Anti-bribery compliance of multinational companiesAuthor: John Liu and Helena Hu 2019-05-141135
Recently, as regulators in various countries generally heighten enforcement efforts against bribery, domestic authorities are also improving their efforts in the fight against corruption. For multinational companies, observing anti-corruption regulations in and outside the PRC are both important. Foreign enforcement bodies mostly require or encourage companies to establish an anti-bribery compliance system. While in practice many bribes are offered by or through individuals, for example salespersons, the company is eventually held accountable. Overseas regulators are mostly unlikely to be convinced by companies reacting on the ground of “personal activity”, if there is no evidence that an effective anti-bribery system is in place.
According to the US Federal Sentencing Guidelines, penalties may be mitigated for companies with an effective compliance system. The Department of Justice (DOJ) and US Securities and Exchange Commission (SEC), the two main enforcement bodies under the Foreign Corrupt Practices Act (FCPA), consider whether an allegedly non-compliant company has established an effective compliance mechanism when deciding whether to lodge a suit, how to measure a penalty, whether to solve the case by way of settlement, and what conditions should be met in the case of settlement.
Therefore, measures such as effective compliance training, investigation and rectification are helpful for avoiding or mitigating penalties under the FCPA.
According to provisions of the UK Bribery Act governing “failure of commercial organizations to prevent bribery” – which state that a criminal offence is committed if a business organization fails to prevent a person associated with it (e.g., an employee, agent or subsidiary) from bribing another person with the intention of obtaining or retaining business or a competitive advantage for the organization – companies are legally obliged to fight against bribery, and “inaction” will expose them to criminal risks. However, a full defence is made if companies are able to prove sufficient procedures are maintained to prevent their associated persons from bribing.
The Sapin II Law of France establishes the Agence Française Anti-Corruption (AFA) to fight against corruption and bribery. Eligible companies are required to take proactive measures and procedures to prevent corruption, especially by implementing internal codes of conduct, reporting procedures, risk review, third-party risk assessment, financial controls, compliance training, sanctions over non-compliances, compliance monitoring and review.
If a company fails to do so, it may be requested by enforcement bodies to put a compliance system in place within the prescribed time limit and be fined up to 1 million euros (US$1.12 million). Enforcement bodies may also impose a fine of up to 200,000 euros on accountable executives and initiate a criminal prosecution process seeking to send the executives to jail for up to two years.
The effective legislation in China does not explicitly require companies to have a compliance system in place. Nor has any company with a compliance system been “rewarded” directly in enforcement proceedings. However, both legislation and judicial practice support including the operations of a corporate compliance system as part of responsibilities of businesses.
For example, the amended Anti-Unfair Competition Law states that “a bribery committed by an employee of a business is deemed committed by the business unless the business has evidence that the act of the employee is irrelevant to seeking a transaction opportunity or competitive edge for the business”. Enforcement bodies further emphasize that this provision shall be interpreted as requiring businesses to take legal, compliant, reasonable and effective measures to monitor their employees, and prohibiting businesses from indulging bribery from their employees. Therefore, if companies can prove that well-established internal control systems are maintained, and bribery is effectively prevented and handled, they may be exempt from liabilities.
At the criminal law level, when determining whether companies shall be held criminally liable, judges usually consider the following questions: Is the bribery committed with the intention of obtaining any advantage for the company? Is the bribery resulting from a decision-making procedure of the company’s decision-making body? Is it carried out in the name of the company? Is it relevant to the company’s business? Does the company own the interests resulting from the offence?
Therefore, companies may be able to persuade judges that the alleged briberies are committed by employees, not on behalf of companies but only in their capability as individuals, if they are able to prove: first, an effective compliance system is maintained; second, there are documented rules prohibiting specific activities; and third, policies have been established regarding definition of powers and authorities at the workplace, decision-making procedures and ownership of interests, or monitoring or control measures have been taken. Below are recommendations on how a company may take steps to establish an anti-bribery compliance system.
Identifying and assessing risks. The authors recommend that companies hire professional lawyers to provide compliance advice upon review, identification and assessment of bribery risks in key business areas and processes in line with legal policies, business environment, industry landscape, organizational structure, decision-making and operations, and business partners.
Anti-bribery compliance policy. An effective documented compliance policy and specific operational procedures (for example those related to procurement, bidding, business entertainment, and reimbursement of travelling expenses) help companies and their employees to act in the ordinary course of business in a regulated manner. As proof that companies have exercised due care, they also form part of effective defence to enforcement bodies in external regulatory proceedings. Materials such as compliance manuals and guidelines should be distributed to employees, who should be made fully aware of the contents.
Regular training. Companies should provide training and education to their officers, employees, agents and business partners on a regular basis to improve their awareness of anti-bribery compliance.
Whistle-blowing and investigation mechanism. It is advisable to establish a complaint and whistle-blowing mechanism, internal investigation process, and reward and punishment mechanism against non-compliance, as well as a mechanism for remedying identified malpractices involving bribery.
Implementation and monitoring. Companies should ensure the effective implementation of their anti-bribery compliance policies. They may also hire lawyers and auditors to strengthen anti-bribery audits and supervision so that active measures can be taken against identified bribery risks in a timely manner.
John Liu is a senior partner and Helena Hu is a senior associate at AllBright Law Offices