Category Archives: Anti-Corruption & Bribery

Training Executives On Anti-Corruption Laws – Best Practices

This week, White Collar Post features a guest post from internationally known compliance and anti-corruption expert Marc Y. Tassé.

Good strategists manage uncertainty by playing the probabilities, but too many executives use wishful thinking when it comes to anti-corruption compliance. Playing the probabilities means understanding the odds of success. Just 1 in 12 companies manages to Mitigate Reputational Risk Exposure resulting from non-compliance and therefore this result in a High Level of Reputational Risk Exposure.

Non-compliance 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. Executives must be pro-active and continuously diligent in their efforts to mitigate individual and organizational risks.

Corporate board members devote significant time to financial oversight and strategy, while ignoring steps needed to protect and promote its most important intangible asset – its culture and reputation. Corporate boards are due for a rude awakening – compliance expectations and competing stakeholders are demanding increased more effective oversight. Directors need to learn how to carry out these important functions.

When training executives on anti-corruption laws we need to make them realize that Boards and senior executives need to do substantially more than a once-a-year “flyover” of their anti-corruption compliance programs if they expect the DOJ to conclude that their program meets the government’s definition of “effective.”

Boards need to be well-versed in all elements of the anti-corruption compliance program, regularly interact with compliance and legal personnel, and receive timely briefings on the program and the personnel responsible for its stewardship and operationalization. Directors and senior executives must understand that any compliance failures are something that they may have to answer to.

The existence of adequate policies and procedures does not provide a full defence against bribery charges but can be a useful tool for negotiating with authorities or avoiding proceedings against corporate entities. Further, because liability can also be founded on ‘wilful blindness’, the existence of anti-corruption policies and procedures can be helpful in rebutting any inference that a company or its executives ignored bribery.

There is still a place for tone at the top. The board and senior leadership must set the right tone in their communications across the company and outwardly. But tone needs to be paired with persistent actions on the part of the board and senior leadership signaling that ethics and compliance are a top priority and that the company is committed to doing business the right way and is prepared to back up its words with actions, including walking away from business and relationships that are not in alignment with the company’s organizational ethos. That is how tone at the top becomes conduct at the top.

When training Boards and senior executives on anti-corruption laws, we also need to make them realize that they 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 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.

Finally, Boards and senior executives need to be aware that no controls, compliance program, or business culture can eliminate or totally prevent people without integrity from doing wrong, but the absence of those factors greatly increases the capacity of wrongdoers to operate with impunity, while the strong presence of those factors greatly increases the likelihood of preventing and detecting wrongdoing, as well as providing a foundation to mitigate its impacts and consequences on the organization.

Canada takes a further step to combat international human rights violations and corruption

The Justice for Victims of Corrupt Foreign Officials Act

Overview

On October 4, 2017, the House of Commons has unanimously voted to pass Bill S-226, the Justice for Victims of Corrupt Foreign Officials Act (the “Act”),[1] that is commonly known as the Magnitsky law.[2]  The law is named after Sergey Magnitsky, a Moscow lawyer who uncovered a large tax fraud and was detained and died in a Moscow prison on November 16, 2009.  Bill S-226 received Royal Assent on October 18, 2017.

The Act imposes various sanctions, including freezing of assets and travel bans, on foreign nationals responsible for gross violation of internationally recognized human rights and significant corruption.  Among other things, the Act permits issuing orders against anyone in or outside Canada who are dealing, directly or indirectly, with the property or financial affairs of the foreign national that is the subject of an order or regulation under the Act.

On November 3, 2017, regulations under the Act were enforced combating the activities of 52 foreign nationals who are believed to have been engaged in gross human rights violations or significant corruption activities.  The majority of the named individuals are the nationals of the Russian Federation, in addition to the nationals of Venezuela and South Sudan.  The Russian government has not welcomed the law.  It retaliated with its own list banning the entry of various Canadians into Russia.  As part of the retaliatory measures, Russia’s officials stated that the government viewed the law as yet another attempt to exert pressure on Russia.

Continue reading »

Take Note: Facilitation Payments Are Now Illegal Under the CFPOA

city, downtown, high rise, buildingsOn October 31, 2017,  the Government of Canada eliminated the facilitation payment exception from the Corruption of Foreign Public Officials Act (the “CFPOA”). The elimination of this exception was the final component of significant and high profile amendments to the CFPOA enacted over four years ago, which also:

  • Expanded the jurisdiction for corruption offences based on nationality.
  • Increased the maximum penalty for an individual convicted under the legislation to 14 years.
  • Created a books and records offence.
  • Provided the RCMP with exclusive authority to lay charges under the CFPOA.

The government delayed implementation of the provision of the 2013 amendments removing the facilitation payment exception from the CFPOA to provide companies with sufficient time to modify business practices and adapt their internal controls. Despite the length of notice, it is critical for companies conducting business abroad to be mindful of this major change to the legislation.

Continue reading »

ISO 37001: The New Anti-Corruption International Standard

The International Organization for Standardization (ISO) has recently entered the fray by establishing an ISO certification standard 37001 specifically addressing anti-bribery in corporations by providing a structure for organizations to assist them in the implementation or management of anti-bribery managements systems.  So what is ISO 37001?  Simply put, it is an international standard for anti-bribery management systems.  The beauty of ISO 37001 is the global acceptance of the standard for anti-corruption compliance.

