Stories of corruption and bribery feel like a staple in the news today, but in-house counsel still has to worry about a lot more than just bad press. For U.S.-based companies operating across borders, stricter global regulations surrounding corruption and bribery have led to increased enforcement of the Foreign Corrupt Practices Act (FCPA), among other anti-bribery and anti-corruption laws.
Corruption in business, whether internal or through third-party relationships, can pose financial, reputational, operational and compliance risks. Therefore, anti-bribery and anti-corruption compliance should be top of mind for companies.
These concerns were front and center at a recent webinar I cohosted with Howard Weissman, counsel with Baker McKenzie’s compliance and investigations practice group, and Joan Meyer, partner at Baker McKenzie.
Below are anti-bribery and corruption best practices that came to light as we discussed “recognizing and mitigating corruption risks to protect your business.”
Checklist: Anti-Bribery and Corruption Risk Assessment Checklist
1. Know Your Region
In-house counsel needs to clearly understand the definitions and scope of issues addressed in the regulatory landscape in which they operate, both domestic and international. For example, there is no hard and fast definition under anti-bribery laws of what has “value.” And for terms like “corrupt payment,” benefits can indirectly be transferred to someone or something other than the direct target of the bribe, such as a charity.
Avoid the practice of making facilitation payments... payments themselves can act as a gateway to actual bribes, intentionally or otherwise.
Additionally, in-house counsel should know what could constitute a “business advantage” and who might be considered a “foreign public official” well before these questions are posed by an enforcement agency. The definitions are broadly interpreted by regulators, which is something in-house counsel should keep in mind when assessing the potential risk areas with respect to bribery and corruption.
Also, when considering anti-bribery compliance frameworks, avoid the practice of making facilitation payments. While such payments may be permitted under the U.S. Foreign Corrupt Practices Act, they are prohibited in most other laws such as the UK Bribery Act. The nuances of the FCPA facilitation payment exception can be hard to explain to employees, and payments themselves can act as a gateway to actual bribes, intentionally or otherwise.
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2. Sweep Every Corner
Against the backdrop of anti-corruption regulations and enforcement, corporate legal departments should start with a comprehensive risk assessment. Certification is also worth looking at under the International Organization for Standardization rubric for anti-corruption compliance (ISO 37001).
You can’t take anyone else’s word on a third party’s integrity.
Regardless of specific certification standards, risk assessment should always account for geography and business partners.
As Howard Weissman stated during our webinar, “You need to ensure that the third parties you’re working with are operating and following your company’s standards… When you sign them up, send them a copy of your policy and contractually bind them to follow it in doing everything on your behalf. Monitor their performance and make sure.” Most importantly, Weissman said, you can’t take anyone else’s word on a third party’s integrity.
To do this, in-house counsel must be able to identify red flags, such as payments offered in cash, unusual credit to new customers, or commissions or fees exceeding customary rates for similar services. “If you encounter a red flag, you always have to conduct due diligence through your legal department and document that due diligence,” Weissman said.
Weissman also noted that his own company ended up losing a contract based on a refusal to deal with a person likely to trigger anti-corruption red flags. “The important thing was to find the problem, to identify it and to be able to walk away” from the relationship as the red flags were not able to be adequately mitigated.
Read More: ISO 37001: Let’s Talk Specifics
3. Sharpen Your Enforcement
Continued, improvement of a company’s anti-bribery program is needed to stay ahead of corruption risk and prosecution. The U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have been the most aggressive enforcers worldwide, but the U.K’s Serious Fraud Office and other jurisdictions have increased their activity against individuals as well as organizations.
Enforcement agencies tend to “focus on effective compliance programs. When you have a compliance program, to gain the broadest protections, it cannot be a paper program. You must make sure that you’re auditing,” said Joan Meyer. “That is very important to an eventual resolution or discussion with enforcement agencies.”
Improvement of a company’s anti-bribery program is needed to stay ahead of corruption risk and prosecution.
Once an anti-corruption investigation starts, a company will realize “the costs of investigating allegations of non-compliance may be even greater than the costs of compliance or even the fines and penalties,” Meyer said. There are collateral consequences, such as debarment, suspension, and loss of licenses, as well as dawn raids, extradition, shareholder suits, internal investigation costs, fines, jail time, or loss of contracts.
As several recent high-profile investigations have made clear, every in-house counsel should recognize that the first enforcement agency to take on a corruption charge is likely not going to be the last to look into the same conduct, and possibly additional conduct that comes to light.
Micro Learning Course: Anti-bribery: "Is that a Bribe?"