Customs Clearing Agents Ethics

Business Ethics
 CONTENTS
1). DEFINITIONS OF ETHICS

2). IMPORTANCE OF ETHICS

3). ETHICAL BEHAVIOR

4). ETHICAL PRINCIPLES

5). MEANING OF BUSINESS ETHICS

6). IMPORTANCE OF BUSINESS ETHICS

7). ETHICAL AND UNETHICAL BUSINESS PRACTICES

8). PRINCIPLES OF BUSINESS ETHICS

9). ETHICAL DILEMMAS

10). DECISION MODELS

 Upon the successful completion of the module, you will be able
to:
• Define the term ethics
• Clarify the importance of ethics
• Explain the meaning of business ethics
• Describe the importance of business ethics
• Compare and contrast ethical and unethical behavior.
• Apply the principles of business ethics in your day to day activities.
• Identify unethical business practices and prevent them from happening in
everyday work situations.
• Apply proper ethical business practices in curbing corruption.
• Discuss the factors that guide their decision making.
• Present the framework of at least three ethical decision models.
• Apply systematic and structured thinking in handling ethical dilemmas.
• Practice the steps for making ethical decisions.
 Discussion Questions
1. what is ethics/business ethics?
2. What is/ are ethical behavior and unethical
behavior?
3. Why ethics is important for CCA?
4. What is the difference between ethics and
law?
DEFINITIONS OF ETHICS
 DEFINITION OF ETHICS
The word Ethics comes from the Greek word ethos,
meaning ``the actual or recommended conduct``.
It is the branch of study dealing with what is the proper
course of action for man.
Ethics answers the question, "What do I do?“
It is the study of right and wrong in human endeavors.
At a more fundamental level, it is the method by which we
categorize our values and pursue them. Do we pursue our
own happiness, or do we sacrifice ourselves to a greater
6
 ETHICS…
A set of principles of right conduct.
A theory or system of moral values.
Moral values help shape the character and personality of
individuals. Children are taught about it through moral stories.
Moral values such as integrity, determination, loyalty,
truthfulness, honesty, giving respect to each other etc should be
inherited by every individual
Specific moral choice.
The rule of standards governing the conduct of a person.
Commitment to do the right thing.
7
The inner eye or voice that governs someone’s conduct.
 Customary/habitual and prescribed communal/shared
living standards, considered to be good.
 Ethics is a set of values and principles that we strongly
believe and follow.
 It is learning what is right or wrong, and then doing the
right thing.
 In generally, Ethics can be defined as going beyond
what is legal and doing what is right, even when no one
is looking!
8
 IMPORTANCE OF ETHICS

• Ethics has enormous influence in the day to day lives of

mankind.

• No society could flourish without having a cohesive basic

ethics at its foundation.

• Poor ethical judgments by ruthless people triggered

devastating wars, massacre that cause the death of innocent
civilians and many other scars in human history.

• Any failure in our ethics will reduce our ability to be

successful in our endeavors.

 Ethical Behavior

• Ethical behavior is conduct that is beyond reproach/

criticism and is in accordance to the laid down standards
of a society, institution or organization.
• The standards of conduct may not always be written and
adopted formally by the institution or organization.
• Standards of conduct change as organizations and
institutions evolve, emphasizing the need for regular
education about acceptable conduct in the profession and
the organization.
 Ethical Behavior…

• Ethics is about choices that people make about ordinary

decisions in day-to-day life.
• The choice to act one way vs another has an impact on the
outcomes.
• Choices are often impacted by personal and professional values.
• Many leaders use their personal lives as a moral compass for
their professional conduct.
• Values that we learn when young often guide us in our adult,
professional lives.
Ethics vs Law
 Ethics vs Law
• Ethics, also described as moral philosophy, is a
system of moral principles which is
concerned with what is good for individuals
and society.
• Law is a system of rules and guidelines
which are enforced through social institutions
to govern behavior.
 Ethics vs Law
Similarity between ethics and laws

• laws are made based on moral values of a particular society.

They describe the basic behavior of human beings.
• laws represent the minimum standards of human behaviors,
that is, ethical behavior.
• Both laws and ethics are systems which maintain a set of moral
values and prevent people from violating them.
• They both provide people guidelines of what may do or what
may not do in certain situations.
• They exist in a purpose of making people benefit from being
members of a well-regulated society.
 Ethics vs Law
Differences between ethics and laws

