Anti-Bribery Legislation and your Compliance Program
The relevance of International and Israeli Anti-Bribery Legislation to your company & why you need an Anti-Bribery Compliance Program
Israel passed legislation during July 2008 adding an additional offense to its penal code, streamlining its domestic laws with the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions from 1997.
The United States was the first to make it a domestic offense to bribe foreign officials in 1977, with its “extra-territorial” Foreign Corrupt Practices Act (more commonly known as the “FCPA”), enforced by both the DOJ and SEC.
According to the new law, it is unlawful in Israel, as in all OECD member countries, such as the US and the UK, to bribe foreign government officials for the purpose of obtaining or retaining business. This provision applies to any individual, firm, officer, director, employee, or agent of an entity and any stockholder acting on behalf of any such entity. The intent of making a corrupt payment, even if not materialized, can constitute a violation of the statute. It is important to note that an “intent” need not necessarily relate to direct payments only, but may relate to payments via intermediaries (third parties such as agents, distributors, or business partners), while knowing that a portion of the payment would go directly or indirectly to a foreign official. Some interpretations under the FCPA, that may not be intuitive include the position that “knowing” includes conscious disregard of “red flags” and deliberate ignorance. Additionally, an offer, under both Israeli and US law, is considered a bribe whether it is in cash or in-kind and and it is illegal, whether or not the offer was accepted. Moreover, in Israel, as in the US, Europe and other OECD member countries, a “foreign official” is interpreted very broadly, and includes not only government employees, but includes for example employees of government-owned enterprises.
In February 2010, the OECD released the “Annex II Guidance” directed at both government agencies and corporations. This document provides certain guidelines, requirements and insights as to how domestic legislation incorporating the OECD Treaty should be implemented and monitored.
In a unprecedented statement, the US Department of Justice recently endorsed the Annex II Guidance as an effective framework of principles for implementing a compliance program.
The basic elements of an Anti-Bribery Compliance Program are as follows:
- Risk Assessment – this is a crucial first step to determine the nature of the company’s business and the type of compliance program that will be required for the company.
- Training – this includes training for the relevant departments within the company, as well as general employee training. Moreover, in many cases, training of business partners is highly recommended.
- “Tone at the Top” – this refers to an executive “buy-in” – both from senior corporate management as well as local management at the various subsidiaries across the globe. This message should also be portrayed via a clear and unequivocal Code of Ethics forbidding unethical and illegal acts such as bribery.
- Policies and Procedures – including gift and entertainment policies, expense reimbursement procedures, as well as payment procedures for business partners.
- Correct practices with Business Partners, including documented due diligence procedures to be conducted prior to engaging business partners to identify “red flags”, suitable contracts addressing anti-bribery concerns, as well as audit rights, etc. In some cases, this may include review of existing business partners.
- In some cases, additional aspects require attention, such as review of the company’s signatory rights, commission guidelines, and other corporate governance issues.
An effective anti-bribery compliance program should be tailored to the specific characteristics of each company, including its geographical distribution, its market, its customers and its corporate history.
This Note shall not be interpreted as legal advice nor shall it replace individual and specific legal advice which should be sought by the company.