TRACE International has published its annual rankings of corruption in countries around the world. As usual, New Zealand and the Nordic countries are the least corrupt places to do business, while failed states such as Somalia, North Korea, Yemen, and Venezuela are the worst.
The 2019 data is available on the TRACE website as of today. Each country’s ranking is based on several criteria including the opportunity for bribery, the climate for deterrence against bribery, transparency in government operations, and more general civil oversight such as the presence of free press.
Taken altogether, the rankings aren’t any big surprise. New Zealand topped the 2018 rankings (OK, Kiwis, we get it that you’re ethical) and the Nordics filled out the rest of the top five, albeit in a slightly different order. All the usual failed states and war-torn countries also filled out the bottom of the rankings, as they always do.
The United States ranked 15th this year, which is a slight improvement from last year when it ranked 18th. Moreover, our overall score was driven more by good marks in transparency in government operations and overall civil society — not in deterrence, where the U.S. scored lower relative to its peers.
That’s something to think about the next time you hear people complaining that the U.S. puts itself at a disadvantage in the global marketplace thanks to zealous enforcement of anti-bribery laws. Specifically on enforcement, the TRACE index gives the United States a score of 29 — worse than Britain (21), Singapore (9), or goody two-shoes Finland (1), among other countries. (In the TRACE methodology, each factor gets a score of 1 to 100, where lower numbers are better than higher ones).
The rankings of some other major U.S. trading partners:
- Brazil: 100th
- Canada: 8th
- China: 133rd
- Germany: 9th
- Japan: 25th
- Russia: 110th
Again, none of this is news. It’s more accurate to say the TRACE index adds some data-driven precision to what compliance professionals already know at a gut level: democracies are less of a bribery risk than autocracies, and failed states are a mess.
This year TRACE also debuted a visually nifty Bribery Risk Typology tool. It works as a decision tree to help people find all countries that fall into a certain type of bribery risk profile. For example, you can start with all countries in the world and then filter down to “more democratic” countries, with “weaker civil societies,” and more “complex economies” — to find the several countries that fit that description. See Figure 1, below.
How to Use Rankings
TRACE bases its rankings on data from groups such as the World Bank, the World Economic Forum, the International Labor Organization, and other groups. TRACE uses that data to answer questions such as how long it takes to register property in a country, how long to get electric service, or share of the labor force working in government.
The practical upshot is that compliance officers can use these rankings to help you put your bribery risk in context: which countries are more corrupt than others, and therefore need more of your attention if you plan to do business there.
The rankings are only a roadmap, of course. For example, Jamaica ranks 50th and Brazil 100th — but it would be wrong to infer that therefore Brazil is twice as corrupt as Jamaica, and you should double your per-capita compliance budget there.
Corruption rankings like this (from TRACE, Transparency International, and other groups) are better used as tools to help a compliance officer guide his or her thinking. So you’ll know that Brazil poses a greater corruption threat than Jamaica, but perhaps not as great as China (ranked 133rd). Then you can consider how your own company’s operations work in each country, and make a better judgment about how much compliance resources to invest in each one.
In other words, rankings like these help compliance officers to take a risk-based approach to developing their corporate compliance program. That’s what the Justice Department and other regulators around the world want to see, no matter where their countries fall on these rankings.