The Role of International Trade Agreements in Fighting Corruption

Tags

, ,

Cargo ships in Rotterdam Harbor. In 2013, trade between the U.S. and EU totaled more than $650 billion.

Cargo ships in Rotterdam Harbor. In 2013, trade between the U.S. and EU totaled more than $650 billion. (Photo: Wikimedia Commons)

The next year is shaping up to be a big one for multilateral free trade agreements and, by extension, efforts to fight corruption in international commerce.

First, there is the historic Trade Facilitation Agreement (TFA) that grew out of the World Trade Organization (WTO) accord reached in December 2013 in Bali. Under the TFA, all the WTO’s 160 members agreed to work toward reducing the red tape and corruption at ports of entry, so that goods can move more quickly and economically from country to country. Second, there is the Transatlantic Trade and Investment Partnership (TTIP), between the United States and the 28 nations of the European Union. Together, the U.S. and EU account for 60 percent of the world’s GDP.

What do trade agreements have to do with reducing corruption? Historically, not much. But these two agreements break new ground both in their scope and their potential for attacking corruption as a barrier to trade. This fact is often lost in media coverage that focuses on winners and losers within specific countries and economic sectors. Adding to the lack of attention paid to corruption issues is the fact that negotiations are complex, not always transparent and can take years to conclude.

To zero in on the role of corruption in disrupting free trade, American University’s Washington College of Law recently put together a panel of experts and advocates, headlined by former World Trade Organization Director General Pascal Lamy. The moderator of the “Addressing Corruption in Global Trade” session, Nancy Boswell, framed the issue concisely. Continue reading »

At a Glance: A New Survey of Chief Compliance Officers

Tags

, ,

compliance-ethics-program-environment
By Junior Kayembe N’Kashama

Building a robust ethics and compliance program is key to managing risk in today’s complex world of global business. That is why understanding best practices and the state of compliance infrastructure among companies is an important step toward better compliance across the board.

Society of Corporate Compliance and Ethics (SCCE) and NYSE Governance Services recently surveyed a variety of organizations — ranging in size from 100 employees to more than 100,000 — in various industries such as healthcare, manufacturing, utilities, finance and insurance, and educational services. The respondents were Chief Compliance Officers or the person responsible for the day-to-day operation of the ethics and compliance program.

Findings are presented in the 2014 Compliance and Ethics Program Environment Survey Report.

Here are some highlights: Continue reading »

Can Boards Help Fight “Compliance Fatigue” In Emerging Market Firms?

Tags

, , , , ,

compliance-fatigue

In the first half of 2014, anti-corruption enforcement actions by the U.S. alone cost the business community more than $500 million. It would seem logical that as a result anti-corruption compliance would be at the forefront of every multinational corporation’s activities. But that’s not the case, at least as described in the 2014 Global Fraud Survey, perhaps one of the largest and most credible surveys on the topic, released by Ernst and Young (EY) earlier this summer.

The report indicates that businesses around the world are suffering from what EY has dubbed “compliance fatigue.” After surveying more than 2,700 business executives in 59 countries, EY discovered that “despite the aggressive enforcement environment…the percentage of companies that have anti-bribery/anti-corruption (ABAC) policies has increased by only 1%.”

According to the survey, the reason for such stagnation rests with chief executives who are reluctant to participate in compliance training programs and take other necessary steps. EY does note that “the majority of businesses have put in place many of the building blocks of effective compliance programs.” However, “one-fifth of respondents say that either their business does not have an ABAC policy or that they do not know if there is a policy” representing a “persistent minority” of firms that have yet to adopt any measures to prevent bribery.  Within this minority, the report shows that executives are not only apathetic towards compliance, but “are willing to act unethically to win or retain business.”

Because executive officers face greater exposure to corruption risks, EY posits that the best course of action to alleviate this compliance fatigue is for boards of directors to maintain a high level of pressure on C-suite executives to ensure they are taking the necessary precautions. The survey authors state, “This level of scrutiny will drive a higher level of engagement among senior executives.” This solution, however, hinges on the idea that board members have sufficient knowledge and understanding to provide such oversight. Unfortunately, CIPE’s work in emerging markets around the world have shown that this is not always the case. Continue reading »

Anti-Corruption Compliance in Kenya

Tags

, , , ,

kenya-compliance

Transparency International’s Corruption Perceptions Index ranks Kenya in a distant 136th place. That low ranking confirms the sentiment often encountered in Nairobi: corruption is widespread in many aspects of life, from bribing a policeman to avoid charges for alleged traffic violations to graft at the highest levels of government, as poignantly described by a British journalist Michela Wrong in her book about Kenyan whistleblower John Githongo, It’s Our Turn to Eat.

Not surprisingly, many segments of the Kenyan society are fed up with the status quo and ready for change. That includes many companies in the private sector that see their growth potential and competitiveness stifled by the highly corrupt environment. Such companies are not waiting for the government to clean up its act and instead are taking the initiative to limit corruption through setting up or strengthening internal compliance procedures.

Long-time CIPE partner Kenya Association of Manufacturers (KAM), KPMG, and the British High Commission recently published four case studies of companies that are committed to integrity and have made significant progress in translating that commitment into daily operations.  Read More...

A Guide for Anti-Corruption Compliance: The New Imperative in Global Value Chains

ac-guide-cover

This post originally appeared on Corporate Compliance Trends.

