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Anti-Corruption Compliance Blog - Published: 01 December 2017
Philippe Montigny
President, ETHIC Intelligence Certification Committee
A corporate policy to prevent passive corruption cannot work if the company has not designed and implemented a robust and visible policy to prevent active corruption

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When I first started working with companies on corruption prevention 20 years ago, their primary concern was related to the issue of passive corruption: how could they ensure that no staff member would accept a bribe, for example, from a supplier or even a client, in exchange for special treatment? If an employee accepts a bribe from a supplier, it is not to benefit the company; instead, passive bribery impacts negatively on a business’ profitability and hampers its competitiveness, making it one of the organization’s main sources of concern. Which is why companies focused primarily on passive as opposed to active corruption for a time.

Twenty years ago, active corruption, the act of offering or giving a bribe, was rarely prosecuted and very few companies considered it a potential threat. In fact, active bribery was used to increase turnover or to ease relations with a relevant administration. Nowadays, developments in anti-corruption legislation rendered the prosecution of active bribery and consequent imposition of fines more systematic and companies have been increasingly interested in equipping themselves with robust corruption prevention tools. Yet such tools are not designed to prevent passive corruption and many businesses, along with their executives, feel ill-prepared to prevent passive corruption.

Why aren’t tools designed to prevent active corruption preventing passive corruption?

To commit an act of corruption for the company’s benefit, an employee will have to engage in fraud. He will have to divert something of value from the company to grant it to a third party such as a public official (public corruption) or an employee from another company (commercial bribery). The fraud will use one of the company’s own processes: it could for instance take the form of a fake contract with a sales agent. This agent will officially be required to provide legitimate services but will officiously pay a bribe or offer something else of value instead. Such a contract would obviously be fraudulent. The fraud could also take the form of the real or fictional hiring of a public official’s relative. In this instance, the fraud would aim at swaying said public official in declaring a favorable outcome to a matter of interest for the company. The hiring in itself would be an act of corruption contrary to legal employment practices. Fraud specialists list seven business processes that can similarly be abused to commit fraud: sales, purchasing, stocks, etc. Whereas fraud is usually committed for personal enrichment, in cases of corruption it is perpetrated with the aim of diverting value from the company to grant it to a corrupt third party, without it resulting in any personal enrichment for the fraudster.

In any case, fraud can be prevented through the implementation of procedures that trace an employee’s decisions. For example, a gifts and invitations policy will enable the company to monitor and regulate gift-giving, to confirm the lack of bribes. Detection will also be possible through the monitoring of procedures – internal controls - and through accurate accounting practices – internal and external audits.

Corruption prevention and detection procedures are useful in precluding the payment of a bribe. They are not, however, useful in preventing passive corruption. Why? Because the logic behind passive corruption is completely different.

In the majority of cases involving active corruption, the corruptor receives no illegal, personal advantage i.e. a kickback. At best, if a contract is signed because of a bribe, the corruptor could receive the bonus attached to his business objectives.

A corrupt employee, on the other hand, acts knowingly and exclusively, for his own benefit and personal enrichment. Moreover, it is easy for an employee to receive an undue advantage or bribe: he just provides a bank account number, accepts the luxurious gifts, travels to the complimentary holiday destination or uses the personal staff which has been put at his disposal…it is all within the sphere of his private conduct and thus, beyond the reach of company controls. In this context, corruption prevention procedures are ineffective. That is why a radically different approach is necessary.

A policy to prevent active corruption is necessary to prevent passive corruption

A corporate policy to prevent passive corruption cannot work if the company has not designed and implemented a robust and visible policy to prevent active corruption.

This could seem paradoxical because, as noted earlier, the tools necessary for the prevention of active corruption are structurally different from those necessary for the prevention of passive corruption. If the employee has the slightest doubt about the company’s ethical business practices or if he thinks that corruption is tolerated by those who deal directly with clients i.e. sales personnel, then the policy of zero tolerance for corruption loses all credibility with the purchasing staff and other departments. Why would an employee behave ethically if he believes that ethical business practices are flexible? Why, if corrupted business practices are tolerated by the sales division, wouldn’t they be so too by the purchasing department?

It is precisely by communicating widely and vigorously on the company’s pledge to conduct business with integrity and on its investment in the means necessary to ensure that turnover is linked exclusively to innovation and competitiveness instead of being tainted by corruption, that it will demonstrate the corporate commitment to ethical business practices. It is on this public declaration on the importance of ethical business that the company will rely to justify its demand for business to be conducted with integrity by each employee, including those who could be tempted to participate in an act of passive corruption.

The very existence of a corruption prevention program for active corruption has a direct impact on the efficacy of a corruption prevention program for passive corruption. This is true even though the programs have different tools for prevention and means of control. In a nutshell: to be credible the zero-tolerance policy should apply to both active and passive corruption.

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About Philippe Montigny

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Philippe Montigny is the founder of ETHIC Intelligence, a leading anti-corruption certification agency that has been certifying companies since 2006. He is currently the Chairman of the Technical and Impartiality committees and has over 20 years of experience in anti-corruption compliance, beginning at the Office of the OECD Secretary-General, for which he was involved in the ministerial negotiations that led to the OECD Anti-Bribery Convention in 1997. Philippe Montigny was also a co-drafter of the compliance management system standard (ISO 19600) published in 2014 and of the anti-bribery management system standard (ISO 37001) published in 2016 and served as ISO liaison officer between the two.

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