Compliance Q&A with Anwar Hashmi

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June Anwar Hashmi 1Anwar Hashmi is a Senior Consultant within Global Ethics & Compliance at Integrity Leadership Partners, LLC  in the Washington DC Metro Area. He has over 14 years of experience in designing, developing, and implementing Global Ethics Programs at Tata Steel, a global Fortune 500 company and Tata Group’s flagship company. Hashmi has been associated with the Business Ethics Program of the company since the Tata Group developed its first Code of Ethics in 1998. While at Tata Steel, Hashmi was actively engaged in the institutionalization of the Global Ethics Program through training and sensitization as well as development and implementation of an ethics system and policies. He also initiated a process of benchmarking the Ethics Program among the world’s top multinational companies. Following the UK Bribery Act’s enactment in 2010, Hashmi launched an initiative to raise awareness amongst Tata Group Companies. The combination of these efforts contributed to Tata Steel being named as one of the World’s 100 Most Ethical Companies by the Ethisphere Institute.

CIPE’s Stephanie Bandyk discusses with Hashmi the factors that led to Tata Steel formalizing the firm’s unwritten code of ethics. Hashmi also discusses what motivated other emerging market companies to follow Tata’s lead.

  • Corporate compliance and ethics programs are still not universally common around the world. In your experience, what are some of the factors behind companies in emerging and frontier markets recognizing the need for such programs and then taking concrete steps to implement them?

I can speak about the Tata Group. Codes of Ethics and Corporate Ethics Programs were not well-known subjects amongst Indian corporations. Tata Group had a long legacy of promoting ethical business conduct, which was like an unwritten code for the Group and religiously followed. Prior to 1990, the Indian economy was closed and there was not much competition, with companies operating in a protected environment. Price was determined by government agencies, so selling your product was not an issue. Then, with globalization and the opening of the Indian economy, which led to unprecedented growth of the Group both domestically and internationally, there was a felt need for codifying the values and business conduct to create value-synergy amongst the varied Group companies operating in different regions. A written document could give guidelines on the mode of Business and Personal conduct for the Group companies and employees.  The Western experience on this was used as a best practice and the Group developed its first Code of Ethics in 1998. We benchmarked the Code with the top Global Corporations Code. Since I was involved in the designing and development of the Code, I still remember how we gathered codes of ethics of U.S. companies like Martin Marietta and many others to use as a standard. With the development of the Code, the Group felt the need for an implementation program that could be applied uniformly across the Group. The implementation program was developed and became known as Management of Business Ethics (MBE).

  • What’s motivated other companies to develop similar programs?

Tata Group was the first to develop a formal Code of Conduct. With the opening of the Indian economy, other Indian companies also started looking for business opportunities globally, especially within Western markets, and searched for association or joint partnerships with the U.S. and other developed countries. Such ethics programs are a requirement of doing business in Western or similar markets – companies need to have articulated values and a defined code of ethics. This led to other Indian companies developing a Code of Conduct and a structure to implement it. In fact, Tata’s experience was used as a benchmark by most of the Indian companies. I was personally called upon by several companies, in both the public and private sectors and other agencies, to help them develop a code of ethics. Read more…

Benchmarking Anti-Corruption and Bribery: A Look at Kroll and Compliance Week’s 2015 Report

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The good news according to the 2015 Anti-Bribery and Corruption (ABC) Benchmarking Report is that many risks have plateaued since the report’s launch in 2011. The bad news is that the survey answers still paint a discouraging picture of compliance officers’ struggles to implement a global strategy for anti-bribery compliance and to tame vendor and third party risks.

Produced by Kroll and Compliance Week, the ABC Report provides an annual, comprehensive view of the types of ABC risks compliance officers face, the resources available for mitigating risks, and how these resources can be best utilized in effective compliance programs. Nearly 250 representatives worldwide from industries including financial services, industrial manufacturing, business services, and insurance responded to the report’s survey, which was broken into four categories: risks, third parties, due diligence efforts, and program effectiveness.

If risks seemingly have plateaued, have compliance efforts also? Though roughly half of all compliance officers surveyed expect their bribery and corruption risks to increase this year (within 1 percentage point of last year’s report), the companies have only minimally stepped up their efforts to enhance compliance in third-party relationships. Forty-eight percent reportedly never train their third parties on anti-bribery and corruption issues, a concerning statistic as third parties arguably bring the gravest risk and heaviest burden for compliance programs. Read more…

Combatting the Cascading Costs of Corruption

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Corruption imposes significant economic and social costs on development across all sectors, undercutting both democratic governance and economic prosperity. To solve this immense global problem, the development community and the private sector will need to work together to target the sources of corruption

To this end, USAID’s Governance and Rule of Law Program released a guide to anti-corruption programming entitled “Practitioner’s Guide to Anticorruption Programming” earlier this year.

