COMMENTARY: Canada's creep up corruption list a cause for concern for regulators, business

HONG KONG/NEW YORK (Thomson Reuters Regulatory Intelligence) - Graft scandals, and the political, economic and legal fallout associated with them, have become public enemy number one. Efforts to fight corruption and punish corrupt individuals and businesses are at the top of the agenda for many regulators and government around the world.

A tourist poses for a picture on a bridge at the Ebrington Square area of Derry City, October 4, 2013 .

Mere association with organizations or geographical locations considered to present a high risk of corruption is sufficient to attract regulatory scrutiny. As a result of these developments, companies are becoming more cautious of their business ties.

The highly publicized misconduct of two large Canadian corporations is shining an uncomfortable spotlight on the Canadian business community. Allegations of corruption and bribery plaguing SNC-Lavalin and Bombardier Inc., two leading conglomerates, are making headlines in a very sensitive global climate that is increasingly intolerant of corruption.


Earlier this month, Bombardier disclosed{here} that it had received a show-cause letter from the World Bank's investigative unit in connection with the financial institution's audit of a 2013 rail signaling contract in Azerbaijan. The project, which was awarded to a consortium led by Bombardier, was heavily financed by the World Bank.

The World Bank’s Integrity Vice Presidency alleges that Bombardier had colluded with senior officials in Azerbaijan to win a C$340 million contract to supply signaling equipment for a section of a rail corridor connecting Asia and Europe via Azerbaijan. The World Bank’s audit also found evidence that Bombardier had used intermediaries to bribe government officials in Azerbaijan, which, if proven, would be a direct violation of the Canadian Corruption of Foreign Public Officials Act (CFPOA).

Generally, recipients of a show-cause letter from the World Bank are required to respond and give reasons as to why formal enforcement action should not be taken against them.

Bombardier previously disclosed that it has submitted a private response. The company has described the show-cause letter as a preliminary finding that does not represent formal accusations. Moreover, it has publicly disagreed with the allegations from the World Bank of any wrongdoing.

Bombardier also said in its statement that the World Bank was intimately involved in the bid evaluations for the Azerbaijan project and had previously issued a no-objection letter representing that it had accepted the bidding process.

The World Bank is not the only organization or agency that has leveled allegations of corruption in against Bombardier over the company’s dealings in Azerbaijan.

In 2017, prosecutors in Sweden launched an investigation into Bombardier's Swedish arm{here}. Prosecutors alleged that the entity and several of its executives were involved in colluding with government officials in Azerbaijan and paying bribes to win the signaling contract.

A former executive at Bombardier Sweden was detained and charged. He was later acquitted but Swedish prosecutors have launched an appeal and a new trial is expected to start this year.

Bombardier, in its statement disclosing the show-cause letter, said that contracts financed by the World Bank only account for 1% of Bombardier Transportation’s business. Nevertheless, the damage to the company’s reputation from the allegations may amount to more than a miniscule slice of profits.

The company has been the subject of criticism in recent years, ranging from complaints over missed delivery deadlines, quality issues to anticompetitive conduct{here}. Negative publicity associated with allegations of corruption may further erode the company's standing in the eyes of investors and the public.


The recent allegations against Bombardier, if proven, will worsen Canada's standing as one of the most frequently cited countries on the World Bank's blacklist of corporations and individuals that have been sanctioned under its corruption and fraud policies{here}.

The list is dominated by companies in China. Vietnam and Canada trail closely.

The number of Canadian companies that have been sanctioned by the World Bank jumped sharply in 2013 after SNC-Lavalin and its affiliates were debarred in connection to alleged bribery of Bangladeshi government officials to secure a construction contract in a road-rail bridge project over the Padma River in Bangladesh.

At the time, the World Bank, which had provided substantial financing for the project, pulled out, specifically citing corruption concerns with SNC-Lavalin{here}.

The subsequent debarment of SNC-Lavalin by the World Bank for a period of 10 years added a substantial number of new names to the blacklist.


SNC-Lavalin has suffered substantial reputational damage in recent years. In addition to the debarment by the World Bank, two of the company’s executives were charged in Canada based on evidence supplied by the World Bank. However, the individuals were later exonerated after wiretap evidence was excluded by the court in 2017.

Despite the exoneration, the Canadian public remembers.

In 2015, SNC-Lavalin and two of its subsidiaries were charged in Canada with corruption and fraud in connection to company dealings in Libya. The case has been slow to make its way through the court system, but a judge on Wednesday ruled that there is enough evidence to send the case to trial.

News reports concerning the case have frequently included references to SNC-Lavalin’s involvement in Padma Bridge. The constant reminders of the company’s alleged misdeeds have chipped away at SNC-Lavalin’s corporate image and even generated rumors that the company could be broken apart in the near future.

The negative press and continuing enforcement actions have cost the company credibility and business prospects{here}.


Canadians need to be concerned about the involvement of Canadian companies in corruption and bribery in overseas markets. These growing occurrences are becoming a stain on the reputation of the Canadian business community.

Cracking down on corruption has become a major priority for regulators in many jurisdictions, including countries where Canadian companies may like to do business such as the United States and the United Kingdom. The heightened regulatory scrutiny on corruption in these countries has put immense pressure on corporations to implement compliance measures to minimize their exposure to bribery risks. Some of these measures undoubtedly include rigorous vetting of business partners with an eye to avoid companies, or even countries, with dubious reputations.

Being seen as a liability risk is fast becoming a serious problem that needs to be addressed by Canadian business, regulators and investors.

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(Helen Chan is a regulatory intelligence expert for Thomson Reuters Regulatory Intelligence, based in Hong Kong.)

This article was produced by Thomson Reuters Regulatory Intelligence - - and initially posted on May 30. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters