A Quick Guide to Anti-Corruption and Bribery

Bribery and corruption are significant issues that entrepreneurs and businesses may encounter worldwide. Violators of anticorruption laws and regulations may face the possibility of financial sanctions, crippling fines, and massive reputational damage. When companies are caught in corruption or bribery, it is usually not a quiet settlement, rather their story becomes a cautionary tale for all others.

The United States has been showing renewed commitment to enforcing the Foreign Corrupt Practices Act (FCPA), which, although it has been in existence since the 1970s, it has only become a top priority recently, when the SEC created the Office of Market Intelligence in 2010. This new team is responsible for collecting, analyzing, and monitoring all of the tips, complaints, and referrals each year. With new structure and resources, the ability to root out corruption in the country expanded, and the number of anti-corruption actions carried about by the Department of Justice and SEC quadrupled over the course of a decade.

Besides the FCPA, companies in the United States must abide by the sanctions imposed by OFAC, and furthermore they must also comply with other country’s anti-corruption laws. This means that an American company that goes to operate in China may be hit with charges if they do not comply with China’s regulations, so it’s important to understand the laws of the destination country.

The United Kingdom’s Bribery Act of 2010 is more or less the gold standard for the world. Compared to the FCPA, it has a much looser definition for what comprises “operating abroad”. This means that things that might normally not be considered business entities, such as private individuals, are subject to sanctions and regulations – whereas the FCPA only applies to companies and their officials. Furthermore, any corporate body that “carries on business” in the UK is subject to the Bribery Act, regardless of whether they are formally registered in the UK or not.  Another difference is that the FCPA only prohibits making bribery payments, whereas the UK Act bars accepting them as well.

Reducing exposure to bribery and corruption starts with implementing and updating anti-corruption policies. Most multinational corporations have these today, but a significant number of Small and Medium Enterprises (SME) lack policies for this. In 2015, a UK Government survey revealed that only 33% of SMEs in the UK assessed the risk for bribery and corruption, while the remainder had heard of them and were aware of the liability without any protective measures created.

Good anti-corruption programs usually follow the guidelines below:

  1. Prevent unethical action with clearly communicated standards of operations and procedures.
  2. Be accountable and provide oversight in implementation of the program.
  3. Conduct due diligence to avoid circumstances where unethical individuals have authority.
  4. Make sure that all members of the organization know what the compliance and ethics program is.
  5. Regularly re-evaluate the compliance and ethics program to make sure that it’s a) up to date and b) effective.
  6. Make sure there is an option for people to anonymously report misconduct, thus preventing retaliatory action by unethical individuals.
  7. The compliance and ethics program must be enforced to be effective, and there must also be discipline for violations. Having a program means nothing if there are no consequences for unethical behaviour.
  8. After the misconduct has happened, the organization must respond and assess it to prevent further problems – and if necessary, if in an example of systematic exploitation, take action to modify operations to prevent misconduct.

With an efficient program in place, organizations and individuals may protect themselves from being exposed to bribery and corruption and prevent fines/reputational damage/sanctions due to ignorant or malicious behaviours.

Sources:

http://www.ussc.gov/guidelines/2016-guidelines-manual

https://www.forbes.com/sites/groupthink/2015/09/23/going-global-what-you-need-to-know-about-bribery-and-anticorruption-laws/#3af3972c2644

http://www.skillsoft.com/assets/offers/industryinsight_Skillsoft_5_Things_You_Need_to_Know_About_Bribery_and_Corruption.pdf?srcID=blog

https://www.sec.gov/news/press/2010/2010-5.htm

This article was written by Kristina Weber, Content Supervisor of Centry. 

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