The Department of Justice and the SEC know they can push companies to expand and improve their anti-corruption compliance programs. They are well aware that the requirements set forth in their settlement documents, as well as the critical “Hallmarks of an Effective Compliance Program” in the FCPA Guidance, have resulted in expansion and improvement of anti-corruption compliance efforts.
One specific area is the ever-increasing requirement that companies integrate agents and distributors into their compliance programs and conduct training of their agents and distributors. DOJ and the SEC know that this is an important area because the more resources dedicated to third-party management the greater the chance of compliance (or at least early detection and prevention).
In this respect, companies have to develop a set of integration procedures to govern their relationship with its third parties. A policy should be defined and then followed.
The integration process should include the following elements:
1. Communication of company expectations on ethics and compliance. A strong statement from senior leaders that bribes will not be tolerated should be communicated often. The message should be reinforced with statements that the company would rather lose business than gain contracts through bribery. You will be shocked how much of an impact such a statement will have on agents and distributors, especially those in high-risk countries.
2. Access to company code of ethics and policies and procedures. Agents and distributors need to have intranet access (or a viable alternative) to company ethics and compliance portals, policies and information made available to company employees. Such information should be in relevant foreign languages, updated on a regular basis, and communicated through regular ethics and compliance messages.
3. Annual certification requirements. Companies have to ensure that third parties and their relevant owners, managers and employees certify on at least an annual basis to compliance with all anti-corruption laws. An annual certification process reinforces the ethics and compliance message from the company and communicates an important principle – accountability.
4. Whistleblower policies and procedures. To maximize internal reporting functions, companies have to expand their whistleblower program to encourage third parties to report complaints by guaranteeing confidentiality and fair treatment of the third-party. There is no reason to exclude third parties from these programs since they will provide a company with important information that can be used to respond to an issue, and remedy the matter before it becomes more serious. Of course, a third-party can coordinate its own internal complaint system with the company depending on whether the agent or distributor wants to handle such issues initially and then report to the company, if necessary (or pursuant to a contractual requirement).
5. Robust in-person training programs. Companies have to extend their training programs to include agents and distributors. It is important to require participation in such training programs in order for the agent and distributor to have exposure to the company’s culture and specific compliance program elements.
Such training should not be conducted through on-line programs. Instead, a high-level compliance officer (or preferably a business officer accompanies by a compliance officer) should conduct the program to reinforce the importance of the compliance message. Relevant hypotheticals and scenarios should be designed around agent and distributor risks and interactions. It is important to recognize the value of personal contact, communications and company and third-party interactions. The most important part of the training session may be the questions asked by agents and distributors. In today’s aggressive enforcement environment, agents and distributors are concerns about risks and compliance. They want to avoid investigation and consequences to their business operations.