It seems that China is revising its anti-corruption rules to give it a stronger hand in prosecuting overseas corporations that bribe government officials, in case you need yet another headache in your compliance officer life.
We don’t know the exact details of the new rules or even have a copy of them available to the public — because, you know, China, communism, secrecy. The usual stuff one expects from an authoritarian government paranoid to maintain its grip on power. Nevertheless, media reports and law firm bulletins have started to emerge talking about guidelines titled “Opinions on Further Promoting the Investigation of Bribery and Acceptance of Bribes.” (Hats off to Sofia el-Mansouri, a.k.a. the Compliance Lady, for catching this one early.)
Apparently the new guidelines establish a blacklist of companies that pay bribes to Chinese government officials, and “further research will also be undertaken on whether offending individuals and enterprises should have their access to markets restricted and qualifications reviewed,” according to one article China Daily, a publication of the Chinese Communist Party.
OK, that sounds like Chinese authorities are still drawing up a list of possible punishments for bribery offenders. We don’t know exactly what that might entail, but one could reasonably assume it will include monetary penalties, loss of business licenses, and, revocation of professional titles or academic degrees (the China Daily mentions those two specifically). In extreme cases, China might kick a foreign company out of the country entirely — and then hand over the company’s physical assets in China to Chinese operators.
How vigorously will these guidelines be enforced? The honest answer is nobody outside the upper echelons of the Chinese Communist Party knows. Will Chinese authorities use anti-corruption enforcement selectively, in pursuit of other national interests where Western companies are pawns in larger geo-political fights? Western business executives would be wise to assume yes.
Exploiting Anti-Corruption Enforcement Globally
One recent bulletin from the law firm Dechert even warns of the scenario where a global business might settle corruption charges with Western law enforcement — say, the Foreign Corrupt Practices Act in the United States, or the Bribery Act in Britain — and then Chinese regulators will pick up those same facts to bring their own prosecution against the company for the same underlying offense.
Of course that will leave global companies in a difficult spot. At least Western nations try to coordinate their settlements these days, to keep document requests, witness interviews, and the eventual monetary settlement at some semblance of reasonable. I don’t see China caring too much about such niceties,
We also see the calculus for voluntary self-disclosure getting more complicated. If you disclose to U.S. regulators, you stay in their good graces; but still shoulder the costs of a lengthy investigation and disgorgement of ill-gotten gains, and then run the risk of China using that voluntary disclosure to wallop your company all over again (and possibly shake you down for other concessions on sharing intellectual property or lord knows what else).
On the other hand, if the company decides not to self-disclose, you run the risk of a whistleblower diming you out to the regulators anyway; and then you face more severe enforcement on both sides of the Pacific. Lovely.
The only comfort that ethics and compliance officers can take here is that effective internal reporting becomes more important, so that executives can keep control of any corruption issues and the all-important question of whether to self-disclose. That gives you an opening to keep hammering the message to senior executives that investment in corporate culture, internal reporting mechanisms, and remediation capability is important. Otherwise, the whistleblower lobby and regulators around the world will decide your company’s path for you.
On the Subject of China…
We’d be remiss if we didn’t also note an article in the Washington Post last week, exploring how China is pressuring U.S. companies to oppose calls for boycotts of the 2022 Winter Olympics happening in Beijing in February. One of China’s top diplomats told U.S. business executives that their companies should “make a positive contribution” to the games, which is diplomat-speak for “don’t support calls for a boycott over our forced labor and other human rights abuses.”
It’s just the latest example of how China is trying to leverage its economic might with U.S. companies, leaving those companies in an awkward position. Either they side with stakeholders in the West who support a stronger, ethically principled line against China; or they surrender to China’s demands for a quick buck and provoke the ire of human rights supporters back here.
This is not new. U.S. companies (Apple, Nike, Coca-Cola) also lobbied against legislation to ban the import of goods made with forced labor from China’s Uighur region. In that case, U.S. companies had plenty of their own economic interests to motivate them — but this is China. It’s only a matter of time before Beijing uses regulatory enforcement there to pressure U.S. companies into doing its political bidding here. The new anti-corruption guidelines will be part of that.