The United Nations and World Bank estimated that corruption can add up to 10 percent to the cost of doing business globally. It fundamentally erodes the ability of shipping companies to operate efficiently and profitably, and tarnishes the reputation of the industry.
The shipping industry is relatively susceptible to corruption because of the following unique factors.
Regular port calls and numerous inspections in different countries around the world, distinct sets of archiac law and regulation in local languages, and multiple levels of bureaucracy, among others, often expose the ship captains and crew to demands for illicit payments.
Also, it doesn’t help that small bribes are often deeply embedded in local culture. Moreover, the probable threats of physical harm and long delays that result in huge cost can add to the pressure to pay bribes.
The Maritime Anti-Corruption Network (MACN) reported that a customs officer accosted one captain and threatened to delay the ship and fine him US$60,000 for an error on the lubrication oil declaration. He then proceeded to ask for a bribe of US$7,000 to solve the problem.
To show the pervasiveness of bribery, there are incidents occurring even in Singapore, a country with strict regulations, extensive enforcement and heavy penalties. A recent case in Singapore involved an associate consultant of marine surveying company PacMarine Services Pte Ltd.
On three occasions, the respondent solicited bribes from ship masters in return for submitting false inspection reports that would allow the vessels to enter an oil terminal.
An aggravating factor in this case was that he was responsible for ensuring that vessels were free of high-risk defects before entering the oil terminal. He ignored this responsibility, understated threats, and sought to illicit bribes of US$3,000 in each incident, thereby putting a significant risk to human lives, the terminal and vessel.
Know the serious consequences
From C-suite management like CEOs and CFOs, to operational crew like ship masters or captains, all staff should be aware that the consequences of paying bribes extend beyond potential prosecution to severe safety risks.
So too, according to MACN, these corrupt demands are bad for shipping companies who stood their ground, as they can lead to delays or other commercial consequences. They are bad for the ports and governments, who acquire a reputation for corruption and have friction in the trading environment.
They are bad for the ships’ captains and crews, who come under pressure to reject demands yet face threats, intimidation, and sometimes violence when they try to do so.
Another issue to note is that acceding to demands for bribes may also constitute an offence under Singapore’s Prevention of Corruption Act and other international anticorruption legislation.
Ship crew and port officials should be aware that even low-level bribery will be pursued by enforcement agencies and prosecutors who are willing to pursue strict penalties to deter future offenders.
Take action now
Anti-corruption compliance is clearly gaining ground in the maritime industry. Now is the time, more than ever, for shipping companies if they have not already done so, to map out their anti-corruption strategy, come up with an action framework and then execute the plan.
To effect a positive change on the wider industry environment, shipping companies are encouraged to also fight corruption through collective action. This provides an opportunity to understand, communicate and engage with competitors and officials alike.
A stronger collective voice is often louder when speaking with governments, ports, and customs officials to combat ingrained and systemic corruption.
The fight is all about having transparency and integrity, therefore increasing the value of the companies. In a nutshell, such acts are detrimental not only to the companies involved, but also to the industry as a whole. CEOs of shipping companies, as captains of industry, should take the lead in the anti-corruption fight.