complianceAnti-corruption has been a hot topic in Russia for some time. But recently, the Russian government has begun to take creative approaches in the fight against corruption. These initiatives are aimed at raising public awareness of corruption among the general public. What appears to be missing in this outreach is compliance guidance to companies in Russia. The Russian Anti-Corruption Law outlines a compliance framework but lacks specifics. Guidance to U.S. companies may be able to fill the gap.

“Together Against Corruption”

The Russian government views public outreach as a necessary element in the fight against corruption. In December of last year, the government awarded a contract to a private company to direct discussions on anti-corruption and civil-society development across the country.[1] This year, for the third year in a row, the Prosecutor General’s Office of Russia has announced a youth contest “Together Against Corruption” that will select video clips and posters on the topic of anti-corruption.[2]

On April 19, 2019, representatives of the Russian Duma, the Prosecutor General’s Office, and the Ministry of Foreign Affairs discussed government initiatives at a press conference on the Prevention of Corruption and Anti-Corruption Education.[3] Anatoly Vyborny, Deputy Chairman of the State Duma’s Committee for Security and Anti-Corruption, explained why the government views the public’s awareness as a necessary element of success in the fight against corruption. “Corruption exists in each one of us,” he said. “This is why it is important that each one of us considers what it is that I can do to counteract corruption.” [4]

But What About Businesses?

The government’s public outreach on anti-corruption is aimed at Russian citizens, including “pensioners and students.”[5] But it leaves out businesses, a segment that is just as likely to engage in and suffer the consequences of corruption. In 2018, the Russian government opened 487 investigations against legal entities for bribery under Article 19.28 of the Administrative Offenses Code (Unlawful Remuneration on Behalf of a Legal Entity).[6] These investigations resulted in the administrative fines imposed against 439 entities in the total amount of RUB 691 million (USD 10.7 million).

In 2019, the Prosecutor General’s Office added 35 entities to the public register of Article 19.28 offenders.[7] These companies are prohibited from bidding in federal and municipal procurement tenders for a period of two years from the date of the administrative penalty.[8] The register now lists over 1,200 entities in total.[9]

While these numbers pale in comparison to prosecutions of corrupt government officials in Russia, they show businesses are far from being immune from corruption. This is why it is surprising that the government does not direct its outreach toward businesses as a segment that could benefit from anti-corruption education.

Anti-Corruption Measures Guidance to Companies

The Russian anti-corruption laws offer very little guidance on what a company can and should do to ensure its compliance with anti-corruption laws. Compliance guidance to companies is limited to Article 13.3 of the Russian Anti-Corruption Law, which mandates that companies “develop and take anti-corruption measures.”[10] The Article lists six measures compliance programs may include. They are:

  • (1) the appointment of a compliance officer;
  • (2) cooperation with law enforcement authorities;
  • (3) development and implementation of compliance policies and procedures;
  • (4) adoption of a code of ethics;
  • (5) prevention of conflicts of interest; and
  • (6) prevention of off-the-books record keeping and the use of falsified documents.

These measures are optional, and no additional guidance from the government appears to exist on the components of an effective compliance program.

Yet Compliance Matters

Russian authorities may, however, consider a company’s compliance function when deciding who to prosecute and how to sentence. The Administrative Code of Offenses provides that “an entity shall be found guilty of committing an administrative offense if it is established that it had the opportunity to comply, but did not take all measures within its control to comply with such laws.”[11] The Code further provides that, in levying penalties, the authorities should take into account both mitigating and aggravating circumstances. Mitigating factors may include, but are not limited to, degree of repentance expressed, voluntary termination or reporting of offense, cooperation in the investigation and prosecution of the offense, and voluntary efforts to mitigate or compensate harm caused by the offense.[12] Aggravating factors may include continued violation despite demands to cease and desist and recidivism.[13] As such, a robust compliance program is imperative and can be a valuable investment in avoiding risks in the first instance and minimizing penalties in the event of a breach.

Lessons from the United States

By contrast to the Russian government, law enforcement authorities in the United States have long focused on the business community as an audience for anti-corruption outreach. Government officials frequently speak at business conferences on anti-corruption and sanctions compliance; settlement documents and sentencing recommendations highlight weaknesses and strengths in a company’s compliance program; and the government offers written compliance guidance.

These include the U.S. Department of Justice’s guidance on the Evaluation of Corporate Compliance Programs, updated just last week; the U.S. Department of Treasury’s Framework for OFAC Compliance Commitments; the U.S. Department of Justice and Securities and Exchange Commission’s Resource Guide to the U.S. Foreign Corrupt Practices Act (“Resource Guide”); and the Federal Sentencing Guidelines for Organizations. While these documents recognize that, when it comes to compliance programs, no size fits all, they set forth several universal elements of an effective compliance program.

For example, the Resource Guide highlights 10 such components:

  • (1) commitment from senior management and a clearly articulated policy against corruption;
  • (2) code of conduct and compliance policies and procedures;
  • (3) oversight, autonomy, and resources;
  • (4) risk assessment;
  • (5) training and continuing advice;
  • (6) incentives and disciplinary measures;
  • (7) third-party due diligence;
  • (8) confidential reporting and internal investigations;
  • (9) periodic testing and review; and
  • (10) pre-acquisition due diligence and post-acquisition integration.[14]

Conclusion

At the April 19 press conference, Andrey Avetisyan, Ambassador-at-Large for International Anti-Corruption Cooperation, acknowledged that other countries have developed a number of best practices to prevent corruption that Russia currently lacks. He also spoke to Russia’s willingness to learn from the other countries’ experience in the fight against corruption. It appears that the U.S. anti-corruption guidance to businesses is one area Russia should examine. In the absence of meaningful guidance from the Russian law enforcement authorities, companies operating in Russia should consider doing the same.

To learn more about anti-corruption trends in Russia, as well as sanctions and counter-sanctions, tune in to our webinar on May 16, 2019. Register here.


[1] https://www.anticorruptionblog.com/anti-corruption/russia-continues-anticorruption-efforts-in-2019/

[2] http://www.anticorruption.life/greeting/ (last visited Apr. 29, 2019)

[3] https://efir.genproc.gov.ru/rubrics/11/video/594 (last visited Apr. 29, 2019)

[4] https://efir.genproc.gov.ru/rubrics/11/video/594 (last visited Apr. 29, 2019)

[5] https://pasmi.ru/archive/232096/ (Apr. 19, 2019)

[6] https://genproc.gov.ru/smi/news/archive/news-1575524/ (Mar. 21, 2019)

[7] https://genproc.gov.ru/anticor/register-of-illegal-remuneration/1558822/

[8] https://genproc.gov.ru/anticor/register-of-illegal-remuneration/

[9] Id.

[10] Federal Law № 273-ФЗ, enacted Dec. 25, 2008 http://www.kremlin.ru/acts/bank/28623/page/5

[11] See Code of Administrative Offenses, § 2, art. 2.1

[12] See id. § 1, art. 4.2

[13] Id. § 1, art. 4.3

[14] https://www.justice.gov/sites/default/wp-content/uploads/sites/10/criminal-fraud/legacy/2015/01/16/guide.pdf, at 56-63

[15] https://www.ussc.gov/guidelines/2018-guidelines-manual/2018-chapter-8