Foreign corruption & tips for compliance

The news earlier this month that the RCMP raided several offices of a construction firm in the Toronto area and were investigating the corporation in connection with a corruption probe in the bidding process for the building of the $1.2 billion Padma Bridge in Bangladesh has forced lawyers representing clients who do business internationally to re-assess the risks and obligations of the Corruption of Foreign Public Officials Act (“CFPOA”).

Bribing Foreign Officials

Under CFPOA, it is an offence to bribe a foreign public official (e.g., to directly or indirectly give, offer or agree to give or offer, a loan, reward, advantage or benefit of any kind as consideration or for inducement of a foreign public official for a business advantage).

There are some important nuances in CFPOA that are unique to Canada such as the requirement that the business be conducted for profit and that there be a substantial connection to Canada for law enforcement in this country to have competence to enforce. What this means is that Canada has jurisdiction over the bribery of foreign public officials if the offence is committed in whole or in part in Canada. Bribery is a predicate offence for money laundering – corporations and their directors and officers may be charged with money laundering under the Criminal Code in parallel with a bribery offence with respect to proceeds of bribery.

Examples of Foreign Bribery

Canada has had negligible enforcement of CFPOA and as a result, businesses are scarcely aware of CFPOA and what constitutes prohibited conduct. In the U.S. which has similar (but not identical) anti-corruption legislation, the following situation have been held to constitute foreign corruption:

  • The arrangement and payment for employees of Chinese state-owned telecommunications companies to travel to Las Vegas, purportedly for “training” purposes in the U.S.;
  • The payment by a subsidiary of commission to a salesperson for the sale of body armour when a portion was funnelled to a U.N. procurement official for the awarding of contracts;
  • Payments to consultants in Costa Rica to obtain business where a portion of the payments were passed on to various Costa Rican government officials;
  • The engagement by an international telecommunications company of a perfume distributor in Honduras as a consultant who was related to a Honduran government official. Corporate officials suspected that funds paid to the perfume consultant would flow to the government official responsible for decisions on contract awards;
  • The payment to several government officials in the oil and gas industries in Russia, Azerbaijan, Angola and Kazakhstan to maintain existing contracts; and
  • Payments to Iraqi officials for contracts to sell vehicles under the U.N.’s Oil for Food Program.

An Ounce of Prevention – 10 Tips to Avoid Bribery

Allegations of bribery adversely affect a corporation’s reputation that may take years to re-establish and usually result in loss of business. To minimize the risk of exposure to violations of CFPOA, corporations should focus their efforts on compliance and in particular:

  1. Develop and promulgate a written and visible corporate policy against violations of CFPOA;
  2. Ensure that senior management provide strong and explicit support and commitment to the corporate policy;
  3. Ensure that the compliance procedures apply to personnel at all levels including, where appropriate, outside parties acting on behalf of the corporation in foreign jurisdictions such as agents, consultants, distributors, contractors, supplies and joint venture parties to the extent employed by the corporation;
  4. Ensure that the compliance procedures are in plain language and include policies governing key triggers such as gifts, hospitality, entertainment and expenses, customer travel, political contributions, sponsorships, when and what types of facilitation payments are permitted, and solicitation;
  5. Assign a senior officer with responsibility for the implementation and oversight of the anti-corruption policies, standards and procedures with reporting accountability to internal audit and the board of the corporation;
  6. Implement an adequate books and records system to detect and avoid the concealment of bribery;
  7. Ensure the corporation has procedures for the confidential reporting by, and protection of directors, officers and employees, of suspected incidents of non-compliance with CFPOA;
  8. Corporations can be held vicariously liable for the conduct of its employees, subsidiaries, joint venturers and third party agents and therefore, corporations should ensure contracts and renewals thereof with agents and business partners are drafted to prevent violations of anti-corruptions laws – those provisions should contemplate anti-corruption representations and undertakings related to compliance; rights to conduct audits of the books and records of agents and business partners to ensure compliance; and rights to terminate as a result of a breach of those provisions;
  9. Periodically review and test the effectiveness of the compliance procedures in detecting and preventing violations of CFPOA and adjusting the policies, procedures and standards as required; and
  10. Conduct periodic risk assessments that gauge the exposure of your corporation to bribery – companies and individuals who operate in areas that are believed to have higher rates of corruption – India, Mexico, Russia, Brazil, Africa and the Middle East – can be expected to require more rigorous compliance programs.