Corruption and Compliance In Russia: A Long Term View
The following is an interview conducted via e-mail with Anatoly Yakorev, (LinkedIn Profile here), Director at the Center for Business Ethics & Compliance, Moscow, Russia.
Q: Hello Anatoly, and thank you for joining me in the second of a series designed to bring in international views for the benefit of those on the front lines of international business. So, first, how about you tell us about yourself and background.
Thank you Richard for inviting me to engage with your community. My observations are based on more than a two decades of corporate experience with a group of large US companies that operate in Russia. I joined Amoco Corporation, originally Standard Oil Company (Indiana), in 1991 when the company came to Russia lured by potential prospects. Initially, I was an interpreter for a company executive, which allowed me to participate in discussions related to ways to engage with local partners. That period in our history we call ‘the roaring 90s’, so against the backdrop of post-Soviet pains and transformation, foreign companies tried to enter the market at great risk for themselves (corruption was not the greatest risk at that time). As I developed my personal network with other companies and their managers, I took interest in various trends in terms of how companies entered the Russian market, and tried to do business while mitigating their risks.
In 2009 I became Deputy Director for the Center for Business Ethics & Corporate Governance (CFBE) in Russia (link here), a non-commercial partnership, founded in 2000 by Mr. Matthew Murray who is now the Deputy Assistant Secretary of Commerce at the U.S. Department of Commerce. CFBE’s mission was to help build a market economy in Russia based on global legal principles, in close cooperation with leaders from the Russian government, business, and civil society. Our goal was to increase voluntary compliance with ethics, corporate governance and anti-corruption standards.
The highlight of my work with Mr. Murray was launching the first Russian Collective Action Project called the Russian Energy Compliance Alliance (RECA). Launched in 2010, it was regarded as a potential global model by the B20 during the G20 meeting chaired by Russia in 2013. I left CFBE in 2012, and shortly thereafter CBFE terminated its activities in Russia due to the ban on NGOs with external funding; however, CFBE’s sister organization in the US is still operational.
In 2013 I turned to research and academia and started the Center for Business Ethics & Compliance (CenBeCom) under the direction of the International University in Moscow www.cenbecom.org. It is here at CenBeCom, where I synthesized my ideas from business, grass roots activism and academia to produce practical initiatives and projects that would build from the existing anti-corruption legislation of the Russian government. CenBeCom has international leadership along with Russian colleagues who have supported my work for many years.
Q: What are you doing now, especially in the context of sanctions?
In addition to CenBeCom, I am also working with the Financial University under the Russian Government to promote Anti-Corruption (AC) compliance in Russian financial institutions and to help implement the Russian Ministry of Labor guidelines on AC compliance. My experience has led me to believe that during the sanctions period it is imperative to try to maintain the level of anti-corruption compliance attained so as to not to lose ground to new corrupt tendencies in the market. Hence, I have organized an event on October 27, 2014, which is on the Center’s home page www.cenbecom.org, and which will address and raise issues of ethical leadership to promote anti-corruption programs. Richard Alderman, former UK SFO Director kindly agreed to address the attendees, and we hope to produce a new practical form of cooperation between foreign and Russian businesses to promote new Russian anti-corruption legislation, initiatives, and to foster adherence to current national laws (i.e. Federal Law 273 etc.).
Q: In a general sense, what is the current state of corruption enforecement in Russia?
A: I would say that on some counts Russia has improved its record, including signing the OECD Anti-Bribery Convention and adopting Federal Law (273) to implement internal anti-corruption compliance procedures by companies. Yet this is far from being enough. If you look at how corruption matured and spread in some Latin American countries, devouring and corrupting judicial systems, I fear that Russia is precariously edging towards a regime with similar traits. However, I am more hopeful that despite such troubling trends, Russia is a country that will ultimately come around and avoid a negative spiral because in Russia, despite the current environment, the institutions of State are quite strong; hence, the reason why I feel optimistic about the future with respect to the adherence to (and enforcement of) anti-bribery laws and conventions.
Q: And how is this impacted by the issuance of sanctions?
A: Well, now the bad news. On the back of the US and EU sanctions, whose impact was worsened by Russia’s self-imposed food ban, it appears that the country is turning back the clock in terms of anti-corruption enforcement. New AC risks have materialized that feed on recent imbalances in the internal market due to these new economic realities. In this standoff with the West, Russia has a lot to lose, including those achievements in the area of AC. Thus, the current challenge is not about improving AC levels but rather about maintaining those standards and commitments that have already been achieved. Neglecting the gains made through internal laws and international conventions would just incur costs too high from a governance perspective. I don’t think that is where Russia is headed long term.
Q: What does this all mean for a multinational that might want to enter the Russian market, as well as for those entities that simply want to maintain current market-share?
A: This is the million Ruble question! I think Russia is destined to work with the West and Western companies just because you cannot throw away past decades of mutually beneficial cooperation. All this talk about leaning toward China is not serious. I think the political pressure on Russia, including sanctions, in the long run will help bring the level of political corruption down to create favorable conditions for democracy building and a commercial level playing field. Russia needs Western expertise and economic ties not only in oil & gas industry, but overall throughout the economy. Tackling corruption will then receive an impetus very much in line with global AC enforcement and outreach, but this is the long-term view.
Q: What about those individuals and groups who operate on the front line of business in Russia, what would you share with them?
A: I would say that they should keep their guard up because these days like never before any misstep could cost a great deal, especially with the introduction of new internal commercial players due to the sanctions regime. It is critical to implement and comply with the new AC Russian legislation, even if they are not being rigorously enforced, and be vocal about it. Engage in local AC initiatives like the Anti-corruption Charter of the Russian business. Companies need to try to show they are committed to keep their house clean, help their Russian partners, clients, distributors and suppliers to improve their AC compliance commitment. The most important guidance I would give now is to think about how they want to be viewed post-sanctions, and conduct themselves like that now.
Q: Are there any resources that you might want to suggest?
A: I think these days most MNC’s employ compliance specialists that along with their legal departments have access to all the relevant information in terms of laws and conventions. But business needs to do more, so much more. Initiatives like Collective Action are always most effective in elevating the issue of business compliance to the right level. I would also definitely recommend reviewing the Anti-corruption Charter.
As I shared, compliance leadership issue in now the hands of business, and multinationals need to use legitimate means to promote anti-corruption initiatives that in turn would impact not only the business environment, but make a difference for society as a whole. I know this might seem strange, as I am recommending that the private sector take the lead on anti-corruption in a rather non-aggressive AC enforcement environment.
Q: Well, thank you. Any other thoughts you might want to add?
A: My message to the business people and their senior management to seriously consider using Collective Action initiatives as providing greater protection against manifestations of corruption. Collective Action raises the “water level” for everyone in terms of promoting anti-corruption initiatives. Remember – Russia agreed and endorsed Collective Action as an initiative, plus the OECD, and G20. Russia is committed to anti-coruption, but right now, our leadership is distracted, but that should not be a reason for businesses to “lift” their compliance programs and initiatives in Russia. When the governement refocuses its energies with respect to anti-corruption programs, you are going to want to show an exemplary record during this period, even if on your own initaitive.
I would just add that the perspective from those like yourself who have come from business, and that have a personal story that people on the front line can relate to, adds great value to organizations and teams which confront with bribery and corruption. Lawyerly mantras are naturally appropriate, but do they resonate in the field? We need more AC ambassadors to go out there and make their messages heard because such experiences strike the right chords with international business leaders who are at the greatest risk. Thank you.