This document discusses strategies for tackling bribery and corruption risks in global supply chains. It defines bribery and contrasts it with conflict of interest, noting areas of overlap. Potential corruption issues in supply chain management are identified, such as in supplier evaluation, order placement, and testing/inspection. The document outlines Intertek's controls to prevent bribery, including education, audits, separation of duties, and transparency. It also discusses the importance of broader strategies like law enforcement, collaboration with stakeholders, and culture building to reinforce integrity in business transactions.

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Tackling Bribery and Corruption
Risks in Global Supply Chains
Frederick Pang
Senior Manager – Audit, South China
Intertek Testing Services

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THE IMPORTANCE:
(1) TO DEFINE THE SCOPE
(2) TO FORMULATE THE ANTI-BRIBERY STRATEGY
First Question – What is Bribery

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What is Bribery?
• The origin of Bribery – Improper Performance
• Citation: Bribery Act 2010, The UK
• s.1 - A person (“P”) is guilty of an offence if either of the following
cases applies.
• s.1(2)(a) – P offers, promises or gives a financial or other
advantage to another person, and
• s.1(2)(b) – P intends the advantage –
• (i) to induce a person to perform improperly a relevant function or
activity, or
• (ii) to reward a person for the improper performance of such a
function or activity.
• s.1(3)(a) – P offers, promises or gives a financial or other
advantage to another person, and
• s.1(3)(b) – P knows or believes that the acceptance of the
advantage would itself constitute the improper performance of a
relevant function or activity

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What is Bribery? (Cont’d)
• s.2(1) – A person (“R”) is guilty of an offence if any of the
following cases applies.
• s.2(2) – Case 3 is where R requests, agrees to receive or
accepts a financial or other advantage intending that, in
consequence, a relevant function or activity should be
performed improperly (whether by R or another person).
• s.2(3) – s.2(8) – ‘improper performance’
• s.1(2) & s.1(3) are separate offences

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What is Bribery? (Cont’d)
• The origin of Bribery – Agency Problem
• Citation: Prevention of Bribery Ordinance of Hong Kong
• s.9(1) – Any agent who, without lawful authority or reasonable
excuse, solicits or accepts any advantage as an inducement to or
reward for or otherwise on account of his –
• (a) doing or forbearing to do, or having done or forborne to do, any
act in relation to his principal’s affairs or business; or
• (b) showing or forbearing to show, or having shown or forborne to
show, favour or disfavour to any person in relation to his
principal’s affairs or business,
• shall be guilty of an offence

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What is Bribery? (Cont’d)
• s.9(2) – Any person who, without lawful authority or reasonable
excuse, offers any advantage to any agent as an inducement to or
reward for or otherwise on account of the agent’s –
• (a) doing or forbearing to do, or having done or forborne to do, any
act in relation to his principal’s affairs or business; or
• (b) showing or forbearing to show, or having shown or forborne to
show, favour or disfavour to any person in relation to his
principal’s affairs or business,
• shall be guilty of an offence
• s.9(1) + s.9(2) = BRIBERY
• Offer and Acceptance; Separate Offences

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BESIDES BRIBERY, CONFLICT OF INTEREST WOULD ALSO
JEOPARDIZE IMPARTIALITY
Second Question – What is
More?

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Is Conflict of Interest (COI) a kind of Bribery?
• Conflict of Interest – in a position acting on the interest of two
conflicting principals
• Bray v Ford (1896) – Lord Herschell – not to be in position
where interests and duty conflicts
• Bristol and West BS v Mothew (1998) – Lord Millett –
single-minded loyalty
• Hence, COI and Bribery may coincide and overlap, but not
necessarily identical

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Possible Corruption in Supply Chain
• Trading/Merchandising
• Supplier Evaluation and Selection
• Order Placement
• The Testing, Inspection and Certification (TIC) Industry
• Audit –
• Inspection –
• Certification –
• Testing –
• Common Feature – Disparity of Power + Agency Problem

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DETECTION AND PREVENTION
The Controls at Intertek

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Identification of Possible Bribe
• Bribe to auditors/inspectors/test operators
• Kick-back or advantages offered in the course of business
• Donations

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Identification of possible Conflict of Interest
• Connection with the industry
• Long term business relationship with clients and auditees
• Undue/Improper influence

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Strategy – Corporate and Company Level
• Structure
• An independent team of Legal, Compliance and Risk
Management reporting to the Group
• Audits
• Factory Visits
• Unannounced Audits
• Education
• Yearly briefing (online) + Quiz
• Bi-monthly meeting on case study

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Strategy – Corporate and Company Level
(Cont’d)
• High Policy & Culture – Zero tolerance Policy and Code of
Ethics
• Business Ethics
• Walk-the-talk
• http://www.intertek.com/investors/governance/

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Strategy – – Corporate and Company Level
(Cont’d)
• Check-and-Balance
• Internal Controls – risk, remoteness, verification
• Separation of powers – A single report is not solely controlled by
the auditor
• Detection of Irregularities and Analysis
• Reporting of offer and acceptance by frontline staff
• Transparency & Approval
• Clearly defined Authorization Limits
• N+1 or N+2 Approval
• Declaration of interests (Yearly)
• Objective : to enhance the probability of detecting
corruption and COI

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Strategy – Beyond Corporate and Company
Level
• Law enforcement
• Criminal investigation and prosecution (c.f. civil litigation)
• Government policy
• Locus standi
• Grant of Leave for litigation
• Open Information
• Reference Check in the industry
• Intelligence Sharing

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Strategy – Beyond Corporate and Company
Level (Cont’d)
• Collaboration – with other stakeholders in the supply chain
• Reporting by informants & Investigation
• Culture Building on impartiality and integrity, no offer and no
acceptance; business on condition of quality and value creation
• Objective : to enhance the probability of detecting
corruption and COI and the consequence of breaches

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Collaboration & Cooperation
Microscopic
Strategy
Macroscopic
Strategy
•Check-and-Balance
•Transparency & Approval
•High Policy & Culture
•Structure
•Audits
•Education
•Law enforcement
•Open Information
•Collaboration

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