Foreign investors now face more scrutiny from their home countries for corrupt practices abroad.
The life of foreign investors in Ukraine, a nation that is one of the hardest places to do business, may even get tougher. But this time, it’s not exactly the Ukrainian government’s fault.
From now on, in addition to working in a highly corrupt business environment, representatives of international companies will have to take into account increased scrutiny on bribery and corruption by law enforcement agencies in their own countries.
Rewards for whistleblowers who bring such abuses to light are also either in place or being put into place.
After the United Kingdom Bribery Act goes into effect on July 1, bribes given anywhere in the world by companies with U.K. business interests are subject to the British legal system.
It means that if an employee of an international company, its subsidiary, partner, agent, or contractor gives a bribe in Ukraine for the company’s benefit, this would be considered a crime in the U.K. And in many cases, having a business presence in the U.K. could mean as little as selling products there.
According to the new legislation, citizenship of a person who committed an act of corruption makes no difference.
Robert Amaee, a lawyer with the London office of Covington & Burling, said the legislation represents a breakthrough with a provision that does not allow top managers to be exempt, even if they prove that they didn’t know anything about the corrupt actions of their subordinates.
“If a bribe is paid, your only defense is to stand up and say we have great procedures in place that were adequate to stop this bribe being paid. But this man went off and did his own thing,” said Amaee, who formerly headed Anti-Corruption and Proceeds of Crime at the UK Serious Fraud Office.
Covington & Burling is one of the world’s most reputable legal firms. Its former partner, Eric Holder, is the U.S. attorney general, the nation’s top law enforcer.
Yulia Tymoshenko, Ukraine’s former prime minister, recently hired the firm to be part of her legal team defending her against charges of misusing $300 million in government money that Ukraine received from selling emission quotas under the Kyoto Protocol.
Amaee noted that the U.K. Bribery Act doesn’t affect only multinational giants. Local companies, such as Ukrainian ones, must also review their business behavior.
“If a Ukrainian company has operations in the U.K., then if any of its associates anywhere in the world, say in Brazil, decides to pay a bribe for the benefit of the company, it can be held to account in the U.K.,” Amaee explained.
As Amaee pointed out, a bribe can be in cash, services or benefits provided. Even tickets to a soccer game or donations to an official’s charity, or the hiring of relatives, can be considered a bribe, Amaee said.
The changes were discussed at a recent conference in Kyiv, where a group of lawyers specializing in fraud and corruption matters explained the consequences of the new U.K. Bribery Act and the U.S. Foreign Corruption Practices Act.
The American Chamber of Commerce in Ukraine and British-Ukrainian Chamber of Commerce organized the event.
One discussion centered on payments made to Ukrainian officials to get them to stop pressuring businesses. In some cases, the payments are made to get officials to actually observe the law.
For example, such payments can speed up customs clearance, ensure timely issuance of permits or get other basic public services provided.
But Amaee said that only payments specified by law are permitted.
John Engstrom, chief of the anti-corruption program at the U.S. Embassy in Kyiv, also warned the audience against hiring lawyers promising to solve problems for a price.
“You ask what will they do for this large fee and the answer is ‘you really don’t want to know.’ Once you hear that ‘you really don’t want to know,’ then it’s a red light,” Engstrom said. “You don’t have to do business in a country that demands bribes. I am not here to scare you into compliance, but it’s an area of interest to the Department of Justice and we have many tools we use to uncover things.”
John Rupp, a lawyer with Covington & Burling, reminded the audience that under U.S. law, in particular the Foreign Corrupt Practices Act, a company could be held liable for corruption not only if they have a business presence in the U.S., but also if the bribe they paid was in dollars and was wired through a U.S. bank.
In 2010, foreign companies paid over $1.5 billion in fines to settle bribery charges. U.S. authorities often rely on whistleblowers to uncover corruption in exchange for financial rewards.
For submitting documents or evidence that reveals corruption, whistleblowers can get on 10-30 percent of the fine that the violator pays, for large-scale infractions involving fines of at least $1 million.
Engstrom said American judges are increasingly tougher when it comes to white-collar crimes, making it hard to avoid a jail term in addition to a fine.
Due to the high level of corruption in Ukraine, many corporate sector employees could try to make a quick and easy buck by revealing corrupt practices of their employers.
According to the recent European Fraud Survey 2011 by Ernst & Young, 91 percent of Ukraine’s respondents say that bribery and corrupt practices are common.
Ukraine and Ireland were the only countries surveyed in which most respondents concluded that government officials, including law enforcement, show no will to combat the problem.
In such conditions, investigations by Western anti-corruption law enforcement officers may be the only way to crack down on corruption in Ukraine.
Kyiv Post staff writer Vlad Lavrov can be reached at [email protected]
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