Anti-Corruption in Business: How to Refuse to Play Bribes and Register Gifts

07.27.2018 | CIPE in News | Natalia Otel Belan

The following is the English translation of an interview with CIPE’s Deputy Regional Director for Europe, Eurasia and South Asia, Natalia Otel-Belan. The article was originally published on July 12th, 2018 by leading independent investigative newspaper Ziarul de Garda.  

Interview with Natalia Otel-Belan, Center for International Private Enterprise (CIPE)

How was a Moldovan able to become the head of such a substantial department in an American organization that works all over the world?

The beginning was normal. Twenty years ago I graduated with a degree in foreign languages. I worked as a program assistant in the office of the World Bank in Chisinau, but very quickly understood that I could do a lot more, that I had enthusiasm and energy for more. So I began to look for opportunities. I decided to leave for the U.S. for further studies at American University in Washington, D.C. I even had a scholarship. Then I took out loans from the American government for foreign students in order to cover educational expenses. However, I had to find an American family, to co-sign the loan in case I did not pay it off. I found a family who agreed to co-sign for me, after which I was registered for a Master’s degree in the field of international relations and business development.

Was it worth taking that financial risk?

Yes, after this I did an internship at the World Bank in Washington, and then worked as a consultant for five years in the field of development of farming regions and the agricultural sector. In the end I came to CIPE. I started as a program coordinator. Now I am the regional director for Europe, Eurasia and Southeast Asia. This took effort.

That means, it’s not important that you came from Moldova, or from another poor, not very developed country, the main thing was that you were determined?

Yes, if you work a lot, honestly, then your efforts will pay off.

CIPE plans to introduce anti-corruption policies to businesses in Moldova. What do you think, why do entrepreneurs need anti-corruption in a country where corruption is everywhere, and bribes and informal payments open doors and solve problems?

I would like to emphasize two things that raise interest in anti-corruption policies: on the one hand, incentives, on the other hand, fear. The incentives come from the desire of entrepreneurs to move beyond the narrow space of the Moldovan market and work in foreign markets. However, it is not possible to enter modern markets with your goods without the implementation of anti-corruption standards. Yet the market in Moldova is very small, and if you want to grow, you should think about external partnerships. Any business that wants to go beyond the borders of Moldova, to the East or to the West, should become competitive, in order to enter into the fight for contracts with strong foreign companies.

And how can an external partner know about the details of the integrity of a Moldovan firm?

For example, if a company that has apple groves wants to sell apples in Europe, most likely they will sign a contract with a distributor in this region. In turn the European company that intends to procure apples from a Moldovan company would want to confirm that it is working with a good partner, who runs a transparent business. In this case the company from Moldova will show its code of ethics when it signs a contract with the European company.

How might if affect a foreign company if a Moldovan partner pays bribes for customs or tax inspections?

There is international legislation about integrity in business. The U.S., United Kingdom, other countries of Europe, the majority of countries of the world have anti-corruption laws that have extraterritorial jurisdiction. In The U.S. this law is called the Foreign Corrupt Practices Act. At first it applied to corrupt acts committed by American subjects on foreign territories. Now, any international company, whether or not it has American origins, but uses the U.S. banking system, Visa or MasterCard, that is, any activity that has a relationship to the U.S., falls under the understanding of “economic footprint.” In this way, on the foundation of this principle, the company is responsible for any corrupt acts committed in other countries, including by third parties.

In this case, international companies that do business in the Republic of Moldova or with partners in this country are responsible for possible corrupt acts committed by employees of the company or Moldovan partner. This is part of the fear that I mentioned in the beginning. And the fear of foreign partners is obvious if you analyze the slow pace at which foreign companies permeate the markets of Moldova or Ukraine. Foreign companies enter with caution markets where integrity standards in business are not well developed, fearing that local partners will not be transparent and honest enough, and they will be held accountable for it.

So you have to understand that creating policies in the field of anti-bribery and transparency can open the doors for entrepreneurs to foreign markets?

Yes, Moldovan companies, which implement anti-corruption standards, become competitive in foreign markets. This is part of the incentives. Any businessman who wants to enter foreign markets with honey, apples, nuts should confirm that it is fulfilling an anti-corruption program.

Along with this, anti-corruption standards are helpful not only for entering foreign markets, but also for attracting investors. For example, Moldovan financial institutions, banks or insurance firms, should demonstrate that they do not create a corruption risk if they want to attract foreign investors.

