Empirical Study of Anti-Corruption Policies and Practices in Nordic

Home , Corruption in Denmark, Corruption in Finland, Corruption in Latvia, Corruption in Norway, Corruption in Sweden, Peter Brixtofte

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries The purpose of this research is to compile turally, Nordic countries tend to see a high Introduction and analyze information on corruption in level of social cohesion, and thus ordinary Nordic countries as well as the tools and citizens feel less of a need to engage in acts practices used to combat corruption in of corruption such as bribery. However, the order to identify effective practices which construction and service industries are ma- then could be implemented in Latvia. The jor sectors contributing to the shadow econ- countries we studied are Denmark, Iceland, omies of Nordic countries. Foreign bribery Finland, Norway, and Sweden. also remains a problem in most of Nordic countries, and the major example of the Te- The research is constructed by separately lia case will be examined. Despite thorough analyzing each country’s anti-corruption regulations on political party financing and framework, and the nature of its public asset disclosure for public officials, no Nor- and private sectors in regards to combat- dic countries have regulations on lobbying ting corruption, as well as the role played in place. by civic empowerment in each country. The sources used aim to be as recent as pos- Though there is some overlap in terms of sible, with most coming from the past five legislation combatting corruption in Nor- years, however older sources are occasion- dic countries, there are tools and practices ally referenced when pertinent. specific to individual countries as well. For example, Norway’s National Authority for In- Certain trends regarding corruption can be vestigation and Prosecution of Economic and identified across the Nordic countries. Cul- Environmental Crime (Økokrim) is a highly

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 2 of 88 effective national organization which both investigates and prosecutes crimes of cor- Country reports ruption. Iceland’s International Modern Me- dia Institute seeks to promote whisleblower have the following protection as well as improved media legislation both domestically and internationally. structure:

Overall, this research seeks to provide • Introduction empirical data and information one ffective • Legal Framework anti-corruption practices and the state of cor- • Institutional Framework ruption in Nordic countries. Though corruption • Corruption at local government level is pervasive across all societies, there are • Transparency of lobbying nonetheless many positive examples of prog- ress towards eliminating corruption from Nor- • Transparency of Financing of political parties dic countries that can be emulated in places • Asset disclosure such as Latvia. Anti-corruption practices will • Fighting Foreign Bribery be more effective if they are standardized and • Shadow economy and money laundering implemented across a number of countries. • Whistleblowing • Identified Good practices

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 3 of 88 Content

I Denmark ……….…………………………………….. 5

II Iceland ….………...…………………………..……. 14

III Finland ………………………………………….… 26

IV Norway …………….…………………………..…. 39

V Sweden …………………………………...…….…. 51

VI Conclusions …….…………………………………… 63

VII Sources ………………………………………………. 71

VII Appendix ………………….…….…………………. 85

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 4 of 88 INTRODUCTION Development Agency (DANIDA) within the Whilst corruption in Denmark is limited, Dan- Ministry of Foreign Affairs has established ish companies are becoming international procedures for reporting corruption, provid- and, indeed, global in their orientation. Thus, ed training on integrity issues and conduct- they are frequently faced with corrupt mar- ed corruption risk management. kets. According to Barforte et al. (2016) Den- mark along with other Nordic countries has In the Danish culture a lot of attention is presented itself numerously as the least cor- being focussed on the openness of infor- rupt country in the history of Corruption Per- mation, and on an informed public. Open ceptions Index (CPI). Nevertheless, Holmes and transparent governance is considered (2015) claims that the CPI does not reach a precondition for preventing and revealing definite conclusions regarding successful corruption and maladministration (Danish corruption control anywhere, much less pro- Institute for Human Rights, 2005). Another vide a full explanation of Denmark’s record. notable point about Denmark is that its top political and administrative leaders lead de- Denmark has a well-developed system of cidedly modest lifestyles, and that the visible legislation, law enforcement and judicial perquisites of political leadership are quite authorities to deal with corruption, although limited (Gilani, 2012). While the Danish royal there is no national anti-corruption strategy. family enjoys considerable outward prestige, I Denmark Few studies and statistical analyses have the political leadership is much less given examined the nature or extent of corrup- over to cults of personality or the symbolism tion in Denmark. The Danish International of power (Holmes,2015,p.14). The climate for

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 5 of 88 discussions remains open and free. None- four years. Access to information is regu- tion of high ethical standards and transpar- theless, the fear of retaliation and tougher lated by law and anyone may access doc- ency in public procedures, few formal rules whistle-blower protection remains on the uments of any public administrative figure. regulating integrity and anti-corruption are agenda in Denmark. It has only recently tak- Additionally, in 2013 the Danish Parliament in place in the public administration. Den- en action to strengthen the legal protection adopted a law that increases openness in mark has had a Code of Conduct for public for whistle-blowers (DLA-PIPER, 2015). the public administration and makes it easi- officials since 2007. The Code deals with sit- er to access documents. However, Denmark uations that may arise in the public admin- LEGAL FRAMEWORK has not implemented the recommendations istration, including ‘fundamental values and Danish criminal legislation covers all forms of the Council of Europe Group of States principles,’ ‘freedom of expression,’ ‘duty of of corruption offences contained in the against Corruption (GRECO) aiming to im- confidentiality,’ ‘impartiality’ and the ‘accep- Council of Europe Criminal Law Convention prove the Danish regulation on financing of tance of gifts.’ The Code has been distrib- on Corruption and the Additional protocol, political parties, individual candidates, and uted in public-sector workplaces, and infor- except trading in influence. In 2013, Parlia- election campaigns. mational activities have been carried out in ment adopted legislative amendments in- order to raise awareness about the Code. In tended to strengthen the prevention, inves- INSTITUTIONAL FRAMEWORK 2007, The Ministry of Justice issued the bro- tigation, and prosecution of cases regarding The Public Prosecutor for Serious Econom- chure ‘How to Avoid Corruption.’ The bro- economic crimes. Regarding bribery, the ic and International Crime is the main body chure gives examples and interpretations of maximum penalty for active bribery in the responsible for investigating corruption, the Danish anti-corruption legislation. public sector increased from three to six whose multidisciplinary team is composed years. For bribery in the private sector and of prosecutors and investigators. The Dan- GOOD PRACTICES bribery of arbitrators, the maximum penalty ish civil service is considered to have a high According to the Code of Conduct the pub- increased from one year and six months to degree of integrity. Due to Denmark’s tradi- lic sector is predominantly build upon values

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 6 of 88 such as openness, democracy, the rule of law, integrity, independence, impartiality A case study of local government and loyalty. The public sector is, at the same corruption in Denmark time, expected to perform tasks in a flexi- ble and efficient manner, and to deliver a With the background knowledge that Den- sted). This consitutes corruption in this high-standard of services. mark is one of the least corrupt countries, case. After similar cases appeared in the this explores the case of a mayor that for media and a court process of more than CORRUPTION AT A LOCAL eight years worked “miracles” for “his” six years, Brixtofte was sentenced to two GOVERNMENT LEVEL municipality (Langsted, 2012, p.1). years of imprisonment in 2008, and again The case study below provides information for additional two years in 2009 (Langsted, The mayor of the Farum, (a town of 18,000 concerning one of the most well-known sit- 2012). inhabitants 20km from Copenhagen) Peter uations of corruption on a local government Brixtofte, and his administration imple- level in Denmark. Despite this example, the In the aftermath of the Farum Commis- mented several projects between 1986 sions report this year, some debate was general facts and figures about the local and 2002. It turned out that the mayor rai- raised whether Peter Brixtofte might have government corruption in Denmark remain sed loans up to EUR 134 million without been stopped at an earlier stage if the unidentified. the agreement or consultation of the na- municipality had had some sort of whis- tional government or local parliament (Bie- tleblower mechanism. One former employ- la, Kaiser, & Hennl, 2013). ee, however, believed that Peter Brixtofte

would immediately have been able to spot The mayor then spent public money on the a whistleblower and stopped his whistling gift-like entertainment of his guests, and before anyone would hear it (Langsted, on his own private hobbies and interests 2012,p.12). such as bottles of wine for EUR 850 (Lang-

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 7 of 88 TRANSPARENCY OF LOBBYING port donations above EUR 2 700, and Par- lations governing conflict of interest, make the Lobbying is not regulated in Denmark. There liament makes party account records avail- system potentially vulnerable to corruption. is no specific obligation to register or re- able to the public. port contacts between public officials and According to Transparency International, the lobbyists. An American consultancy firm ar- Nevertheless, gaps still remain in the cur- limited transparency of private party financ- gued in a report from 2009 that access to rent legislation on the transparency of polit- ing is one of the biggest weaknesses to the Danish regulators is markedly easier than in ical party funding. For example, there are no integrity of the Danish system. In a recent other European markets. Professional lobby limits on donations from abroad, from legal Global Corruption Barometer, the Danish groups in Denmark have requested a lobby persons or from anonymous donors, and respondents perceived political parties in register. However, Parliament recently aban- there are no restrictions on the amounts Denmark to be one of the institutions most doned plans to set up such a register. that may be donated. This leaves the public affected by corruption. GRECO submitted with few means to measure possible links nine recommendations to Denmark to im- FINANCING OF between private funding and policy deci- prove the transparency of party funding. POLITICAL PARTIES sions. After a discussion in the Danish Parliament, The Danish system of transparency of po- the Danish authorities saw ‘no need for any litical financing at the national level is regu- Political parties in Denmark at the national, measures to be taken in order to amend lated in the Accounts of Political Parties Act regional, and local levels receive significant the current legislative framework of party (APPA) and the Public Funding Act (PFA). public funding from the state. Despite this, financing.’ In its compliance report, GRECO These two laws have been gradually amend- the limited regulation of private funding of described it as disappointing that nothing ed and improved in recent years to provide political parties and individual party mem- substantial had been achieved in respect to more transparency of political funding; for bers, together with the lack of rules on lob- the recommendations even though compli- example, political parties are obliged to re- bying, asset declarations, and special regu- ance does not necessarily require legislative

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 8 of 88 measures. The government plans to set up Presidium also deals with cases of conflict FOREIGN BRIBERY an Expert Committee to make recommenda- of interest relating to ministers or MPs. As of 2013, the Eurobarometer shows that tions to improve transparency of financing Moreover, the Danish Parliament has set only 4% of Danish people within the busi- of political parties. a positive example in improving the trans- ness community believe that corruption parency of ministers’ expenses through the is a problem when doing business in Den- Despite a very low level of corruption, in- ‘openness scheme,’ an agreement between mark. Another survey shows that almost half ternational monitoring institutions have political parties whereby ministers are en- of Danish companies believe they have to criticised Denmark for its opaque rules on couraged to declare their monthly spending, bribe or break formal rules if they want to do financing of political parties, and for insuf- travel expenses, gifts received, and other business in certain countries such as Brazil, ficient enforcement of foreign bribery laws. relevant information. On a voluntary basis, Russia, India or China. Civil society repre- Nonetheless, the government enforces their ministers also disclose their personal and sentatives in Denmark have confirmed this existing anti-corruption policies effectively. financial interests on the Prime Minister’s perception. Office website. ASSET DISCLOSURE The OECD’s Working Group on Bribery ex- Danish Members of Parliament (MPs) are The Ministry of Taxation in Denmark has made pressed the concern that only one foreign under no legal obligation to disclose their so-called ’Fair Play’, i.e. truthful reporting of bribery allegation out of 13 has resulted in assets, nor are they subject to any other income earned and wages paid in all sec- prosecution and sanctions. The charges form of rules to monitor conflicts of interest. tors, a top priority. In Denmark, tax evasion against this company were resolved out of However, certain political parties demand or cheating is often punished with a payment court. Under the settlement, the company that their MPs disclose their assets, though equal to 200% or more of the tax that original- admitted to committing private corruption, without any formal obligation; the control is ly was avoided, the relevant percentage being which is a less serious offence than foreign exercised by the Parliament Presidium. The determined by the amount of tax evaded. bribery. The Danish authorities have also

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 9 of 88 concluded 14 cases of sanction evasion and es were closed, whether Danish authorities with Kuwait Danish Dairy Co (Ferrell, Fraed- breaches of the UN embargo on Iraq relating rely too much on investigations by foreign rich, and Ferrell 2002) p.12). to the UN Oil-for-Food program. These cases authorities, and whether adequate efforts did not result in court verdicts, as the statute have been made to secure foreign evidence For the private sector, a crime of corrup- of limitations had expired; however, the pro- and co-operation. GRECO has reported that tion has been committed when a person re- ceeds of the offences were confiscated. the precondition of dual criminality for pros- ceives, demands, or accepts presents or any ecuting bribery offences significantly limits other advantages, or when a person gives, Denmark has a system of sanctions for legal Denmark’s ability to fight corruption com- promises, or offers such a present or advan- persons committing foreign bribery; they are mitted in certain foreign states. GRECO be- tage (Danish Penal Code §299, number 2). subject to fines which are set taking into ac- lieves that this legal requirement sends the count the company’s turnover. In the case re- wrong message regarding Denmark’s com- SHADOW ECONOMY ferred to above, the defendant paid EUR 335 mitment to fight corruption. According to Schneider (2013) the shad- 000 in fines, and a further EUR 2.7 million ow economy constitutes 12% of Denmark’s were confiscated in the out-of-court settle- There have been instances when Danish GDP. In Denmark, it is suggested that about ment. However, these sanctions appear to be business people are encouraged to either half the population purchases shadow work low compared to the value of the bribe, which make or receive bribes according to the po- (Schneider & Williams, 2013,p.7). In some sec- was EUR 760 000, and of the contract won litical and social traditions of a country they tors – such as construction – about half the by the defendant, EUR 109 million. are operating in. For example, “If Danish workforce works within the shadow economy, Moreover, the OECD Working Group on businesses want to export to Middle East- often in addition to formal employment. Only Bribery reports that the absence of prose- ern countries they will have to pay so that a very small proportion of shadow economy cutions raises concern over whether suffi- things run smoothly - otherwise they can workers can be accounted for by illegal immi- cient inquiries have been made before cas- forget about it” (Christian Bruun, manager grants in most countries.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 10 of 88 Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 11 of 88 According to a survey conducted in 1998, WHISTLEBLOWING SCARCE LEVEL the construction industry in Denmark ac- Denmark does not provide any comprehen- counts for about half of the informal econo- sive whistleblowing protection for employees OF WHISTLE- my sector. Moreover, 70% of the work com- in the public or private sector. Denmark’s BLOWING pleted in the informal sector takes place Code of Conduct for Public Servants pro- PROTECTION within the service and construction indus- vides guidelines that public employees are Denmark has no comprehensive law for tries (Petersen & Skov, 2014). entitled to freely disclose non-confidential whistleblowing protection. Guidance can be information to the press and to other exter- found in various statutory provisions, but with MONEY LAUNDERING nal partners. The Danish Labour Code does no overall protection for whistle-blowers. Between 2006 and 2010, Denmark signifi- not offer any protection against dismissal cantly upgraded its anti-money laundering for private-sector employees reporting sus- systems as a result of consultations, and a picions of bribery. In 2009, the Ministry of • Code of Conduct for public servants: certain amount of pressure, from the Finan- Employment published an Explanatory Memo- guidelines for the disclosure of NON-confidential cial Action Task Force (FATF), an interna- randum and a Code of Guidance with partic- information to the media or other third parts tional body established by the G-7 govern- ular focus on whistleblowing and freedom of • Danish Labour Code: no protection against dismissal of private-sector ments in 1989 (Holmes,2015,p.18). Danish speech for private-sector employees. employees reporting suspicions of bribery authorities report drug crimes and various • A whistle-blower program can be or- • Ministry of Employment: types of economic crimes, particularly VAT ganised in many ways. In most cases, 2009 – Explanatory Memorandum and Code of and investment frauds, smuggling, and vio- it is advisable to establish a special unit Guidance for whistleblowing in the private sector lations of intellectual property rights as ma- to handle reports. This unit should be suggestion for companies to set up special jor sources of money laundering (Internation- placed outside the normal management units to handle reports of irregularities al Monetary Fund, 2007p.19). structure and refer directly to top man-

