The Essential Toolkit for Anti-Bribery and Corruption Compliance

“Without strong watchdog institutions, impunity becomes the very foundation upon which systems of corruption are built. And if impunity is not demolished, all efforts to bring an end to corruption are in vain.“

Rigoberta Menchú, Nobel Prize laureate.

Businesses and individuals have to follow the Anti-Bribery and Corruption Laws of their respective jurisdictions to mitigate risks, ensure AML compliance, and maintain ethical practices.

Financial and Designated Non-Financial Business professionals who are required to conduct due diligence on their customers to assess potential money laundering risks associated with them must ensure that their clients have not violated Anti-Bribery and Corruption laws.

Conducting due diligence regarding a client’s association with Anti-Bribery and Corruption violations can provide insight into the potential money laundering or embezzlement risk associated with a customer.

Let’s understand the concept of Anti-Bribery and Anti-Corruption (ABAC), its guidelines and laws, and how it has become an essential factor in anti-money laundering checks.

What Is The Concept of Bribery and Corruption?

Bribery is the act of offering or receiving something valuable to influence decisions for personal gain, often occurring in both public and private sectors.

It involves government officials, business leaders, or employees who may neglect their duties for personal benefit, potentially leading to AML penalties.

Corruption, in broader terms, refers to the misuse of power by an influential person after being appointed to a position, for their own benefit, often through acts such as bribery.

Public officials, executives, and staff are especially vulnerable, using their positions to acquire wealth and show favor to relatives.

Over time, corruption erodes an organization’s reputation, undermines client trust, and leads to financial losses, making it a genuine concern in global business.

So, what legal measures are in place to mitigate or prevent such actions? Let’s discuss them.

Anti-Bribery and Corruption Laws and Guidelines

Different countries have different laws related to bribery and corruption. More than 46 countries in the world have Anti-Bribery and Corruption Laws and Guidelines. The U.S. and the U.K. attract the limelight for impactful “ABAC laws”.

The US and UK ABAC laws are considered to be setting global standards and requirements aimed at preventing unethical practices, corruption, and bribery, to maintain the integrity of the financial ecosystem.

Individuals and entities are required to follow the Anti-Bribery and Anti-Corruption Laws in their respective jurisdictions. Breaching these Anti-bribery and compliance laws leads to penalties and other legal consequences, like revocation of licenses.

Significance of Anti-Bribery and Anti-Corruption (ABAC)

Anti-Bribery and Anti-Corruption laws criminalize corruption in all forms, including bribing influential people for personal gain.

Anti-bribery laws criminalize giving, accepting, or attempting to bribe a foreign official, as well as failing to prevent others from offering bribes on your organization’s behalf.

This implies that a company can be held liable if a third party attempts to bribe public authorities under its name.

Anti-corruption policies, like anti-bribery laws, restrict payments to foreign public officials or executives of state-owned firms in exchange for favorable treatment.

The notion of payment goes beyond money and includes lavish gifts, luxury vacations, expensive automobiles, and extravagant dinners, all of which may be subject to anti-corruption regulations.

Key Anti-Bribery and Corruption Laws

Some important Anti-Bribery and Corruption Laws are given below:

The UK Bribery Act

The UK Bribery Act applies to the public and private sectors. According to this law, it will be considered bribery if a person or organization offers something valuable in return for their benefit, such as advantages in a business deal or operation.

The UK Bribery Act encompasses individuals and organizations that offer or accept bribes, as well as third parties who engage in such activities on behalf of other organizations, entities, or individuals.

Entities are subject to different penalties based on the  severity of the violation of the anti-bribery law, such as

• 10 years imprisonment
• Unlimited fines
• Restricting participation in public contracts.
• Seizing of assets
• Convicted executives may be prohibited from leadership for up to fifteen years.

US Foreign Corrupt Practices Act (FCPA)

The United States’ Foreign Corrupt Practices Act (FCPA) of 1977 can be seen as a companion to the UK Bribery Act. It prevents organizations from bribing foreign officials to benefit the business.

The FCPA is enforced by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), both of which have made it a top priority for over a decade.

The amendments in 1998 set a global standard for anti-corruption to cover both domestic and foreign organizations.

The FCPA requires publicly traded companies to establish accurate internal accounting controls to record all transactions.

Breaching the FCPA leads to the following penalties.

• Imprisonment for five years
• Criminal penalties up to $100,000
• Civil fines up to $10,000

Complaints must implement ABC due diligence to ensure the right ABC compliance.

The OECD Anti-Bribery Convention

According to this convention, any person who offers a bribe to a foreign public official should be held accountable, as it will be considered bribery. This anti-bribery and corruption policy applies to businesses engaged in international transactions.