• ethics comes from people’s awareness of what is right and

what is wrong
• laws are written and approved by governments.
• Ethics may vary from people to people because different people
may have different opinions on a certain issue,
• laws describe clearly what is illegal no matter how people
arguing.
• Ethics is not well defined but laws are defined and precise.
• Nobody will be punished when they violate ethics
• Whoever violates laws is going to receive punishment carried
out by relevant authorities.
 Ethics vs Law
• An action can be illegal, but morally right. For example, in
ancient China, some people rob properties from rich people,
and give it to poor people, and it is considered to be morally
right but be illegal.
• An action that is legal can be morally wrong. For instance,
some people spend thousands of dollars on their pets while
some poor people on the street can not have enough food.
• Ethics and laws are closely related since laws represent
minimum ethical behaviors of human beings
• Ethics provides people guidelines on how to behave in order
to create a peaceful society
• laws carry out restrictions through punishment.
• Ethics and laws do not necessarily have any overlap, but
these two combined define how people should behave in
the society.
BUSINESS ETHICS
 WHAT IS BUSINESS ETHICS
It is the critical, structured examination of how people &
institutions should behave in the world of commerce.
It is also known as corporate ethics that examine the
ethical principles and moral or ethical problems that arise
in a business environment.
Business ethics is a form of applied ethics that examines
ethical principles and moral or ethical problems that arise
in a business environment. 19
Applied ethics refers to the practical application of moral
considerations. It is ethics with respect to real-world actions
and their moral considerations in the areas of private and
public life, the professions, health, technology, law, and
leadership.
Generally business ethics is coming to know what is right
or wrong in the workplace and doing what's right, in regard
to effects of products/services and in relationships with
stakeholders.
20
it is a system of moral principles applied in the
commercial world.
It is moral values and principles that determine our
conduct in the business world.
The development of reasonable moral standards and
procedures for deciding what is morally right and wrong in
practical business contexts.
The discipline of applying general ethical principles to
examine and solve complex moral dilemmas in business
situations. 21
GROWING IMPORTANCE OF BUSINESS ETHICS

Running a business requires adequate consideration

to a number of issues outside the traditional scope of
making money, of which ethics is most certainly one.
As our business grows and becomes more
significant, we impact on the lives and circumstances
of people in ways we can only imagine - through
bringing jobs, creating wealth and inspiring others to
grow their businesses
 IMPORTANCE OF BUSINESS ETHICS…

Business ethics has assumed a lot of importance.

Since everyone be it an investor, customer or public
view an organization with suspicion it is very
important that the organization portrays an ethical
image.
Business ethics provide guidelines for acceptable
behavior by organizations in both their strategy
formulation and day-to-day operations.
 IMPORTANCE OF BUSINESS ETHICS…

Business ethics are also important for a company

and its success. In generally we can see the
importance of business ethics from three ways.
Public Image
Investment
Partnerships

24
 ORIGIN OF BUSINESS ETHICS

• Business ethics has come to be

considered a management discipline,
especially since the birth of the social
responsibility movement in the 1950s.

Thursday, July 25, 2024 GUMRUK (TRANSITORS) 25

An increasing number of people
asserted that because businesses were
making a profit from using our
country's resources, these businesses
owed it to our country to work to
improve society.

Thursday, July 25, 2024 GUMRUK (TRANSITORS) 26

Many researchers, business schools and
managers have recognized this broader
constituency, and in their planning and
operations have replaced the word
"stockholder" with "stakeholder," meaning to
include employees, customers, suppliers and
the wider community.
Thursday, July 25, 2024 GUMRUK (TRANSITORS) 27
 Today 90% of business schools teach business
ethics.
Ethics in the workplace can be managed
through use of codes of ethics, codes of conduct,
roles of ethicists/specialist in ethics and ethics
committees, policies and procedures, procedures
to resolve ethical dilemmas, ethics training, etc.

28
 SIGNIFICANCE OF BUSINESS ETHICS

• The primary aim of business is not just to

maximize profits. It is rather to cater to the
needs of society and work towards benefiting
the masses.
ETHICAL AND UNETHICAL BUSINESS
PRACTICES

I have always recognized that the

object of business is to make
money in an honorable manner. I
have endeavored/try hard to
remember that the object of life
is to do good." –
Peter Cooper, American Inventor,
Manufacturer and Philanthropist

30
• In todays business environment ethics and social
responsibility are vital issues for managers.
• The ethical domain of behavior pertains to values
of right and wrong.
• Ethical decisions and behavior are typically
guided by a value system. The ability to make
correct ethical choices depends on:
• Individual characteristics such as the level of moral
development
• Organizational characteristics such as corporate
culture
 Ethical Business Practices

Following are a few ethical business practices that should

be followed to build an honest reputation and ensure
smooth running of the organization.
• Investors: Ensuring safety of their money and timely
payment of interest.
• Employees: Provision of fair opportunities in
promotions and training, good working conditions and
timely payment of salaries.
• Customer: Complete information of the service and
product should be made available. Personal information
of the customers should not be used for personal gain.
• Competition: Unscrupulous/dishonest, tactics
and methods should be avoided while handling
competitors.
• Government: Rules and regulations regarding
taxes, duties, restrictive and monopolistic trade
practices and unlawful activities like
corruption and bribing should be adhere to.
• Environment: Polluting industries should
ensure compliance with the government norms
regarding air, water and noise pollution.
 Unethical Business Practices

1) Mistreating Employees
 Sexual discrimination
Manipulating people emotionally by exploiting their
vulnerabilities.
 Invasion of privacy used as leverage, for obtaining
personal or professional gains. Eg. public disclosure of
private facts, video recording without consent or
knowledge 34
 Unethical Business…
2) Financial Misconduct
Greed to amass excessive profit.
Creation of false documents to show increased profits.
Resorting to dishonesty, trickery or deception.
 Distortion of facts to mislead or confuse.
 Perform unnecessary procedures to make more

money; tax evasion; tax fraud.

