“In high risk countries, good jobs are often steered to people tied to the local circle of power. Further troubling is the often all but abject lack of the capability and capacity to function effectively in the local language whenever a traditional compliance review is done in-country. Many have never even called their own whistleblower lines, much less conducted any in-country compliance testing. In reality, very few have actually conducted any real-time field testing to see if their company’s compliance programme actually works. Instead, all too often senior executives setting up new offshore operations or already operating in a high-risk country will say that their company has a very strong and robust anti-bribery compliance programme. One only has to look at the number of journalists killed in a country to gauge the level of the local transparency – yet no corporate headquarters-developed compliance plan I have ever seen considers this valid, however tragic, metric. Additionally, many of these countries’ cultures do not embrace speaking up against corrupt practices, in fact, simply speaking up often results in imprisonment and sometimes even death. Corporations, however, all too often fail to truly appreciate this verity or look the other way. In high-risk countries, company employees, vendors and joint venture partners encounter bribery daily and most simply accept it as ‘this is how business gets done’. While I have every reason to believe that his firm tries its best to operate as ethically as it can within its home country, the general counsel could readily see that this was far from sufficient to comply with the FCPA. Appropriate steps notwithstanding, after reading between the lines the general counsel knew that effective anti-bribery compliance is all but impossible in the ethically challenging environment of South Asia. The Indian company duly retained a well-known US law firm to develop a standard FCPA policy as well as provide training to its senior management. His company recently entered into a joint venture agreement with an American company and was required to implement an FCPA compliance programme. For example, I was recently approached by the general counsel of a large and well-established India-based corporation. There are also signs of concern overseas. My standard advice is that it is imperative to understand the ‘tone at the bottom’ to be able to effectively communicate a ‘tone from the top’. Problematic, senior executives, who should be visiting their overseas operations, seldom do so and thus often fail to understand local cultures and their nuances. It is also essential to remember that it is extremely difficult to operate ethically in an unethical business environment that is often many times zones away from corporate headquarters and its policies.
No argument, strong compliance per current standard practices mitigates a number of identifiable risks however, rarely are the truly problematic offshore risks carefully considered and then duly addressed. A strong compliance programme can also enhance profitability by improving controls and operations. In fact, companies that engage in foreign trade need to drill down on the real risks, many of which senior management often do not fully understand, before painstakingly reviewing their offshore operations with the following key question in mind, “Where is operating offshore worth it?”.Ī strong compliance programme is essential, if not also mandatory, in today’s regulatory and business environment. Too many executives think that such things will never happen to them.
Many companies do not fully understand the often basic risks and challenges that must be overcome to achieve both statutory compliance as well as effective operations when operating offshore, especially in high-risk countries.Īlso, less than well understood is the even more ruinous reputational damage that arises from a bribery investigation, regardless of its outcome. I will further broach whether or not operating offshore is worth the risk. Achieving truly effective compliance, however, is proving to be illusive.Īs such, I would suggest undertaking a holistic view to addressing the key underlying issues – the rights and wrongs – as well as what are often the most significant FCPA risks and challenges when operating offshore. In turn, many international companies have endeavoured to improve their compliance efforts. There has been considerable media coverage, as well as corporate concern, arising from increasing levels of costly enforcement of the US Foreign Corrupt Practices Act, anti-bribery and corruption policies and other sovereign anti-corruption statutes. By Mike Kenealy – Chief Operating Officer at Insiders Integrity
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