How to Create and Manage an Effective Anti-Corruption Policy
As trade has become more global, so have the threats that are associated with it. One significant threat vector is sanctions. Another is bribery and corruption, both of which attract stiff penalties.
Many countries, including the U.S., have enacted strong anti-bribery and corruption (ABAC) laws to stamp out the practice. These laws have made it a punishable offense to bribe or make payments to a government official, third party, or fixer to win a contract.
In this article, we'll cover:
- Anti-corruption laws in the U.S. and around the globe
- What counts as bribery and corruption
- How to build an anti-bribery and corruption compliance program for your business
- Nine steps to managing your anti-corruption policy
- How software automation can help a business ensure their anti-bribery and corruption policy is adhered to
Anti-Bribery and Corruption Laws in the U.S. and Globally
The most high profile of all anti-corruption laws is the U.S. Foreign Corrupt Practices Act (FCPA). Enforcement actions are put in place by organizations like the Department of Justice to ensure corporate compliance with ABAC laws like the FCPA.
The FCPA takes its inspiration from the OECD Anti-Bribery Convention. This focuses on the "supply side" of corruption. In other words, the party offering the bribe gets punished, not the party accepting the bribe.
There are many other anti-corruption and bribery laws in the world you have to consider depending on where you do business.
For example, breaking the U.K. Bribery Act can lead to significant fines and jail time. Companies found guilty can also be barred from bidding for public contracts. Firms may be subject to confiscation orders, and some or all of their Board of Directors may be banned from holding leadership roles for up to 15 years.
The United Kingdom is one of nine countries in the world where corruption and bribery is a criminal offense. Other countries with a zero-tolerance approach include Australia, Chile, India, Italy, Kenya, Malaysia, Switzerland, and Ukraine.
Many jurisdictions your company operates in may have their own local laws against making improper payments too, including those where corruption risk is higher. So one act of bribery may result in punishment in multiple countries.
What Counts as Bribery and Corruption?
Private sector companies may use bribes to secure an improper advantage over their rivals when competing for a contract.
ABAC risk here is high. To protect themselves, companies need a strong anti-corruption policy with a comprehensive compliance program to enforce it.
Anti-corruption laws forbid the bribing of any of the following persons acting in an official capacity:
- Government staff
- Public officials
- Employees of state-owned entities
- Any instrumentality of the government
- Employees of public international organizations like the United Nations, World Bank Group, or the Red Cross
Bribes may not just be direct cash payments. A bribe can be anything of value — from consulting agreements to political donations and even visas. In essence, a bribe could be anything that gives some type of personal benefit to the party receiving it, including cash equivalents.
Bribes may also be:
- Charitable contributions and sponsorships: Like charitable donations requested by a business partner or government official
- Facilitation payments: Like payments made to speed up or influence the actions of a government agency or government-owned organization when, for example, awarding a contract
- Political contributions: Like donations to a political party, lobbying exercise, or a political office
With gifts and hospitality, make sure that your anti-bribery and corruption policy stipulates that any incentive offered is reasonable and appropriate. Incentives should not be significant enough to improperly influence the recipient's decision-making. You should show extra vigilance in the provision of gifts and hospitality to family members.
Not all bribes are direct either. In other countries, you may have wholly or partly owned subsidiaries or be engaged in joint ventures that are legally separate from your core business. You may alternatively have commercial partnerships with third parties like intermediaries and distributors that act as representatives for you. Your anti-corruption policy needs to cover this too.
If you are the beneficiary of a contract brokered by a third party, subsidiary, or an extended enterprise where bribery was involved, you may be legally responsible. That’s even if you knew nothing about it.
How to Build an ABAC Compliance Program for Your Business
Effective anti-corruption and anti-bribery policies set out what you define as acceptable business conduct to your members of staff, subsidiaries, and third parties.
These policies should align with your ESG (Environmental, Social, and Governance) and corporate ethics and compliance policies. You should update them regularly to reflect changes to applicable laws.
