Creating and Implementing Anti-Bribery Compliance Programs
Many countries, including the United States, have specific laws on conducting business with foreign government officials that may come into play in any given export sales or other international transaction. The US Foreign Corrupt Practices Act (“FCPA”) includes comprehensive anti-bribery provisions and accounting and internal audit requirements designed to ensure that companies establish and maintain adequate compliance procedures. In general, the FCPA prohibits US companies from making corrupt payments to foreign officials for the purpose of obtaining or keeping business. The FCPA also requires issuers of securities to meet its accounting standards. These accounting standards, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require companies covered by the provisions to maintain books and records that accurately and fairly reflect the transactions of the company and to design an adequate system of internal accounting controls to ensure that transactions subject to the FCPA are properly executed and recorded. The Department of Justice (“DOJ”) is the chief enforcement agency, with a coordinating role played by the Securities and Exchange Commission (“SEC”). The consequences for a violation of the FCPA are extremely severe, both for the company and individuals, and may include criminal sanctions and civil liabilities.
While the FCPA is obviously a matter of principal concern to US companies with respect to corrupt practices in foreign countries, notice should also be taken of global initiatives relating to bribery and extortion such as the OECD Guidelines for Multinational Enterprises and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, December 18, 1997, 37 I.L.M. 1 and UN Convention Against Corruption, G.A. Res. 4, UN GAOR, 58th Sess., Agenda Item 108, UN Doc. A/RES/58/4 (2003). Other international agreements relating to bribery and corruption include the African Union Convention on Preventing and Combating Corruption (2003), the Inter-American Convention against Corruption (1996) and the European Union Convention on the Fight against Corruption Involving Officials of the European Communities or Officials of Member States of the European Union.
Numerous countries have also adopted their own laws relating to bribery of public officials and there is a decided increase in enforcement activities in foreign jurisdictions. Anti-bribery training should be localized and should cover not only the company-wide policies adopted at headquarters in the US but also the actual requirements and prohibitions of local laws. This means that all training and compliance tools should be translated as needed in order to be understood and followed by employees in all countries where the company is conducting business. When necessary, advice should be obtained from local counsel; however, care should be taken in selecting local counsel since lawyer in many developing countries rely heavily on relationships with local governmental officials and those relationships may cloud the advice they provide to foreign companies considering inbound investment activities.
When assisting clients with developing anti-bribery programs for activities in foreign countries, business counselors should also refer to several useful indexes and related tools that have been developed to measure corruption around the world. One well-known index is the Corruption Perceptions Index, or “CPI”, published annually by Transparency International. The CPI consists of scores for various countries based on how corrupt their public sectors are seen to be. Also useful is the TRACE Matrix developed by Rand Corporation and Trace International. The TRACE Matrix is an index for business bribery risk in various countries that takes into account factors such as difficulty of doing business; need for interactions with government; the relevant antibribery laws and regulations; information concerning enforcement of domestic and international antibribery laws and regulations; a measure of government transparency and quality, including budgetary transparency; information about a government’s civil service quality and management; and civil society oversight, including the role of the press and media.
In addition, companies can and should adopt antibribery management systems. Of note in this area is ISO 37001, the antibribery management systems standard adopted by the International Organization for Standardization (“ISO”) and set for final publication by the end of 2016. ISO has described ISO 37001 as being designed to help an organization establish, implement, maintain, and improve an anti-bribery compliance program or “management system” by adopting a series of measures and controls that represent global anti-corruption good practice. ISO 37001 applies both to bribery by the organization, or by its personnel or business associates acting on the organization’s behalf or for its benefit, and to bribery of the organization, or of its personnel or business associates in relation to the organization’s activities. The recommended measures and controls should be familiar to companies that have consulted prior international standards and the DOJ guidelines and include an anti-bribery policy, procedures, and controls; top management leadership, commitment and responsibility; senior level oversight; anti-bribery training; risk assessments; due diligence on projects and business associates; reporting, monitoring, investigation and review; and corrective action and continual improvement.
ISO 37001, like ISO 9001 (the quality management systems standard), is a “requirements standard”, which means that companies will be able to seek and obtain certification from accredited third parties that their antibribery management systems meet the standard’s criteria. It is expected that implementation of ISO 37001, including certification, will provide reassurance among investors and other stakeholders that an organization has an effective system in place to manage the risk of bribery. It is also likely that companies will require participants in their supply chain to obtain ISO 37001 certification. In addition, ISO 37001 certification will become an important part of a company’s corporate social responsibility initiative and can be cited as an indicator of the company’s commitment to ethical business practices.
New Chapter 271 of Business Transactions Solution on WESTLAW, titled “Anti-Bribery Compliance”, covers the design and implementation of compliance programs necessary for fulfilling the requirements of the FCPA as well as local anti-bribery laws that have been adopted by foreign countries around the world. The chapter includes a detailed discussion of the key provisions of the FCPA and the essential elements of an anti-bribery compliance program. The materials include a Master Form and Clause Library for an FCPA compliance policy. The specialty forms library includes a letter from the chief executive officer to employees regarding the FCPA compliance policy and FCPA policies and procedures. The chapter also includes foreign subsidiary FCPA compliance audit worksheets and conflicts of interest policies, FCPA accounting and internal control review worksheets, a client executive summary regarding the FCPA, a template for a client alert regarding FCPA recent and anticipated developments and a slide deck presentation on FCPA compliance counseling suitable for law firm and department training purposes. Related issues are covered in other Business Transactions Solution chapters on Compliance Programs (§§ 229:1 et seq.), Launching and Managing Global Business Activities (§§ 259:1 et seq.) and Building and Managing a Global Law and Compliance Program (§§ 269:1 et seq.).
Want to learn even more? Sign up for the webinar on “A Short Course in Implemeting and Maintaining an Effective Foreign Anti-Bribery Compliance Program under the FCPA” being presented by West Legal Ed Center and the Business Counselor Institute on Tuesday, December 6th at 11:00 AM Central Time. Follow this link for registration information. It’s the third of a four part series on Going Global to help you be better prepared for client questions on growing their businesses in foreign countries. You can learn more about the series here.