.
|Trading in influence||
(Also known as influence peddling). Trading in influence occurs when a person who has a real or apparent influence on the decision-making of a public official exchanges this influence for undue advantage. The offense is similar to bribery with one important difference: trading in influence concerns the “middleman”, or the person that serves as the go-between the decision-maker and the party that seeks an improper advantage. The final decision-maker may not even be aware of the illicit exchange. One example is when an MP receives a payment from a company to attempt to convince fellow legislators to support amendments that would benefit that company. Trading in influence is difficult to prove because the legal definitions involve disputable criteria of “intentionality” and “undue”/improper influence. Trading in influence is also often difficult to distinguish from permissible forms of lobbying.
Often it is assumed that corruption is a “third world problem”. While it is often prevalent or detected more in the third world, it does not mean that the CBDC can ignore the problem here or around the world. Figure 1 provides a map of known corruption around the world.
The Foreign Graphics website produced a report and reported the following about the U.S.6):
There are roughly 10 Laws and Regulations in the U.S. covering Corruption.
|Law or Regulation||Description|
|U.S. Foreign Corrupt Practices Act||
|18 U.S. Code § 201 - Bribery of public officials and witnesses||
Section 201 of Title 18 is entitled “Bribery of public officials and witnesses.” The statute comprises two distinct offenses, however, and in common parlance, only the first of these is true “bribery.”7)
The first offense, codified in section 201(b), prohibits the giving or accepting of anything of value to or by a public official, if the thing is given “with intent to influence” an official act, or if it is received by the official “in return for being influenced.”
The second offense, codified in section 201©, concerns what is commonly known as “gratuities,” although that word does not appear anywhere in the statute. Section 201© prohibits that same public official from accepting the same thing of value if he does so “for or because of” any official act and prohibits anyone from giving any such thing to him for such a reason.
The specific subsections of the statute are:
The two offenses differ in several respects. The most important of these differences concerns how close a connection there is between the giving (or receiving) of the thing of value, on the one hand, and the doing of the official act, on the other.
Also see: Anti-Corruption in the United States
|18 U.S. Code § 1952 - Interstate and foreign travel or transportation in aid of racketeering enterprises||
|18 U.S. Code § 1341 - Frauds and swindles||
“There are two elements in mail fraud: (1) having devised or intending to devise a scheme to defraud (or to perform specified fraudulent acts), and (2) use of the mail for the purpose of executing, or attempting to execute, the scheme (or specified fraudulent acts).” Schmuck v. United States, 489 U.S. 705, 721 n. 10 (1989); see also Pereira v. United States, 347 U.S. 1, 8 (1954) (“The elements of the offense of mail fraud under . . . § 1341 are (1) a scheme to defraud, and (2) the mailing of a letter, etc., for the purpose of executing the scheme.”); Laura A. Eilers & Harvey B. Silikovitz, Mail and Wire Fraud, 31 Am. Crim. L. Rev. 703, 704 (1994) (cases cited).8)
|18 U.S. Code § 1343 - Fraud by wire, radio, or television||
The elements of wire fraud under Section 1343 directly parallel those of the mail fraud statute but require the use of an interstate telephone call or electronic communication made in furtherance of the scheme. United States v. Briscoe, 65 F.3d 576, 583 (7th Cir. 1995) (citing United States v. Ames Sintering Co., 927 F.2d 232, 234 (6th Cir. 1990) (per curiam)); United States v. Frey, 42 F.3d 795, 797 (3d Cir. 1994) (wire fraud is identical to mail fraud statute except that it speaks of communications transmitted by wire); see also, e.g., United States v. Profit, 49 F.3d 404, 406 n. 1 (8th Cir.) (the four essential elements of the crime of wire fraud are: (1) that the defendant voluntarily and intentionally devised or participated in a scheme to defraud another out of money; (2) that the defendant did so with the intent to defraud; (3) that it was reasonably foreseeable that interstate wire communications would be used; and (4) that interstate wire communications were in fact used) (citing Manual of Model Criminal Jury Instructions for the District Courts of the Eighth Circuit 6.18.1341 (West 1994)), cert. denied, 115 S.Ct. 2289 (1995); United States v. Hanson, 41 F.3d 580, 583 (10th Cir. 