CKR Global identifies top three foreign corruption risks facing Canadian companies

With World Bank estimates that up $1 trillion is being paid each year in bribes, the pervasive impacts of corruption have led to recent changes to Canada’s anti-bribery laws.  Canadian companies are facing new and evolving threats linked to their overseas operations, investments and partners, according to leading risk mitigation consultancy CKR Global.

 Based on practical experience with Canadian companies operating in high risk environments, CKR’s risk mitigation experts report that the three most pressing issues for Canadian businesses combating corruption risks are (1) unique risks to the extractive industry, (2) the hidden business costs of corruption investigations, and (3) recent changes to Canada’s anti-corruption laws.

 1. New focus on extractives sector

While the RCMP has yet to file charges against a Canadian mining company for violations of Canada’s Corruption of Foreign Public Officials Act (CFPOA), industry sources suggest they have several open files on companies in the extractives sector.  Canadian companies comprise some 75 percent of the global mining sector, with nearly half operating in overseas jurisdictions ranked near the top of global corruption indexes. There are heightened corruption risks with securing concessions, choosing local partners and clearing goods through customs. The extractive industry is subject to intense scrutiny by civil society, and the industry itself is pushing for improved corporate social responsibility.

 2. Hidden business costs of corruption

Fines issued by Canadian authorities for CFPOA violations are relatively modest compared to penalties levied by US regulators, which can be in the hundreds of millions of dollars.  By contrast, the largest CFPOA fine to date is $10.3 million. CFPOA fines appear to be getting larger but they are unlikely to reach the scale of US penalties. While fines may grab headlines, they are often dwarfed by other costs of a corruption investigation.  Legal and accounting fees, the cost of complying with a probation order, debarment from the World Bank (as well as all ancillary banks), class action lawsuits and delayed stock offerings can be much more costly than a punitive fine.  Following the announcement of a corruption investigation, it often takes several months or even years for a public company’s stock price to bounce back.

 3. Legislative and enforcement changes

The CFPOA was amended in 2013 to include harsher penalties, a books-and-records provision and a broader reach.  Legal and political analysts anticipate that the amendments will be enacted later this year.  “We have seen the books-and-records provisions of the US Foreign Corrupt Practices Act used extensively to pursue companies in recent years,” notes Mark LaLonde, director of Risk Solutions at CKR Global, a division of Granite Global Solutions. “It has been the key component of the regulators’ arsenal in the US, which has caught the attention of their Canadian counterparts.”

The RCMP has upped its own enforcement efforts.  In the last two years, there have been two fines of around $10 million and the first conviction of an individual (currently awaiting sentencing) under the CFPOA.  The RCMP now has two specialized units focusing exclusively on bribery and corruption, which are managing over 30 active investigations up from just three a few years ago.

 Practicing your ABCs

“As with other risk areas, prudent preventative measures can protect companies and their directors from costly and extremely damaging consequences of corruption,” says LaLonde.  “Having adequate anti-bribery/anti-corruption procedures in place is essential to reducing risk and liability, which can also extend to a company’s directors and executives.  Once in place, an ABC program needs to be effectively communicated, tested and adapted as a business evolves.

“CKR is uniquely qualified to provide these services to our existing and new clients because we’ve had feet on the ground in these industries and locations for decades,” LaLonde emphasizes. “We look at mitigating measures for corruption from a practical rather than purely theoretical approach.  We know this nets a better and more cost-effective outcome for our clients.  Whether addressing an acquisition due diligence exercise, responding to the inquiry of a regulator, or third party stress testing of an existing program, our experts bring industry and geographical experience to the table and understand the Canadian context.  That makes a big difference in the value of our offering.” 

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ABOUT CKR GLOBAL   www.CKRGLOBAL.com

CKR Global is Canada’s leading provider of risk mitigation and investigation services.  CKR provides innovative solutions that reduce client risk, minimize loss and increase human safety.  We enable our clients to enhance business performance and ensure operational continuity by providing the experts and the tools to manage all levels of risk.

With over 500 subject matter experts in 23 offices across Canada, and strategic locations around the world, we offer expert support to insurance, government, legal, and corporate organizations internationally.  CKR Global is there to protect our clients’ business interests from all levels of risk, enabling our clients to perform at the top of their respective industries.

FOR FURTHER INFORMATION:     Mark Lalonde, Director, CKR Global Risk Solutions

604.517.4545 ext. 2042    1.800.661.9077 mark.lalonde@ckrglobal.com