May 29, 2020
By: Scott Nance, Principal, Langley Compliance Consulting LLC*
Detecting and preventing corruption should be an integral part of any organization’s efforts in the battle against financial and economic crime.
Though we often think of corruption involving public officials, corruption also occurs at the commercial level. An effective anti-corruption compliance program should always seek to address both varieties of corruption. As with other areas of financial and economic crime, preventing corruption within an organization requires an effective and robust internal compliance system.
Similarly to the OFAC’s “Framework for Compliance Commitments”, the OECD handbook, the Department of Justice’s Guide to the FCPA, and the UN Practitioner’s Guide all identify the following as elements of an effective anti-corruption program.
- Commitment by Top Management;
- Risk Assessment;
- A System of Internal Controls;
- Periodic Testing and Audit; and
In this series on combatting corruption, each of the above components will be discussed and analyzed to provide tips on how your organization can best build an effective compliance system and ensure compliance with global anti-corruption laws.
In Part One, we will explore the first of these components: Management Commitment.
Commitment by Top Management
The first component of a compliance system for combatting corruption is commitment by management, especially top management. Commitment by top management is essential to fighting corruption. In this context, “top management” includes the chief officers of an organization, such as the President, Chief Executive Officer, Chief Financial Officer, and others, as well as the board of directors, management board, supervisory board, and other governing bodies.
Top management can demonstrate its commitment through concrete steps, such as the formulation of an anti-corruption policy and the implementation of a code of conduct that applies to all employees, including top management itself. Top management can also demonstrate its commitment by responding appropriately if corruption does occur, by disciplining and even dismissing those responsible and, if appropriate, reporting them to the authorities.
If top management expresses their “strong, explicit, and visible” support for efforts to fight corruption, and makes it clear that they have a zero tolerance policy towards corruption, those efforts are much more likely to be successful.
For top management to fight corruption effectively, its members must understand the applicable laws, as well as the organization’s risks with respect to corruption (risk assessments for corruption will be the subject of our next article). A good starting point for an organization’s anti-corruption efforts is the provision of specific training to top management. Not only will this provide top management with the information and understanding it requires, it will also send a strong message throughout the organization of top management’s commitment to fighting corruption.
Commitment to Anti-Corruption Policy and Code of Conduct
The most immediate way top management can express its commitment to fighting corruption is through the promulgation of a strong corporate anti-corruption policy. While the individual elements of an anti-corruption policy can vary, such a policy will typically include the following elements:
- A general policy against bribes and other forms of corruption;
- Adherence to all applicable laws;
- Adherence to corporate anti-corruption policies and procedures;
- Avoidance of conflicts of interest by employees; and
- A duty to report internally violations of law and corporate policies.
The policy may also address specific issues, such as gifts; travel and hospitality; political contributions; and whether or not the organization will allow “facilitation” payments. The 21 member strong Asia-Pacific Economic Cooperation (APEC), among others, has published a corporate anti-corruption policy, which can be useful as a reference.
An organization’s anti-corruption policy serves as both a public and an internal expression of the organization’s commitment to fighting corruption. The policy should be made concrete by embodying it in a Code of Conduct, which all employees – including top management – must sign.
The Code of Conduct should require all employees to comply with the principles of the anti-corruption policy, as well as to perform their individual responsibilities under the institution’s anti-corruption policies and procedures. It should obligate employees to avoid conflicts of interest. Because the Code of Conduct sets forth specific obligations on the part of employees, it may be useful to include in it even more detail than in the corporate anti-corruption policy. Finally, the Code of Conduct should discuss the consequences in the event of a violation.
Creation, Implementation and Operation of the Compliance Program
The most effective expression of management’s commitment to fighting corruption is through the design, implementation, and operation of an anti-corruption compliance program. This program should reflect the organization’s legal obligations, as well as its internal policies. Part 2 of this article series discusses the elements of such a compliance program in detail.
The active involvement of top management in the operation of the system will greatly increase its effectiveness. Ideally, overall responsibility for the performance of the system should be a responsibility of someone in top management, such as the Chief Compliance Officer or General Counsel. Whoever takes on that responsibility, top management should receive periodic reports on the operation of the anti-corruption compliance system, and make discussions of the organization’s anti-corruption efforts a standard item in quarterly and annual meetings.
To facilitate this, top management should require the regular reporting of key performance indicators for the system, including:
- The number of solicitations from business partners for arrangements that could be considered corrupt;
- Transactions rejected because of corruption concerns;
- Number and resolution of whistleblower complaints;
- Number of inquiries from personnel about anti-corruption issues;
- Annual performance or renewal of an anti-corruption risk assessment; and
- The number of employees receiving anti-corruption training annually.
Another thing top management can do both to facilitate the effectiveness of the system and to signal its commitment is to allocate adequate resources to anti-corruption efforts. This includes both assigning enough well trained personnel as well as providing funding and other resources needed to operate the system. In the end, the costs of an anti-corruption compliance system can pale compared to the consequences of committing corruption.
Top management should communicate its commitment to anti-corruption. One of the easiest ways to do this is to include a discussion of the organization’s anti-corruption compliance system and its efforts to fight corruption in materials provided to the public, such as annual reports. Top management should also communicate this commitment to the organization itself through both written communications and discussions of corruption by top management in meetings within the organization.
Another important means of communicating commitment is to demonstrate zero tolerance for corrupt behavior. Employees who violate anti-corruption laws or internal policies should be subject to internal discipline, including dismissal, and even referral to the authorities for prosecution if appropriate. Through its actions, top management should make it clear that its zero tolerance policy applies to everyone within the organization, even those at the very top. This includes top management always making sure to fully cooperate in investigations of potentially corrupt behavior, either within the organization or by governmental authorities.
In these ways, top management can protect both the organization and itself from the consequences of engaging in corrupt behavior.
*Scott Nance is the Principal of Langley Compliance Consulting LLC, based in Washington, D.C., and the former Global Head of Sanctions Compliance for ING in Amsterdam. Scott is a member of the ACSS Editorial Task Force and the ACSS Certification Task Force.
To continue reading this series on Fighting Corruption with an Effective Compliance Program, please go to Part 2: Risk Assessment.