1994) (two elements comprise the crime of wire fraud: (1) a scheme or artifice to defraud; and (2) use of interstate wire communication to facilitate that scheme); United States v. Faulkner, 17 F.3d 745, 771 (5th Cir. 1994) (essential elements of wire fraud are: (1) a scheme to defraud and (2) the use of, or causing the use of, interstate wire communications to execute the scheme), cert. denied, 115 S.Ct. 193 (1995); United States v. Cassiere, 4 F.3d 1006 (1st Cir. 1993) (to prove wire fraud government must show (1) scheme to defraud by means of false pretenses, (2) defendant's knowing and willful participation in a scheme with intent to defraud, and (3) use of interstate wire communications in furtherance of the scheme); United States v. Maxwell, 920 F.2d 1028, 1035 (D.C. Cir. 1990) (“Wire fraud requires proof of (1) a scheme to defraud; and (2) the use of an interstate wire communication to further the scheme.”). 9)
|18 U.S. Code § 1346 - Definition of “scheme or artifice to defraud”||
Honest services fraud is defined in federal statute 18 U.S.C. §1346 as a scheme to defraud another of the intangible right to honest services through a scheme to violate a fiduciary duty by bribery or kickbacks. A fiduciary duty is a duty to act only for the benefit of the public, an employer, shareholders, or a union. The statute was created by Congress as a response to the government's limitation in its use of the wire fraud statute.https://www.federalcriminallawyer.us/honest-services-fraud/
|Sections 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934||
Sections 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934, as amended. Section 13(b)(2)(A) of the Exchange Act requires issuers to make and keep books, records, and accounts, that accurately and fairly reflect the transactions and dispositions of the assets of the issuer. Section 13(b)(2)(B) of the Exchange Act requires issuers to devise and maintain a system of internal accounting controls that, among other things, is sufficient to provide reasonable assurances that assets are used, transactions are executed, only in accordance with management’s general or specific authorization. https://tinyurl.com/5n87cf3u
|15 U.S. Code § 78dd–1 - Prohibited foreign trade practices by issuers||
The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. (“FCPA”), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of the instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.
Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.
The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls.10)
|17 CFR § 240.15d-1 - Requirement of annual reports from Securities Exchange Act of 1934||
This practice note discusses reporting obligations under Section 15(d) (15 USCS § 78o) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Section 15(d) provides that any issuer who registers a class of securities under the Securities Act of 1933, as amended (the Securities Act) shall become subject to periodic reporting requirements under Section 13(a) (15 USCS § 78m) of the Exchange Act, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. However, Section 15(d) does not trigger all Exchange Act obligations. For example, reports under Section 16 (15 USCS § 78p) or Section 13(d) or obligations with respect to proxies are not triggered by the application of Section 15(d) alone. https://tinyurl.com/583z6nxv
|2018 Chapter 8 Chapter Eight - Sentencing of Organizations||
The guidelines and policy statements in this chapter apply when the convicted defendant is an organization. Organizations can act only through agents and, under federal criminal law, generally are vicariously liable for offenses committed by their agents. At the same time, individual agents are responsible for their own criminal conduct. Federal prosecutions of organizations therefore frequently involve individual and organizational co-defendants. Convicted individual agents of organizations are sentenced in accordance with the guidelines and policy statements in the preceding chapters. This chapter is designed so that the sanctions imposed upon organizations and their agents, taken together, will provide just punishment, adequate deterrence, and incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct.
This chapter reflects the following general principles:
These guidelines offer incentives to organizations to reduce and ultimately eliminate criminal conduct by providing a structural foundation from which an organization may self-police its own conduct through an effective compliance and ethics program. The prevention and detection of criminal conduct, as facilitated by an effective compliance and ethics program, will assist an organization in encouraging ethical conduct and in complying fully with all applicable laws.