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 12 of 88 agement or the Board (Dansk Industri, visit can be expected to lead to a reduc- to replace a roof, the tax deduction only 2006,p.75) tion in tax evasion without penalties being covers the hours spent on the job by the imposed (Schneider & Williams, 2013,p.56) carpenter, and not the roofing materials. GOOD PRACTICES One of the explicit goals of the policy was • Nearly all tax authorities pursue initiatives • The Danish government said as of next to reduce activity in the informal sector by to improve the effectiveness of inspec- year (from 2016), businesses such as making it less costly to purchase the same tions. These initiatives range from increas- clothing retailers, gas stations, and activities in the formal sector (Petersen & ing the number of inspections through to restaurants should no longer be legal- Skov, 2014,p.9). improving the effectiveness of inspec- ly-bound to accept cash (Tange, 2015). tions in terms of, for example, the number • An online form established by the Ministry of instances of shadow work identified, • In 2011, the government introduced a of Foreign Affairs for reporting instances and the value of the undeclared tax col- tax deduction called the “Home Work of corruption abroad. http://um.dk/en/ lected or sanctions imposed. To achieve Scheme”. This policy initiative gave a tax danida-en/about-danida/Danida-transpar- this, administrations have, for instance, deduction to households for expendi- ency/Report-corruption/ concentrated inspections on ‘suspect’ tures on a specified list of services. The sectors where shadow work is prominent. list includes services often purchased • A company’s anti-corruption policy should ‘Announced inspection visits’ have also in the informal sector, such as home not be just another document; rather it must been used, whereby a particular work- maintenance and improvement, clean- be referred to on a regular basis. The docu- place is informed that a visit is to occur in ing services, and childcare. The tax de- ment also has to be embraced by the man- the near future. This has been done in in- duction applies only to the services pro- agement team, and employees must see dustries such as hotels and restaurants in vided, and not to the materials required. that it pays off career wise to live by the rules Denmark. The pre-announcement of the For example, if a carpenter is contracted (Ferrell, Fraedrich, and Ferrell 2002).p.18).

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 13 of 88 INTRODUCTION shadow economy comprises 14.4% of its GDP Iceland ranks 13th on the 2015 Corruption as of 2010, which is comparatively low within Perceptions Index, perceived as the most the EU27. corrupt of the Nordic countries. Though still a top ranking country globally and general- Arguably, a contributing factor as to why Ice- ly perceived by the world community to be land is perceived as having little corruption is an un-corrupt country, problems in Iceland its small population of 331,727 people, and exist on the local level and with regards to its strong civic society. As of 2012, Iceland foreign bribery. Icelandic legislation does not has a poverty ratio of 0.063, which is low in adequately regulate foreign bribery. A certain comparison to the rest of the world. Iceland degree of corruption exists within some local also has an employment rate of 85.2%. With governments due to political mayors having low poverty, high employment, strong welfare strong authority. Icelanders perceive political state and rule of law, citizens are less com- parties to be the most corrupt public institu- pelled to operate in the shadow economy. tion. Iceland mainly combats corruption through Iceland has clearly defined laws in place with legislation and suppressive measures. There regards to bribery and codes of conduct for are some curative measures in place, but government officials. There are in-depth laws least of all preventative measures. Iceland II Iceland regarding political party financing and the seems to lack anti-corruption awareness rais- disclosure of financial records of members ing efforts, particularly with foreign bribery. of government and political parties. Iceland’s Although since 2013 Iceland has been includ-

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 14 of 88 ed in Transparency International Exporting payments. The legality of gifts and hospitality Sanctions range from thirty days to three Corruption Report, but due to the small size depend on intent and benefit obtained, and if years imprisonment for active bribery (domes- of its economy, the measurements were not the act has led to an undue advantage or im- tic and foreign), and a maximum of six years deemed statistically significant. Also, there proper influence of a person’s decision mak- for passive bribery. For fines to be imposed is now an association actively working on being. A company can be held criminally liable on a natural person, prosecution will need to coming a national chapter of Transparency In- and fined for corruption offences committed establish that a financial advantage was either ternational, raising awareness through social by persons acting on the company’s behalf. obtained or sought. media, and various events and publications Other legal anti-corruption measurers con- (www.gagnsaei.is). sist of codes of conduct for government staff INSTITUTIONAL FRAMEWORK and ministers to regulate conflicts of interest. The Althing is the national parliament of Ice- LEGAL FRAMEWORK Those affected by illegal activities are required land. Institutions operating under the Althing Iceland’s General Penal Code (GPC) crimi- to report them. A code of conduct for Members are: nalizes the act of giving and receiving a bribe, of Parlament (MP) was adopted in July, 2015, in • the National Audit Bureau, which audits abuse of office, trading influence, and fraud. accordance with the code of conduct for MP state-owned enterprises; examines the Individuals and companies are criminally lia- Assembly of the Council of Europe. Political efficiency and effectiveness of public ble, and bribery between business and Icelan- parties are required to disclose their account spending, and evaluates the internal con- dic and foreign public officials is forbidden. and donation information. Iceland is a signa- trol and performance of state agencies The Penal Code fails to effectively criminalize tory to the OECD Anti-Bribery Convention, the bribery of officials in foreign state-owned en- United Nations Convention Against Corruption • the Althing Ombudsman, which monitors tities, and the obligation of officials to report (UNCAC), the Council of Europe’s Criminal Law the administration of the State and local foreign bribery is not clear. The GPC does not Convention against Corruption, and the Group authorities and safeguards the rights of differentiate between bribes and facilitations of States Against Corruption (GRECO). the citizens vis-à-vis the authorities.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 15 of 88 CORRUPTION AT A study out of the University of Iceland used are ineffective, and 53% feel that the level of LOCAL GOVERNMENTS the influence of the National Planning Agency corruption in the country has increased from Icelandic local governments are similar to (NPA) to determine the level of local monitor- 2007–10. Political parties are perceived to be Southern European local governments, with ing by the national government. One role of most affected by corruption. In 2013, 76% of small local government units and relatively the NPA is to review spatial plans with local au- respondents to a University of Iceland survey strong mayors. This tends to lead to more thorities. Ratings of local transparency were say that they have little or no trust in parlia- corruption on the local level. evaluated on the basis of the question, “Do ment. you think that the local government in your Iceland does not have a system for corruption municipality does a good job of making plans TRANSPARENCY OF LOBBYING prevention at the local level. Auditing is high- for big construction projects or changes to Iceland does not have any lobbying regulation. ly decentralized, and very few municipalities existing plans public known—or are you neu- have developed agencies to deal with citizen tral with regards to this?” The ratings ranged complaints, such as a local ombudsperson. from 1 (very badly presented) to 5 (very well The effectiveness of corruption prevention by presented). The mean among municipalities the national government is considered to vary was 3.3, with a standard deviation of 0.3. by locality, and the level of transparency var- ies in proportion to administrative capacity. According to research conducted by Trans- Towns with “political mayors” are more likely parency International in 2010, 3% of Iceland- to have higher levels of corruption than towns ers reported paying a bribe. 78% feel that with “mayor managers”. their government’s efforts to fight corruption

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 16 of 88 Transparency of Financing of political parties 000 00 1010100 The following are Iceland’s regulations regarding political financing: 101010000 101010

• There is a ban on donations from foreign representation or which won at least 5% of the in addition to a supplement which is calculated interests to political parties vote in the last election. in inverse proportion to the number of inhab- • There is a ban on donations from foreign • State funding is partly allocated equally and itants entitled to vote in the relevant electoral interests to candidates partly proportionally by votes gained. district. For presidential elections, the limit is • [Domestic] companies may donate to political • There are not provisions for how direct public 35 million ISK. The limit for candidate nomina- parties funding should be used. tion is 100,000 ISK. • Corporations may donate to candidates • There are provisions for free or subsidized • Political parties annually report their finances. • There is a ban on donations from corporations access to media for political parties. • Political parties report on their finances in rela- with government contracts or partial govern- • There is equal distribution of access to free or tion to election campaigns within their annual ment ownership to candidates subsidized media report. • Trade unions may donate to political parties • There are not provisions for free or subsidized • Candidates who spend less than 300,000 ISK • Trade unions may donate to candidates access to media for candidates. are exempt from reporting. • There is a ban on anonymous donations to • Tax relief is another form of indirect public • Certain information in reports from political candidates funding. parties and/or candidates can be made • There is a ban on state resources being given • The provision of direct public funding to polit- public. to or received by political parties or candidates ical parties is not related to gender equality • All donations from legal persons over 300,000 (excluding regulated public funding) among candidates. ISK from individuals must be made public. • There is not a ban on any other form of • There are not provisions for other financial • The National Audit Office receives finan- donation advantages to encourage gender equality in cial reports from political parties and/or • There is a limit on the amount a donor can political parties. candidates. contribute to a political party over a time • There is a ban on vote buying. • The National Audit Office is responsible for period: 400 000 ISK (3 040 EUR) per year • There are not bans on state resources being examining financial reports and/or investigat- from any individual donor used in favour or against a political party or ing violations. • There is regularly provided public funding to candidate. • Decisions regarding political finance oversight political parties • There are no limits on the amount a political can be appealed to the Supreme Court. • Funding is provided to parties that won at least party can spend • Political finance infractions can bring fines, 2.5% of the vote in the last election. • Candidates running for internal party selection forfeiture, and prison for up to two years. • Municipal support to parties with local council must not exceed 1,000,000 ISK (8,295 EUR)

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 17 of 88 ASSET DISCLOSURE in 2009. He sold 50% of the company to his The following interests Disclosures in Iceland are available online. wife for $1 eight months later. At the time, must be disclosed: In 2009, MPs were asked to provide a public the transaction did not break Icelandic law account of their financial interests and posi- regarding asset declaration. In 2015, Gunn- Paid activities: tions of trust outside Parliament. This became laugsson’s wife funneled millions of dollars of • Paid Service on the board of directors of mandatory in 2011. The rules are published inherited money into the offshore company. private or public companies. Position and on the Althing website. Gunnlaugsson naturally denied any wrong- name of company should be disclosed. Paid work or tasks (other than salaried doing, stating that their company had been • parliamentary work). The position and The obligation to declare extends to alter- reported as an asset on his wife’s income name of employer should be disclosed. nate members who take a permanent seat tax returns since 2008. Protests and anger • Business conducted concurrently with in Parliament, or those who have served in amongst the Icelandic people regarding this parliamentary work, which generates in- Parliament for four consecutive weeks. Minis- scandal compelled Gunnlaugsson to step come for the member or a company that ters who are not MPs are also subject to the down. he owns in part or in full. The type of busi- declaration requirement. The obligation to de- ness should be disclosed. clare does not include the financial interests of MP’s spouses or other family members. Financial support, gifts, travels abroad, and debt cancellation: Iceland had a major scandal when the new • Financial contributions or other financial former Prime Minister Sigmundur Gunnlaugs- support from domestic and foreign legal son was named in the Panama Papers. He entities and private individuals, including and his wife owned an offshore company but support in the forms of office facilities or did not declare it when he entered parliament similar services not included in the support provided by Althing or the member’s

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 18 of 88 party, where the value of the support ex- or a company in which he holds a quarter agreement on vacation, unpaid leave ab- ceeds 50,000 ISK (336 EUR), and the gift share or more, other than premises for sence, continued wage payments or bene- is given because of membership of Alth- the personal use of the member of par- fits, pension rights etc. during membership ing. The name of the giver and nature of liament and his family, and the land rights of parliament. The type of agreement and the support should be disclosed. to such property. The name of the landing name of employer should be disclosed. • Travels and visits in Iceland and abroad and its location should be disclosed. • Any agreement with a prospective employ- which could be linked to an MPs parlia- • The name of any company, savings bank, er on employment, regardless of whether mentary duties, where the expenses are or foundation engaged in business activ- the employment does not take effect until not paid in full by the State Treasurer, the ities in which the member holds a share after the member leaves parliament. The member’s political party, or the member exceeding any of the following criteria: type of agreement and name of employer their self. The person carrying the ex- • The share at fair value amounts to should be disclosed. pense of the travel, its duration, and des- more than 1,000,000 ISK (6,734 EUR) at • Positions of trust outside the Althing: infor- tinations should be disclosed. 31 December each year; mation on service on boards of directors • Forgiveness of residual debt and conces- • The share is 1% or more in a company, and other positions of trust for interest sive changes in the terms of contract with savings bank, or foundation where as- groups, public organizations, municipali- the lender. The name of the lender and sets at year-end are 230,000,000 ISK ties, and associations other than political the nature of the contract should be dis- (3,100,000 EUR) or more; parties should be disclosed, regardless of closed. • The share amounts to 25% or more of the whether such work is remunerated or not. share capital or initial capital of a compa- The name of the association, interest group Assets ny, savings bank, or foundation. organization, or municipality and the nature • Any property which is one third or more • Any agreement with a former employer of the position of trust should be disclosed. in ownership of a member of parliament which is financial in nature, including any