And not only on paper…

For sure. In this regard I would like to note the fact that Russia has legislation, in which rules and definitions of corruption are stricter than in America or Europe. But, unfortunately, in Russia the legislation is not implemented. Most likely these legal clauses are used for political goals, in order to keep political competitors in check.

Don’t you think that business people in from Moldova, who would have want to implement anti-corruption policies, are between a rock and a hard place? On the one hand, the desire to enter foreign markets helps them comply with these standards, on the other hand—all the same they live in a corrupt state, which sometimes encourages bribes for the sake of advancement.

Anti-corruption standards, created and accepted by companies, offer, actually, a defense from corruption risks. This is a defensive tool. The first step in the realization of this standard is evaluating risks. The entrepreneur should evaluate all processes of the business and document possible risks, creating a map of corruption risks. For example, in customs they might be asked for a bribe. The anti-corruption polices of the company, which definitively determine what an employee should do in that risky situation, are grounded in this risk analysis. The company can establish an absolute ban on unofficial payments as part of the anti-corruption policy. Coworkers should be trained on the basis of the standards established by company, so that they know how to behave and counteract corruption in concrete situations.

How realistic is it that employees record cases when bribes are demanded of them?

Companies decide how to teach employees to react to elements of corruption. An employee might say to the customs official or person asking for a bribe that her company has a policy to not give bribes, that it has documents that require employees to observe standards, but if they are asked for a bribe, they should record the cases: how much was asked, who asked, when it occurred. We hear this from companies of various countries of the world: when a coworker shows that the firm in which he works has a system of regulation of corruption risks, the person requesting the bribe stops asking.

And if the official, who is demanding the bribe, insists, and the losses to the company might be greater than the size of the bribe, and if the customs official, for example, does not allow the cases of fruit to cross the border?

In any case, companies should take this step: tell their coworkers that all acts of corruption should be documented. And workers should have the skill to talk about bribes directly: “If you are asking for money, I have to inform my supervisor, I have to inform her about the name, date, and place. Such is the policy of the company.”

It is possible that recording cases of extortion is a complicated process, but it is the first step, which will lead to an improvement of the situation, to changes. Moldova has anti-corruption legislation in the sphere of public governance. Complaints can be submitted about corruption. There are cases in which companies would have been able to submit a complaint if the case of extortion or the act of corruption had been documented.

Moldova also has legislation, and authorities, but there is no guarantee that they work in the interest of ordinary citizens or small businesses, in particular in situations of corruption.

The idea is that not only one company implements these standards of anti-bribery, but several companies at once. Slowly, this mass of companies that have integrity standards and actions against bribery will grow. The process is simple, there is nothing complicated. All employees should just be informed about the anti-corruption policies of the company. This is not only a system of documentation and reporting to the supervisor about cases of corruption, but also a mechanism for correcting such cases either peacefully or in court.

From the conversations you have had with local companies, where are the greatest corruption risks: in registration of the company, in tax agencies, in customs?

We work with business associations, but in the Republic of Moldova there has been research about this topic. In the latest research, in which corruption risks are evaluated, the systems most susceptible to corruption are control systems, including tax inspections, labor inspections, and quality control of food products. Contact with employees from the public service and accusations of excessive bureaucratization during the formulation of several documents and services were also noted as corruption risks. Organizations of entrepreneurs put forward proposals about necessary reforms to the leaders of the country. At the same time, it is clear that it is not possible to unendingly offer reforms to the government. Businesses also must do something internally: voluntarily apply anti-corruption standards, and large companies should implement standards of corporate governance, which include anti-corruption policies as well.

How can representatives of small businesses, who have numerous problems and are on the verge of disappearance, be motivated? What can they do to remain, continue work, and take upon themselves ethics standards?

Corrupt deals are very expensive. Bribes lower the profits of companies, and this money can be invested in greater production capacity and innovation, opening new work places, or raising salaries. In this way, money lost to bribes can be used for other needs of the company. We will work with those who have principles, who want to expand and grow, having overcome corruption risks. For example, one company told us that it works at a third of its capacity, and wants to develop, grow. For this reason it supports anti-bribery standards. We want to work with such companies in Moldova, bringing in our contribution to their development.

CIPE works in several countries of Eastern Europe, and post-Soviet states developed about the same in the past couple decades. Where, however, is progress felt in the sphere of business anti-corruption?

We have a lot of success in Ukraine. Recently a court was created there, specializing in the fight against corruption. Five years ago we began to implement these standards in Ukraine. Companies that want to enter foreign markets or attract investment were very interested and invited us to collaborate. They noted that the implementation of anti-corruption standards helps them reduce risk, grow their business, and protect from raiders.

