Baker Tilly Blog

Anti-Bribery Compliance: Staying on the Right Side of the Law

[fa icon="calendar"] 18 May 2018 09:09:01 BNT / by Gerald Cheang

Gerald Cheang

"Operation Car Wash” is the name of an operation currently being carried out by Brazilian authorities. What started as a money laundering investigation involving petrol kiosks has ballooned, dragging in foreign organisations and other countries. This has resulted in what is believed to be the largest corruption scandal in the world. It has uncovered illegal payments in excess of US$5 billion paid to company executives and political parties thus far.

Closer to home, the American subsidiary of a Singapore Exchange-listed blue-chip conglomerate was slapped with hefty penalties  for its role in bribes discovered during Operation Car Wash. The bribes were channelled by the  conglomerate through an unrelated third party, disguised as consultancy fees. The third party then  channelled these figures to Brazilian officials, which ultimately led to the conglomerate securing multiple construction projects.

The fines levied against the conglomerate totalled more than US$400 million, dwarfing the profits generated from the construction projects. The drama is far from over; investigations are ongoing in Brazil, the US, and Singapore, to determine if another Singapore-based conglomerate was involved in similar corrupt acts. This incident has highlighted the need for organisations to have strong internal controls to prevent bribery and corruption. 

 

Anti-Corruption Legislations

The conglomerate’s actions were deemed to be in breach of the Foreign Corrupt Practices Act 
(“FCPA”), which is extra territorial in nature and applies to virtually any organisation that has 
business dealings in the United States. In addition to applying to direct corrupt payments made to a foreign official with the intent to  obtain or retain business, or securing an advantage, it also applies to indirect payments made through third parties.

It is likely that organisations operating within Asia will have their operations regulated by the Singapore Prevention of  Corruption Act (“PCA”), which is the main anti-bribery and corruption law of Singapore. The far-reaching arms of the FCPA and the United Kingdom’s Bribery Act are also likely to apply, seeing  as they have an extra-territorial application. While the PCA does not have the same
extra-territorial scope as the FCPA or Bribery Act, it applies to acts committed outside Singapore,
particularly if the business occurs in Singapore, or if the individual resides in Singapore.

The different legislations overlap at many points, but certain distinctions can be drawn. A simplified comparison is demonstrated in the table “Simplified Comparison between FCPA, Bribery Act, and PCA”, below: 

It should be noted that an action not considered an offense under one legislation may be an offense under another. For instance, the FCPA does not prosecute the recipient of a bribe, but he is punishable under the Bribery Act and the PCA. Under the PCA, a recipient may be found guilty for receiving a bribe even if he does not return the favour.


Minimise Non-Compliance Risk

More organisations are expanding overseas, where business may be graft-ridden. Common business practices such as entertaining prospective clients over dinner, or gift baskets could be viewed as corrupt actions. On top of this, organisations need to be aware of corrupt actions entered into by third-parties; vendors, agents, or consultants. What are the steps a business can take to minimise the risk of running afoul of  these legislations, and being slapped with heavy penalties and even sanctions?

First, a strong internal control system to prevent, detect, and deter non-compliance. Organisations should establish a robust anti- corruption compliance  programme, code of conduct, and whistle-blowing procedures as part of their systems of internal  control. An effective anti-corruption compliance programme should minimally include procedures for  entering into contracts, and policies governing employee reimbursement, marketing and promotional expenses. These procedures and policies should be  tailored to the organisation’s industry and operating territories, and be sensitive to the cultural  nuances of its overseas operations. An effective pre-acceptance due diligence procedure helps to minimise  the risk of an organisation being caught unaware of its third parties’ corrupt actions.

Second, educate employees on acts that are prohibited under the applicable laws. Employees should be aware that some activities  considered to be cultural or societal norms, such as a dinner with a prospective customer, could be  viewed as acts intended to corrupt. Employees should also be informed of what to do when they  discover graft, whether internal to the organisation or involving third parties engaged by the organisation.

Implementing the above is easier said than done; there is no one-size- fits all system of internal control for different  organisations operating in a multitude of territories and industries. Organisations should conduct  a risk assessment to determine if their operations are vulnerable to corrupt payments. An
independent reviewer should be consulted to assist an organisation minimise its risk of
non-compliance.

Topics: anti-corruption legislation

Gerald Cheang

Written by Gerald Cheang

Gerald Cheang is the Forensic and Litigation Support Manager at Baker Tilly TFW. He leads forensic accounting and fraud investigation engagements dealing with accounting and finance issues. Gerald has also conducted a number of compliance engagements involving anti-money laundering, anti-bribery and corruption, and contractual compliance. He is a member of CPA Australia and holds the Certified Anti-Money Laundering Specialists designation.

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