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Fraud and Corruption Compliance can be summed up in one word; Transparency



There is a growing global movement to stamp out unethical business practices. The stage is set to make the drastic changes, pushing companies to adopt ethical practices and implement comprehensive and holistic compliance programs.

Before starting the Fraud and Corruption Compliance journey there are certain prerequisites that have to be accomplished. The Copenhagen Charter execution procedure on Fraud and Corruption focuses on a top down approach using these 6 key principles as guidance:
  1. Conduct a Risk assessment procedure based on the Copenhagen Charter Framework and Roadmap
  2. Ensure Board of Directors and Top Executive level endorsement, commitment and ownership
  3. Perform Due diligence on the results of the Risk assessment and issues raised during the BoD and Executive Fraud and Corruption Workshop. The due diligence is based on the perception that; what management and organization do not know on the internal Fraud and corruption activities that can damage the reputation.
    1. Members of the Copenhagen Charter will be provided with a due diligence checklist.
  4. Make sure that there are clear, practical, accessible policies and procedures that address specific risks and measures to ensure a monitoring process. (see Adequate Procedures)
  5. When the above 4 steps are vigilantly achieved, there is a further need to figure out the various dilemma in the subsidiaries and geographical locations, that can be an impediment to ensure that effective implementation is structured and in place
  6. Monitor the performance and review thru at least three lines of defense.

It is wise to presume that the FCPA and the Bribery Act has no boundaries and applies to companies doing business all over the world. The boundaries of what “carrying on business” actually means in this context are not defined but regulatory authorities on both sides of the Atlantic suggest a restrained approach.

It is also wise to expect the Fraud and Corruption laws and practices to get tougher over time as prosecutors gain confidence and courts set precedents.

Adequate Procedures
As mentioned in step number 4 it is vital that there are clear, practical, accessible policies and procedures that address specific risks and measures to ensure a monitoring process. If your organization has Adequate Procedures to prevent corruption/bribery in place and can document that these were sufficient it probably is not guilty of the offence of failure to prevent bribery.

However, each case will turn very much on its own facts. Adequate Procedures to prevent bribery/corruption will become clearer when the organization goes thru the 6 steps defined earlier. Remember that guidance from consultants or authorities will not be prescriptive.

In addition to the 6 steps, it is necessary to address the following issues:
  • Regulatory authorities are increasing their focus on the mantra of transparency and self reporting
  • Facilitation payments are outlawed in the EU and UK. Under the FCPA there is a widely discussed facilitation payments exemption if such payments are recorded in the books. Recording the bribe payment on the other hand is evidence under the Bribery Act
  • Even if no offense is committed under the FCPA or Bribery Act it is possible that another offense may have been committed under the anti money laundering laws
  • The FCPA settlements have shown that organizations that are guilty of bribery face unlimited fines and confiscation (disgorgement) of the proceeds of crime. Disgorgement is not limited to profits but extends to the entire value of the contract
  • It is believed that future UK/EU financial penalties under the Bribery Act will be at par with the known US settlement, fines and penalties
  • An additional consequence is the possible debarment from government procurement contracts
  • Take a Zero Tolerance approach to bribery, grease/facilitation payments, kickbacks and lavish hospitality expenses, and be strict on exemptions e.g. related to employee security

There is no defense for Directors/Executives or individuals guilty of bribery. They will run the risk of prosecution. Authorities are willing to communicate and work through issues, however Regulatory authorities have said they intend to take a hard line, nevertheless they are willing to work with organizations that bring forward crimes identified within their companies.