TRACE’s List of Top 5 Most Colorful Projects to Raise Anti-Bribery Awareness 1

Raising awareness about bribery doesn’t always have to be serious business.  In fact, sometimes it can even be fun.  That’s why here at TRACE, we are interested in learning about unique campaigns designed to raise anti-bribery awareness in engaging, new ways.  From the forward-thinking, to the humorous and irreverent, these are the projects that have recently caught our eye:

  1. A Walking Tour of Corruption in Prague – Ah, Prague, the golden city of a thousand spires.  Some people go to stroll across the Charles bridge or visit Prague’s famed castle; others go to learn about corruption.  Yes, that’s right, you can spend your vacation in one of Europe’s most beautiful cities with The Corrupt Tour Travel Agency, which offers walking tours of Prague that explore the city’s unique corruption history.  Pick from three different tours: the “Prague Crony Safari,” which explores the “ostentatious dens” of some of the capital’s wealthiest residents, next, the “Hospital on the Edge of the Law” which explores graft at three Prague hospitals, and finally, “Prague’s Best of the Worst” a tour which daftly celebrates Prague’s “Monuments of Corruption.”
  1. The 185-Mile March to End Corruption – Last year, in the dead of winter, Lawrence Lessig, a Harvard Law School Professor, Constitutional scholar and political activist, led a 185-mile march across the state of New Hampshire to promote the idea of tackling campaign finance reform in Washington. The “New Hampshire Rebellion” is a nonpartisan movement that seeks to turn back the Supreme Court’s decision in Citizens United.  And yes, they’ll be back in New Hampshire this upcoming January, once more trudging through the sleet and snow.
  1. Corruption Summer Camp – Since 2009, the Organization for Security and Co-operation in Europe, along with the NGO The Future Is Yours, has organized a summer camp in Armenia to educate children in Armenia’s southern Syunik province about the dangers of corruption. The young campers conduct trainings, discussions and various games and activities aimed at promoting civil activity and participation and skills that kids can use to resist bribery demands later on in life.  And, as with all summer camp experiences, lasting friendships are always made.


What was this month’s biggest anti-bribery story? Reply

Take a moment to read our poll and vote for which headline you think was most newsworthy this month:

  1. China announces Investigation into Volkswagen AG’s China Joint Venture: China’s anti-corruption authority — the Central Commission for Discipline Inspection — has reportedly opened an investigation into two top executives at the joint venture between the German automaker and state-owned FAW Group Corp.  Audi, Volkswagen’s luxury unit, is also involved in a probe by Chinese anti-monopoly regulators regarding inflated vehicle and spare part prices.
  1. Tanzania Takes Positive Steps Towards Curbing Corruption: The country’s Prevention and Combating of Corruption Bureau (PCCB) recently announced that law enforcement have filed 327 cases over the past year and recovered about TZS 40 billion (roughly USD $24 million) during that time period as well.   The government also recently announced that it was setting up a special unit to monitor oil and gas revenues, including training auditors on how to manage and oversee lucrative contracts with foreign multinationals.
  1. U.S. Tennis Association Comes Under Scrutiny: A New York Times article has created a stir for the U.S. Tennis Association, pointing out possible conflicts of interest between several of the group’s current and recent board members and recent U.S.T.A. grants and contracts.  The paper alleges that at least $3.1 million worth of U.S.T.A. contracts have gone to organizations with ties to board members.
  1. Cobalt International Receives Warning Shot From SEC: The US oil company announced that it had received a Wells Notice from the SEC this month, which warned that the company faced an enforcement action for breaches of certain federal securities laws.  The notice is thought to be linked to alleged breaches of the Foreign Corrupt Practices Act (FCPA) pertaining to certain offshore oil deals in Angola. Following news of the notice, Cobalt shares fell by more than 10% and several shareholder plaintiffs firms announced that they too were investigating whether to bring actions against the company.

The Role of Academia in Anti-Corruption Collective Action Reply

Last week TRACE joined leading anti-corruption experts and academics from all over the world in Vienna, Austria to discuss effective teaching and pedagogy in anti-corruption studies within institutions of higher learning. The workshop, which was organized by the United Nations Office of Drugs and Crime (UNODC) and formed part of the Anti-Corruption Academic Initiative (ACAD), facilitated the exchange of academic expertise between professors with experience in the delivery of anti-corruption education and those who wish to introduce anti-corruption courses in their institutions.

