B20’s New Anti-corruption Resource for SMEs

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Corruption in global value chains remains among the top risks that companies around the world must mitigate. Most multinational corporations have gone to great lengths to ensure anti-corruption compliance among their business partners abroad. However, many firms in emerging markets – especially the smaller ones – still do not necessarily know how to go about putting in place anti-corruption checks and balances in their day-to-day operations.

A growing number of resources, including CIPE’s own Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets, have been created to help address this knowledge gap and assist businesses everywhere with anti-corruption compliance regardless of their size. The latest contribution in this area comes from the B20 Coalition, produced at the request of the G20 Anti-corruption Working Group: a new Anti-corruption Toolkit for Small and Medium-sized Enterprises (SMEs). The B20 Coalition brings together leading independent business associations from G20 economies and advocates on behalf of more than 6.7 million small, medium and large companies.   Read More...

What do Hamburgers and Compliance Have in Common?




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Reflect, for one moment, on just how much you know about McDonald’s.  (It doesn’t matter whether you love McDonald’s or would never be caught dead in one; this works either way.)  You know the names of many of their foods.  You know that an Egg McMuffin is eggs on an English muffin with cheese and Canadian bacon, and if you made a sandwich at home that looked like that you might have to resist the urge to call it an Egg McMuffin.  You probably even know that the Shamrock Shake only comes around at certain times of the year, and you will remember the Hamburglar and Ronald McDonald for the rest of your life.

AND YET:  You have never read a single policy related to Big Macs.  You have never received annual training on eating Chicken McNuggets.  You have never signed a Certification that says that you know who Grimace is and that you agree that he is a big, affable purple guy.  Read More...

Attracting Foreign Investment in Kazakhstan through Anti-Corruption Reforms


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Kazakhstan Business

Image from harrisonbrook.co.uk.

Kazakhstan, Central Asia’s largest and most prosperous country, has a closing political space. Nursultan Nazarbayev, the country’s leader since 1989, wins elections by Soviet-style margins – 97.7 percent in April 2015. Opposition journalists and politicians routinely face harassment, arrest, and imprisonment. Once-ignored internet activists are getting prison sentences for “inciting ethnic hatred” as Kazakhstan’s authorities become increasingly sensitive to providing a pretext for its giant neighbor to the north, Russia, to make the kind of land grab seen in Ukraine. The domestic political environment is deteriorating in response to external threats and a brittle domestic system based on one elderly man’s hold on power.

All the same, faced with the economy in crisis, Kazakhstan is choosing to open up to the international business community as never before. To do this successfully, Kazakhstan must offer potential investors transparency, rule of law, and a fair way to settle business related disputes. This potentially translates into a significant dividend for the country, as anti-corruption measures and the fair privatization of state-owned companies could benefit all Kazakh citizens and open the door for broader reforms. Read more…

Perceptions of Fraud Are on the Rise, Yet Anti-Fraud Strategies Remain Slight


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fraud words

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The annual 2015 Kroll Global Fraud Report finds that fraud has continued to increase and businesses are more vulnerable and at risk than ever before. A reported 75 percent of 768 senior executives representing a broad range of industries and regions in the survey experienced a fraud incident last year – and 81 percent of companies affected by fraud reported insider perpetrators. The wide range of sectors represented included financial and professional services such as retail, wholesale, and distribution; technology, media, and telecommunications; healthcare, pharmaceuticals and biotechnology; and manufacturing.

In this year’s Global Fraud Report, the proportion of respondents reporting at least one fraud in their company in the past year has risen to its highest level in the report’s eight-year history, however, every separate category of fraud has decreased. This contradiction points to the survey being a measure of perceptions, and not that a category of fraud has been missed.  While “fraud is on the agenda and in people’s minds… the apparent decrease in each of the individual categories reflects a lack of specific knowledge [by reporting executives] of the details of the frauds, and so the allocation by type may in many cases involve some guesswork on the part of the respondent.” Read more…

The Case for Framing Corruption in Terms of Human Rights



By Kiwiev (Own work) [CC0], via Wikimedia Commons

By Kiwiev (Own work) [CC0], via Wikimedia Commons

While in the past 20 years the international community has made strides in acknowledging that corruption contributes to and facilitates human rights abuses, it has yet to acknowledge that acts of official corruption are in and of themselves human rights abuses. In other words, we treat corruption as a symptom rather than a cause of social, political, and economic privation.

In a recent white paper released by the Brookings Institution, Matthew Murray and Andrew Spalding argue that elevating freedom from corruption to the status of a human right would send the message to victims of official corruption as well as to the perpetrators that “the vigorous enforcement of anti-corruption measures is not only possible, but essential.”
Read more…

CIPE Hosts USAID Community of Practice Event: Reducing Private Sector Corruption Through Development Projects


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Thailand’s Coalition Against Corruption is a successful example of private-sector-led collective action.

How do you convince skeptical anti-corruption activists that business can be part of the solution? How do you better coordinate anti-corruption efforts between governments, aid organizations, development banks, and the private sector? How do you establish a useful set of indicators for measuring the impact of programs seeking to reduce corrupt practices?

