Recent policy shifts and guidance from U.S. regulators have underscored the importance of implementing well-designed and effective compliance programs, especially for multinational, matrixed organizations operating in high-risk jurisdictions. With U.S. agencies actively pushing for stronger anti-corruption measures, compliance professionals face the daunting task of aligning corporate procedures with an increasingly complex and rapidly evolving regulatory landscape.
The highest levels of the U.S. government are echoing a resounding call for collaboration and cooperation—fulfilling their commitment to combat corporate crime. Notably, Deputy Attorney General Lisa O. Monaco and Assistant Attorney General Kenneth A. Polite, Jr. have been vocal advocates for anti-corruption reforms. Illustrative of their commitment, the DOJ has announced the creation of the International Corporate Anti-Bribery Initiative (ICAB). Additionally, in late 2023, the U.S. adopted the Foreign Extortion Prevention Act (FEPA) which establishes criminal liability for foreign officials who demand or receive bribes from any U.S. person or company while located in the U.S. Companies must account for this expansion of U.S. bribery law—which formerly criminalized only the offering or giving of bribes—by updating their compliance programs to address and adequately train employees on the demand-side of bribery.
With U.S. corporations paving the way with reinforcing its already robust system of accountability, multinational compliance programs must prepare to be held to the same standards for their workforces. Compliance professionals are thus challenged to enhance the management, communication, and reinforcement of anti-corruption measures amid escalating enforcement risks. Multinational compliance programs are expected to foster a ‘culture of compliance’ and establish effective, multidirectional internal communications that facilitate smooth information flow and shape employee engagement and perception of the organization’s mission, values, and culture. To achieve this objective, multinational, organizations will look to revamp their compliance programs to be more dynamic, data-driven, and deeply integrated at all levels of the organization.
Partner, Ropes & Gray
Those attending the TRACE London Forum last week enjoyed captivating talks including “Taking on Putin” by Sir William Browder (“Bill”), an accomplished investment banker and the author of Red Notice and Freezing Order, and “EVs, Energy & Microchips: How China’s Emerging Supply Chain Dominance Has the West Scrambling” by Sandy Garossino, a reporter for Canada’s National Observer. Although their topics may seem far apart, a common theme resonated across them. With mesmerizing real-life stories and eye-popping statistics, they left the audience with a better understanding of how corrupt regimes preserve their power by creating and funding distractions that stoke human rights abuses.
Bill captivated the audience with a heartfelt story of his continuing pursuit of justice for Sergei Magnitsky, his former lawyer in Russia who, while gravely ill and imprisoned without access to medical treatment, was beaten to death by several Russian Police for his investigation of corruption by Russian President Vladimir Putin and his henchmen. Largely through the efforts of Bill, 35 countries have enacted Magnitsky Acts, which empower enforcement officials to freeze the assets of kleptocrats and human rights violators.
These laws have angered, not restrained Putin. Funded by enormous sums tithed by Russian Oligarchs who fear him, Putin maintains a tight grip on power to avoid the cruel fate that he imposed on Magnitsky, Navalny, and so many others. As Bill explained, Putin’s professed motivation for invading Ukraine out of historical and patriotic necessity is a laughable ruse. Rather, Putin simply seeks to remain the apex predator in Russia’s kleptocratic food chain to avoid the alternative – ending up on the menu. Putin preserves his power by using the national treasury to fund the war in Ukraine as a distraction, so the focus and blame are on others rather than on him and his corrupt regime.
Sandy Garossino spoke of a different sort of power – electric – and used mind-boggling graphs to depict how China is a generation ahead of the West in Electric Vehicle (EV) technology, production, and supply chain fundamentals. EV batteries and solar power are the new oil, and geopolitically they could power China to essentially become OPEC 2.0. Some Western countries have blocked or slowed imports of Chinese EVs in hopes their national industries will catch up. But as Garossino points out, given the opportunity to buy a very inexpensive EV from China, consumers in the West will quickly and even happily forget that their purchase will assist in China’s human rights abuses.
Specifically, success in the global EV market will result in a continuous stream of funds for China’s government that will reinforce its confidence and its treasury, helping to fund its continuing systematic abuse and destruction of the cultures of Uigurs, Tibetans, and other minorities within China, as well as funding China’s aggression towards Taiwan and in the South China and Philippine Seas.
