As an attorney focused on ethics and compliance, companies often talk to me after they have discovered an export compliance problem.  In the best cases, the issue can be resolved through speaking with the freight forwarder or updating administrative procedures. 

In the worst cases, the company may need to make a Voluntary Self Disclosure to government enforcement personnel. In this era of massive anti-corruption headlines, many companies have ignored or down-played potential export compliance risks.

Companies need to adopt a new mind-set, a proactive compliance strategy that embraces export compliance company-wide to mitigate the real and significant risks of violations.

Companies who gloss over the underlying circumstances that led to a problem in the first place will usually find themselves dealing with another problem in the not-too-distant future.

It is common for companies to think that they do not need an export compliance program.  Some of these companies rarely export products or services. Others only export “benign” products or services that generally do not require a license, while still others hire a single trade compliance expert and think their job is done.  These are risky mistakes.

Even companies with very little export activity must have a basic compliance program in place or they will be constantly managing (and dodging) potential violations and problems.  You could be the most knowledgeable export compliance expert, but if you haven’t implemented a compliance program to communicate with operational employees you will find yourself without eyes and ears.

Forward thinking companies realize that the best time to implement a basic export compliance program is before a problem arises.  This will save you time and headache down the road. Most companies can prevent 99% of problems with a few basic steps. Of course, if your company is exporting military-grade equipment to countries all over the world, you will need much more than the basics. But, for most of the clients I work with, their export compliance programs consist of the following five components.

1. A clear and simple policy

Export rules and regulations are mind-numbingly complex. Definitions can be hard to find.  That level of detail is not useful for your operational employees. Your export compliance policy should consist of a single clear message: think about what you are exporting, who you are exporting to, and where it is going.

Of course, you will also want to include an explanation of the policy, definitions, reporting lines, non-retaliation policy, and other components you see in most compliance policies, but the underlying message should fit in a single paragraph. Once people become aware of the “what, who, and where” you will have focused attention where it should be.

You do not need your employees to be able to tell you from memory what type of license is needed to export your widgets to Country B – they just need to know enough to ask you.

2. Defined roles and responsibilities

This is where the rubber meets the road.  You need to have clear roles and responsibilities defined for who is going to perform export compliance checks. That can include screening counter-parties for sanctions compliance or reviewing export transactions to consider if a license is needed. Either way, those operational personnel need to know that export compliance is part of their job. In terms of your policy, it isn’t enough to say this is what the company has to watch out for – you need to identify the specific person(s) who will actually make sure that potential issues are flagged.

3. Regular training

This component varies by organization.  Some companies who export frequently should provide basic export compliance training to all their employees on a regular basis. Companies that export infrequently may not need such a comprehensive program and can be effective with a shorter message to everyone. Regardless, the individuals who are responsible for your export compliance – those we just talked about above, need to be thoroughly trained about their areas of responsibility.

Individuals performing sanctions screenings should know why red flags arise and what it means to be on a sanctions list. Targeting those employees results in the best return on your training investment.

4. Meticulous recordkeeping

All the hard export compliance work your employees do will be worthless if they are not creating an audit-ready record. Someone may think they have a good memory, but when issues arise it is often weeks, month, or years later. No one remembers if a screening was conducted, or why certain red flags were resolved. Make sure your employees know the importance of documenting each step taken in the export compliance process.

5. Auditing and monitoring

The last component is making sure that the procedures you put into place are being followed.  I recommend starting with more frequent, less intensive audits of your export compliance procedures. This allows your operational personnel to become familiar with the types of requests and information that may be sought in audits down the road. Not to mention, if an issue does arise, your employees will be ready to go with the information you need to fully assess the facts and circumstances.

These five simple components of an export compliance program will go far to ensure that your employees are ready to prevent your company from making export compliance mistakes.

The post 5 simple steps to a successful compliance program appeared first on Trade Ready.

There is not a week that goes by where we do not see a headline reporting some type of bribery and corruption scandal, or yet another example of unethical behaviour by an executive or politician.