“Sometimes I see that the private sector and NGOs are at loggerheads and don’t see each other’s perspective or how they can work together,” said Kenneth Barden, a key contributor to the guide. This realization, in part, inspired the creation of the Guide in order to, “let everyone know what we’ve learned and build on those experiences – and to think abstractly and to harmonize, get a more focused approach,” said Barden. Read more…

The Importance of Effective Policy Writing for Compliance

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Last week I was reviewing a company’s supply chain code of conduct which was sent to thousands of distributors around the globe. It was not impressive. Cluttered with unnecessary and complex language, it featured lengthy paragraphs and heavy use of the passive voice. It was written in English but distributed in China and Russia — ignorance of international audience was also a big problem. Further, one paragraph described “the organization’s only mission” and then another paragraph began “One of the organization’s missions,” showing that the organization itself is in need of a consistent policy.

Why it is imperative to have a clearly-written policy? Policy engagement starts with (effective) policy writing, which is the foundation for an effective code of conduct. A policy basically defines the general business guidelines by which the organization operates. Policy, as laid out in a clearly written code of conduct, establishes the compliance and ethics practices on an enterprise-wide level, which can be further distilled into procedures that define ongoing process of work.

Emphasizing effective policy, Carole Switzer, president of the Open Compliance and Ethics Group, raises the question, “When we are trying to engage employees without overloading them with policies, how can we make sure that each employee gets what they need and no more?” She further adds, “In the past, a big challenge has been keeping policies fresh and making sure people aren’t accessing and using old data. How does automation in a policy system address these issues?” Read more…

Compliance Q&A with Nancy Boswell

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Boswell photoNancy Boswell is Director of the American University Washington College of Law’s US and International Anti-Corruption Law Program, a certificate program for practitioners worldwide. CIPE’s Frank Brown discusses Boswell’s academic work, along with general global anti-corruption trends in light of her past leadership of Transparency International USA and her current advisory role at various U.S. and international ethics-centered organizations.

  • The Washington College of Law at American University’s summer program focused on anti-corruption law issues seems to be the only one of its kind in the United States. Can you describe how you conceived of it, how it has developed, and how, if at all, the way it has evolved over these years has surprised you?

The WCL Anti-Corruption Law Program was designed to meet today’s demand for trained public, private, and non-profit sector professionals to carry out integrity and compliance functions.

Public officials are struggling to fulfill the demands of their citizens for more accountable government.  The private sector is confronting a highly competitive global market and, at the same time, a heightened risk of prosecution for illicit dealings.  Development agencies are under pressure to make sure their assistance reaches those in need and is not diverted for corrupt purposes.  Non-profits are pressed to protect humanitarian assistance from corrupt demands under crisis conditions.

The challenge for all these stakeholders is to put into practice what we have learned about fighting corruption.  We have secured global consensus on laws, standards, and practices to address corruption, notably the UNCAC and regional anti-corruption agreements and a host of voluntary private sector integrity and compliance standards.

Today’s challenge is to secure comprehensive, effective implementation and enforcement of these new laws, standards, and practices.  To secure progress on a global scale will take technical capacity and political will. Read more…

Assets or Liabilities: Assessing and Managing Third Party Risk

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According to an Ernst and Young Report, the U.S. Department of Justice said in 2012 that more than 90% of its anti-corruption actions involved the actions of third parties. The heads of compliance programs worry that they don’t know where to begin when designing a process for reviewing all third-party business partners.

Why we are so fretful dealing with third parties? These business partner can be vendors, service providers, distributors – they providing value to a company’s clients, and they are often brand ambassadors. But they also make the job of compliance officers broader and more difficult. Read more…

Debunking Compliance Myths

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Screen+Shot+2015-04-09+at+10.57.20+AMI’ve recently read with great interest a blog series by Michael Scher, senior editor of the FCPA Blog, on the common myths that persist about compliance. In three parts (one, two, and three), Scher takes on views on compliance that once might have been accurate but no longer fit the new notion of what compliance should be. He calls this more evolved version Compliance 2.0 where “compliance officers [are] untethered from the general counsel, working directly with C-Suiters, and participating in many of the company’s most important business decisions.”

In other words, greater levels of independence and influence within the company are now increasingly expected of compliance officers in order for them to be able to do their jobs effectively. The process of moving from Compliance 1.0 to Compliance 2.0 is by no means universally complete but more and more businesses realize that this is where compliance is headed.  Read More...

Should Governments Subsidize Corporate Compliance?

By Matthew Stephenson, Professor, Harvard Law School

This post originally appeared at the Global Anticorruption Blog.

