The terms compliance, anti-corruption and anti-bribery policies and procedures have recently become trendier. Businesses in general and multinational corporations in particular are becoming more concerned about these issues, and have as a goal to meet the legal compliance obligations in order to reduce corruption risks. In two recent cases, we can confirm the global impact of anti-bribery and corruption compliance policies
The Halliburton case
In a settlement between the United States’ Securities and Exchange Commission (SEC) and Halliburton held on July 27, 2017, the US firm – without admitting guilt or accepting responsibility – agreed to pay 29.2 million US dollars for violations of the books & records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA). The former VP involved also received a civil fine of 75 000 US dollars. An additional element of interest is that the company agreed to hire an independent compliance monitor for a term of 18 months.
While Halliburton was acting in Angola, the local state-owned oil company (Sonangol) required them to increase the local content on their Angolan projects. Halliburton chose to outsource 15 million US dollars’ worth of outsourcing services from a local provider, who had also been a former Halliburton employee and was a friend and neighbour of the Sonangol official in charge of the execution of the project.
This sanction falls within the substantial efforts by Halliburton to reduce its risk with FCPA (they had an ongoing compliance program, an active code of ethics and a whistle-blower mechanism). In this context, it is critical for multinational corporations to be aware of their activities in any jurisdiction, and to take all necessary preventative measures to reduce and mitigate corruption risks, especially when authorities like the US Department of Justice (DOJ) and the SEC have such a quick global reaction.
The General Cable Corporation case
General Cable Corporation (GCC), based in Kentucky (USA), is a multinational manufacturer and distributor of copper and aluminium wires as well as optical fibre cables, for energy, construction, industrial and communications sectors. From 2003 until 2015, GCC’s subsidiaries in Angola, Thailand, China, Indonesia, Bangladesh and Egypt made payments to government officials in the form of money, non-cash gifts and electronics, totalling approximately 19 million US dollars, allegedly generating over 51 million US dollars in sales.
The SEC investigated GCC for violations of the anti-bribery, books and records and internal controls, and reached a settlement with them (on December 29, 2016) for more than 75 million US dollars. In addition, the SEC ordered GCC to report for three years on the status of the implementation of anti-corruption compliance policies and procedures.
The DOJ also entered into a non-prosecution agreement with GCC through which the company would not be prosecuted as long as the FCPA rules were not violated, and to pay a penalty of 20 million US dollars. The commitment also included implementing further anti-corruption compliance policies and procedures (and to report periodically to the DOJ).
What companies can do to mitigate corruption risks
Companies doing business internationally must increase their level of care on anti-bribery and all anti-corruption scenarios, especially when operating in locations that might be prone to irregular behaviours.
In 2016, the International Organization for Standardization (ISO) released the first set of standards designed to help organizations prevent and detect bribery. The ISO 37001 standard might become the proper benchmark for assessing and managing anti-bribery and corruption systems.
Corporations should consider some of these specific measures:
Internally (and externally) assess the level of corruption risk in the operating country (corporate risk mapping, or simpler tools such as Transparency International’s Corruption Perceptions Index).
Send a strong message to international business managers by setting a strict standard of behaviour and principles to be applied globally.
Apply a proper anti-corruption policy adapted to the industry or sector (Code of Business Ethics), through benchmarking and risk assessment and previous sanctions analysis (a proper review of past FCPA sanctions).
Closely verify the track record of outsourcing providers, local agents, distributors or intermediaries. In case of convictions for corruption offences, these companies should be excluded from the providers list.
Train the local management and employees on anti-corruption policies (the company’s and global standards). These training sessions are normally held once a year, and should be provided in the local language to guarantee the understanding of the policies.
Provide a follow-up system and mechanism to verify that the policies are being properly followed, including third-party contracts.
Conduct periodic performance tests (audits) as well as public industry reports to be delivered to public authorities and other relevant parties.
Most major companies have already introduced and are performing most of these tasks. However, without a constant, independent monitoring of all involved parties, there is always a risk that some element of the chain might fail. A proper anti-corruption culture must be the credo of the corporation, providing recurring due diligence exercises, internal audits and the realization that the constant upkeep of these policies is the only way to reduce any negative outcome.