Foreign companies doing business in China, especially U.S. companies and U.S. listed companies are confronted by the formidable challenge of determining whether cross-border operations and transactions are untainted by corruption.
The stories are legendary - bribery, possession, money laundering and more. In some countries, these practices are business as usual. Which is all the more reason to take this issue seriously.
A new salesperson for a business unit in Shanghai greases the wheels to get a deal done. A production manager in Guangzhou bribes officials to get materials delivered on time. It’s an age-old practice with many names - and it’s a sure fire way to destroy the value and reputation of any company.
Some argue that the chances of getting caught are slim. That doesn’t matter, because the consequences of getting caught are enormous. Your company can be liable for punitive damages, your officers and directors face personal and criminal risk, governments can impose sanctions and your company can be prohibited from getting future contracts.
If your leadership behaves in accordance with ethical, legal and moral guidelines, that will go a long way toward instilling integrity throughout the organisation. Beyond that, be sure you have your fingers on the pulse of all potential risks around corrupt practices, especially related to M&A. Don’t cut corners on any of these capabilities:
The recent surge in prosecutions by the U.S. Department of Justice and enforcement actions by the Securities and Exchange Commission under the Foreign Corrupt Practice Act of 1977 (“FCPA”) has forced companies to carefully examine whether they have effective policies and procedures in place to manage FCPA related risks.
FCPA deals with bribery and accounting. Its bribery provisions apply to U.S. public and private companies, U.S. citizens, and U.S. and foreign companies registered with the SEC. Accounting provisions apply to U.S. and foreign companies registered with the SEC, as well as foreign subsidiaries and affiliates of issuers.
Many countries have attached more and more importance to foreign corruption prevention and enforced counterpart laws and regulations to the FCPA.