Home / Lights & Construction

While continuing to develop and improve its international business strategy, China International Engineering Corporation is also adapting to the new rule of international business compliance. Once an enterprise violates the rules, it will face serious consequences such as reputation damage, high compensation, sanctions and even criminal punishment for managers. Most multinational enterprises put compliance management first in risk management.  

In this context, compliance is increasingly attracting the attention of China International Engineering Corporation. However, some "going global" Chinese international trade enterprises lack an accurate understanding of the compliance standards in the international business field, especially the concept and scope of compliance, or the understanding is too broad or insufficient, and they lack experience in how to establish an effective overseas compliance system for international trade enterprises. From the strategic perspective of international development, China International Engineering Corporation (CIEC) needs to change its concept in time, actively adapt to changes in the external environment, and do a good job of its own compliance to avoid giving others a handle. Therefore, it is particularly important to establish an effective overseas compliance system to safeguard the interests of enterprises.

1、 Compliance is a responsibility and task requiring high attention

Compliance means that the company shall comply with all applicable rules. Under the current international compliance supervision system, there are relatively clear compliance standards in five specific areas: anti-corruption, anti money laundering, anti-monopoly and anti unfair competition, export control, privacy and data protection, of which anti-corruption compliance is the core. The areas in which the compliance system should be established need to be determined according to the industry and specific business of the enterprise. For Chinese international engineering companies, they should establish a compliance system with anti-corruption as the core, which is commonly referred to as the narrow compliance system. In addition to adopting compliance standards conforming to international standards in the above areas, multinational enterprises should also pay attention to complying with the laws, regulations and regulatory provisions of the country where their business is located in such areas as labor, tax, environmental protection, safety, and quality. Localized compliance strategies are usually adopted for these areas as part of the broader compliance system.

Corporate compliance originated in the middle and late 20th century. For example, the United States formulated the Anti Foreign Corruption Act in 1977. With the development of global economic integration and the continuous growth of international business of transnational corporations, anti-corruption is no longer a problem faced by individual countries alone, and every country is aware of the harm of corruption. With the response of more and more international organizations and countries, relevant global and regional international organizations have begun to actively introduce initiative documents or conventions on corruption and bribery in specific areas. For example, the United Nations Convention against Corruption, which entered into force in 2005, marks the formal establishment of the anti-corruption legal system of international law, and China is also a party.

At the level of regional international organizations, the Organization of American States promulgated the Inter American Convention against Corruption in 1997, which is the first regional anti-corruption legal document in the world; In 2002-2003, the Council of Europe successively promulgated the Criminal Law Convention against Corruption and the Civil Law Convention against Corruption; The African Union promulgated the Convention on the Prevention and Combating of Corruption in 2003; As an international institution with important influence in the field of compliance, the Organization for Economic Cooperation and Development has promulgated a series of international compliance standards and conventions, the most important of which are the 1997 Convention on Combating Bribery of Foreign Public Officials in International Business Affairs, the 2010 Best Practice Guide on Internal Control, Ethics and Compliance, and the 2011 updated Guidelines for Multinational Corporations, These have gradually become the compliance management standards commonly followed by large international companies; In 2014, APEC issued a series of documents, the Beijing Declaration on Anti Corruption, in which the content of corporate compliance elements is basically consistent with the OECD compliance standards in principle.

At the level of the international multilateral development banks, the World Bank has issued the Guidelines for Integrity and Compliance, and signed joint sanctions agreements with several other international multilateral development banks in 2010. Any company that triggers the joint sanctions mechanism will be subject to the joint sanctions of these international multilateral development banks. The compliance and sanctions system of the World Bank has effectively supplemented the international anti-corruption framework mechanism.

