How to create an anti-corruption compliance programme

Calvin Ding
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Recently, the number and size of FCPA investigations and prosecutions have soared. While these cases carry the threat of substantial terms of imprisonment and frequently result in significant fines, the government investigations that foreshadow prosecutions often plague a company for years and very often generate internal and external costs that eventually dwarf the size of the fine itself. Against this backdrop, an effective anti-corruption programme can serve as an important measure for fulfilling a company's obligation to comply with anti-corruption laws. The US government has been indicating that the existence of an FCPA compliance programme is an important mitigating factor taken into account when deciding whether to bring charges, the extent of charges brought and assessed penalties. Simultaneously, China's continuous efforts to strengthen its own anti-corruption enforcement regime make compliance with anti-corruption laws more important than ever.

Assessing the risk profile

In order to frame an appropriate anti-corruption programme, it is essential to fully understand potential direct and indirect interface points between the company and any arm of the government, including state-owned enterprises. Needless to say, it is at these points that anti-corruption risks are heightened. Under the FCPA, companies may be held responsible for violations by agents that benefit the company with the government assuming a company's knowledge and intent via circumstantial proof. Accordingly, the foundational work of an effective anti-corruption programme is to ground it with full knowledge of core interface points.

The identification and evaluation of these interface points occur primarily through interviews of company personnel and are supplemented by a basic business documents review. The extent of this exercise is a direct reflection of the complexity of a company's business, industry, and risk profile.

Creating FCPA policies and procedures

Once the nature and extent of a company's direct and indirect governmental interface points are identified, appropriate anti-corruption policies and procedures can be drafted. While some elements of these rules are present in many procedures, effective procedures tend to supplement such basic provisions with those designed to address the specifics of the company's business. For example, companies operating in the Chinese healthcare and real estate sectors may find it prudent to implement more tailored controls given those sectors' vulnerability to public corruption.

Internal anti-corruption structure

For many anti-corruption compliance programmes, individuals within the company are tasked to lead anti-corruption compliance efforts. Upon completing the fundamental scoping groundwork, the company will need to sketch out an internal anti-corruption compliance structure. This often occurs at the same time that anti-corruption policies and procedures are being drafted. For businesses with straightforward anti-corruption profiles, a single person may be sufficient to staff this function, while businesses with more complex anti-corruption footprints face larger anti-corruption challenges.

Training

Training is critical to an effective anti-corruption compliance programme. Such training involves two to three stages: basic anti-corruption education, teaching employees and executives the way in which a company's anti-corruption procedures operate, and routine follow-up/refresher training. While the first two elements are self-explanatory, the third step is equally important. It is essential to make sure that the company demonstrates a clear commitment to anti-corruption principles commonly referred to as the “tone at the top” and that employees keep their anti-corruption obligations squarely in mind. It is also vital to provide a continuing education function as the company's risk profile or as anti-corruption laws change. A company can have first-class anti-corruption procedures, but if it lacks robust training, the effectiveness of the programme will be limited.

Counselling and assistance

Once a company's programme is set up and training is completed, an effective anti-corruption programme generally requires upkeep and problem solving. Upkeep usually takes the form of counselling on the best ways to manage programmes and adjust for changes arising from a fluid anti-corruption and business environment. Management counselling can also include advice on how the highest layer of a company can best emphasise “tone at the top”, which is essential to the success of any anti-corruption programme. Most important among a company's responsibilities, however, is how a company handles potential anti-corruption problems when they arise, also known as red flags. While it is a company's wish that its anti-corruption compliance programmes shields it from problems, the US government recognises that this is often impossible, especially in environments in which corruption is endemic. Accordingly, the US government places tremendous weight upon the way a company responds when its anti-corruption compliance programme signals a potential problem. Committed identification of trouble and robust remediation of issues is essential to protect a company from FCPA prosecutions.