35
 Unethical Business…

3) Misrepresentation
Lack of transparency and resistance to investigation.
Creation of false documents to show increased
profits.
Lies about his company's products, or it can be false
or misleading advertising.
Harming the environment by exceeding the
36
government prescribed norms for pollution
 PRINCIPLES OF BUSINESS ETHICS
Business ethics are the key to profits and
sustainability.
 If clients and customers don’t trust you, and your
business ethics, they will not do business with you.
Would you buy from a company you didn’t trust?
Business ethics have become a hot-button topic.
There are often ethical conflicts between making
money, and doing what is right.
37
some important Principles of Business Ethics:-
 Business Ethics Principle 1 – the customer is not
sheep that can be sheared.
Business Ethics Principle 2 – the buyer's domain is
more important than the middlemen's domain.
Business Ethics Principle 3 – be diplomatic with your
competitors.
Business Ethics Principle 4 – productivity is much
more important than profitability. 38
12 Ethical Principles for Business Executives
HONESTY
INTEGRITY
PROMISE-KEEPING & TRUSTWORTHINESS
LOYALTY
FAIRNESS
CONCERN FOR OTHERS
RESPECT FOR OTHERS
LAW ABIDING
COMMITMENT TO EXCELLENCE
LEADERSHIP
REPUTATION AND MORALE
ACCOUNTABILITY
 HONESTY

• Ethical executives are honest and truthful in all

their dealings.
• They do not deliberately mislead or deceive
others by misrepresentations, overstatements,
partial truths, selective omissions, or any other
means.
 INTEGRITY

• Ethical executives demonstrate personal integrity and the

courage of their certainty by doing what they think is
right even when there is great pressure to do otherwise;

• They are principled, honorable and upright/straight; they

will fight for their beliefs. They will not sacrifice
principle for expediency /convenience, be hypocritical
/two faced, or unscrupulous/ dishonesty.
 PROMISE-KEEPING & TRUSTWORTHINESS

• Ethical executives are worthy of trust.

• They are candid/frank and forthcoming in supplying relevant

information and correcting misunderstanding of fact, and they
make every reasonable effort to fulfill the letter and spirit of
their promises and commitments.

• They do not interpret agreements in an unreasonably technical

or legalistic manner in order to rationalize non-compliance or
create justifications for escaping their commitments.
 LOYALTY
• Ethical executives demonstrate faithfulness and loyalty to persons

and institutions by friendship in hardship, support and devotion to

duty;

• They do not use or disclose information learned in confidence for

personal advantage.

• They safeguard the ability to make independent professional

judgments by scrupulously avoiding undue influences and conflicts

of interest.

• They are loyal to their companies and colleagues.

 FAIRNESS

• Ethical executives are fair and just in all dealings;

• They do not exercise power arbitrarily and do not use

overreaching

• Fair persons manifest a commitment to justice, equal

treatment of individuals, tolerance for and acceptance of

diversity.

• They are willing to admit the wrong they did.

 CONCERN FOR OTHERS

• Ethical executives are caring, compassionate,

benevolent/ generous and kind;
• They like the Golden Rule, help those in need,
and seek to accomplish their business objectives
in a manner that causes the least harm and the
greatest positive good.
 RESPECT FOR OTHERS

• Ethical executives demonstrate respect for the

human dignity, autonomy, privacy, rights, and
interests of all those who have a stake in their
decisions;
• They are courteous/ polite and treat all people
with equal respect and dignity regardless of
sex, race or national origin.
 LAW ABIDING

• Ethical executives abide by laws, rules and

regulations relating to their business activities
 COMMITMENT TO EXCELLENCE

• Ethical executives pursue excellence in

performing their duties, are well informed and
prepared, and constantly endeavor to increase
their proficiency in all areas of responsibility
 LEADERSHIP

• Ethical executives are conscious of the

responsibilities and opportunities of their
position of leadership and seek to be positive
ethical role models by their own conduct and by
helping to create an environment in which
principled reasoning and ethical decision making
are highly prized.
 REPUTATION AND MORALE

• Ethical executives seek to protect and build the

company’s good reputation and the morale of
its employees by engaging in no conduct that
might undermine respect and by taking
whatever actions are necessary to correct or
prevent inappropriate conduct of others.
 ACCOUNTABILITY
• Ethical executives acknowledge and accept personal accountability for the
ethical quality of their decisions and mistakes to themselves, their colleagues,
their companies, and their communities

Putting principles into practice.