In many countries, fighting corruption seems to be an impossible battle, especially for mid-sized companies with limited resources. While there is a broad global consensus that corruption suppresses competition and innovation, thus hampering entrepreneurship and economic growth opportunities, countering it presents a challenging task due to resistance to reform in corruption-tainted business environments. In many cases anti-corruption rules and regulations may be weak or unevenly enforced, government-led steps to fight corruption remain insufficient or ineffective, and bribes are a widely accepted part of doing business.

Yet businesses committed to anti-corruption are not helpless. They can lead by example by improving their own safeguards against corruption and act together to create a movement for integrity that makes clean business conduct the norm, not the exception.

In today’s globalized world, where international value chains stretch across borders and continents, anti-corruption compliance provides a vital competitive advantage.  Read More...

A Guide for Anti-Corruption Compliance: The New Imperative in Global Value Chains

Tags

, , , ,

ac-guide-cover

In many countries, fighting corruption seems to be an impossible battle, especially for mid-sized companies with limited resources. While there is a broad global consensus that corruption suppresses competition and innovation, thus hampering entrepreneurship and economic growth opportunities, countering it presents a challenging task due to resistance to reform in corruption-tainted business environments. In many cases anti-corruption rules and regulations may be weak or unevenly enforced, government-led steps to fight corruption remain insufficient or ineffective, and bribes are a widely accepted part of doing business.

Yet businesses committed to anti-corruption are not helpless. They can lead by example by improving their own safeguards against corruption and act together to create a movement for integrity that makes clean business conduct the norm, not the exception.

In today’s globalized world, where international value chains stretch across borders and continents, anti-corruption compliance provides a vital competitive advantage. Ethical companies tend to have higher valuations, are more attractive to potential investors and employees, and are more likely to be engaged in long-term arrangements with their business partners.  Read More...

Reducing Third-Party Company Risks in Emerging Markets

sai-global-webinar

This post originally appeared on CIPE’s Corporate Compliance Trends blog.

As the world’s multinational companies seek profits in new, high-risk markets, they inevitably start depending on local businesses – third parties – to operate. Such partnerships bring with them both the promise of mutual growth and, for the multinational, responsibility for the behavior of its new local partner. That’s because aggressively applied laws such as the U.S. Foreign Corrupt Practices Act (FCPA) hold the multinationals responsible for third parties’ behavior.

Of the estimated 106 companies currently under investigation for FCPA-related violations, a significant number of them are related to suspected third party wrongdoing – assuming that past settlements made public are a reliable guide. So, how to reduce the corruption risks presented by doing business with third parties in developing countries where bribery is an accepted practice? CIPE is working on finding answers. So, too, is one of the world’s leading risk management firms,  SAI Global, which recently presented a webinar and offered a few tips on how to construct an anti-corruption training program for third parties.  Read More...

Reducing Third-Party Company Risks in Emerging Markets

Tags

, , ,

sai-global-webinar

As the world’s multinational companies seek profits in new, high-risk markets, they inevitably start depending on local businesses – third parties – to operate. Such partnerships bring with them both the promise of mutual growth and, for the multinational, responsibility for the behavior of its new local partner. That’s because aggressively applied laws such as the U.S. Foreign Corrupt Practices Act (FCPA) hold the multinationals responsible for third parties’ behavior.

Of the estimated 106 companies currently under investigation for FCPA-related violations, a significant number of them are related to suspected third party wrongdoing – assuming that past settlements made public are a reliable guide. So, how to reduce the corruption risks presented by doing business with third parties in developing countries where bribery is an accepted practice? CIPE is working on finding answers. So, too, is one of the world’s leading risk management firms,  SAI Global, which recently presented a webinar and offered a few tips on how to construct an anti-corruption training program for third parties.    Continue reading »

Introducing Corporate Compliance Trends, a Website for Anti-Corruption Compliance in Emerging and Frontier Markets

Tags

,

compliance-site

The need for anti-corruption compliance programs in companies of all sizes in global value chains has never been greater. Since 2006, the U.S. government has settled or prosecuted nearly 300 corruption cases against companies from around the world, including many where the corrupt conduct originated from multinational corporations’ suppliers, vendors, and agents. The average cost of resolving these enforcement actions now tops $80 million.

Beyond the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, new anti-corruption laws with international reach are hitting the books, such as Brazil’s Clean Companies Act, introduced earlier this year. Similarly, many international bodies, including the Organisation for Economic Co-operation and Development (OECD) and the International Chamber of Commerce, have introduced conventions and norms meant to combat bribery of foreign officials. Few doubt that this growing global trend toward rooting corruption out of international business conduct is here to stay.

Still, as a recent study found, the number of global companies with anti-corruption policies has increased by only 1 percent over the past two years, and a sizable minority of these companies have yet to implement even the most basic of compliance programs.  Read More...

How Effective Are Helplines at Enabling Compliance Reporting?

Tags

, ,

helplinesWhistleblowers can be one of the most effective ways for companies to find out about and address potential ethical and legal violations, making them an important part of any anti-corruption compliance effort.

Recently, the Society of Corporate Compliance and Ethics (SCCE) conducted a survey on helpline calls and incidents reports. The survey, based on 677 responses from compliance and ethics professionals around the world, revealed that over the last two years employees are reported to have grown more likely to come forward and raise concerns both through whistleblower helplines and directly to management and/or compliance officers. Continue reading »