Firms could get caught in Asia as corruption rules tighten

SINGAPORE: Multinational companies trying to get a bigger piece of the Asia growth story face a rising risk of becoming embroiled in corruption scandals unless they enforce stricter compliance norms and new regulations.

The region may have moved centrestage in many companies' growth strategies as developed economies struggle but firms are also scrutinising investment projects even more and stepping up due diligence before jumping into new joint ventures and mergers and acquisitions.

The United States has ramped up its enforcement of the Foreign and Corrupt Practices Act (FCPA), while the United Kingdom's tough new Bribery Act comes onstream in April.

“There is an awful lot happening in the region when it comes to anti-corruption and multinational companies, wherever they're headquartered, are having to do a big review of their compliance procedures” said Kelly Austin, a partner at law firm Gibson Dunn in Hong Kong.

Avoiding corruption in Asia is notoriously tricky given the woeful record many nations have when it comes to tackling bribery. In Transparency International's league table of the least corrupt countries, China comes in at 78 and India at 87 while Indonesia and Vietnam are languishing at 110 and 116 respectively out of 178.

Last year, a record number of enforcement actions were brought under the United States' FCPA, which bans payments of bribes to foreign officials. A big chunk of those 74 cases involved Asia with Alcatel Lucent the latest big name to get caught up. It agreed to pay US$137mil last year to settle charges it paid bribes to foreign officials in a number of Asian and Latin American countries.

This step-up in enforcement was one factor that prompted law firm Kobre & Kim to open a Hong Kong office last November specialising purely in US litigation the first of its kind in the city.

“There is definitely a lot of concern in the marketplace more intense in Asia than in other areas,” said William McGovern, the former Morgan Stanley lawyer who heads the office.

A typical case for him tends to involve US firms under competitive pressure to find a foothold in the Chinese market which get caught in a gift-giving or bribery scandal with a public official.

“US government prosecutors have demonstrated that they expect companies operating in China to adhere to US standards despite the pull of Chinese business norms,” he said.

These sort of cases are set to increase given the US Securities and Exchange Commission has recently opened an FCPA enforcement unit in San Francisco specialising in Asia and California.

But even for companies well established in Asia with an FCPA compliance programme in place, there is a new rule looming that is forcing many of them to review their control procedures.

The United Kingdom's new Bribery Act will apply to any company with operations in Britain, even if the bulk of its business is done elsewhere. Dubbed the “FCPA on steroids”, it goes further than prohibiting bribery payments to foreign officials. It criminalises bribes between private businessmen meaning lavish examples of corporate hospitality are likely to come under scrutiny and bans the payment of facilitation payments.

“The new law is incredibly tough the initial response when we advise clients about it is disbelief,” said Wilson Ang, a dispute resolution lawyer at Norton Rose in Singapore. “We've had to approach most of our clients here in Asia as they just assume that it's a UK bit of legislation so won't apply to them, but it's very far-reaching.” - Reuters

Latest business news from AP-Wire

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3

Next In Business News

Bank Negara adds two companies to money services business alert list
Top Glove’s billionaire founder buys stake in education firm
FBM KLCI breaks below 1,600-mark
Bitcoin hits record high of US$62,575
Perodua launches Aruz in Singapore, priced at RM286,409
Grab set to announce deal with US SPAC at US$40 bil valuation
Indonesia's trade surplus seen shrinking in March
China shares dip as strong trade data fuels tightening concerns
MRT to raise private funds to finance 10-30% MRT3 project
Perodua Aruz launched in Singapore

Stories You'll Enjoy