Preventative Anti-Corruption Guidelines – Perspective From Vietnam – Prevention is Better Than Cure
Addressing corruption before it can occur has now become virtually a necessity.
Vietnamese laws, America’s Foreign Corrupt Practices Act (FCPA), the UK’s Bribery Act 2010, and the laws of most other countries prohibit corrupt payments to Vietnamese government officials. Vietnam has clearly drawn the attention of the US Department of Justice (DOJ), as suggested by the 2009 FCPA enforcement action against Nexus Technologies Inc., a Philadelphia-based export company. The Vietnamese Government, in its own right, has increased its prosecution of corrupt acts. It may be difficult to understand what that could mean for your business in Vietnam. After all, you do not engage in bribery yourself and you are certain that no one in your company does either. Unfortunately, that certainty is not enough to protect you in case of an investigation.
First, investigations and the resulting charges themselves can be quite broad, extending beyond charges of bribery to conspiracy, money-laundering, tax violations, and misrepresentations, Second, managers are no longer immune from direct prosecution, and are expected to be aware of and responsible for what is happening downstream in their company, In fact, prosecution of individuals, not just of corporations, has increased steadily. The DOJ and Security & Exchange Commission (SEC) imposed penalties on 18 companies and 28 individuals in a record amount of US$6.4 billion in 2020. In 2021, penalties were assessed on 4 companies and 20 individuals.
Third, the jurisdictional reach of the FCPA is quite broad. Any US citizen or company is subject to the FCPA, even if the prohibited activity occurred completely outside of the US. Furthermore, the FCPA has been expanded to assert jurisdiction over foreign individuals and companies if any conduct in furtherance of an improper payment occurs in the US, this approach has permitted the DO] to pursue individuals with even fairly tenuous links to US jurisdiction.
What can you do to protect yourself? Build a better compliance program by paying attention to the trinity of anticorruption compliance programs: have clear policies, train your employees and consultants, and carry out due diligence investigations. Company management must first be fully on board to drive the process, and after you take these steps, you must keep accurate records to memorialise your progress and to be prepared for any investigation.
Your management team must make a public commitment to its employees to run a clean business. A compliance program must be a priority for management before it can be a priority for any other employees. Management backing will give employees the confidence to actually put the program to daily use. Company leadership must set the standard and enforce the message.
Management must set clear expectations within the company, The message must be consistent across departments, throughout the company’s hierarchy, and in its interactions with customers, government officials, employees, consultants, and agents, Violations must have consequences, which are applied consistently, including termination of employees and contracts with third party consultants for improper conduct. The company must adopt a culture of strict accountability for FCPA violations, large or small Finally, the corporate culture must offer support and assistance, rather than retaliation, to employees who come forward to report corrupt activities or to seek guidance.
Gifts should be modest and be intended to create goodwill only. Gifts that are intended to create or maintain business are unacceptable. A gift policy should define what is permitted, for example: who may give gifts; the appropriate value of gifts, including a maximum value that is not excessive; a limited selection of preapproved types of gifts that may be given; acceptable occasions on which gifts may be given; the maximum number of gifts that may be given to anyone person or department; the documentation that must be submitted to obtain internal approval for the gift; and the person who will approve the gift.
The key to a meaningful gift policy is to develop a process that can be followed internally. It is better to have a simple policy that is used consistently, than to have an elaborate policy that is not used at all. You should maintain records of approved gifts, including the individual responsible for requesting the gift, the value and type of gift, and the identity of the recipient.
DUE DILIGENCE AND THIRD PARTIES
Pay as much attention to your third-party consultants as you would to your direct employees. A due diligence investigation with a clear checklist should be made for all third parties, including consultants, agents, distributors, and joint venture partners, and should cover, at a minimum: the consultant’s reputation and past business experience; an assessment of whether the fee is commensurate with the tasks they will perform, and whether it is reasonably comparable with other fees paid in similar circumstances to similar consultants; and conflicts of interest and relationships between the consultant’s personnel and government officials.
The goal for your due diligence program should be to identify problems, or “red flags”, and resolve them to your satisfaction. Willful ignorance is not an acceptable strategy for addressing potential problems with third parties, and due diligence is a powerful tool to obtain the information you need to determine whether you ate comfortable developing a relationship with a particular consultant or agent.
Develop a standard questionnaire, maintain records of the responses you receive, and negotiate access to records ahead of time, including a right to opt out of contract negotiations if the investigation uncovers red flags. If you take the process seriously, your consultant will too.
You must educate your employees and consultants about the contents of the policies you have created, and how to abide by them. You cannot satisfy this obligation, however, by handing out a manual or making the same PowerPoint presentation year after year. Regular, in person, interactive training is the gold standard for a strong anti-corruption compliance program. Training should use real life examples, role playing, and hypotheticals to engage your employees and help them to understand what you expect from them and to respond to requests for inappropriate behaviour.
Good recordkeeping is the first line of defence in an anti-corruption investigation, and shoddy recordkeeping will undermine your efforts to develop and implement a gift policy, run due diligence investigations, or train your employees. First, payments must be booked accurately and must actually be what they purport to be. A facilitation payment may itself be legal, but you and your company will be responsible if it is booked inaccurately or deceptively. Second, you should maintain updated written policies that outline approval processes.
Third, your company should have written records that demonstrate your efforts to build and maintain a compliance program. Maintain records of due diligence investigations of third-party consultants and schedule regular updates. Require employees to sign in to training sessions, whether in person or online. Require them to have your employee manual and to demonstrate that they have read it. Log complaints and keep notes about follow up investigations.
Few companies have a comprehensive anti-corruption program. It is not realistic to produce a complete, perfect anti-corruption program overnight. It is realistic to pick one area, make a written plan on how to systaematise your activities in that area, and create a schedule for making simple, concrete steps to phase in the parts of your plan. You should be able to demonstrate that, as a company, you have taken steps to reduce the systemic opportunities for corruption, to educate your staff, and to create a system to address acceptable but potentially problematic issues, such as gifts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
* * *