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Bribery fine reflects Middle East risk shift

March 07th, 2016 - Posted by Jeremy Shayler in Anti-Bribery And Corruption

The latest prosecution and fining of a multinational for bribery in the Middle East is evidence of the increasing need for companies based or doing business in the region to have robust and vigilant anti-corruption and bribery controls.

Organisations that don't confront fraud, bribery and corruption before they occur run the risk of being pursued by cross-border regulators, potentially resulting in long-term damage to their reputation and ability to compete for business, as well as hefty penalties.

In mid-February, UK-based construction and services company Sweett Group was ordered to pay £2.25 million in fines and other payments after pleading guilty to failing to prevent an act of bribery intended to secure a contract in the United Arab Emirates.

The case, brought under anti-bribery laws introduced recently in the UK, is a landmark win for the SFO (Serious Fraud Office). It is also evidence that, while there are ingrained perceptions within the Middle East that bribery and corruption are sometimes a necessary part of doing business, governments and regulators elsewhere are increasing external pressure to prevent such practices and punish offenders.

Among other examples is the French industrial group Alstom being ordered to pay $772 million after it was found to have spent $75 million on bribes in countries including Egypt and Saudi Arabia. That 2014 prosecution was brought under the United States's Foreign Corrupt Practices Act.

Kickbacks and 'facilitation' payments

Bribes in the form of kickbacks, and 'facilitation' payments demanded by agents to secure business or speed up processes, are particularly common in the Middle East. As the recent prosecutions in the Europe and the US have shown, they have the potential to do significant damage to a company's reputation in other parts of the world.

When Sweett Group told investors late last year that it had admitted to the bribery offence and was likely to face an unlimited fine, it was widely publicised in the general and business media, and the company's share price tumbled 10 per cent. Companies involved in bribery investigations may also be excluded from procurement opportunities.

Sam Achampong, General Manager, Chartered Institute of Procurement & Supply (MENA) comments, "This action demonstrates the effectiveness of anti-corruption legislation in an international context. Multinational corporations operating in the Middle East remain accountable for ethical compliance to the highest international standards and must ensure that measures are in place to mitigate against corrupt practices."

The challenge of sanctions

Another challenge for any company or subsidiary doing business in the Middle East is to maintain due diligence in regard to sanctions against entities and individuals. Sanctions, which usually relate to money laundering, support for terrorism and human rights abuses, are subject to change and require consistent monitoring through access to up-to-date Politically Exposed Persons (PEP) and Sanction watch-lists.

Building on a culture of compliance

Embedding and implementing a robust ethical and compliance culture is a growth enabler that places a company in a position of strength in both local and international markets. If Middle East organisations are to compete and succeed in the international marketplace, management must fully embrace anti-corruption initiatives.

Companies should demand of themselves – and of the suppliers – practices typically including internal audit functions, whistle-blowing procedures, conflict-of-interest policies and anti-bribery/corruption policies. They should do regular and frequent risk assessments of clients, suppliers in their supply chains and associates, and carry out enhanced due diligence on entities considered to be high risk. It is essential that management takes the lead and that employees are aware of anti-bribery/corruption global best practice. Sanctions Uncovered - Iran Special

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