OECD Criticizes Finland

The Organization for Economic Cooperation and Development has given Finland what can only be described as a sharp and unaccustomed rap on the knuckles for a "general lack of awareness and understanding of the foreign bribery offence in both the public and private sectors" in the country.

A working group examining the Nordic country's approach to combating bribery, in a 45-page report released by the OECD, said it was "concerned by the lack of reporting mechanisms within key government agencies" and recommends that Finland get its act together to put measures in place to make it easier for public officials to report to law enforcement authorities.

Finland has habitually been ranked among the world's cleanest countries by Transparency International. In the NGO's 2009 Corruption Perception Index, Finland was rated at 8.9, sixth best of 180 countries, topped only by New Zealand (9.4), Denmark, (9.3), Singapore and Sweden (tied at 9.2) and Switzerland (9.0).

Asked why Finland was singled out for the first such report, Leah Ambler, a legal expert in the OECD's Anti-Corruption Division who was part of the evaluation team, said there was no particular reason. "The order in which these evaluations take place only reflects the order of country evaluations followed in previous cycles," she said in an email.

The problem with Finland, according to the working group, is that the national perception is that the issue of foreign bribery is not relevant to Finland.

"Finland appears to rely on its long-held reputation as a transparent and non-corrupt society, rather than proactively raising awareness (in both the public and private sector) of the offence of foreign bribery and the responsibility to report it," the report concluded.

However, Finnish businesses are involved "in markets and countries that present a high risk of bribe solicitation and/or in which corruption is endemic," including, in Asia, China, Pakistan and Indonesia.

"There appears to be an insufficient appreciation by the public sector that, whereas business within Finland is conducted with transparency and high levels of integrity – a fact that the Finnish public and private sectors are correctly proud of, and even associate as part of the national identity – the challenges faced by Finnish businesses abroad, and their reaction to those challenges, pose real risks of involvement in foreign bribery and impact on a range of government portfolios."

There indeed are risks. Six cases of suspected foreign bribery, apparently most of them revolving around military arms sales, have been under investigation, the first such cases since Finland implemented the OECD'S Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the report notes.

Finnish businessmen have substantial exposure to countries where bribes are a common way of life. Exports are Finnish lifeblood, with goods and services equivalent to 36.1 percent of the country's gross domestic product, mainly electric and electronic industry products (20.6 percent of total exports) forest industry products (19.3 percent of total exports) and chemical industry products (17.3 percent of total exports), according to the report.

Imports are equal to 33.4 percent of GDP, of which chemical industry products represent the main imports. Major trading partners for 2007-2010 have been Germany, Sweden, and the Russian Federation, with growing trade links with Australia, China, Indonesia, and Pakistan.

For 2008, according to the report, the highest volumes of outward foreign direct investment were to the United States, Belgium, Germany and Russia. Finnish investments to Russia have grown over recent years to reach US$3.4 billion of FDI stocks. Investment flows had almost tripled by the end of 2008, the report notes.

"China, Indonesia, Pakistan and the Russian Federation are countries with low Corruption Perception Indices," the report continues. However, it appears that the problems are closer to home. "The public and private sectors in Finland, and civil society, acknowledge that Finnish businesses face high risks of bribe solicitation in Russia and China, as well as in Estonia, Latvia and Lithuania."

Investigations into bribery cases, the working group notes, have been well resourced and scrutinized by experienced investigators and supported by specialized economic crimes experts. Law enforcement authorities have taken a proactive approach in obtaining the cooperation of relevant foreign authorities in asset recovery.

Prosecutors said two involving foreign bribery, one in the early 1990s and another in 1998 were handled as tax frauds, and were discovered by tax inspectors. Since 2002, the report found, six cases of suspected foreign bribery have been under investigation, the first such cases since Finland's implementation of the bribery convention. All of the cases have been investigated in Finland by the National Bureau of Investigation.

Of the six, one initially led to an acquittal because the offence was allegedly committed before the bribery law came into effect in 1999. Finland's General Prosecutor's Office appealed and asked that it be retried over the fact that only £900,000 of the £3.1 million of alleged bribery payments had been delivered before the law was passed. The SOE wasn't named.

However, three cases involve allegations against the same state-controlled enterprise and its subsidiaries, operating in the defense industry. In June 2010, charges of accounting fraud and aggravated bribery of a foreign public official were brought against five individuals working for a subsidiary of the SOE, Patria Vammas Oy, in connection with a howitzer project in Egypt between 1999 and 2007.

That case also involved "the conduct of other persons, in respect of which: (i) insufficient evidence was found to exist for the bringing of formal charges against three persons; (ii) charges could not proceed in one case because the statute of limitations had expired (that individual had stopped working for the project in February 2000); and (iii) charges against two foreign individuals could not proceed because MLA was refused by Egypt."

The case concerning the howitzer project in Egypt continues in respect of other suspects. Pre-trial investigations are also proceeding in the other two cases, with joint investigation teams having been established in respect of both investigations.

Of the two cases which continue to be under investigation, one concerns a 2006 contract for the supply of 135 armored personnel carriers to Slovenia. The formal pre-trial investigation into this case began in Finland in May 2008 (preceded by intelligence-gathering) and is expected to be concluded in October 2010. The other pre-trial investigation began in early 2010 and concerns allegations surrounding a contract in 2007 for the sale of 126 armored personnel carriers to Croatia.

The fifth case under pre-trial investigation involves allegations of bribery by Finnish consortium Medko Medical Instrumentarium for a 2001 contract to supply medical equipment although the report. The pre-trial investigation began in 2008 and it is hoped that the investigation will be concluded by early 2011. The sixth case concerned allegations of bribes paid by a Finnish businessman to Norwegian welfare service employees between 1999 and 2001 for the award of contracts to provide language courses. The pretrial investigations into this matter did not reveal evidence of the payment of bribes, but the person concerned was successfully pursued in respect of aggravated tax fraud, dishonesty by a debtor and book-keeping offences, the report noted.