Dotting the i’s and crossing the t’s to curb corruption threats
Macroeconomic disruptions are concurring worldwide as a result of a combination of shocks driven by a pandemic, employment gap, war, etc. On top of that, Malaysia is enduring the consequences of past and collective malfeasance - national debt on the rise, food security fright, higher costs, natural disasters caused by illegal land clearance activities, B40 broadening to B60, etc.
Notwithstanding, resilient Malaysian businesses are venturing into global marketplaces but not without a gambit. The time lapse between enactment and enforcement of the Malaysian Anti-Corruption Commission (Amendment) Act 2018’s provision Section 17A[1] would have taught businesses to rehabilitate business practices in order to capture that market share ethically. These businesses would then have access to fair competition as do businesses around the world bound to anti-corruption laws of their jurisdictions, and depending on the extent of their business, the Foreign Corrupt Practices Act 1977[2].
[1] Section 17A addresses corporate liability for corruption offences committed by commercial organisations, directly, vicariously or unknowingly, to obtain or retain business or business advantage. [2] The FCPA prohibits U.S. persons (natural, legal) and foreign issuers of securities in the U.S. from bribing foreign officials. FCPA would have far-reaching legal claws over these U.S. subjects should they further such bribery via subsidiaries, affiliates or domestic agents while operating business outside of the U.S.
“Corporate bribery is bad business. In our free market system, it is basic that the sale of products should take place on the basis of price, quality & service. Corporate bribery is fundamentally destructive of this basic tenet. Corporate bribery of foreign officials takes place primarily to assist corporations in gaining business. Thus, foreign corporate bribery affects the very stability of overseas business. Foreign corporate bribes also affect our domestic competitive climate when domestic firms engage in such practices as a substitute for healthy competition for foreign business.”
The US Senate, 1977
T.R.U.S.T. Principles
This rehabilitation process starts with implementing a Compliance Program in the organisation, referencing the Guidelines on Adequate Procedures pursuant to Section 17A Subsection (5)[3] as a compliance framework. The adequate procedures are based on the following principles:
Top-Level Commitment: The Leadership of an organisation is a consummate model of the principles in its Compliance Program, thereby inspiring employees to be amenable to the same principles and be engaged in self-governance and accountability.
Risk Assessment: Organisations are to evaluate the likelihood of bribery and the severity of its impact to their business operations. The more meticulous the risk assessment, the better the organisation is at in negating risk areas with fitting anti-bribery and anti-corruption (“ABC”) control measures.
Undertaking Control Measures: An organisation needs to implement both financial and non-financial control measures realistically, that is, to proportionately fit its size and business nature.
Systematic Review, Monitoring & Enforcement: Conformation to the procedures and processes needs to be vigorously tested, reviewed and monitored, aiming for a strengthened enforcement.
Training & Communication: Communicating should not just be limited to employees, where possible, external business associates should be informed of an organisation’s ABC endeavours.
[3] The GAP covers adequate procedures that deter and detect commercial organisations from committing bribery in the normal course of business, that if soundly implemented, may be relied upon as defence in the failure of preventing the occurrence.
#1 - How to level up commitment
A Leader’s commitment habits that need to be seen and felt by, include:
Seriousness: Setting the tone on zero-tolerance on unlawful and unethical conducts.
Foresight: Able to recognise risk hotspots & not underestimate blind spots, then see to the right mitigation measures to curtail occurrence of non-compliance.
Tactfulness: Listening, advising, mediating – an agility in diplomacy for handling relevant & sometimes difficult conversations on business ethics.
Impartiality: Mindful of employee grievances, complaints & concerns, and unbiased in carrying out actions following the facts received & investigated.
Mentorship: Guiding the next level of leaders to make instinctively ethical decisions to elevate the compliance cadence.
Being a Budget Ally: The cost of doing business is not in the provision of resources to build & maintain a compliance program. Non-compliance on the other hand can cost an organisation more than just financial paralysis.
#2 - Risk assessment
The following corruption indicators should be contemplated into an organisation’s risk-mapping process:
Business Purpose Test: The bottom line of business corruption is concluded when providing undue pecuniary interests or other gratification to secure an unfair advantage or retain or obtain business.
Corruption Perception Indices: Transparency International’s annual corruption perception indices are taken from datasets of various institutions that measure the materialisation of corruption in the public sector as perceived by businesses having interactions with governments. The data depict the:
ease of doing business - burdensome red-tape hurdles created to facilitate bribes;
regulatory enforcement of ABC laws – corruption containment, whistleblower’s protection, government officials’ declaration of finances & conflict of interests;
transparency of government activities – information made available to the public; and
impact of corruption to the economy – diversion of public funds, human trafficking, media freedom limitation, watchdog agencies’ warnings.
Government Relations: In some jurisdictions, economic development, security (defence, food, disease control, etc.), foreign direct investments & trade relations are amongst some areas where government officials are more inclined to demand kickbacks, negotiate bribes or embezzle national coffers enabled by systemic conventions like patronage, cronyism & nepotism. Kindred ABC policies like gifts, meals and entertainment, tender-bidding, lobbying, donations and sponsorships delineate stricter requirements for dealing with the public sector including state-owned entities, better known as government-linked corporations.
