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Anti-Corruption Compliance Stalls, Despite Aggressive Enforcement




by:
Paul Pimentel
Blaney McMurtry LLP - Toronto Office

 
August 29, 2014

Previously published on August 26, 2014

Anti-corruption compliance efforts appear to be stalling, despite an increase in enforcement actions. According to a global fraud survey conducted by auditing firm Ernst & Young, the percentage of companies that have anti-bribery/anti-corruption policies has increased by only 1% over the past two years, and a persistent minority has yet to take even the basic steps toward an effective compliance program.1 The survey was based on interviews with more than 2,700 senior decision-makers in a sample of the largest companies in 59 countries, including Canada.2

While more than 80% of respondent companies had anti-corruption policies in place, the survey suggests anti-corruption compliance efforts have stalled at that level.3 Moreover, the survey found that less than 50% of respondents had attended anti-corruption training and there had been a reduction in the level of reporting on compliance issues to boards.4 The survey also found that less than a third of businesses are always or very frequently conducting anti-corruption due diligence as part of their mergers and acquisitions process.5

These findings are particularly disturbing in light of more aggressive enforcement actions in Canada, the United States and the United Kingdom. For example, Nazir Karigar, a 67-year old Ottawa-based executive who was acting as an agent for the firm Cryptometrics Canada, was sentenced to 3 years in prison for his role in a plan to bribe officials from Air India and an Indian Cabinet Minister.6 The RCMP has since issued warrants for the arrest of three more Cryptometrics executives, including its CEO and COO.7

In 2013, the United States saw an increase in the fines levied against corporations under the Foreign Corrupt Practices Act8 (“FCPA”), jumping from US$260 million in 2012 to US$720 million in 2013.9 There was also an increase in the number of actions brought against individuals under the legislation,10 although there was a decrease in the number of actions brought against corporations.11

The United Kingdom has also seen significant sentences handed down for the bribery of foreign officials. For example, four executives at Innospec Inc., a specialty fuels company, received sentences ranging from 4 years to 18 months in prison for their role in bribing officials in Indonesia and Iraq.12

These enforcement actions underscore the importance of developing an anti-corruption compliance program, which complies with requirements of the Corruption of Foreign Public Officials Act13 and, if applicable, the FCPA and the UK’s Bribery Act 2010.14


1 Ernst & Young, “13th Global Fraud Survey: Overcoming Compliance Fatigue” (3 June 2014) Online: Ernst & Young at 2 http://www.ey.com/Publication/vwLUAssets/EY-13th-Global-Fraud-Survey/$FILE/EY-13th-Global-Fraud-Survey.pdf.
2 Id at 22.
3 Id at 14.
4 Id at 2.
5 Id at 3.
6 R. v. Karigar 2014 ONSC 3093 at para 2 http://www.canlii.org/en/on/onsc/doc/2014/2014onsc3093/2014onsc3093.html.
7 Royal Canadian Mounted Police, “RCMP Charge Individuals with Foreign Corruption” (4 June 2014) Online: RCMP http://www.rcmp-grc.gc.ca/ottawa/ne-no/pr-cp/2014/0604-corruption-eng.htm.
8 15 U.S.C. §§78dd-1, et seq.
9 Shearman & Sterling LLP, “FCPA Digest: Recent Trends and Patterns in the Enforcement of the Foreign Corrupt Practices Act” (January 2014) Online: Shearman & Sterling LLP at 6 http://www.shearman.com/~/media/Files/Services/FCPA/2014/FCPADigestTPFCPA010614.pdf.
10 Id at 5.
11 Id at 4.
12 Serious Fraud Office, “Four sentenced for role in Innospec corruption” (4 August 2014) Online: Serious Fraud Office http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2014/four-sentenced-for-role-in-innospec-corruption.aspx. Please note that these offences took place prior to the enactment of the UK Bribery Act, and therefore the sentencing took place under older UK anti-corruption laws. There has yet to be a successful corporate prosecution under the UK Bribery Act.
13 S.C. 1998, c. 34.
14 2010 c. 23.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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