• We all know that mastering any skill takes practice. That goes for recognizing
and properly dealing with ethical issues.

The Principles Approach

• There are several different ways in which managers may go about improving
the ethics of their decision making. One popular approach, which we shall call
The Principles Approach, is based upon the idea that managers need to
compare their proposed actions, decisions or behaviors with certain principles
of ethics.
 Discussion Questions
• Is it possible to consider and apply ethical
principles in every decision making ?
• What do you do if you encounter a situation
that require ethical principle violation?
ETHICAL DILEMMAS
An ethical dilemma (ethical paradox or
moral dilemma) is a problem in the
decision-making process between two
possible options, neither of which is
absolutely acceptable from an ethical
perspective.

ethical dilemmas are extremely

complicated challenges that cannot
be easily solved. Therefore, the ability
to find the optimal solution for ethical
dilemmas is critical to everyone.
Implementing codes of conduct and
ethical standards
 ETHICAL DILEMMAS
 It is a choice between two options, both of which will bring a

negative result based on society and personal guidelines.

 It is a debate between two moral principles, where two sides can

argue about what is wrong or what is right.

 It is simply a matter of what one believes in.

 It is a complex situation that often involves an apparent mental

conflict between moral imperatives, in which to obey one would

result in contravene another
 ETHICAL DILEMMAS…
• It is a difficulty in which one is presented with two
equally good/bad options and the correct decision is
not immediately clear.

Example of ethical dilemmas

• Abortion

• steal food in order to feed one’s starving family

• taken a sick day when you weren’t sick

"Ethics Isn't Easy"
All of us are faced by those
moments when doing what’s
right is very different from
doing what’s easy or what
would be the most profitable.
That’s one of the reasons for a
company to have a mission
statement or a code of
conduct: so that employees
understand what’s expected of
them when they’re faced with
the choice between right
versus easy, ethical versus
profitable.
 Handling Ethical Dilemmas
What factors guide our ethical decision making?
• Personal – values, beliefs like honesty, integrity etc

• Company/organization – corporate culture, codes,

practices, loyalty to organization
• Trade/Profession – codes, regulations, Agreed
practices, accountability
• Government – laws, regulations
• Society – values, expectations, public opinions
Three-step strategy that shows you how to
combine ethical dilemma.

STEP1: ANALYZE THE CONSEQUENCES

Assume you have a variety of options. Consider the
range of both positive and negative consequences
connected with each one.
• Who will be helped by what you do?
• Who will be hurt?
• What kind of benefits and harms are we talking
about?
• look over the long run as well as the short run.
STEP 2: ANALYZE THE ACTIONS
o Consider all of your options from a completely different
perspective.
o Don’t think about the consequences. Concentrate instead
strictly on the actions.
o How do they measure up against moral principles like
honesty, fairness, equality, respecting the dignity of others,
respecting people's rights, and recognizing the vulnerability of
individuals weaker or less fortunate than others.
STEP 3: MAKE A DECISION
Take both parts of your analysis into account and make a decision
DECISION MODELS
 DECISION MODELS

•Decision Model is a suggested thinking process for use

in handling ethical dilemmas and reaching a decision
about a course of action in a structured and systematic way
• It helps to make ethical discussions systematic and clear

The American Accounting Association Model

William May’s 7 steps
1. Determine the Facts – What, who, where, when, how.
2. Define the ethical issues
 List the significant stakeholders
 Define the ethical issues
3. Identify major principles, rules, values e.g., integrity,
accountability, respect for persons, profit.
4. Specify the alternatives
 List the major alternative courses of action, including
those that represent some form of compromise/
negotiation.
5. Compare values and alternatives
 Determine if there is one principle or value, or
combination, which is so convincing that the proper
alternative is evident.
6. Assess the consequences
 Identify short and long, positive and negative
consequences for the major alternatives.
7. Make your decision
 Balance the consequences against your primary
principles or values and select the alternative that best
fits.
The Laura Nash Model
The 12-question Model
 This 12-question model emphasizes on
practicability instead of abstract philosophical
concepts
1. Have you defined the problem accurately? Make
available all precise facts.
2. How would you define the problem if you stood on
the other side of the fence?
Consider alternative viewpoints.
3. How did this situation occur in the first place?
 Consider all background information.
4. To whom and what do you give your loyalties as a
person and as a member of the corporation?
 Weigh conflicting values.
5. What is your intention/aim in making this decision?
– Can you justify your action?
6. How does this intention compare with the likely
results?
– Are good intentions well-served by the results?
7. Whom could your decision or action injure?
– Consider all possible effects.
8. Can you engage the affected parties in a discussion
of the problem before you
make your decision?
– Involve all primary stakeholders.
9. Are you confident that your position will be valid over a long
period of time as
it seems now?
– Consider long-term consequences.
10. Could you disclose without doubt your decision or action to
your boss, your CEO, the board of directors, your family, or
society as a whole?
– Is your action able to survive disclosure and public
scrutiny/analysis?
11. What is the symbolic potential of your action if understood?
If misunderstood?
– Assess the likely perceptions of others.
12. Under what conditions would you allow exceptions to your
stand?
– Are such exceptions warranted?
 Mary Guy’s Values, Rules and Decision Model

