Clampdown on Corruption
reform, corruption is
By Antony Ireland
Even the world’s corruption hot spots are now taking regulation more seriously.
If one doubts that progress is being made in anti-corruption enforcement in some of the world’s corruption hotspots, look no further than Brazil. In a bid to clean up the country’s energy sector, investigators unearthed a network of bribery and corruption that would, over three years, lead to the impeachment of President Dilma Rousseff, a nine-year jail term for her
predecessor Luiz Inacio Lula da Silva and the implication of 80 of Brazil’s political
and business elite.
While this example is glaring and high-profile, the anti-corruption landscape
is undoubtedly becoming more stringent around the world. China, for example,
expanded the scope of its anti-corruption watchdog in October, while France this
year introduced a game-changing ‘Sapin II’ framework.
Other countries are becoming more watchful, including developing markets
with a history of corruption. Multinational companies could find themselves
facing heavy penalties if they fail to keep up with compliance demands. However,
corruption is often deeply culturally rooted and traps remain.
According to John Kocoras, partner with the law firm McDermott, Will
and Emery, the most susceptible companies are those that operate in countries
where bribery is part of the business landscape, or in highly regulated industries
involved in sales to foreign government agencies and government-owned
“In short, the more government touch points a company has, typically the
greater the risk of anti-corruption compliance challenges,” he warned.
“Like crime, corruption cannot be totally avoided,” said Corina Monaghan,
senior vice president of credit, political, and security risk improvement, JLT
“What remains to be seen is whether these law changes are transparent
and enforced consistently enough for foreign investors to clearly know what
constitutes breaching the law,” she added.
“When there are gray areas in bureaucracy, this creates room for corruption.”
It is, of course, essential for multinational companies to get to know local
conditions as comprehensively as possible in every jurisdiction in which they
operate. That’s particularly true of systems, though the law can sometimes work
differently in theory and practice.
Monaghan advises clients to find out who the key players and counterparties
are in the sector in which they operate, including the government ministry with
whom they’ll be dealing.
“If there are elections coming up, find out who may be elected and how this
could affect your business,” she added.
However, even a granular knowledge of local legislation will only get multinational companies so far, as they could run afoul of domestic law even if they do
not break the rules overseas.
U.S.-listed companies, for example,
are obligated to maintain accurate
books and records. They also are
obligated to enforce effective internal
control. Failing to do so in a foreign
operation could cause liability in
“A substantial change over the last
10 years is our ability to address anti-corruption issues outside of the U.S.,”
“This used to be seen as a U.S.
concern, with the tail wagging the
dog as far as multinational operations
were concerned, but now cross-border
“When there are gray areas
in bureaucracy, this creates
room for corruption.”
— Corina Monaghan, senior vice president of
credit, political, and security risk improvement, JLT
• Companies that sell to foreign
governments and agencies are
• Porous bookkeeping on the part
of U.S.-based companies could
attract attention from foreign
• Even emerging markets are
becoming much more attentive to
the possibility of corruption.