At the national level, some countries put forward mandatory compliance requirements for enterprises through domestic legislation. In addition to the Anti Foreign Corruption Act of the United States, the Anti Bribery Act passed by the United Kingdom in 2010 can be regarded as the most stringent global compliance measure. With the entry into force of the Act, many multinational companies have revised and improved their compliance standards to adapt to more stringent regulatory requirements. The Second Sabin Act, issued by France in 2016, established France's anti overseas corruption system by drawing on the relevant contents of the anti-corruption laws of the United States and the United Kingdom. The Act for the first time clarified the mandatory compliance system, that is, it requires eligible companies to assume the obligation to establish a compliance system, and establishes legal responsibility for companies that have not established a compliance system, which has greatly promoted the development of the construction of the compliance system of French companies. More countries have formulated their own compliance normative documents by referring to the international prevailing compliance standards, urging domestic enterprises to strengthen the construction of compliance systems. Such as the Corporate Compliance Program document issued by the Canadian Competition Agency in 1997; The Australian Bureau of Standards (AS3806-1998) issued the national standard for compliance systems in 1998; In recent years, China has also been actively promoting the establishment of rules and regulations in compliance related fields and clarifying the compliance obligations of enterprises. For example, the State owned Assets Supervision and Administration Commission of the State Council issued the Guidelines for Compliance Management of Central Enterprises (for Trial Implementation) in 2018, the Guidelines for Compliance Management of Enterprises' Overseas Operations jointly issued by seven departments including the National Development and Reform Commission in 2018, and the GB/T 35770-2017 Guidelines for Compliance Management System jointly issued by the State Administration of Quality Supervision and the National Standards Commission in 2018. It is the equivalent conversion standard of the international standard organization ISO19600, which means that I SO19600 was successfully implemented in China. It should be noted that the above-mentioned documents issued in China are normative documents and do not yet have the mandatory effect of administrative regulations or laws.

Reviewing the development process of compliance of international trade enterprises, it has evolved from the product of the original American judicial environment to the important responsibility and task highly concerned by global multinational enterprises today, especially for Chinese international engineering companies pursuing sustainable development in the global market.

2、 Why to establish an effective compliance system

For China International Engineering Corporation operating overseas, it must pay attention to whether the country where the business is located has mandatory requirements for company compliance at the legal level. Take the United States as an example. In the Federal Sentencing Guidelines for Organizations, it is clear that whether the company has established an effective compliance mechanism is an important factor that the court should consider when punishing the company. The Anti Bribery Law of the United Kingdom has stricter requirements on corporate compliance, requiring companies not only to operate in compliance, but also to be responsible for the compliance of suppliers, partners, agents and other stakeholders. If an enterprise does not have measures to prevent bribery, it will bear strict legal responsibility, unless it can prove that it has sufficient procedures to prevent bribery. "Adequate procedures" include that the enterprise needs to build appropriate compliance projects Clear requirements for establishing a relatively perfect compliance institution and compliance system.

The International Multilateral Development Bank also puts forward clear compliance requirements for companies participating in its projects. Take the World Bank as an example. If a company violates its compliance requirements, such as fraud, collusion, corruption, coercion, etc. during its participation in the World Bank project, it will be subject to the World Bank's sanctions. If the company is finally subject to prohibitive sanctions for more than one year, it will trigger linkage sanctions from several other international multilateral development banks, that is, the company cannot participate in the projects of the World Bank or other international multilateral development banks during the period of sanctions. In practice, many regional international multilateral development banks will also refer to the sanctions list of the World Bank and reject these companies. In addition, the World Bank stipulates in its system that the precondition for lifting sanctions is to establish an effective compliance system in accordance with World Bank standards.

Some Chinese international trade enterprises do not know enough about international compliance standards, or pay insufficient attention to compliance. For example, after being sanctioned by the international multilateral development banks, some companies did not take the initiative to establish a compliance system, or did not meet the bank's compliance standards, resulting in the inability to lift the sanctions. Some enterprises also lack a correct understanding of international compliance standards: or their understanding of the scope of compliance is too broad, and they do not establish a compliance system that is too complex or contains many unnecessary content in combination with the actual situation of the company, resulting in waste of resources and low operational efficiency, leading to excessive compliance; Or they don't know enough about compliance. They think that even if a compliance system has been established by setting up a compliance agency and introducing a compliance system under the corporate governance structure, this formal compliance system has not been effectively operated, nor can it play a role in controlling overseas compliance risks. Once problems occur and they face compliance investigations from international regulators, Only then did the company find that it had lost the condition to advocate an effective compliance system and strive for exemption or mitigation of punishment.