Obviously an anti-bribery system is to prevent bribes from being given or offered by corporate individuals representing business interests of the organization.  As with all ISO certification standards there are specific elements that must be met by the organization in order to be certified.  The system is set up that there is a consistent review of the system in order to ensure compliance and continual improvement.

While national laws may differ regarding anti-corruption compliance, the idea, as with any standard, is to provide a common ground where all global branches of an organization, no matter the location, have the same basis for compliance.  Keep in mind that ISO 37001 only addresses bribery.  Other white collar compliance issues such as fraud, ant-trust offences and other types of corrupt practices activities are not within the scope of this standard.

Continue reading »

Corruption Prosecution Collapses After Wiretap Evidence Excluded

The high-profile corruption prosecution of two executives and the alleged intermediary to a foreign government has ended dramatically after a judge excluded the wiretap evidence collected by the RCMP. The defendants – Kevin Wallace & Ramesh Shah, both former Vice-Presidents at SNC-Lavalin, and Zulfiquar Bhuiyan, a dual Bangladeshi-Canadian citizen – were charged under the Corruption of Foreign Public Officials Act for bribes allegedly paid by SNC-Lavalin to secure a contract to supervise construction in Bangladesh.

The construction project was to build a multipurpose bridge connecting the southwestern region to the rest of Bangladesh. [1]  It was intended to stimulate economic growth by allowing transport of passengers, freight, natural gas, telecommunications and electricity.[2]  The project was forecast to cost approximately $2.9 billion and was funded, in part, by a $1.2 billion credit from the World Bank.

The Canadian investigation started after a World Bank investigator provided information obtained from four tipsters to the RCMP.  The tipsters alleged SNC-Lavalin was in the process of bribing Bangladeshi officials to secure the contract to supervise construction.  The RCMP never met any of the tipsters, but spoke with one by telephone.  The information provided by three of the four tipsters was obtained from other sources, but the RCMP never spoke with the tipsters’ other sources where identified.  The RCMP used information from the tipsters to obtain authorization to wiretap the private communications of the three defendants.  The information gathered on the wiretap led to the charges being laid.

Intending to challenge the wiretaps, the defence applied for a third party production order to compel senior investigators of the World Bank to appear before a Canadian court and produce documents.  The trial judge granted the applications.  The decision was appealed all the way to the Supreme Court of Canada.[3]   The Court overturned the trial judge’s decision.  The Court held that the World Bank did not waive its immunity by voluntarily providing information to Canadian law enforcement officials accordingly, its documents were immune from production.  Further, the Court found the documents requested were not relevant to the challenge of the wiretaps.

The defence subsequently brought a successful application to exclude the wiretap evidence.  Justice Nordheimer found that the two preconditions for a wiretap – (i) reasonable and probable grounds to believe an offence is or has been committed and (ii) investigative necessity – were not met and the wiretap should never have been granted.  On the first criterion, Justice Nordheimer noted that the RCMP relied almost entirely on information provided by the tipsters.  In his view, that information was not sufficient to provide reasonable and probable grounds because it was not compelling, credible or corroborated.  He was particularly critical of the reliability of the information.  He wrote:

The fact that a particular investigation may be difficult, does not lower the standard that must be met in order to obtain a [wiretap] authorization. Reduced to its essentials, the information provided in the ITO was nothing more than speculation, gossip, and rumour. Nothing that could fairly be referred to as direct factual evidence, to support the rumour and speculation, was provided or investigated. The information provided by the tipsters was hearsay (or worse) added to other hearsay.[4]

On the second criterion for a wiretap, Justice Nordheimer found that the RCMP failed to establish there were no other reasonable ways to investigate the allegations.

Justice Nordheimer concluded that the wiretap should not have been issued, and the evidence gathered by wiretap violated the defendants’ Charter rights to be free of unreasonable search.  Accordingly, he excluded all of the private communications intercepted from the evidence at trial. The Crown admitted that it had no reasonable prospect of conviction without the wiretap evidence.  The prosecutor decided not to call any evidence, and all three defendants were acquitted.

This was certainly not the end that Canadian prosecutors envisioned to a case the World Bank described as “a high-level corruption conspiracy among Bangladeshi government officials, SNC-Lavalin executives, and private individuals” that was proven by “credible evidence corroborated by a variety of sources.”[5]  The collapse of the Canadian case was caused, in large part, by deficiencies in the RCMP’s preliminary investigation.  Investigators appear to have taken insufficient steps to vet tipster information before seeking authorization for wiretaps.  This failure rendered the wiretap evidence inadmissible.  This case underscores the importance of the preliminary stages of the investigation and highlights opportunities for defence counsel seeking to exclude evidence obtained by wiretaps authorized primarily on the basis of tipster information.

[1] World Bank “Bangladesh Padma Multipurpose Bridge Project”, online: http://projects.worldbank.org/P111017/bangladesh-padma-multipurpose-bridge-project?lang=en

[2] Ibid.

[3] World Bank Group v. Wallace, 2016 SCC 15

[4] R. v. Wallace. 2017 ONSC 132 at para 71

[5] World Bank, “World Bank Statement on Padman Bridge” (29 June 2012) online: http://www.worldbank.org/en/news/press-release/2012/06/29/world-bank-statement-padma-bridge