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 19 of 88 FIGHTING FOREIGN BRIBERY awareness of foreign bribery with companies SHADOW ECONOMY AND Iceland’s Phase 3 Report from the OECD rec- (including SMEs), business associations, pro- MONEY LAUNDERING ommended the Icelandic government enhance fessional organisations, trade unions, NGOs, The shadow economy makes up 14.4 +% of awareness of the Convention and of the foreign universities, business schools, the media, as Iceland’s GDP as of 2010. Undeclared work bribery offence within the public and private well as the general public. Accordingly, Ice- in Iceland is likely to largely involve paid fa- sectors. Since Phase 3, Iceland has not provid- land did not take steps to address its Phase vors made to close social relations. Iceland ed any awareness-raising or training to public 2 recommendation to cooperate with the remains weak on pursuing curative measures officials of foreign bribery. The Ministry of In- private sector in order to raise awareness of that seek to transition workers out of the un- terior committed to writing other relevant Min- companies, and in particular, encourage and declared economy. istries, including the Overseas Business Devel- promote internal corporate compliance pro- opment Department in the Ministry of Foreign grams for exporting companies. Neither did There are no agencies combating undeclared Affairs, to urge them to take action. Iceland has it provide guidance on how to deal with bribe work in Iceland. There is not a state depart- yet to promote the Good Practice Guidance on solicitation. There are government bodies ment officially responsible for tackling unde- Internal Controls, Ethics, and Compliance set charged with assisting Icelandic companies clared work, although the Internal Revenue out in Annex II to the 2009 Anti-Bribery Rec- operating abroad, including the Overseas Department (IRD) undertakes workplace in- ommendation. There has not been training or Business Development Department within spections to detect undeclared work, though awareness-raising among auditors, though the the Ministry of Foreign Affairs. The Promote with limited resources. Ministry of Industries and Innovation plan to ad- Iceland partnership oversees trade promo- dress this matter. tion abroad in cooperation with the Ministry As of September 2010, a law came into ef- of Foreign Affairs. However, these bodies do fect which issued ID cards in the workplace, Since Iceland’s Phase 2 evaluation, initiatives not provide any guidance to companies on specifically for the building and construction have not been taken to cooperate on raising how to address bribe solicitation. industries, and the hotel and restaurant sec-

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 20 of 88 construction; service industry; hotels and restaurants; paid favors to close social relations; SHADOW high percentage of undeclared work and ECONOMY especially underpaid immigrant workers

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 21 of 88 tors. The current boom in the tourism indus- with the aim of making Iceland a journalistic ICELAND – THE INTERNATIONAL try (an estimated 2 million visitors per year safe haven. The accompanying International MODERN MEDIA INSTITUTE 2016) is having an impact on the increase of Modern Media Institute (IMMI) was founded The International Modern Media Institute undeclared and underpaid foreign migrant in Iceland in 2011. The IMMI combines the (IMMI) was founded in Iceland in 2011 follow- workers, andthe Icelandic enforcement sys- laws most friendly to journalists so that Ice- ing the scandals involving Icelandic banks in tem was poorly prepared to anticipate the land-based media would be immune from the the context of the 2008 Economic Crisis. Rec- negative aspects of the tourism boom, such least friendly laws elsewhere. It takes from ognizing the importance of the freedom of the as instances of human trafficking. Sweden’s law on the protection of sources, press in unveiling shady practices that, when which mandates that journalists are not al- conducted in businesses such as banking Icelandic authorities adopted Act No. lowed to reveal sources. Freedom of informa- can have serious negative repercussions on 64/2006 in June of 2006, which works in con- tion laws are pulled from Norway and Estonia the general welfare of a country, the overall junction with the Third EU Money Laundering for their presumption of public access to all aim of the Institute is “to build in Iceland a Directive. The Act requires parties engaging in government documents. comprehensive policy and legal framework to financial undertakings to obtain knowledge of Iceland is widely regarded as a safe haven for protect the freedom of expression needed for their customers and their business activities whistleblowers, however, Iceland does not investigative journalism and other politically and to report to authorities any knowledge of have any measures to protect whistleblowers important publishing as well as to inspire oth- illegal activity pertaining to money laundering that would apply to foreign bribery cases. er nations to follow suit by strengthening their and terrorist financing. own laws”.1 A legislative bill specifically designed to pro- WHISTLEBLOWING tect whistleblowers was introduced to Par- In order to pursue their objective, the IMMI is In 2010, Icelandic Parliament passed the liament in 2015 but it is not likely to be ad- particularly active in 6 areas, namely the Gov- Icelandic Modern Media Initiative resolution, dressed before upcoming elections. ernment’s Freedom of Information Act; source

1 IMMI website. https://en.immi.is/about-immi/

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 22 of 88 The IMMI was founded in Iceland in 2011 following the banking scandals of the 2008 Economic Crisis. Its main objective is to “build in Iceland a comprehensive policy and legal framework to protect the free expression needed for investigative journalism and other politically important publishing as well as to inspire other nations to follow suit by strenghte- ning their own laws”.

Open access to Online proactive All exceptions regarding public documents disclosure disclosure must be explicit and weighed against the public interest

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 23 of 88 protection; whistle-blower protection; communi- ily knows what to request from the govern- protection, the IMMI also proposed stronger cations protection; prior restraint of information ment. Following the proposal, a new Informa- measures to encourage whistle-blowers, re- of public interest; history protection. For each tion Act was passed in 2013 but it does not ferring to the U.S. Federal False Claim Act, area problems are identified and specific pro- satisfy the IMMI resolution’s level of quality and specifically the clause that provides that posals are elaborated and submitted to the au- and assurance, as referred to with regards to guarantee for whistle-blowers to preserve se- thorities in order to tackle them. the public’s access to information. The new niority status and salary and allowing her/ Act is currently under review by the IMMI.2 him to be awarded a portion of the proceeds 1) Freedom of Information (FoI) from the whistle-blowing action.3 Act. In this area, the main concern of the 2) Source and Whistle-blower IMMI was the current Icelandic Freedom of Protection. The IMMI puts special em- 3) Communications protection. Information Act 50/1996, which did not com- phasis on the protection of the confidentiality The IMMI emphasizes the need to protect all ply with the international standards set in the of journalistic sources as a critical require- communications between sources and jour- 1998 Aarhus Convention and the 2009 Coun- ment of the freedom of the press. Though nalist, taking as its primary model the Belgian cil of Europe Convention. The proposal to re- the Icelandic law on criminal procedure law on the protection of journalistic sources. form the FoI Act reflected a radical commit- recognized journalists’ right not to disclose Data retention (policies of storage of data for ment to transparency in government as a way their sources, there was also an overly broad business or compliance reasons) is a critical of ensuring online general access to public exception, in part undermining the right. issue to secure source-journalist commu- information and effective democratic control. Thus, the IMMI suggested to model the law nication. The IMMI found that the Icelandic Moreover, eventual exceptions regarding dis- on Chapter 3 of the Swedish Freedom of the Electronic Communication was not in compli- closure must be explicit and weighed against Press Act, which entails criminal liability for ance with the 2006 EU Directive on data re- the public interest. This proposal relies on the those who disregard their duty of confiden- tention policy, therefore suggesting to review assumption that the general public necessar- tiality towards their sources. Beside source this measure on account of a general trend

2 https://en.immi.is/immi-resolution/progression/ 3 Fernandez-Delgado F. & Balanza M., ‘Beyond Wikileaks: The Icelandic Modern Media Initiative and the Creation of Free Speech Havens’, International Journal of Communication, 2012

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 24 of 88 towards more privacy awareness. Another im- 5) History protection. As more and portant element of the IMMI is intermediary more information moves from multiple phys- protection in source-journalist communica- ical archives to centralized Internet servers, tions. On this issue, the IMMI advanced the and as copyright laws make it very difficult to proposal of specification of the exact circum- republish the information elsewhere on the stances under which an Internet service pro- Web, it is increasingly easy for powerful orga- vider or host can be held liable for the infor- nizations to drop compromising information mation it transmits or hosts.4 about them into the so-called “digital memory holes”. To prevent the destruction of histori- 4) Prior restraint over the cove- cally significant documents, the IMMI refers rage of information of public in- to the French Criminal Law, which establishes terest. According to Icelandic law it is possi- a limitation period of three months for libel ble to acquire an injunction prohibiting certain action and a ceiling for damages of € 15.000.6 material to be shown or published by the media. Injunctions of this kind can place severe restrictions on freedom of information and freedom of expression and in most democratic states there are strong and even universal limitations put on 4 such injunctions. The IMMI explores mecha- ibid. 5 https://en.immi.is/immi-resolution/progression/ nisms that guarantee strong limitations on prior 6 Fernandez-Delgado F. & Balanza M., ‘Beyond restraint and prevent legal abuses intended to Wikileaks: The Icelandic Modern Media Initiative and the Creation of Free Speech Havens’, International limit freedom of expression.5 Journal of Communication, 2012

25 of 88 INTRODUCTION Table 1. Within the past ten years, Finland has There is a low level of perceived corruption been among the top counties in the CPI. in Finland. As Transparency International’s Year Score (rank) Corruption Perceptions Index (CPI) shows, 2015 90 (2nd) Finland has performed well even among the 2014 83 (3rd) Nordic countries (table 1). 2013 89 (3rd) 2012 90 (1st) 2011 94 (2nd) In 2013, the Special Eurobarometer on Cor- 2010 92 (4th) ruption places Finland among the least cor- 2009 89 (6th) rupt countries in the EU. 2008 90 (5th) 2007 94 (1st) According to the Finnish Ministry of Foreign 2006 96 (1st) Affairs, “in the case of Finland, the histor- ical diminution of corruption cannot be at- be of special added value in international an- tributed to any specific reforms undertaken ticorruption efforts. in specific sectors. The establishment and maintenance of a social order that provides Four such strengths are particularly worth very barren ground for corruption to take noting and emphasising: root can be itself considered as constitut- 1) a value system that includes moderation, III Finland ing Finland’s main strength. But the Finnish personal restraint, and work towards the social order is characterised by number of common good, specific strengths that can be considered to 2) legislative, judicial, and administrative

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 26 of 88 structures that closely monitor and guard the prioritized objectives of the program. cials stating their obligation to report sus- against abuse of power, A separate program, the Internal Securi- pected criminal offences including foreign 3) prominence of women in political deci- ty Program 2012, discusses the risks of bribery to law enforcement authorities. sion-making, corruption in public procurement and for 4) and low income disparities and ade- Finnish enterprises or their representa- Legal Framework quate wages.” tives when conducting business abroad. According to the EU report on corruption In order to prevent corruption, the Inter- in Finland, “Finland has a well-functioning ANTI-CORRUPTION nal Security Programme stresses the need criminal justice system which is capable of FRAMEWORK for greater international cooperation and dealing with high-level corruption cases and sector specific preventive measures for which benefits from having institutionally Strategic Approach public officials and for the business sec- independent prosecutors”. The principle of According to the European Commission tor. In 2002, the Ministry of Justice set up free access to public records is laid down 2014 Report on Finland, “corruption is not a specialist anti-corruption network which in the Constitution as well as in the Open- perceived as a serious threat and Finland meets to discuss and exchange informa- ness of Government Activities Act. Finland has no dedicated national anti-corruption tion. Questions have been raised as to the amended the Political Parties Act in 2010, strategy”, although draft projects have effectiveness of cooperation between the taking into account all of the recommenda- been developed recently. In 1996, the various bodies responsible for the detec- tions made by the Council of Europe Group Finnish Parliament approved its first pro- tion and prevention of corruption, espe- of States against Corruption (GRECO). gram designed to reduce economic crime cially between law enforcement and tax The new legal framework aims to provide and the shadow economy. The current Ac- authorities. The tax administration has, transparency in respect to the financing of tion Plan covers the years 2012–2015, but however, after recommendations from the election candidates, political parties, and anti-corruption measures are not among OECD, published guidelines for tax offi- other entities affiliated with political parties.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 27of 88 Institutional Framework is the group of four auditors, elected among and impartiality. The aim of Ombudsman is Finland relies on several watchdog institu- its members, where one member is chosen to ensure that the principles of constitu- tions to implement impartially the above outside the Parliament, which works with tional and human rights and good adminis- mentioned anti-corruption laws. The key public liability. The public reports are pro- tration are followed. Alongside investigat- watchdog institutions are the Parliamen- vided by the auditing activities. ing complaints, the Chancellor of Justice tary Audit Committee, Ombudsman, Chan- has the task of overseeing the legality of cellor of Justice, National Audit Office, Two institutions represent legal regula- the government’s actions, and hence is and the media. The low level of perceived tion and supervision of legality in Finland, present at cabinet sessions and examines corruption in Finland indicates that these as mandated in the Finnish Constitution. all the plenary sessions of the government watchdog institutions have been rather They are the Chancellor of Justice (2013), as well as presidential sessions. The review effective in implementing the various who reports to the government and to process of the Chancellor of Justice focus- anti-corruption laws. the Parliament, and the Parliamentary es on the consideration of issues of legal- Ombudsman (2013). They differ from the ity, instead of the appropriateness of de- The functions of these institutions are administrative courts where cases of in- cisions or any other political assessment. partly implemented by the Finnish Parlia- tegrity violations of public servants are Additionally, all government agencies have ment. The Parliamentary Audit Committee handled, accused, and sentenced. Howev- a unit for internal control. If internal units oversees the management of government er, the amount of control is very strong. find misuse or references to corruption, finances and compliance with the budget. The Chancellor of Justice is more concen- they refer the case to the police authorities. The Committee concentrates on the gen- trated on wrongdoing (disqualification, eral state and management of government misuse of power) cases of public servants National Audit Office (NAO) is the coun- finances as well as issues on which Parlia- than the Ombudsman, who concentrates try’s supreme audit institution. The office ment ought to be informed. Another organ on violations of the principles of equality has several roles in controlling integrity vi-

