According to the 2017 Transparency International Corruption Perceptions Index, the worst‑performing region was Sub-Saharan Africa. For businesses operating in the region, making payments to public entities or officials can trigger compliance concerns. There is a high level of perceived corruption, and many of these economies are cash-based with incipient banking systems. Companies must navigate a multiplicity of applicable rules, both domestic and regional, and determine from a legal perspective what rules actually apply in reality.
Some countries apply regional regulations in addition to domestic laws. For example, countries may apply regulations from the West African Economic and Monetary Union (UEMOA), the Central African Economic and Monetary Community (CEMAC), the Organization for the Harmonization of Corporate Law in Africa (OHADA), or the Economic Community of West African States (ECOWAS), along with local regulations and laws.
Concerning domestic legislation criminalizing corruption in different African countries, Pinto discussed the origins of such legislation and the range of criminal punishments available. The punishments for the offense of corruption vary, from up to two years in prison in The Democratic Republic of Congo, to up to ten years in prison in Gabon, Cameroon, and the Republic of Congo.
Pinto provided a four-step roadmap for making lawful payments in the region. The steps are designed to help companies determine their compliance risk levels while operating in the African region.
- Companies should confirm the request for payment is duly grounded and legally justified. This necessitates examining local legislation, regional regulations, and separate rules related to particular sectors, such as the energy sector.
- Companies should determine how the payment can and should be made. For example, in Cameroon, Congo, and Equatorial Guinea, you cannot make payments in cash exceeding €700.
- Companies should make the payment to the correct and legitimate beneficiary, typically the public treasury.
- Companies should properly report and fully document the payment. Having the proper documentation can be quite challenging, but nothing should be paid without proper documentation and a receipt.
Pinto ended her presentation with a discussion of two practical cases. The first case was a tax audit of a U.S. company operating in Equatorial Guinea, and the second was a customs dispute in Gabon.
In the first case, tax authorities in Equatorial Guinea were conducting a tax audit of the Equatorial Guinean branch of a foreign company, headquartered in the United States. The tax authorities sent the company a letter indicating that they would be carrying out an inspection and that the company would be required to bear the cost of travel and accommodations to the headquarters.
In this example, there was legislation in Equatorial Guinea that required the company to pay displacement costs to government officials. When tax audits are conducted outside of the country, then all costs must be borne by the taxpayer. These costs include reviewing tax law, travel expenses, and the costs of all accommodations. All expenses should be supported by receipts and not be in excess of $30,000 for one year of an audit. In cases such as these, companies will typically choose to submit payments to the Equatorial Guinean government through third parties.
In the second case, Gabonese customs authorities conducted a customs audit on a Gabonese company and identified offenses that resulted in a fine of $80,000. The authorities proposed to settle the matter for $10,000. Pinto noted that similar situations often occur in countries like Gabon, Congo, or Cameroon, and, under the CEMAC, customs disputes can be subject to settlements. However, the company has to follow correct procedures and maintain required documentation of all payments. It depends on the jurisdiction and local laws, but, as a general rule, settlements should be paid to the public treasury.
Following the presentation, Pinto responded to questions, including one about the potential adoption of legislation punishing corruption-based offenses by government officials with unexplainable wealth. Pinto replied that, in most of the African countries, including Mozambique and Angola, government officials must present their tax returns. However, she acknowledged there is little enforcement of these provisions, and unexplainable wealth is generally not a criminal offense in these countries.
This article is also published in the Summer 2018 Edition of the Section’s International Anti‑Corruption Committee Newsletter.
For additional information about making lawful payments to public officials in Africa, read her article in the committee newsletter. See Ana Pinelas Pinto, Lilia Azevedo, & Vincent Olivier, Payments in Francophone African Countries: A Few Recent Trends, Int’l Anti-Corruption Comm. Newsletter (ABA Section of Int’l L.), Spring 2018 at 5.
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The Committee Co-Chairs for 2017–2018 are Roberto Bauza, Frank Fariello, and Corinne Lammers.
In August 2018, Frank Fariello and Severin Wirz will begin their terms as Committee Co-Chairs for 2018–2019.