Rio Tinto, Daimler AG, Nexus Technologies, and others have managed to make their way into the headlines this past week, and they have all managed to do so for the same reason: conviction of bribery. Bribery and other FCPA infractions have been longstanding issues facing a number of companies due to the differences in laws and ethics around the world.

Each country has a different opinion on administering and accepting bribes for the gain of business- or the individual. In the article “New Global Standard of Good Corporate Citizenship” on the Corporate Compliance Insights website, the OECD Good Practice Guidance for Anti-Bribery Compliance Programs by Kaplan & Walker “seems destined to become the most significant set of compliance and ethics standards yet promulgated- at least for global companies.” The steps addressed by the OECD regarding good practices provide great points for review when it comes to developing compliance and ethics policies for your company.

Standards for Good Corporate Citizenship

The OECD states that:

“Effective internal controls, ethics, and compliance programs or measures for preventing and detecting foreign bribery should be developed on the basis of a risk assessment addressing the individual circumstances of a company, in particular the foreign bribery risks facing the company Such circumstances and risks should be regularly monitored, re-assessed, and adapted as necessary to ensure the continued effectiveness of the company’s internal controls, ethics, and compliance program or measures.”

The OECD recommends paying close attention to these 12 principles of good practice guidance and implementing them into your company:

1. Tone at the Top- Strong, visible support and commitment from senior management to the company’s internal controls, ethics and compliance programs or measures for preventing and detecting foreign bribery.

2. Anti-Bribery Policy- A clearly articulated and visible corporate policy prohibiting foreign bribery.

3. Compliance is the Responsibility of Everyone–Compliance with anti-bribery policies and related internal controls, ethics, and compliance programs or measures is the duty of individuals at all levels of the company.

4. Senior Officer Duties- The oversight of ethics and compliance programs regarding foreign bribery- including the authority to report matters directly to independent monitoring bodies such as internal audit committees of boards of directors or of supervisory boards, is the duty of one or more senior corporate officers, with an adequate level of autonomy from management, resources and authority.

5. Areas of Bribery- Ethics and compliance programs designed to prevent and detect foreign bribery are applicable to all directors, officers, and employees. They are also applicable to all entities over which a company has effective control, including subsidiaries. These areas of bribery include: gifts, entertainment and expenses, customer travel, political contributions, charitable donations and sponsorships, facilitation payments, solicitation and extortion.

6. The Power of Many- Ethics and compliance programs designed to prevent and detect foreign bribery are applicable to all employees and other intermediaries- consultants, representatives, distributors, contractors and suppliers, consortia, and JV partners regarding the following elements:

i) Properly documented risk-based due diligence related to the hiring, as well as the appropriate and regular oversight of business partners.

ii) Informing business partners of the company’s commitment to abiding to laws on the prohibitions against foreign bribery and of the company’s ethics and compliance program.

iii) Seeking a reciprocal commitment from business partners.

7. Accurate Accounting Documentation- Develop a system of financial and accounting procedures- including a system of internal controls, designed to ensure the maintenance of fair and accurate books, records, and accounts, to ensure that they cannot be used for the purpose of foreign bribery or hiding such bribery;

8. Communicate and Train- Design a program to ensure periodic communication and documented training for those at all levels of the company pertaining to the company’s ethics and compliance program, as well as for subsidiaries- if applicable.

9. Reward and Support- Develop measures to encourage and provide positive support for the observance of ethics and compliance programs at all levels of the company.

10. Establish Consequences and Disciplinary Procedures- Address appropriate disciplinary actions for violations, at all levels of the company, of laws against foreign bribery and the company’s ethics and compliance program.

11. Handling Internal Complaints and Investigations- Develop effective measures for handling investigations and allegations made through reporting systems:

i) Provide guidance and advice to directors, officers, employees and other business partners, on complying with the company’s ethics and compliance program- including what to do when they need urgent advice on difficult situations in foreign jurisdictions.

ii) Internal and confidential reporting by and protection of directors, officers, employees, and other business partners not willing to violate professional standards or ethics under instructions or pressure from hierarchical superiors. As well as protection for directors, officers, employees, and other business partners willing to report breaches of the law, professional standards or ethics occurring within the company.

iii) Undertaking appropriate action in response to such reports.

12. Regularly Update and Review Policies- Periodic reviews of the ethics and compliance programs to evaluate and improve their effectiveness in preventing and detecting foreign bribery, taking into account relevant developments in the field and evolving changes in international and industry standards.