It's important to understand the purposes of this policy from the outset. The goal of your anti-corruption policy is to uphold integrity, maintain public and stakeholder trust, and prevent any form of corruption and bribery that could undermine your company. This involves being vigilant about any red flags that could indicate potential corruption.
In addition to ensuring compliance with ABAC policies, companies should also consider integrating sustainability initiatives and ESG metrics into their operations.
Your anti-bribery and corruption policy should:
- Show intent: You need to explain clearly where the company stands on bribery and corruption. This demonstrates that you're serious about acting in good faith in contractual arrangements. It's a strong message to employees and representatives that you expect them to stay true to these values when acting on behalf of the company.
- Be unambiguous: Describe precisely what you mean when using terms like bribes and kickbacks so everyone knows what they are. For example, make it clear in the guidelines how employees and third-party business partners should deal with government officials at both local and foreign government levels.
- Contain clear instructions: Employees need to know what they have to do to adhere to your policy and how to report any suspected or actual violations. Explain to staff and partners the relevant code of conduct for managing potential conflicts of interest. Be explicit about how to handle business dealings, including issues like travel expenses.
- Assign responsibility: Consider hiring a compliance officer specifically dedicated to anti-bribery and corruption. Make them responsible for delivering ABAC compliance across your company. They can also be the person to lead any inquiries into suspected breaches.
9 Steps to Managing Your ABAC Program
Having an anti-corruption policy is the first step to protecting yourself from governmental action for non-compliance. Now, you should put the right business practices in place to ensure employees and others adhere to them.
Nine ways to achieve this with your anti-corruption policy are:
- Perform due diligence: Check each current and future third-party relationship for ABAC compliance. Enhanced due diligence will reduce any potential future liability. Take a risk-based approach by considering each party's background, financial health, and current/historic ABAC compliance with their legal requirements prior to onboarding. This is particularly important for procurement professionals dealing with supply chain issues.
- Establish contractual obligations: Include clauses in your third-party contracts on anti-corruption and anti-bribery. Ensure they follow your ethical standards and initiatives to comply with anti-corruption laws.
- Track and audit: Continually oversee your third-party relationships to ensure ABAC compliance. Keep looking for potential risks through audits and risk assessments.
- Prohibit facilitation payments and kickbacks: Strictly enforce your rules against both. Make staff aware that violations can lead to severe penalties for themselves and the company.
- Put in place training and awareness programs: Educate employees on your anti-bribery and corruption policy, especially the harder-to-understand areas. Be exact on what their responsibilities are and share changes with them through regular training sessions and webinars.
- Maintain recordkeeping and internal controls: Keep accurate financial records of all transactions and expenditures. In particular, closely track which bank accounts you pay monies into and why. Put procedures in place for reliable reporting of accounting practices, payments, and expenses.
- Set up reporting mechanisms and whistleblower protection: Establish safe channels like a hotline for employees to report policy violations. Make sure that you protect whistleblowers from retaliation in your anti-bribery and corruption policy.
- Enforce policy and outline consequences of non-compliance: Let staff know the potential repercussions of non-compliance. Show the impact civil penalties and criminal punishments will have. Detail what disciplinary action is available to you for violation of this policy. Explain the circumstances under which you would use termination of employment as the ultimate punishment.
- Continually improve and review your policy: Regularly test and refine your anti-bribery and corruption policies and processes. Use feedback and data analysis to identify areas for improvement.
How to Create and Manage an Effective Anti-Corruption Policy
As trade has become more global, so have the threats that are associated with it. One significant threat vector is sanctions. Another is bribery and corruption, both of which attract stiff penalties.
Many countries, including the U.S., have enacted strong anti-bribery and corruption (ABAC) laws to stamp out the practice. These laws have made it a punishable offense to bribe or make payments to a government official, third party, or fixer to win a contract.
In this article, we'll cover:
- Anti-corruption laws in the U.S. and around the globe
- What counts as bribery and corruption
- How to build an anti-bribery and corruption compliance program for your business
- Nine steps to managing your anti-corruption policy
- How software automation can help a business ensure their anti-bribery and corruption policy is adhered to
Anti-Bribery and Corruption Laws in the U.S. and Globally
The most high profile of all anti-corruption laws is the U.S. Foreign Corrupt Practices Act (FCPA). Enforcement actions are put in place by organizations like the Department of Justice to ensure corporate compliance with ABAC laws like the FCPA.
