National Defense Industrial Association

Creating an Anti-Corruption Program

Author(s): Katherine Krebel
Source: National Defense , April 2017, Vol. 101, No. 761 (April 2017), p. 9
Published by: National Defense Industrial Association

Stable URL: https://www.jstor.org/stable/10.2307/27021725

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 Ethics Corner By Katherine Krebel
Creating an Anti-Corruption Program
Corruption-based allegations can be crippling for any
company. Compliance in this area of the law is of partic-
ular importance to companies who regularly use international
consultants and sales representatives, commonly referred to as
“intermediaries,” to develop business opportunities.
Legal and compliance professionals across the world rec-
ognize this as a significant area of risk, and the normal course
of action is to develop a robust infrastructure around vetting
foreign intermediaries.
Several of the largest enforcement actions of all time involve
the use of third party intermediaries, including Justice Depart-
ment and Securities and Exchange Commission settlements
with Siemens for $800 million in 2008, BAE for $400 million
in 2010, Total SA for $245 million in 2013, and Alstom S.A.
for $772 million in 2014. The danger has only increased as a
result of the declining U.S. defense budget which has resulted
in industry focus on growing international business.
Any number of sources can be found to provide guidance on
developing a strong risk-based intermediary compliance pro-
gram. In particular, the 2012 Resource Guide to the U.S. For-
eign Corrupt Practice Act issued by the Justice Department’s
criminal division and the SEC’s enforcement division, which
includes a section titled “Hallmarks of an Effective Compliance
Program,” and can help businesses understand the need for a
risk-based program.
Other sources for best practices and benchmarking can be
found by referencing the U.S. Sentencing Guidelines, which
contain a section titled “Effective Compliance and Ethics Pro-
grams,” and the Organization for Economic Co-operation and
Development’s “Good Practice Guidance on Internal Controls,
Ethics and Compliance.” The International Organization for
Standardization has released ISO 37001 covering anti-bribery
management systems, which may be a good place to start for
businesses who are in the initial stages of program develop-
ment, and where additional best practices can be added over
time. There are a variety of other sources for guidance and
resource tools related to foreign law, policy development,
monitoring and evaluation as well as training.
While a compliance infrastructure related to intermediary
vetting is critical to the success of any international program, if
inefficient, it can conflict with the constant need to stay agile
and competitive. Compliance professionals face the challenge
of reacting to this dichotomy by coming up with thoughtful
and effective ways to strike the correct balance and streamline
infrastructure where possible. The goal is to build a solid anti-
corruption program that eliminates material risk, yet avoids
unnecessary resource drain.
Leonardo DRS Inc. developed a program which leverages
efficiencies created through an electronic data collection and
management platform, along with a process which creates
a touch point for executive engagement on the front end of
each proposed intermediary opportunity. Its various diligence
requirements are based on a number of risk factors, which
include the amount of compensation being proposed, the level
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of interaction with foreign government officials and the per-
ceived corruption within the contemplated territory.
In order to achieve a competitive posture and avoid wasted
effort, it is critical that upper and executive level management
are engaging in the initial and renewal screening of providers.
The first phase of the intermediary diligence process
requires a front-end employee — typically in business develop-
ment — to notify upper and executive-level management of
the proposed provider. For DRS, creating a limited workflow
on the front end of the proposed opportunity has all but elimi-
nated a foreseeable rejection of the application for business
reasons, as opposed to any adverse diligence which may result
in a rejection later in the process.
Those employees on the front end of the business are then
only able to task responsible functions with diligence collection
once the proposed provider has been notionally approved and
identified as a value added provider from an operations per-
spective by upper and executive level leadership. This affords
a tailored list of approvers the opportunity to review the busi-
ness case, and reject the application before critical resources
are spent compiling the necessary diligence.
That same preliminary notification is used by the compli-
ance team to quickly evaluate threshold issues and provide
a response to the requestor outlining the necessary diligence
to be collected. This includes verifying that the type of rep-
resentation, method of compensation, and citizenship of the
proposed provider are all in line with the legal requirements in
the proposed territory.
Leonardo thus only expends critical resources on vetting
those proposed intermediaries who have the greatest potential
for success. By cutting back the number of proposed interme-
diaries to enter the diligence phase of the process, it is able to
spend more resources on those select providers. Compliance
professionals may also want to encourage management to con-
sider developing criteria to assess international intermediary
performance. This type of regular evaluation can more quickly
identify poor performing intermediaries who can be phased
out of the program altogether.
In addition, to streamline the entire process, the company
also internally developed an electronic data collection and
management tool, an electronic platform to collect additional
diligence on the provider by taking a close look at a variety
of factors to include their qualifications, that all proper reg-
istrations are obtained, multiple business references and an
indication of financial stability including a bank reference. It
also requires interviews and often requests and reviews third-
party supporting information to include international company
profiles provided, as well as information from local law firms
and other diligence providers such as the non-profit TRACE
International, which is dedicated to delivering quality support
in this space.
Katherine Krebel is vice president, corporate counsel at Leonardo DRS
Inc.
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