Corruption

Corruption is dishonest or unethical—and often illegal—behavior perpetrated by those in power such as corporate executives and government officials for their own personal gain. It can occur at any level of society, including large business entities, national policymakers, police officers, and local government officials. Transparency International, a global advocacy organization that tracks and monitors instances of corruption, organizes corruption into three distinct classes: grand corruption, petty corruption, and political corruption. The organization defines grand corruption as the manipulation of policies and the central functioning of government entities for the benefit of its leaders and not the public good. It defines petty, or administrative, corruption as everyday abuses of power against ordinary people seeking government or social services. It considers political corruption to be the manipulation of polices or procedures to allocate resources to the officials' preferred channels so that they can stay in power.

Background

In 1887, English historian John Emerich Edward Dalberg Acton, also known as Lord Acton, penned one of the most famous quotes in history when he said, “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.” He was not the first person to express that sentiment, as corruption can be found as far back as ancient Rome, where the emperor Nero used his position to enjoy an opulent lifestyle while heavily taxing Roman citizens to support it.

While all countries have anticorruption laws, corrupt practices are widespread. Government officials have enormous influence over public policy, from budget allocations to regulatory authority, and that responsibility comes with the potential to misuse their influence for personal gain. The temptation to abuse authority can occur almost daily, especially if one assumes that very few people are truly honest. Corruption also tends to be more pervasive in dictatorial regimes or in areas with high levels of political instability such as Africa, the Middle East, Latin America, and in the countries that used to be part of the former Soviet Union. In these areas, the checks and balances that normally would be provided by citizen participation in society, including the ability to vote, strong institutions, functioning legal systems, and a free and independent media, are either weak or nonexistent, meaning that there is little incentive for the people in power to do things honestly and ethically. Research has indicated that there is no correlation between certain types of ideology and the level of corruption within a political and societal system.

Investigating corruption remains a top priority for the US Federal Bureau of Investigation (FBI). The FBI believes it is such a severe offense that it threatens both national security and everyday life. It affects all aspects of society, from the security of national borders to police protection in neighborhoods to how the courts rule on certain matters. Corruption also impacts infrastructure decisions, including how roads and schools are built and who builds them. The FBI estimates that public corruption costs the US government and its citizens billions of dollars every year.

Corruption can easily infiltrate multinational corporations. The FBI's International Corruption Unit (ICU) handles cases involving foreign corruption through, among other things, enforcement of the US Foreign Corrupt Practices Act (FCPA), which was passed in 1977. The law makes it illegal for American business officials to make payments to foreign government officials in exchange for doing business with them. Specifically, it prohibits the use of the mail system and any other means of interstate commerce to exchange illegitimate money, illicit contracts, and anything else of value in an attempt to buy influence or receive favorable treatment. All companies listed on the US Stock Exchange are subject to the FCPA, and they must follow certain accounting transparency standards outlined by the Securities and Exchange Commission (SEC). This allows for concurrent civil and criminal penalties against those who violate the act.

While the US government does not have the authority to charge foreign officials under the act, they focus on charging American officials who pay bribes while routinely working with their international counterparts to bring charges in foreign states. In 2006, the FBI cofounded the International Contract Corruption Task Force (ICCTF) to address fraud concerns stemming from overseas spending during wars in Iraq and Afghanistan that occurred in the early 2000s. Cases involved bribery, gratuities, bid rigging, collusion, conflicts of interest, and products and services invoiced without delivery. The program has since extended beyond wartime efforts to include almost all US military actions, including foreign aid and development and humanitarian aid in any international region. The FBI believes that misuse of US funds overseas poses numerous threats, including promoting more corruption, damaging diplomatic relations, and strengthening criminal and terrorist organizations.

Corruption is particularly rampant in Iran, which has two militaries: the official Iranian Army and the Revolutionary Guard. The Revolutionary Guard has approximately 150,000 soldiers who are tasked with protecting the country's Islamic system and preserving power for Supreme Leader Ayatollah Ali Khamenei. The force is funded by seemingly legitimate companies in the fields of construction, energy, telecommunications, manufacturing, and banking. US officials believe that the Revolutionary Guard has deep ties to Hezbollah and other suspected international terrorist groups.

Impact

Despite law enforcement's best efforts to control it, corruption scandals continue to rock some of the world's largest corporations. In 2015, German automaker Volkswagen admitted to rigging emissions sensors on diesel vehicles intended for sale in the United States and Europe. The revelation cost the company $87 billion in lost sales and reputational damage, and the chief executive officer (CEO) was fired. The Enron accounting scandal, which began in 2001, cost the company $74 billion. In 2000, shares of the energy company stock were trading at $90.75, but by January of 2002, the value had dropped to $0.67 per share. Top-level executives were unloading all of their own stock, and most of the lower level employees lost their entire life savings.

Since the 1990s, there has been an increased focus on corruption. Groups such as Transparency International, formed in 1993, are committed to battling corruption around the world. The FBI continues to aggressively prosecute corruption. Regulatory agencies around the globe continue to require financial disclosures for publicly-traded companies.

In 2015, Süddeutsche Zeitung, a German newspaper, reported that its investigative reporters had received about 80 gigabytes of leaked files revealing offshore accounts held by clients of the Panamanian law firm Mossack Fonseca. The newspaper shared the files with the International Consortium of Investigative Journalists, which in turn shared them with its media partners. In all, more than three hundred reporters collaborated over the course of a year on what became known as the Panama Papers investigation, which exposed what a Pulitzer Prize judge called “the hidden infrastructure and global scale of offshore tax havens.” While offshore tax havens and shell companies are not necessarily inherently illegal, they can be and are often used for corrupt purposes. The investigators found that the law firm had set up 214,0000 shell companies for clients, including at least 140 politicians and public officials, who wanted to hide their identities and their wealth. Of these, twelve were current or former heads of state and thirty-three were entities that the United States had blacklisted or sanctioned for fraud, money laundering, terrorism, and/or trafficking. As a result of the Panama Papers, eighty-two countries opened formal investigations. At the 2016 Anti-Corruption Summit in London, three hundred economists called on governments to implement tax transparency policies; in response, sixteen nations or international groups implemented at least one reform related to the Panama Papers. Twenty-three nations recovered more than US$1.2 billion in taxes. The firm at the center of the investigation, Mossack Fonseca, closed. European banks that handled the money of Mossack Fonseca's shell companies have been subject to legal liability for breaking national and international laws against money laundering. In March 2019, the European Parliament and European Union Council proposed groundbreaking legislation to protect whistleblowers.

Corruption law remained an area of scrutiny in the US in the early twenty-first century. For instance, in 2024, the Supreme Court of the United States ruled that US corruption law allowed the acceptance of gifts by state and local officials for past acts while still prohibiting bribery and other gifts or actions intended to influence a decision before it is made. Observers felt that the Supreme Court’s decision was a continuation of the Court’s trend of weakening corruption laws that began with a number of cases throughout the 2010s and 2020s that adopted narrow interpretations of several anti-corruption laws.

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