These challenges were among the many discussed by development practitioners on the International Anti-Corruption Day as part of the third Community of Practice event organized by the Governance and Rule of Law Team at USAID’s Center of Excellence on Democracy, Human Rights, & Governance.  CIPE hosted the event, and presented on its value chain anti-corruption program, which seeks to improve anti-corruption compliance among mid-sized firms in emerging markets and help them join global value chains.  CIPE presented two country case studies – Thailand and Russia. Read more…

Anti-Corruption Compliance for Indonesian Mid-Sized Companies


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Jakarta Anti-Corruption

Photo credit: Jakarta Times

As highlighted in a previous Corporate Compliance Trends post about the importance of anti-corruption efforts in Indonesia, corruption is a major problem in the country. According to a Gallup poll, more than 8 in 10 Indonesians say that corruption is widespread throughout the nation’s government and businesses. Instances like the current corruption allegation involving the House of Representatives’ Speaker Setya Novanto (accused of having a backchannel deal with mining giant PT Freeport Indonesia) is just one example of why Indonesians’ perception of rampant corruption is so strong.

Addressing this reality is a challenge. Even though the government is taking strides to improve the situation (for example in 2003, the Corruption Eradication Commission, or KPK, was formed to combat political corruption), reducing corrupt practices remains difficult. This is especially true for mid-sized companies with limited resources. Such firms often face the dilemma of following cumbersome bureaucratic procedures or paying bribes to expedite processes.  Read More...

Reflecting on Corporate Compliance and Ethics Week in Pakistan


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Photo Credit Muhammad Talib Uz Zaman

Compliance is essential to avoiding corruption in value chains but it is still not the primary focus for many business owners, especially in emerging markets. As Director of Public Policy at the Society of Corporate Compliance and Ethics Corporate Joe Murphy explains, “Making sure your people do the right thing may just not seem as exciting or essential as running and growing the business.” The reality is, however, that compliance can have a major impact on many primary functions of a business.

Compliance and Ethics Week was first observed in 2005 by the Health Care Compliance Association and the Society of Corporate Compliance and Ethics in the U.S. to highlight the importance of compliance and ethics in their member organizations. A decade later, the week has gained momentum, and is now celebrated by companies across the globe including Emirates National Oil Company, and Velia Consulting Limited in Ghana – to name a few. Celebratory activities included slogan and mascot contests, recognizing compliance champions within the organization who have contributed to company compliance efforts, and launching updated codes of ethics and business conduct.

In celebration of Corporate Compliance and Ethics Week – November 1-7– CIPE Pakistan and Washington based think-tank Accountability Lab hosted a panel discussion in Karachi on compliance practices in third party businesses. Companies and vendors from different sectors including pharmaceutical, oil and gas, shipping, fast moving consumer goods, packaging and distribution, electric appliances, and textile and apparel joined the conversation. Participants discussed the variety of challenges facing businesses including:  How do companies ensure that third party practices uphold the same business standards as the contracting company? How do you know that you are doing business with an ethical organization? How do you overcome challenges related to enforcement? How can training help support better compliance practices? Read more…

Carrots Before Sticks: Celebrating International Anti-Corruption Day with Successful Anti-Corruption Approaches


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On Wednesday the world celebrated the International Anti-Corruption Day, designated in 2003 by the United Nations (UN) General Assembly when it adopted the UN Convention Against Corruption. Recognizing the importance of fighting corruption in that way was a major step in a growing global effort to remove the taboo around addressing corruption in the international discourse on development. Indeed, the new expectation of governments and businesses alike is to face corruption head on everywhere it cripples democracies and markets.

This year’s theme for the International Anti-Corruption Day is breaking the corruption chain. CIPE’s work with private sector organizations in countries around the world reflects precisely that objective. In many environments where corruption has become entrenched, it is very hard for an individual or a company to stand up against abuses such as bribery or extortion.  Read More...

Corruption and Labor Trafficking in Global Supply Chains


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Corruption WP Cover Photo

Photo: Verité

By Declan Croucher, Verité

Verité’s on-the-ground research, risk assessments, and monitoring work in global supply chains routinely uncover situations where unethical labor brokers and corrupt government officials are instrumental in greasing the wheels of labor trafficking. The foreign subsidiaries, franchisees, joint ventures, and suppliers of global multinationals who end up employing trafficked migrant workers frequently express ignorance of the continuing—and largely hidden—scourge of modern-day slavery that affects more than 20 million people.

Is there a direct connection between the corrupt practices occurring in the foreign migrant labor supply chain and the type of red flags associated with human trafficking and forced labor? Yes. These red flags include deception regarding employment terms and conditions, illegal or unethical placement fees charged to foreign contract workers, unexplained fees and costs, lack of transparency, and workplace practices such as passport retention and “runaway insurance” deposits.

Recently issued Foreign Corruption Practices Act (FCPA) guidance from the Department of Justice (DOJ) reaffirms that payments to foreign government officials (e.g., border control, immigration, or law enforcement) to gain an improper business advantage or to secure or maintain business can give rise to liability, regardless of whether there was actual knowledge of wrongdoing or purposeful avoidance of such knowledge. The FCPA makes it clear that “willful blindness” or “deliberate indifference” to red flags is sufficient to establish criminal knowledge of corrupt practices.

US companies, including foreign subsidiaries, franchisees, joint venture entities, or even suppliers that use third party employment agencies or labor brokers, run the risk of potential FCPA liability. The risk arises from the fact that these entities rely on employment agencies and labor brokers who must interact with foreign officials to obtain work and travel permits, visas, etc. Any interaction with foreign officials creates potential for exposure under the FCPA. Read more…