Understand and mitigate bribery and corruption risks
Bribery and Corruption
Understanding the bribery and corruption risks posed by business partners, vendors, third parties, and potential acquisition targets is critical.
Adhering to specific legislation
An organization’s compliance program needs to adhere to Know Your Customer (KYC), Politically Exposed Persons (PEPs), Anti-Money Laundering (AML), and Countering the Financing of Terrorism (CFT) legislation in order to satisfy regulators’ demands.
However, there is specific legislation that covers bribery and corruption such as the U.S. Foreign Corrupt Practices Act (FCPA), which needs to be factored in when forming a holistic program to ensure that an organization remains compliant. In recent years, the fines for violation of the FCPA alone have run into billions of dollars.
Although led by the U.S., anti-corruption and anti-bribery legislation has been adopted by many countries that have become signatories to the Organization for Economic Co-operation and Development (OECD) Anti-Bribery Convention. The OECD Anti-Bribery Convention is the first and only international anti-corruption instrument focused on the ‘supply side’ of the bribery transaction. Other legislation with many similarities to the FCPA is the UK Bribery Act.
Yet compliance programs that focus entirely on legislation leave organizations exposed to unseen risks that can cause costly legal, financial, and reputational damage.
Your exposure to risk
Business expansion, particularly through joint ventures, mergers, acquisitions, distribution, and agency agreements, can expose an organization to regulatory risk. Operating in unfamiliar locations, where local practices may transgress international legislation or where local language and cultural differences can be misinterpreted, heightens risk.
Supply chains can equally increase exposure to risks such as corruption, theft, and fraud, as well as reputational risks such as human rights abuses and environmental malpractice. These are risks that can severely impede or destroy an organization, even one with sophisticated and carefully maintained processes.
To mitigate this risk, and to protect your organization’s reputation, the implementation of a structured and robust compliance program guided by best practice is crucial.
Your corruption risk
Assessing corruption risk includes external factors such as:
- Geographical exposure
- Interaction with government officials
- Reliance on agents
- Structure of any agency payments
- Complexity of global supply chains.
Best practice policy
Best practice policy provides internal structures, procedures, and reporting that help to reduce risk and demonstrate effective compliance, such as:
- Employee training, skills, and knowledge
- Guidance on gifts, hospitality, promotional expenditure, and political or charitable contributions
- Sound financial controls
- Clear anti-bribery message from the executive, which cascades down the organization and to its third parties.
It is important to have a compliance strategy that is comprehensive, straightforward, and clearly communicated.
This article will highlight the need for companies to implement or review existing approaches to third party risks in supply chains.
This article will highlight the efforts of other countries to enact and enforce legislation to curb bribery and corruption across the globe.
World-Check trusted and accurate source of risk intelligence made available to help you meet your regulatory obligations, make informed decisions, and help prevent your business from inadvertently being used to launder the proceeds of crime or association with corrupt business practices.
Enhanced due diligence processes form part of a best-practice, risk-based approach as well as providing a critical framework during the anti-money laundering and know your customer on-boarding life cycle.