A Global View of Ethics, Compliance and Corporate Culture

Thomas Fox

Next week in a sponsored podcast series, I will visit with Vincent DiCianni, founder and President of Affiliated Monitors, Inc. (AMI) and Eric Feldman, Senior Vice President of AMI. We consider the global view of ethics, compliance and corporate culture of non-US companies, outside the US; in both their home countries and in other countries where they operate. In today’s post I preview the series and hope that you will check it out as I know you will find it useful.

DiCianni noted the single biggest difference for non-US companies and countries is the focus on legal compliance as opposed the US focus on values-based ethics and compliance programs. This is partly attributable to the maturity of an intersection of several conditions. The first is the nascence of national anti-compliance legislation. Many countries have only passed such laws within the past five years. Next is the relative youth of many anti-corruption enforcement agencies and prosecutorial services. Finally, many countries have Code based rather than Common Law based legal systems. Such legal systems tend to favor more legalistic compliance as opposed to a more general formula such as the Ten Hallmarks of an Effective Compliance Program that was laid out in 2012 FCPA Guidance.

Obviously, some countries are more advanced along this continuum. The United Kingdom had its Bribery Act come into force in 2010. Brazil had the Clean Companies Act come into force the following year. Prosecutors in both of these countries are farther along in their enforcement actions and have issued guidance on the types of best practices compliance programs that companies should put in place. However other countries such as Germany, Spain and France are less further along in both their legal frameworks and their corporate compliance programs.

DiCianni made clear that these countries are all moving forward along the compliance continuum much in the way the US did, beginning 10-15 years ago. In the mid-00’s compliance was largely legal based written by lawyers for lawyers. However this decade we have seen a move to a more values-based system of ethics and compliance, which has been reflected in corporate compliance programs.

One thing DiCianni has observed, literally across the globe, is the desire of compliance practitioners to move the ball forward. This comes in the form of enthusiasm for the compliance profession but also an understanding of the true costs of bribery and corruption in everyday society. This also means there is a great thirst for compliance learning and instruction on how to implement best practices compliance programs.

Many countries have other focuses such as corporate social responsibility (CSR) requirements for their corporations which impact the compliance function. DiCianni believes that a CSR function can lead to a more ethical culture within an organization. He noted that many non-US companies have taken the lead on modern slavery, conflict minerals and other issues. He believes this leadership will strengthen a values-based culture within a company and it is something that US companies should more strongly consider taking leadership positions on.

One of the interesting contrasts by non-US companies by DiCianni was what he termed, the failure to enforce their own internal codes. This is true whether it be in a Code of Conduct or policies and procedures. This all ties back into a consistent theme from AMI, which is institutional fairness and a values-based culture. DiCianni stated, “sometimes it’s the most important aspect of a compliance program, what do you do when there’s a violation internally. Do you do anything to enforce your policy?” The problem he noted is that “if you don’t then it’s sort of not worth the paper it’s written on. If you’re going to just have a paper program that doesn’t have any real bite, that’s a concern that I’ve seen globally for those companies that have compliance programs.” If you do not enforce your own compliance requirement, for whatever reason, it creates a very negative impact on your employees.

We concluded by considering some of the enforcement regimes and mechanisms outside the US. While US prosecutors and regulators have certainly taken the lead in the international enforcement of anti-corruption laws, countrie s such as the UK and Brazil are quickly taking up their roles as well. In the UK, we have seen the first uses of Deferred Prosecution Agreements (DPAs) by the Serious Fraud Office (SFO). The Brazilian prosecutors seem to be moving in that direction, if in a de facto manner.

Feldman noted that the US has led most of the enforcement efforts because of the long-standing role of the Foreign Corrupt Practices Act (FCPA) as one of the earliest anti-corruption laws. US enforcement has also been the most aggressive across the globe. However over the past five years or so the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have worked to train a cadre of prosecutors in enforcement techniques and tactics to fight the international scourge of bribery and corruption.

This cross-training steered by US prosecutors led to several immediate and longer-term impacts. The most obvious and initial impact was the cooperation by prosecutors and regulators, literally across the globe. One need only review each DOJ or SEC Press Release announcing a FCPA prosecution and the non-US agencies who provided assistance are listed near the bottom. The cooperation began during the Obama Administration but has continued under the Trump Administration and Sessions-led DOJ. Feldman noted that he has seen more cooperation in the investigations and international enforcement front and a sharing of the penalties in several cases. This began as the one Pie model where there would be ‘one pie’ of penalties for an organization. The name has evolved into the anti-piling policy.

The aggressiveness of US prosecutions led to the US penalizing many non-US based companies and keeping the vast lion’s share of the financial penalties. Simply look at the current Top Ten in all time FCPA enforcement cases and you will see that only two of the top ten are US based companies. In addition to the cross training listed above, many countries wanted to get in on the financial penalty action. This has led to many large anti-corruption fines and penalties being shared by multiple countries since 2016. This includes Odebrecht/Braskem, with $2.6bn shared between the US, Switzerland and Brazil; Petrobras with $1.78bn shared between the US and Brazil; Telia Company, with $965MM shared by the US and Sweden; Alstom, with $814MM shared between the US and Switzerland; Rolls-Royce, with $809MM shared between the UK, US and Brazil; VimpelCom, with $795MM shared between the US and The Netherlands; and SocGen, with $585MM shared between the US and France.

Feldman pointed to the specific example of Singapore, where over the last couple of years have had the instance of Keppel Offshore being prosecuted by DOJ for corruption under the FCPA. This was very embarrassing to the government of Singapore because while Singapore always had corruption laws on the books it did not have a big method of enforcing them. Then two years ago, Singapore passed legislation requiring DPAs as an alternative mechanism for settling those types of international corruption cases. Now DPAs are a part of the landscape for anti-corruption prosecutions in Singapore. Just across the straits in Malaysia, the country passed tougher anti-corruption laws as well. All of this means from Feldman’s perspective that both investigations and enforcement are up in a much wider variety of countries combatting bribery and corruption.

As to where all of this enforcement may be heading, Feldman noted the DOJ model of enforcement has been fairly consistent. The basic level of enforcement and theory that the US will continue going forward to enforce the FCPA is fairly high. Feldman believes that the cooperation which began in the earlier part of the decade will continue, particularly between DOJ and the SFO, when it comes to the UK Bribery Act. This may be even more so with the new Director of the SFO, who is a former DOJ prosecutor and has an “American understanding and acceptance of enforcement of these laws, as an accepted way of doing business. I think is going to move the SFO to even more aggressive enforcement going down the road.”

The bottom line is that even if the US somehow or for some reason dialed back its prosecutions under the FCPA, there are multiple international enforcement agencies who stand ready to pick up the slack and reap the benefits in terms of fines and penalties. This also means that companies operating in these countries should have robust compliance to not only detect and prevent legal violations but provide a solid defense if something goes askance.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thomas Fox, Compliance Evangelist | Attorney Advertising

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Thomas Fox

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