ANTI-BRIBERY AND CORRUPTION
- October 6, 2020
- Posted by: Raghav
- Category: Forensics
Anti-bribery and corruption compliance and the mitigation of correlated risks continue to be some of the major challenges organizations are facing, both in their domestic and international markets. All around the globe, more and more nations have been promulgating new and more sophisticated anti-bribery and corruption legislation. We can also observe a trend of aggressive enforcement by the respective government regulators to mitigate risks. Enforcement agencies of different countries are also increasingly cooperating and working in tandem in their fight against corruption. In addition to the regulations and laws, more countries are introducing individual criminal liability for bribery-related offences.
The US Foreign Corrupt Practices Act (FCPA), the UK Bribery Act (UKBA), the Indian Prevention of Corruption Act (PCA) and other similar anti-corruption legislation around the world prohibits corporations and individuals from indulging in bribery and requires corporations and businesses to maintain accurate financial records. Below are the key provisions of these crucial acts in brief;-
FOREIGN CORRUPT PRACTICES ACT (FCPA)
The Foreign Corrupt Practices Act (FCPA, the Act) is a United States law, passed in 1977, that prohibits U.S. firms and individuals from paying bribes to foreign officials for organizational benefits to further business deals. The FCPA contains two main articles:
- The anti-bribery provisions, and
- The books, records, and internal control provisions, which speaks to accounting practices.
The FCPA applies to prohibited conduct anywhere in the world and extends to the U.S. publicly traded companies.
The Foreign Corrupt Practices Act targets corruption and bribery not just within the USA, but also internationally. The FCPA contains elaborate policies for governing the actions of publicly traded companies, their directors, officers, shareholders, and all stakeholders. This includes working through third parties such as consultants and partners in a joint venture (JV) with the company, which essentially means that the use of proxies to execute a bribe will not protect the involved company or individual from culpability.
UK BRIBERY ACT (UKBA)
Passed by the British Parliament in the year 2010 and fully effective from 2011, the Bribery Act criminalizes bribery, the bribing of foreign government representatives and the failure by private companies to prevent corruption. It also made it an offence to be bribed. The act applies to UK citizens, residents and companies and organizations that are incorporated in the UK, or that conduct business in the UK—granting similar extraterritorial privileges as the FCPA. The Serious Fraud Office (SFO) enforces the act.
If found guilty of violating the UKBA, penalties per violation are more straightforward and stringent than the FCPA:
- Individuals face up to 10 years in prison and unlimited fines based on the severity of the bribery offence.
- Companies face unlimited fines, a formal mandate to implement an anti-bribery program, forfeiture of financial gains received because of the bribe(s) (“confiscations,” similar to the FCPA’s disgorgement) and dismissal of responsible directors and a subsequent 15-year ban from holding a director position.
INDAIN PREVENTION OF CORRUPTION ACT (PCA)
The primary anti-corruption legislation in India is the Prevention of Corruption Act 1988 (PCA), which criminalises, among other things, the taking and giving of ‘undue advantage’ to ‘public servants’. Both individuals and companies are liable to be punished for an offence under the PCA.
The PCA states that undue advantage is any gratification (not limited to being pecuniary in nature or estimable in money) other than the legal remuneration that a public servant is permitted to receive either from the government or any other organisation served by the public servant.
As the legislation around bribery and corruption continues to increase, with many countries developing their own set of rules and regulations on what is and is not acceptable, organizations need to ensure they are compliant with these laws in the markets they operate.
HOW TO DEVELOP A ROBUST FRAUD RISK MANAGEMENT PROGRAM
Failure to adopt effective compliance programs and procedures can result in serious reputational damage, significant fines, imprisonment for individuals, and debarment of organizations from conducting business with national and local governments. However, merely adopting a policy that simply states the requirements of the law is not sufficient in the fight against corruption and bribery. You should embrace a robust program that:
- Fosters an organization-wide culture of compliance endorsed and promoted by the top leadership of the organization,
- Frequently engagement of stakeholders in thoughtful risk assessments and adoption of proportional control procedures based on the identified risks,
- Requires due diligence on third-party partners, while onboarding clients &, employees especially who are managing critical operations or are decision-makers
- Promotes regular auditing using novel methods of fraud detection
- Ensures effective training and communication about the program.
It needs to contribute greatly to preventing or reducing civil and criminal liability even when a rogue employee engages in an act of corruption or bribery.