• Values
– Prior to offering a decision model, Guy suggests that
one might keep “Ten Core Values” in mind.
• “By evaluating how these values relate to an issue under
consideration, and by analyzing who the stakeholders are
in the decision, the ethical implications of an action
become clearer.”
1. Caring – treating people as ends in themselves, not as
means to ends.
2. Honesty – being truthful and not deceiving or distorting.
3. Accountability – accepting the consequences of
one’s action and accepting the responsibility for
one’s decisions and their consequences.
4. Promise keeping – keeping one’s commitments.
5. Pursuit of excellence – striving to be as good as
one can be: being diligent/hard working,
industrious/productive, committed, becoming well
informed and well prepared.
6. Loyalty – being faithful and loyal to those with
whom one has dealings.
7. Fairness – refrain from taking undue advantage of
another’s adversities.
8. Integrity – using independent judgment and
avoiding conflicts of interest, restraining from
perceived personality, and resisting economic
pressure.
9. Respect for others – recognizing each
person’s right to privacy and self-
determination and having respect for human
dignity.
10. Responsible citizenship – having one’s
actions in accord with societal values.
 Rules
• Guy also suggests five rules, which integrate these
values, and which might be of assistance towards
codifying one’s ethical decision-making:
Rule 1 Consider the well-being of others,
including nonparticipants. This rule emphasizes
caring and respect for others.
Rule 2 Think as a member of the community, not
as an isolated individual. This emphasizes loyalty,
integrity, respect for others, and responsible
citizenship.
Rule 3 Obey, but do not depend solely on the law.
This emphasizes integrity and responsible citizenship
 Rule 4 Ask, ‘What sort of person would do such a
thing?’ This emphasizes all the values by calling each
into question.
Rule 5 Respect the customs of others, but not at
the expense of your own ethics. This emphasizes
accountability, fairness, integrity, and respect for
others.
Guy’s Decision Model
1. Define the problem.
– Isolate the key factors in question and diagnose the
situation to define the basic problem and to identify
the limits of the situation.
 2. Identify the goal to be achieved.

– It is essential that a goal is clearly declared to avoid going

astray.
3. List all possible solutions to the problem. All alternatives that
will address the
problem and achieve the goal are placed under consideration.
4. Evaluate each alternative to determine which one best meets the
requirements
of the situation.
– This requires a thorough analysis of each alternative. The
analysis involves measuring the benefits, costs, and risks of
each, as well as identifying the likely intended and
unintended consequences of each.
5. Identify the one course of action that is most likely to
produce the desired
consequences within the constraints of the
situation.
This requires selecting the alternative that
maximizes the most important values and holds the
most promise of achieving the goal, while solving
the problem as effectively as possible.
6. Make a commitment to the choice and implement it.
This requires converting the decision into action.
 Quick Test
• Texas Instruments devised the ethical “quick test,” which can be
used for both actions and verbal expressions that will impact
others in one way or another.
• If you know it is wrong, don’t do it.
• If you’re not sure, ask.
• Keep asking until you are satisfied with the answer.
4-Way Test
• The 4-Way Test, Created by Rotarian Herbert J. Taylor in 1932,
adopted by Rotary International in 1934, and translated into
more than 100 languages, asks:
• Is it the truth?
• Is it fair to all concerned?
• Will it build good will and better friendships?
• Will it be beneficial to all concerned?
The “Ethics Check” Questions
• The questions from The Power of Ethical Management by Kenneth
Blanchard and Norman Vincent Peale are:
• Is it legal?
• Is it balanced?
• How will it make me feel about myself?

Applying Decision Models

• What models would you like to choose in making ethical decisions?

– The choice of an ethical model is dependent on an individual’s
personal preferences
– These models could be modified to suite individual needs
– The models are useful in enabling the individual to make well-
informed and thought-out decisions
– All these models allow for “ethical pluralism” i.e. no single moral
theory can assume supremacy over the others.
 MODULE TWO
BASIC CONCEPTS OF CORRUPTION
 MODULE CONTENT

• DEFINITION OF CORRUPTION

• DISTINCTIVE CHARACTERISTICS OF CORRUPTION

• TYPES OF CORRUPTION

• FORMS OF CORRUPTION

• CAUSES OF CORRUPTION

• EFFECTS OF CORRUPTION

• TYPES, CAUSES, AND CONSEQUENCES OF

CORRUPTION IN CUSTOMS
corruption is a form
of dishonesty or
criminal activity
undertaken by a
person or
organization
entrusted with a
position of
authority, often to
acquire illicit
benefit, or, abuse of
entrusted power
for one's private
gain
 DEFINITION OF CORRUPTION
• Abuse of public office with the intent to procure inappropriate benefit to

oneself or to another or to inflict harm on another.

