In 2024, companies active in the UK, EU, and US are navigating an increasingly complex regulatory terrain in the realm of anti-corruption and anti-bribery. Recent legislative developments, such as the United States’ Foreign Extortion Prevention Act (FEPA), reflect a global trend towards more stringent anti-corruption laws. Coupled with the evolving frameworks in the UK and EU, this shift underscores a global move towards greater enforcement and accountability. This blog explores the key strategies and trends that businesses should consider to navigate these complexities successfully.
The Changing Regulatory Environment
United States
In the United States, the Foreign Corrupt Practices Act (FCPA) remains the cornerstone of anti-corruption legislation, targeting corporate bribery overseas. It includes both anti-bribery provisions and accounting provisions, criminalizing bribing foreign government officials and mandating issuers to maintain proper recordkeeping and internal controls. Recent policy changes in 2023 have introduced more lenient penalties for self-disclosure of misconduct and cooperation with the Department of Justice (DOJ). Additionally, a new policy protects acquiring companies from criminal prosecution for pre-acquisition misconduct of acquired companies, provided the misconduct is promptly disclosed and remediated.
United Kingdom
The UK’s primary legislation in this area is the Bribery Act 2010, which broadly defines bribery offenses and includes the corporate offense of failure to prevent bribery. This act is significant for its strict liability corporate offense, where the only defense is showing adequate prevention procedures. The Economic Crime and Corporate Transparency Act (ECCTA), passed in October 2023, introduces a new ‘failure to prevent fraud’ offense, expanding the corporate liability model. This offense applies to large organizations that fail to prevent fraud offenses committed by an employee or agent for the organization’s benefit without adequate fraud prevention procedures.
European Union
The EU is in the process of updating its anti-corruption framework with a proposal for a new directive and a communication on the fight against corruption, presented in May 2023. This directive aims to modernize the EU’s legislative framework on anti-corruption to address a broader range of corruption offenses, including misappropriation, trading in influence, abuse of functions, and illicit enrichment. The directive also seeks to standardize criminal sanctions across Member States and enhance investigative tools to fight corruption. Until the formal adoption of the new directive, the main anti-corruption legislation in the EU includes the 1997 Convention on fighting corruption involving EU officials and the 2003 Council Framework Decision on combating corruption in the private sector.
Trends to Watch in 2024
In 2024, the anti-corruption and anti-bribery landscape is characterized by several emerging trends that are reshaping how businesses in the UK, EU, and US approach compliance. Understanding these trends is crucial for organizations to develop effective strategies and remain compliant.
Global Regulatory Alignment
The trend towards global regulatory alignment in anti-corruption is expected to continue. This alignment leads to more streamlined but stringent compliance requirements across different jurisdictions. As PwC notes, anti-corruption enforcement is set to expand and evolve globally, unaffected by changing political landscapes or the rise of populism. This trend points towards a more unified global approach to tackling corruption.
Cross-border Enforcement Collaboration
The US, under the Biden Administration, has emphasized a coordinated international approach to anti-bribery and corruption (ABC), indicating a trend towards enhanced cross-border enforcement collaboration. This includes shoring up gaps in the financial and regulatory system, strengthening enforcement mechanisms, and bolstering international ABC frameworks. Enhanced anti-money laundering regulations and robust enforcement are part of this strategy, signaling more stringent requirements for businesses. The strategy also recognizes the need to protect a broader range of actors, including journalists and activists, aligning with international trends like the EU Whistleblower Directive.
Increasing Role of Technology
Artificial Intelligence (AI) and automation are playing a more significant role in compliance. AI and cloud compliance tools are increasingly used to remove human error, automate tasks, and improve efficiency and effectiveness in compliance processes. Compliance-specific generative AI software can analyze complex regulatory documents, identify policy gaps, provide instant answers to compliance questions, and track requests and reports for audit trails. This technology trend is crucial for compliance professionals to reduce manual burdens and improve efficiency and agility in risk prevention.
Elevated Scrutiny in M&A Activities
In mergers and acquisitions, there is a heightened focus on anti-corruption due diligence. The DOJ and SEC have defined their expectations around anti-corruption due diligence for acquiring companies both pre- and post-acquisition. Comprehensive due diligence is critical, and where misconduct is uncovered and disclosed, companies may be afforded certain benefits, including the possibility of declination with disgorgement of ill-gotten gains. An effective compliance program must include both pre-close due diligence and post-close acquisition risk assessment and integration activities.
Focus on Supply Chain Transparency
Supply chain transparency is increasingly becoming a focal point for potential corruption risks. Businesses need to ensure transparency and compliance throughout their supply chains, partly driven by public demand and regulatory pressure for higher levels of openness. Generative AI is revolutionizing supply chain management by processing large data sets and analyzing complex variables. This AI can refine and adapt its analysis over time, enhancing various aspects of supply chain operations such as procurement, regulatory compliance, and manufacturing workflows. By 2024, it’s expected that half of supply chain organizations will invest in AI and advanced analytics capabilities.
Recent Notable Anti-Corruption and Anti-Bribery Cases in Business
Recent notable cases related to anti-corruption and anti-bribery in businesses include:
- The DOJ and SEC announced two significant settlements under the Foreign Corrupt Practices Act. One settlement involved a payment of $160 million (coordinated with Brazil), and the other was for $460 million (coordinated with South Africa). These were part of eight FCPA corporate enforcement actions in 2022, including a $1.1 billion global agreement involving Glencore with authorities in the United States, United Kingdom, and Brazil.
