Chapter 8. Good practices and common pitfalls

Translation:

French

Spanish

As this resource guide demonstrates, there are many tools, in particular sanctions and incentives, available to States to strengthen business integrity. However, each of these tools comes with good practices as well as common pitfalls to avoid. In line with the seven core implementation principles outlined at the beginning of this guide, the following considerations should help States with the implementation of any of the previously mentioned measures.

Enforcement and accountability: Even with strong laws in place, their enforcement is crucial to meet UNCAC and OECD Anti-Bribery Convention requirements. Insufficient resources, inadequate training of law enforcement officials and systemic corruption within law enforcement agencies can hamper effective implementation. Additionally, if corrupt officials are not held accountable and face consequences for their actions, it sends a message of impunity, undermining overall anti-corruption efforts. When laws go unenforced, it signals to the private sector that they can get away with misconduct, negating any incentive to self-report acts of corruption.
Independence and impartiality: When attempting to carry out anti-corruption policy reform and encourage integrity in the private sector, it is essential that State institutions responsible for addressing corruption do not suffer from a lack of independence and impartiality. Political interference, nepotism, or favoritism can compromise the effectiveness and credibility of anti- corruption efforts. If institutions are not sufficiently autonomous, they may be unable to investigate and prosecute corruption cases, grant incentives, or otherwise be able to adequately provide the incentive structure that fosters a culture of compliance in the private sector.
Public sector integrity: The public sector should model the type of environment it desires from the private sector. For example, when public officials solicit bribes for common interactions with companies such as for licensing procedures or via customs declarations, this undermines efforts to reform the private sector and encourage business integrity. The failure to prevent corruption in the public sector due to the absence of codes of ethics, supervision, appropriate training for public officials and transparency provisions cannot be compensated for by promoting integrity in the private sector. For private sector integrity to be incentivized, public sector integrity must be modelled and, if necessary, enforced through disciplinary procedures and/or criminal proceedings. Otherwise, a culture of impunity undermines trust in public institutions and fosters corruption in the private sector. In the same vein, States must ensure that state-owned enterprises (SOEs) equally implement and adhere to anti-corruption practices. This is especially so when SOEs interact with the private sector through contracting, partnerships or otherwise. Given the importance of SOEs in global markets, “Good governance of SOEs is critical for fair and open markets, for the functioning of their domestic economies where SOEs are active and for the delivery of public services to the general public.”¹¹⁹

Transparency and access to information: Lack of transparency and overly restrictive access to information hinders anti-corruption initiatives. Opaque procurement systems or limited public access to information on business dealings can create an environment conducive to corruption. When States wish to provide incentives to the private sector to encourage compliance with anti-corruption requirements, their own processes should also be transparent with open communication, the sharing of good practices and the provision of transparent information to the public.

Assessing corporate compliance: As with the need for guidance, competent authorities must be invested with the required resources and expertise to carry out their duties. This is especially crucial in the context of non-trial resolutions where authorities will assess and evaluate corporate anti- corruption programmes, board expertise, training programmes and other integrity measures. The assessment of corporate anti-corruption programmes is also essential when granting incentives to promote business integrity.
Assessing corporate compliance demands specific skills and a comprehensive understanding of business operations as well as the challenges of designing, implementing, and reviewing internal controls and other compliance measures. Sustaining an ongoing dialogue with the business community and compliance practitioners is crucial to competent authorities acquiring and maintaining relevant expertise in corporate anti-corruption compliance. This is especially important with regard to new technologies and data analytics in this area. Rigorous training for competent authorities is also required. Poor assessments of corporate compliance programmes jeopardize the efficacy of incentive mechanisms. First, wrong signals may be conveyed to the business community through inconsistent or inaccurate assessments.¹²⁰ This creates significant distortion in the market and undermines government efforts to promote compliance. Second, a lack of expertise can lead enforcement agencies or other government authorities to outsource the assessment of compliance programmes to external parties. These might not have the capacity or the incentives to properly evaluate the effectiveness of companies’ anti-corruption programmes.
In addition, competent authorities need to strike the right balance between assessments based on a tailor-made approach or pre-determined criteria. Tailor-made approaches enable competent authorities to consider internal and external factors, including the company’s structure and size, the sector of operations and the business environment it navigates. A tailored assessment may also prove advantageous for businesses, notably those functioning in highly exposed sectors. Furthermore, requiring companies to develop their own metrics to assess the effectiveness of their anti-corruption programme may enable competent authorities to evaluate the company’s understanding of how and why its programme is effective. Nevertheless, embracing a tailor-made approach has limitations. Clear, consistent, and foreseeable expectations, indicators and methods are imperative for the private sector to invest in, develop and implement what competent authorities would consider as an effective anti-corruption programme. This challenge is exacerbated by the “trade-offs involved in employing different quantitative and qualitative approaches when measuring corporate compliance”¹²¹ and the fairly nascent research in this area. Further work in this domain could help governments and private sector practitioners identify good practices to measure effective anti-corruption compliance. The development of consistent practices at a global level could also help private sector practitioners implement good practices across the jurisdictions in which they operate.
For example, the United States Department of Justice publishes detailed assessment criteria and guidance on the questions that should be examined to determine whether a corporate anti- corruption programme is effective in practice [see chapter VII.B.1) for the case study on corporate penalty mitigation in the U.S. framework].