After 35 years with the RCMP, and several years as the Compliance and Anti-Corruption expert with the Sensitive and International Investigations Unit, these types of headlines should not really surprise me. From the Panama and Paradise Papers to revelations of corruptions amongst company executives and politicians, it appears that the ugly spectre of corruption is being highlighted everywhere.

One could easily become jaded and cynical by these constant reminders of how some people let greed and a lack of integrity distort their moral compass.

Bombarded by continual headlines of corporate and government corruption, the general public cannot be blamed for their anger, distrust and frustration at such behaviour. These feelings are further fueled by the belief that those actively involved in corrupt conduct are not being made to account for their unethical and criminal behaviour.

Technology and a new generation of business leaders is leading us in the right direction

Contrary to the prevailing wisdom, however, I see this growing trend of headlines and scandals as a very good sign that we are on the right path to slowly change the culture and environment that has allowed corruption to thrive for so many years. The reality is that ten, even 5 years ago, we would not have seen these headlines. Those corruption scandals would have been buried, and the individuals involved would have continued to operate with impunity and without fear of public disclosure, let alone being prosecuted.

The very fact that that we now have high ranking public officials, senior corporate executives, and well-established companies being named, shamed and prosecuted for unethical behaviour is a clear sign that the fight against corruption is evolving in the right direction.

More aggressive enforcement action, new laws, as well as the growing demand for greater transparency and accountability around the world is having a visible impact.

Two key factors that are driving this change are the growing push-back from civil society, along with the power and immediacy of social media platforms. These platforms are empowering civil society to organize, and people to report instantly on corrupt and unethical conduct. Consequently, it has become much harder for public officials and companies to hide their corrupt activities or control the narrative.

In this new and changing environment, it is likely that the corruption headlines will continue for some time and we will see more disclosures similar to the Panama and Paradise Papers occur.

The millennial generation are also playing a critical role in changing the business culture. This next generation of business leaders are much less accepting of unethical behaviour, and crucially, are connected through social media with countries and people being victimized by corruption. As a result, those millennials are more likely to speak-up and report unethical and corrupt behaviour.

Organizations who fail to have a robust compliance program, which includes an effective whistleblowing program, will see millennials report wrongdoing to authorities or leak information to the web.

I have always warned managers that if I get a complaint of wrongdoing by an employee, they and their company have failed in implementing an effective anti-corruption compliance program and ethical business culture.

Having an anti-corruption compliance program does not necessarily mean that a company is ethical

Having a robust compliance program is a very important step in mitigating and managing corruption risk, but will invariably fail if it is not supported by a corporate culture that not only supports compliance, promotes integrity and ethical governance.

An ethical business culture is the foundation on which a compliance program succeeds. Compliance is the framework to tackle corruption while an ethical business culture is the foundation on which this framework operates. Organizations cannot control the integrity of individuals, but they can certainly influence it.

An organization’s culture influences the integrity of those employees that are either on the fence or would rationalize wrongdoing. This occurs when the culture promotes willful blindness, permits ignorance of policies and controls, or encourages the avoidance of those controls through unreasonable business goals and rewarding ‘success by any means’.

No controls, policies or compliance program can totally eliminate or prevent unethical people from getting involved in wrongdoing, but the absence of those measures greatly increases the capacity of wrongdoers to operate with impunity and fear of detection.

The absence of a robust anti-corruption compliance program:

• seriously increases risk and liability,
• depreciates M&A and joint venture value,
• potentially damages the brand,
• undermines and reduces trust and confidence,
• increases the potential for prosecution,
• and threatens sustainability

Protect your company by incentivizing ethical behaviour

On the flip side, the existence of a robust compliance program and an ethical business culture can not only prevent, detect and mitigate misconduct, but will markedly increase the chances of authorities going after the individual wrongdoers instead of the company itself.

In addition to an organization’s culture, business and thought leaders must also consider what role greed, selfishness, blind ambition, reckless need for recognition or even performance anxiety can play in the non-compliance rationalization process. These leaders must be pro-active and continuously diligent in their efforts to mitigate individual and organizational risks by exploring new, creative ways to recognize performance and incentivise ethical behaviour.