- The DOJ entered into deferred prosecution agreements with three companies to resolve FCPA charges. These included GOL Linhas Aéreas Inteligentes S.A. agreeing to pay over $41 million, ABB paying over $315 million, and Honeywell UOP resolving for over $160 million. The SEC announced parallel FCPA settlements with these companies and Oracle.
- The French aerospace company Safran S.A. received a formal declination from the DOJ based on voluntary self-disclosure, cooperation, remediation, and disgorgement of $17.9 million in profits related to bribes in China. Additionally, Swedish telecom company Ericsson agreed to a one-year extension of a three-year compliance monitorship for FCPA charges related to bribery in multiple countries.
- U.S. Senator Robert Menendez, his wife, and three businessmen were charged with bribery offenses related to a scheme where Senator Menendez allegedly used his official position to benefit the government of Egypt in exchange for various forms of compensation.
Clear Channel Outdoor Holdings agreed to pay over $26 million to resolve allegations by the SEC that it bribed Chinese officials to obtain advertising contracts, violating the Foreign Corrupt Practices Act (FCPA).
Key Strategies for Businesses in 2024
To effectively manage anti-bribery and anti-corruption risks in 2024, businesses should adopt comprehensive strategies, including the implementation of robust ABAC programs. These strategies are informed by current best practices and emerging trends in the compliance and risk management landscape.
- Culture of Compliance
Businesses must foster a culture where ethical conduct is paramount. This involves not only establishing clear anti-corruption policies but also ensuring they are ingrained in every aspect of the organization. This includes knowing the definitions and scope of issues addressed by laws like the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. It’s crucial to avoid practices like making facilitation payments, which, although allowed under the FCPA, are prohibited in most other laws
- Enhanced Due Diligence
With the US DOJ offering protections for companies that disclose and remediate misconduct in acquisitions, due diligence becomes critical. This is equally important in the UK and EU, where the regulatory focus is on preventing corruption.
- Continuous Risk Assessment and Adaptation
As legal standards evolve, so should compliance measures. Regularly updating risk assessments and compliance protocols is essential to stay ahead of potential legal and operational risks. This includes using integrated risk assessment questionnaires and monitoring third-party performance to ensure they align with the company’s standards.
- Effective Implementation and Monitoring
Define clear anti-corruption goals and policies, and ensure their implementation is monitored and audited for effectiveness. Keeping anti-bribery programs updated is vital. This involves regular auditing and ensuring that the programs are more than just “paper programs.” The costs of investigating non-compliance allegations can be greater than compliance costs or even fines and penalties.
- Stakeholder Engagement and Transparency
Keeping stakeholders informed about anti-corruption efforts is vital for maintaining trust and transparency, especially in markets sensitive to corporate governance like the UK and EU.
- Leveraging Technology
Utilize advanced technologies such as AI and NLP in monitoring compliance and due diligence processes. AI and machine learning technologies can streamline compliance by automating manual tasks, reducing human error, and analyzing complex regulatory documents efficiently. This can be particularly useful in handling the complexities of multi-jurisdictional regulations.
- Obtain ISO Certifications
Obtaining ISO certifications can be a strategic approach for businesses to strengthen their anti-bribery and anti-corruption (ABAC) efforts. The ISO 37001 standard, in particular, provides a framework for establishing, implementing, maintaining, and improving an anti-bribery management system. This certification helps organizations:
- Demonstrate Commitment: Achieving ISO certification shows a commitment to ethical practices and compliance with international anti-bribery norms.
- Enhance Credibility: It enhances the credibility of the organization with stakeholders, including investors, customers, and partners.
- Improve Internal Controls: ISO 37001 provides guidelines for setting up comprehensive internal controls that help prevent, detect, and address bribery.
- Global Compliance: As it’s internationally recognized, this certification can assist businesses in aligning with global anti-bribery and anti-corruption laws.
- Risk Management: It aids in identifying and managing bribery risks in organizational processes.
ABAC™ – Your Partner in Excellence in 2024 and Beyond
ABAC™ offers a comprehensive range of ISO certifications and training programs that are instrumental in fostering an ethical business culture and ensuring compliance with international standards. These programs include:
- ISO 37301 Compliance Management System: This standard guides organizations in establishing, developing, implementing, evaluating, maintaining, and improving an effective compliance management system.
- ISO 37002 Whistleblowing Management System: This standard provides guidelines for establishing an effective whistleblowing management system, crucial for internal corruption detection and prevention.
- ISO 31000 Risk Management: It offers principles, frameworks, and processes for managing risk, applicable to all types of organizations and essential for comprehensive risk management strategies.
- ISO 37001 Anti-Bribery Management Systems (ABMS): This standard helps organizations implement or enhance their anti-bribery management systems, aligning with practices in the U.S. Foreign Corrupt Practices Act, OECD guidelines, and the UK Bribery Act. It covers various aspects of bribery prevention, including leadership, risk assessment, due diligence, financial controls, and audit procedures.
- ISO 37000 Governance of Organisations: This new standard provides tools for effective organizational governance, promoting ethical and responsible behavior in achieving business and financial goals.
ABAC™’s certifications and training are designed to meet the specific requirements of different industries and organization sizes. The benefits of these ISO standards include increased market share, cost savings, improved customer satisfaction, enhanced product quality, and better business efficiency. They also enable organizations to access new markets and improve their overall risk management processes, particularly in third-party affiliations.
Join us at ABAC™ and let’s build a future where business integrity is the norm, not the exception! Let’s transform your practices in 2024 and beyond!
