Stopping bribery and corruption
This past June, the establishment of the Extractive Sector Transparency Measures Act (ESTMA) brought into focus the efforts and commitment of the Canadian government, and governments around the world, in the fight against bribery and corruption.
The ESTMA, along with the Extractive Industry Transparency Initiative (EITI), highlight the anti-corruption efforts made by the government of Canada as well as other authorities around the world who promote greater transparency and accountability in business transactions. Additionally, the increased enforcement action by the RCMP and their international law enforcement partners demonstrate their commitment to investigate and prosecute companies and individuals who partake in corrupt action.
By the nature of its activities in high-risk countries, the extractive industry is particularly at risk of being entangled in bribery and corruption schemes. At every stage of the life cycle of an extractive project, contacts with foreign government officials are constant and numerous, exposing one to potential opportunities and pressure for corruption to occur.
The impact to a company facing a conviction under the Corruption of Foreign Public Officials Act (CFPOA) goes beyond the criminal sanctions stemming from it which may include unlimited fines for the company and up to 14 years in jail along with fines for individuals.
The following additional costs and consequences associated to a corruption investigation, prosecution and conviction should give pause to executives who may look at anti-corruption compliance as too costly and burdensome to implement;
- Legal and auditing costs: Past corruption cases in Canada and elsewhere have shown that the legal and auditing costs resulting from internal investigations and the remediation process equals and often surpass the actual cost of the criminal fine. Court imposed probation conditions also add to these costs.
- Impact on productivity: Company officials and other resources are diverted to dealing with the repercussions of corruption instead of concentrating on core business. Issues of employee morale, retention, hiring and other HR issues as a result of a corruption investigation can also negatively impact productivity.
- Civil liability with shareholders: The increase in corruption related prosecutions of companies globally has been followed by an increase in class- action lawsuits against these companies and executives deemed responsible for the resulting decline in share value.
- Successor liability: Where the goal of many junior mining and exploration companies is to secure a M&A deal, potential buyers or joint venture partners will walk away or demand deep discounts and waiver conditions rather than assuming the liability of a company facing criminal sanctions for bribery.
- Impact on brand and potential business: A company’s brand and reputation can be seriously impugned by a corruption investigation and conviction, which can impair its ability to obtain financing, secure business relationships and obtain contracts. International arbitration of disputes will not be available when a contract is secured through a bribe.
- Higher costs to prove legitimacy and remediation: There will likely be higher costs resulting from the need to meet greater due diligence requirements to secure financing, insurance and other support from private and government agencies.
- Proceeds of crime: Any profits stemming from contracts and agreements secured through a bribe could be considered proceeds of crime and thus possibly be forfeited.
The costs and consequences of bribery and corruption cannot be ignored. The changing business landscape for the extractive industry requires companies to be pro-active in reducing their risk and exposure by implementing a robust anti-corruption compliance program.
Leveraging available cost-effective tools, anti-corruption compliance should be viewed as an investment that increases a company’s ability to manage risk, control costs and adopt an ethical governance model that will improve their ability to effectively prevent, detect and address bribery and corruption risk.
Implementing a robust anti-corruption compliance program can reduce the risk of being subjected to a CFPOA (or foreign) prosecution and it is now being viewed as a competitive business advantage when dealing with potential M&A and joint venture partners.
The RCMP is committed in its efforts to combat bribery and corruption. This commitment also involves working with and helping Canadian industry reduce their risk and exposure to bribery and corruption through outreach and prevention activities.
For more information and links to material and anti-corruption compliance tools, visit www.rcmp-grc.gc.ca/ottawa/corruption/index-eng.htm
Sgt. Pat Poitevin is Senior Investigator, Outreach Co-ordinator, Sensitive and International Investigation Unit, Royal Canadian Mounted Police.