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 28 of 88 olations and corruption. As an external au- ruption cases. Greater press freedom is Finland does not have an authority specif- ditor, it has an independent position and linked to lower levels of corruption. ically charged with the prevention of cor- broad rights to gather information on the ruption. The Ministry of Justice is responsi- Finnish public administration. The audit According to the 2014 EU report on cor- ble for the coordination of anti-corruption work covers the whole state economy in ruption, “the Finnish administration is re- matters, although Finland’s anti-corruption the areas of fiscal policy, finances, compli- garded as being transparent in its practic- contact point for EU purposes is in the ance, and performance. The NAO is a spe- es and is characterised by high standards, Ministry of the Interior. In 2002, the Minis- cial whistle-blowing instrument for citizens relatively non-hierarchical structures and try of Justice set up a special anti-corrup- and organizations. As part of the formal little if any politicisation of key civil service tion network which meets to discuss and audit everyone is able to turn to the NAO positions. Combined with other social fac- exchange information. The National Bu- concerning complaints about suspected tors, these features contribute to a low lev- reau of Investigation has an officer whose illegalities of financial management of the el of corruption in public institutions. Rules full-time duty is to follow matters related to state including illegal procedures in state- and principles of conduct are to be found corruption in Finland. The tax administra- owned companies. in several types of legislation such as the tion has, after recommendations from the Constitution and the State Civil Servants OECD, published guidelines for tax officials The role of media is important in curbing Act (750/94). The handbook, “Values in stating their obligation to report suspected corruption. Media uncovers integrity viola- the Daily Job – Civil Servant’s Ethics,” il- criminal offences, including foreign brib- tions through investigative journalism, and lustrates and provides guidelines on eth- ery. The Ministry of Finance has also pub- makes possible public debate of account- ics for civil servants working in the state lished guidelines for government officials ability among politicians. Media raises administration with the aim of maintaining on hospitality, benefits, and gifts. public awareness of corruption and helps Finland’s high standards of integrity and public sector authorities to investigate cor- ensuring low levels of corruption.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 29 of 88 Legal enforcement be ordered to pay corporate fines of up to EUR 1,500 in parliamentary elections. The Corruption in Finland is covered by the EUR 850,000 for violations. Act on Public Contracts instates manda- Criminal Code and issues penalties rang- tory exclusion of bidders from competitive ing from fines to imprisonment of up to four Subject to certain conditions, a ban on tendering if they have been convicted of a years. Both giving and accepting a bribe is business operations may be imposed on serious offence such as bribery. considered a criminal act under the Crim- a natural person found guilty of bribery in inal Code. business (Act on Bans of Business Operations Corruption at the local government level 1059/1985). Corruption at the local government level Finland’s Criminal Code prohibits active does not seem to be a problem for Finland. and passive bribery, embezzlement, fraud, Finland’s law offers no distinction between No scandal involving local administrations abuse of office, breach of trust, and abuse bribes and facilitation payment, while the has been reported in recent years. of insider information. It criminalizes brib- propriety of gifts and hospitality depends ery between businesses, of Finnish and on their value, intent, and potential benefit Transparency of lobbying foreign public officials, and through inter- obtained. The Ministry of Finance has issued Lobbying is not regulated in Finland. There mediaries (agents, consultants or other guidelines for civil servants regarding gifts, are no rules or legislation governing the representatives). The Criminal Code distin- benefits, and hospitality. MPs are not allowed regulation of lobbyists in the Finnish par- guishes between non-aggravated bribery to keep gifts exceeding a value of EUR 100. liamentary system. Interest groups are not and aggravated bribery, with the latter registered in the Finnish parliament. Lob- carrying penalties of up to four years impris- Other relevant legislation includes the Polit- byists may contact members of parliament onment. A company can be held criminally ical Parties Act, which requires candidates informally as they wish. There is no spe- liable for corruption offences committed by and parties to report campaign donations cific requirement for lobbyists to register individuals working on its behalf, and may exceeding EUR 800 in local elections, and or for contacts between public officials and

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 30 of 88 lobbyists to be reported. After receiving Finland amended the Political Parties Act to financial support given to a political party recommendations from GRECO, the Finn- in 2010 to take into account all of the rec- or a party association by an entity affiliated ish Parliament has set up a working group ommendations made by GRECO. According with a party, however. In addition, the Act in order to prepare ethical guidelines on to the National Audit Office’s report to Par- contains a ban on receiving contributions conflicts of interest, including lobbying liament on the monitoring of the funding of from certain public-sector organisations for parliamentarians. political parties in 2015, “the Act on Polit- or receiving foreign contributions or con- ical Parties (10/1969, amended 683/2010) tributions from an unidentified donor. The Transparency of Financing contains mandatory provisions aimed at Act on Political Parties requires a political of political parties promoting the transparency of funding for party, a party association, or an entity affil- In 2007 there were funding controversies political parties and party associations. iated with a political party to disclose to the regarding the parliamentary election cam- According to the Act, all contributions in contributions with a value of at least 1,500 paign of the Centre Party, which received the form of money, goods, services or other euros to National Audit Office, as well as the extensive funding from a wealthy group of such services are regarded as financial identity of theirdonors. Political parties and real estate developers with keen interest support. Only certain contributions that associations mentioned in a party subsidy in the construction of out-of-town shop- are expressly mentioned in the Act are not decision must itemise election campaign ping malls via the Kehittyvien Maakuntien regarded as financial support and therefore costs and funding. When election campaign Suomi (KMS) association. It is now known do not come within the sphere of regula- costs and funding are itemised, each indi- that KMS was established for the specific tion. A political party, a party association, or vidual contribution and its donor must also purpose of steering the Centre Party to an entity affiliated with a party may receive be mentioned separately if the value of a victory and its financiers had met with contributions up to a maximum value of contribution exceeds 1,500 euros. Informa- Prime Minister Matti Vanhanen at his res- 30,000 EUR from the same donor in a cal- tion is entered in the party funding register idence on January 22nd, 2007. endar year. This restriction does not apply and made available to the public.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 31 of 88 The monitoring of political parties is the of election funding in the 2012 municipal 18, the Municipal Officeholders Act Section responsibility of the National Audit Office, and presidential elections, the new legal 18, and the Local Government Act Sections the Ministry of Justice, and the auditors of the framework creates conditions which are 35 and 36 include provisions against con- organisations and foundations in question. favourable to openness in candidates and flicts of interest. High-ranking civil servants, political parties’ funding and generally func- before appointment, are obliged to give an The National Audit Office oversees elections well. Nevertheless, concerns have account of their involvement in business, tion and party funding ,and receives and been raised as to whether the National company share holdings, secondary jobs publishes the documents stipulated in the Audit Office has enough resources to verify etc. Members of Parliament (MPs) are Act on Political Parties and the Act on a the information given by political parties required to file a notification of interest Candidate’s Election Funding. The tasks and individual candidates, and whether it (‘disclosure of outside ties’) to the Parlia- prescribed in the Act on Political Parties has the authority to control the parties’ mentary office at the beginning of each and the Act on a Candidate’s Election compliance with the Act. For instance, the parliamentary term and the information pro- Funding concern mandatory disclosures. National Audit Office does not have the vided is then published on the Parliament’s The National Audit Office can require a authority to request accounts and addi- website. There is however no legal obliga- monitored entity to fulfil its obligations on tional information from third parties in tion on MPs to declare assets. GRECO has pain of a penalty. A penalty can be imposed order to check the accuracy of a disclosure. therefore recommended that Finland make only after an entity has been cautioned, According to the National Audit Office, this its reporting arrangements mandatory. The however, and if the breach is considered restriction has a detrimental effect on the prevention of conflicts of interest for MPs substantial. Office’s ability to monitor disclosures.1 is currently regulated under Article 32 of the Constitution. According to GRECO, this According to the National Audit Office’s Asset disclosure rule on conflicts of interest needs further reports to Parliament on the monitoring The State Civil Servants’ Act Section 8a and clarification in order to guide MPs as to how

1 EU Report, http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/organized-crime-and-human-trafficking/ corruption/anti-corruption-report/docs/2014_acr_finland_chapter_en.pdf

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 32 of 88 to act when faced with actual or potential services. Public procurement is an import- provisions of the Framework Decision conflicts of interest.2 ant target area in combatting against the 2003/568/JHA regarding the definition of shadow economy. According to the Parlia- active and passive corruption in the private Public procurement ment’s Audit Committee, the embedding sector. The OECD Working Group on Bribery The Ministry of Employment and the of corruption in public sector procurement commended the efforts made by Finland to Economy is responsible for preparing the and local decision making puts a strain on investigate suspected foreign bribery cases legislation relating to public procurement. services paid for by taxation, and distorts and to raise awareness of foreign bribery The value of procurement of goods and healthy competition in business as well both within the public and private sectors. services by public sector bodies, as well as weakens the confidence of citizens in Nevertheless, according to the OECD, more the construction work they commission, decision makers. According to calculations could be done to raise awareness of Fin- is about EUR 33–35 billion annually. The by the City of Helsinki’s Audit Department, land’s framework for combating foreign significance of public procurement has Helsinki loses about EUR 50–60 million a bribery in high-risk sectors such as the continuously increased because many year in tax revenue because of the shadow defence industry, and among state-owned public services are delivered by private economy.3 enterprises, SMEs and the legal, account- service providers. The way in which bodies ing, and auditing professions.4 that carry out public procurement use their The Ministry of Employment and the buying power has a lot of impact on the Economy proposed enacting a new law to There is scarcely any empirical information development of markets in certain sectors. replace the 2007 Act and Decree on public available on the extent of corruption in the The proportion of companies’ turnover that contracts. private sector in Finland. Only rarely have is accounted for by public procurement is cases of suspected bribery in the private considerable, for example, in the construc- Private Sector sector come to court. According to crime tion and private social and health care Finland has correctly transposed the statistics, most of the cases of bribery

2 EU Report, http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/organized-crime-and-human-traffick ing/corruption/anti-corruption-report/docs/2014_acr_finland_chapter_en.pdf 3 Page 5, GreyEconomy 2015, file:///C:/Users/Admin/Downloads/Grey_Economy_2015%20(1).pdf 4 EU Report, http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/organized-crime-and-human-traffick- 33 of 88 ing/corruption/anti-corruption-report/docs/2014_acr_finland_chapter_en.pdf that come to the attention of the author- prevalence of corruption.) A striking feature have experiences with corruption (Aromaa ities have involved the public sector, and of the studies was that many of the com- et al 2009). As noted earlier, corruption is public officials. Although considerable pany representatives, although regretting harmful to the fundamental principles of a attention has been paid to the control of the need to pay bribes, regarded it nonethe- market economy and free trade. It could be public procurements in the public sector, less as a cost of business in those particular added that, although paying a bribe may be the structure of decision-making in the pri- circumstances. PriceWaterhouseCoopers a business strategy for companies struggling vate sector is more opaque. Some studies recently conducted a small-scale inter- in a difficult market, it brings various risks, provide a key-hole view of the extent of national study on how often companies ranging from the “costs” associated with corruption, at least in international trade. A have been the victim of economic crime. possible law enforcement and punishment, series of studies was conducted during the According to the results, about one half of to the negative impact that public knowl- 1990s regarding the experience of Finnish Finnish company representatives stated edge of bribery may have on the reputation companies trying to get a foothold in the that their company had been the victim of of the company. Earlier mention has also emerging economies in the Baltic republics an economic crime when doing business been made of the guidelines prepared by and in Russia (see Aromaa and Lehti, esp. pp. abroad. About 5% of the Finnish compa- the International Chamber of Commerce on 172-177). The focus of the studies was on nies in question had been the victim of principles of ethical business activity, and the experiences of these companies with corruption-related offences; this figure is of anti-bribery, and the work of the Finnish crime. The methodology was based on lower than for other countries included in Central Chamber of Commerce to promote interviews with company representatives. the study. A study commissioned by the implementation. In addition, many large The studies indicated that the majority of Ministry of Justice regarding corruption Finnish companies have specific anti-cor- Finnish companies involved had experience on the Finnish - Russian border suggested ruption policies and programs, often based in paying bribes in this region. (Subsequent that an appreciable number of Finnish on a “zero-tolerance” approach both domes- reports suggest a clear diminishment of the companies doing business cross-border tically and when doing business abroad.5

5 http://www.oikeusministerio.fi/material/attachments/om/tiedotteet/en/2009/6AH99u1tG/Corruption.pdf

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 34 of 88 Fighting Foreign Bribery number of its senior executives in Egypt The shadow economy is particularly present Finnish citizens do not come across cor- last year, and upheld lesser accounting in sectors that utilize a lot of manual labor ruption in their daily life, yet the country is offences, according to Transparency and in sectors that operate on a cash basis. home to a string of companies accused of International.6 The common factor is the utilization of an receiving bribes from places ranging from undeclared workforce. Examples of indus- Slovenia to Kenya. Last year the OECD Shadow economy and money tries that utilize a lot of manual labor are wrote to the Finnish prime minister out of laundering the construction, hotel and catering, trans- concern for the country’s failure to imple- The Act regulating the operations of port, cleaning and maintenance industries, ment 12 of the 19 recommendations to the Grey Economy Information Unit barbers and hairdressing, as well as beauty improve its foreign bribery.5 (1207/2010) entered into force on 1 Janu- services. Nowadays, issues related to the ary 2011. Under the Act, the task of the unit use of foreign companies or foreign workers In March of 2013, a Finnish court dismissed is to promote and support the combating are coming to the forefront when consider- allegations of bribery against the company of the grey or shadow economy by providing the shadow economy.8 Wärtsilä Finland Oy, which denied the ing information about the shadow economy charges. A former senior manager at Wärt- and the effort to combat it. In 2015, the unit Whistleblowing silä was also convicted of bribery in Kenya completed a total of 55 information provi- There is no specific protection for whis- to secure a tender to build a power plant. sion tasks, published reports on offences tleblowers in Finland. Employees in the aimed at hampering tax control, business public or private sector, who report sus- Ongoing allegations of bribery by the Finn- tax liabilities, warehouse operators of the pected acts to competent authorities, in ish state-controlled arms company Patria Finnish Customs, real estate and landscape good faith and on reasonable grounds, are Oy continue to play out in Croatia and Slo- management, foreign exchange operations, not explicitly protected from discriminatory venia. Courts cleared the company and a and purchases by the City of Helsinki7. or disciplinary action. Instead, the Finnish

