CIPC Guideline: Managing the risk of Corruption

• South Africa

• Corporate

27-11-2018

Topically, in light of the ongoing reports of corruption which dominate the headlines, seemingly on a daily basis, the Companies and Intellectual Properties Commission has published Guideline 1 of 2018 – Guideline for Corporate Compliance Programme. This guideline is intended to assist the Social and Ethics Committee to fulfil one of its obligations, which is to effectively identify and evaluate likely corruption risks, and to develop appropriate measures to reduce those risks.

The guideline sets out minimum compliance principles which should be incorporated into a compliance programme, to ensure its effectiveness:

1. Top Management Commitment

The programme should be clearly communicated throughout the organisation, as well as to external stakeholders.

Senior management should establish a culture in which corruption is not acceptable, which includes appointing appropriate compliance officers and ensuring disciplinary proceedings are instituted in response to corruption which is identified.

2. Policies and Procedures

The policies and procedures to prevent corruption must be clear, practical and accessible and made known to all directors, officers, and employees, as well as outside parties who act on behalf of the company (such as agents, intermediaries, consultants, distributors, contractors, suppliers, JV partners).

Policies governing the following areas should be standard:

• Gifts

• Hospitality, entertainment and expenses

• Customer travel

• Political contributions

• Charitable documentation and sponsorship

• Facilitation payments

• Solicitation and extortion

3. Communication and Training

Periodic training should be provided for all directors, officers and employees (and business partners where necessary), and compliance with such training should be certified.

4. Periodic Reviews

The compliance programme should be reviewed periodically and tested to evaluate and improve its effectiveness in preventing and detecting violations.

5. Due Diligence

A company should know who it is doing business with and ensure transparent and ethical business relationships. Agents and business partners should be informed of its commitment to preventing corruption, and of its ethical and compliance standards – and seek reciprocal commitment.

6. Auditing and Accounting Controls

The company must have a clear and concise accounting policy that prohibits off the books accounts or inadequately identified transactions, and monitor accounts for inaccuracies, and for ambiguous or deceptive book-keeping entries, that may disguise illegal payments.

The Guideline is addressed to companies which are required to have a Social and Ethics Committee, which limits it to listed public companies, state-owned companies, and companies with a public interest score of 500 or more in any two of the previous five years. That does not, however, prevent other companies from taking these principles on board and using them to cultivate an ethical culture, and to improve their ability to prevent and detect corruption.