The problem of non-compliance

Anti-corruption standards vary around the world. A group-wide compliance management system and effective handling of whistleblowers are therefore essential.

German companies are often quick to distance themselves from practices such as bribery. Nevertheless, they repeatedly make the headlines because executives or individual employees negligently or deliberately violate the relevant requirements.

For example, in early 2024 software group SAP had to accept a USD 222 million penalty in return for the US authorities ending bribery investigations, as Deutschlandfunk reported on 10 January 2024. The company is alleged to have falsified its accounts between 2013 and 2022 to make bribes paid to government officials in seven countries appear to be legitimate business expenses.

High penalties for corruption

Commodities trading group Trafigura was also charged in the United States, as the Austrian daily newspaper “Der Standard” reported at the end of March. The company pleaded guilty to corruption charges and is paying around USD 127 million. The case concerned former Trafigura employees bribing Brazilian officials. Between 2003 and 2014, bribes were paid to employees of the oil company Petrobras in Brazil, generating profits of more than USD 61 million. Bribes of up to 20 cents per barrel are said to have been paid in oil trading between Petrobras and Trafigura.

The 2006 bribery allegations at Siemens, which also involved the Management Board, likewise remain an unpleasant memory, as do the incidents surrounding the VW “emissions scandal” that came to light in 2015. Here too, the consequences included penalties and compensation payments running into billions, as well as immense reputational damage that persists to this day.

A difficult position for internationally active companies

The rules are clear, as are the penalties. Nevertheless, companies breach compliance requirements. How can this be explained?

A study by Transparency International seeks to answer this question. It surveyed 539 companies that generate part of their revenue in countries where levels of corruption are higher than in Western countries. According to the study, one in two exporting companies faces demands for bribes or gifts, and 63 per cent of these companies comply with those demands. The study finds that one in three companies uses bribery abroad.

But how should companies act when faced with “no corruption, no contract”? Our Head of Compliance & Data Protection and Certified Compliance Professional (CCP), Dr Arnt Glienke, has a clear view: “Companies must take a clear position and make it clear at every level of cooperation that ‘zero tolerance’ is the principle. The more convincingly and unequivocally they communicate and live by this, the more likely business partners are to accept such a principle.”

What can those responsible do to enforce compliance policies even in countries with low awareness of anti-corruption standards? Here too, lawyer Dr Glienke has a clear view: “Compliance must be a matter for senior management. Above all, this means two things: company management must communicate the compliance standards personally and anchor their importance in the company’s DNA. At the same time, there must be an open corporate culture in which compliance with rules is rewarded — rather than securing contracts at any price.”

Compliance management systems in companies

Given the complexity of international business relationships, corporate groups in particular face the challenge of monitoring statutory and internal company rules. Take Frankfurt Airport: its operating company, Fraport, has summarised its internal anti-corruption guidelines in the Fraport Code of Conduct. A group-wide compliance management system conducts continuous reviews to ensure that these requirements are observed. The system checks whether group companies comply with the rules, for example in their handling of gifts and invitations, and performs compliance checks on business partners. Reports of compliance violations are also taken into account. The local management of each company is responsible for the compliance management system. From there, the strands come together in the central “Legal Affairs and Compliance” department under the Chief Compliance Officer. He is responsible for the content, organisation, maintenance and further development of Fraport AG’s compliance management system.

Whistleblower systems and training as effective tools

As at many companies, the most important instrument for preventing and uncovering compliance violations at the airport operator is the legally required whistleblower system. Employees, business partners and customers can report irregularities at any group company anonymously online. Employees at the Frankfurt site can also contact an internal trusted person. Tried-and-tested, legally compliant products are now available for companies to use in this area as well.

Another important element in enforcing anti-corruption standards is compliance training programmes. Continuously updated and adapted to new challenges, they ensure that compliance is genuinely practised at every level of the company. After all, compliance is as dynamic as business itself — and requires dialogue with all stakeholders to remain effective and adapt to current developments.

Compliance expert Dr Glienke therefore recommends: “Personal liability for company management has repeatedly been expanded in recent years, most recently by the EU Supply Chain Directive in spring 2024. At the same time, risks are particularly difficult to recognise and assess in the area of compliance. Yet this complexity is impenetrable only at first glance: proven tools such as compliance management systems and whistleblower systems ensure there is no need to reinvent the wheel. Combined with fostering an open corporate culture, they make risks visible before they become problems. The greatest risk is therefore non-compliance.”

Fraud and embezzlement

Incidents of fraud and embezzlement indicate serious compliance violations involving financial misconduct, unethical practices and breaches of trust. Such actions require thorough investigations, enforcement measures and penalties to deter future incidents.

• These incidents can have a significant impact on financial stability and a company’s reputation within its sector. If fraud remains undetected, it can escalate quickly and cause extensive damage that may take years to remedy.
• Implementing fraud prevention strategies and improving compliance controls are crucial steps in protecting against fraudulent conduct.
• By fostering a culture of ethics and integrity, organisations can create a strong deterrent to fraudulent activity and promote a transparent and trustworthy business environment.

How can effective compliance measures be implemented in your company?

We will be glad to support you in designing a compliance management system and whistleblower system, as well as the corresponding training. With proven legal tech tools and individual advice, you benefit from the practical expertise of our lawyers.

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