A Shift towards Mandatory Anti-Corruption Compliance?

Photo Credit: Inside Reg

Private sector anti-corruption compliance is predominantly associated with corporate corruption prosecutions, sanctioning, and debarment, with some positive examples of voluntary integrity building, as in the case of Thailand. Companies, regardless of jurisdiction, are focused on compliance and the required due diligence under the United States (U.S.) Foreign Corrupt Practices Act (FCPA) and/ or the United Kingdom’s UK Bribery Act, especially those seeking access to projects funded by the World Bank and similar development agencies. For companies caught in corrupt practices, anti-corruption compliance programs (or lack thereof) have become a crucial factor for successful conclusion of criminal or debarment proceedings.

Private sector entities in emerging markets that wish to do business with multi-national corporations subject to U.S. or UK rules also have a vested interest in this topic as corruption risk management and due diligence is increasingly becoming a notable condition of contracting and procurement proceedings. However, globally anti-corruption compliance has yet to become a mandatory element of doing business, but this may be about to change.

At the beginning of 2017, France joined U.S. and UK efforts to suppress corruption with its new law on transparency or “Sapin II”. Similar to the two well-known laws, Sapin II looks to address acts of bribery, private sector corruption, and trading in influence committed by French companies or French subsidiaries of foreign companies in the country and abroad. Unlike its predecessors, it takes the effort one step further by introducing a mandatory anti-corruption compliance program for certain categories of companies. Accordingly, as of June 1st, all French companies or subsidiaries of foreign companies located in France – which have at least 500 employees and an annual revenue of more than €100 million, are obliged to have an anti-corruption compliance program in place that entails elements set forth by Sapin II.

Moreover, companies must meet this obligation irrespective of any possible involvement in corrupt activities or related investigations and prosecutions; and will be heavily fined for not doing so, up to the criminal statute currently set at €1 million. The newly established Anti-Corruption Agency will conduct oversight of the development and implementation of company compliance programs. With this move, a considerable part of the state burden to fight corruption has been shifted to private sector companies, which will have to show that they are doing their part.

Sapin II hints a possible future trend of state efforts to fight corruption whereby failure to have prevention mechanisms in place will be seen on equal footing as actual involvement in corrupt activities. Born out of significant international pressure on France to address private sector corruption, if successful, the Sapin II approach may become the method of choice for other countries struggling with rampant corruption and under immense pressure to devise solutions. In order to pre-empt market integrity becoming a matter of state-imposed governance, private sector entities operating in different markets would be well advised to capitalize on the French experience and boost their anti-corruption compliance structures thereby promoting the value of clean and honest business. By the same token, chambers of commerce and business associations may wish to consider introducing anti-corruption compliance programs as a membership requirement in an effort to show that sector self-governance can play an equal, if not greater role, in addressing corrupt practices.

Jelena Jolic is a Program Officer for the Global Alliance for Trade Facilitation at CIPE