Last week I participated in an interactive webinar at EDC to help small and medium-sized companies learn how to protect themselves against the costs of corruption. Other panelists included Marc Tassé from the University of Ottawa’s Canadian Centre of Excellence for Anti-Corruption; Mora Johnson, a lawyer who specializes in anti-corruption policies and compliance; and Justin Taylor, a senior analyst with EDC’s Corporate Responsibility team. If you missed the live program, you can watch it on-demand to learn more about how corruption can impact your business and the laws that regulate financial crimes in Canada and around the world.
Corruption happens. Regardless of the good intentions of most business owners, you can’t monitor the behaviour of every employee never mind a network of sales agents working halfway around the world. But becoming an accomplice in a corruption scheme – even unknowingly -- is serious stuff, with far-reaching legal, financial, and reputational consequences.
It’s not only large companies that are targeted for bribes. Unscrupulous government officials often demand bribes from smaller companies, presuming they’re vulnerable. Small companies frequently lack the resources to employ their own staff overseas and so rely on third parties who, in many cases, have to deal with requests for bribes.
It’s important to note that Canadian anti-corruption legislation makes no allowances for the illegal behaviour of a third-party acting on your behalf in another country. If an agent pays a bribe, you can be held legally accountable, even if you don’t know anything about it. Under the law, the onus is on you to take steps to avoid activities like bribery from occurring in connection with your business. Formulating an appropriate compliance program for your industry and market is crucial to mitigate the risk of engaging in bribery and corruption, for the sake of your reputation and your bottom line. But where do you start?
For the past two decades, I’ve advised companies of every size and stripe in the areas of anti-corruption and compliance. Among smaller company executives, there’s almost universal reluctance to start developing a program because they worry it will be too labour intensive or cost prohibitive. But the truth is, a robust anti-bribery program doesn’t have to be onerous nor break the bank.
Sometimes, even if a company manages to kick-start the process, it ends up stalling because they don’t want to launch an imperfect compliance program. But indecision and delay leave you open to the consequences of corruption in the meantime. It’s akin to not locking your door at night because you’re waiting to install a state-of-the-art security system.
My advice? Just get started. After making a reasonable effort to establish the scope of the project including a common-sense assessment of the levels of risk, you need to dive in. You can reassess and adjust your policies later. Most enforcement agencies encourage companies to do that. Tinkering with your due diligence approach down the line is not a sign of weakness but a demonstration of an evolving and increasingly sophisticated program.
‘Perfect’ due diligence risk assessments never happen. They’re the unicorns of the compliance world. In the real world, it’s better to operate with the protections and benefits of a program that’s ‘good enough’ rather than remain vulnerable while you orchestrate the ‘perfect’ plan, which might be released someday way into the future.
There are many resources available to Canadian companies looking to develop a compliance program. The Canadian Trade Commissioner Service, Export Development Canada, the United Nations, the International Chamber of Commerce and TRACE International all have materials and tools to help you. Do some basic research, ask questions and trust your common sense. Start with these six steps:
1. Develop a policy that prohibits bribery
Make it clear that your company has a “zero tolerance” policy on bribery. Ideally, the policy should be introduced with a letter from your CEO to help underscore compliance as a corporate priority.
2. Train employees
Whether online or in person, prompt employees to think about compliance issues. You need to clearly identify the difference between what is permitted—reasonable hospitality, for example—versus what isn’t, such as facilitation payments.
3. Identify high-risk markets
Using the TRACE Bribery Risk Matrix, evaluate your international markets of interest based on the likelihood of bribe demands by country, then tailor your export strategy accordingly.
4. Raise auditor awareness
Have your auditors look for warning signs so they are alert to bribery risk, financial fraud and accounting abuses.
5. Review international sales agents
Develop a list of all sales agents you work with and check their status through the TRACE Intermediary Directory. If they’re not in the registry, encourage them to go through the due diligence process so you can be assured that they have completed a thorough due diligence review based on international benchmarks.
6. Develop a reporting protocol
Circulate an email to all employees telling them how they can raise concerns about bribery schemes or vulnerabilities found in your organization, in confidence and without reprisal.
Vetting agents is essential to compliance. You need to really get to know them. Ideally this is done in person. A walk through their facilities can help you assess whether or not they’re a legitimate entity. A deeper dive into the vetting process may include public searches and a review of media and sanctions lists. Ask your agents questions about how they do business. If they’re operating in a market with a reputation for high levels of corruption, ask them point-blank if they agree with that assessment. Be diplomatic but remind them that no country is immune from bribery—certainly not Canada. Listen to their answers carefully to gauge whether they understand the local risks and how to avoid them.
Although bribery is a crime everywhere , the definitions and interpretations of bribery vary. I once spoke to an international agent about the risk of bribery in his country. He replied that, of course he had a full understanding of the anti-bribery laws. But he nevertheless proceeded to describe with zeal the scheme he’d come up with to avoid a way around getting caught. He cleverly disguised the line item on his expense reports with another, legitimate descriptor. Sadly, but unsurprisingly, my explanation of a “bribe by any other name” was lost in translation.