The defense industry is a particular challenge. It's likely that the payment of major bribes by both American and European-based contractors has been limited by exposure from such recent cases as those involving BAE Systems and Siemens, and defense contractors now have their own business international ethics organization (the International Forum on Business Ethical Conduct). However, Russia and China, as key exporters of arms, remain outside this forum. The issue is at its most acute in the $8 billion per year small arms market, which thrives on corrupt payments and which fuels a range of conflicts around the world (from the Democratic Republic of Congo to Afghanistan). The trade in small arms is also the main reason that Washington (under pressure from the National Rifle Association) vetoed the proposed U.N. Arms Trade Treaty in mid-2012, in spite of its valuable draft clauses that targeted corruption in the trade.
Another huge source of corruption is mispricing. That's when goods that are undervalued in an exporting country are invoiced to a purchasing entity in a tax haven (usually a "secrecy jurisdiction") from which profits can eventually be transmitted to a company's main domicile. It remains a critical issue both for low-income exporting countries (which are deprived of due revenue) and importing countries (where revenue is diminished through the parking of revenues in tax havens). International accounting bodies and the OECD have rules about "arms-length trading" that are designed to eliminate this (by referencing world prices), but its members -- and the big four auditors -- fail to live up to the task. Passive collaboration in mispricing should become an actionable offense.
The banks remain a big challenge. Once regarded as "innocent until proven guilty," the industry now inspires universal distrust thanks to numerous court cases that have shown its members guilty of a wide range of criminal activities. Their offenses range from laundering the fruits of drug cartels to misrepresenting the creditworthiness of borrowers with sub-prime mortgages. Evidence of bankers' repentance is amazingly scarce. Constant surveillance by regulators and a willingness to prosecute or withdraw licenses is the only answer, but again one which requires government support across the G20.
Organized crime remains a major driver of corruption as mafia groups continue to control politicians in countries as different as Mexico, Italy, and India. The United Nation's Office for Drugs and Crime reports a steady increase over the last ten years in the value of illegal and counterfeit trade, necessarily abetted by political power. Yet the expansion of forms of international collaboration in response are regularly threatened by the behavior of individual countries, such as the United Kingdom, which incredibly enough is threatening to withdraw from 132 information-sharing arrangements for criminal offenses, including corruption, that it holds with its E.U. partners. The WG needs to ensure that governments adopt exactly the opposite response.
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