UNDERSTANDING AND COUNTERING BRIBERY RISK IN CHALLENGING MARKETS
Under global anti-bribery laws, including the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, a company can face significant liability if an intermediary, agent or other business partner pays a bribe to a foreign official on its behalf. In identifying those risks, it is best practice to conduct thorough research on the specific industry and markets the intermediary operates within.
Companies have a responsibility to implement adequate safeguards and controls against bribery, including performing appropriate due diligence to identify red flags that might signal a heightened likelihood of bribery. Enforcement agencies have consistently emphasised that these safeguards should be tailored to the particular risks a company faces, with higher-risk situations warranting greater attention to ensure compliance.
For example, the extractive, construction and defence sectors are known to carry elevated risk, but the prevalence and acceptance of bribery can vary widely from one jurisdiction to another. Acknowledging these factors is a crucial early step in performing a comprehensive risk assessment of a company’s activities and allocating compliance resources accordingly.
It is worth taking a closer look at country-specific risk. Already, this is a simplification: there is little reason to expect to encounter the same issues doing business in urban centres as in far-flung field operations, for example. It is common for companies to make compliance-related decisions and risk disclosures based on a country’s ranking on one or more global corruption indexes, such as our Bribery Risk Matrix. But one level of third-party due diligence is not suitable for all situations, and a more tailored risk response is often required. By understanding the factors behind a country’s risk score, a company can take concrete steps to adapt its strategy to the industry and market.
Jan-Mar 2020 Issue
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