In supply chains, trading partners often do favors for each other. But favors can be a slippery slope to bribes, depending on those involved. Criminality often creeps in once past the original transaction. Once employees are emboldened to break the law, they rarely stop. Money must be obtained and moved with as little visibility as possible. This invites books and records violations as employees scramble to disguise illicit transactions. Employees may falsify records to accumulate cash to pay bribes, then help themselves to the off-the-books funds.
Disruption to Business
Bribery investigations are long, labor-intensive and expensive. Even companies fined hundreds of millions of dollars have complained that the fines were dwarfed by the cost of outside counsel and forensic accountants. The government will assume that a problem at home may reflect a larger, systemic problem if you’re part of a global supply chain. The travel bills will mount alongside management distraction. Few things derail operations like a team of FBI agents in the lobby. Business partners will want to delay deals or stand-down on projects until the matter is resolved.
Pick Your Prison
While the U.S. has been more active than any other country in prosecuting international bribery, other countries are picking up the pace. A single act of bribery by a U.S. citizen working for a German company in China can subject that employee to prosecution in all three countries and imprisonment in any of the three.
This is not as complicated as it sounds. With enforcement up and budgets down, companies can nevertheless find cost-effective solutions to difficult compliance problems. A strong message from senior management should be communicated through written policies and updated with periodic emails. A company-wide email from the CEO clearly stating the company’s commitment to transparent business practices and intolerance for violations can have a powerful and immediate effect at very little cost.
Although off-the-shelf anti-bribery programs can seem most cost-effective, many companies can save money by taking a more tailored approach. One company’s risk profile doesn’t look like another and doing more than necessary makes as little sense as doing less.
Use your employees as a resource, especially those operating internationally, and find out what keeps them up at night. It may be customs officials, those responsible for inspections and permits, tax officials, senior members of the government or even their own family members. Addressing your employees’ concerns will make the most of your compliance budget while conveying to your employees your support for transparent business practices.
Ensure that your policies are accessible to your employees. Use clear non-legal language and “field test” it with your business people. Once you’re satisfied, have the policy translated into all appropriate languages for your team. Make the policy, in all languages, available on the company intranet, if possible. If that isn’t possible, ensure all new employees are given a copy and everyone else knows where to get one. Make it required reading and ensure managers follow-up.
Make sure you know your business partners, including agents, consultants, distributors, joint venture partners and others. Each due diligence program will be different, but make sure you review your partners at intervals and that they know and understand your anti-bribery policy. Consider requiring them to certify that they will not pay bribes but, at a minimum, include anti-bribery language in all agreements.
Ensure your employees understand and follow the company’s policy on gifts, entertainment, travel and other benefits for government officials. Bribes need not be cash, and can come in the form of scholarships or jobs for the children of customers, trips to corporate headquarters or other facilities with no real business purpose. It can even be as seemingly innocent as support for a favorite charity at the request of an official.
Taken together, these steps will place a company in the middle of the pack for anti-bribery compliance. With the enforcement agencies circling, the middle of the pack is where you want your company to be.
Alexandra Wrage is the president of TRACE, a non-profit membership association that pools resources to provide anti-bribery compliance solutions for multinational companies and their commercial intermediaries. She is also the author of Bribery and Extortion: Undermining Business, Governments and Security and the host of Toxic Transactions, a training video produced by NBC and TRACE. Alexandra can be reached at [email protected].