In this changing business environment insurance underwriters, development banks, financial institutions, venture capitalists, pension funds and a growing number of businesses and government agencies are looking at mitigating their risk and exposure to bribery and corruption. Having a robust compliance program and adopting ethical business practices is now becoming a competitive business advantage.

We need to raise the bar collectively and work towards creating an environment where compliance does imply integrity.

You can find more information on the CCEAC’s anti-corruption and ethics training here.

The post Today, compliance does not eliminate corruption – but that’s changing appeared first on Trade Ready.

Detailed compliance policies help keep companies on the right side of the law.

But this needs to be balanced with an understanding that no policy can ever contemplate every possible risk. They need to proscribe behavior that is not permitted, while recognizing that few decisions fall on one side or the other of a bright line.

Employees should know more than just “why” compliance is important. They should know who presents risks of improper payments (like government officials), what kinds of requests are inappropriate, where the company faces the most risk, when to involve others in a transaction and how to decline an improper request.

That requires a compliance program that provides practical information that is relevant to employees in an interesting and engaging way. It’s a challenging process, but it can be done.

Here are some strategies to develop a compliance program that does more than simply reiterate the rules:

1) Create cascading compliance

Management tone is crucial to the success of a compliance program, but it is not enough for the C-Suite to tell employees that compliance is important. Top-level executives should communicate with employees about the company’s values, why compliance is important and that the company is prepared to walk away from bribe-tainted deals.

When employees see that the C-Suite is committed to compliance, they are more likely to share that commitment. Institute and enforce mechanisms whereby employees are encouraged to disclose compliance issues.

When employees see that candid communication is valued, they will be more likely to share information.

2) Make it practical and relevant

In addition to bright-line rules and prohibitions, help employees recognize risks, coach them on appropriate ways to respond to improper requests and support them when they avoid potentially improper situations.

This can be done through practical, scenario-based training, with realistic case studies that employees can work through in teams. Encourage employees to discuss why they chose a particular response and why other responses might not be appropriate.

When providing the best response, explain why other responses were less good. Case studies should be relevant to the industry you work in and the locations in question. Employees in pharmaceutical sales in China should not be trained using case studies about freight forwarders in Nigeria.

Everyone relates more easily to information that is relevant to what they are doing and where they work.

Carefully selected examples will also demonstrate that headquarters understands the local challenges they face.

3) Find the weak spots

To ensure training is relevant, visit foreign branch offices and subsidiaries regularly and speak with the employees. Discussions with employees out on the front lines can be a tremendous source of valuable and timely information.

They will know which government officials are demanding bribes, if any, or if other companies are offering bribes. Find out what the challenges are in specific locations. What do employees believe to be “reasonable and customary”?

What techniques have they found useful in the past for circumventing extortionate government officials? Do they believe that an industry-wide initiative might bolster their efforts? What positive suggestions do they have to address the problems they face?

And then tailor your compliance programs to address those specific risks and embrace the best of these suggestions, thereby improving your program and assuring employees that their concerns have been heard.

On a similar note, conduct exit interviews when employees are leaving to provide them with an opportunity to voice any concerns they may have been unwilling to address while still employed.

4) Keep it interesting

Employees will be less engaged in a compliance program based on strict rules.

There are many ways to make a compliance program interesting, engaging and effective.

Periodically send employees short videos on specific topics to re-enforce training or provide practical advice between required training sessions.

Include compliance quizzes in communications. Hold town-hall meetings or lunches to discuss hot topics and trends in compliance, and encourage employees to ask questions. Schedule team-wide exercises that incorporate contests or other activities related to compliance.

These strategies will keep employees interested and engaged and contribute to a stronger sense of community and a better culture of compliance. While a rule based program tells employees what not to do when choices are reasonably clear, prescriptive programs fall short when choices are less clear.

In these situations, employees need to be confident in their ability to apply good judgment based on candid discussion and scenario-based training. They need to know who they can approach with questions. And they need to know that their company will support them on the legitimately close calls.

How do you communicate the grey areas of your compliance program?

The post 4 strategies to overcome the grey areas in your compliance program and avoid corruption appeared first on Trade Ready.