Anti-Corruption Landscape

By William Henderson, Special for US Daily Review.

Creating a culture of integrity

In recent years, corruption has cost large companies billions of dollars in fines and penalties as regulators enforce anti-corruption laws more strictly than ever before. Many steps go into building an effective anti-corruption program.  Carefully developed policies and procedures form the backbone of this program.

Alignment with corporate ethics and compliance program

Anti-corruption is not the sole compliance risk for companies, and management of this risk should be aligned with the company’s overall ethics and compliance structure.  Included in this alignment are setting the appropriate tone at the top and promoting a culture of integrity through communication, education and training, and monitoring.  Companies should also leverage existing corporate compliance infrastructure and resources as much as possible in building their anti-corruption program.

References to the anti-corruption policy should be included in the code of conduct governing all company employees, and compliance with the anti-corruption policy should have a prominent place in the overall corporate compliance program.

Setting an anti-corruption policy

A company’s anti-corruption policies and procedures are a set of documents developed to address identified bribery and corruption risks (such as an anti-corruption policy and related certification program).  Most global companies base their anti-corruption compliance policies and procedures on the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, which are two of the most comprehensive anti-corruption laws on record.

An effective anti-corruption policy should be a clear statement of the company’s position that both governmental and commercial bribery on any scale are not tolerated. It also should discuss the company’s commitment to accuracy in reporting and recording transactions and its commitment to internal controls that ensure accountability and proper safeguarding of assets.

It’s crucial that the policy provide specific guidance on prohibited activity, which can include a wide range of corrupt acts. This guidance should cover areas such as:

-Bribery of public and private sector employees.

-Concealing the true nature of bribery and other improper acts in the company books and records.

-Use of third parties in potential bribery schemes.

-Travel, entertaining, and gift giving.

-Charitable giving and community payments.

-Corruption risks in mergers and acquisitions.

Facilitating payments

One of the most difficult areas to control, but which every company should take a position on, is facilitating payments. Facilitating payments made to government officials are allowed under the FCPA in certain situations for routine and nondiscretionary actions. These are commonly thought of as “grease payments,” and generally made to low-level government employees.

However, the U.K. Bribery Act makes no exception for facilitation payments, and many payments that meet the FCPA’s narrow definition of facilitating payments may be illegal in the country where payment is made.

Given the different legal treatment by the various authorities and the inherent difficulties in enforcing a policy that prohibits bribery but allows facilitating payments, many companies ban facilitating payments altogether. If a company decides that it will permit facilitating payments, it should develop a process to ensure appropriate approval of all such payments, including analysis of their legality under local law, the U.K. Bribery Act, and the FCPA.

Keeping employees engaged

Ensuring that employees fully understand and support anti-corruption policies and procedures is an important tool in a company’s fight against corruption.

An effective policy should encourage employees to report violations or seek guidance, and offer examples of “red flags” that help employees identify problem situations such as providing payments for travel and hospitality for government customers to promote company products.  In addition, many companies have formal programs requiring senior employees to regularly certify compliance with the FCPA and other anti-corruption laws.

A key component of an effective anti-corruption program is training.  At a minimum, every person in a position to obtain business or a business advantage through bribery or improper means should receive anti-corruption compliance training.  Effective training includes many or all of the following characteristics:

-Presented in the local language.

-Includes the support of local management.

-Presents realistic case studies or examples.

-Creates opportunities to interact or ask questions.

-Includes practice aids for sales professionals and others to improve understanding.

-Is offered on a regular basis and is part of new employee training.

-Tracked attendance.

-Regularly reviewed and updated.

Conclusion

Global businesses are facing more pressure than ever before to comply with anti-corruption laws as regulators pursue violators more aggressively. Ensuring compliance can be challenging, but the backbone of any company’s efforts should be its anti-corruption policies and procedures. With a well-thought-out anti-corruption program, a company is more likely to withstand regulatory scrutiny and corruption pressures in daily business.

William Henderson, a partner in Ernst & Young LLP’s Fraud Investigation & Dispute Services practice.  Bill is a CPA and licensed non-practicing attorney.  He was formerly a federal prosecutor and held a senior corporate compliance position at a Fortune 100 Company.

Additional information on anti-corruption due diligence can be found in Ernst & Young LLP’s Fraud Investigation & Dispute Services (FIDS) practice’s latest book, Bribery and Corruption – Navigating the Global Risks (www.ey.com/bcrisk).

The views expressed herein are those of the author and do not necessarily reflect the views of Ernst & Young LLP

©Ernst & Young LLP

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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