Some Chinese enterprises have successfully lifted the sanctions through the construction of the compliance system, and some even lifted the ban in advance. Taking the data of the World Bank in 2019 as an example, there are 23 enterprises in the world that have successfully lifted the ban, including 3 Chinese enterprises. In order to ensure the healthy and sustainable development of overseas business, China's international engineering companies must establish an effective compliance system that conforms to international standards in their corporate governance structure.

3、 How to establish an effective compliance system

"Effective compliance system" includes two dimensions: first, the company should have compliance system, compliance organizational structure and other elements of the compliance system; The second is to ensure that the compliance system has been effectively implemented in the company's operation, which is more important. The construction of the compliance system must be carried out from the top to the bottom, and promoted within the framework of the corporate governance structure, that is, through the company's top management, including the board of directors and management, to make a clear voice, and give strong and continuous support to the compliance work. For example, the World Bank requires the board of directors and management of the company to give strong, clear, obvious and positive support and commitment to the planning and implementation of compliance work in spirit and in writing. In its Best Practice Guide on Internal Control, Ethics and Compliance, OECD stipulates that the board of directors and senior management of a company should provide strong and clear support and commitment to the company's internal control, ethics and compliance projects or anti-corruption measures.

The common practice in practice is that the chairman or CEO of the company issues a public written statement to introduce the company's compliance system construction plan and compliance code of conduct to the outside world. The announcement issued by the highest level of the company has two functions. One is to convey the company's support and commitment to the compliance system to all levels of management and every employee of the company internally, and inform all employees of the company's compliance code of conduct that everyone needs to follow; The second is to communicate the company's information on building a compliance system and the compliance standards to external stakeholders such as the company's business partners and owners, and inform stakeholders that they also need to comply with the company's compliance requirements when conducting business cooperation with the company.

The internal policies in the compliance system need to cover such key areas as due diligence on business partners, gifts and entertainment, donations and sponsorship, financial records, bidding and tendering, to prevent violations. Taking due diligence as an example, it is necessary to further decide whether to conduct business cooperation with a series of high-risk signals through identification and judgment. For example, we need to know whether the reasons for choosing the relevant party for cooperation are reasonable and sufficient, what is the reputation of the relevant party, whether it has the corresponding financial, technical and management capabilities, whether the shareholders or actual controllers of the relevant party are government officials, whether the relevant party is blacklisted by international organizations or local governments, and comprehensively conduct compliance risk assessment.

The compliance institutions usually set up include the Compliance Committee, the Chief Compliance Officer, the Compliance Department, etc. The Compliance Committee can help coordinate the compliance implementation of all departments within the company, and discuss and make decisions on major compliance issues. The Chief Compliance Officer is directly responsible for the company's compliance management and leads the company's internal compliance management team. The Chief Compliance Officer can directly report to the Board of Directors on major compliance matters. Each level of the company can set up compliance officers at different levels to be responsible for the compliance work within the scope of this level of organization. Within the compliance organizational structure, vertical reporting level by level is adopted to ensure the independence of the compliance audit work. Other business departments of the Company shall cooperate with the compliance department to jointly control the compliance risk of the Company.

The most important thing for an effective compliance system is to establish and improve the operating mechanism to ensure the effective implementation of the compliance system in the company, including training, communication and publicity, incentives and sanctions, reporting and investigation. At the same time, fostering a culture of integrity and compliance is crucial to the effective operation of the compliance system in the company. The compliance culture is an invisible link connecting all levels of the enterprise and a golden shield of the company. It not only creates value for the company, but also is a powerful weapon against bad hidden rules. The company needs to raise the construction of compliance culture to a certain height, cultivate the awareness of compliance creating value, and promote the sustainable development of the enterprise through compliance culture.

International trade enterprises engaged in overseas business are vulnerable to changes in international relations and the political and economic situation of the country where they operate. Therefore, the compliance system is not static. The company needs to regularly assess internal and external risks, solve key and difficult problems, complement weaknesses, strengthen weaknesses, and continue to adjust and improve the compliance system to adapt to the new development situation. There is no perfect end point for compliance. The enterprise's overseas compliance system needs to keep pace with the times and continue to improve to meet the needs of international business risk management and control, and truly achieve the goal of protecting the sustainable development of the enterprise's internationalization.