When it comes to the monitoring of employee conflicts relating to gifts and entertainment (G&E), and political contributions, it can be challenging for compliance professionals to keep everything in check. Without an effective framework in place to pre-clear, surveil, and reconcile an employee’s or board member’s activities, a firm's reputation is at risk from breaches of anti-bribery rules and regulations – not to mention the heavy penalties and fines that come with it.
This is highlighted by a recent example from November 20 2023, when the US Department of Justice (DOJ) fined two British reinsurance brokers, Tysers Insurance Brokers Ltd, and H.W. Wood Ltd, for violations of the Foreign Corrupt Practices Act (FCPA) by bribing Ecuadorian government officials. In each case, Tysers and H.W. Wood admitted to paying bribes totalling approximately $2.8 million to two Ecuadorian state-owned insurance companies – in which both British reinsurance brokers stood “to earn tens of millions of dollars in illicit profits for themselves and their co-conspirators.”
As a result, Tysers has been ordered by the DOJ to pay a criminal penalty of $36 million and administrative forfeiture of approximately $10.5 million. H.W. Wood was also landed with a penalty of $508,000 due to its financial condition and inability to pay the penalty calculated under the US Sentencing Guidelines, which would have amounted to $22.5 million, and approximately $2.3 million forfeitable to the US.
MONITORING FOR BRIBERY AND CORRUPTION
While identifying bribery and corruption may be tricky, firms need to be able to mitigate conflicts of interest through greater transparency and monitoring of their workforce’s activities. And the good news is that compliance software solutions exist to help firms establish the necessary framework to keep everything above board.
At Star, our G&E and Political Contributions software works like an ‘HQ’ for all potential conflicts in these areas. It enables employees to request pre-clearance of any donation or G&E expenditure while maintaining a fair and consistent approval process. The configurable rules engine evaluates the request in real time, providing an instant approval or denial based on the rules established by the firm. Requests needing further review are routed internally for assessment, and final approval will be determined by the reviewer, who will then alert the employee.
The ability to put in place—and automate—clear guidelines and parameters on all G&E and political contribution activities means firms can benefit from real-time monitoring and swift identification of irregularities or potential issues to ensure proactive intervention before they can escalate.
A vital element of establishing a robust anti-bribery and corruption framework is the ability to run a holistic risk assessment within a single system. This enables companies to gain a comprehensive understanding of potential bribery and corruption risks associated with external interactions and financial dealings By being able to pre-clear and monitor G&E and political contributions from one system, compliance can more effectively spot irregularities faster and investigate quickly. This also involves reporting and analytics that provide data-driven insights into trends and patterns related to both G&E and political contributions. This information empowers decision-making and fosters continuous improvement of the overall compliance program.
As seen with the DOJ’s enforcement against the two British reinsurance brokers, it's important to consider how your firm navigates the diverse regulatory landscapes associated with G&E and political contributions in different countries to ensure consistent compliance across borders. And for all compliance frameworks, firms must be able to demonstrate the effectiveness of their practices to regulators.
Setting up a comprehensive audit trail with meticulous documentation across both G&E and political contributions activities is key. This trail will need to be provided during audits or investigations and underscores the organization's commitment to due diligence.
Our software does all of this with our integrated approach to monitoring both G&E and political contributions. Not only does this help create a robust and seamless strategy, but also reinforces a proactive stance against bribery and corruption. So instead of being blindsided, firms can have a solid plan that dovetails with compliance best practices – cultivating a culture of ethical business behavior.