• Corruption is any offense committed in relation to a government or public

service or public interest in violation of duties proper to a government or a

public service, seeking or exacting promise, or receiving any gratification or

advantage for himself or for other person, or groups of persons.

• inflicting harm on another person, and includes corrupt practices,

acceptance of undue advantage, traffic in official influence, abuse of power,

maladministration; appropriation and, misappropriation in discharge of

duties, extortion and disclosure of secret

DISTINCTIVE CHARACTERISTICS OF CORRUPTION

1) Corruption mostly, if not always, involves more

than one person
2) Some acts of corruption are easily
concealed/covered by discretion/carefulness.
3)Those involved in corrupt practices usually
attempt to cover up their activities to some form of
lawful justification.
 CHARACTERISTICS OF CORRUPTION…

4) Existence of satisfied “customer”

 Customer here is not the usual customer as in business.

 It means rather a party to a bribery or corruption.

 Call it receiver or giver in an act of corruption, both parties

will be satisfied.

5) Corruption can involve the very persons who ought to fight it.

6) Capacity to take revenge on those who expose corruption

 TYPES OF CORRUPTION

1. Petty Corruption
requires minor payments to junior civil servants in
return to speeding up state functions or to avoid state
sanctions for minor infractions of law.
This kind of corruption is sometimes considered as
helpful mechanism that reduces delays and avoids
burdensome regulations and taxes.
 2. Grand corruption

It involves substantial amounts of money and usually high-level

officials.

It is the abuse of public power by heads of state, ministers and top
officials for private pecuniary profit.

It is believed that it involves prominent persons from public as well

as private sectors.

A large sum of money is required in return for decisions made in

one's favor.

Grand corruption is attractive for the beneficiaries.

 3. Political corruption

It refers to the misuse of political power for private

gain for preserving or strengthening power, or personal
enrichment, or both
 FORMS OF CORRUPTION
Bribery
• It is an offering of money or favors to influence a public official.

• It can be initiated by a person who seeks or solicits bribes or by

a person who offers and then pays bribes.

• The «benefit» in bribery can be virtually any inducement:

money and valuables, company shares, inside information,
sexual or other favors, entertainment, employment or, indeed,
the mere promise of incentives.
 FORMS OFCont.
CORRUPTION…
Specific types of bribery include the following

 Bribery to avoid liability for taxes or other costs

 Bribery in support of fraud

 Bribery to avoid criminal liability

 Bribery in support of unfair competition for benefits or

resources.

 Private Sector Bribery

 Bribery to obtain confidential or «inside» information

 FORMS OF CORRUPTION…
Nepotism
 It is favoritism shown by public officials to

relatives or close friends.

