Anti-corruption watchdogs in the region are gearing up to catch companies that get up to no good. Governments have enacted new laws, and they won’t stop there. Until now, their sights had been set on individuals. Take Vietnam, Malaysia, and Indonesia, for example.
In Vietnam, the Anti-Corruption Law (Law No. 36/2018/QH14) came into force on 15 August 2019. It was issued alongside a new Anti-Corruption Implementing Regulation (Decree No. 59/2019/ND-CP). Non-state enterprises that rely on public capital – e.g., publicly held companies and credit institutions, as well as social charity organizations established by a competent state authority – are now required to implement anti-corruption policies. They’re also subject to investigation by government inspectorates to ensure compliance.
In Malaysia, the amended Malaysian Anti-Corruption Act, which takes effect in 2020, introduces an adequate procedures defense similar to that in the UK Bribery Act. Companies will be expected to implement anti-corruption measures, and failure to do so might expose them to criminal liability.
In Indonesia, the Corruption Court has sentenced the first company for corruption crimes. The Corruption Eradication Commission (Komisi Pemberantasan Korupsi – KPK) is investigating and indicting several others. Also, Supreme Court Regulation No. 13 of 2016 on the Procedure of Corporate Crime Case Handling (SCR 13) is gaining traction. According to SCR 13, a company may be criminally liable if it benefits from corrupt conduct, if the corrupt conduct (including bribery) advances its interests, if it lets the corrupt conduct happen, or if it didn’t have adequate procedures in place to prevent the crime.
Culture, corruption, and compliance
Understanding the history and culture of the region is vital to tackling compliance issues. It explains why top executives might be explicitly or implicitly involved in corrupt conduct. Sometimes they give a nod of assent. Sometimes they turn a blind eye to misconduct under their watch or to why it isn’t challenged internally or externally.
Historically, South East Asian countries have been home to numerous kingdoms, big and small. Years of colonial domination consolidated the belief that those who sit in the government – the people with power – are rulers. Zooming in on the micro level, the concept of a respected patriarch adopting a top-down approach to leadership to rule a family business remains remarkably prevalent. There’s a perception that a ruler is entitled to certain tributes from their subjects. Such cultural perceptions have arguably hindered anti-corruption initiatives that have often been devised through a Western, liberal, and/or democratic lens.
Some cases across the region show that these rulers – or public officials – feel entitled to some benefit, including asking for bribes from companies that work on projects within their territory. Secret codes are exchanged – water, salam, left tire, right tire, and so on. Even outside South East Asia, our global network can speak to their own geographically distinct codes for bribes. In Brazil, for example, “a little coffee” is often the term for a kickback. While tributes are traditionally rooted, corrupt schemes are becoming increasingly creative as the anti-corruption watchdogs become more aggressive.
Difficulty arises when companies feel they cannot openly reject a corrupt request if a ruler asks for a tribute. It could lead to an open conflict with those in power, which is bad for business (now and in the future).
Another cultural perception that makes combatting bribery and corruption so difficult is the tolerance of the people. They’re generally not outspoken about alternative or opposing ideas they may have.
It isn’t always clear if the person on the street really shares, or feels passionate about, the view that bribery and corruption is bad. While it’s dangerous to generalize, South East Asia has a long history of social segregation. This means many ordinary people believe they’re not entitled – or perhaps don’t see the benefit or need – to participate more actively in civic society and political economy. This leaves the political elites, who have ample opportunity to abuse their privileged positions in society and business. It can then be difficult for a company headquartered outside the region to know how to tackle pockets of power in geographically and culturally distinct areas.
A few options for your company
An effective approach we’ve implemented with clients is a mix of social engineering and legal techniques.
Your global policy might not apply in South East Asia
A global compliance policy will never cope with local idiosyncrasies. Training, for example, should be adjusted so high-risk, relevant functions, i.e., those that deal with government or public officials, know what to do and what to say to avoid difficult situations and stay compliant. And when you have site offices or projects in remote areas, the training should be adjusted to the local culture.
Various locations across South East Asia have different cultures and customs. Your training should recognize the global policy and attend to this marriage or conflict with local tradition.
Independent whistleblower systems
Because of the tolerant culture, people don’t feel the need to report misconduct if it doesn’t affect their livelihoods. Even when it does, sometimes people in lower, junior, or far-removed positions feel they cannot report the misconduct of a superior – as if it’s taboo. We’ve seen that when there’s a whistleblower system in a company, sometimes there hasn’t been a single report in a year.
A whistleblower system needs to be publicized to encourage employees to be vigilant and proactive.
Finding suitable compliance champions in middle and lower management can also play a part in solving the cultural barriers. Reliable and honest with a good sense of leadership, compliance champions are your beacons to set the tone. They’re also a point of contact. We advocate a multi-pronged approach to listening for malfeasance. It’s better that you hear about it first from within than from the media.