Essential that firms tailor compliance programs to the country
VIENNA, Virginia. (TrustLaw) - As U.S. enforcement of the Foreign Corrupt Practices Act (FCPA) intensifies and the stringent U.K. Anti-Bribery Law takes effect on July 1, companies doing business in Brazil, Russia, India and China – the BRIC countries – face particular challenges, an expert said at a recent anti-corruption conference.
“BRIC is a very good place to start when starting to assess risk,” Bill Olsen, national investigations practice leader at Grant Thornton LLP, the U.S. member of the global audit, tax and advisory organization, said at the 6th FCPA and anti-corruption compliance conference.
“Each country presents unique risks due to the diversity of cultures, government structures, business practices and legal framework,” he said, speaking to an audience composed primarily of corporate lawyers and compliance officers at the two-day event.
Noting that the BRIC countries rank high in terms of corruption and bribery risk, Olsen emphasized that firms should make sure they not only give proper compliance training to their employees and can document that it was given, but also include compliance standards in their contracts with third parties.
In that way, “organizations can separate themselves from the actions of the individual,” he said.
“You need to look at bribery and corruption risks in each country you do business with,” he added.
For example, he said that in Brazil the importance of personal relationships can lead to graft because “business is about who you know.” He pointed out that in several recent cases regulators have looked at corporate entertainment expenses to see if they are ‘reasonable.’
“If you took a government official to a $2,000 dinner is it reasonable to assume that’s the only thing that happened at that dinner?” he said.
The pressure to avoid taxes can lead to cash payments and off-the-books transactions, particularly in industries such as oil and gas, consulting and tobacco, he said.
“It’s important to understand how bribery and kickbacks take place and are buried in books,” he said, advising companies to insist on being able to examine the books of local partners as part of their contracts.
In Russia, Olsen said, there are “glaring” differences from the other BRIC countries because of the “clear infiltration of organised crime in legitimate businesses,” the use of banks for money laundering, a corrupt environment at very high levels and low pay in the public sector. This adds up to a “wild west” environment in which it’s hard to tell the good guys from the bad guys and corruption is rife, he said.
“It’s in the culture. It’s accepted. It’s wide open. It’s very difficult to do business in that environment.”
In India, Olsen said, problems include the common use of “facilitation payments” for public services, such as police security, and private services including trucking and freight – all of which are illegal under the new U.K. law. Heavy government involvement in the commercial sector also poses potential problems under FCPA, he said.
In China the use of cash is more common than in the United States and the importance of gifts and entertainment at certain times of the year provides opportunities to hide FCPA violations, Olsen said. He pointed particularly to the manufacturing and energy industries as areas where firms should be vigilant about payments.
In all cases, Olsen said, companies should be aware that the “tripwires of doing business” are both country- and industry-specific.
(Editing by Rebekah Curtis)
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