The longstanding view was that corruption is an inevitable aspect of doing business in Thailand, in large part due to the constant allegations of graft against government officials coupled with historically weak enforcement by local regulators. However, companies operating in Thailand should be aware of several indicators that this is changing:
- The current military Government has made anti- corruption a centrepiece of their domestic policy from the very start. We have since witnessed an unusual wave of corruption probes and enforcement actions against the public sector, including arrests of high ranking police officers, suspensions of numerous public officials and a recent indictment of the former Tourism Authority of Thailand governor in a well-known bribery scandal. In addition, Former Prime minister Yingluck Shinawatra and several former ministers have been charged with graft. The Office of the Auditor General has also become extremely active in the anti-corruption space under the new Government regime. Our view is that the overall uptick in enforcement activity signals a renewed commitment to tackling the problem of corruption.
- The country’s primary anti-corruption law, the Organic Act on counter corruption, was significantly strengthened through recent amendments which impose harsher penalties for corruption offenses. Fines and prison terms have increased, but, most notably, severe corruption is now punishable by death under the Act. Moreover, these penalties now extend beyond civil servants to Thai and foreign state officials, including officials who work for international government agencies/ organisations who are found guilty of corruption. The head regulator has commented that the changes are justified because of the severity of a corruption offense and the danger it poses to the country.
- Another key amendment to the Organic Act on counter corruption is a new provision that penalizes a company for a bribe made by an employee, agent, or associated company – much like the UK Bribery Act. Importantly, the provision expressly provides for a defense if “appropriate internal control measures” are in place to prevent the offense. It is unclear what would specifically meet that standard, but this language presents a compelling reason for Thai companies to implement a robust compliance program that includes educating and training employees to act accordingly.
- Other legal reforms have gone into effect that reflect the Government’s emphasis on rooting out unscrupulous activities that have long flown under the radar in Thailand. For example, the new Licensing Facilitation Act is designed to counter bribery and enhance transparency in relation to the issuance of licenses and permits. The Act requires all agencies that issue licenses and permits to develop a manual that describes the procedural requirements and sets internal timelines for approvals. Importantly, the Act also contains a whistleblower remedy for applicants to file complaints.
- The target date for the creation of an integrated ASeAn economic community (Aec) is the end of 2015. The Aec countries are aiming for regional cooperation to curtail systemic corrupt business practices which have become so deeply engrained in the region. It is expected that the Aec will allow countries to share best practices and develop joint approaches to fight corruption. many predict that the looming formation of the Aec will continue to put pressure on corrupt business practices in Thailand to be investigated more aggressively and prosecuted with a greater sense of urgency.
Given the convergence of all the above, the perception in the market is that Thailand’s stance on corruption is finally hardening after years of rhetoric and inaction. Although the Thai anti-corruption laws and measures have thus far been aimed at Thai and foreign public officials and international government agency/organization officers, it appears inevitable that enforcement actions against private companies are on the horizon. Businesses will want to be more attentive than ever about their operations so as not to find themselves embroiled in a corruption investigation or prosecution in Thailand. not only could this result in a ban from conducting business in Thailand, but for multinationals this could also trigger a separate investigation by regulators in their home country and/or by US/ UK regulators if subject to the US Foreign Bribery Corrupt Practices Act or UK Bribery Act.
In light of the changing business environment, establishing a comprehensive compliance program is becoming particularly important for companies operating in Thailand. For the first time, it is expressly indicated that appropriate compliance measures can serve as a defense for companies under the new amendments to the anti-corruption law. Internal anti-bribery policies, procedures and guidelines must be established and actively enforced. Any company engaging in transactions with Government entities or interactions with Government officials and agencies is well advised to conduct regular compliance audits, and address any complaints or “red flags” immediately.
Some of the areas worth paying attention to include:
- Maintain up-to-date policies and procedures and codes of conduct and ethics in both english and Thai.
- Regular training of staff, presented in both Thai and english, to ensure they understand their roles and responsibilities and applicable procedures.
- Set out clear instructions/guidance to applicable staff regarding interactions with Government officials and reporting of interactions and work to their direct report.
- Check and assess document management and data retention policies and whether these are well communicated to employees.
- Periodic monitoring and auditing of sales and marketing practices, as applicable.
- Check and assess the current procedures for the handling of whistleblower complaints.
- Have a plan in place for an unannounced visit from local authorities and for a potential regulatory investigation, including protocol to properly implement and train your employees to respond in an orderly and effective manner.