Amid headlines trumpeting the first trial conviction under the Foreign Corrupt Practices Act and record criminal penalties doled out by the Justice Department, it's no surprise that anti-corruption is top-of-mind for many compliance officers today. Now with just one month away from the U.K. Bribery Act going into effect, compliance officers say they are revamping their policies accordingly.
At the Compliance Week 2011 conference last week, several compliance officers shared their stories and the changes they are making to anti-corruption programs. Dun & Bradstreet, for example, has taken an approach that more and more global companies are considering: engineering its anti-corruption program to make the Bribery Act its default standard, said K.C. Turan, chief compliance and privacy officer for the business credit information provider.
Concern around facilitation payments was an especially hot topic. The Bribery Act, which goes into effect July 1, expressly outlaws facilitation payments, sums paid to foreign officials to expedite a normal business transaction, such as clearing goods through customs. Such payments differ from a bribe, which is meant to entice a foreign official to award, say, a contract.
Some compliance officers believe that is a distinction without a difference, and have never been fans of the facilitation payment anyway. “We now explicitly prohibit facilitation payments, whereas previously we severely restricted them,” Turan said. He added that Dun & Bradstreet also has “expanded prohibition of offering, promising, or paying bribes to include requesting or agreeing to receive or accept bribes,” since the Bribery Act establishes new criminal offenses against individuals who not only give or offer bribes, but also against those who receive or solicit bribes.
Peter Jaffe, chief ethics and compliance officer for AES Corp., a supplier of electricity, said its challenge is with agents and representatives, whom the company classifies as either low or high risk. Those who deal with government officials, for example, are considered a high risk; less clear is who should be considered low-risk. “That is an area we struggle with a little bit,” he said.
Generally speaking, however, “most of what the Bribery Act requires is things we already deal with anyway,” Jaffe said. “We certainly don't allow commercial bribery or facilitation payments.”
But how would you detect payments outside of books and records? “That's a big challenge,” Turan said. “Whenever the payment is coming from within the organization, that is going to have to be—and should be—recorded somewhere.”
Dun & Bradstreet has certain red-flag indicators for vague recordings, whether they are a consultant payment that raises suspicion or a payment routed through a different country or currency exchange. In those cases, Turan said, either he or internal audit looks into such payments, but D&B also has automated controls and programs to detect such payments as well.
Outside of questionable payments, companies are making other changes, as well. McDonald's Corp. is amending its employee handbook in the United Kingdom to ensure that contracts include obligations and penalties regarding anti-corruption, said Haydee Olinger, global compliance officer for the fast-food giant.
“Anti-corruption efforts are “becoming a part of the way people do business. It is just something that everybody understands has to be done.”
—Haydee Olinger,
Global Compliance Officer,
McDonald's Corp.
Terms and conditions for its global suppliers also will be amended to ensure they are aware of the Bribery Act's requirements. Additionally, Olinger said, the U.K. operation will bring on a local compliance officer, who will report to her.
Dun & Bradstreet has increased its due diligence on M&A transactions and around third-party contract terms. “We have more oversight over them,” such as using internal audit more as they go to these local markets, specifically as it relates to corruption and kickbacks, Turan said.
Making Bribery Personal
Compliance officers also discussed the cultural challenges of enforcing anti-bribery measures. A common grievance from many compliance officers is that some countries couldn't care less about the FCPA or the Bribery Act, because they don't directly apply to them.
“We are trying to come up with a global standard for compliance, so we are not dealing with FCPA versus the Bribery Act,” said Gus Hubert, vice president of compliance at Jacobs Engineering Group. The aim is to extract common features shared by all the anti-corruption regulations and to come up with corporate policies and procedures using those commonalities going forward, he said.
Conducting due diligence in emerging markets presents particularly unique challenges, because some countries have literally never even seen a contract before, Jaffe said. Others might have anti-corruption laws, but never been through an investigation, he said.
(From left) K.C. Turan, chief compliance and privacy officer for Dun & Bradstreet; Haydee Olinger, chief compliance officer of McDonald's; moderator Mary Spearing, parner at Baker Botts; and Kristine Robidoux, partner at Gowling Lafleur Henderson, talked about the effect of the U.K. Bribery Act on anti-corruption programs.
Some multinational companies are overcoming such obstacles by taking a more principle-based approach. “Our concept goes more toward the cultural side of things,” said Alberto Garrido, vice president of compliance and ethics for Diageo's North America operations. The more employees understand the company's values and the consequences of individual acts in different countries, the more effective the message. “It's important to power them locally,” he said.
Turan agreed. “Ultimately, the local markets and the business channels need to know that they own the risks,” he said. “There does need to be local responsibility.”
Many Canadian-based companies follow a similar approach. “In large measure, our Canadian clients have already been addressing foreign corruption not as an FCPA issue, but as a broader more principle-based anti-corruption issue for quite some time,” said Kristine Robidoux, a partner with the Canadian law firm Gowling Lafleur Henderson.
“We are trying to come up with a global standard for compliance, so we are not dealing with FCPA versus the Bribery Act,” said Gus Hubert, (left) vice president of compliance at Jacobs Engineering, while Peter Jaffe, chief ethics and compliance officer for AES Corp. looks on.
In the past, Canada has fallen under a great deal of criticism for its lackadaisical approach toward anti-corruption enforcement. While the “Corruption of Foreign Public Officials Act”—the Canadian version of FCPA—has been in place since 1998, no significant prosecution has resulted from the statute. The Bribery Act now makes it easier to convince clients to comply with anti-corruption, Robidoux said.
It also helps clarify the often-confusing gray area between bribery and facilitation payments. “For an organization to say, ‘We do not engage in the making of improper payment to public officials, but we can make improper payments to our business partners,' that becomes a very difficult thing for you to credibly defend your organization,” Robidoux said. From that perspective, the Bribery Act allows companies to have one consistent approach.
Overall, the Bribery Act is a positive development, because it helps drive home the message associated with having a strong anti-corruption and FCPA compliance program, “so more people will take notice,” Olinger said.
It helps multinational companies to improve their anti-bribery programs, as well. “The question really becomes, who is making the leap from the preventative controls to the detective controls?” Turan asked. Having policies, procedures, training, and communication is one thing, but “what are you doing in terms of monitoring, testing, sampling, auditing, and going to the markets?”
Anti-corruption efforts are “becoming a part of the way people do business,” Olinger said. “It is just something that everybody understands has to be done.”
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