• Governance I Risk I Compliance Management

While the COVID-19 pandemic has caused supply chain disruptions and a host of other problems for businesses worldwide, companies should be aware that anti-bribery and anti-corruption compliance and enforcement is still in full effect. There is no indication that investigations or enforcement actions have slowed, and those organisations doing international business and fall under the purview of the Foreign Corrupt Practices Act (FCPA) or the UK Bribery Act, among other anti-corruption laws, should be vigilant. Now is not the time to relax due diligence and compliance efforts.

Internal controls and third-party due diligence are under a special microscope when it comes to U.S. Security and Exchange Commission (SEC) scrutiny. According to FCPA Blog, “… the SEC is on an ‘internal controls rampage’ involving the way issuers (public companies) establish and manage relationships with third parties, particularly distributors and resellers.” This is especially important right now when many companies have had their supply chains disrupted, and might be looking for urgent replacements. The desire to fulfill sales and keep product lines moving might tempt business leaders to cut corners. Doing so, however, might be a costly mistake.

“We can debate whether the FCPA’s third party provision creates liability for the reseller who occasionally purchases products for resale, but ultimately, that doesn’t matter. The internal controls provision on its face is subject to a strict liability standard. Read the provision, and you’ll see no mention of state of mind for civil violations. The determination of whether a company has sufficient internal controls is binary – either it does, or it does not – and the sole arbiter is the SEC” (FCPA blog, 2020).

Here are some steps every company should take right now to protect against bribery and corruption and the resultant risk of investigations, liability and enforcement.

1. Implement ISO 37001 Anti-Bribery Management Systems standard.

ISO 37001 provides a practical, measurable system that your organisation can implement to prevent and protect fraud; while keeping the system flexible and adaptable to fit any industry or jurisdiction. ABAC® Center of Excellence, powered by CRI Group, is an accredited provider of ISO 37001 ABMS. ABAC®’s experts provide experienced implementation of ISO 37001’s key elements, helping clients more effectively prevent bribery and corruption.

2. Conduct thorough risk assessments across your supply chain, including all suppliers, contractors and other third-party partners.

Gain an understanding of every step in your supply chain and all of your business markets. Complicated relationships and multiple layers of suppliers increase risk, so measures should be taken to simplify those links in the chain. Conduct risk-appropriate due diligence on distributors and resellers. Mitigating risks in your business starts with identifying them.

3. Examine discounts, commissions, rebates and other areas that are traditional “hot spots” for fraud.

Laws regarding “gratuities” are becoming ever more strict in jurisdictions around the world – what was seen as an acceptable gift a few years ago now is likely seen as an illegal gratuity, and your business should identify and eliminate any such liabilities.

4. Evaluate third parties in relations to their contracts and their scope of business with your organisation.

Does the third party meet the parameters of the contract in terms of resources and experience? How do they compare to comparable providers and competitors along those lines? Proper due diligence will uncover problems that may indicate a more thorough review is in order.

5. Check court and criminal records.

You wouldn’t hire someone to run your production line without conducting a thorough background check. So why not do the same for a third party distributor or supplier? Conduct due diligence checks to uncover any criminal record or reputation for bribery, corruption, fraud or similar crimes, as well as fines or penalties for same.

This is a difficult time for businesses as they deal with the global impacts of the COVID-19 pandemic. We know, however, that bribery and corruption don’t decrease in times of crises – in fact, fraud in general increases during times of opportunity. Investigators and regulators know this as well, and they will be aggressively enforcing anti-bribery anti-corruption laws now and in the future.

Fortunately, the ISO 37001 anti-bribery anti-corruption management standard gives organisations clear guidance on how to stay in compliance with laws like the FCPA and UK Bribery Act. Implementing ISO 37001 standards help demonstrate that your organisation has taken reasonable steps to prevent and detect bribery corruption, and comply with applicable laws. Now is the time to take action – let an accredited, experienced certification body like ABAC® CoE help your organisation implement ISO 37001 today.

About ABAC® Center of Excellence
ABAC® is an independent certification body powered by CRI Group. ABAC® Center of Excellence offers a complete suite of services and solutions designed to educate, equip & support the world’s leading business organisations with the latest best-in-practice risk & performance assessments, systems improvement & standards certification. ABAC® programs protect your organisation from damaging litigation & safeguard your business in the global marketplace by providing certification & training in internationally recognised ISO standards, such as ISO 37001 Anti-Bribery Management Systems, ISO 19600 Compliance Management Systems and ISO 31000 Risk Management Systems.

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