6 https://www.icij.org/blog/2014/02/worlds-least-corrupt-nations-fail-police-bribery-abroad 7 Greyeconomycontrolstatistics 2015, https://www.icij.org/blog/2014/02/worlds-least-corrupt-nations-fail-police-bribery-abroad 8 Vero Skatt, page 4 The Grey Economy 2015, GREY ECONOMY INFORMATION UNIT FINNISH TAX ADMINISTRATION 35 of 88 WAREHOUSE

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 36 of 88 authorities rely on the provisions for the pro- to an international trend of increasing pro- be signed off by more than one official. tection of victims and witnesses and on the tection for whistleblowers, such as a new • The simplicity and transparency of the provisions made within administrative and proposal to establish an independent shel- administrative and judicial system: all labor law. Witness protection is however ter for whistleblowers in the Netherlands, parties with an interest in a decision limited, and labor law protects in principle which will receive funding from the Dutch have a constitutional right to be heard against dismissal, but does not cover other government and will offer legal protection by the appropriate authority, all admin- forms of discrimination that may follow a to employees who denounce abuse in the istrative and judicial decisions must whistleblower’s report. The United Nations private and public sectors.10 be made in writing, with the substan- Convention against Corruption (UNCAC), tive and legal grounds for the decision the OECD, GRECO and Transparency Inter- GOOD PRACTICES clearly laid out, and instructions given national has therefore encouraged Finland • Public administration with good repu- for appeal. to explore the possibility of establishing a tation – a strong sense of the rule of • Public scrutiny of the work of the comprehensive system for the protection of law: public officials and citizens take it public officials; anyone, anywhere whistleblowers.9 for granted that the law must and will can request information regarding any be followed. documents held by the public authori- The former Minister of Justice Anna-Maja • Prevention of conflicts of interest: the ties, unless a specific exception is laid Henriksson has also highlighted the impor- general and absolute requirement that down in law. tance of whistleblower protection, and the no public official may participate in • Education and awareness of what the Ministry of Justice recently set up a work- making a decision in which he or she law requires: citizens tend to be well-in- ing group to evaluate the current status of (or close relatives or dependants) has formed about their rights and about the whistleblower protection in relation to cor- a personal interest. law, and will insist on having a matter ruption cases. This initiative could be linked • Thereferendary system: any decision must dealt with properly.

9 EU Report, http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/organized-crime-and-human-trafficking/corruption/anti-corruption-report/docs/2014_acr_finland_chapter_en.pdf 10 http://www.nortonrosefulbright.com/knowledge/publications/137786/current-activities-in-the-finnish-anti-corruption-field#autofootnote1

37 of 88 • Innovative e-democracy: to a large of the United Nations Office on Drugs extent, applications and requests can and Crime (UNODC), the development be submitted to the authorities online. cooperation and civil crisis-management • Ease and affordability of taking a case instruments of the European Union as well to court for those who believe that their as Finnish membership of the UN Com- rights have been violated. mission on Crime Prevention and Criminal Justice, will all provide viable instruments Finland continues to carry out anticor- for combating corruption internationally. ruption work both domestically and internationally. Finland actively participates In April, 2012, the Finish court found parlia- in the anticorruption efforts of its long-term ment member and former foreign minister development partners, and contributes to Ikka Kanerva guilty of accepting bribes multilateral anticorruption programs. Since and neglecting his official duties as chair- the turn of the millennium it has signed all man of the Regional Council of Southwest relevant international conventions against Finland’s managing board, and issued a corruption and bribery, such as the OECD, 15-month suspended jail sentence. Three EU and Council of Europe Conventions on codefendants received harsher sentences. Bribery, the UN Convention Against Corrup- tion, and the Cotonou Agreement. For the future, local cooperation funds coordinated by the Finnish foreign missions, the Global Programme Against Corruption (GPAC)

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 38 of 88 INTRODUCTION Notably, though Norway has extensive regula- Norway, perhaps similarly to other Nordic tions regarding political party financing, they countries, sees generally very low rates of are not always as strict as other countries. Cor- corruption. This is potentially due to the harsh porations may donate to both political parties penalties for corruption found in Norway’s and individual candidates, and there is no limit penal code. Additionally, Norway also has the to how much a donor can give. Additionally, the Norwegian National Authority for Inves- Norway’s efforts in cracking down on cor- tigation and Prosecution of Economic and ruption and bribery committed by Norwegian Environmental Crime (Økokrim), a separate companies abroad have been limited. investigative body whose purpose is to seek out and stop cases of corruption. ANTI-CORRUPTION FRAMEWORK There is a high level of civic engagement engagement in Norway, as well as public trust Strategic Approach in the judicial system. Norway has a high level Norway primarily combats corruptions through of social cohesion: with low wage inequality, repressive measures such as legislation. It has an high rates of employment, and redistribution investigative body, the Økokrim, which persecutes of wealth through the tax and benefit system. corruption-related crimes. Media and journal- With a relatively egalitarian society, there is ism also plays a role in exposing corruption. IV Norway less of a need in Norway to conduct business Norway seems to lack in curative or preventa- in the shadow economy or pay bribes. tive approaches to combating corruption, and has had problems with foreign bribery scandals.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 39 of 88 LEGAL FRAMEWORK • Verification and registration of the cus- enforcement and the legal framework for com- tomer’s identity and owners of property bating corruption in Norway are considered System of Legislation rights very strong. The Norwegian Penal Code criminalizes active • Obtain information about the customer and passive bribery, trading in influence, fraud, relationship’s identity and owners of prop- Law Enforcement Fines extortion, breach of trust, and money launder- erty rights The penalty for fraud is fines or imprisonment ing. A company can be held criminally liable for • Reinforced control measures for areas of for up to three years. Any person who aids in corruption offences committed by individuals high risk for money laundering/terrorist fraud is liable to the same penalty. acting on its behalf. Facilitation payments are financing prohibited, and gifts and hospitality can be • Identification of politically exposes per- The penalty for gross fraud is imprisonment considered illegal depending on their value, sons (PEPs) for up to six years. Additional fines may be intent, and benefit obtained. • Investigate suspicious transactions imposed. Any person who aids in fraud is • Reporting of suspicious transactions to liable to the same penalty. Fraud is determined The Norwegian Money Laundering Act of 2009 the Financial Crime Unit (Økokrim) gross if it has caused considerable economic imposes requirements on companies with a • Internal control and communication damage, if the offender has assumed or mis- reporting obligation to prevent and detect routines. used a position or assignment, if they have transactions linked to crime or terrorist financ- Norway is a signatory of the OECD Anti-Bribery misled the public or a large group of persons, ing. Organizations must meet the following Convention, the United Nations Convention if they recorded false account information, requirements in order to adhere to the Money Against Corruption (UNAC), the Council of prepared false accounting documents or false Laundering Act: Europe’s Civil and Criminal Law Conven- annual accounts, or if they knowingly caused • Risk-based customer appraisal of the orga- tions against Corruption, and the Group of material loss or endangered any person’s life nization and on-going monitoring States Against Corruption (GRECO). Both law or health.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 40 of 88 Any person who commits fraud through gross damage, it has been committed by a public The penalty for corruption is fines or imprison- negligence shall be liable to fines or imprison- official or any other person in breach of the ment for up to three years. Any person who aids ment for up to two years. special confidence placed upon them by virtue in corruption shall be liable to the same penalty. of their position or activity, if the offender has A person is guilty of breach of trust if they recorded false accounting information, pre- Gross corruption is punishable by imprison- neglect another person’s affairs which they pared false accounting documents or false ment for up to 10 years. Any person who aids manage or supervise, or acts against the other annual accounts, if they have destroyed, in gross corruption shall be liable to the same person’s interest for the purpose of obtaining rendered useless, or concealed recorded penalty. The corruption is gross if the act has for themselves or another person unlawful gain accounting information or accounting mate- been committed by or in relation to a public or conflicting damage. rial, books or other documents, or if they have official or any other person in breach of the knowingly caused material loss or endangered special confidence placed in them by virtue The penalty for breach of trust is imprisonment any person’s life or health. of their position, office or assignment, if it has for up to three years. Additional fines may be resulted in considerable economic advantage, imposed. Any person who aids in breach of Any person who for themselves or other if there was any risk of considerable damage trust shall be liable to the same penalty. persons requests or receives an improper of an economic or other nature, or if false advantage or accepts an offer thereof in con- accounting information has been recorded, or The penalty for gross breach of trust is impris- nection with a position, office, or assignment, false accounting documents or false annual onment for up to six years. Additional fines or gives or offers any person an improper accounts have been prepared. may be imposed. Any person who aids in gross advantage in connection with a position office breach of trust shall be liable to the same pen- or assignment, shall be liable to a penalty for Any person who for themselves or other alty. A breach of trust is considered gross if corruption. persons requests or receives an improper the act has caused considerable economic advantage or accepts an offer thereof in return

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 41 of 88 for influencing the conduct of any position, act by threatening or to make an accusation or Additionally, the the Norwegian National office or assignment, or gives or offers any report of any offense, or by making a defama- Authority for Investigation and Prosecution of person an improper advantage in return for tory allegation or giving harmful information or Economic and Environmental Crime (Økokrim) influencing the conduct of a position, office, who aids thereto. is the central unit for investigation and prose- or assignment, is liable to a penalty for trading cution of economic and environmental crime, in influence. The penalty for extortion is imprisonment and the main source of specialist skills for the for up to five years. Additional fines may be police and the prosecuting authorities in their Trading in influence is punishable by fines or imposed. combat against corruption. Økokrim was estab- imprisonment for up to three years. Any person lished in 1989, and is both a police specialist who aids in trading of influence shall be liable Any person who obtains or collects funds agency and a public prosecutors’ office with to the same penalty. or other assets with the intention that such national authority. assets should be used, in full or part, to finance Any person who, for the purpose of obtaining terrorist acts or any other contraventions is Institutional Framework for themselves or another person an unlawful liable to imprisonment for up to 10 years. Any The Storting is the supreme parliament of gain, compels any person by unlawful conduct person who aids in such an offence is liable Norway. There are 169 elected members, and or by threat of such conduct to commit an act to the same penalty. elections take place every four years. There are that causes loss or risk of loss to them or the not by-elections, nor any constitutional provi- person for whom they are acting shall be guilty Judicial Authorities to Deal with sion to dissolve the Storting between elections. of extortion. Any person who aids in extortion Corruption is liable to the same penalty. The same applies Norway uses a three-tier court system, con- 75% of people aged 15-64 in Norway have to any person who for the said purpose unlaw- sisting of 70 district courts, 6 appeal courts, a paid job. 82% of adults aged 25-64 have fully compels any person to commit such an and the Supreme Court. completed upper secondary education. Life

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 42 of 88 expectancy at birth in Norway is 82 years. Transparency is a basic principle of the Norwe- • Foreign interests are banned from donating Voter turnout was 78% at recent elections. gian public sector, according to the Norwegian to political parties. Freedom of Information Act. Wage inequality in Norway is low. An egalitarian distribution of net household income is Norway has a long-standing tradition of pub- achieved through the tax and benefit system. lishing transparent and comprehensive budget documents. Regarding the petroleum sector, Corruption at local government Norwegian citizens are entitled to know which level companies are operating on the Norwegian Norway has a two-tier system of local gov- continental shelf and how much tax and other ernment: the municipalities and the county income is paid into the state treasury. Govern- authorities. There are 428 municipalities and ment decisions are subject to public review 19 county authorities. and consultation. Documents in the public administration are registered and the record Municipalities are subject to rules involving is publicly accessible. state supervision and control. State authorities control the legality of the municipal councils’ Norway does not appear to have had any fiscal resolutions only if they are registered as recent corruption scandals at the local gov- a municipality with economic problems. The ernment level. state can check whether municipal decisions are legal. Individual residents may also file Transparency of lobbying complaints against municipal resolutions. Norway does not have any lobbying regulations.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 43 of 88 Transparency of Financing of political parties 000 Rules regarding political party financing in Norway are as follows: 00 1010100 101010000 101010 • Foreign interests may donate to individual • Anonymous donations may be made to • The criteria to receive direct public funding candidates. individual candidates. are as follows: for “basic support” parties • Corporate donations to political parties are • There is a ban on state resources (exclud- must receive 2.5% of the vote or have at allowed. ing regulated public funding) being given least one seat in Parliament. • Corporate donations to individual candi- to or received by political parties or • Allocation of direct public funding is pro- dates are allowed. candidates. portional to votes received. • Corporations with government contracts or • Any other forms of donation are allowed. • There are no provisions as to how direct partial government ownership are banned • There is no limit on the amount a donor public funding should be used. from donating to political parties. can contribute to a political party over a • Subsidized access to media and political • Corporations with government contracts or time period. commercials are banned. partial government ownership may donate • There is no limit on the amount a donor • There are no provisions for free or subsi- to individual candidates. can contribute to a political party in rela- dized access to media for candidates. • Trade Unions may donate to political parties. tion to an election. • Political parties are exempt from income • Trade Unions may donate to individual • There is no limit on the amount a donor and capital tax. candidates. can contribute to a candidate. • The provision of direct public funding to • Anonymous donations to political parties • There is regularly provided public funding political parties is not related to gender are banned. to political authorities. equality among candidates.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 44 of 88 • There are no provisions for other financial with a total value of 35,000 kroner of more. advantages to encourage gender equality in • The central register receives financial political parties. reports from political parties and/or • There are no limits on the amount a political candidates. party can spend. • The Political Parties Act Committee and the • There are no limits on the amount a candi- Party Auditing Committee are responsible date can spend. for examining financial reports and investi- • Political parties are required to submit gating violations. annual reports on income and expenditures • The Ministry of Government Administra- as well assets and liabilities. tion and Reform can recommend that • Parties are required to file reports in relation government grants to a party are withheld. to election campaigns if they receive dona- Decisions are made by the Political Parties tions above 10,000 kroner. Act Committee and can be challenged to • Candidates do not have to report on the the courts. campaign finances. • Depending on the severity, sanctions for • Information in reports from political parties political finance infractions can include a and/or candidates are required to be made formal warning, fines, prison, forfeiture, or public. loss of public funding. • Political parties and/or candidates must reveal the identities of donors for donations

