What do you consider will be the most significant corruption-related challenges posed to businesses in your jurisdiction over the next 18 months?
Bribery & Corruption
Once enacted, the proposed new laws described in response to question 18 will increase companies' anti-bribery and corruption related compliance requirements and, over time, the prospects of regulatory enforcement. To address these challenges, businesses, in particular those currently implementing a one-size-fits-all or 'off the shelf' anti-bribery and corruption compliance programs, will need to identify and assess their risks to develop tailored 'adequate procedures' to comply with the new legislative framework.
If the proposed regulations with respect to corporate criminal liability and anti-corruption compliance obligations are passed in their current form, they will present challenges to businesses. In particular, businesses will have to adapt to new legal requirements and either revise or implement internal anti-corruption compliance mechanisms. Furthermore, businesses will face the obligation to conduct internal investigations in order to verify the irregularities reported by the whistle-blowers. Also, as the new laws will provide for a possibility of a settlement with the law enforcement authorities, businesses will have a bigger incentive to conduct internal investigations (see: answer to Question 18 for details).
As noted, the Criminal Justice (Corruption Offences) Bill 2017 proposes a new criminal offence under which a company shall be held liable for the corrupt actions committed for the benefit of the company by a director, manager, secretary, employee, agent or subsidiary. The Bill provides for a defence, where the body corporate took all reasonable steps and exercised all due diligence to avoid the commission of the offence. As a result, companies will need to ensure that they have robust anti-bribery and corruption policies and procedures in place.
The most significant corruption-related challenges posed to businesses in Brazil over the next 18 months are related to the development of a greater compliance culture, where prevention should have an important role.
In the current scenario, most Brazilian companies are reactive on compliance matters, and therefore only adopt any compliance measures once a breach has occurred and demands from the various stakeholders to adopt an effective compliance program are presented.
Mergers and acquisitions represent a key risk area. Buyer companies face real challenges in conducting pre-acquisition due diligence on a potential target which is sufficient to uncover corruption issues. Issues may not discovered until after execution of the deal, at which point the buyer has "bought an investigation". Similar risks exist in joint ventures.
A high proportion of bribery cases involve intermediaries such as consultants and agents. The recent Rolls-Royce case shows the issues which companies face in monitoring and policing action by intermediaries. Putting effective due diligence measures into place to manage this risk remains a significant challenge for UK businesses.
It is also difficult for businesses to keep pace with regulatory and legal developments. The UK has experienced a proliferation of changes in the last few years, but the challenge is not simply volume of law or the pace of change. Companies face a multitude of different business risks, some of which are still emerging (e.g. risks around technology). They face the challenge of applying evolving laws to the evolving business landscape.
Finally, businesses face the challenge of global investigations and increasing cooperation between jurisdictions – sharing information, and joint prosecutions. There are an increasing number of countries co-operating, beyond the UK and US. These include Canada, Australia, France, Russia, China, Brazil and other South American countries.
VAT has now come into place and the fines for failing to adhere to the law can be severe. This may increase people trying to get out of the fines by any means necessary.
Another substantial challenge are the sanctions placed on Iran by the EU, UN and USA due to their terrorist activity. The UAE supports the sanctions implemented by the parties. People have been trying all manners of ways to bypass the sanctions such as the recent case in 2013 where people were using currency exchange houses to funnel money of third parties into Iran. This has not changed as very recently in May 2018, an Iranian currency exchange house was sanctioned by the USA (and supported by the UAE) where it is alleged that the house has been used to funnel hundreds of millions of dollars to the Iranian Revolutionary Guard. It is clear that there will be challenges in ensuring that the sanctions against all nations that have them are enforced are upheld and that there are no members of the public, including companies, that try to bypass these sanctions and deal with the sanctioned countries or entities within them.
Whilst Singapore is a beacon in terms of the anti-corruption landscape in ASEAN, the corruption levels across the remainder of the region remain patchy – with neighbouring jurisdictions ranking such as Malaysia, Indonesia and Thailand ranking 62nd, 96th and 107th (out of 180) respectively in the most recent CPI Index.
As discussed elsewhere in this article, many multinationals have their regional headquarters in Singapore. These headquarters are managing operations in other parts of Southeast Asia. This can present a significant risk for corporates, who may see incidents of cross-border bribery spill over into their Singapore management operations – particularly where these actively oversee "on the ground" business conducted in other regional jurisdictions with a higher bribery risk.
The trend of greater enforcement focus being placed on corporates (in addition to the individuals involved) is one that is being seen across a number of jurisdictions in the region. It is therefore more important than ever that multinationals operating in South-East Asia ensure they have robust and effective anti-bribery systems in place to mitigate this risk – both in terms of preventing bribery and managing eventual enforcement risk.
The next 18 months will be the most critical period, during which the newly published legislations such as the Law of Supervision and the Anti-Unfair Competition Law will be implemented, and the restructuring of the government departments will be ongoing. Companies need to take a relatively conservative approach to the uncertainties that are not yet clarified by the laws, as well as relevant authorities and the interactions with the relevant authorities in corruption related investigations and matters. Considering that employee’ corruptive misconduct could lead to the criminal liabilities to both the individual and the entity, it is necessary for companies to plan ahead in compliance enhancement to prove their conscientiousness and their continuous efforts in duty execution.
Another delicate issue for companies to consider is with regards to personal information protection during any internal investigation, since the collection and handling of personal information will be subject to the detailed requirements and principles regulated in the Network Security Law, the Criminal Law, and the corresponding regulations and official interpretations.