Other Red Flags: All other things being equal, the private sector is also no stranger to the likes of money-laundering, financial fraud, tax evasion, misappropriation of assets, ultra vires actions by the management of organisations and other all-encompassing criminal activities. How an organisation could protect itself from being thrown under the bus in connection to such activities is by identifying and acknowledging the existence of red flags linked to the industry, operations, individuals involved, purpose of transactions, etc. so that prescribed mitigation measures can be duly applied.
#3 - Corruption risk covenants
Control measures should be visibly available in the form of ABC-centric policies that specify inter alia, the do’s and don’ts, processes and procedures, responsibilities and authorised matrices, and actions and remedies for misconducts. These covenants are present in:
Third Party Due Diligence & Payments: Prior to entering into business contracts, business partners must be screened for their integrity & the proposed business transactions or events be subject to scrutiny on legitimacy, business purposes, payment structures and recipients, etc. Onboarding third parties to due diligence is not intrusive as it is misunderstood. It is a highly necessary step to identify red flags of any potential business arrangement.
Accounting Provisions: Financial controls are steps toward preventing & detecting fraudulent accounting practices or payment schemes. Payment structure of potential business transactions are also incorporated into due diligence processes.
Employment: An organisation should have a policy that clearly defines conflict of interests on the:
recruitment of individuals who are closely related to government officials or stakeholders who can exert influence over business decisions; and
retention or promotion of employees who had historically conducted bribery.
"If you think compliance is expensive; try non-compliance."
Former US Deputy Attorney General Paul McNulty
#4 - Sustainable compliance
The method to the madness in sustaining compliance is to lean into the organisation’s cadence on embracing the best practices commended in its Code of Conduct and ABC policies, further boosted by:
Confidential Reporting & Internal Investigations: Employees must be given the avenues to reach out or make reports upon encountering wrong-doings. A good policy on confidential reporting gives the assurance to employees that their reports shall receive acknowledgement, and investigation would be initiated and closed within reasonable time.
Investigation, Analysis & Remediation of Misconduct: What are the methods deployed to investigate a misconduct? How to analyse the data and information of an investigation? Is a misconduct being dealt with on a timely basis and remediated appropriately? How to properly document investigations and analyses for improvements?
Periodic Testing & Review for Improvement: Measure the tools, mechanisms and systems of the Compliance Program for effectiveness against present time forces (business changes, laws or industrial standards) through regular testing and focused audits. Reviews bring discovery of new risk areas to the forefront more often than anticipated. Suffice to say, a hardworking Compliance Program can never be in stagnation.
#5 - 5 tips to communicate compliance better
An effective Compliance Program needs persuasive conveyance, akin to a marketing strategy that creates frequency bias. Eventually people will start noticing or become more aware than before of a word, visual or lesson that is being imparted persistently.
These five tips help the executives of the Compliance Program to understand some training and communication dynamics including any nuances in order to better deliver the program’s content:
Forming the Messaging: How an organisation sets the tone on its anti-bribery & anti-corruption compliance policies is pivotal to maintaining its compliance framework. Explicitly explain and train on the purpose of each policy and reassure on the commitment to mitigate corruption risks from present day to the foreseeable future. Law regulators expect to see how well an organisation communicates its ABC compliance regiment.
Training, Train-the-Trainer, More Training: Training enhances the awareness on policies, is a form of reminder, communicates updates or changes to policies and is actively conducted.Engage high-risk employee groups to participate in training sessions vis-a-vis their job scope.Supplement people managers with enhancement training on parts of policies, such as responsibilities & processes, enabling them to adequately train their subordinates of the same where required.
"Consistently. Purposely. Repetitively in different ways."
Amaya Sentinel Consulting
Demonstrating Coherence: Results and reality bring reaffirmation. In producing a story of `positive vs negative’ impacting the organisation including the actors of compliance or non-compliance, routine compliance ought to be merited but notoriety is also accorded with no less honorable mention. In addition, leaders and people managers are expected to show up with integrity and hold themselves accountable for their work ethics.
Reinforcing Adequate Preparedness: Run employee surveys, schedule compulsory 3-minute macro-learnings, initiate `compliance Q&A clinics’, encourage active participation in compliance week, etc. to assess if the Compliance Program runs in adjacency to the business momentum.
Rulebook: A handbook with the organisation’s compliance related resources, eg. Code of Ethics, policies, reporting channels, contacts, etc., can provide support to employees faced with remote respite or limited access to central office’s connectivity conveniences.
Good Practices
1. An organisation should take the advantage in a jurisdiction where ABC law has been enacted to convey its stance on complying to the law, and thus its Compliance Program:
through company website, business communication, the media or public relations;
by having that crucial conversation about corporate risk of criminal prosecution with government officials, trade associations, clients, suppliers, business partners, etc.; and
by always reiterating the policy on resistance and refusal to bribe for business.
2. Any misconducts involving employees or business partners must be addressed swiftly and according to the procedures in relevant policies. Investigation, remediation and enhancement actions should be made known throughout the organisation, thereby reinforcing the Compliance Program framework.
3. Be it in SMEs or conglomerates, a management must never traipse lightly on ethical business sense, for example, calling a well-intentioned Compliance Program a sham or dismissing it down to merely a paper just to satisfy the law or acting in contradiction to it. This leadership type is never admirable.
Now that you have gained another perspective of the Guidelines on Adequate Procedures, what is your ethics resolution in this recession? Let us know your thoughts or get more insights from us:
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