Home – Bribery & corruption risk: Airbus reports €1.4B loss as enforcement fines soar to record heights

Bribery & corruption risk: Airbus reports €1.4B loss as enforcement fines soar to record heights

Posted on 02-24-2020 by Lisa Thompson

 This should have been a bumper year for Airbus, after rival Boeing grounded its 737 MAX aircraft following fatal crashes. Yet the multinational aerospace company reported a troubling loss of $1.5B earlier this month. A key reason for this result is a series record fines for bribery in many countries. The case is a stark reminder of the reputational, regulatory, financial and strategic costs when a compliance program falls short. 

Airbus recently agreed to pay a record $4 billion in penalties to the U.S., France and UK. This roughly breaks down as $2.3B to France, $1.1B to the UK, and $582M to the U.S. to settle charges of breaching the Foreign Corrupt Practices Act (FCPA) and International Traffic in Arms Regulations (ITAR).

The reason? Airbus paid bribes in Malaysia, Sri Lanka, Indonesia, Taiwan and Ghana between 2011 and 2015, using used a network of agents to make large ‘backhander’ payments to foreign officials to land high-value contracts. This operation was run by a unit at its French headquarters.

Adding up the costs of non-compliance with anti-bribery & corruption laws

The Airbus case is a reminder of the significant costs of bribery and corruption. For Airbus, these included:

  • Substantial fines: The $4B in fines contributed to the company’s $1.5B annual loss. Airbus CEO Guillaume Faury acknowledged in a press release that the bribery investigations are partly responsible.
  • Business disruption: Airbus was under investigation by regulators in France, the UK and the U.S. for four years, requiring a significant time investment by corporate leaders. In addition to paying fines, Airbus will enter into three-year agreements to improve its compliance practices, which will cause further disruption.
  • Reputational damage: Reputation is particularly important for companies in the aerospace industry at the moment, after Greta Thunberg’s campaign against the environmental costs of air travel and the fatal crashes of Boeing planes. The negative headlines surrounding the bribery scheme certainly had a dampening effect on the company’s reputation. 
  • Growth stagnation: Airbus had a clear opportunity this year in the wake of Boeing’s own reputational crises. Instead, this bribery and corruption investigation means Airbus must focus on damage control for its own reputation and tackling the risk of bribery and corruption. Its CEO hinted at this focus when he identified “company culture” as one of three priorities for 2020.
  • Staff turnover: The Guardian reports that “scores of senior executives” were sacked during the investigation. Airbus also announced thousands of job cuts in late February, although it did not explicitly link these to the fines.

Enforcement trends to watch

This case also demonstrates a number of trends in modern anti-bribery and corruption work which companies should be aware of:

  • Cross-border cooperation among regulators: The investigation was an international effort involving three countries. The Financial Times said the level of co-operation on this case was “unusual”, especially for French prosecutors. 
  • Investigations are going high tech: Technology is increasingly used in corruption investigations, making it easier for regulators to uncover corruption. Predictive coding software technology was used in this investigation to sift through millions of emails, contracts and other documents.
  • Deferred Prosecution Agreements (DPAs): have become the new normal. Under its agreement with the UK’s Serious Fraud Office, Airbus will pay the fine and improve its compliance program while being monitored for three years. If it cannot demonstrate improvement, it will face prosecution. 
  • Enforcement efforts are improving:  Globally, anti-bribery and corruption legislation and enforcement has increased. Prior to new anti-corruption legislation introduced in 2016 (known as Sapin II), France had never convicted a company of corruption. As the Financial Times wrote recently, “France long had a reputation for being lax on global corruption and outsourcing its juiciest cases to U.S. prosecutors—Airbus’ record settlement in an international bribery probe shows this era may be over.”
Until recently, the U.S. has led the world in enforcement, using its Foreign Corrupt Practices Act  (FCPA) to prosecute companies across many industries when anti-bribery and corruption compliance falls short. But given the strengthening of anti-bribery and corruption laws globally, companies face even greater pressure to implement robust risk management processes—from mapping corruption risks for different jurisdictions and sectors to engaging in risk-aligned due diligence and monitoring of third parties . How confident are you that your current compliance program could stand up to scrutiny? 

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  1. Learn more about risk management solutions and datasets available from Nexis® Solutions.
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