The Most Powerful Tool an Organization Can Use to Demonstrate “Adequate Procedures” as an Effective Bribery Defense and Deterrent Strategy.
As the international outcry on bribery and corruption practices continues to tighten its grip around rogue players in the private and public business sectors, global organizations continue to ramp up their efforts to develop effective frameworks to prevent, detect and report bribery and corruption.
And by fortifying their anti-bribery management systems, such organizations are further helping their own cause as such systems can play a pivotal role in establishing “adequate procedures” as a compliance defense in the event of a bribery accusation.
“Adequate procedures” is a term made popular through the UK Bribery Act of 2010, which poses the potential of a company avoiding liability for failing to prevent bribery if that organization can demonstrate sound and established policies and procedures that deter individuals (inside and outside of the organization) from partaking in questionable or corrupt conduct.
A key challenge, though, is that “adequate procedures” oftentimes carries its own unique definition depending on what country or jurisdiction one may reside. Further, most enforcement agencies and government authorities offer little guidance that pinpoints what exactly “adequate procedures” means when considered as a possible defense in a legal proceeding.
Let’s take a look at the two most regarded international legislative provisions that offer “adequate procedures” as a possible legal defense consideration and learn how a new international standard is beginning to gain a foothold in offering multi-national organizations specific guidelines in developing a globally accepted anti-bribery management system that may support most “adequate procedures” defenses.
UK Bribery Act of 2010
Under the UK Bribery Act, an “adequate procedures” defense would be considered during an investigation into a corporate failure to prevent bribery. The Act provides commercial organizations with a defense to liability when commercial organizations can prove and demonstrate that they had in place proper procedures designed to prevent persons associated with them from undertaking bribery related conduct.
Consequently, corporations that are otherwise liable for violating the corporate failure to prevent bribery provision can escape criminal liability from the provision if they can prove that they had in place “adequate procedures” to prevent the relevant illegal conduct from occurring. This defense is unique in that it contends that corporations are acting in good faith and taking proper precautions throughout the organization in implementing adequate compliance procedures, and subsequently can avoid being held criminally accountable for the failure to prevent bribery. This defense is significant in that there is no such defense under the FCPA (see below) or most other foreign anti-bribery laws.
FCPA (U.S. Dept. of Justice)
While corporate compliance procedures are not considered in the liability phase of the FCPA, they are taken into account during the sentencing phase by the U.S. DOJ relevant to the FCPA. The United States Sentencing Commission outlines through its Federal Sentencing Guideline Manual six factors — four aggravating and two mitigating — that a sentencing court must consider in determining the appropriate penalty on organizations convicted under the FCPA. The existence of an effective compliance program is one of the two mitigating factors. Subsequently, an organization convicted of FCPA violations can use the existence of an effective compliance program to reduce a penalty against it potentially.
Demonstrating “Adequate Procedures” through ISO 37001 Certification
ISO 37001 Anti-Bribery Management System is an internationally accepted standard which specifies the procedures by which an organization should implement to prevent bribery while detecting and reporting any bribery incident that occurs.
The standard requires organizations to implement these procedures on a reasonable and proportionate basis according to the type and size of the organization, and the nature and extent of bribery risks faced. It applies to small, medium and large organizations in the public and private sector and can be implemented in any country. Though it will not provide absolute assurance that bribery will completely cease, the standard can help establish that the organization has in place reasonable, proportionate and adequate anti-bribery procedures.
To achieve ISO 37001 certification, an accredited, third-party Conformity Assessment Body first undertakes a bribery risk assessment and audit for the scope of the standard. The audit methodology is evidence-based, meaning any issues raised will be confirmed by adequate evidence that the auditor discovered during the course of the audit.
Auditing techniques take a risk-based approach to examining the organization’s Anti-Bribery Management System (ABMS), and the auditor will increase the scale of the investigation if they determine that a specific process presents on a higher risk side. Factors such as Impact, Negligence, Minor, Major, and Critical are taken into consideration during the audit.
A separate audit method is a process-based approach where the auditor examines the organization’s individual processes while considering the interaction between those processes. Finally, there is a sampling-based audit approach where the auditor incorporates an appropriate sampling plan utilizing samples from different ABMS processes to conclude and support the audit findings and results.
The audit is extremely thorough in its approach, which results in accredited certification for the scope of the ISO 37001 Anti-Bribery Management System. Because of the standard’s international acceptance and the thoroughness of the audit process, such certification can provide a valuable safeguard in demonstrating an “adequate procedures” compliance defense in cases posing a liability for a company’s failure to prevent bribery. Indeed, from an FCPA perspective, certification may provide tangible evidence that a compliance program was in place at the time of the alleged bribery actions. And from a UK Bribery Act perspective, the certification could provide the company with tangible prima facie (or “first look”) evidence presented by an accredited certification body attesting to the establishment and effectiveness of the organization’s compliance program.
Perhaps someday in the near future, international standards will be set in place whereby the availability of a globally recognized “adequate procedures” definition will act as an acceptable “insurance policy” for corporations entangled in corruption litigation. But for now, the most powerful “insurance” tool that public and private sector organizations can use in their defense strategy is ISO 37001 ABMS certification.
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ABAC Certification (www.ABACGROUP.com) is an accredited conformity assessment body in issuing ISO 37001:2016 Anti-Bribery Management System certification, and an independent component of CRI Group’s recently launched Anti-Bribery Anti-Corruption Centre of Excellence, which was created to educate, equip and support the world’s leading business organizations with the latest in best-practice due diligence processes and procedures, providing world-class anti-bribery and anti-corruption solutions to organizations seeking to validate or expand their existing compliance frameworks to maintain a competitive edge in the world marketplace.
CONTACT CRI CERTIFICATION
Zafar Anjum, MSc, MS, CFE, CII, MICA,
MABI, Int. Dip. (Fin. Crime)
CRI Group Chief Executive Officer
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South Quay, London E14 9GE