Corruption Compliance in COVID times – What’s the Exit Strategy?

Corruption Compliance in COVID times – What’s the Exit Strategy?

At this complex time, I would like to focus on one question: Is the Covid-19 crisis a place for compliance? Is it possible to comply with laws and regulations when a company is engaged in business reconstruction or survival, or is it key to move forward during the emergency and deal with the consequences later?

The question arises from what is happening now around the world: now that the crisis period seems to be abating, we are witnessing many deals unfolding in required areas such as food, medical equipment, infrastructure, telecom and computing. Many companies are continuing with their business development activities, and some have even increased sales – and their compliance risk. For example, imagine a company that has closed a business deal to sell medical equipment to the military of a Latin American country. Due to the state of emergency, the company may decide to employ new agents and intermediaries who will work with the country’s government agencies, but without carrying out proper due diligence or the required set of corporate approvals. In addition, to execute the transaction, the company may decide that its purchasers will work with new East Asian companies and suppliers, but not inform the purchasers of the compliance do’s and don’ts in this arena, all due to the short time and contractual urgency.

When the crisis ends, partially or fully, and it turns out that compliance directives were not followed by one or more of the transaction’s points of contact (i.e., agent, distributor, supplier, business partner, acquired company or others) or that bribes or money laundering activities occurred, the company and its executives will risk criminal investigations, indictments against those involved, and legal claims from shareholders and third parties that may be harmed by the affair. It should be emphasized that enforcement authorities worldwide have already made it clear that no “COVID discount” will be given to those who violate the law during the crisis, as the laws and regulations are not repealed during this period. Moreover, when there is a partial or full return to normality, they will not hesitate to investigate and prosecute whoever violated the law during the “twilight period” we are in now.

If so, what are the practical solutions to this problem? How can we continue to conduct compliance and prevention activities in the complex circumstances we face? Here are our main recommendations:

• Compliance actions in the company must continue and, as regular activity resumes, all matters of compliance that have been neglected must be addressed. Even if the compliance array is now difficult to manage as per “normal” times, it may be possible to operate – for a certain period – with partial procedures that will enable you to keep a handle on new third-party engagements and transactions.
• Compliance projects that are underway must not be stopped but, as needed, can be deployed over a longer period than planned. Experience shows that it is difficult to reinvigorate the “spirit of compliance” and recapture the required managerial attention if compliance disappears from the horizon for a long period of time.
• It is highly recommended to continue compliance activities which do not require significant resource allocation, such as training for representatives and subsidiaries worldwide, completion of correspondence and reviews that began before the crisis, and reviews and updates of existing plans and procedures.
• Before conducting merger and acquisition transactions, ensure that no “cornering” is carried out and that problematic points that emerge on the way to the closing receive full treatment and response before the deal is executed. Do not neglect these issues because of the crisis or the urgency of the issues.

With proper conduct, it is possible to maintain compliance during the crisis and exit periods without inflicting significant damage to the company’s compliance array, business operations, or legal status or reputation. However, as we follow this “emergency routine”, we must use our existing resources to the best of our ability and ensure that the company continues to adhere to laws and regulations amid the complexity of the circumstances we are now experiencing.

Written by our man in Tel Aviv, Attorney Asher Miller, who is a Compliance, Regulation and Defense Expert, Consultant and Lecturer.  For more details and questions, please contact comply.ace@gmail.com or + 972 052-5773001