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How To Mitigate Bribery Overseas

17 Oct 2012

Senior executives should be aware of how their companies are identifying possible risks of overseas corruption being faced by their subsidiaries. Such developments as new regulation and changing law enforcement initiatives are providing the incentives for corporate boards to recognise any potential business improprieties. Taxand UK discusses how to mitigate the risks of expanding into international territories.

It is important that international companies ascertain how their overseas subsidiaries are doing business and take steps to identify and mitigate the risks of overseas corruption. Some simple steps can help to avoid bribery risks:

  • Perform regular risk assessments of international operations (e.g., identify country, sector, business opportunity, transaction and business partnership risks).
  • Visit those countries at higher risk of corrupt activity - understand what it is like to live and do business in those locations and identify the inevitable difficulties that will be faced by the local employees in meeting international anti-corruption standards.
  • Review and amend compliance policies and procedures and internal controls to provide protection proportionate to the risks faced, and provide regular tailored face-to-face anti-corruption training to employees (i.e., there is a defence to the corporate offence of failing to prevent bribery under the UK Bribery Act if the organisation had implemented "adequate procedures" to prevent bribery).
  • Ensure that specific identified risks are mitigated to the maximum extent possible.
  • Perform regular risk-based due diligence on third party customers, suppliers and business partners.
  • Regularly audit and monitor transactions and controls.

Discover more: Bribery overseas - no longer someone else's problem

Taxand's Take

There will be risks of corrupt activity in the overseas subsidiaries of US and European headquartered businesses. Senior executives should know and will increasingly demand to know how their corporations are identifying and mitigating the risks of overseas corruption faced by these operations.

In some countries, employees will regularly face pressure to provide bribes in their personal lives - from trying to connect their home to electricity, to turning right at a traffic light, to obtaining vital medicines for their sick children.

How quickly organisations recognise such realities and appreciate the challenges that they face in ensuring that employees who culturally accept bribery at home will not do so in the work place - when greater pressures may come their way - will determine how well they can avoid or mitigate the consequences of being party to bribery overseas.

Your Taxand contacts for further queries are:
Keith Williamson
T. +44 207 715 5218

Andrew Gavan
T. +44 207 663 0406

Taxand's Take Author