Responding to Supply Chain Issues and Increased Corruption Risks | The Volkov Legal Group

The changing global economy raises anti-corruption compliance challenges. In response to economic upheaval and disruption resulting from the COVID-19 pandemic and the Russian invasion of Ukraine, businesses are facing situations where supply chain delays and disruptions inevitably increase demands. and corruption pressures.

A perfect example of such a situation was the delay in the export of essential goods from China to American and European companies. Due to the near-shutdown during the pandemic and pent-up demand, the recovery in demand levels has resulted in container space shortages on shipping vessels. In response, shippers and logistics companies seized the opportunity to raise prices for container space, and public and private employees often included corrupt payments and demands.

A second example illustrates the new environment in response to the sanctions program against Russia. Global companies have faced significant supply chain disruptions due to Russian-based manufacturing facilities. As the global sanctions response to Russia’s invasion of Ukraine hardened, global companies faced difficulties in exporting items needed to maintain operations in the manufacturing plant 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 might seek to extract bribes or “bonus” payments given their growing importance to maintaining business operations.

In this new and ever-changing risk environment, companies are often faced with the question of how to handle bribery claims. It becomes even more difficult for compliance professionals when company representatives report to compliance that they “know” that competitors are making these payments to the detriment of the company’s ability to compete in the marketplace. Compliance professionals themselves are often faced with increased pressure to find a way to “fix” the problem created in this environment.

Compliance professionals must follow several steps:

First, in many situations it is unclear whether the “premium” or surcharge for a specific service (eg booking a container on a ship) is in fact a “bribery” payment. To zero in on the issue, the company should seek specific documentation and an explanation of the exact charges that the customs broker, shipowner, or other third party is offering and the basis for each charge.

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

Third, the compliance and business team needs to analyze the trend and be more confident about the “reasonableness” of the detailed charges, recognizing that there are legitimate explanations for price increases in response to market demands.

Fourth, Compliance and Corporate employees must agree that any request from a third party for undocumented payment to an individual employee of a third party is a nonstarter and will be summarily denied.

Fifth, corporate employees often hear from other industry colleagues if a ship or customs broker is seeking to extract questionable payments or charges and such “intelligence” may be considered. However, compliance and business managers must be careful not to violate antitrust principles that separate legitimate market information from sensitive price information.

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

This is a difficult situation to manage, but basic compliance principles can help guide a business through this thicket as a means of working with the business and adhering to corporate ethics and values. the company.

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About Bob C. Zoller

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