Several months ago I did a couple of posts (here and here) on the Transparency International USA report from a couple months back on verification of corporate anti-corruption compliance programs. That report also got me thinking about a more general question: Should governments provide a subsidy (perhaps in the form of a tax credit) for businesses — particularly small and medium-sized enterprises — to support spending on the design, evaluation, and testing of their anti-bribery compliance programs?

I haven’t yet come across anything that advocates for something like this, so let me make a tentative case for why it might be a good idea:

The basic justification is straight out of Econ 101: Investments in compliance have “positive externalities” — that is, they have socially desirable effects that the companies that invest in compliance can’t capture as profits. So, all else equal, the companies will tend to invest too little (from a social point of view) in compliance — which is, after all, expensive.

One way to deal with this — what we do now — is to impose penalties on companies for the harms that result from compliance failures. (After all, in this case the principal “positive externality” associated with an effective compliance system is a reduction in the probability of the large “negative externality” that results from corporate bribery.) In a perfect world, that should do the trick: If we set the expected penalty (discounted by the probability of detection) at the right level, then firms should have an incentive to invest optimally in compliance and other forms of prevention.  But there are a couple reasons that in the real world, this isn’t working (and isn’t likely to work). Read more…

Compliance Q&A with Nikos Passas

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passas029Nikos Passas is a professor of criminal justice at Northeastern University. He is the author of “Legislative  Guide  for  the  Implementation  of  the  United  Nations  Convention against Corruption,” available for download here. Passas is an expert on the United  Nations  Convention against Corruption (UNCAC), about which he spoke at a conference earlier this month at the George Washington University of Law. His remarks focused on the opportunities and challenges posed by UNCAC, adopted in 2003 as the first global legally binding international anti-corruption instrument. This Q&A conducted by CIPE’s Frank Brown engages Passas further on UNCAC’s impact and potential.

Q: You describe UNCAC as an unprecedented achievement and yet we hear little about it in business-focused, anti-corruption circles in the developed world. Why is that and how might it be remedied?

This is a pity because the UNCAC provisions provide a blueprint for good governance in both the public and private sector. The discussions revolve a lot around instruments that are more directly applied to companies, and this is where the national laws and enforcement practices matter a great deal. The OECD Working Group on Bribery has been very active with the private sector and has been publishing relevant papers and guidelines that align with the FCPA, U.K. Bribery Act and similar laws.

Many UNCAC discussions are limited by the absence of authoritative interpretation of the text and the inter-governmental nature of a lot of UNCAC activities. The Legislative Guide and other UN publications are meant to be consensus documents and thus can only go so far. A way to engage business-focused, anti-corruption circles in the developed world is to start producing high-quality issue papers that discuss and review critically the application of different UNCAC provisions, seek out and develop good practices, engage the creative imagination of researchers, scholars, NGOs and the media. This can be done by organizing symposia and workshops advancing our thinking about practical applications and implementation ideas for diverse contexts, and by publishing guidelines and principles that may inspire collective actions with or without government participation. Guidelines and suggestions can also be forwarded and presented to the Conference of States Parties to the UNCAC and its working groups for their consideration, so that broader consensus and evidence-based knowledge can be promoted by governments too. Read more…

Businesses Exit Pakistan over Corruption Risk

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In a worrying sign for Pakistan’s ability to attract and maintain foreign investment, two prominent manufacturers have announced recently that they are pulling out of the market, citing supply chain concerns including corruption.

“Investors are the backbone of any country. Protection of their interests is an important duty of the market regulators,” noted Shariq Zaidi, Partner Assurance, Ernst & Young Pakistan, in commenting on the need for both government and business to improve the business environment.

Citing corruption issues in its supply chain, the Walt Disney Company pulled approximately $ 200 million worth of yearly textile production from Pakistan and banned it from the list of approved supplier countries, along with other “high-risk” countries such as Bangladesh, Ecuador, Venezuela, and Belarus. Speaking to CNN, Bob Chapek, President of Disney Consumer Products commented, “After much thought and discussion, we felt this was the most responsible way to manage the challenges associated with our supply chain.” The second firm, the Canadian menswear label and retailer Kanati Co., came to a similar decision citing many of the same factors as Disney, although the firm’s co-founder downplayed corruption as a factor in a subsequent interview.

The two firms’ action are a wake-up call, both for those representing multi-nationals’ interests in Pakistan and those Pakistani firms in the multi-nationals’ value chains, according to the Contracting & Procurement Manager at Shell Pakistan, Mehnaz J. Mohajir. “As people who work in companies that are either operating units of multinational companies or suppliers of foreign companies, we should now accept and take immediate actions that improve our working conditions. Among many remedial steps that come to one’s mind, improving our adherence to international standards of ethics and compliance ought to be definitely be on high priority,” said Mohajir. He is also a member of CIPE Pakistan’s Compliance Advisory Committee, which helps guide CIPE’s efforts to improve the country’s culture of anti-corruption compliance. Read more…