www.intertek.com1

Tackling Bribery and Corruption Risks in Global Supply Chains

Frederick Pang

Senior Manager – Audit, South China

Intertek Testing Services

www.intertek.com2

THE IMPORTANCE:(1) TO DEFINE THE SCOPE(2) TO FORMULATE THE ANTI-BRIBERY STRATEGY

First Question – What is Bribery

www.intertek.com3

What is Bribery?

• The origin of Bribery – Improper Performance• Citation: Bribery Act 2010, The UK

• s.1 - A person (“P”) is guilty of an offence if either of the following cases applies.

• s.1(2)(a) – P offers, promises or gives a financial or other advantage to another person, and

• s.1(2)(b) – P intends the advantage –

• (i) to induce a person to perform improperly a relevant function or activity, or

• (ii) to reward a person for the improper performance of such a function or activity.

• s.1(3)(a) – P offers, promises or gives a financial or other advantage to another person, and

• s.1(3)(b) – P knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity

www.intertek.com4

What is Bribery? (Cont’d)

• s.2(1) – A person (“R”) is guilty of an offence if any of the following cases applies.

 • s.2(2) – Case 3 is where R requests, agrees to receive or

accepts a financial or other advantage intending that, in consequence, a relevant function or activity should be performed improperly (whether by R or another person).

• s.2(3) – s.2(8) – ‘improper performance’

• s.1(2) & s.1(3) are separate offences

 

www.intertek.com5

5

What is Bribery? (Cont’d)

• The origin of Bribery – Agency Problem• Citation: Prevention of Bribery Ordinance of Hong Kong

• s.9(1) – Any agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage as an inducement to or reward for or otherwise on account of his –

• (a) doing or forbearing to do, or having done or forborne to do, any act in relation to his principal’s affairs or business; or

• (b) showing or forbearing to show, or having shown or forborne to show, favour or disfavour to any person in relation to his principal’s affairs or business,

• shall be guilty of an offence

www.intertek.com6

What is Bribery? (Cont’d)

• s.9(2) – Any person who, without lawful authority or reasonable excuse, offers any advantage to any agent as an inducement to or reward for or otherwise on account of the agent’s –

• (a) doing or forbearing to do, or having done or forborne to do, any act in relation to his principal’s affairs or business; or

• (b) showing or forbearing to show, or having shown or forborne to show, favour or disfavour to any person in relation to his principal’s affairs or business,

• shall be guilty of an offence

• s.9(1) + s.9(2) = BRIBERY

• Offer and Acceptance; Separate Offences

www.intertek.com7

BESIDES BRIBERY, CONFLICT OF INTEREST WOULD ALSO JEOPARDIZE IMPARTIALITY

Second Question – What is More?

www.intertek.com8

Is Conflict of Interest (COI) a kind of Bribery?

• Conflict of Interest – in a position acting on the interest of two conflicting principals

• Bray v Ford (1896) – Lord Herschell – not to be in position where interests and duty conflicts

• Bristol and West BS v Mothew (1998) – Lord Millett – single-minded loyalty

• Hence, COI and Bribery may coincide and overlap, but not necessarily identical

www.intertek.com9

Possible Corruption in Supply Chain

• Trading/Merchandising• Supplier Evaluation and Selection• Order Placement

• The Testing, Inspection and Certification (TIC) Industry• Audit – • Inspection – • Certification – • Testing –

• Common Feature – Disparity of Power + Agency Problem

www.intertek.com10

DETECTION AND PREVENTION

The Controls at Intertek

www.intertek.com11

Identification of Possible Bribe

• Bribe to auditors/inspectors/test operators

• Kick-back or advantages offered in the course of business

• Donations

www.intertek.com12

Identification of possible Conflict of Interest

• Connection with the industry

• Long term business relationship with clients and auditees

• Undue/Improper influence

www.intertek.com13

Strategy – Corporate and Company Level

• Structure• An independent team of Legal, Compliance and Risk

Management reporting to the Group

• Audits• Factory Visits

• Unannounced Audits

• Education• Yearly briefing (online) + Quiz

• Bi-monthly meeting on case study

www.intertek.com14

Strategy – Corporate and Company Level (Cont’d)

• High Policy & Culture – Zero tolerance Policy and Code of Ethics

• Business Ethics

• Walk-the-talk

• http://www.intertek.com/investors/governance/

www.intertek.com15

Strategy – – Corporate and Company Level (Cont’d)

• Check-and-Balance• Internal Controls – risk, remoteness, verification• Separation of powers – A single report is not solely controlled by

the auditor• Detection of Irregularities and Analysis• Reporting of offer and acceptance by frontline staff

• Transparency & Approval• Clearly defined Authorization Limits• N+1 or N+2 Approval• Declaration of interests (Yearly)

• Objective : to enhance the probability of detecting corruption and COI

www.intertek.com16

Strategy – Beyond Corporate and Company Level

• Law enforcement • Criminal investigation and prosecution (c.f. civil litigation)• Government policy

• Locus standi• Grant of Leave for litigation

• Open Information• Reference Check in the industry

• Intelligence Sharing

www.intertek.com17

Strategy – Beyond Corporate and Company Level (Cont’d)

• Collaboration – with other stakeholders in the supply chain• Reporting by informants & Investigation• Culture Building on impartiality and integrity, no offer and no

acceptance; business on condition of quality and value creation

• Objective : to enhance the probability of detecting corruption and COI and the consequence of breaches

www.intertek.com18

Collaboration & Cooperation

Microscopic

Strategy

Macroscopic

Strategy• Check-and-Balance

• Transparency & Approval

• High Policy & Culture

• Structure

• Audits

• Education

• Law enforcement

• Open Information

• Collaboration

www.intertek.com19

Valued Quality. Delivered.