It differs from other anti-bribery laws by targeting the briber, not the recipient. Suppliers will be held accountable, and companies following the 2021 Anti-Bribery Recommendation will implement new procedures to detect and mitigate foreign bribery risks.

The OECD Anti-Bribery and Corruption Convention has been signed by 44 countries, including the U.S., the UK, Germany, Japan, and Canada.

Each signatory country must align its local laws with the convention’s requirements, typically by introducing or updating legislation to criminalize bribery and establish enforcement mechanisms.

These laws vary by country but generally impose penalties for companies and individuals involved in foreign bribery.

ISO 37001: A Global Standard for Anti-Bribery and Corruption Compliance

ISO 37001 is a standard for achieving anti-bribery compliance that can be integrated into organizations of all sizes and types.

According to ISO 37001, establish clear compliance guidelines, implement robust anti-bribery policies, and mitigate bribery risks through thorough due diligence processes.

Compliance Monitoring and ABC Risk Assessment

Companies conduct due diligence for various reasons. Financial institutions assess risks associated with potential partners, while businesses perform due diligence on third-party suppliers to ensure clean backgrounds and compliance status.

Following ABAC guidelines not only ensures compliance with AML laws but also helps do the due diligence against partner businesses before establishing any business with them.

Compliance monitoring and ABC risk assessment play a crucial role in mitigating risks by ensuring thorough due diligence across financial institutions and business partnerships.

Many countries have introduced laws and Bribery and Corruption Guidelines, like the Foreign Corrupt Practices Act in the United States and the UK Bribery Act in the United Kingdom.

How to Conduct ABC Due Diligence for Third Parties

Understand Compliance Requirements

The cross-border business activities require companies to meet evolving regulatory requirements, such as the U.S. Foreign Corrupt Practices Act and Germany’s Supply Chain Due Diligence Act.

It is essential to screen third parties or contractors associated with government entities or involved in contracts with State-Owned Enterprises (SOEs), as these relationships may entail additional risks related to bribery and corruption.

Objectives for Due Diligence

Align your due diligence strategy with your company’s risk tolerance. Define objectives by considering factors like the organization’s size, potential political exposure, and legal risks.

Due diligence helps identify potential exposure and ensures compliance with anti-bribery and corruption regulations.

Screen Against PEP and Sanctions Lists

Check the names of companies and individuals against global sanctions lists or watchlist to ensure they are not involved in illicit activities or subject to trade restrictions.

Screening against PEP profiles can reveal individuals or third parties who may pose a higher corruption risk due to their influence, authority, or connection to public funds.

Screen contractors or individuals associated with government projects or State-Owned Enterprises (SOEs) to ensure they are not linked to high-risk political figures or entities that are subject to sanctions.

Screening for Regulatory Enforcement list

Additional screening through adverse media checks and regulatory enforcement warnings is essential for high-risk third parties.

Adverse media checks show negative press or legal issues, while regulatory warnings highlight sanctions or penalties, which helps in assessing reputational and legal risks.

Conduct Ongoing Monitoring

Screening isn’t a one-time process. Ongoing monitoring is important to ensure that any changes in a third party’s status are promptly detected.

Regularly monitor for updates to sanctions, PEP, and adverse media lists to stay informed about changes in a third party’s risk profile.

Businesses can reduce exposure to financial crimes and ensure they are not facilitating illicit activities by continuously monitoring third parties.

AML Watcher: Your Shield Against Corruption and Bribery Risks

AML Watcher helps businesses by:

• Efficiently screening customers, suppliers, and business partners for anti-corruption and anti-bribery risks, and AML Compliance in line with risk risk-based approach analyzes corruption risks using sentiment insights on Politically Exposed Persons (PEPs).
• Maintaining anti-bribery and corruption compliance by screening data against warnings and regulatory enforcements, from court orders and law enforcement documents. These detailed records assist in detecting corrupt entities from different countries.
• Assessing ABAC risk through adverse media screening provides real-time insight into corruption-related operations and access to global leaked data on corrupt individuals and organizations.
• Offering ongoing monitoring for corruption-related keywords with real-time updates on potential risks. Additionally, it analyzes legal and law enforcement documents, helping detect risks associated with entities involved in bribery or corruption activities.
• Providing cost Effectiveness by reducing false negatives by 15%, and automated workflows streamline compliance tasks. It cuts false positives by 44% and reduces irrelevant alerts.
• Offers custom whitelisting/blacklisting feature that flags high-risk individuals with personalized risk categories. It enables businesses to tailor compliance to their industry-specific needs and assess corruption Risks in Third-Party Vendors.
• The Custom Risk Scoring feature enables you to tailor risk assessments to meet the specific needs of your industry and operations.

Book a Free Demo now to ensure ABC compliance by mitigating bribery and corruption risks.