“How to Bribe” by Transparency International. A Review & Recommendation from the fr
I recently had an opportunity to read Transparency International’s (UK) paper “How to Bribe, A Typology of Bribe-Paying and How to Stop It,” (link here) written with the support of Pinset Masons and www.TheBriberyact.com (January, 2014). The authors state that the purpose of the publication is to “illustrate how bribes are paid in practice, based on legal cases and realistic experiences.” They go on to describe why they took the time and effort to compile 46 pages of bribery scenarios: “to help individuals and companies anticipate, recognize, avoid and resist bribery.” The authors, based on my experience, accomplish both goals. First, in the description of “how bribes are paid,” they use both broad and specific examples to surface a wide and relevant variety of bribery scenarios. Second, for each group of bribery activity they have a concluding segment which includes guidance on how to “look out for red flags and fact patterns” designed to assist the reader in the early detection of bribery. In my judgment, the authors’ call-to-action is succinctly and accurately identified in their own reference to this work as “a source book for training, avoidance and for designing adequate procedures to prevent bribery.”
I would like to call attention to a number of interesting and relevant chapters, and then make a recommendation as to exactly which groups I think would benefit from this exhaustive and impressive paper. In one of the early chapters, I focused on a recommendation under “Know How to Deal with a Bribe,” which advocated that a company “ensure that any staff who withdraw from a business opportunity because they refuse to pay a bribe know they will have the support of their line managers and senior managers.” I have referenced this corporate maxim in my repeated discussion about how it only takes one manager or senior executive in a company to be out of message alignment, in order to distort, or worst case, discard, the entire anti-bribery culture of an organization. Line employees need to know that they work in a culture which rewards compliant behavior, financially and otherwise, regardless of the short-term financial consequences of “walking away” from suspect transactions.
In Section 2.1 “Bribery Through Associates: Middlemen,” the authors call attention to five variations, of which I view the second presents as presenting a great challenge to individuals and organizations which are trying to vet and screen their third parties (e.g. agents). This category is identified as “intermediaries providing both legitimate business services and a bribery service.” In this case, a third party might have good references, solid credentials, and a record of success based on legitimate services, while masking the bribery component under the smoke screen of financial achievement. From my perspective, this is a very challenging and relevant real-world issue. An agent like this can be attractive to a company or line sales person looking for an in-country business partner, and to complicate matters, the component of the intermediaries “bribery service” in some regions, might go from one extreme to another depending on regime change. Thus, the snapshot of an investigation or vetting process might find that entity as “legitimate” at one point in time, and then after a regime change, where the agent now has “connections in place,” the opposite might be true. I would be interested to hear from compliance and investigatory professionals as to how they account for this type of scenario.
Speaking of third parties, in the same chapter under “guidance,” the authors talk about the importance of communicating “to all agents and intermediaries the company’s anti-corruption standards as well as international regulations and ensure that they are contractually obliged to abide by these standards.” I think that this is invaluable, but often ignored advice. The communication of anti-bribery ethics and programs, even at the introductory state of a third party relationship, makes the message loud and clear: either you are on “our program,” or find another partner. In my opinion, this is critical preventative messaging which can help companies avoid great financial and reputational damage later on in the relationship.
These are but a few examples, where I call attention to the value of the work in both detailing the diversity of bribery activities, while offering valuable recommendations to help with early detection. So, when I had completed reading the paper, I asked who would benefit from this work? I came up with two distinct, yet dramatically different groups:
1. Small to Medium sized businesses looking to grow overseas. In a recent K&L Gates paper entitled “DOJ and SEC Representatives Tackle Pressing Anti-Corruption Issues in 2014,” (link here) there was a discussion of how the DOJ and SEC recognized that “small companies may have little money to build state-of-the-art compliance programs, but that these companies still need to find ways to manage their corruption risk profiles.” For such a company, new to the international marketplace, this work is a great starting point for understanding the potential scenarios, risks, and possible methods of detection which can operate in overseas sales. While such a company might still need to bring in external compliance support, or to increase their internal “bench strength” to shore up an anti-bribery program, it all starts with an understanding of “what’s out there.” This work, which describes real-world and easy to understand examples, all of which can shape a corrupt transaction, is of significant value to a novice individual or corporation looking to expand internationally.
2. On the opposite end of the corporate spectrum, I would recommend this as “required reading” to any Board of Directors who sit with companies that have to manage international risk. I specifically recommend it to the Board Members who do not sit on the audit, governance or risk committees of the Board. Why? It will give these Board members insights and possible challenges to raise to Board members who do sit on those committees, spurring “what about this”, “and how do we deal with that” type of questioning – of which there is a 46 page menu from which to choose! Again, for a Board member with limited international exposure and experience, this paper will provide information and examples to draw from in order to challenge those charged with governance, and to engage the full board and management on a critical discussion, as to how the company is coping with bribery and corruption risk in its compliance programs.
I hope that this review provides some insight, based on my own perspective, as to how this work can be best utilized in the field. While I have linked the paper in my introduction, TI has graciously requested a 25GBP contribution in order to support future writings and I was more than happy to comply.