During the three-day workshop, academics, government officials and anti-corruption professionals with diverse backgrounds, perspectives and experiences shared stories, challenges, resources and teaching methodologies. A major theme that reverberated throughout the seminar was that academics have an increasingly important role to play in advancing the global anti-corruption agenda and that a deeper level of change can result when academics engage in collective action and collaborate with business and government.

Unfortunately, however, anti-corruption studies and research remain in their infancy due to the present lack of inter-disciplinary anti-corruption materials and funding at the donor level. The ACAD, a collective action project formed in 2012 between UNODC, Northeastern University in Boston, the Organization for Economic Co-operation and Development (OECD) and the International Bar Association (IBA), seeks to address these issues mainly by 1) providing the academic community with a comprehensive anti-corruption academic support tool and 2) encouraging the teaching of anti-corruption issues as part of courses such as law, business, criminology and political science. Still, more needs to be done to include academics and researchers in the global fight against corruption. Here’s why:

This post was originally published on the International Centre for Collective Action (ICCA) Blog. Continue reading here.

Demystifying Anti-Bribery Certifications 1

Over the past few weeks, we here at TRACEblog have noticed a few interesting critiques of anti-bribery certifications. Harvard Law Professor Matthew Stephenson writes on his blog that he holds “a fair amount of skepticism” regarding anti-bribery certifications and believes that they “might in some cases prove counterproductive.” As British poet William Blake once wrote, “opposition is true friendship,” and we think that the same holds true here. So, in that spirit, we’ve taken Professor’s Stephenson’s blog posting as an opportunity to address head-on some common assumptions and misunderstandings that we believe surround anti-bribery certifications.

Full disclosure at the outset: TRACE Inc., an independent compliance firm working alongside TRACE International, offers a third party compliance certification to SMEs that involves a due diligence review, analysis and approval process. The TRACE certification differs from most in that it’s confirmation of a rigorous due diligence process, rather than confirmation that a company’s program is adequate.

  1. Certifications falsely promote a definitive judgment on the adequacy of a company’s compliance program

This is probably the most common misperception that we hear at TRACE. Critics of certification programs all too often obsess over the word “certification”: how can any compliance program ever be ‘certified’?” The word seems duplicitous, adding a pretense of certainty in an uncertain world. Of course, it is universally recognized that no compliance program, no matter how sophisticated, guarantees against wrongdoing. So to those critics of anti-bribery certifications, we would suggest focusing less on the form of the word and more on the substance of the review. A certification, at least as that term is used by TRACE, is an attestation that a company has successfully completed certain discrete steps aimed at combating corruption.

Certification by TRACE does not mean that the company is problem-free. In fact, each TRACE certificate explicitly states that it is not a guarantee against past or potential wrongdoing by the certified entity or a guarantee against potential liability, and goes on to explain that a summary of any red flags identified during the TRACE certification review is included in the report. In the end, what we at TRACE are certifying is that the entity has completed a rigorous review and that no unresolvable red flags were uncovered . But risk factors vary by company. Ownership of a consulting company by the Minister of Defense, even if legal under local law, will matter more to an aerospace and defense companies than it will to a medical device company. Companies must request and read the reports in the context of all facts known to them, their business and their appetite for risk.

  1. Certifications rely on methodologies that are non-standardized and opaque

Another common misperception is that certifying organizations make up an unfettered industry. In fact, TRACE is heavily committed to efforts aimed at standardizing anti-bribery compliance certifications. We are active participants in the ISO’s efforts to create a standard to evaluate anti-bribery management systems. This is a three-year process aimed at creating a set of best practices for companies to establish systems to mitigate, identify, and handle bribery-related issues. The standard will be a central part of an eventual ISO certification regime.