Such abuses, however, are governed not by the self-
interest of an official but the interests of someone
linked to him or her through membership of a family,
political party, tribe, religious, or other group.
 FORMS OF CORRUPTION…
Embezzlement, Theft, and Fraud
 The misappropriation of property or funds
legally entrusted to someone in their formal
position as an agent or guardian.
 Fraud is an intentional misrepresentation to
obtain an unfair advantage by giving or
receiving false or misleading information.
 Cont.
• In the case of embezzlement and theft, the
property is taken by someone to whom it was
entrusted. Therefore, embezzlement and theft
can be defined as «stealing money or other
government property.»
 Cont.
• «Theft» per se, goes far beyond the scope of
corruption, including the taking of any
property by a person with no right to it. Using
the same example of the relief donation, an
ordinary bystander who steals aid packages
from a truck is committing theft but not
corruption.
 Cont.
• Elements of fraud are more complex. Officials may
create artificial expenses; «ghost workers» may be
added to payrolls or false bills submitted for goods,
services, or travel expenses. The purchase or
improvement of private real estate may be billed
against public funds.
• Employment-related equipment, such as motor
vehicles, may be used for private purpose. In one
case, World Bank-funded vehicles were used for
taking the children of officials to school, consuming
about 25 percent of their total use.
 Cont.
• Extortion
The unlawful demand or receipt of property,
money or sensitive information to induce
cooperation through the use of force or threat,
i.e., extortion to allocate land rights
• Abuse of Discretion
In some cases, corruption can involve the abuse
of discretion, vested in an individual, for personal
gain.
Grand Corruption
• Grand Corruption is a type of corruption that
involves substantial amounts of money and
usually high-level officials.
Petty Corruption
• Petty corruption is a type of corruption that
involves smaller sums and typically more junior
officials.
 CAUSES OF CORRUPTION
• To identify the causes of corruption we draw
on the theoretical and empirical literature on
this topic. To ease the exposition the causal
variables have been categorized into three
main factor-groups, namely: political and
judicial factors, social and cultural factors, and
economic factors.
 Cont.
• Personal Motivations in Corruption
People offer bribes because they want an unfair
advantage over others-to pay lower taxes, to get
an appointment or promotion, to win a contract,
or to get something done quickly. They also may
offer bribes to avoid a fine or penalty.
 Cont.
• Bad Systems
We have just considered what causes individuals
to pay or take bribes.
 Cont.
• What causes corruption is,
First, a clear opportunity, such as the purse of
cash sitting in the parking lot.
Second, what causes corruption is little chance
of being caught. This lack of accountability
comes primarily from
a) A lack of transparency
b) b) Weak enforcement
 Cont.
• Third, are bad incentives, such as an officer not earning enough to
live on or not being sure that he will have a job tomorrow so that
he supplements his income with bribes.
• Fourth, is an attitude or circumstances that make average people
disregard the law.
• Fifth, what cause corruption is absence of proper vigilance and
effective countermeasures? It is possible to say that without
proper vigilance and effective countermeasures, corruption can
occur anywhere.
• Sixth, are systems with excessive individual discretion and overly
complex rules on discretionary powers, as well as systems lacking
structures to monitor effectively the exercise of discretion and
hold decision makers accountable, tend to be more susceptible to
corruption than those that do not.
 Cont.
• Seventh, are systems in which individual offices,
departments, or agencies operate in isolation from one
another tend to be more susceptible to corruption.
• Eighth, are systems with operational secrecy. Systems with
operational secrecy are more susceptible to corruption
than those that operate in transparency.
• Therefore, corruption is not just about ethics. It is also,
about how the government is set up and managed. As you
can see, more people would engage in corruption under
the wrong circumstances, that is, if no one would find out
and if they had few alternatives.
 EFFECTS OF CORRUPTION
• Corruption has many damaging effects: -
weakened national institutions, inequitable
social services, and blatant injustice in the
courts, along with widespread economic
inefficiency and unchecked environmental
exploitation.
 Effects on politics, administration, and
institutions
• corruption tends to break the trust
between the governing and the
governed, as well as implant
disagreement among communities that
can degenerate into destructive or
violent conflict.
 Economic effects
• The economic effect of corruption can be
direct or indirect. Loses of revenue or fund
diverted from their intended use may make
the direct impact high. However, the indirect
impact, such as the economic distortions,
inefficiencies, and waste resulting from
corrupt practices are more problematic.
 Cont.
• Corruption distorts both the national economy
and public investment through the tax system.
When governments apply high tax rates, with
complex rules that are interpreted by
underpaid officials they can expect to lose a
lot of tax income – particularly if there is little
risk of being caught or punished. This, in turn,
could reduce the capacity of government to
provide quality public services.
 Corruption on Human Development

• Corruption undermines human development.

This can happen through various channels. It is
likely, for example, to corrode ideals of public
service, so that corrupt administrations will
tend to be less interested in investing in health
and education.
 Cont.
• Corruption is also likely to undermine efforts
at poverty reduction – by diverting goods and
services targeted for the poor to well-off and
well-connected households who can afford to
bribe officials. The poor also lose out when
they have to pay bribes, since they can only
afford small amounts, which represent a high
proportion of their income.
 Cont.
Corruption on Justice
Corruption is often at its worst in law
enforcement, seriously undermining justice.
Corruption on Health Services
Corruption can occur within health services at
all levels
Corruption on Education
Corruption is also widespread in education
systems
 Cont.
Corruption on Public Utilities
• For electricity and water supplies, the
standard kickback for infrastructure projects is
often quoted as 10 per cent of the value of the
contract. Corrupt officials regularly demand
bribes to accept bids or to approve the
completion of the work.
 Cont.
In general the following are some of the major environmental
and social effects of corruption:
• Corruption decreases wildlife, especially endanger species
either by encouraging trade in them or by allowing excessive
hunting.
• Corruption causes damage to the environment by granting
concessions for logging or sale of land for tourism without
due concern to the environment in order to gain kickbacks.
• Corrupt practices can endanger health and public well-being
by consciously over-looking adulterated drugs and vaccine,
sale of food declared unfit for human consumption, sale of
outdated canned food, medicine, etc.
 Cont.
• Corruption undermines social values for people find it
easier and more lucrative to engage in corruption than to
seek legitimate employment or service.
• Corruption reduces expenditure for education and health.
Such expenditures are not as attractive to the corrupt as
the expenditures to arms. Hence, the government does
not want to allocate significant budget to such fields.
• Corruption overrides rules and regulations and cause
severe social harm. Enforcement bodies may co-operate
with criminals some times participating in the crimes
themselves.
 TYPES,CAUSES, AND CONSEQUENCES OF CORRUPTION IN CUTOMS

