DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS CZECH REPUBLIC: PHASE 2 REPORT ON THE APPLICATION OF THE CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN INTERNATIONAL BUSINESS TRANSACTIONS AND THE 1997 RECOMMENDATION ON COMBATING BRIBERY IN INTERNATIONAL BUSINESS TRANSACTIONS This report was approved and adopted by the Working Group on Bribery in International Business Transactions on 27 October 2006. TABLE OF CONTENTS EXECUTIVE SUMMARY......................................................................................................................... 5 A. INTRODUCTION...................................................................................................................... 6 1. The On-Site Visit............................................................................................................................. 6 (a) The On-Site Visit in May 2006........................................................................................ 6 (b) Postponement of the On-Site Visit in October 2005........................................................ 6 2. General Observations ...................................................................................................................... 7 (a) Economic System............................................................................................................. 7 (b) Political and Legal System............................................................................................... 7 (c) Implementation of the Convention and the Revised Recommendation........................... 8 (d) Cases Involving the Bribery of Foreign Public Officials................................................. 8 3. Outline of the Report....................................................................................................................... 9 B. PREVENTION, DETECTION AND AWARENESS OF FOREIGN BRIBERY..................... 9 1. General Efforts to Raise Awareness................................................................................................ 9 (a) Government Initiatives to Raise Awareness .................................................................... 9 (i) The Updated Government Programme of Fight against Corruption...................... 9 (ii) CzechTrade............................................................................................................ 9 (iii) Additional Government Initiatives ...................................................................... 10 (b) Private Sector Initiatives to Raise Awareness................................................................ 10 (i) Business Organisations........................................................................................ 10 (ii) Major Enterprises................................................................................................. 11 (iii) Small and Medium-Sized Enterprises.................................................................. 11 (iv) Civil Society and Trade Unions........................................................................... 11 (c) Conclusion on Awareness and Awareness-raising......................................................... 11 2. Reporting, Whistleblowing and Witness Protection...................................................................... 12 (a) Duty to Report Crimes ................................................................................................... 12 (b) Whistleblowing and Whistleblower Protection.............................................................. 12 (c) Witness Protection ......................................................................................................... 13 3. Officially Supported Export Credits.............................................................................................. 13 (a) Awareness-Raising Efforts............................................................................................. 13 (b) Detection of Foreign Bribery ......................................................................................... 14 (c) Duty to Report Foreign Bribery ..................................................................................... 15 4. Official Development Assistance .................................................................................................. 15 5. Foreign Diplomatic Representations ............................................................................................. 16 (a) Awareness-Raising Efforts............................................................................................. 16 (b) Duty to Report Foreign Bribery ..................................................................................... 16 6. Tax Authorities.............................................................................................................................. 16 (a) Non-Deductibility of Bribes........................................................................................... 16 (b) Awareness, Training and Detection ............................................................................... 17 (i) Awareness-raising and Training .......................................................................... 17 (ii) Detection of Foreign Bribery............................................................................... 17 (iii) Conclusions on Awareness, Training and Detection ........................................... 18 (c) Sharing of Information and Duty to Report Foreign Bribery......................................... 18 2 7. Accountants and Auditors ............................................................................................................. 19 (a) Accounting and Auditing of the Private Sector ............................................................. 19 (i) Awareness and Training ...................................................................................... 19 (ii) Accounting and Auditing Standards.................................................................... 19 (iii) External Auditing................................................................................................. 20 (iv) Duty of Auditors to Report Crimes...................................................................... 20 (v) Duty to Provide Information to Law Enforcement upon Demand....................... 21 (b) Accounting and Auditing of the Public Sector .............................................................. 21 8. Money Laundering Reporting ....................................................................................................... 22 (a) Suspicious Transaction Reporting.................................................................................. 22 (b) Typologies, Guidelines and Feedback ........................................................................... 23 (c) Sanctions for Failure to Report ...................................................................................... 24 C. INVESTIGATION, PROSECUTION AND SANCTIONING OF FOREIGN BRIBERY AND RELATED OFFENCES ................................................................................................. 24 1. Investigation and Prosecution of Foreign Bribery......................................................................... 24 (a) The Commencement of Proceedings ............................................................................. 24 (b) Law Enforcement Authorities........................................................................................ 25 (i) Unit for Combating Corruption and Financial Crime (ÚOKFK) ........................ 26 (ii) Unit for Detection of Illegal Proceeds and Tax Crime (ÚONVDK) ................... 26 (iii) Resources, Awareness and Training.................................................................... 26 (iv) Division of Competence and Co-ordination among Law Enforcement Bodies... 26 (c) Prosecutors and the Judiciary......................................................................................... 28 (i) Organisation of the Public Prosecutor’s Office and the Judiciary....................... 28 (ii) Resources, Awareness and Training of the Prosecutor’s Office and the Judiciary............................................................................................................... 28 (iii) Division of Competence and Co-ordination among Prosecutors......................... 29 (iv) Supervision by Superior Prosecutors................................................................... 29 (d) Investigative Techniques and Bank Secrecy.................................................................. 30 (e) Mutual Legal Assistance and Extradition ...................................................................... 31 (i) Mutual Legal Assistance...................................................................................... 31 (ii) Extradition ........................................................................................................... 32 (iii) Denial of Co-operation Due to “Material Protected Interests”............................ 32 2. The Offence of Foreign Bribery.................................................................................................... 33 (a) Elements of the Offence................................................................................................. 33 (i) Bribery through Intermediaries............................................................................ 33 (ii) Bribery in Order that an Official Acts or Refrains from Acting in Relation to the Performance