The Tribune

By DEREK SMITH

Corruption and bribery risks, by all indications, increase during a crisis. Over the past decade, a sustained number of corruption and bribery cases have occurred because of entities not fully appreciating the risk attached to their vendors or weak internal anti-bribery regimes. In The Bahamas, I conclude, it is little different. The Bahamas was ranked 81st in the 2019 Bribery Risk Matrix released by TRACE International, a globally recognised anti-bribery business organisation, and the 29th least corrupt nation out of 180 countries by Transparency International.

I have had the distinct fortune of previously working for an institution that had a well-defined and developed anti-corruption compliance culture. Against this background I appreciate the complexities of a robust "culture of compliance". Notwithstanding the above, each institution has its own corporate culture. It is imperative that despite an institution's size, local or global footprint or industry, companies must embody a strong culture of ethics, honesty and legal and regulatory compliance. This is more than possible with senior management commitment, their willingness to support the efforts of their risk and compliance teams over a sustained period of time, and the mindset that not all business is good business.

A strong anti-bribery and corruption ("ABC") policy is a key component of your institution's risk and compliance framework, and will help kick corruption risk out. The ABC policy promotes transparency, the avoidance of conflict of interest, and applies standards both internally and to third parties.

During this pandemic, companies should review and evaluate their "culture of compliance" pertaining to stamping out corruption and bribery risk. Additionally, they must examine, at a minimum, the following areas.

Tone of senior management

"Managers and employees take their cues from these corporate leaders," said the resource guide to the Foreign Corrupt Practices Act (FCPA), issued by the US Department of Justice and the US Securities and Exchange Commission (SEC). The release further added: "A well-designed compliance programme that is not enforced in good faith, such as when corporate management explicitly or implicitly encourages employees to engage in misconduct to achieve business objectives, will be ineffective." Simply out: Without clear and consistent communication from the top that echoes an anit-bribery culture, companies may expose themselves to fines or sanctions.

Third party and outside business director management

If you have not applied your anti-bribery policy to your third parties, meaning a person or group besides you that represents you or acts on your company's behalf, your processes are fundamentally flawed. But do not be alarmed, as you have now identified a lapse, and there are steps to remedy the potential risk. Establish processes and controls that give your company sufficient assurance that third-parties are legitimate, and do not expose you to any financial risks, reputational risks and corruption risks. Similarly, understanding your company's exposure to conflicts by way of employees' involvement in personal business ventures - and even non-governmental involvement - greatly assists in managing the anti-bribery environment.

Red flag training and management

A 'red flag' is any circumstance that could lead to an ethical, legal or compliance concern. A vigorous control environment assists with, and deters, non-compliance and leads to the identification of red flags. Bespoke training is paramount in helping employees understand the applicable content within your industry and, more importantly, your company. The more aware staff are, the more likely they will notice and report red flags.

Politically exposed persons (PEPS) management

The Financial Action Task Force (FATF) provides strategic guidance regarding PEPs. Whether a domestic or foreign PEP, companies must ensure extra precautions and controls are established to mitigate and manage corruption and bribery risks. Furthermore, they must ensure that persons close to PEPs are identified and monitored based on the risk rating. Companies must not forget that voluntary organisations and charities associated with your client should also be closely monitored.

In short, although the above is not an exhaustive list, an anti-bribery and corruption regime must at a minimum include a number of elements - tone of senior management; third party and outside business director management; red flag training and management; and politically exposed persons (PEPS) management. Now, more than ever, is the time to assess, adapt and act regarding your company's anti-bribery and corruption regime.

NB: Derek Smith Jr is a compliance officer at a leading law firm in The Bahamas, and a former assistant vice-president, compliance and money laundering reporting officer (MLRO), at local private bank. His professional career started at a 'Big Four' accounting firm and has spanned over 15 years, including business risk management, compliance, internal audit, external audit and other accounting services. He is also a CAMS member of the Association of Certified Anti-Money Laundering Specialists (ACAMS).