Tag Archives: compliance

Anti-Corruption Compliance in Kenya

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Transparency International’s Corruption Perceptions Index ranks Kenya in a distant 136th place. That low ranking confirms the sentiment often encountered in Nairobi: corruption is widespread in many aspects of life, from bribing a policeman to avoid charges for alleged traffic violations to graft at the highest levels of government, as poignantly described by a British journalist Michela Wrong in her book about Kenyan whistleblower John Githongo, It’s Our Turn to Eat.

Not surprisingly, many segments of the Kenyan society are fed up with the status quo and ready for change. That includes many companies in the private sector that see their growth potential and competitiveness stifled by the highly corrupt environment. Such companies are not waiting for the government to clean up its act and instead are taking the initiative to limit corruption through setting up or strengthening internal compliance procedures.

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A Guide for Anti-Corruption Compliance: The New Imperative in Global Value Chains

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This post originally appeared on Corporate Compliance Trends.

In many countries, fighting corruption seems to be an impossible battle, especially for mid-sized companies with limited resources. While there is a broad global consensus that corruption suppresses competition and innovation, thus hampering entrepreneurship and economic growth opportunities, countering it presents a challenging task due to resistance to reform in corruption-tainted business environments. In many cases anti-corruption rules and regulations may be weak or unevenly enforced, government-led steps to fight corruption remain insufficient or ineffective, and bribes are a widely accepted part of doing business.

Yet businesses committed to anti-corruption are not helpless. They can lead by example by improving their own safeguards against corruption and act together to create a movement for integrity that makes clean business conduct the norm, not the exception.

In today’s globalized world, where international value chains stretch across borders and continents, anti-corruption compliance provides a vital competitive advantage. Ethical companies tend to have higher valuations, are more attractive to potential investors and employees, and are more likely to be engaged in long-term arrangements with their business partners. Increasingly, companies are expected to ensure not just the integrity of their own operations but also the conduct of their suppliers, distributors, and agents wherever they may be. Evidence of this comes from high-profile prosecutions of multinational firms that are not only subject to significant fines but also risk loss of share value and reputation.

CIPE’s newest publication, Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets, is meant to help local companies around the world think about anti-corruption compliance as a strategic investment and take concrete steps to introduce or strengthen their internal compliance programs. Going forward, the guidebook will serve as the basis for CIPE training and capacity building initiatives for businesses in countries ranging from Kenya to Pakistan and Ukraine where, despite persistent challenges, many companies already are a part of global value chains or aspire to join them. In order to be competitive, they need tools outlined in the CIPE guidebook to translate their commitment to integrity into the day-to-day business operations. Stay tuned for the country updates!

Click here to get the guidebook.

Anna Nadgrodkiewicz is Director of Multiregional Programs at CIPE.

Reducing Third-Party Company Risks in Emerging Markets

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This post originally appeared on CIPE’s Corporate Compliance Trends blog.

As the world’s multinational companies seek profits in new, high-risk markets, they inevitably start depending on local businesses – third parties – to operate. Such partnerships bring with them both the promise of mutual growth and, for the multinational, responsibility for the behavior of its new local partner. That’s because aggressively applied laws such as the U.S. Foreign Corrupt Practices Act (FCPA) hold the multinationals responsible for third parties’ behavior.

Of the estimated 106 companies currently under investigation for FCPA-related violations, a significant number of them are related to suspected third party wrongdoing – assuming that past settlements made public are a reliable guide. So, how to reduce the corruption risks presented by doing business with third parties in developing countries where bribery is an accepted practice? CIPE is working on finding answers. So, too, is one of the world’s leading risk management firms,  SAI Global, which recently presented a webinar and offered a few tips on how to construct an anti-corruption training program for third parties.

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Introducing Corporate Compliance Trends, a Website for Anti-Corruption Compliance in Emerging and Frontier Markets

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The need for anti-corruption compliance programs in companies of all sizes in global value chains has never been greater. Since 2006, the U.S. government has settled or prosecuted nearly 300 corruption cases against companies from around the world, including many where the corrupt conduct originated from multinational corporations’ suppliers, vendors, and agents. The average cost of resolving these enforcement actions now tops $80 million.

Beyond the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, new anti-corruption laws with international reach are hitting the books, such as Brazil’s Clean Companies Act, introduced earlier this year. Similarly, many international bodies, including the Organisation for Economic Co-operation and Development (OECD) and the International Chamber of Commerce, have introduced conventions and norms meant to combat bribery of foreign officials. Few doubt that this growing global trend toward rooting corruption out of international business conduct is here to stay.