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 45 of 88 Foreign Bribery between 2004 and 2009. The company admit- Shadow economy and money Transparency International’s 2014 Exporting ted bribing senior government officials in India laundering Corruption report, which looks at how well and Libya, as well as to suppliers in Russia and Shadow economy has been recognized to be countries are enforcing the OECD Anti-Bribery India. The fine was the largest ever of its kind one of the most relevant societal problems Convention, scored Norway as having limited in Norway. The case puts two cohorts of Yara in Norway. Norwegian authorities have been enforcement when it comes to cracking down executives up against each other. particularly concerned about determining the on bribery by Norwegian companies abroad, a current real extent of the phenomenon and the trend that is surprisingly common among the As for Telenor, in 2014 the company was negative consequences it might have in the Nordic Countries. The most recent examples allegedly involved in a corruption scandal in long run for the stability of the welfare state of corruption scandals abroad involved the Uzbekistan with ties to the president Islam and the quality of working conditions. chemical company Yara and the telecommu- Karimov’s daughter. According to the docu- nications company Telenor. ments published by the Klassekampen daily, an Overall, the size of the shadow economy in Uzbek firm partially owned by Telenor paid $25 Norway has been estimated to be oscillat- Regarding Yara, Norwegian authorities had million in bribes to obtain telecom licenses in ing between 13-14% of the GDP in the years been informed by the company in 2011 that the Central Asian nation. The money were paid 2010-2015. Among the sectors and businesses it might have been involved in corruption in to a company linked to president Karimov’s most involved in the shadow economy are the connection with 2008 negotiations leading oldest daughter, Gulnara Karimova. Though construction and cleaning trade, joineries and to the investment of 1.5 billion Norwegian the bribes were not paid directly by Telenor, restaurants. Particularly concerning are the kroner into a 50% share of Libyan Norwegian the scandal led to the resignation of Telenor’s proportions of undeclared work. According to a Fertiliser Company, or LIFECO, in 2009. In Jan- finance director and general counsel. survey conducted by the Norwegian authorities, uary 2014, the corporation agreed to pay a in the period 2006-2011, 18% of the popula- $48 million fine in a case involving corruption tions said they had bought undeclared work,

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 46 of 88 and this percentage is nowadays expected to They work towards this objective through and reporting routines when buying various be even higher.1 According to another survey exchanging relevant knowledge in order to services from private companies, as well as by the Agenda think tank, Norwegian private find effective measures against the black information on why it is important for society at individuals purchase cleaning services to the economy. Furthermore, the alliance members large to tackle undeclared work; Spleiselaget. tune of six million undeclared working hours aim to pass their knowledge on to companies, no was launched in 2006 as a part of an edu- per year, equivalent to 3.400 full time jobs just entrepreneurs, workers and consumers so cational programme directed at young people, in the cleaning trade. Such an extent of the that it can help them ‘make the right choices’. providing information on the Norwegian wel- phenomenon makes really difficult for serious To reach their objectives the alliance primarily fare model and on the importance of paying players to stay competitive.2 engages in awareness raising activities, mainly taxes and tackling black economy. Further- through the websites www.samarbeidmotsvar- more, the website makes possible for schools In order to fight the growing phenomenon, the tokonomi.no (‘Collaboration against the black to meet with representatives from the alliance, “Joint Alliance Against the Black Economy” economy’), www.handlehvitt.no (buy legally) offering dialogues and presentations on the (Samarbeid mot svart økonomi) was originally and www.spleiselaget.no (‘the cost-sharing consequences of undeclared work. Approxi- established in 1997 through an agreement team’, directed at young people). matively 200.000 students participated in the between the central social partners in Nor- educational programme from 2006 to 2012. wegian working and business life and the The website Samarbeidmotsvartokonomi.no, country’s Ministry of Finance and Tax Admin- launched in 2009, is the alliance’s home and In 2015, the Norwegian Labour Inspection istration and in September 2008 the parties provides links to all its current projects, news Authority, together with regional and municipal renegotiated the agreement with an ambition related to black economy and information tax offices, the customs and The Norwegian to further develop their work. The alliance’s about the organization’s objectives; Han- Labour and Welfare Administration (NAV) have overall objective is to ‘create zero tolerance dlevitt.no was launched in 2011 and it brings gathered in joint offices in Oslo, Bergen and for undeclared work in Norwegian society’.3 consumers information on current tax rules Stavanger to cooperate in the fight against black

1 European Monitoring Centre on Change, “Joint Alliance Against the Black Economy, Norway”, 2013. http://www.eurofound.europa.eu/observatories/emcc/case-studies/tackling-undeclared-work-in-europe/joint-alliance-against-the-black-economy-norway 2 Nordic Labour Journal, “Coordinated controls in fight against Norway’s Shadow Economy”, 2015. http://www.nordiclabourjournal.org/i-fokus/in-focus-2015/how-the-nordics-fight-the-shadow- economy/article.2015-09-28.0304689051 3 Joint Alliance Against the Black Economy, Norway10 http://www.nortonrosefulbright.com/knowledge/publications/137786/current-activities-in-the-finnish-anti-corruption-field#autofootnote1 of GDP (2010)

SHADOW ECONOMY Initiatives to fight the phenomenon:

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 48 of 88 economy focussing mainly on undeclared work ethical standards such as corruption, danger • Anyone who has been subjected to retal- and working conditions. Building sites and other to life and health, and bad work environment. iation in breach of the first or second workplaces have been targeted in coordinated paragraph may claim compensation with- operations by 120 investigators. During the first Protection for whistleblowing under the Work out regard to the fault of the employer. major control, 430 businesses on various con- Environment Act 2005 (WEA) is as follows: The compensation shall be fixed at the struction sites were investigated. Information • An employee has a right to notify amount the court deems reasonable in was gathered on 1,200 individuals, 150 of them concerning critical conditions at the view of the circumstances of the parties were thoroughly controlled. It turned out 20 of undertaking. and other facts of the case. them were not registered to pay tax and four • The employee shall follow an appropri- • Employers are expected to develop inter- people who were illegally in the country were ate procedure in notifying. nal routines for whistleblowing. expelled. In 16 cases the work sites were closed • The employer has the burden of proof down because of health and safety breaches, 10 that notification has been made in Gaps in the legislation include the following: million kroner (EUR 1.05m) in unpaid fees and breach of this position. • No concrete definition of the term taxes were discovered and 20 businesses were • Retaliation against an employee who “whistleblowing” in the legislation. found not to be VAT registered.4 notifies the pursuant to section 2-4 • The vague language regarding, “crit- is prohibited. If the employee submits ical conditions” and “appropriate Whistleblowing information that gives reason to believe procedures.” According to the Preparatory Papers, “whis- the retaliation in breach of the first tleblowing” is a term implying, “employees sentence has taken place, it shall be WEA Section 2:4 does not cover former speaking out on critical conditions within the assumed that such retaliation has taken employees. company.” “Critical conditions” implies con- place unless the employer substantiates WEA Section 3:6 states an obligation for ditions that are contrary to the law or other otherwise. employers to develop routines for internal

4 Coordinated controls in fight against Norway’s shadow economy

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 49 of 88 notification but makes no mention of exter- • 49% of the whistleblowing resulted in nal disclosures. improvement in the wrongdoing; • If the company does not have internal • 54% of the whistleblowers reported routines it would be difficult to conclude positive reactions, and 35% did not that an employee has reported a con- experience any reactions. cern in an appropriate manner. • It is not clear whether the WEA’s right to notify covers both past and future circumstances. • Greater clarity in terms of what should be reported and how it should be done might be useful for potential whistleblowers in Norway, especially in relation to external disclosures.

According to Norwegian studies conducted in 2012: • 34% of employees had observed serious wrongdoing at the workplace in the last 12 months; • 53% of them blew the whistle on the wrongdoing;

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 50 of 88 INTRODUCTION INSTITUTIONAL FRAMEWORK Sweden has, together with other Nordic coun- The low levels of perceived and experienced tries, been at the forefront when it comes to corruption in Sweden are linked to a long tradi- developing societal structures that help pre- tion of openness and transparency in Swedish vent corruption. High living standards and the society, its institutions, and strong respect for culture of openness are considered to be the the rule of law. The National Anti-Corruption main explanations for a low rate of corruption, Unit of the Office of the Prosecutor General but not only that, in Sweden, the public, and was established in 2003 after recommen- therefore the media, has the right and the will dations made by Group of States against to access all official documents (Harter 2010). Corruption (GRECO). The Unit handles all sus- The culture of openness, transparency, and picions of bribery, both giving and receiving, high respect for the principles of democracy and also suspicions that are connected to such makes corruption in government agencies crimes. The Unit cooperates with other public more difficult to hide. With its reputation as authorities in order help prevent corruption. one of the four least corrupt countries in the The National Anti-Corruption Unit has reported world, Sweden consistently ranks as least cor- that between 2003 and 2009, 280 pre-investi- rupt in TI indexes (Transparency International gations led to 90 convictions. In January 2012, CPI 2009; Transparency International Global Cor- the National Anti-Corruption Police Unit was ruption Barometer 2007). created to support the National Anti-Corrup- V Sweden tion Unit in investigations, including foreign bribery (European Commission 2014,p.2).

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 51 of 88 STRATEGIC APPROACH public officials and private individuals than representative democracy and parliamen- Sweden has no national anti-corruption the previous legislation. It also introduced tary system. strategy but has carried out several risk two new offences: trading in influence and Legality: Public power shall be exercised assessment studies and reports on cor- negligent financing of bribery. More general under the law. Objectivity, impartiality and ruption. These assessments have covered, rules and principles of conduct, including equal treatment. among other aspects, risk of corruption provision on conflicts of interest, are set Equality of all persons before the law: in local government, risk of corruption in out in several legislative documents such Government agencies and courts must treat public procurement, and risk of corruption as the Constitution, the Administrative Act all persons equally. in Swedish central authorities. In 2012 the (1986:223), and the Act on Public Employ- Free formation of opinions and free- government established a Council of Basic ment (1994:260). The six principles in the dom of expression: Swedish democracy Values, which works to maintain public ‘Shared Values for Civil Servants’ are based is founded on the free formation of opinions. confidence in civil services by promoting on laws and regulations and provide guide- Respect: Public power shall be exercised a culture that prevents corruption, and will lines on how government agencies and with respect for the freedom and equality of finish its work by the end of 2016 (http:// employees should conduct their work (Euro- every person. www.vardegrundsdelegation.se/in-english/). pean Commission, 2014 p.2-3). Efficiency and service: Public sector activities must be conducted as inexpensively Legal framework The six key principles according to which and with as high quality as possible, given Sweden has a well-developed system of people regulate their behavior based on the resources available. legislation, law enforcement, and judicial laws and regulations are: (European Commission, 2014). authorities to deal with corruption. A revised Democracy: All public power in Sweden anti-corruption law entered was enacted in stems from the people Universal suffrage, 2012. The new law covers a broader range of

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 52 of 88 Corruption at local registering food establishments, or grant- is no specific obligation for registration of government level ing building permits. Moreover, another lobbyists or reporting of contacts between Though it is a trend in many places for at-risk group is personnel in healthcare and public officials and lobbyists. The provision national government or supranational enti- homecare services who are offered gifts or on trading in influence is applicable to illegal ties to be more corrupt, it is the opposite an inheritance by elderly persons needing lobbying (European Commission, 2014p.4). in Sweden. Compared to other countries, care in exchange for commitments that are even the neighboring Nordic states, Swed- actually part of the employees’ duties (The Transparency of Financing of ish local government is prominent for being Swedish National Council for Crime Prevention, political parties relatively corrupt (The Quality of Government 2013p.14). Political parties at the national level in Institute, 2013p.4). According to The Swed- Sweden receive significant public funding ish National Council for Crime Prevention Stockholm county overshadows the rest of from the state and Parliament. The public 2013 p.12) report on corruption prevention the country with almost half of all corrup- funding system provides political parties in Sweden claims that several instances of tion cases, followed by Skåne and Västra with the possibility of pursuing their politi- close ties between the private sector and Götaland. This is influenced by population cal activities on a long-term basis without public employees –in particular local gov- density, but despite metropolitan domi- being dependent on other contributions. In ernment officials – appear to constitute a nance, corruption exists throughout Sweden order to provide transparency on political corruption risk. (The Swedish National Council for Crime Pre- parties’ funding, the political parties have vention, 2013p.13). developed a voluntary Joint Agreement. The In local government, cases show that per- agreement provides that the parties’ sources sons with supervisory and control functions of income must be made as transparent as are particularly exposed. This relates to offi- Transparency of lobbying possible and that voters have a right to know cials considering on-license applications, Lobbying is not regulated in Sweden. There how the parties and candidates finance their

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 53 of 88 activities and campaigns. Nonetheless, results in the autumn this year. According 2014,p.5). It is arguable that Sweden has the there is no ban on anonymous donations to to the law, a party or an individual candi- highest tax-to-GDP ratio in the world, and political parties from private or legal persons date must disclose information annually on there is a presumption that the incentives for and no regulation to make the accounts of their revenues and the information will be tax evasion would be particularly high in this political parties accessible to the public. The published on Kammarkollegiet’s website. economy (Engstrom & Holmlun, 2009 p. 5). agreement does not cover all political par- Political parties are obliged to report dona- ties in Parliament and it does not include tions over EUR 2 500, including the identity In Sweden, asset declaration requirements parties at county and municipal level (Euro- of the donor and the amount of the dona- put emphasis only on parliamentarians. pean Commission, p.4-5). tion (European Commission, 2014p.5) In 2016, Declarations include information on assets GRECO (2016,p.5) has concluded that that and liabilities, loans, sources and levels of After repeated criticism from GRECO, includ- Sweden has satisfactorily implemented six income, additional employment, gifts, and ing suggestions from an Expert Committee, of the ten recommendations contained in employment history. The reports filled by in 2014, the Swedish Government presented the Third Round Evaluation Report. More- elected officials and senior public servants draft legislation aiming to increase the trans- over, all remaining recommendations have are available online. There are no legal parency of financing of political parties. The been partly implemented. sanctions and no strictly defined legal con- law was enacted in 2014. The same year sequences for violations of the requirements the government appointed a commission Asset Disclosure but rather soft measures to achieve compli- charged with looking into the possibility of GRECO has also suggested developing ance. For example, if a member of parliament establishing a set of regulations covering the current asset declarations system and fails to submit information to the register, not only the central government, but also including quantitative information, such as this compliance failure is announced at the party financing at local and regional levels. income the approximate value or number plenary meeting (Transparency International, This commission is expected to report their of shares owned.(European Commission, 2011, p.4).

