It pays to develop a corporate culture of compliance. Do your employees and contractors know the answers to these questions?

  • Can I pay for the managers of the factory in China where my goods are manufactured to travel to the United States?
  • Is it okay for me to give a wedding gift to the daughter of a Minister who invited me to the wedding ceremony?
  • I’m tempted to pay off a government clerk so that I can receive the permit that I need but I don’t want to get into trouble. Will I?
  • We have discovered that a foreign company that we are in the process of acquiring has been making illegal payments to win business. What do we do?
  • Can my company be held responsible for bribes paid by a consultant hired to help us win a government contract?

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., the world’s largest retailer, lost $10 billion of its market value on the day after the story appeared in print and has been sued by its investors. And small companies, like this one, which can least afford it, also get fined and perhaps go out of business.

What To Docompliance

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 cultivate 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.

For guidance on the questions posed at the start of this article, sign up for our upcoming webinar. 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.