What happened to anti-bribery and corruption?

Business in Asia is hard. Staying competitive demands investment in expensive operational systems and resources; markets pivot quickly. Finite compliance resources – both human and technical – are often spread thinly. When it comes to compliance, being a good corporate citizen is often positioned as a pathway to profitability, not as a sacrosanct obligation. Being ESG-minded and cybersecure is seen as popular with employees and investors.
 
Anti-Bribery and Corruption – “ABC” - is not as popular. Trump 2.0 has attacked FCPA enforcement; the EU CSDDD has largely ignored it. ABC can be expensive, resource-draining and often hit-and-miss in terms of actually identifying corruption, a reality reflected in the number of prosecutions that blindside the businesses involved. So - does ABC still matter? Whether or not it is popular, it does.
 
First, the world is not heading towards compliance perfection. Strong regional leaders and their associates with vested interests in murky accountability are not leading any charge towards transparency. In many Asian markets corruption remains simply a business reality. It is inevitable that doing business with, or in, such jurisdictions, brings risk and temptation to follow the local practices. This continues to be dangerous for operators from mature markets, bringing their offshore ABC obligations with them.
 
Second, third parties are an inevitable part of business. For example, engaging “introducers” to create investment opportunities in emerging markets is still considered by many a necessary practice. However, there has always been a very fine line between “lobbying” and corruption, which is difficult to see and very often crossed. Third parties ready to quietly pay bribes on your behalf are the same parties ready to complete your compliance questionnaires and say they won’t.
 
Third, the genuine corporate desire to embrace the “E” and the “S” in ESG – that is, protect people and save the planet – fails to account for a sad reality. Lurking behind many egregious environmental or human rights violations is an act, or acts, of corruption. For example, the dumping of toxic waste from factory to river is often made possible by inspectors paid to look the other way. Accidents in a South Asian garment factory seem inconsistent with very clear and good warning signs and well-maintained equipment. The accidents sadly make sense once the practice of HR taking bribes to conceal the illiteracy of new workers is exposed. And bribes paid to conceal poor construction work, substandard working environments and illegal labor practices very often result in suffering and loss.
 
The “G” in ESG – governance – needs to address corruption. So, what is the point? And what should you do?
 
It’s trite to promote the traditional ABC tools and practices – accessible whistleblowing, effective ABC training, robust financial controls. By now, these should be a given. What will help you maintain effective ABC – and in particular, find the hidden “C” – corruption – in ESG, is the following:
 
Be diligent with your third-party diligence. Get professionals involved. Professionals are money-well-spent when accurate, high-volume scrutiny of suppliers, sub-contractors and agents is needed, or where specific deeper scrutiny is justified due to perceived high risk or the significance of a particular third party. Professionals will be able to help build and tune your systems to decide where basic ‘red flag’ scrutiny is adequate, and where more in-depth scrutiny is justified.
 
Coordinate your teams and systems. Ensure integration, or at least very close coordination, between procurement, environmental oversight, compliance, legal – as relevant to your business. Procurement teams prioritise quick, cost-effective delivery of goods and services; they often need to be hitched to other internal teams to appreciate compliance risks, such as social and environmental impact, and corruption. Without increasing complexity and compromising efficiency – not an easy feat – payment systems must be monitored by teams responsible for maintaining compliance standards, not simply by those tracking finances and business supplies.
 
Investigate holistically and strategically– particularly in a crisis environment. Effective, efficient investigations require specialists, and the deployment of specialist tools. Internal legal or compliance people may have conflicts of interest, and limited bandwidth beyond their everyday obligations. Professionals have the resources and tools, and experience in planning for crises and post-investigation outcomes. Most importantly, they will sniff out the underlying root cause – sometimes the hidden “C” – which may not be immediately apparent.
 
Gary Gillis Head of Investigations for Australia in the Investigations, Diligence and Compliance practice of Kroll.  Gary has almost three decades of complex forensic investigations experience across the globe from Australia to South Africa to Canada. His experience includes assisting his clients in preventing, detecting and investigating fraud and related financial crimes and misconduct. His clients include public sector organisations, the New South Wales and federal government, and companies across industries such as consumer and industrial markets, telecommunications and IT, and financial services, in Australia, the Asia Pacific region, North America, Eastern Europe, the Caribbean and Africa.
 
https://www.kroll.com/en/our-experts/gary-gill
  
Maurice Burkeis a Managing Director in the Investigations, Diligence and Compliance practice, based in Australia. He leverages more than 20 years of experience in dispute resolution, investigations and contentious regulatory matters across the Asia Pacific region, including Indonesia, Vietnam, Thailand, Malaysia and the Philippines. Maurice solves complex problems for his clients and has advised a broad range of multinational clients on strategies to meet operational and commercial goals. He has a deep understanding of legal systems, the critical role of local culture in identifying and remediating compliance issues, and the challenges of cross and multijurisdictional issues. 
 
https://www.kroll.com/en/our-experts/maurice-burke