Building a Culture of Compliance in Emerging Markets

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By Stephanie Bandyk

Corruption is a destructive tax on business that hampers entrepreneurship and economic development. In the last two decades significant progress has been made in making the fight against corruption a top priority for governments and businesses worldwide.

Yet many challenges remain, including spreading best practices in anti-corruption compliance beyond large companies to smaller firms in global value chains. The launch of CIPE’s new guide on anti-corruption compliance for mid-sized companies in emerging markets, held yesterday in Washington, DC, at the OpenGov Hub, focused on ways to boost third party compliance in difficult environments. Read more…

Could Rana Plaza Help Make Labor Standards a Corruption Issue?

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In recent years, the private sector has been increasingly responsive to supply chain issues. This is a result of two distinct forces – one related to corruption, and the other related to issues such as human trafficking and child and other labor issues. While the focus on corruption has largely resulted from legislation such as the FCPA and UKBA, interest in labor-related supply chain issues has often been spurred by NGOs, public pressure, and the media.

However, investigations resulting from the Rana Plaza garment factory collapse may change that. On April 24, 2013, over 1,130 people were killed in the building collapse while many employees were making clothing for western companies. While the accident and the resulting public outcry drove some companies to sign accords promising to establish fire and building safety programs, other companies did nothing.

In July of this year, the Bangladesh Anti-Corruption Agency filed charges against 18 people in connection with the disaster, finding that they “grossly breached the building code.” Although bribery may have played a role in the accident — municipal workers were held liable for giving Rana permission to build more floors on top of the existing structure, although they had no authority to do so — the commission’s decision makes no mention of bribery or corruption. Instead, they hold private sector actors accountable directly on the basis of violating local building codes. Read more…

EVENT: Anti-Corruption Compliance for Mid-Sized Companies in Emerging Markets

mapJoin the Center for International Private Enterprise (CIPE) on Monday, November 10 for a discussion on Anti-corruption Compliance for Mid-Sized Companies in Emerging Markets.

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. Increasingly, companies are expected to ensure not just the integrity of their own operations but also the conduct of their suppliers, distributors, and agents wherever they may be.

At the same time, in many countries, fighting corruption seems to be an impossible battle, especially for mid-sized companies with limited resources operating in corruption-tainted environments. CIPE’s newest publication, Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets, is meant to help local companies around the world think about anti-corruption compliance as a strategic investment and take concrete steps to introduce or strengthen their internal compliance programs.  Read More...

Reflections on the Anticorruption Movement

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By Rick Messick

The World Bank’s Integrity Vice-Presidency is celebrating its 15th anniversary.  It recently asked a number of individuals for their thoughts on the anticorruption movement over the past 15 years.  INT’s questions and my replies below.

1) How has the anti-corruption movement changed in the past 15 years?

Fifteen years ago consensus about corruption was lacking.  Didn’t it foster development by providing a way around bureaucratic roadblocks to economic growth?  Wasn’t bribery a reflection of the gift-giving culture of many countries?  How could rich Western countries, many of which permitted their companies to take tax deductions for bribe payments, complain about corruption in poor countries? 

 The greatest change in the past 15 years is that those and other tired questions about corruption are no longer heard.  Instead an extraordinary consensus on the need to combat corruption now exists, the most visible sign being the overwhelming support the United Nations Convention Against Corruption enjoys.  Read More...

Getting Creative about Saying “No!” to Corruption in Lebanon

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Graffiti art produced at LTA-LABN’s public rally held in the Beirut Souks, September 12, 2014.

Graffiti art produced at LTA-LABN’s public rally held in the Beirut Souks, September 12, 2014.

CIPE partner the Lebanese Transparency Association (LTA) recently wrapped up a banner month in its fight against corruption in Lebanon. CIPE’s partnership with LTA dates back over ten years, and since 2012 CIPE has been supporting LTA through a grant from the U.S. Department of State’s Middle East Partnership Initiative (MEPI) to strengthen the rule of law in Lebanon. Our approach has been not only to raise public awareness, but also to empower citizens to exercise their rights. This effort has been consolidated primarily through the Lebanese Advocacy and Legal Advice Center (LALAC) and the Lebanese Anti-Bribery Network (LABN), both of which are housed and managed by LTA.