What about methodology? During a TRACE certification review, the candidate is asked to provide a predefined package of information and documentation that is then verified by TRACE, to a large extent using public domain sources and PEP/Sanctioned and Denied Parties databases. The review is fact-intensive, requiring the active participation and collaboration of a candidate, and also involves an anti-bribery training component for key employees and assistance in the adoption of an appropriate Code of Conduct. And while we cannot speak with regard to other certifying organizations, TRACE has always been transparent about the methodology it uses to review entities interested in TRACEcertification. The result is not a simple pronouncement by TRACE, but a hefty report with all relevant documentation included. Below is the description of the TRACEcertification process, as described in our public, marketing material:

To complete a review successfully, you must provide responses to a comprehensive anti-bribery questionnaire and disclose the following information:

›› Detailed company information, including information on subsidiaries and affiliated entities
›› Business registrations, as applicable
›› Corporate literature or a company description
›› Beneficial ownership (except for shareholders owning less than 5% of publicly-traded companies)
›› Identification of directors and key employees
›› Curriculum vitae for owners, directors and key employees
›› Additional ownerships, directorships and employment of all owners, directors and key employees
›› Current government employment of owners, directors and key employees
›› Previous government employment of owners, directors and key employees
›› Three business references
›› One financial reference or audited financial statement

TRACEcertification involves a media search dating back ten years and denied party screening. Candidates are required to adopt a code of conduct and to complete a mandatory anti-bribery training course (administered by TRACE utilizing our online training module) as part of the certification process. TRACEcertification requires certified parties to update their verified due diligence information on an annual basis.

  1. Certifications are mistakenly aimed at seeking protection from US, UK and other state enforcement agencies, yet are not recognized by these agencies.

Another common misperception is that certifications promise a false defense against government investigators located in the US and UK. The reality, as we’ve observed, is that most certified companies are not looking for a defense from US investigators, but rather are looking for a defense against bribe-seekers, that is, the government officials who extort bribes from them.

The uncomfortable reality that we here at TRACE are trying to address is that Western-focused anti-bribery compliance is a nonfactor for the vast majority of global business transactions. In the Philippines, small and medium sized companies constitute an estimated 99% of all business. How can we reach these SMEs who are, by default, not subject to the FCPA or UK Bribery Act, yet just as vulnerable to bribery demands? The fact that SMEs are a very easy target for low level government officials seeking to supplement their incomes is rendered even worse by the fact that so little effort has been made to reach these organizations and provide them practical tools with which to defend themselves.

Conspicuous certifications backed by internationally-recognized organizations like TRACE are tangible tools that SMEs can proudly display on their websites, in their offices or on the back of their contracts — and often do — to show that they will not acquiesce to bribe demands. It is an open, public display that they are committed to responsible business dealings and provides a solid foundation (policies, training, etc.) with which to resist government graft. Certification also builds strength in numbers. It allows SME to take matters into their own hands to create a better business environment for themselves. Certifications also play an important role for those SMEs seeking a competitive advantage in their business dealings by demonstrating their commitment to commercial transparency. And while we do not, as described above, certify a company’s reputation, we do certify their successful completion of the due diligence process followed by daily screening against media and denied party lists, which itself can be an important factor for multinational companies in vetting their smaller business partners.

  1. Certification companies have a conflict of interest that prevents them from providing independent judgment regarding the adequacy of a company’s compliance program.

The thought here is that because companies pay to be certified, certifying organizations have a conflicting incentive to overlook faults in a compliance program in order to grant certification. As already mentioned above, at TRACE we do not certify the adequacy of compliance programs, but rather are certifying whether the entity has been sufficiently transparent in the due diligence process. This distinction means that the decision to certify is based on objective measures, like whether the third party has produced the requisite documentation, not on the discretion of the person reviewing the entity’s compliance program. Less discretion means less possibility of conflicting interests.

Moreover, entities seeking TRACEcertification must agree that a decision to grant or deny certification will be solely within TRACE’s discretion. TRACE does deny certification to those entities that are insufficiently transparent during the review period or fail to provide required documentation. Payments made to TRACE are non-refundable, however, regardless of the outcome of the certification. This means that TRACE has zero financial interest in the outcome of the review.

Finally, because TRACEcertification reports are typically provided to multiple companies, we believe that there is a considerable incentive to the entities undergoing the process to be scrupulous in their responses.   While it may be possible to mislead a single company about ownership or past misconduct, more eyes on the report mean a greater likelihood of being caught, — and so of having the certification revoked.

And so, while we at TRACE hold Professor Stephenson in high regard, we would respectfully point out that in this instance he is wrong. We see TRACE’s anti-bribery certification program as an exciting new way to include small and medium sized businesses in the anti-bribery discussion. These are companies that might otherwise have no other resources to build a compliance program on their own. For those interested in finding out more about TRACEcertification, we encourage you to read a recent case study by S3 International, a Milwaukee-based repairer of military and commercial spare parts.