Newsletter | Volume 1

Issue I
Issue II
Issue III
Issue IV
Issue V
Issue VI
Issue VII
Issue VIII
Issue IX
Issue X
Issue XI
Issue XII
Issue XIII
Issue XIV
Issue XV
Issue XVI
Issue XVII
Issue XIX
Issue XX
Issue XXI
Issue XXII

click here to

Subscribe to our newsletter

To Unsubscribe click here

Facilitation Payments are often small amounts with substantial complications

Asian business leaders will gather to get guidance on Fraud, anti-Corruption & Investigations at the at the corruption summit in Hong Kong on the 2-4 November 2015. Attend the 3rd annual Fraud, Corruption & Investigations Asia Summit and get ultimate guidance to end facilitation payments and achieve zero tolerance on Bribery, Fraud and Corruption

Sir, you have to pay this small additional amount to get the installation completed or get the final goods delivered. Many companies are prompted to provide a small amount, token or gift, even if all corporate rules do not permit it.

The payments are often described as grease or facilitation money and are widespread in many countries. The custom may frustrate European or other Western companies when the African visa-processing or Chinese customs officer asking for "a little extra sum" when the enterprise is engaged in a trade transaction. The amount is meant for low-ranking government officials to obtain real estate licences or push goods through customs.

Corrupt companies get bad reputation
Until 1990, facilitation payments were deductible under most EU GAAP rules. The universal corruption watchdog still allows facilitation payments to foreign authorities. The problem, however, is that with large corporations like Walmart, who is under US probe for paying millions of USD in bribes in India, speed money payments that are as low as $5 to less than $200, together add up to a few million dollars. Therefore, Walmart is now likely to face US foreign-bribery charges under the FCPA over the payments.

Adequate procedures and efforts
Such payments are never huge economic problem, as only tiny amounts are tolerated, however once you start giving facilitation money, there is a precedence, and it becomes a habit. Later when the amounts get large, the total adds up to the fact that companies are alleged to be corrupt and get a bad reputation for not having adequate compliance procedures and efforts to avoid corruption.

Facilitation money is not limited to visa expeditions or at border crossings. It can be a major problem when personal security is involved. Depending on the company's maturity state and the employee experiences it is advisable to have an open discussion within the business to ensure uniformity and efforts to achieve Zero Tolerance to avoid damage to the corporate reputation
Therefore, it is desirable to be transparent and accountable and avoid discussion behind closed doors.

Take an active stand against bribery
Discuss the differences in direct corruption, where bribes can secure competitive advantages and facilitation money provided for a service that the company has already paid for and is entitled to.
After the internal debate on the difference between facilitation and bribery, companies must realise that the problem cannot be solved by the individual company on a global basis. However, they can play a significant role by being firm and strict taking an active stand against bribery.

When facilitation payments are the only option left, the advice often given is to document the payment and record as much evidence that is possible for the transaction. Later the incidents is recorded and reported to the local trade authorities, embassy and with the Foreign Ministry.
Even tough Denmark is on top of the transparency list, according to a recent survey by the Confederation of Danish Industries 27 percent of companies paid amounts classified as corruption and bribery for exports to Africa. The same percentage is 19 for European countries outside the EU and 18 percent respectively for the Middle East and South and Central America.

At the 9th annual Governance, Risk Management and Compliance Summit in Stockholm a separate Bribery and corruption workshop will be held to discuss the above topic by Claus Andersen of Royds, London.