As we get deeper into the 21st century, more and more American companies are pursuing the revenue growth offered by global markets. Around the world, new markets are emerging as the middle class of countries is wielding its discretionary income to demand a wider array of products and services.
However, just as there is great potential for growth, there is also a very real risk related to charges of corruption, particularly for companies as they research, develop, test, or sell their products overseas.
Potential Areas of Risk
Companies are often extensively involved with foreign entities throughout the life cycle of their products and services. Bribery and corruption risk can arise at multiple points, including:
- Selection and management of third party agents and distributors
- Management of regulatory risks relating to gaining operating license and permits to distribute products
- Gifts offered to foreign entities
- Investigations resulting from whistleblowers
- Funding of research, educational, and professional development efforts for foreign professional staff who may have influence over business decisions
The consequences of being found guilty of bribery or corruption violations within the aforementioned scenarios can be enormous both for a company and its key individuals, including:
- Steep financial penalties
- Debarment: preventing the company from pursuing government contracts
- High legal and investigative costs that can adversely affect the company’s profitability
- Drop in stock price or shareholder value
- Damage to the company’s reputation
- Prison term for key individuals
Clearly, with so much at stake, any company developing and selling its products and services in the global marketplace should take proactive steps to become educated on anti-bribery and anti-corruption measures that should be put in place.
According to the Organization of Economic Cooperation and Development (OECD) Working Group on Bribery, 40 countries have joined the Anti-Bribery Convention. These countries generate nearly two-thirds of global trade and 90 percent of outward foreign direct investment.
Criminal anti-corruption investigations and prosecutions are managed by the Department of Justice (DOJ) according to the guidelines established in the Foreign Corrupt Practices Act (FCPA). The FCPA is a federal anti-bribery statute that prohibits U.S. individuals, companies, their subsidiaries, personnel, shareholders, and agents from paying, offering, or promising to pay anything of value to foreign officials, either directly or indirectly, for the purpose of retaining business.
Although the key sections of the FCPA are associated with SEC rules and regulations, it is important to note that in addition to U.S. public companies, U.S. private entities, individuals, and anyone else taking or soliciting action within the United States are also subject to the law. The consequences of being found guilty of FCPA violations can be enormous for a company and its key individuals. Companies that violate FCPA provisions face criminal fines up to $2 million per violation.
A common misconception is that companies, not individuals, are the only entities prosecuted under the FCPA. In fact, corporate executives, officers, business partners, sales agents, board members, directors, and shareholders, can be prosecuted and face severe civil and criminal charges including up to five years in prison or fines up to $100,000 per violation.
The United States cooperates with governments around the globe in its anti-corruption initiatives. Major partners include:
Best Practices for Company Compliance
Be proactive in understanding the impact of anti-bribery and anti-corruption regulations in the countries in which a company operates. Asses levels of risk, organizational readiness, and what will be required to meet minimum compliance standards. Do this by putting adequate transparency procedures in place to prevent acts of bribery. When developing such a program, focus on these priorities:
- Top-Down Support. Assign lead responsibility for the compliance program to a senior member of the management team who reports directly to the CEO and the board chairperson.
- Project Management. Assign a dedicated project manager to implement the program.
- Prioritize. Systematically asses areas of risks and prioritize activities to address high-risk activities first.
- Maintain an ongoing program. Do not let the program lapse after launch. This can raise red-flags to investigators.
- Self-Audit. Implement an ongoing review process to ensure procedures reflect any updates or changes in compliance requirements
- Track activities. Retain all records and information related to compliance. Do so in a secure, yet accessible manner.
- Maintain certifications. Certify employees most exposed to bribery risks.
- Translate. Invest in translating bribery prevention training materials to ensure they are clearly communicated to all employees in their native languages.
Beyond compliance programs, strive to create a cultural of ethical conduct in day-to-day company operations. Ensure this is clearly communicated to all employees and partners. This can be difficult for corporations with diverse offices and employee groups across the globe.