LALAC operates centers in Beirut, Bekaa, and Nabatieh, which are staffed by attorneys and legal assistants who field complaints of corruption from citizens across Lebanon. Through LALAC, citizens can report corruption by calling the LALAC hotline, writing a letter or e-mail, or visiting one of three centers in person.  Read More...

“FCPA Professor” Criticizes Focus on Corporate Enforcement Actions

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Known as “The FCPA Professor” for his highly trafficked blog, Southern Illinois University Law Professor Mike Koehler spoke in Washington, DC on October 2, 2014 about what he sees as flaws in the way FCPA enforcement is carried out.

In his latest book, The Foreign Corrupt Practices Act in a New Era, Koehler dissects recent developments and trends related to the U.S. Foreign Corrupt Practices Act (FCPA) and its enforcement. Although often a critic of FCPA prosecutions, Koehler maintains that the law itself is sound and apt – even for today’s globalized corporate environment.

He submits, however, that a gap exists between the text of the FCPA statute and current DOJ and SEC enforcement. Koehler ties this gap to the large number of corporate actions, which almost always lead to out-of-court settlements, as opposed to actions against individuals which would require greater judicial review.

Read more…

The Business Case for Putting Ethics at the Heart of Corporate Culture

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Participants at Ethisphere

Participants at Ethisphere’s 2014 Europe Ethics Summit.

In today’s global business environment, corruption poses a risk that companies with operations around the world must understand and manage effectively. Those that do reap the benefits. As the Ethisphere Institute points out, the business case is clear: the five year annualized performance of the World’s Most Ethical (WME) Companies Index was 21 percent, beating S&P 500’s 18 percent. Similarly, the ten year annualized performance of the WME Index is, at 11.4 percent, significantly higher than that of S&P 500 at 7.4 percent.

The key to success in ethical business is placing ethics at the center of corporate culture and building strong compliance programs that can mitigate corruption risks. That was the overarching theme of the recent 2014 Europe Ethics Summit: Leadership through Ethics and Governance, hosted in London by the Ethisphere Institute and Thomson Reuters. The Summit was Ethisphere’s first such event in Europe and gathered nearly 150 compliance experts, professionals, and stakeholders.  Read More...

Ghana: A Trendsetter for Resource-Rich Emerging Markets?

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In four out of six petroleum agreements recently approved by Ghana’s Parliament, the government required oil and gas producers to certify compliance with the Foreign Corrupt Practices Act (FCPA), UK Bribery Act, and OECD Anti-Bribery Convention. At an event in June sponsored by the Ghana government, the FCPA was referred to as model legislation for fighting abuses in the oil and gas industry. This new standard highlights the importance of anti-corruption compliance for companies and businesses seeking to do business in global markets. Read more…

Case Studies: Advancing Anti-Corruption Efforts in Armenia and Thailand

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Corruption is a systemic problem that plagues many transitional countries across the world, rooted in weak rule of law and lack of private property rights. Not only does corruption erode trust in public institutions, such practices also hinder economic growth and weaken democratic governance.

The corruption challenge can be addressed by building responsive institutions that offer basic assurances of private property rights and ensure law and order. CIPE programs address the root causes of corruption through a multi-pronged approach. CIPE programs mobilize the private sector to raise anti-corruption standards and advocate for reforms; streamline regulations and reduce implementation gaps to limit opportunities for corruption; improve corporate governance to strengthen firm-level integrity; facilitate collective action to level the playing field and coordinate company efforts; and equip small and medium-sized enterprises to resist bribery and meet the requirements of global value chains.

Two recent case studies, described below, show these CIPE approaches in action.  Read More...

The Role of International Trade Agreements in Fighting Corruption

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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. Read more…