Looking at foreign markets?

Penalties for non-compliance to CFPOA can be severe. PHOTO: THINKSTOCK

There have been significant changes in the world of foreign corruption enforcement, which includes Canada’s Corruption of Foreign Public Officials Act (CFPOA), in effect since June 2013.

In addition to increasing the maximum penalty to 14 years in prison, CFPOA changes provide additional jurisdiction over Canadian companies and individuals, add a new offence related to creating false accounting records to conceal bribery, and phase out facilitation payments. Companies are slowly becoming aware of these changes, but they’re unsure what needs to be done to protect themselves in this new environment.

Canadian manufacturers looking to foreign markets for both sales and production face increased risks, and the consequences for non-compliance can be severe. They include fines, jail time, class-action lawsuits, crippling costs, and damage to reputations.
The US and UK governments published guidance to help companies navigate the laws, be aware of their responsibilities and understand what’s expected of them. Although no formal guidance has been provided in Canada, there’s a roadmap for companies operating overseas with the 2011 bribery conviction of Niko Resources Ltd., a Calgary-based oil and gas company focusing on India and Asia. Canadian courts assessed fines and penalties of $9.5 million, and three years of probation. The following high-level summary of the order provides a good starting point for manufacturers wishing to up their game.

Companies are required to have a rigorous anti-corruption compliance code. Standards and procedures need to detect and deter the violation of CFPOA and other applicable anti-corruption laws. At a minimum these should include: a clearly articulated and visible corporate policy against violations of the act, and other foreign law counterparts; strong, explicit and visible support of the policy from senior management; compliance standards and procedures to reduce violations; and a program that applies to all directors, officers employees and third parties acting on behalf of the company.

The Niko probation order also highlights several areas recognized as particularly high-risk, including gifts, hospitality, entertainment and expenses, customer travel, political contributions, charitable donations and sponsorships, facilitation payments, solicitation and extortion.

What steps should companies take? Assign responsibility to one or more senior corporate executives for the implementation and oversight of the anti-corruption program, with a direct line of control from the board of directors.

Develop the program as a risk assessment that addresses potential bribery issues. In particular, consider the following factors: the organization’s locations; interactions with government officials; industrial sectors of operation; involvement in joint venture agreements; the importance of licences and permits; the degree of government oversight; and inspection, volume and importance of goods as well as personnel that are cleared through customs and immigration. Experience has shown the use of third-party agents is also a key risk factor.

Have an effective system of financial and accounting procedures in place to identify suspicious activity. Include internal controls, accurate books, records and accounts to ensure they can’t be used for bribery, or concealing bribery.

But policies and procedures aren’t enough. Systems are needed to ensure details of the anti-corruption program are effectively communicated to directors, officers, employees, agents and business partners, and should include periodic training at all levels and annual certifications to verify compliance with the training requirements. This training should be focused on high-risk areas and ensure all staff have a general awareness and knowledge of the law, as well as their responsibilities. Individuals in key positions identified in the risk assessment will require more detailed knowledge of what to look for, how to behave, and what to do if problems arise.

The use of third-party agents and business partners warrants special mention, but ensure they’re properly informed of the company’s commitment to abide by anti-corruption laws, ethics policies and reciprocal commitments.

Preventing problems
Put a confidential whistle-blower or reporting system in place and offer informants protection against retaliation, and have an effective system for providing guidance, advice and timely information to staff and agents. This prevents problems from arising at an early stage.

Review the program at least annually and update as appropriate. All program elements require ongoing review and testing to evaluate and improve their effectiveness while incorporating recent developments and changes.

Carefully tailored policies and controls are key, but so is enforcing an organization-wide culture change by ensuring the anti-corruption message is broadcast and followed from the top down.

The Niko probation order provides a framework for an anti-corruption program, but the elements must be actively implemented and monitored. Even the best program, if unused, will not help if the police come knocking.

Download a copy of the Niko probation order here.

Sandy Boucher is a senior investigator at Grant Thornton LLP in Toronto. His 30-year career includes more than 12 years with the Royal Hong Kong Police.

Comments? E-mail jterrett@plant.ca.