Despite the advent of global anti-corruption enforcement efforts, Transparency International’s (“TI”) latest Corruption Perceptions Index (“CPI”), which ranks countries based upon “perceived levels of public sector corruption,” found that two-thirds of the 176 countries ranked in 2012 scored below 50 on a scale of 0 (“highly corrupt”) to 100 (“very clean”).1 TI concluded that “public institutions need to be more transparent, and powerful officials more accountable.”2

The CPI is not a measure of actual corruption activity. Rather, as its title suggests, the CPI is an index of “perceptions” based upon data from 13 international surveys that consider factors such as the accountability of national and local governments, effective enforcement of anti-corruption laws, access to government information and abuse of government ethics and conflict of interest rules.3

This year, TI updated the methodology used to calculate the CPI in order to better capture changes in perception in each country over time.4 The updated methodology is reflected in a revised scoring scale from the 0 to 10 scale used in previous years to the 0 to 100 scale described above.5 Despite these changes, the CPI’s year-to-year comparative ranking of countries (as opposed to individual scores) remains a useful tool and benchmark for allocating compliance, prosecutorial, and regulatory resources. The CPI’s annual rankings are a key measure for private actors to consult when designing or refining antibribery programs.

Bearing in mind the inherent limitations involved in such year-to-year comparisons, a number of trends are worth noting.

A key development in this year’s rankings was the “underperform[ance]” of many of the Eurozone countries affected by the recent financial and economic crisis.6 Greece, the Eurozone’s lowest-ranked country, experienced a significant decline from 80th place in 2011 to 90th place in 2012, a position it now shares with Colombia, Djibouti, India, Moldova, Mongolia, and Senegal. Among other Eurozone countries, Italy fell three places from 69th to 72nd, Austria and Ireland tied for 25th place (down from 16th and 19th, respectively), and Malta dropped from 39th to 43rd. In light of this marked and continued increase in the perception of corruption among Eurozone countries, TI has “consistently warned Europe to address corruption risks in the public sector to tackle the financial crisis….”7

Also of significance this year, none of the BRIC countries, representing some of the world’s largest emerging economies, scored above 50 out of 100. In terms of rankings, Brazil slightly improved, climbing from 73rd to 69th place (tying South Africa, which fell five spots). China also fell from 75th to 80th place, notwithstanding its recent adoption of anti-bribery legislation.8 India and Russia trailed the group, with India moving from 95th to 94th place. Russia, another BRIC country that recently adopted anti-bribery legislation,9 seems to have reversed its decline over the past several years, moving from 143rd to 133rd, where it is tied with Comoros, Guyana, Honduras, Iran, and Kazakhstan.

Among the other leading OECD countries, the United States improved slightly from 24th to 19th place, marking its first appearance among the top 20 countries since 2009. Germany, Japan, and the United Kingdom all ranked above the United States, with Germany at 13th (up from 14th), and Japan and the United Kingdom tied at 17th (down from 14th and 16th, respectively). Mexico, the United States’ third largest trading partner,10 continued its downward trend, sliding from 100th to 105th, despite also having enacted anti-bribery legislation.11

The rankings of perceived corruption for several South East Asian countries declined markedly over the past year. Indonesia fell 18 places, from 100th to 118th, where it is now tied with the Dominican Republic, Ecuador, Egypt, and Madagascar. Similarly, Vietnam slid 11 places from 112th to 123rd, tied with Belarus, Mauritania, Mozambique, and Sierra Leone. Thailand also fell eight places from 80th to 88th, tied with Malawi, Morocco, Suriname, Swaziland, and Zambia. Singapore, by contrast, remained stable, ranking fifth.

The Middle East and Central Asia continue to be extremely high-risk, with Kazakhstan (continuing its decline from 120th to 133rd), Kyrgyzstan (improving from 164th to 154th), Tajikistan (moving from 152nd to 157th), Turkmenistan (moving from 177th to 170th), Uzbekistan (also moving from 177th to 170th), and Afghanistan (moving from 180th to 174th) all ranking in the bottom third of the CPI. Although Iran and Pakistan both improved in the rankings last year, both declined this year and remained in the bottom third of the CPI. Iran fell from 120th to 133rd, tied with Kazakhstan and Russia, while Pakistan fell from 134th to 139th, tied with Azerbaijan, Kenya, Nepal, and Nigeria.

Africa remained the region perceived to be the most high-risk, with 25 countries ranked in the bottom third. Notable outliers were Botswana and Rwanda, which ranked in the top third of the CPI at 30th and 50th, respectively (from 32nd and 49th).

Overall, the countries perceived to be the most corrupt were Afghanistan, North Korea, and Somalia, whose rankings TI attributed to “the lack of accountable leadership and effective public institutions….”12 Rounding out the bottom ten were Haiti, Venezuela, Iraq, Turkmenistan, Uzbekistan, Myanmar, and Sudan.

Conversely, the countries perceived to be the least corrupt were Denmark, Finland, and New Zealand, a fact that TI attributed to “strong access to information systems and rules governing the behavior of those in public positions.”13 Sweden, Singapore, Switzerland, Australia, Norway, Canada, and the Netherlands were also ranked among the top ten countries. In light of the 2012 CPI, companies should carefully review the jurisdictions in which they conduct business, particularly if those countries rank in the lower end of the CPI. In considering whether to conduct business in a particular jurisdiction, companies should take note of TI’s warning that “[d]oing business in a country where corruption is rife means higher costs, delays and losing business to competitors who pay bribes.”14