Philippino and Mexican fraud cases raise questions about ECA due diligence on corruption

(ECA Watch, 30 June 2008) Last month we noted a case of fraud against the U.S. Export Import Bank in which a Texas man solicited Mexican-based companies, helped them find lending agencies in the U.S., and helped the borrowers get loans using false information.

A recent Ernest & Young report on compliance with anti-corruption regulations and standards notes that "foreign bribery investigations by prosecutors in OECD countries have increased five-fold from 51 cases in 2005 to 270 in 2007." Yet Transparency International notes that less than half of OECD governments enforce their prohibitions against foreign bribery.

Further information on the Texas/ Mexico case, the ongoing UK BAE / Saudi / ECGD bribery scandal and the conviction last month of a California businessman of defrauding ExIm of more than $10 million in the Philippines, raise the question of just how diligent ExIm and other OECD ECAs monitor and ensure compliance with the OECD Recommendation on corruption and official export credits.

ECA Watch is not aware of any credible monitoring and compliance activities under the OECD Recommendation which indicate that OECD export credit agencies are taking seriously their commitment to increase due diligence, as required by their 11 May 2006 Action Statement on Bribery, which became an OECD Recommendation in December 2006. A revised reporting form was posted on the OECD ECG web site on 9 May 2007 with a deadline of 27 July 2007 for responses. The responses were not posted until 25 January 2008 and indicate that this survey is seen largely as a "box ticking" exercise, providing mainly an elaboration of practices but little or no information about actual experiences with cases of bribery which would permit some form of OECD "peer review" of performance with respect to the Recommendation. Like many other OECD export credit documents, the survey results are "hidden" on their web site, appearing under a May 2007 main page posting despite the January 2008 date, a clear indicator that transparency and accountability for the use of public funds are not taken seriously by OECD Members or by their Export Credit Secretariat.