The FCPA takes its inspiration from the OECD Anti-Bribery Convention. This focuses on the "supply side" of corruption. In other words, the party offering the bribe gets punished, not the party accepting the bribe.
There are many other anti-corruption and bribery laws in the world you have to consider depending on where you do business.
For example, breaking the U.K. Bribery Act can lead to significant fines and jail time. Companies found guilty can also be barred from bidding for public contracts. Firms may be subject to confiscation orders, and some or all of their Board of Directors may be banned from holding leadership roles for up to 15 years.
The United Kingdom is one of nine countries in the world where corruption and bribery is a criminal offense. Other countries with a zero-tolerance approach include Australia, Chile, India, Italy, Kenya, Malaysia, Switzerland, and Ukraine.
Many jurisdictions your company operates in may have their own local laws against making improper payments too, including those where corruption risk is higher. So one act of bribery may result in punishment in multiple countries.
What Counts as Bribery and Corruption?
Private sector companies may use bribes to secure an improper advantage over their rivals when competing for a contract.
ABAC risk here is high. To protect themselves, companies need a strong anti-corruption policy with a comprehensive compliance program to enforce it.
Anti-corruption laws forbid the bribing of any of the following persons acting in an official capacity:
- Government staff
- Public officials
- Employees of state-owned entities
- Any instrumentality of the government
- Employees of public international organizations like the United Nations, World Bank Group, or the Red Cross
Bribes may not just be direct cash payments. A bribe can be anything of value — from consulting agreements to political donations and even visas. In essence, a bribe could be anything that gives some type of personal benefit to the party receiving it, including cash equivalents.
Bribes may also be:
- Charitable contributions and sponsorships: Like charitable donations requested by a business partner or government official
- Facilitation payments: Like payments made to speed up or influence the actions of a government agency or government-owned organization when, for example, awarding a contract
- Political contributions: Like donations to a political party, lobbying exercise, or a political office
With gifts and hospitality, make sure that your anti-bribery and corruption policy stipulates that any incentive offered is reasonable and appropriate. Incentives should not be significant enough to improperly influence the recipient's decision-making. You should show extra vigilance in the provision of gifts and hospitality to family members.
Not all bribes are direct either. In other countries, you may have wholly or partly owned subsidiaries or be engaged in joint ventures that are legally separate from your core business. You may alternatively have commercial partnerships with third parties like intermediaries and distributors that act as representatives for you. Your anti-corruption policy needs to cover this too.
If you are the beneficiary of a contract brokered by a third party, subsidiary, or an extended enterprise where bribery was involved, you may be legally responsible. That’s even if you knew nothing about it.
How to Build an ABAC Compliance Program for Your Business
Effective anti-corruption and anti-bribery policies set out what you define as acceptable business conduct to your members of staff, subsidiaries, and third parties.
These policies should align with your ESG (Environmental, Social, and Governance) and corporate ethics and compliance policies. You should update them regularly to reflect changes to applicable laws.
It's important to understand the purposes of this policy from the outset. The goal of your anti-corruption policy is to uphold integrity, maintain public and stakeholder trust, and prevent any form of corruption and bribery that could undermine your company. This involves being vigilant about any red flags that could indicate potential corruption.
In addition to ensuring compliance with ABAC policies, companies should also consider integrating sustainability initiatives and ESG metrics into their operations.
Your anti-bribery and corruption policy should:
- Show intent: You need to explain clearly where the company stands on bribery and corruption. This demonstrates that you're serious about acting in good faith in contractual arrangements. It's a strong message to employees and representatives that you expect them to stay true to these values when acting on behalf of the company.
- Be unambiguous: Describe precisely what you mean when using terms like bribes and kickbacks so everyone knows what they are. For example, make it clear in the guidelines how employees and third-party business partners should deal with government officials at both local and foreign government levels.
