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Facing Reality in China

china3As I have frequently stated, if your business is operating in China, chances are you are violating the FCPA.  That sounds very cynical but there is a measure of reality to my claim.

With all the recent attention from the GSK investigation in China which is rapidly extending to other drug companies, China should be on every company’s mind.  There are several important aspects to compliance in China.

I have scheduled a webinar for tomorrow, Tuesday, August 13, 2013, at 12 noon (Sign Up Here) to discuss the issue in greater depth.  I hope you can make it.

China’s ranking on the Corruptions Perception Index calculated by Transparency International represents which was 80 for2012, represents an interesting dilemma.  Many suggest that this ranking significantly underestimates corruption risks in China and reflects a political accommodation designed to encourage the Chinese to participate in the global anti-corruption enforcement network.  From my observations and experience in China, I agree with these commentators.

China’s corruption enforcement has always focused on corruption within its government committed by Chinese individuals.  Several years ago, Rio Tinto got caught in a corruption investigation and focused on four Chinese nationals who worked for Rio Tinto in China.  They were sentenced to periods of incarceration which were eventually commuted and they were freed.china

GSK is likely to involve some serious fines and prison sentences.  What makes the GSK matter more disturbing is that the current investigation involved bribery which directly resulted in higher prices charged for GSK products.  This has given the Chinese two strong motives for an aggressive investigation – to reduce corruption and reduce drug prices to benefit Chinese consumers.

Compliance professionals have to be careful to avoid a knee-jerk reaction to corruption risks in China.  Too often, compliance officers will prescribe more of the same medicine – more training, more due diligence, more audits and more tone-at-the-top.  I do not mean to belittle these ideas since they are practical and necessary as part of an overall China-specific Enhanced Compliance program.

Compliance officers have to adopt new strategies which are China specific and respond to the precise risks and cultural influences which cause Chinese and non-Chinese to commit bribery.  These pressures are very strong in China and bribery does not carry as negative a message as in other countries or the United States.

Again, please join me for an interesting webinar session tomorrow when I will discuss some possible solutions to respond to corruption risks in China.

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1 Response

  1. August 16, 2013

    […] poses to the US and the rest of the world. Michael Volkov also talked about China in his blog post Facing Reality in China, in which he invited readers to register for his Wednesday webinar. If your business is operating […]