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Q&A with Peter Dent and Gina Campbell

Canadian companies face new risks in the fight against bribery and corruption

There is increasing pressure on corporations to keep up with legislation to prevent bribery and corruption – legislation that is becoming more defined, and with greater penalties for non-compliance. The Financial advisory Deloitte Forensic team has prepared a POV, Global bribery and corruption and the impact on Canadian businesses, addressing the details of the UK Bribery Act and its impact on Canadian businesses with any kind of connection to the UK.

Here, Peter Dent, Leader, Deloitte Forensic and Gina Campbell, Partner, answer questions about the new UK legislation, as well as the recent indictment of Canadian companies under the Corruption of Foreign Public Officials Act (CFPOA).

Q: As of right now, only two indictments and convictions have occurred in Canada under the Corruption of Foreign Public Officials Act. Does this mean Canadian companies are at a lower risk for anti-bribery penalties at home and abroad?

Peter Dent: Not at all. In many ways, the risk has never been greater. There is increased pressure globally for the Canadian government to take action. The anti-corruption teams of the RCMP have indicated that there are 22 active investigations within Canada. In addition, Canadian companies with a nexus to either the U.S, or UK may also have to potentially deal with foreign government regulators.

Gina Campbell: No. Depending on the type and location of operations, Canadian companies can be subject to anticorruption legislation in other jurisdictions such as the U.S., UK and throughout Europe. As Peter mentioned, the Canadian authorities have numerous open investigations under Canada’s anticorruption legislation. Canadian companies looking for investors abroad, seeking transactions with companies that are subject to even stricter anticorruption legislation (e.g. U.S. companies) or conducting business outside of Canada should consider how they are addressing or will address the corruption risks presented by Canada and other countries’ anticorruption legislation.

Q: Beyond the monetary penalties associated with non-compliance of the UK Bribery Act, what are the other risks involved?

Peter Dent: Reputation, reputation, reputation. A company’s ability to raise capital and debt, to engage in mergers and acquisitions, to contract with the Canadian government or foreign governments, as well as with multi-lateral development organizations such as the UN or World Bank could all be impacted. Added to this are the costs associated with developing a remediation program subsequent to an “event.” These could be substantial and might include the appointment of a monitor to ensure that a company is appropriately remediating its compliance framework.

Gina Campbell: In addition to the reputational damage that Peter describes, regular business activities will be impacted. Non-compliance with anti-corruption legislation often results in the need to conduct an internal investigation as well as to cooperate in regulatory or criminal investigations. Conducting and cooperating in these types of investigations distracts employees, management and the Board away from day-to-day activities of the business. The time and resources required to conduct and cooperate in these types of investigations is not insignificant.

Q: The UK government has outlined six principles for organizations to establish their own bribery prevention programs. What steps can companies take to help prevent bribery and corruption from occurring in offices abroad?

Peter Dent: The starting point would be a gap analysis. This entails the assessment of the current state of the company’s anti-corruption / anti-fraud compliance framework. Based on our experience of how corruption manifests itself within specific industries, we take a risk-based approach to identifying those aspects of a company’s operations that require increased attention and controls. Once the areas of increased risk are identified, a more detailed review of the current control environment is undertaken, which may include an analytical review of transactions for areas of non-compliance. Any weaknesses are then remediated through a remediate process.

Gina Campbell: The only defense to a charge under the Bribery Act is to demonstrate that adequate procedures were in place at the time of the offense. Therefore the six principles are important as they provide guidance on adequate procedures. Conducting an anticorruption risk assessment is one of the six principles and is also one of the gaps that many companies have in their overall anticorruption program. The anticorruption risk assessment will drive the other elements of an anticorruption program, such as which employees should receive tailored anticorruption training and which transactional types of controls should be implemented.

Q: What is an example of an offense under the UK Bribery Act that may surprise Canadian companies? Why is “the Corporate Offense” important to understand?

Peter Dent: The use of facilitation payments in order to get something done more quickly. Under the CFPOA, a payment to a foreign government official to have them perform their duties more quickly can be acceptable. For example, making a payment to a customs officer so that they quickly clear the personal effects of a company employee in a foreign jurisdiction. In essence, what might have taken weeks to clear, might happen in a matter of days. Of course, the amount or frequency of such a payment does bear on the applicability of this exception under the CFPOA. Under the UK Bribery Act, all such payments are contrary to the legislation.

Gina Campbell: The Corporate Offense is important as it extends the responsibility of the corporation to the third parties that act on behalf of the company. While this is similar to what we have seen in the enforcement actions in the U.S., the UK Bribery Act clearly refers to the actions of associated persons. Therefore, the anticorruption program at a company also needs to address those risks presented by third parties through mechanisms such as third party due diligence.