Transnational Bribery Legislation

Transnational Bribery Legislation


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Full transcription available below:

Hello, everyone, and welcome to today's webinar, hosted by me, Joe Boyhan, of MCO, and international tax expert, Selva Ozelli. Today's webinar is titled Is This Bribe Tax Deductible? I'm now gonna pass you on to Selva, who's gonna start today's webinar.


Let's now look at pages 11 in your PowerPoint presentation, and touch upon the laws that criminalize transnational bribery. Bribery occurs usually when the bribe payer and the bribe recipient could be in two different countries, so it was very difficult to crack down on such behavior when the laws of one country wasn't sufficient enough to cover transnational transactions. However, transnational bribery became a crime 40 years ago for the first time with the enactment of the Foreign Corrupt Practices Act in the United States in 1977. It was enacted following the Watergate scandal, and it then became a tax crime and illegal in several countries around the world, 19 years ago, when the Foreign Corrupt Practices Act was amended to ban tax deductibility of bribes, and adopted by 41 OECD member countries in 1998.


As a result, when bribery payments are excluded from taxable income, or if bribery payment is deducted for tax purposes, it can violate those criminal laws under FCPA, as well as tax laws in various countries, and legally implicate the briber receiver for tax evasion, for hiding bribe money in offshore bank accounts and offshore entities. It could implicate the briber payer for FCPA and tax evasion. It can also implicate the bribe concealer, which could include banks, lawyers and accountants for aiding and abetting tax evasion. Here is a recent example from Uzbekistan, which also is not in your PowerPoint presentation.


Last week on July 28th, the same day Prime Minister of Pakistan Nawaz Sharif was removed from office by court order, in Uzbekistan, Uzbek prosecutors exposed that Gulnara Karimova, who was the daughter of ex-president of Uzbekistan, Islam Karimov, was convicted and jailed for five years for accepting $2 and a half billion in bribes from several foreign companies in exchange for contract-to-do business within Uzbekistan. Revelations from the investigation show that Gulnara was paid bribes through a series of offshore shell companies by a series of multinational companies seeking to negotiate with her directly, to conduct business in Uzbekistan. Gulnara's corruption investigation began only five years ago in 2012. It originated not in Uzbekistan, but in [inaudible 00:13:40] where Gulnara held a bank account, and also Sweden, where the Swedish telephone group, [inaudible 00:13:49] paid Gulnara 320 million to a Gibraltar-based shell company, in exchange for telecom licenses and frequencies in Uzbekistan.


The telecom investigation spread to other countries. In 2013, the US and Dutch authorities, in 2014, German, French, Netherlands, Russian authorities, and then, 2015, Irish, Belgian, Luxembourg, Norwegian authorities began investigating Gulnara's bribes as well.


In 2016, the US and Dutch authorities settled FCPA violations with two telecom companies for paying millions in bribes to Gulnara. [inaudible 00:14:51] was fined for 1.4 billion, and [inaudible 00:14:51] a Russian Norwegian telecom operator was fined 795 million, respectively. On July 20th of this year, Gulnara was found guilty in Uzbekistan, and jailed for extortion, embezzlement, tax evasion, concealment fraud, concealment of foreign currency, money laundering, violation of trade and customs regulations, as well as document forgery. Finally, the bribe concealing bank, the Swiss bank, was subjected to criminal investigation during 2017, when the Swiss prosecutors opened a criminal money laundering investigation into [inaudible 00:15:46] It's a Swiss private bank.


It matters potentially explosive for [inaudible 00:15:53] as it managing partner, [inaudible 00:15:55] headed Switzerland's banking lobby until last September, and urged Swiss banks to clean up, and to prevent crimes like bribery and money laundering.


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