Covid cut your Anti-Bribery and Corruption budget? Stop there! Read this first.

Covid-19 left a dent in most businesses irrespective of their sector, region or country in the past year. A severe slump in sales, broken distribution chains and inability to operate critical business assets have left frowns on the face of even the most seasoned business people. Although the pandemic is at its tail end now, the lessons learnt are important for unprecedented future events and maintaining good compliance hygiene overall. 

During Covid, news of organizations cutting corners and indulging in corruption and bribery to come out on top became “usual” practice. These unethical means of conducting business are often transmitted via third-party intermediaries (TPI) to obscure their true intent.  

TPIs have been involved in more than 90% of all Foreign Corrupt Practices Act (FCPA) sanctions since 2010 [1], much before the pandemic era. Government authorities are well aware of this ploy and therefore ramped up their effort to reduce the chances of foul play. The Biden administration in 2021 renewed its commitment to FCPA. It brought sweeping changes that further tightened the noose around bad actors. A similar commitment has been observed in our domestic legislation too. A recent verdict from the Supreme Court of India has upheld the Enforcement Directorate’s (ED) power to arrest, attach property, and search and seizure, among other things, under the Prevention of Money Laundering Act (PMLA) [2]. Bribery and corruption may have peaked during Covid but it was always an underlying disease destroying businesses from the inside out.  

Focus points – 

By now, we all know bribery and corruption come with cons and cons only. So, the next logical question is how do you manage and successfully run an Anti-Bribery and Corruption compliance program during a crisis or on a budget constraint? Let us find out. 

1. Assess the Risks – 

Assessing the risks associated with your organization’s sector is a crucial ingredient when it comes to developing a robust compliance program. Not only does it help you weigh the pros and cons of any action, it further serves to show you are running a business fairly. If investigated under the FCPA, the Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) take serious note of these policies as a part of an organization’s business procedures. 

Crises on such an unprecedented level can quickly topsy turvy your organization’s risk profile and, therefore, your assessment of the same. External factors such as supply chain delay, cross-border restrictions, containment zones, etc., and internal factors like high pressure to meet business expectations, decreased demand for services and clients pulling out can sway employees to ignore standard Anti-Bribery and Corruption policies. While real-time risk assessment may not be possible under circumstances like low staffing, companies must consider establishing a system where risks are ranked based on how critical they are to keeping the business functional. This hierarchical system can make assessing risks much easier and more effective. 

2. Policies and procedures from paper to action –

A robust set of policies and procedures adds teeth to a compliance program. Standard mistakes organisations make in times of distress are to relax policies and cut corners on procedural requirements. This aids corruption to flourish. Instead of being utterly lax with the safety measures, we recommend segregating the procedures and controls dedicated to detecting and preventing bribery from those complementary to Assessing the Risk.  

For instance, a background search or screening should be mandatory while onboarding a new third-party entity. But presenting annual certification to partners you are already working with can take a back seat for the time being. Such processes further reduce the load on the organisation to allocate precious resources while still complying with Anti-Bribery and Corruption guidelines.

3. Widen your views – 

Ralph Lauren discovered in 2010 that one of its subsidiaries was indulging the Argentine government by paying bribes to clear merchandise otherwise prohibited. The parent company disclosed the matter to the U.S. DOJ and SEC and paid a fine of more than $1.6 million to settle the matter [3]. Although this might seem detrimental at first blush, in hindsight, the fine was just a slap on the wrist, especially because Ralph Lauren had no ABAC training in place for its subsidiaries in Argentina at the time of the incident. 

It is vital to have principles that support self-regulation in an ABAC policy and a broad mentality that believes in solving a problem rather than brushing it under the rug. An excellent start would be educating all employees irrespective of their designation. Instead of waiting until the company is in a position to allocate funds and have full-blown physical compliance workshops, which we are all used to, it is a good idea to consider online workshops. The ultimate goal here is to constantly remind the employees of the ills of bribery and corruption and teach them the values of an ethical workplace as deeply as possible.

4. Supervising third-parties – 

Organisations that have to engage with third parties due to the nature of their work are exposed to a significant amount of risk. For instance, selling products to government-owned sectors is well known to carry a higher degree of bribery and corruption risk, as multiple enforcement cases from the past can demonstrate. Making matters worse, the pandemic has created a perfectly ripe scenario for bribery and corruption to flourish. Factor in the effects of lockdowns, disruption in production chains etc., and it can quickly break down the standard protocols of ABAC compliance leading to demand and acceptance of facilitation payments, also known as grease money, to get things rolling. Therefore, it is best suited for organisations to use the existing distribution channels or resellers that have been previously vetted rather than using a new third-party partner. A periodic reminder of the company’s zero-tolerance policy toward bribery and corruption is also a healthy practice.

5. Tone from top – 

More than ever, having a C-suite that lives and breathes integrity is mission critical. The tone set at the top is known to trickle-down on employees’ attitudes towards compliance and ethical behaviours. Suppose employees perceive their leaders as people simply paying lip service to ethical obligations. In that case, they are more likely to develop the same attitude that can progressively push the organisation to commit more unethical or fraudulent behaviours. When budgets are dry, the most effective and least expensive process an organisation can take up is regular communication with its staff. Short videos like the one here, newsletters and flyers on values and ethics can go a long way. 

6. Don’t lose sight – 

It is understandable when your organisation’s survival is at stake, there will be more focus on mitigating areas of immediate impact caused by the crisis. However, ABAC’s continued implementation must continue to avoid a more significant crisis that can add to the challenges already faced by the organisation. It is the right time to revisit and update all necessary Anti-Bribery and Anti-Corruption measures. 

For example, considering how most of the workforce has shifted to a work-from-home model, digital gift vouchers and other online rewards may now be used by bad actors as bribes instead of what could previously be front-row seats to a game. Another example – Companies under various tax saving schemes may decide to increase their CSR. While this is a praiseworthy development, this can also present a heightened bribery and corruption risk if due diligence is not in place. These are just some of the many areas that an organisation’s compliance team must think of in the coming days to reduce exposure. 

Conclusion –

During the pandemic and in the post-pandemic era, several roadblocks have seriously challenged the viability of keeping compliance training on track. But this is an acid test that organisations have to triumph over and use as an opportunity to improve and invest in the right corporate culture. We understand this can quickly become overwhelming when faced with adversities. At Rainmaker, we help train corporates to eliminate systemic diseases like bribery and corruption from their work culture. Please feel free to contact our experts.

Author: Sagnik Mukhrejee Editor: Sumali Nagarajan

References – 

1. https://advisory.kpmg.us/blog/2022/new-chapter-anti-corruption-enforcement.html
2. https://www.livelaw.in/top-stories/supreme-courts-pmla-judgement-vijay-madanlal-choudhary-vs-union-of-india-204937 
3. https://www.reuters.com/article/us-ralphlauren-fcpa-idUSBRE93L0N920130422 

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