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 54 of 88 Information that is directly or indirectly documents unless secrecy applies (Ministry partly, be attributed to the requirements of referable to a natural living person consti- of Justice 2006, p.17). dual criminality and to the low level of sanc- tute personal data (Ministry of Justice 2006 tions applicable to legal persons, and lack of p,10). Information in the population regis- If the money involved in a case where a cooperation on the part of the country where ter is public. The Swedish Tax Agency does person is sentenced for a tax crime is signifi- the alleged crime has been commited. not provide information if there are special cantly more than in a theft case, then the reasons to assume that doing so could be person sentenced for tax fraud gets a more Foreign bribery acts are being carried out harmful to the persons that the information severe punishment than the thief (skattever- through foreign affiliates, and as a result of pertains to or anyone close to them. In such ket, 2015,p.14). Swedish authorities being unable to investi- cases, the information is confidential (Skat- gate foreign affiliates, many cases are left teverket, 2014,p.2). Foreign bribery unsolved. Nonetheless, the Swedish author- In the past, bribes paid by Swedish compa- ities have reported that the new offence of It is prohibited to process personal data that nies to foreign politicians and officials have ‘negligent financing of bribery’ from 2012 will discloses race or ethnic origin, political opin- been accepted as certain forms of bribery address the challenges concerning interme- ions, religious or philosophical convictions, and have only been explicitly forbidden as diaries. As a result of international criticism and membership of trade unions. It is also of 1999 (Andersson, 2002). in the UN, OECD and EU, a commission has prohibited to process personal data relat- It should be noted that there is no distinc- been charged with reviewing the liabilities ing to health or sexual life. The principle of tion in Sweden between bribery of a foreign of legal person. Results are expected later public access to official documents, which public official and bribery of a domestic this autumn. is embodied in the Freedom of the Press Act public official. Nonetheless, the apparent means that the public authorities are liable weakness of enforcement against compa- In 2005, fines were determined for legal upon request to provide copies of public nies for foreign bribery offences can, at least persons involved in foreign bribery from SEK

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 55 of 88 5000 to SEK 10 million (EUR 1.1 million). Within Swedish society, corporations of indi- Telia Uzbekistan Affair viduals involved or prosecuted in the cases After 2012, the allegations first time appeared on the National of foreign bribery are not only prosecuted, Television claiming that Swedish prosecutors are investigating but are also “sentenced” by the decline the daughter of Uzbekistan’s president on suspicion of taking of reputation. The penalty for bribe-taking bribes (2.3 billion Swedish crowns ($358 million) for a 3G licence or bribe-giving is a fine or a maximum of in Uzbekistan) to let Nordic telecoms company TeliaSonera (37% owned by the Swedish state) enter the country’s market. Gulnara Karimova, daughter of President Islam Karimov, two-years imprisonment. If a bribe-taking named by the Swiss public prosecutor as a suspect in the case which is also being investi- crime is regarded as gross or major the gated by Dutch and U.S. authorities (Nordenstam & Swahnberg, 2014) (Hansegard, 2015) punishment is increased to a sentence of a minimum six-month to a maximum six-year In 2016, Prosecutors asked the Amsterdam court to confiscate 300 million euros and imprisonment (Andersson, 2002). impose a fine of nearly 5 million euros. They also called on the court to seize a 6 percent stake held by the front company, Takilant, in Ucell, the Uzbek subsidiary of Nordic tele- In order to further the fight against corrup- coms operator Telia Company AB.”The bribes were paid in exchange for entry into the tion in cases of foreign bribery, international Uzbek telecommunications market,” prosecutors said in a statement. “The beneficiary of legal systems must be similar. In order for the money was the daughter of the Uzbek president.” Takilant was owned by Karimova, this plan to be effective, an accurate over- prosecutors said (Deutsch, 2016). view of dual criminality must be reviewed (European Commission,2014). The story in Figure 1 to show: The Teliasonera Uzbekistan foreign-bribery scandal Figure 1 illustrates the difficulty and new appearances of foreign bribery.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 56 of 88 SHADOW ECONOMY AND be also linked to shadow economy: alcohol transactions from entering the market, little MONEY LAUNDERING and tobacco. According to CAN, in 2015 the research has been conducted in this field. The term shadow economy does not appear 5.5% of alcohol consumed was a result of that often in Sweden as it has a variety of smuggling. In 2014, 2% of the consumption MONEY LAUNDERING synonymous terms to describe it such as of cigarettes was a result of smuggling. In the past, Sweden has been critizised by black market, undeclared work, parallel the Financial Action Task Force (FATF) for economy, and black work. The term black There is also the existence of “Shadow not having paid enough attention to money work is the most commonly used in Sweden Banking” (Hansson, Oscarius, & Soderberg, laundering crimes and not having introduced to refer to the shadow economy. Swedes 2014). It consists of financial organizations up to date legislation. The Swedish Financial think of black work as “undeclared pay in outside the regular banking system, which Supervisory Authority (SFSA) is the agency money or in favors” or “undeclared com- are not regulated or supervised as tradi- which deals with money laundering . Its aim pensation for work”. (Skatteverket, 2006). tional banks. The monetary transactions in is to reduce money laundering by promoting According to Schneider (2015), in 2015 the “Shadow Banking” vary from SEK 4-12 mil- stability and efficiency in the financial sector shadow economy was responsible for 13.2% lion (423.596 - 1,2M annually) (International Bar Association, 2014). of Sweden’s GDP. Swedish society encourages people to The Swedish Bar Association (2015) Where undeclared work makes up the largest reduce their usage of cash (Schneider). For describes money laundering as an illegal part of the shadow economy, the second and example, many bars do not accept cash, act used for the purpose of hiding or con- the third largest sectors could be identified and tickets to events are purchased with a verting income which has been obtained as prostitution and illegal drugs (Warmark, text message. Out of 780 bank branches in from criminal activities. Investment firms, a Bjorling, Papilla, & Engdahl, 2008). Moreover, Sweden, 530 do not allow cash services. significant number of companies, and other there are two more industries which could Although this can prevent illegitimate money professionals outside the financial sector

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 57 of 88 Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 58 of 88 are required to prevent money laundering anti-corruption measures (http://www. employees (Dahlstrom & Lapuente, 2008). by complying with governing regulations, institutetmotmutor.se/en/publications/ • “Punishment” of politicians by not voting recommendations and general guidelines business-code/). again for them, a high number and avail- (Finansinspektionen 2011). • An online course where people can ability of clean alternative politicians test their knowledge about corruption and political parties (Esaiasson & Munoz, Swedish legislation dealing with money (http://fxm.se/Utbildning_eng/story_ 2014). laundering exists in the Penal Code and the html5.html). The course was established • Introducing a general ban on donations Money Laundering Act (MLA). In practice, by the Swedish Defense and Security from donors whose identity is not known crimes associated with money laundering Export Agency and it can be used as a to the party or candidate and extending are prosecuted, but not money launder- form of training for new employees. the scope of that legislation to cover ing itself. Most often, money laundering is • Public access to information is critical regional and local levels (European prosecuted as tax evasion if no other direct to Swedish culture. Information about Commission,p.10). connection to crime is found. Many money state and municipal activities are open • Requiring municipalities and counties laundering incidents involve self-laundering, and accessible to the general public to secure a sufficient level of transpar- wherein a person tries to launder their own and the media. This plays a key role in ency in public contracts with private illegally obtained capital (U.S. Department of ensuring a high level of transparency entrepreneurs. Ensuring the indepen- State, 2013). and therefore is crucial for effective dence of municipal audits reviewing prevention of corruption. municipal activity and that monitoring GOOD PRACTICES • Low levels of “politization” among public of compliance at local governance level • The code developed by the Swedish servants and individuals. High standards is prioritized (European Commission,p.10). Anti-Corruption Institute, which is a busi- and expectations for the principles of • Ensuring that the liability of legal persons ness organization, promoting preventive political neutrality among the public for foreign bribery is enforced in cases

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 59 of 88 where the offence is committed through • There is an open exchange of ano- remain anonymous and it may constitute a lower-level employees, intermediar- nymized information regarding potential criminal offence for a representative of an ies, subsidiaries, or third-party agents cases of corruption. Representatives authority to inquire into a subject’s identity including non-Swedish nationals. Rais- from the respective authorities (The or for the journalist to reveal it. There is no ing the level of fines for corporations and Swedish Work Environment Authority, equivalent protection in the private sector. other legal entities. Consider reviewing Swedish Economic Crime Authority, However, a recent Swedish government the provision of dual criminality (Euro- Swedish Social Insurance Agency, Swed- official report proposed new legislation to pean Commission,p.10). ish Competition Authority, Migration strengthen whistleblowing protection in • The perception of culture and norms Agency, Swedish Tax Agency, Swedish the private sector for employees working among employees could be evaluated Board for Accreditation and Conformity in publically funded activities and services: by means of surveys in which questions Assessment and The National Agency health, education, and welfare. Furthermore, are asked about the employees’ knowl- for Public procurement) meet approxi- an independent expert committee of inquiry edge of operational rules and policies mately every 6 weeks to discuss issues has been launched to review and propose to combat corruption and irregularities and developments (Lunning, 2016). recommendations to increase protection (National Council for Crime Prevention, for employees who blow the whistle on var- 2013,p.36) WHISTLEBLOWING ious forms of misconduct, irregularities or • Training could be carried out about conse- The laws protecting civil servants regarding offences (European Commission 2014, p.4). quences and myths relating to corruption. the disclosure of information to the media Training can, for example, be conducted and access to official records are clearly It is important that the agency has a support- by industry associations in cooperation stated in the Freedom of the Press Act and ive attitude towards the person who blows with police and prosecutors (National the Freedom of Expression Act. The law also the whistle. Keeping an eye open for irregu- Council for Crime Prevention, 2013,p.77) provides that civil servants have the right to larities should be encouraged. A person who

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 60 of 88 has the courage to report their observations • Review and develop systematic risk anal- this means in purely practical terms, in should not risk being punished through yses and control systems. Work on risk training and workplace discussions. Fine direct or indirect reprisals from managers analyses and control systems should tune the functions that form the agency’s or colleagues. This is the management’s be arranged as active cooperation give public face. Show in words and action responsibility. all parties opportunities to understand that management wants openness to • “Confront naivety and complacency and learn. Regularly follow up the results also mean an open discussion climate and create risk awareness discussions of risk analyses and controls. Discuss within the agency. regarding the results of a systematic risk the results in the management team. • Inform the employees of their respon- analysis. Encourage workplace discus- Update and develop policy documents sibility to react and take action if they sions on ethical dilemmas and setting and systems as necessary. observe misconduct and irregularities. boundaries. This contributes to an open • Annual employee performance reviews. Make clear that management welcomes climate for discussion and has a pos- Bring up the risk of irregularities at the information when an employee observes itive impact on learning” according to annual employee performance review something inappropriate. Ensure that the Council on Basic Value. between managers and employees. employees know who they can to turn to • Emphasize basic values in the workplace. In areas where there is a clear risk, in the organisation with this information. Set up a platform through introduction, discussions should address matters Protect and support whistle-blowers. training and regular workplace discus- concerning possible exposure to inap- • Train managers to act quickly when sions that reaches all employees at all propriate influence and how this can be signs of inappropriate behaviour come levels. Then keep the discussions on dealt with. to light Train managers and supervisors ethical dilemmas in the organization • Promote external and internal openness to observe signs of changed behaviour alive and regularly raise difficult issues and transparency. Discuss the purpose among employees or fellow manag- to managerial level. of openness and transparency, and what ers. Require that they regularly initiate

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 61 of 88 constructive discussions that refer back in new forms. Examples of corruption in Council For Crime Prevention, 2013,p.73). The to the basic values and issues related to Sweden do not always involve monetary most common sanctions for corruption activ- the agency. transactions. Corruption usually comes in ities are day-fines, followed by a conditional • Take open and forceful action in the the form of favors or assistance. The public sentence. In some cases, damages have event of exposure Make the routines does not view corruption as a pressing issue also been awarded. Only 12% of those con- for dealing with suspected irregularities or something that has to be on the country’s victed of corruption charges receive prison known and have measures prepared. main agenda. sentences– and for about half of those, It can be useful to conduct exercises the length of imprisonment is at most one for worst-case scenarios. Diffuse the Nonetheless, recently Sweden received year (National Council For Crime Prevention, spread of rumours and gossip by being criticism from the EU Commission for its 2013,p.29-30). open about past incidents and how they inability to tackle the issue of foreign brib- were dealt with. ery. The most well-known case was when • Avoid acting in a way that creates a cul- the Swedish telecommunications company ture of fear of reporting on one another. Telia was involved in a foreign bribery scan- (Marcusson & Cloarec, 2014,p.23-24). dal in Uzbekistan. The company attempted to bribe the Uzbekistan political elite in IDENTIFIED GOOD PRACTICES order to enter the market. According to surveys, reports and journal articles conducted both nationally and Sweden does not have a designated anti-cor- internationally, Sweden is labelled as a ruption agency, but does have a number of “Corruption–Free” country. Nonetheless, bodies that may collectively be considered corruption exists, is visible, and can appear to fulfil an equivalent function (National

