In an annual non-event, Transparency International (TI) released its so-called Corruption Perceptions Index (CPI) (see here). The CPI “draws on 13 independent data sources” and “ranks 182 countries and territories worldwide by their perceived levels of public sector corruption. The results are given on a scale of 0 (highly corrupt) to 100 (very clean).”
As stated by TI: “While 31 countries have significantly reduced their corruption levels since 2012, the rest are failing to tackle the problem – they have stayed stagnant or got worse during the same period. The global average has fallen to a new low of 42, while more than two-thirds of countries score below 50.”
According to the TI: “The U.S. government’s decision to temporarily freeze and then degrade enforcement of its Foreign Corrupt Practices Act … sends a dangerous signal that bribery and other corrupt practices are acceptable.” TI does not explain what “degrade” means nor does it mention that in 2025 there was more corporate FCPA enforcement by the DOJ compared to 2021 or 2015 nor does it mention that the past nine months – including the present – has been the most active period of FCPA trials of individuals in the FCPA’s nearly 50 years.
The CPI generates a lot of media coverage and is aggressively marketed by TI and is perhaps a popular tool for business organizations in ranking risk (and thus prioritizing compliance).
However, for the reasons highlighted in this post compliance professionals should take the CPI with a grain of salt.
For starters, just because compliance professionals should take the CPI with a grain of salt, does not mean that the CPI (or other similar rankings) should be ignored.
Indeed, in a rare appellate court decision in the FCPA space, the Second Circuit in the Bourke case listed circumstances which provided “ample evidence” to support Bourke’s trial conviction on a conscious avoidance theory under the FCPA’s third-party payment provisions and specifically stated that “Bourke was aware of how pervasive corruption was in Azerbaijan generally.”
Nevertheless, query whether the CPI is a reliable or meaningful measure of the specific risks specific business organizations face when competing in the global marketplace for the following reasons.
- For starters, what is the utility of comparing the occurrence of something happening (or in the CPI’s case the perception that something is happening) in countries with less than 10 million people (for instance Denmark or Finland) compared to countries with more than 100 million, 200 million or 300 million people?
- The CPI is mostly a survey, and a survey of perceptions at that. This is not a dig on the CPI itself, after all how does measure an issue like bribery and corruption (particularly since there is no universal definition of these terms).
- The CPI is composed of distinctions without differences. Each country in the CPI is assigned a numerical score between 100 (the best score) and 0 (the worst score). Sure there is a meaningful distinction between Denmark (89) and South Sudan (9), but you probably did not need the CPI to inform you of this (see here). However, as a practical matter is there a meaningful distinction between a score of 40 (Tanzania), 30 (Peru) or 29 (Gabon)? Hardly, but these scores result in a substantial difference in the CPI rankings.
- The CPI is country specific, not province or region specific. We all recognize that certain states in the U.S., indeed certain cities within those states, have higher levels of actual or perceived corruption and the same is true in foreign countries. However, the CPI score is only on a country basis and is not province or region specific. In short, bribery and corruption is often localized and thus the CPI can both induce complacency (i.e. the business is fine because the country’s overall score is fine, even though a specific region in which the company operates may have higher levels of actual or perceived corruption) as well as result in needless worry (i.e. while the country overall has higher levels of actual or perceived corruption, the specific region in which the company operates may have substantially less).
- At its core, FCPA risk is the function of specific business actors (employees and agents) coming into contact with specific foreign officials, in the context of specific foreign business conditions. None of these factors are adequately captured by the CPI. Indeed, one can easily imagine a scenario in which – because of the industry, because of the product or service, and because of the go-to-market strategy – doing business in Denmark may present more risk than South Sudan.
- The CPI perpetuates stereotypes. No surprise that New Zealand is, as it always has been, near the top of the CPI list and that Libya is, as it always has been, near the bottom of the list. Yet to state the obvious, there are millions of hard-working, honest and ethical people in Libya. On the flip side, there are some dishonest and unethical people in New Zealand.
In short, I enjoy maps and thus each time this year look at the CPI map.
However, for the reasons stated above compliance professional should take the CPI with a grain of salt.
FCPA risk is best minimized through a risk assessment unique to a business organization in which the following questions provide a good starting point.
- Who are the company’s customers or potential customers in each country? Is the customer a government (whether federal, state, or local) department, agency or instrumentality? Does a government department, agency, or instrumentality, or individual associated with such units, have an ownership or equity interest in the customer?
- How does the company do business and/or interact with customers or potential customers in the country? Does the company use third parties in the foreign countries?
- How does the company’s product enter and exit the country? Does the company use the services of a customs broker or freight forwarder?
- What licenses, permits, or certifications does the company need to do business in the country? As to each license, permit or certification, how does the company obtain such approvals?
- Is the company subject to other unique forms of government regulation in the country? What other points of contact does the company have with foreign government in the country (such as tax and immigration authorities)?
