With so many regulations to follow, fleets and shippers probably don’t need another reason to fret, but bribery and corruption are on the rise.
It’s easy to dismiss corporate bribery and corruption as “nothing to worry about,” but the fact is it is one the rise, according to data from the U.S. Department of Justice and Securities and Exchange Commission. Since 2007, total Foreign Corrupt Practices Act (FCPA) fines have reached $9.9 billion. But, in just the last two years, more than one-third of that amount – $3.5 billion – has been levied in fines.
Either crime is rising or enforcement is cracking down, but either way, it’s becoming a key focus for companies that does business globally.
“Pretty much every industry in every sector [is affected], there is no industry or sector that is immune to the risk of bribery and corruption or the need to be compliant with bribery and corruption (standards),” Charles Thomas, director of anti-bribery and corruption for Lexis Nexis Risk Solutions, tells FreightWaves.
Thomas says industries at higher risk are ones where the value of the goods is more than the value of the workforce.
“Bribery and corruption is usually focused on a number of areas, one of those areas is whenever there is a disparity between the value of the goods and the value of the workforce, [although] it sounds terrible to say that,” he explains. “For instance, the economic value of gold is incredibly high but the economic size of the workforce that mines that gold, puts that gold into a truck, moves that gold, makes that gold into jewelry, the workforce producing those products is not a high value workforce. Wherever you have that … is where you are going to find the likelihood of bribery or corruption occurring.”
Thomas also says that when goods must cross borders, the potential for bribery and corruption increase.
“Where ever you have that government crossover, you have the potential for bribery or corruption for gaining government contracts, obtaining licenses, and I imagine within the freight sector you’re likely to find people looking to get those licenses or approvals, those border crossings quicker, because the quicker you can get your product to market, you can improve your profitability,” Thomas says.
Moving goods across borders opens up an opportunity for a bribe to speed up that process. The more protectionist approach some nations are taking with regards to trade and open borders could potentially lead to companies willing to take more risks. China, though, is not one of those countries, Thomas explains.
“China is a very strong country in terms of the ways that it is approaching anti-bribery and corruption,” he says. “There’s a lot documented there in the press. But we’re seeing it at the company level, companies are approaching us and saying they need the tools and services to be a more compliant company. They’re doing that to be a more appetizing or appealing company for Western investment or customers. So we’re beginning to see a lovely age where compliance is not seen as a burden but as a competitive advantage.”
While there is no single global entity enforcing anti-bribery and corruption laws, individual countries are stepping up and cooperating more in prosecutions, and that is raising the stakes for companies committing these crimes.
“There are number of enforcement agencies around the world that come down on bribery and corruption in the corporate space, the chief among them would be the Department of Justice and the Securities and Exchange Commission in the U.S.,” Thomas notes. “They’re the really big fish in the pond. But the United Kingdom is becoming to come after people more with the UK Bribery Act.”
“How they work together is improving as well,” he says. “The Department of Justice, until recently, had a lawyer working in the UK Justice Department specifically on cross-border enforcement cooperation. So, they are working together better on enforcement activities.”
And it is that cooperation that is leading to record fines for the companies getting caught.
“If you’re moving goods around Europe and crossing all those borders and paying bribes, there is now the possibility, if those bribes are identified, you’d have the FCPA coming after you under the Department of Justice and SEC, the UK bribery act may be interested in coming after you, you may find the French prosecutors – they have a new law there as well – may come after you as well,” he Thomas says. “You may find yourself if someone in your company is paying a bribe or acting in an improper way, you may find yourself on the end of multiple prosecutions channels rather than just one prosecution.”
If you are involved in the movement of goods in a regulated industry, i.e. the supply chain, there is potential for corruption and bribes. So how do you prevent them?
“Anti-bribery and corruption is not a regulated scenario, so it’s not something where a government regulator will come into your company and tell you you’re doing a good job,” Thomas observes. “You only find out about the problem when they knock on your door and say, here is a fine for you. It’s very much a scenario where a company needs to be prepared and have their defenses in place before the government knocks on your door.”
To do that, Thomas suggests taking a risk-based approach.
“The first way to do that is you need to understand who you are doing business with and who is doing business on your behalf,” he says. “In the freight and logistics sector, that may well be the more troublesome piece. Certainly, with clients we’ve worked with here at LexisNexis we’ve seen that length of the supply chain in logistics space can pose issues. Knowing the size of the problem is the first part.”
It’s also critical to perform the proper checks on anyone you are doing business with.
“You need to be able to prove you’ve carried out adequate due diligence on those entities; just saying they are a friend of mine and I trust him and he’s done some work for us is not enough,” Thomas says. “And knowing that you are responsible for the activities of those third parties, so if you do sign a contract or give a job to a friend of yours and he’s paying bribes, if you haven’t told him that bribery and corruption is not acceptable in your business, if you haven’t communicated that then you are liable for his actions.”
In the end, it comes down to being prepared, Thomas says, because bribery and corruption doesn’t appear to be going away and governments are cracking down.
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