Tag Archives: compliance

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

ti-report-release

“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

Kennan Institute event

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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Current Trends in the Relationship Between Boards and Compliance Officers

boardrelationshipBy Hyeji Kim

Any corporate compliance program needs a strong relationship between the board of directors and the compliance and ethics officer in order to be effective. In 2010, the Society of Corporate Compliance and Ethics (SCCE) and the Health Care Compliance Association (HCCA) conducted a study which showed that the relationship between the Chief Ethics and Compliance Officers (CECOs) and boards of directors was much weaker than it should be. In 2013, SCCE conducted the study again to see if there were any changes.

The recently published 2013 study, based on over 600 responses from compliance and ethic professionals in the SCCE and HCCA database, seems to be on a much brighter note with generally positive findings.

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How Brazil’s Clean Companies Act will Affect Emerging Markets

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As my colleague Anna Nadgrodkiewicz recently discussed on this blog, corruption is a preeminent threat to developing countries.  In Brazil, corruption has been estimated to cost somewhere around $53 billion (approximately 2.3 percent of GDP) in 2013 alone.  Because this loss has a corrosive effect on democratic governance and the country’s ability to deliver continued improvement, Brazilians took to the streets in massive protests.  As a result the government of Brazil passed the “Clean Companies Act” which began being enforced on January 29.

The new law, like similar legislation in other countries, establishes corporate liability for corrupt practices committed by Brazilian companies as well as foreign companies that have branches or affiliates within the country.  Under the act, companies that bribe public officials (foreign or domestic) can be subjected to civil and administrative sanctions including heavy fines, prohibition on receiving state funds, and even dissolution of the firm.  The fact that Brazilian president Dilma Rouseff exercised her line-item veto power to make the law more strict than originally drafted seems to signal to the world that Brazil is serious about reining in corruption.

In the wake of the passage of the Clean Companies Act, much talk erupted over the implications for international trade.  Since the law closely resembles existing anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the UK Bribery Act, experts have warned that companies operating in the region can expect Brazilian authorities to cooperate more closely with their counterparts in the US during investigations.

More general discussion has involved the importance of solid compliance programs in multi-national companies (MNCs) if they are to avoid any run-ins with the law.  However, such commentary ignores a large audience that should take note of this development: developing countries.

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Compliance Officers – Unsung Heroes in the Fight Against Corruption

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Anti-corruption compliance has become one of the key issues that companies around the world need to tackle, especially if their business involves extensive cross-border value chains.

The responsibility for designing and overseeing a compliance program, at least in larger companies, lies with an ethics and compliance officer or department. That’s not an easy job. Robust compliance requires sufficient resources; a communication strategy – both internal and external – to convey company values, policies, and procedures; a level of trust among employees to voice concerns and flag violations; and above all, a clear commitment from the board and top management.

Not surprisingly, in many companies at least some of the elements necessary for sound compliance need more attention and remain on a compliance officer’s wish list. In a recent blog, Michael Scher, who has over three decades of experience as a senior compliance officer and attorney and work for major companies in New York and the Middle East, shares several such items. Based on 2013 trends Scher complied 10 areas where more needs to be done, which can be summarized in the following categories:

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Beyond Company Compliance: Collective Action Against Corruption

There is a growing interest in what the private sector can do to fight corruption. In part, it is driven by the increased enforcement of the Foreign Corrupt Practices Act (FCPA) and the new UK anti-bribery laws. They are leading companies to strengthen their compliance programs, important in their own right.

Yet, as the experience of IKEA in Russia shows – compliance is not enough. Ikea had a zero tolerance policy against bribery and a rather strong compliance program, but the corrupt environment proved too difficult to overcome. Operating in highly corrupt countries (i.e. many of emerging and developing markets according to TI’s corruption perceptions index) presents a unique set of risks and challenges that can’t be addressed only by saying no to corruption.

So what can be done to complement strong compliance programs? John Sullivan and I look at some solutions – collective action against corruption and the role of business associations – in this article published in the Ethisphere magazine.