CompliancecartoonIt pays to develop a corporate culture of compliance. What do the following and scores of other companies have in common?

They have all been accused by the US Government of violating US anti-bribery laws and paid a hefty price for it.

Anti-Bribery Laws

The US Foreign Corrupt Practices Act (FCPA) makes it illegal for U.S. persons to offer business bribes.  A bribe is any offer to pay, promise to pay, or actual payment of money or anything of value to secure or retain a business opportunity. The United State is one of thirty-nine countries  which has signed the OECD Anti-Bribery Convention  and adopted the Anti-Bribery Recommendations. Each country has a different approach to monitoring and enforcing its anti-bribery laws. The United States and the United Kingdom are among the most aggressive enforcers. For individuals and companies found guilty of violating the U.S. anti-bribery law, the penalties can include huge fines and imprisonment.  It cost Hewlett-Packard $108 million in fines, for example. Global aluminum manufacturer, Alcoa  paid $384 million in fines. The allegations alone can cause serious harm to one’s reputation, even for a major corporation.  Imagine an Internet search that links your company’s name to a bribery scandal for the foreseeable future.  Wal-Mart Stores, Inc. lost $10 billion of its market value on the day after the story appeared in print and has been sued by its investors.

What To Do

An ounce of prevention is better, and much cheaper, than a pound of cure. Wal-Mart has disclosed pre-enforcement professional fees and expenses equating to approximately $1.2 million per working day in connection with its FCPA scrutiny. All companies, even the smallest, need to develop a corporate culture of compliance, using the following tools:

  • A compliance manual that clearly articulates a policy against bribing and outlines internal controls aimed at enforcing this policy.
  • A risk assessment process. For example, do you know if you’re doing business in a country with a high risk of corruption? Transparency International, a global NGO, ranks countries each year based on public perception of corruption. Such an environment raises the likelihood of being approached about paying a bribe in order to obtain business.
  • Clearly outlined guidance that incorporates red flags and procedures to officers and employees on potentially high-risk activities, such as gift-giving.

A corporate culture of compliance signals that the company aims to comply with relevant laws and regulations. A corporate culture of compliance can therefore lead to drastically reduced penalties even in the event of a violation. Contact us for assistance with developing a corporate culture of compliance.

DevelopTradeLaw, LLC provides business-oriented advice to the legal challenges that face companies doing business internationally. Contact us for more information or advice on the topic of this article.