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Recognising and mitigating COVID-19 corruption risk

Claire Rajan
William Jacobson
Jonathan Lopez

Legal and compliance professionals should consider how COVID-19 coronavirus may affect corruption risk under applicable anti-corruption laws, including the Foreign Corrupt Practices Act, and what steps may be taken to mitigate these risks even while large swaths of the company’s employees may be working remotely.  Some corruption risks are amplified in the current environment.

Government touchpoints and lobbying

As always, where business interacts with government officials, there is an elevated risk that conduct may violate anti-corruption laws.  State and local governments around the world are now taking unprecedented measures to respond to the pandemic and shore up their economies in ways that directly affect companies.   Companies may engage with government officials on these issues, for example, companies may seek to: obtain regulatory approval for vaccines or clinical trials; bid for government contracts in connection with relief measures; lobby government officials for favorable tax treatment, deregulation, or “bailout” funds; apply for exceptions with respect to virus-related government restrictions, such as the closing of offices, factories, or other facilities; seek preferential treatment in connection with enhanced border controls to transport goods and employees across borders and through customs; and make charitable donations or make facilities available to benefit the public health or respond to COVID-19 related challenges.

Government contracting

In times of economic distress, government investment and procurement may be viewed as more enticing, particularly when potential commercial customers are themselves facing financial challenges.  An economic downturn may increase pressure on businesses to demonstrate financial performance and the motivation to engage in improper behavior may outweigh an otherwise strong culture of compliance.

Business restructuring, mergers and acquisitions

The economic environment in the coming months may lead to significant restructuring, financing, acquisition of distressed businesses, and efforts to engage in joint venture partnerships.  Despite business pressures to move expediently and in a cost-effective manner, parties should ensure that they conduct proper risk-based corruption due diligence.  A  company acquiring operations or working with a new joint venture partner should implement post-acquisition integration plans on a reasonable timetable.  If historic issues are uncovered, ensure the conduct is stopped and consider other appropriate risk mitigation measures.

Compliance tips

These are challenging times for legal and compliance personnel.  Travel restrictions and shuttered offices may restrict a company’s ability to respond fully to allegations of wrongdoing, conduct interviews and collect documents and data in-person, and conduct on-site audits, reviews or other monitoring exercises.  Remote working may also increase the likelihood that employees use non-approved forms of communications for business that cannot be maintained or monitored.

Legal and compliance personnel should consider the following options to mitigate corruption risk:

  • Identify the government touchpoints in the business, including with respect to procurement, and who is engaging with government officials directly or through third-parties.
  • Ensure that employees involved in these efforts have appropriate training, understand the risks, and know where and to whom to escalate concerns that may arise.
  • Get creative in your training and education programming where in-person efforts are likely limited. Consider whether to:
    • Conduct targeted small group video conferencing training; and
    • Increase the cadence of communications and education efforts while employees are working remotely.
  • Where third-parties or agents are used to interact with government on behalf of the business, particularly in high-risk jurisdictions, consider a review or monitoring to ensure that compensation is commensurate with services provided and risk-based due diligence has been conducted.
  • Evaluate whether anti-corruption policies and procedures require a refresh to account for changes in business and risks.
  • If the business is considering making a charitable contribution or donation of goods or services, such as donating medical supplies or making space available to government, ensure that corruption concerns have been considered, such as whether the donation was requested by a government official and whether a government official or family member will benefit from the donation.

Companies that move swiftly to adjust to the new normal and maintain strength and flexibility in their compliance programs will be better positioned in the long-term.  For guidance on other regulatory and enforcement risks raised by COVID-19 please see our full guide, which covers securities, commodities, antitrust and sanctions.

This article appeared on the Allen & Overy Investigations Insight Blog – sign up to the blog to receive updates on important developments in business crime and financial services investigations  – email Investigations.insight@allenovery.com.

 

 

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