• Types of Corruption in Customs

Irene Hors, of the Organization for Economic Co-operation and Development
(OECD) Development Centre, has identified three types of corruption that
typically occur in the customs working environment and suggests that the
strategies necessary to deal with the three types of corruption vary significantly.
1) Routine corruption, in which private operators pay bribes to obtain the speedy
completion of routine customs procedures.
2) Fraudulent corruption, in which the trader or agent asks customs officials to
turn a blind eye to certain illegal practices to reduce taxation liability or fiscal
obligations.
3) Criminal corruption, in which criminal operators pay bribes to conduct a totally
illegal but lucrative operation, such as drug trafficking or the abuse of export
promotion schemes.
• Other forms of corruption in customs: namely, bribery, nepotism, and
misappropriation.
 Cont.
I) Bribery in the customs context includes the
payment of money to secure or facilitate the
issuance or processing of licenses, clearances, and
authorities; payment to alter or reduce duty or
taxation liabilities; payment to ensure that officials
turn a blind eye to illegal activities; and payment or
kickbacks provided after the fact, to ensure that an
individual successfully obtains a lucrative
exemption from normal administrative formalities.
 Cont.
• II) Nepotism in the customs context can
include such behavior as the selection,
transfer, or promotion of individuals or groups
on the basis of an existing relationship rather
than on merit; the awarding of lucrative
customs appointments; and the allocation of
scarce government resources to individuals on
a non-merit basis.
 Cont.
• III) Misappropriation includes a wide range of behavior
such as theft, embezzlement, falsification of records,
and fraud. It can be seen at the individual, group, or
organizational level. While this form of corruption has
been reported in many industrialized countries, it is also
a common factor in the customs administrations of
many developing countries in which administrative
controls or checks and balances are not always present
and where systems to ensure appropriate supervision
and audit of financial transactions are not well
developed.
 Cont.
• Corruption can be initiated by either the client or the agent;
and can be practiced both inside and outside the organization.
A study shows that corruption in customs shows itself in several
forms, the main ones being the following:
1. Extortion of bribes or goods for permits to transit goods;
2. Protection by certain persons with high-ranking positions in the
Customs Department of illegal activities of economic agents; the
implication of officials in the development of smuggling channels;
3. Creation of conditions of unmoral competition for economic
agents;
 Cont.
4. Reduction or increase of goods customs value,
falsification of goods codes;
5. Appropriation (confiscation) of goods without sale
and without contributing the corresponding amounts
to the state budget
6. Double activity (both as customs official and
entrepreneur)
7. Recruitment by customs of persons with criminal
record
8. Abuse of official status by use of “telephone right” by
parliamentarians and other high-ranking officials;
 Cont.
Findings show that generally the customs activity is
contaminated with the forms of corruption related to the
domain of business:
• Extortion of bribes at filing documents and organization of
economic activities;
• Extortion of bribes under claims of disclosure of legal
offenses; illegal initiation of administrative and criminal
cases, groundless penalties;
• Creation of conditions of unmoral competition;
• Use of officials as “shelter” for the shadow economy,
suppression of activity of competitors, illegal appropriation
of assets of businessmen;
• Corruption of officials and use of illegal methods of business.
• Causes of Corruption in Customs
Findings indicate that a corrupt country annually
lose two thirds of the budget because of
corruption in the state institutions and the
conspiracy between dishonest officials and
entrepreneurs. In customs, in the major part,
this happens because of lack of transparency in
the relations between customs officials and
economic agents.
• Remaining face to face with the entrepreneurs
the customs officials do not settle the problems of
the state, but their own. The smuggling of various
goods is flourishing; everybody knows the ways
for the introduction of goods into the country and
the executors, both the customs officials and the
law enforcement institutions, yet everybody
keeps silent for having personal interest.
• Corruption in customs is supported (or initiated)
by some economic agents who seek ways to avoid
the payment of customs taxes. This is one of
reasons for the increase of smuggling.
 Consequences of Corruption in Customs
Customs plays a central role in every international trade
transaction and is often the first window through which
the world views a country. The implications of corruption
in customs on a nation’s capacity to benefit from the
expansion of the global economy are obvious.

The presence of widespread corruption in customs can

act as a major disincentive to foreign investment. In
addition, corruption in customs takes on new significance
in the current environment of heightened concern about
the security of international trade.
 Cont.
• The presence of widespread corruption
can, therefore, destroy the legitimacy of
a customs administration and severely
limit its capacity to contribute to
government objectives.
 Cont.
• The presence of widespread corruption can,
therefore, destroy the legitimacy of a customs
administration and severely limit its capacity
to contribute to government objectives.