Still, as a recent study found, the number of global companies with anti-corruption policies has increased by only 1 percent over the past two years, and a sizable minority of these companies have yet to implement even the most basic of compliance programs. Nearly 60 percent of global companies surveyed said they never train third parties despite the fact that many compliance actions have resulted from conduct by agents or intermediaries.

While governments and international organizations set anti-corruption rules and standards, and while law enforcement agencies around the world aggressively pursue potential violations, many companies simply lack sufficient practical knowledge on how to comply with these new global norms. Understanding what effective anti-corruption compliance looks like and how to set up internal compliance programs that mitigate the risk of corruption is an especially daunting challenge for firms operating in emerging and frontier markets, where the Center for International Private Enterprise (CIPE) has worked since 1983 with local partners such as chambers of commerce, business associations, and economic think tanks.

To share our experiences from supporting private sector-focused anti-corruption programs in high-risk countries around the globe, and to help advance international best practices on anti-corruption compliance in these countries, CIPE is launching this new website, Corporate Compliance Trends.

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The Challenge of Anti-Corruption Compliance for Emerging and Frontier Market Firms

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Visit cctrends.cipe.org, our new site just for anti-corruption compliance in emerging and frontier markets.

“Among a people generally corrupt, liberty cannot long exist.” - Edmund Burke

Until recently, corruption has been accepted and treated as a cultural norm in countries across the world. Increasingly, thanks to the efforts of organizations like Transparency International (TI) and a range of business groups, nonprofits, and government initiatives, the private sector is now openly talking about corruption. But to make significant progress, not just multinationals but also domestic companies in emerging and frontier markets need to believe in the business case for anti-corruption compliance.

As a community we are at a crossroads, as a wide range of actors have not only come to realize the destructive nature of corruption but are putting their heads together to create the conditions necessary to combat it.

TI-USA’s new report on Verification of Corporate Anti-Corruption Programs, the project of extensive research and consultation, marks an important step towards a unified vision of what successful anti-corruption compliance programs should look like. At a July 24 event presenting TI’s key findings and recommendations on corporate compliance, Andrew Wilson, CIPE’s Deputy Director for Strategic Planning and Programs, shared his views as part of a panel that included speakers from TI, Siemens AG, and Tyco.

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Multinationals Discuss Issues with Supply Chain Compliance in Pakistan

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“I see a great need of vendor supply chain training providers to run the show effectively. If we want growth, train the relevant person first” — Ayesha Muharram, Chief Internal Auditor and Country Compliance Officer, Glaxo Smith Kline.

Lately it has become a requirement among multinational companies to comply with international anti-corruption laws such as U.S. Foreign Corrupt Practices Act (FCPA), U.K. Bribery Act, Canadian Corruption of Foreign Public Officials Act, Brazilian Clean Companies Act. Under these laws, multinational companies need to take appropriate actions for ensuring clean business — including making sure that all of their suppliers, vendors, and subsidiaries around the world are following the rules.

To help local companies and multinationals working in Pakistan deal with this challenge, CIPE Pakistan initiated a discussion on issues related to supply chain compliance in multinational companies. In collaboration with the Overseas Investors Chamber of Commerce & Industry, CIPE conducted a first focus group meeting of the Value Chain-Unethical Practices project. This first meeting was used to conduct a gap analysis, focusing the capacity building needs and the given standards in Pakistan.

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New Banditry, New Solutions

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Faced with a corrupt judicial system, what strategies do Russian businesses employ to resolve business disputes?  Lately, less murder and more litigation.

Faced with multinational firms who are liable under U.S. and U.K. laws for their Russian partners’ corrupt practices, how do Russian businesses gain access to international partners? Start putting in place anti-corruption compliance programs.

Those were some of the answers that came from experts from Russia and the U.S. had some answers at a recent panel discussion co-hosted by CIPE and the Kennan Institute, “Corruption and Business in Russian: National Problem, Regional Solutions.” Jordan Gans-Morse, an assistant professor of political science at Northwestern University, presented the results of his innovative research on how non-oligarchic firms are surviving in an atmosphere of endemic corruption. Against this backdrop, CIPE Moscow Program Officer Natalya L. Titova, joined by CIPE partners from St. Petersburg, Chelyabinsk, and Kaliningrad, spoke about a CIPE program in Russia that is helping regional businesses to meet international anti-corruption standards in order to join global value chains.

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