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 62 of 88 General trends and common and Public Service. This, together with a VI Conclusions issues of the Nordic countries well-informed society characterized by a Nordic countries have emerged over the strong cohesion, sense of common good, years as “champions” in the fight against and high education levels, makes corruption corruption, representing an example to an almost non-existant issue, as confirmed follow for countries struggling for a more by its very high ranking in the CPI. The transparent, equal, and just society. More- decidedly modest lifestyle of its political over, they placed several times at the elite makes Denmark a remarkable example highest position of the Corruption Percep- to follow. tion Index. These remarkable results are due to various factors common amongst all of Iceland has taken a very positive turn towards them, namely, strong social cohesion and a the freedom of press when the International sense of the common good that reduces the Modern Media Institute was founded in need for citizens and public servants to get 2011, combining various international laws involved in corrupt practices, openness and most friendly to journalists. Therefore, this transparency as fundamental principles of country represents a safe haven for journal- conduct of public affairs, efficient and equal ists and whistle-blowers. justice systems, and very thourough laws on asset disclosure of government officials. Finland is regarded as being very transparent in its governmental, legislative, and Denmark has a long tradition of openness administrative procedures, and is charac- and transparency regarding its Parliament terised by high standards of living, relatively

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 63 of 88 non-hierarchical societal structures, and also basic human rights. Sweden is also in tackling these issues in accordance with little if any politicisation of key civil service very active in increasing general knowledge directives and recommendations produced positions. In addition, Finland is very com- on issues of corruption, having produced a over the years. mitted to international cooperation against series of studies and surveys for public offi- corruption. cials and civil servants, and online courses for ordinary citizens. For several years, Norway has been in the top 5 least corrupt countries, mostly because of Despite the merits and achievements of the its harsh penalties that strongly discourage Nordic countries in the field of anti-corrup- politicians and public servants from engag- tion, as evident from this study, there are ing in criminal practices. It is also the only still pressing issues regarding corruption Nordic country that has a clear and explicit that need to be addressed properly, pertain- law on whistle-blowers’ protection, though ing to four main areas: lobbying regulation, flawed by some technical irregularities. foreign bribery, protection of whistle-blowers, and the shadow economy. Though of Sweden has been always famous for its course the performances of the five Nordic good practices of transparency and open- countries in these areas differ depending on ness in conducting public affairs, and for their specific political and socio-economic its citizens’ trust in their government. Its context, in the past decade major interna- laws on freedom of speech and freedom of tional insitutions such as the OECD, GRECO, press put Sweden not just on the frontline EU, and the G7 have repeatedly insisted on regarding whistleblowers’ protection, but increased efforts from Nordic governments

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 64 of 88 The table below presents a summary of the issues and the current state of these four areas by country.

Denmark Iceland Finland Norway Sweden

Lobbying Not regulated: a Not regulated. Not regulated: after Not regulated: Not regulated: pro- lobby register has GRECO recommen- though provisions on visions on trading been requested by dations, working trading in influence in influence are some professional group set up by Par- may be applied to applicable to illegal lobby groups but liament in order to illegal lobbying. lobbying. plans were recently prepare ethical abandoned by the guidelines on conflict Parliament. of interests and lob- byng of MPs.

Absence of consis- Recommendations Failure of the imple- Limited efforts in No distinction Foreign tent prosecutions from OECD (Phase 3 mentation of 12 out of cracking down foreign between bribery of bribery raised doubts about Report) to enhance 19 OECD recommen- bribery notwith- domestic and foreign the capacity of the control of cor- dations to improve standing very though public officials. Limits Denmark to pursue ruption abroad. No the control of foreign internal anticorruption due to precondition of foreign bribery cases. initiative has been bribery. However, laws. dual criminality. Precondition of dual taken by main insitu- zero-tolerance policy criminality may be a tions in order to raise on foreign bribery by limit. awareness or train many Finnish compa- public officials. nies and very active on the internation cooperation in this area.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 65 of 88 Whistle- No comprehensive Due to the Interna- No specific protection Whistleblowing pro- Laws protecting civil blowers whistle-blowers tional Modern Media for whistle-blowers. tection regulation servants for disclo- protection protection frame- Institute, founded After recommenda- under the 2005 Work sure of information work. Code of in 2011, Iceland is tions from OECD, Environment Act are clearly laid down conduct for public a journalistic safe GRECO and TI, a (WEA). Right of the in the Freedom of servants: guidelines haven and the insti- working group on employees to notify the Press Act and for disclosure of tute works effectively the issue has been irregularities and to the Freedom of non-confidential as a whistleblowers set up. receive a compen- Expression Act. A information. protection tool. The National Audit sation if subject of recent report of from Ministry of Labor However, no mea- Office (NAO) retaliation. the government has (2009): Code of sure for protecting can work as a Vague language of proposed new legis- guidance on whis- whistle-blowers whistleblowing the regulation and lation to strengthen tleblowing and on foreign bribery instrument for cit- ambiguities in tech- whistleblowing pro- freedom of speech cases. izens who want to nical aspect may tection in the private for private sector report irregularities. constitute a limit to sector for employees employees. the effctivity of the working in publicly law. founded activities and a Committee of inquiry on the issue has recently been instituted.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 66 of 88 12% of the Danish 14,4% of Icelandic Grey Economy Infor- Around 14% of gross “Black work” rep- Shadow economy GDP. The construction GDP (2010). No mation unit insituted GDP. Presence of resents 13,2% of industry represents agencies against in 2011. Labor-inten- mafia-like networks Swedish GDP. Pres- 50% of the shadow undeclared work in sive sector the most reported. ence of “shadow economy. “Home Iceland. invoved in shadow banking” and large work” scheme of tax economy. shadow econ- reduction for services omy based on usually purchased in alcohol, prostitution the informal sector. and drugs. Swedish authorities encourage people to reduce dras- tically the use of cash in their transactions.

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 67 of 88 Good practices from Nordic three main areas and institutions of high interests, undermining the Latvian demo- Countries that might be relevance to corruption: political parties, cratic process. Furthermore, Latvian citizens exported to and implemented parliament and legislative processes; public consider political parties, parliament, and in Latvia offficials and civil Servants; the shadow legislature as the institutions most affected economy and money-laundering. A thor- by corruption according to the TI 2015 Cor- Though the “faces” that corrupt practices ough intervention in these areas following ruption Perception Index. might assume, and the ways in which the the leading example provided by the Nordic phenomenon can unfold, are closely related countries might have a significant positive The Latvian National Anti-corruption author- to the specific political and socio-econom- impact on the fight of corruption in Latvia. ity, the KNAB, already has the power of ic-cultural context of a country, there are legislative initiative and the task of moni- several good practices employed by the 1) Political parties, Parliament and leg- toring political party financing. However, as Nordic countries that Latvian policymakers islative processes. The Latvian political noted by the EU anti-corruption report, the could take as example and “import” in order system is characterized by a large number KNAB’s impartiality is put in doubt by the to tackle the most relevant issues of corrup- of small and weak political parties. Their fact that its director is nominated by the tion that affect Latvia.This can be done even small size and fragmentation makes them government and approved by parliament, while acknowledging the fundamental differ- highly vulnerable to corruption, especially the very actors actors the KNAB is supposed ences between Nordic countries and Latvia in the form of illegal or “shadow” party to monitor. Therefore, increased indepen- regarding history and societal patterns. financing and lobbying. Often members of dence of the KNAB from the government by the business community, both domestic and involving other actors such as civil society or Transparency International’s 2015 Corrup- foreign, are the source of shadow lobbying, labor organization representatives would be tion Perception Index and the European and in this way influence and distort the a good starting point. In addition, the KNAB Union Anti-Corruption report identified legislative process in order to pursue their should be given powers of prosecution,

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 68 of 88 based the model of the Norwegian Økokrim. their positions to make citizens pay for ser- should be implemented along with an obliga- Other pertinent changes could be made vices they have a right to, they are also easy tion for companies and public administration regarding asset disclosure of members of targets of passive corruption by the citizens to define clear whistleblowing procedures. parliament. Thorough asset declaration themselves in order to avoid, for example, requirements, such as in Sweden, with long bureaucratic procedures. This phe- In addition to a whistle-blowers’ protec- an emphasis on the employment history nomenon has very negative repercussions tion system, measures should be taken to of the individual MP, would be effective in on the overall equality of the provision of increase the transparency of public admin- exposing eventual conflicts of interest or public services. istrative procedures, for example making relevant connections with members of the all documents of public officials accessible business community. Furthermore, in order An effective whistle-blower protection by citizens online, as in Denmark and Fin- to increase transparency and empower system would be highly beneficial for expos- land. All these potential measures could be citizens, such asset declaration should be ing irregularities in public administration accompanied, following Norway’s exam- made available online, as in Iceland. procedures and practices. A comprehen- ple, by very harsh penalties for active and sive system for protecting whistle-blowers passive corruption to discourage people in 2) Public officials and civil servants. in Latvia could be implemented based on getting involved in corruption practices. According to the Corruption Perception the system in Norway under the Work Envi- Index report on Latvia, public officials and ronment Act. Public officials seeking to 3) Shadow economy. The shadow econ- civil servants are considered, along with escape corrupt systems should be guaran- omy is another pressing problem for Latvia, political parties, most exposed to the risk of teed compensation, either monatery or of since it represents around 21.3% of its corruption, both active and passive. Public another nature, should they face retaliation annual GDP. The consequences of such officials in Latvia are not only involved in from their superiors. Such measures would massive undetected money traffic is very hidden networks that allow them to exploit be also effective in the private sector, and it negative for citizens, since all the missed tax

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 69 of 88 revenues from the shadow economy could to households for expenditures on a specific be used, for example, to improve public ser- list of services, encouraging people to pur- vices and infrastructure, or to create more chase those services in the regular market. job opportunities. In the specific case of Latvia, it could be expanded to the construction sector to There are many potential effective mea- fight the so-called “envelope wages” phe- sures that Latvia could implement to reduce nomenon. Another example of an effective the size of its shadow economy following the measure, again provided by Denmark, would example of the Nordic countries. The first be advanced announcement of tax authority step would be to create an institution simi- inspections to companies suspected of tax lar to the Finnish Grey Economy Information avoidance. This measure would have the Unit, with the task of publicizing information effect of reducing tax evasion without pen- about the shadow economy and on how to alties being imposed. reduce it. This institution could operate with a regular exchange of information with the Finally, following the example of Sweden, KNAB, since the shadow economy and cor- which has been particularly active in fighting ruption are often intertwined. the shadow economy and money-laundering, a simple but drastic reduction of cash pay- A second potential measure, in the area of ments could be enacted for those services taxation policy, would be to implement a that are thought to be susceptible of tax “Home Work Scheme” based on the Danish avoidance and money laundering. model. Such a scheme provides tax reduction

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Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 83 of 88 THIS PUBLICATION HAS BEEN PRODUCED WITH THE FINANCIAL SUPPORT FROM THE NORDIC COUNCIL OF MINISTERS. THE CONTENT OF THIS PUBLICATION IS THE SOLE RESPONSIBILITY OF TRANSPARENCY INTERNATIONAL (SABIEDRĪBA PAR ATKLĀTĪBU DELNA) AND DO NOT NECESSARILY REFLECT THE VIEWS OR POLICIES OF THE NORDIC COUNCIL OF MINISTERS.

Many thanks for help developing this study to Nicole Nicole Daphnis (USA), Karolis Tankunas (Lithuania), Mariam Apriashvili (Georgia) and Antonio Greco (Italy).

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 84 of 88 VII Appendix Appendix 1

TAX CALCULATIONS

• A Dutch court orders Takilant Ltd. to forefeit $135 million, having been found guilty accepting bribes from VimpelCom Ltd. and Telia AB in exchange for wireless frequencies. • The court also fined Takilant 1.6 million Euros/1.8 million USD on charges of complicity to foreign bribery and forgery. • The US government is demanding $550 million as the result of a money laundering scandal revolving around Gulnara Karimova in April

The Dutch prosecutor is still investigating Telia and thus it is doesn’t seem possible to find information on any charges or legal actions besides the 1.6 million Euro fine.

Sources: http://www.bloomberg.com/news/articles/2016-07-20/takilant-found-guilty-of-accepting-bribes- from-telia-vimpelcom http://www.bloomberg.com/news/articles/2016-04-22/u-s-seeks-default-order-against-uzbek- president-s-daughter-inbwolwx

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 85 of 88 Appendix 2

TAX CALCULATIONS IN FINLAND, ACCORDING TO KPMG

Annual income 24 000 Annual income 72 000 Annual income 120 000 Tax rate 14,07% Tax rate 30% Tax rate 37,7% Net income after tax and socia costs 19 170 Net income after tax and socia costs 45 500 Net income after tax and socila costs 67 508

Annual income 36 000 Annual income 84 000 Tax rate 20,8% Tax rate 32,8% Net income after tax and socila costs 26 322 Net income after tax and socila costs 51 300

Annual income 48 000 Annual income 90 000 Tax rate 25,4% Tax rate 34,8% Net income after tax and socila costs 32 900 Net income after tax and socila costs 56 700

Annual income 60 000 Annual income 108 000 Tax rate 28% Tax rate 36,3% Net income after tax and socila costs 39 200 Net income after tax and socila costs 62 233

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 86 of 88 Appendix 3

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 87 of 88 Appendix 4 TRUST IN PUBLIC INSTITUTIONS – NORDIC COUNTRIES

Government Parliament Pol. parties Judicial System

46% 59% 36% 83% Denmark (2015) (2013) (2013) (2014)

47% 60% 37% 74% Finland (2015) (2013) (2013) (2014)

46% 31% 18% 63% Iceland (2015) (2012) (2012) (2014)

70% 66% 42% 83% Norway (2015) (2012) (2012) (2014)

56% 69% 40% 68% Sweden (2015) (2013) (2013) (2014)

Sources: 2012 – Europian Social Survey 2013 – European Research Centre for Anti-Corruption and State Building (ERCAS) 2014 – OECD (Government at a Glance Survey)

Empirical Study of Anti-Corruption Policies and Practices in Nordic Countries 88 of 88