How corrupt is your air cargo business?
BRIBERY and corrupt practices are thriving within the global air cargo and logistics industries whose managers continue to shy away from even acknowledging its existence.
Across the world, airfreight contracts and agreements are being sealed with ‘sweeteners’ and ‘oiled-palms’ behind closed doors, particularly in Africa, India and in the Far East.
The guilty companies turn a blind eye to the unspoken, hidden crisis in air cargo – despite a major report’s revelations that a company employing strict anti-bribery corporate governance measures is more likely to enjoy enhanced profitability, writes Thelma Etim.
The ‘old school’ bribery culture – something from which the flagging air cargo business suffers given its ponderous approach to new technologies, for example – is largely to blame, reveals international law firm Eversheds, author of anti-bribery and corruption report Beneath the Surface.
‘..you have to pay bribes, otherwise you are going to be unsuccessful’
Some 500 board-level executives of large organisations across 12 countries took part in a survey of how businesses are responding to bribery and corrupt practices in 2016.
“You often hear lots of old-school people saying: You know what, if you are going to work in certain countries you have to pay bribes, otherwise you are going to be unsuccessful,’’ Neill Blundell, a partner at Eversheds and a highly experienced fraud and regulatory lawyer, reveals in a BBC News report.
“But actually what the study has shown is the companies with good anti-bribery systems and controls, companies that minimise their risk, are more likely to be successful: 14 per cent [revenue] growth over three years in high-risk jurisdictions in comparison with 12 per cent [growth] over the same period [within companies without the same measures in place],” he says.
So why does corruption remain omnipresent in air cargo dealings? Blundell lays the blame at the globalisation of trade and fresh opportunities in new, immature markets. “Companies are moving into new jurisdictions. We see very exciting opportunities in Africa, for example, and in South America, and companies are having to go in and deal with different jurisdictions, regimes and ideas amongst the local people who work for them as well,” he observes.
Businesses are operating unlawfully in emerging economies
“But they need to bring that ethical message into the new jurisdictions to make sure they are behaving in the right way, and actually if they do they are more likely to be successful because that is borne out by the statistics,” he insists.
Blundell’s observations about air cargo and other businesses operating unlawfully in emerging economies are corroborated by expansive research conducted by USA, Annapolis-based, anti-corruption business association TRACE International.
The non-profit organisation has created a global business bribery risk index, called the Trace Matrix, which names a number of major air cargo markets as high risk areas. These include Nigeria, Vietnam, India, Pakistan, Bangladesh and Venezuela.
Global air cargo logistics supply chains remain especially vulnerable to becoming embroiled in corrupt practices, ranging from illicit financial flows – illegal movements of money or capital from one country to another through trade mis-invoicing – to locally-paid enticements and inducements masquerading as hospitality, gifts and favours.
Russian lawyer Katya Lysova, an associate at TRACE, asserts in her blog for aircargoeye.com that the companies operating in the supply chain should train their front-line staff on how to resist bribery and corrupt practice demands.
“Logistics and freight forwarding services are a high-risk industry from an anti-bribery compliance standpoint due to their frequent interactions with foreign government officials in ports, airports, Customs and immigration,” Lysova warns.
Increased scrutiny against corrupt practices
She notes that since Swiss forwarder Panalpina’s 2010 case, logistics and freight forwarding companies have been under increased scrutiny by both enforcement agencies and their own corporate clients.
Panalpina admits that between 2002 and 2007, it paid thousands of bribes totalling at least US$27 million to foreign officials in at least seven countries, including Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia and Turkmenistan, on behalf of many of its customers in the oil and gas industry.
More recently the UK’s Serious Fraud Office’s investigation into F H Bertling, a UK-based subsidiary of the Germany-headquartered Bertling Group, has resulted in seven individuals being charged with bribing an agent of the Angolan state oil company Sonangol, to further F H Bertling’s business operations in that country. The alleged activity occurred between January 2005 and December 2006. The case is pending before the UK’s Southwark Crown Court.
Since transparency and frank discussion almost always ushers in progress, why has corruption and anti-bribery never been on the agendas of the prolific revenue-generating air cargo conferences and exhibitions which take place around the world?
Why is bribery not on the conference agendas of industry organisations, such as those of The International Air Cargo Association (TIACA)? Maybe TIACA’s self-focused website exists as a metaphor for how it prioritises key issues.
And apart from a document from the World Customs Organisation on standards, there is no mention of the work that organisation is doing to stamp out this pernicious menace.
Similarly, airline association IATA’s website proffers only a training course on business ethics, targeting managers, general counsels, human resource professionals and entrepeneurs. Those who decide to undertake ‘24-hours of instruction’ delivered by an IATA instructor will learn how to ‘manage cultural attitudes towards bribery and corruption’ are among aspects listed.
However, forwarder association FIATA’s logistics academy at least recognises the existence of the scandal. It goes much further, proffering a course entitled Preventing Bribery and Corruption in a Global Economy and another on the Foreign Corrupt Practices Act for its freight forwarding members.
A quick search for material related to corruption and bribery on the Airports Council International website lands nil results . . strange given the untold global media reports, which reveal how many airports around the world are clearly struggling with this issue.
Read Katya Lysova’s blog here