The appointment of the head of the Specialized Anti-Corruption Prosecutor Office, which implies the materialization of the SNA and the presidential election to take place on July 1st, 2018, will be critical to determine the challenges for businesses in Mexico, corruption and legal certainty-wise. We consider that this transitional period, same that creates an uncertainty atmosphere, represents a challenge for companies looking to anticipate to the economic, social and legal developments to take place in Mexico in the next months. Dealing with a corrupt government and potential lack of successful implementation of anti-corruption regulations, result in a burdensome scenario for companies willing to act with strict observance of laws. Also, although Mexico’s FDI rates seem to be stable, there is no doubt that corrupt practices in the country are a deterrent for foreign investors, affecting the free trade, commercial environment and economic growth of the country.
Businesses will need to promote further their compliance programs and co-operate in adopting common procedures for combating corruption. Effective compliance programs and effective internal procedures will become increasingly important given that corporate liability (as set out above) is stipulated by numerous legal provisions and the consequences may be complex. Sanctions may not only affect the financial status of a company (by imposed fines) but also its regular business (through suspension of activities or other restrictive measures).
In the recent past, the enforcement agencies have been extremely proactive in monitoring compliance under the anti-bribery laws in India. Even the courts in India (especially the Supreme Court of India) have been adopting a rather stringent approach so far as the quantum of penalties for companies / corporations is concerned. The Courts have not shied away from acting against the directors / senior officials of a company once it is established that the said officials were responsible for the crime in addition to imposing a fine on the company per se. Accordingly, corporate liabilities and the approach of the courts towards the same is steadily gaining importance in the spheres of social concerns such as consumer protection, environment law, health and safety norms as well as in the areas of countering corruption and exploitation. The same trend is expected to continue which may lead to rapid changes in the anti corruption landscape in India. However, currently Indian laws do not provide any guidance on compliance programmes for businesses and accordingly most business houses must develop a robust monitoring and reporting mechanism to identify and mitigate risks.
The most significant challenge will probably be changing the status quo. For a long time the organisations have operated in a certain fashion. Although not all required changes are equally important, the need for change is still significant.
We believe that the biggest challenges for companies operating in Portugal are, in the near future, the implementation of adequate compliance programs and policies, in order to comply with an increasingly demanding regulation, not only in relation to anti-bribery and corruption, but also to anti-money laundering.
We do not foresee any significant corruption-related challenges posed to business other than those already outlined above.
The implementation of the EU Directive 2016/943 will be very important. It will also be interesting to see how the courts will apply the newly introduced sections of the Criminal Code regarding bribery related to sports (sections 265c and 265d) and the public health care sector (sections 299a and 299b). It will also be challenging to raise even more awareness in business transactions.
The above-mentioned legislation on criminal liability of corporation is quite effective, but still not binding: that means that even a very big company might decide not to adopt and implement a compliance program. The non-adoption and implementation of a compliance program by a company is likely to mean, on the one hand, that the people who work in the said company might not be well aware in some cases of the nuances between an illicit conduct and a licit one, and, on the other hand, that the said company has not in place procedures and policies regulating sensitive areas of risk (e.g. a policy regulating gifts and sponsoring). On top of that, as already pointed out above, we think that a thorough rethinking of the criminal law system (which might also imply a significant reform of the Criminal Code and the Criminal Procedure Code) is really called for, and that in the end the enforcement – also as regards bribery and corruption crimes – will be much more effective and both the Authorities, the companies and the private persons will benefit from that.
We believe that the fight against corruption that has been driven by the Chinese and the Macao authorities is very positive for businesses in Macao, and therefore we believe that the forthcoming years have more opportunities for companies and individual entrepreneurs operating in Macau than challenges, in what comes to corruption-related matters.
HRA: Nowadays, businesses are quite accustomed to corruption in Mozambique and have created several ways to elope from such scenarios. The biggest challenges will be establishing effective compliance programs and enforcement to ensure proper anti-corruption measures.
There seem no to be specific issues which businesses should pay significant attention to with regard to bribery and corruption. Relevant authorities tend to enforce bribery regulations in accordance with specific facts in each case.
The implementation of the obligations arising from the Sapin II Act will generate significant cost and operational difficulties.
The compliance of companies with their new obligations, and those that continue to be added on such as ‘the duty of vigilance’, represent a great challenge.
Developing a ‘risk culture’ in such an emerging system of rules is also quite difficult. It will take a long time for French companies to train managers and stakeholders on compliance issues. Particularly, a large number of French companies are currently building or fine tooling their risk maps. In practice, risk mapping involves:
- identifying all internal processes, as well as external processes in which the organisation’s representatives are involved, and describing these processes in detail ,
- defining individual roles and responsibilities within each of these processes for public officials, employees of public-law or private-law entities, or elected representatives ,
- determining appropriate decision-making and internal control procedures for high-risk operations.
The key challenge for businesses will consist in continuing implementing and further strengthening their compliance organization. This may be a particular challenge in an environment of increasing regulation and growing economic uncertainty that requires management attention in many different areas. At the same time, the increasing level of prosecution of bribery in Switzerland and abroad leads to higher legal risks in the case of compliance failures. Given the considerable business risks that a conviction for bribery offences can entail, businesses are well advised not to relax their efforts to effectively combat bribery and corruption risks within their organizations.
The most significant challenge for businesses that have uncovered potential violations is weighing whether or not to seek the benefits set out in the DOJ’s recently announced FCPA Corporate Enforcement Policy. As discussed in Questions 16 and 18, the policy offers many potential advantages to businesses that provide full cooperation in that the DOJ will presume that declination is appropriate unless aggravating circumstances are present.