Corruption in customs domain

In the recent years authorities have started to pay more and more attention to customs area in connection with anti-corruption. Therefore importance of customs related activities as part of corporate anti-corruption program has grown, which has created need for corporations to include customs area in their anti-corruption programs. Despite of practice need, there is gap in literature to be base for corporate anti-corruption program in customs area. This thesis attempts to reduce the gap by studying motivating factors for supply chain actors to bribe customs authorities and considering lessons learned for corporate anti-corruption programs. This thesis uses literature from customs, anti-corruption, and supply chain areas to conclude propositions on what gains supply chain actors are looking for, as well as methods for supply chain actors, when they bribe customs authorities. Also, to collect lessons learned for corporate anti-corruption compliance program literature was reviewed to understand elements that anti-corruption program should include. Then propositions are tested using case study research. Published United States Foreign Corrupt Practices Act (FCPA) cases are used as material for the case study. All three hundred cases that were published at the United States Department of Justice website at the end of the year 2016 were first analysed to seek any customs relevance. There was found thirteen customs relevant cases that were analysed deeper and used as test material to evaluate propositions for theory building. The cases had occurred in twelve countries, involving companies from 22 countries. Based on literature it was proposed supply chain actors to bribe customs authorities to receive a gain, in form of less or smaller payment of customs duties, taxes, fees or penalties, or to enable good subject to restrictions or prohibitions to cross the customs border or speed up border crossing process. The cases supported proposed gains. The propositions included also means for supply chain actors to receive the gains. Most of the means were supported by the studied cases. Most common mean was to pay bribes for customs to accept smuggling of goods through the customs by using improper customs procedure or customs not to impose customs controls and inspections for the consignment. There was less support for bribery during license or permit application phase to receive licenses for prohibited or restricted goods. There was also a case where penalties were avoided by bribing auditing customs officer at a company site. Then based on propositions and studied cases lessons learned for corporate anti-corruption programs were formulated. During the thesis work there was found four lessons learned for corporate anti-bribery programs. First, a robust and effective customs compliance program is also an element for effective anti-corruption program. Second, customs brokers, transportation companies and other agents dealing with customs authorities on behalf of the company should be 4 considered as risky third parties, and therefore be subject to special anti-corruption program measures. Third, companies should not assume employee in any function or level to be safe from anti-corruption risk. And finally fourth learning is that companies should verify invoices charged by customs brokers and other third parties that are dealing with customs to ensure payments to be appropriate and bribes being not hided. Therefore this thesis makes contribution to the knowledge base by creating understanding on why supply chain actors bribe customs authorities and by collecting lessons learned for corporate anti-corruption programs. However there are several limitations, mainly related to use of only the FCPA cases as material. Also several ideas for future study possibilities have been presented. Both limitations and future study ideas are presented in the chapter 9.