In the recent times, majority of the entities in Africa that have been engaging in projects funded by the development agencies such as the World Bank, European Investment Bank, African Development Bank, Asian Development Bank and many more, have found themselves gambling with integrity compliance issues that have in one way or another led to them facing sanctions proceedings before the said agencies and ultimately being debarred for years from undertaking development funded projects.
Majority of the integrity issues that have be flagged out include fraud, bribery, engagement in corruption, collusion and conflict of interest. This has majorly been attributable to the fact that the companies at the time of engaging in the development funded projects either do not have an Integrity Compliance Program (ICP) in place hence are not aware what their integrity compliance requirements are or already have the ICP in place but the same is not functional.
For clarity purposes, an ICP is a set of policies and procedures that ensure a company’s ethical behavior and legal compliance. These policies describe in depth the corporate culture of an organization. From the polices, the development agencies are normally able to establish the culture and position of the company as relates to various issues such as fraudulent practices, money laundering, corruption and bribery, conflict of interests, collusion among others. Of key attention for these agencies include the following policies: –
- Anti bribery and Anti-corruption policies;
- Antitrust and Anti-fraud policies;
- Conflict of interest;
- Whistle Blower policy;
- Code of Conduct;
- Sales and Bid Management Processes;
- Procurement Policy;
- Recruitment Policy;
- Third Party Due Diligence policy; and
- Suppliers Code of Conduct.
Of key note however is that whereas these African companies are increasingly becoming aware of the need to have a working ICP in place, getting the right expertise to not only effectively represent them during the conduct of the sanction proceedings or settlement engagement but also guide them with the formulation and implementation of a functional ICP is not easy especially as per the standard requirements set by these development agencies.
Due to the lack of such expertise in most cases, the African companies normally end up sourcing for representation from experts from outside Africa or outside their jurisdiction of residence which in most cases is expensive. Where they are not able to afford such representation, majority opt to either engage persons they consider as being locally able to defend them or in the alternative represent themselves. The risk of this though is that unless there is prior understanding of the options that can be taken by the suspected entity, that is, either defending themselves on the sanction proceedings or alternatively agreeing on a settlement proposal, the likelihood of getting a reduced debarment period with no conditions attached thereto may be a mirage. Also the imminent risk of cross debarment by the other development agencies cannot be wished aware hence further loss of business to the company.
Even after the debarment period has been imposed on a company which in most cases is accompanied with conditions to be fulfilled before the expiry of the said period, getting the expertise of a competent and independent Compliance Advisor that will guide the company through the whole process is also not easy especially one within the jurisdiction the company is located.
Further and noting that the formulation and indeed the implementation of the ICP is a very practical and high intensity process that requires the engagement of each employee in the organization including its affiliates, in most cases coordinating the same is not a walk in the park leading to delays that may ultimately cause the extension of the debarment period that an entity faces.
Of note is that the development agency’s concern is not only on the existence of the policies but rather that the same are being implemented and form part and parcel of the organizational culture. The processes and procedures as indicated in the respective policies including relevant approvals must align with what is practically happening on a day-to-day basis in the organization including its affiliates.
To ensure the formulation and implementation of the ICP, the appointment of an Independent Compliance Advisor, Compliance Officer (CO) and/or Assistant Compliance Officer (ACO) are a requirement. The CO and ACO will be working internally in the Company whereas the Independent Compliance Advisor will be an expert approved by the subject development agency and will be engaged on consultancy basis during the period of debarment to guide and oversee that the company has the relevant integrity compliance program in place. In most cases, the CO and ACO need to have undergone extensive trainings on integrity compliance covering areas such as fraud, bribery, corruption, money laundering, legal compliance, corporate governance among others.
Moreover, the independence of the CO and ACO from both the Management and Board are some of the key audit concerns by the agencies when analyzing the existence of a functional ICP by the Organization.
Apart from the requirements on the CO and ACO, there is also the requirement imposed on the company that all employees, including the management and the board of the company, must be trained on the policies on a regular basis. Moreover, the policies must be stored in areas that can easily be accessed by the employees and third parties engaging the organization.
To monitor the progress in terms of formulation and implementation of the ICP, the Independent Compliance Advisor will periodically issue its report to the development agency describing the progress in terms of implementation. Further, he has the mandate of identifying areas of improvements and recommendations thereto to be implemented by the company. This report will normally be analyzed by subject development agency and they will return with queries, request for proof or further recommendations to be implemented.
Once there is a functional ICP in place and the development agency is convinced that the company has made steps to ensure the full implementation of the same including conducting audit on key areas of concern, the company will be released from debarment upon lapse of the debarment period. This however does not mean that the entity is no longer subject to the ICP policies, but rather makes a commitment to continue implementing the ICP with frequent audits of the same.
Conclusion
For companies that are undertaking projects funded by the development banks/agencies, it is prudent to note that having a functional ICP in place is cheaper than having to wait till non compliance issues are flagged out by the development agencies then having to formulate the same. At that point, the company will already be facing debarment, loss of reputation and business and time.