When instating measures to prevent workplace fraud, the goal is to establish a system with the ability to stop fraud before it even happens. Companies want to hire honest employees that have beliefs and ethics similar to those of the company, in order to create a culture where it’s mutually understood that fraud and unethical business practices are unwelcome- and harshly punished. The ultimate goal of ending corporate fraud altogether can be very difficult. Therefore, many companies set their sights on earlier detection of fraud and focusing on a decrease in the number of cases and expenses tied to corporate fraud on an annual basis.

When companies invest in reporting channels and internal measures to prevent workplace fraud, it becomes harder for employees to commit fraud, as they know that they are being watched and there are fewer chances for the fraudulent act to take place and remain unnoticed. In 2008, the weapon of choice when it came to reporting issues of internal workplace fraud or misconduct was the use of tips/ complaints from employees, vendors, customers or another source that had information regarding the activity.

The ACFE Report to the Nation on Occupational Fraud and Abuse:

The Association of Certified Fraud Examiners 2008 Report to the Nation on Occupational Fraud and Abuse shows not only an increase in the use of tips as a fraud detection source since 2006, but it also depicts just how many more fraud cases are detected through this particular method. The data in the graph below comes from the 2008 Report to the Nation on Occupational Fraud and Abuse, showing the percentages of cases reported through specific channels, as well as any changes in their usage when compared to the respondent results from the survey in 2006. The 2008 Report to the Nation on Occupational Fraud and Abuse also found that of the cases identified through hotline tips in particular, approximately 58% of them were tips provided by employees of the company. The next largest group providing tips were company customers, reporting almost 18% of cases detected through the use of hotlines.

Gathering Tips

With the above statistics, it’s easy to see the importance of the role that your employees play in the detection of fraud. Hotlines and other anonymous reporting tools are methods that make it easier for employees to communicate any observed fraud activities or misconduct that they encounter. Internal audits and internal controls are other important contributors that lead to the fact that the easiest ways to detect fraud come from within- you just need to have tools in place that allow these forms of internal detection to occur.

Solutions such as i-Sight Investigation Software allow you to receive notifications of new cases or complaints made through multiple channels- including your hotline provider, internal webform, or directly from employees. This type of hotline integration means that new cases are instantly funneled into i-Sight and placed in the New Referrals Queue, then a manager can review the details and decide on the next steps. Another option is to send e-mails to i-Sight. Many teams operating without an enterprise investigative case management system rely heavily on e-mail.  Employees or local HR staff send e-mails into shared folders where they’re reviewed to determine the next steps.  i-Sight allows you to keep that process– you don’t even have to change the e-mail address being used.  These e-mails get redirected to i-Sight and a new case is automatically generated.

i-Sight is a web based software and uses a web form to record new cases.  Many of our clients place a simple referral form on their intranet or vendor/customer portal.  This is an easy way to collect tips and referrals, and you decide what information to ask for- you can also make one available through your website. All of these options are flexibile and easy to implement in order to better manage incoming tips and the investigation process.

i-Sight then makes it easier for your investigations team to manage cases, proiritize cases based on risk, identify repeat offenders and track trends based on the nature of the allegation. i-Sight provides you with the following benefits:

• Meet regulatory and legal guidelines
• Improve communication across the enterprise
• Centralize case information
• Effectively manage milestones and key dates
• Automate reminders and other alerts
• Identify and understand trends
• Accelerate the case resolution cycle time

Last week the Organization for Economic Co-operation and Development made a statement calling on businesses to step up their efforts in the fight against bribery. There have been new guidelines established regarding ethics, compliance and internal controls, in order to assist member countries in developing anti-bribery strategies.

From this month forward, the OECD Working Group on Bribery will track the progress of each country in encouraging their companies to implement the Good Practice Guidance on Internal Controls, Ethics and Compliance.

The OECD has added some additions to the guidelines that were established in November. As published in the article on the OECD website, the Good Practice Guidance calls on businesses to:

• “Adopt a clear and visible anti-bribery policy that is strongly supported by senior management.
• Instill a sense of responsibility for compliance with the policy at all levels of the company, as well as independent compliance structures.
• Keep up regular communication and training on foreign bribery for all employees, as well as with business partners.
• Encourage observance of anti-bribery compliance measures, and disciplinary procedures to address their violations.
• Also, that business organizations play a leading role in providing information, advice and training to companies, especially small- and medium-sized enterprises, on how to protect themselves against the risk of foreign bribery.”