On February 8, 2017, the U.S. Department of Justice (DOJ) issued a guidance document entitled Evaluation of Corporate Compliance Programs (“the Evaluation”), which was immediately noticed by compliance practitioners in many countries. The Evaluation highlights the importance that the DOJ attaches to the thoroughness and flexibility of corporate compliance programs. A compliance program may satisfy DOJ’s requirements only if it encourages a company’s long-term compliance, addresses the particular risks faced by the company in its sector, and evolves with practical needs over time. This is in line with the principles and general spirit of A Resource Guide to the U.S. Foreign Corrupt Practices Act (the FCPA Guide).
The compliance issues considered are those directly related to the legal system and environment of the United States. To some extent, compliance management originated from the DOJ’s consideration of the effort put into compliance when sentencing was being addressed. Initially, companies passively complied with legal requirements, then gradually they became more proactive and started taking compliance measures, leading to the establishment of an internal compliance culture and flexible and comprehensive compliance systems. U.S. companies operating globally have made compliance management common practice for all multinationals. International treaties on compliance, as well as compliance standards and guidelines formulated by international organizations are coming out one after another, including the ISO 19600:2014 Compliance Management Systems – Guidelines published by the International Organization for Standardization (ISO). International consensus and standards on the core issues for compliance management are now in place.
In addition to the U.S. and ISO, many intergovernmental or nongovernmental organizations have published their own compliance guidelines imposing compliance requirements on companies in various countries. These include the World Bank, the African Development Bank, the Asia-Pacific Economic Cooperation, the International Chamber of Commerce, and the Organization for Economic Co-operation and Development. These compliance guidelines have common aspects and provide similar frameworks and composition for an effective compliance management system. In addition, these international compliance guidelines emphasize opportunities for companies with a history of non-compliance to improve their internal compliance systems. If a company is able to make adjustments and satisfy compliance requirements within a prescribed period of time, it may be removed from the “negative list” before the scheduled time and released from other sanctions and limitations.
As professional compliance practitioners, we are partly responsible for helping companies establish their internal corporate compliance systems that conform to international standards and are able to deal with particular risks in specific areas. In practice, compliance risks are not limited to the fields of anti-corruption, anti-bribery and anti-monopoly. Key compliance areas may also be in the fields of food safety, health and safety in production, quality control, environmental protection, and so on. Another part of our practice involves helping sanctioned companies to be removed from the “negative list”.
Taking the World Bank sanctions for noncompliance as an example, once a company is sanctioned, it will not qualify for any commercial program initiated or funded by the World Bank for a period of years, depending on the severity of the non-compliance. However, if a company can demonstrate that it has established or improved its internal compliance system, then one year after the sanction, it may submit written material evidencing that fact to the World Bank for review. It may be released from the sanction before the scheduled time if the World Bank determines that required standards have been met.
It is noteworthy that there are mutual-debarment agreements among international organizations with similar interests. For instance, the World Bank has mutual-debarment agreements with the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development and the Inter-American Development Bank. Under these agreements if a company is sanctioned by one of the participating organizations, then it must immediately notify the other participating organizations. The others may, within their own jurisdictions, enforce the sanction imposed by the initial decision-making organization. No doubt the network formed by these mutual agreements enhances the penalties for noncompliance. Even if one organization decides to relieve sanctions imposed on a company, other organizations still have the discretion to determine whether to continue to enforce the sanctions against the company.
In a heightened compliance management environment, China is paying greater attention to the establishment of corporate compliance systems. On February 7, 2017, the China National Institute of Standardization published the Compliance Management System Guideline (Exposure Draft) (the “Compliance Guideline”). The Compliance Guideline draws on the experience of the framework and major contents of ISO 19600. This shows the Chinese government’s focus on the cultivation of a corporate compliance culture, and its determination to enhance the global competitiveness of Chinese companies. It reflects a confidence in Chinese company compliance systems benchmarking against multinationals and intergrading with international standards. Therefore, we believe that the era of compliance has come, and effective compliance management and risk control will be increasingly important for Chinese companies to gain advantages in the international market. Is your company prepared?