Nobody wins in maritime corruption

Legal trade is profitable trade.

The maritime industry plays a crucial role in the global economy in sustaining growth in trade and commerce.  However, corruption is a cancerous tumor that is slowly choking the life out of maritime trade.  

Corruption, the misuse of entrusted power for private gain, can equally be perpetuated by port authority, customs official, port agent to CEO and CFO, basically just about anyone along the maritime supply chain.  Contrary to popular belief, corruption is detrimental to the one paying the bribe as well.  So, in the end, it is a loss-loss situation.

The globalized nature of the world has made corruption a borderless crime, more so for maritime trade where the supply chain crosses multiple jurisdictions, and where there is a significant number of cross-border activities and a large amount of interaction among personnel of different nationalities, which give rise to more opportunities for corruption.  Therefore, the very nature of maritime trade can leave companies exposed to bribes and fraudulent financial practices.

Corruption takes on many forms, including illegal purchase of letters of credit, under-invoicing, bribe paid to gain contract, and illegal payment to marine surveyor, and is often used to further various other criminal activities like wildlife or counterfeit goods trafficking.  One of the most common corrupt acts happen during port calls where certain officials demand cigarettes and cash, threatening the delay of the vessel, which has knock-on negative consequences, and sometimes even threatening the safety of the crew.

Corruption is expensive.  The United Nations estimated that corruption can add at least 10 percent to the cost of doing business.  And according to the United Nations Conference on Trade and Development’s Economic Development in Africa Report 2020, every year an estimated US$88.6 billion, equivalent to 3.7 percent of Africa’s GDP, leaves the continent in the form of illicit capital flight.  

Corruption is a direct assault on the integrity of free markets, distorts resource allocation, and erodes the public trust in private enterprise.  When business transactions are affected by the payment of bribes, they are not transparent and make a mockery of the business environment.  And when port and customs officials engage in corrupt act, they are essentially stealing from public fund and diverting money away from essential services to private interests, giving the maritime industry and the country a bad name. 

And if corruption is left unchecked, is perceived to be entrenched and widespread, and that the bureaucracy exists only to solicit bribes, whether in a region, country or industry, can lead to reputation damage, loss in investor confidence, a breakdown in social order and economic hardship.

Once the corrupt impression, whether justified or not, has been formed in the public’s mind, it will be relatively difficult to change it.  Sooner or later, the issue of prevalent corruption will be taken up by bad actors to stir up public sentiment and exploit popular grievances for political advantage, and who will also use this opportunity to crack down on targeted industries and political opponents, which will eventually destabilize the economy.

From an ethical perspective, corruption undermines fair competition and the rules of law, and punishes those moral companies that do not join in.  Sometimes, corruption can turn deadly and costs lives.  Transnational crime syndicates are known to offer bribes to customs and port officials to facilitate the trafficking of illicit drugs across borders.

Corruption is universal and is a fertile ground for organized criminal activities, including terrorism, and affects the individual, company, society, economy and the entire country, thus undermining national security, political, social and economic stability.  Therefore, corruption carries enormous costs, whether one measures in dollars, livelihood or public trust.

CEOs must plug all loopholes

Corruption comes from a weakness of the human nature – greed, temptation, the desire to amass wealth and to obtain business through unfair means. It is a fact of life that even if there is a high risk of getting caught and harsh penalty being meted out by the judiciary, corruption may not be eradicated completely.  

Accordingly, for a company, one of the better solutions to prevent corruption is to have an automated and ironclad compliance system which will as much as possible, minimize exposure for people to come into contact with opportunities for corruption; strong internal controls; multiple levels of checks and balances; and regular audits. 

Additionally, fighting corruption requires strong commitment from the top management, who must pledge a policy of zero-tolerance, and must ensure that anti-corruption efforts become an integral part of the corporate culture.  

CEOs must realize that employees’ indifference is the best breeding ground for corruption to grow.  As such, to lead by example and spur everyone into action, CEOs must not only be heard, but must also be seen, to walk the talk, and doing and acting out what they preach.

The anti-corruption message must permeate to everyone.  To end corruption decisively, CEOs need to promote ethics, transparency, accountability and integrity to all employees and stakeholders.

Having a zero-tolerance policy and framework protects a company and employees from being caught in thorny and compromising situations. It will also enhance competitive edge, boost reputation and staff morale, and for customers and potential customers alike, provide peace of mind and make doing business with the company more attractive.

Every employee and company must do their part in rooting out corruption because a chain is only as strong as its weakest link.  Only then can the maritime industry remain a conducive place for investment and business, and reap the benefits of a clean and incorruptible reputation.

Photo credit: iStock/ fizkes

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