The evolution in the global economy is raising challenges for anti-corruption compliance.  In response to economic dislocations and disruptions stemming from the COVID-19 pandemic and Russian invasion of Ukraine, businesses encounter situations where supply chain delays and disruptions inevitably increases bribery demands and pressures.

A perfect example of such a situation was the delay in export of essential goods from China to the United States and Europe businesses.  As a result of the near shutdown during the pandemic and pent up demand, the resumption of demand levels resulted in shortages of container space on shipping vessels.  In response, shippers and logistic companies seized the opportunity to raise prices for container space and public and private employees often included bribery payments and demands. 

A second example illustrated the new environment in response to the Russia Sanctions Program.  Global companies faced significant disruption to their supply chain as a result of manufacturing facilities based in Russia.  As the global sanctions response to Russia’s invasion of Ukraine tightened, global companies faced difficulties in exporting items needed to maintain operations at the manufacturing facility and/or restrictions on export of manufactured goods for delivery to third-party distributors.  It is easy to imagine opportunities here where indirect third parties may seek to extract bribes or “premium” payments given their increasing importance to maintaining the company’s operations.

In this new, evolving risk environment, companies often face the situation of how to handle the demands for bribery.  This becomes even more difficult for compliance professionals when business representatives report to compliance that they “know” competitors are making these payments to the detriment of the company’s ability to compete in the marketplace.  Compliance professionals themselves often face increased pressure to find some way to “solve” the problem created in this environment. 

There are several steps that compliance professionals should take:

First, in many situations, it is not clear whether the “premium” or extra charge for a specific service (e.g. reservation of a container on a vessel) is in fact a “bribery” payment.  To focus on the issue, the business should seek specific documentation and explanation of the precise charges that the customs broker, vessel owner or other third party is proposing and the basis for each charge. 

Second, the documentation and email correspondence (for example) should be preserved and reviewed to ensure that all potential issues have been raised and resolved.

Third, the compliance and business team should analyze the trend and seek further comfort in the “reasonableness” of the itemized charges, recognizing that there are legitimate explanations for price increases in response to market demands.

Fourth, the compliance and business employees must agree that any request by a third-party for a non-documented payment to an individual employee at a third-party is a non-starter and will be summarily rejected.

Fifth, business employees often hear from other industry colleagues if a vessel or customs broker is seeking to extract questionable payments or charges and such “intelligence” may be considered.  However, compliance and business officials have to be careful not to violate antitrust principles that divide legitimate market intelligence from sensitive pricing information.

Sixth, whatever decision is made based on the third-party responses to inquiries, it is important to document the information and analysis.  If the compliance officer decides to proceed even with some residual risk, the business should be careful in how it books the expenditure.  It may be appropriate to designate a separate special account (at least temporarily) for such an “increase” in payments until additional information is learned through future transactions and the handling of these increased costs.

This is a difficult situation to navigate but basic compliance principles can help guide a company through this thicket as a way to work with the business and adhere to company ethics and values.