How do you measure progress in the realization of anti-corruption policies in businesses, in every country or separately?

In Ukraine, for example, we began working with 20 companies. Currently about 1000 companies implement anti-corruption standards. In our opinion, this is obvious progress. Small steps create a culture of transparency and anti-bribery. Ukrainian companies that which implemented anti-corruption standards were able to shorten not only the volume of corruption, but also to improve relations with government institutions, which regulate business, and also create a circle of anti-corruption, which is continuously growing.

Is there progress in the Republic of Moldova?

Here we only intend to introduce anti-corruption policies to businesses. In 2017 we led a series of seminars to familiarize companies with these standards, and I noted an interesting moment: I invited a certain number of companies to familiarize themselves with the topic, but two times more came than were expected, representatives of banks came, and on the last day we had to change the location of the session in order to give everyone who wanted the change to participate in the seminars. So this was a reliable signal about the interest from the side of businesses and companies on the subject of anti-bribery.

Eastern Europe, on which you work, is well known for the phenomenon of oligarchs. You work in Georgia, Ukraine, Moldova, famous for their oligarchs, and in Ukraine even more so. In such conditions business is controlled politically. How are anti-corruption standards applied in oligarchic regimes?

Conditions of anti-corruption in part help firms create their own systems to defend their businesses and come to together to protect themselves from oligarchic capture.

What support does your institution provide? What should entrepreneurs know about the support of CIPE?

We not just in theory, but in practice, implement programs in Moldova. We strive to adapt them to local legislation and conditions. We search for one organization or a group of organizations, which in turn can realize the programs. We insist that our programs are continuous and accessible, including financially, so that companies from Moldova can use them. An international system of anti-corruption management already exists, ISO-37001, but its implementation is very expensive and this makes it inaccessible for small and medium sized enterprises in Moldova. I know that the National Center for the Fight against Corruption (NTsFK) intends to promote this system, but for now it is not very practical if there is not widespread access to it.

Despite the fact that NTsBK, according to its charter, was created for the fight against corruption, it was also accused of nontransparent acts, and the directors were not able to prove their honesty, property and interests. What do you think, is it a good partner?

NTsBK asked to collaborate in the advancement of anti-bribery standards and, now, insofar as this is our mission, we are interested in working with those who share this mission. At present we are carrying out only informational activities, we work with all institutions and structures that are interested in anti-corruption standards.

What anti-bribery standards in the private sector work in the U.S.?

In the U.S. it is absolutely normal that all companies comply with these standards. The code of ethics is an irreplaceable document in any company. Even we, in our company, have an anti-corruption policy. Every employee is required to read this document and sign every page. Our code of ethics is on our website, it has over ten pages, which describe possible situations of corruption risk both in the office in Washington and on business trips.

Exactly what kinds of situations does the given code of ethics regulate?

For example, we have the right to drink coffee for free, we have the right to accept various goods from partners, what kind of exchange of gifts is allowed. All of these clauses are taken seriously. For example, our partner the U.S. Chamber of Commerce has in its code of ethics a rule, according to which at events, to which official representatives are invited, it is forbidden to provide dishes that do not qualify as “finger food,” that is, small appetizers, which you can eat with your fingers. That is actually what happens. The legislation is strict, but people respect it.

Out of curiosity, if an American official comes, and at the event are steaks, what will he do?

Then the official will not touch the food. He will leave.

And what kind of restrictions are there in your office? What kind of presents do you have the right to receive?

For example if a partner comes and brings a box of chocolates, we do not want to be rude and we take it, but we register it: we received such-and-such number of 200-gram boxes of chocolates. After this if we want, we eat the chocolate as a whole team. Acceptable gifts are well determined. In this way, gifts costing up to $20 are acceptable. We understand that partners have various traditions of politeness, and insofar as we work in many countries, often partners come with some kind of local culture. Traditions of politeness and hospitality differ, with various values. But we have a rule to not accept anything that costs more than $20.

Did you ever have to receive an uncomfortable gift?

Yes, someone came from Georgia, and as a sign of respect brought a little statue. I did not know what kind of metal it was made of and refused to take it, but the person insisted, saying that this object represents the culture and art of his state. Then I took the gift for the company, not for myself, and registered it in the registry of gifts and put it in a cabinet designated for such objects.

Thank you for the interview.

Alina Radu led the conversation

To read the full original interview, please visit Ziarul de Garda’s website.