Like Putin, China’s leadership understands that engaging in human rights abuses are a self-preservation tactic in that they distract the people from the real challenges to be resolved. Success in the EV market also will help China’s leadership to distract the people from problems created by weak sectors in the country’s economy, especially real property and banking, and serve as a point of nationalistic pride for Chinese – all to the benefit of the current regime.
Attending the Forum last week to hear from experts how corrupt regimes maintain their grip on power was daunting but also invigorating. On the bright side, the Forum’s audience of skilled corporate compliance officers are to a person actively engaged in the struggle against human rights abuses. By ensuring their companies and colleagues comply with law and company shared values, and through their anti-bribery, anti-money laundering, sanctions, and other efforts day in and day out, compliance officers are continually working to keep resources out of the hands of those who would use or contribute them toward abusing human rights.
General Counsel
Many companies include in their template agreements a little provision that feels like humble bragging mixed with a warning: “Your company agrees and warrants that your employees shall comply with our company’s Code of Ethics, which can be found at [URL].” Some even request your company to sign up to their Anti-Corruption, Health & Safety, and/or a broad ESG policies. Too often, internal business clients assume this sort of provision is “no big deal” since “we have all those policies anyway.” At that point, dear Compliance Officer, you may be thinking that medical school would have been a good idea. But, no, you instead recognize this is another opportunity to tackle a recurring risk gap, and maybe even do some humble bragging of your own. Here are some reflections and tactics to help:
Consider your company’s posture in the business relationship. If you are a supplier and the policies are specific to their supplier network, you will probably need to be more flexible. Even so, it is important to remember that your Business colleagues are not going to read the other party’s policies, so you will need to do that and explain what would be required to comply, including timeframes and costs.
In most business relationships, it is important to engage with the other party on this type of provision to manage the risk it poses. Start with constructive pushback by sharing with them your company’s policies and stress these points, which are very likely true:
Your company has very similar policies and training that are built on the same principles,
It would be confusing and impractical to require your employees to comply with their policies, and
The agreement already contains representations and warranties regarding compliance with applicable laws, including anti-bribery, anti-competition, sanctions, criminal finances, etc., so warranting to their internal policies does not add much additional protection, and, in fact, it muddies the waters.
Finally, ask the other party what will happen in the very unlikely event that the provision was breached? Would that be a material breach of the agreement?
Expect to hear crickets. But to be fair, if your company’s templates contain a similar provision, then you should be able to respond cogently to points a through d above. (NB. We all need to reconsider these types of provisions and whether there is a better approach. Please feel free to add your comments below.)
So, what to do? Try this: include with the above pushback points and questions a request that the provision be a mutual obligation, so each party has the same level of comfort that the other is ethical and maintains basic corporate compliance hygiene. Also suggest the provision be revised so that each party:
x. Acknowledges their receipt of the other’s policy (perhaps including their URLs), and
y. Is obliged to continue providing their respective policy and training to their employees through the term of the agreement and any extensions.
It is a useful tactic to mark-up their template to reflect the above points x and y so that you move the discussion in the direction you want it to go and put the action squarely on the other party to deal with your proposal (which is the entire point of redlining and a fun topic for another time).
It is worth noting that this proposed revised mutual provision also accomplishes three other important goals (to share with specific audiences):
1. It minimizes the chance that a party’s failure to comply with the provision may be viewed as a material breach of the agreement. (Share that with the other party.)
2. It better positions the provision within the bigger picture of parties’ business relationship. (Share with your Business or Exec team.)
3. Also, it will not add to your Compliance team’s already huge workload. (Yay! Share only with your team.)
Hit the send button on your email + attachments (your policies and the mark-up) back to the other party. You will feel sheer joy for having humble bragged about your company’s Compliance program in a way that also inches the business forward. When the other party agrees to the proposed mutual provision, you may even be tempted to yell out “Sorted!” But wait . . . there’s more to do if you want to replicate this success across all similar situations. Yes, there’s always more.
In a word: Training. Prepare your Business and Legal colleagues to expect these ‘you-comply-with-our-policies’ provisions, how they should react to them, and why your company cannot simply sign up to the other party’s policies. Include a slide with a fairer, workable mutual provision like that discussed above and distribute it to the Legal team with a request they add it to their negotiations quiver. Ask all to get the Compliance team involved if the other party refuses to play nicely on these types of provisions.
By completing a training campaign on this topic, you will have further expanded your Compliance team’s reach and the company’s ability to manage this particular risk. And that is yet another point to humble brag about. (Share with everyone!).
General Counsel