Caution against over-reliance on a single tool: Sanctions and incentives work together to provide an environment that strengthens business integrity. States should not rely on one single measure as the solution to counter corruption. For example, though beneficial ownership transparency has been increasing in popularity, it alone will not suffice. It requires a coordinated effort to ensure law enforcement agencies can collect, verify and interpret the data, and that anti-money laundering and tax laws be drafted in a way that supports the transparency initiative. The same can be said of other tools: a holistic approach to engaging with the private sector and improving the business integrity climate is what works best.

A collaborative approach: Initiatives such as the UN Global Compact, the B20 Collective Action Hub and the Anti-Corruption Leadership Hub provide examples of how to involve the private sector, specifically as it relates to collective action initiatives. In addition, some states have recognized the importance of partnering with the private sector to promote business integrity through national strategies and ensure the full participation of the business community.¹²²

International cooperation: Corruption often transcends national boundaries. Inadequate international cooperation and coordination can limit the effectiveness of anti-corruption efforts at the domestic level. To prevent and counter corruption effectively, States need to collaborate on investigations, share information and cooperate in the recovery of illicitly acquired assets.
Having a comprehensive domestic approach to prevent and counter corruption may be hampered if States do not sufficiently cooperate with each other.
This problem is further exacerbated where there is policy incoherence at a regional and global level. Where one State may offer self-reporting incentives, this may be offset if another State favours strict prosecution. Similarly, a company will be reluctant to investigate a potential misconduct in the context of proceedings conducted by a jurisdiction if such efforts may contravene data privacy requirements in another jurisdiction.¹²³
Policy consistency should also be ensured at a global level to avoid additional difficulties for companies operating internationally and navigating between different systems and regulatory requirements.¹²⁴ Avoiding inconsistencies across national policies and enforcement is even more important as many domestic legal instruments have extraterritorial reach. The international community should do all it can to harmonize and ensure cooperation and consistency in the way in which it incentivizes business integrity.

Sanctions: States must ensure that their sanctions regime is appropriate and considers the various entities that might engage in corruption. Sanctions are an important tool to dissuade actors from engaging in corruption and legal frameworks should ensure that liability can be imposed on those responsible.
Legislation and guidance: Criminalizing corruption and going after the proceeds of corruption is an essential step. But laws alone are insufficient to strengthen integrity in the private sector.

Businesses yearn for guidance on the implementation of laws and regulations. The private sector generally gravitates towards certitude. While a degree of flexibility in the application or enforcement of legislation may allow for the consideration of variations among businesses requiring different anti-corruption procedures, it is generally recommended that States outline their expectations as a way of guiding the private sector to implement relevant measures.

Ensure coherence of policy approaches domestically: Many of the tools in this Resource Guide are complementary, but it is imperative that in their efforts to prevent and counter corruption States pass laws and regulations that do not counteract each other. For example, if States adopt regimes to promote non-trial resolutions with the stated purpose that companies will implement robust anti- corruption programmes and self-report instances of non-compliance upon discovery, they should not also be threatened with automatic debarment or other forms of punishment that would weigh against the likelihood of their self-reporting.
To remain consistent, States must also ensure that the mandates of various ministries and anti- corruption authorities are in harmony with one another. Conflicting mandates can lead to disjointed approaches to anti-corruption, and ineffective and incoherent use of public resources. On the other hand, having multiple potential sites of enforcement can prevent or hinder State capture.
While each sanction and incentive targeting the private sector may have its own stated purpose, they must also be drafted and framed in a way that seamlessly interact with each other. Otherwise, there is the risk that the overarching policy intent will be negated by competing, and even conflicting, laws, regulations and policies. UNCAC article 5(3) stresses the importance of periodic review to “evaluate relevant legal instruments and administrative measures with a view to determining their adequacy to prevent and fight corruption”.
With a view to ensuring effective and consistent enforcement, States should ensure that all parties are held to account.¹²⁵ While holding legal persons liable of corruption is instrumental, enforcement should also be pursued against individuals engaged in corrupt conducts. Similarly, steps should be taken to trigger the liability of public officials who solicit or receive bribes.

United Nations

UNODC Business Integrity Portal

Chapter 8. Good practices and common pitfalls

Principle 1: States should lead by example by implementing sound integrity policies and ensuring their consistent enforcement across the public and private sectors.

Principle 2: Corporate anti-corruption programmes are a primary tool for strengthening integrity and their effectiveness should be assessed.

Principle 3: States should encourage better private sector practices through a combination of wellbalanced and thought-out sanctions and incentives. Sanctions and incentives should be guided by raising the costs of corruption while increasing the benefits of behaving ethically.

Principle 4: Business integrity is best achieved through a collaborative multi-stakeholder approach and States are encouraged to involve the private sector when designing and promoting incentives or sanctions to build ownership and strengthen compliance.

Principle 5: States should coordinate at the international level to harmonize approaches to business integrity, avoid policy incoherence and promote a level playing field for companies.

Principle 6: States shall ensure that legal persons held liable can be subject to effective criminal and/or non-criminal sanctions, including monetary ones.

Principle 7: States should develop a set of business integrity measures that are complementary and undertake periodic reviews to evaluate their adequacy.