- Contain clear instructions: Employees need to know what they have to do to adhere to your policy and how to report any suspected or actual violations. Explain to staff and partners the relevant code of conduct for managing potential conflicts of interest. Be explicit about how to handle business dealings, including issues like travel expenses.
- Assign responsibility: Consider hiring a compliance officer specifically dedicated to anti-bribery and corruption. Make them responsible for delivering ABAC compliance across your company. They can also be the person to lead any inquiries into suspected breaches.
9 Steps to Managing Your ABAC Program
Having an anti-corruption policy is the first step to protecting yourself from governmental action for non-compliance. Now, you should put the right business practices in place to ensure employees and others adhere to them.
Nine ways to achieve this with your anti-corruption policy are:
- Perform due diligence: Check each current and future third-party relationship for ABAC compliance. Enhanced due diligence will reduce any potential future liability. Take a risk-based approach by considering each party's background, financial health, and current/historic ABAC compliance with their legal requirements prior to onboarding. This is particularly important for procurement professionals dealing with supply chain issues.
- Establish contractual obligations: Include clauses in your third-party contracts on anti-corruption and anti-bribery. Ensure they follow your ethical standards and initiatives to comply with anti-corruption laws.
- Track and audit: Continually oversee your third-party relationships to ensure ABAC compliance. Keep looking for potential risks through audits and risk assessments.
- Prohibit facilitation payments and kickbacks: Strictly enforce your rules against both. Make staff aware that violations can lead to severe penalties for themselves and the company.
- Put in place training and awareness programs: Educate employees on your anti-bribery and corruption policy, especially the harder-to-understand areas. Be exact on what their responsibilities are and share changes with them through regular training sessions and webinars.
- Maintain recordkeeping and internal controls: Keep accurate financial records of all transactions and expenditures. In particular, closely track which bank accounts you pay monies into and why. Put procedures in place for reliable reporting of accounting practices, payments, and expenses.
- Set up reporting mechanisms and whistleblower protection: Establish safe channels like a hotline for employees to report policy violations. Make sure that you protect whistleblowers from retaliation in your anti-bribery and corruption policy.
- Enforce policy and outline consequences of non-compliance: Let staff know the potential repercussions of non-compliance. Show the impact civil penalties and criminal punishments will have. Detail what disciplinary action is available to you for violation of this policy. Explain the circumstances under which you would use termination of employment as the ultimate punishment.
- Continually improve and review your policy: Regularly test and refine your anti-bribery and corruption policies and processes. Use feedback and data analysis to identify areas for improvement.
How Certa Helps Businesses Ensure ABAC Compliance
Adhering to an anti-corruption and bribery policy is difficult. It's even harder for businesses that also trade abroad because of the challenges in replicating overseas the controls you have in your home country. There is a long-term business advantage to getting this right though.
To mitigate these third-party risks, the Certa platform offers clients the following features that streamline workflows associated with your anti-bribery and corruption policy:
- Risk management: Conduct and track your risk assessments centrally to understand your organization's risk profile. Build a company-wide approach to identifying and addressing potential corruption risks.
- Audit trails: Keep records of all activities for greater accountability and transparency. Use them as evidence of compliance in the case of regulatory audits or investigations.
- Automated workflows: Automate compliance-related processes for greater efficiency. Also ensures consistent implementation of anti-corruption measures across your organization.
- Real-time compliance dashboards: Get an at-a-glance view of your organization's anti-corruption status. Quickly spot any areas that might need attention.
- Document versioning: Keep a history of all document changes with third parties and end clients. Make sure everyone is on the same page regarding compliance-related contractual issues. This transparency will minimize the risk of miscommunication or misunderstandings.
- Compliance documentation: Centralize all necessary documentation for your anti-corruption certification process. Make sure internal and external auditors can find all evidence of anti-corruption measures easily.
- Reporting: Benefit from on-demand generation of reports to share with stakeholders.
Talk to our experts for assistance with your anti-corruption and anti-bribery initiatives.
