PHASE 3 REPORT ON IMPLEMENTING THE OECD ANTI-BRIBERY CONVENTION IN ESTONIA June 2014 This Phase 3 Report on Estonia by the OECD Working Group on Bribery evaluates and makes recommendations on Estonia’s implementation of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the 2009 Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions. It was adopted by the Working Group on 5 June 2014. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 2 TABLE OF CONTENTS EXECUTIVE SUMMARY ........................................................................................................... 5 A. INTRODUCTION .............................................................................................................. 6 1. The on-site visit .................................................................................................................. 7 2. Summary of monitoring steps prior to Phase 3 .................................................................. 8 3. Outline of the Report .......................................................................................................... 8 4. Economic background ........................................................................................................ 8 5. Cases involving the bribery of foreign public officials ...................................................... 9 6. Legislative and policy reforms since Phase 2 ................................................................... 10 B. IMPLEMENTATION AND APPLICATION BY ESTONIA OF THE CONVENTION AND THE 2009 RECOMMENDATIONS ...................................................... 11 1. The foreign bribery offence .............................................................................................. 11 (a) Definition of foreign public official ........................................................................ 12 (b) Arranging a bribe or gratuity ................................................................................... 13 2. Liability of legal persons .................................................................................................. 14 (a) Legal entities subject to liability ............................................................................. 14 (b) Standard of liability ................................................................................................. 14 (c) Proceedings against legal persons ........................................................................... 17 (d) Jurisdiction over legal persons ................................................................................ 20 (e) Responsibility of legal persons in practice .............................................................. 21 3. Sanctions .......................................................................................................................... 21 (a) Sanctions against natural persons for foreign bribery ............................................. 21 (b) Sanctions against legal persons for foreign bribery ................................................ 22 (c) Other sanctions ........................................................................................................ 22 4. Confiscation ...................................................................................................................... 23 5. Investigation and prosecution of the foreign bribery offence ........................................... 24 (a) Relevant bodies responsible for investigation and prosecution of foreign bribery . 24 (b) Conduct of investigations and prosecutions ............................................................ 28 (c) Statute of limitations ............................................................................................... 31 (d) Jurisdiction over natural persons ............................................................................. 32 (e) Prosecutorial independence ..................................................................................... 33 6. Money laundering ............................................................................................................. 34 (a) Foreign bribery as a predicate offence to money laundering .................................. 34 (b) Money laundering statistics ..................................................................................... 35 (c) Detection of foreign bribery in the FIU through STRs ........................................... 35 7. Accounting requirements, external audit, corporate compliance and ethics programmes ............................................................................................................................. 38 (a) Accounting standards and false accounting offence ............................................... 38 (b) Detection and reporting of foreign bribery by external auditors ............................. 39 (c) Internal controls, ethics and compliance ................................................................. 40 8. Tax measures for combating bribery ................................................................................ 41 (a) Non-tax deductibility of bribes and enforcement .................................................... 41 (b) Awareness, training and detection ........................................................................... 42 (c) Reporting and sharing of tax information ............................................................... 42 3 9. International Cooperation ................................................................................................. 43 (a) Mutual legal assistance and extradition framework ................................................ 43 (b) Spontaneous sharing of information with foreign authorities ................................. 45 10. Awareness-raising in the public and private sectors and reporting of acts of corruption ................................................................................................................................. 45 (a) Awareness-raising in the public and private sectors ............................................... 45 (b) Reporting suspected acts of foreign bribery ............................................................ 48 (c) Whistleblower Protection ........................................................................................ 50 11. Public advantages ......................................................................................................... 52 (a) Public procurement.................................................................................................. 52 (b) Official Development Assistance ............................................................................ 53 (c) Officially supported export credits .......................................................................... 53 C. RECOMMENDATIONS AND ISSUES FOR FOLLOW-UP ............................................... 55 1. Recommendations of the Working Group ........................................................................ 56 2. Follow-up by the Working Group .................................................................................... 59 ANNEX 1: PHASE 2 RECOMMENDATIONS TO ESTONIA AND ASSESSMENT OF IMPLEMENTATION BY THE WORKING GROUP ON BRIBERY IN 2010 ................. 61 ANNEX 2: LIST OF PARTICIPANTS ...................................................................................... 64 ANNEX 3: LIST OF ABBREVIATIONS, TERMS AND ACRONYMS .................................. 65 ANNEX 4: EXCERPTS FROM RELEVANT LEGISLATION ................................................ 66 4 EXECUTIVE SUMMARY The Phase 3 Report on Estonia by the OECD Working Group on Bribery evaluates and makes recommendations on Estonia’s implementation and enforcement of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and related instruments. The Report considers key Group-wide (horizontal) issues, particularly enforcement. The Report also focuses on country-specific (vertical) issues arising from changes in Estonia’s legislative and institutional framework, as well as progress made since Estonia’s Phase 2 evaluation in 2008 and Written Follow-Up in 2010. While the Working Group welcomes certain efforts of Estonia to implement the Convention, it is concerned about the lack of enforcement of the foreign bribery offence. Since becoming a Party to the Convention in 2005, Estonia has not investigated or prosecuted any foreign bribery cases, despite available information of allegations of bribery of foreign public officials committed by Estonian individuals or companies. Estonia needs to ensure that foreign bribery allegations are thoroughly investigated by gathering information from diverse sources, including foreign authorities. Taking due consideration of the size and increasing openness of Estonia’s economy and the efforts undertaken by Estonia to enhance the competitiveness of its companies abroad, the Working Group notes with heightened concern that lack of awareness of foreign bribery risks prevails among Estonian public officials and the private sector alike. This may in turn affect the proper detection and reporting of this crime in Estonia. Estonia should adopt a whole-of-government