In this second part of a two-part interview series, Lee Kok Leong, our special correspondent, continues his conversation with Alexandra Wrage, president and founder of TRACE, who has provided anti-bribery consulting or training in over 120 countries.
Do not take the easy way out. Under pressure and facing tremendous time and cost constraints, it is often easy to just give in to corrupt demands to smooth things over and hasten bureaucratic processes.
But, where will it stop? This vicious cycle can continue on indefinitely when someone feeds it, however small or inconsequential the bribes. Also, those that refuse to pay bribes will be put at a disadvantage.
Doing the right thing is always difficult, but well worth the effort in the long run.
Therefore, for all the C-level executives in the shipping industry, take a stand, provide the infrastructure and say No to corruption.
Read part one here where Alexandra explains why the shipping industry is prone to corruption and why she believes the situation is improving.
An industry pillar of anti-corruption
Alexandra was a member of FIFA’s failed Independent Governance Committee and has served for four years on the B20 Taskforce on Anti-Corruption, drafting recommendations to G20 leaders to consider in their global economic policies.
She is the author of Bribery and Extortion: Undermining Business, Governments and Security, co-editor of How to Pay a Bribe: Thinking Like a Criminal to Thwart Bribery Schemes and What You Should Know about Anti-Bribery Compliance and host of the training DVD Toxic Transactions: Bribery, Extortion and the High Price of Bad Business, produced by NBC.
Alexandra hosts the popular weekly podcast: Bribe, Swindle or Steal. She is a guest blogger for Forbes and speaks frequently on topics of transparency, good governance and the hidden costs of corruption.
She was named one of the “Canadians Changing the World” by the Toronto Globe & Mail and one of Maryland’s “Top 100 Women” by The Maryland Daily Record. She has been awarded the Women in Compliance “Lifetime Achievement Award for Service to the Compliance Industry.”
TRACE is a globally recognized anti-bribery business organization and leading provider of cost-effective third party risk management solutions. Members and clients include hundreds of multinational companies headquartered worldwide.
Corporate Fair Trade Community (CFTC): How does corruption undermine shipping companies?
TRACE (T): Corruption is insidious. In the short term, a small bribe may seem like a quick and easy solution to an immediate problem. However, it always invites more corrupt demands.
Once you make it clear that you’re willing to play along, it’s very difficult to regain the high ground.
In fact, occasional small bribes can have a counterintuitive effect over the long-term. Instead of “expediting” processing in one-off cases, inspectors are emboldened to create new obstacles and generate unjustified delays just so they can continue their shakedown.
In addition to these direct costs of bribery, bribes can lead to fraudulent books and records.
It’s also fairly common to have bribery accompanied by embezzlement and other crimes.
Once you establish a slush fund, you can’t reliably monitor who is dipping into it and for what purpose!
This sort of shoddy governance erodes trust, undermines crew morale, destroys reputations, and exposes shipmasters, crews and companies to criminal prosecution in multiple jurisdictions.
CFTC: Why are transparency and good governance important?
T: Corruption and criminality thrive in darkness and transparency is a powerful antidote.
Shining the light on the problem, exposing opaque corrupt schemes, and being outspoken about your anti-corruption commitment are all necessary for tackling this corrosive crime.
Without the corporate tone at the top and effective anticorruption policy backed by strong effective procedures and sufficient resources, shipmasters and crews cannot be expected to fight corruption alone.
CFTC: What are your recommendations for shipping companies wanting to fight corruption?
T: Below are my recommendations.
- Acknowledge the problem, take a stand, and be ready to invest in your effort. Develop and implement an anti-corruption policy and let shipmasters and crews know that your company really means what the policy says.
- Strength in numbers. Join an anti-corruption industry group, like TRACE [or the MACN], for support, collective action, benchmarking, sharing of resources, and increasing the impact of your efforts on the ground.
- Understand the causes and be deliberate in your actions. Analyze the government “touchpoints” and the operational areas where corruption is likely. Free resources like the TRACE Matrix can help you evaluate, and gain a deeper understanding of bribery risks.
- Create a clear plan of action to respond to bribe demands. Be proactive, set clear expectations for personnel, and give shipmasters and crews direct access to compliance professionals. It isn’t enough to tell people to “just say no”.
- Scrutinize third parties. Evaluate third party risk and conduct due diligence as appropriate. Leverage industry resources such as TRACEcertification to minimize screening costs while raising due diligence standards.
- Reward good behavior and remove or minimize perverse incentives. Too many companies tell their employees to avoid paying bribes, but then punish them for delays that arise when they refuse to pay.
- Keep up the anti-corruption awareness campaign.
CFTC: Please highlight the role and initiatives of TRACE in helping the shipping industry.
T: We developed a Shipping and Maritime Initiative, in response to the direct request from vessel owners, shipping agents and freight forwarders for assistance on how to tackle bribery and corruption at ports.
We met with leading stakeholders to discuss their specific concerns and to develop practical and innovative solutions to meet the unique compliance challenges of the shipping industry.
As part of this initiative, TRACE in partnership with RightShip,offers a compliance rating and, where appropriate, a due diligence report designed for vessel owners called TRACEcertification for Vessel Owners.
TRACEcertification is a heavily benchmarked and comprehensive due diligence review, analysis and approval process establishing that an individual or organization has been thoroughly vetted, trained and certified by TRACE.
This due diligence review allows vessel owners to obtain a compliance rating for the entire fleet, provided that the vessels are in 100 percent ownership by the applicant company.
The compliance rating of vessel owners helps to increase commercial transparency and reduces risk to charterers, who are expected to conduct due diligence on the vessels they charter, beneficial vessel owners, and third parties involved with the vessels.
Companies that successfully complete TRACEcertificationfor Vessel Owners can display their compliance rating on the RightShip Qi Platform.
Read part one of the interview here.