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FCPA Blog Daily News

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Monday
Jul312017

Jerry Fang: Local Chinese regulator develops anti-bribery management system based on ISO 37001

In June this year, the Market Supervision Commission of the Shenzhen Municipality published an instructive standard document named Anti-bribery Management System Shenzhen Standard to help companies and other organizations prevent bribery, and detect and deal with any bribery that does occur.  

Carved from ISO 37001, the Anti-bribery Management System Shenzhen Standard is the first domestic anti-bribery standard document for organizations adopted by a local regulator in China. Although it is not mandator for organizations to adopt it, it's a significant milestone in China's fight against bribery.

In October 2016, the International Organization for Standardization published requirements with guidance for use of anti-bribery management systems, known as ISO 37001, to guide organizations in designing their own anti-bribery management system.

Not surprisingly, ISO 37001 is highly regarded by global companies. Even some countries have directly adopted ISO 37001 for their own governments’ anti-bribery management systems, including Singapore and Peru.

To a great extent, the components of ISO 37001 reflect steps and contents set forth in the FCPA guidance issued by the U.S. Department of Justice and the Securities and Exchange Commission, and the adequate procedures document issued by the UK Ministry of Justice.

The Anti-bribery Management System Shenzhen Standard or AMS defines "bribery" this way: with specific purpose, someone provides, commits to and accepts any improper benefits in any value for actions or inactions of others.

The AMS lists some typical types of improper benefits, such as property, jobs, and loans. That means “bribery” isn't necessarily restricted to money but can also be any forms of value, including but not limited to special information and job opportunities.

Moreover, the Anti-bribery Management System Shenzhen Standard calls for organizations to set up an evaluation system to mitigate commercial bribery risks. Under the AMS, organizations are first to classify different bribery risks as low, medium, and high. They can then design internal policies to assist in dealing with bribery risks of different extents.

The Anti-bribery Management System Shenzhen Standard focuses on the combination of internal audit and internal controls for preventing potential commercial bribery. Consistent with ISO 37001, the organizations can conduct periodic internal audits. Meanwhile, the organizations can also conduct self-evaluations on their anti-bribery management systems.

As for internal controls, the AMS suggests that organizations not ignore the control of non-financial section, notably company policies and reporting procedures for suspected bribery. In terms of company policy, the AMS encourages employees to resist and report commercial bribery, and report it without fear of retaliation, generally through anonymous reporting.

While room for improvement exists, the Anti-bribery Management System Shenzhen Standard is a good step forward for China-based organization. It's a positive sign that a growing numbers of organizations, including state-owned enterprises, increasingly recognize the importance of anti-bribery management.

In another positive development, Foshan (a city in Guangdong Province) has published guidance for state-owned enterprises to prevent bribery risks in IPOs. The Foshan guidance also refers to ISO37001.

The trend in China toward more sophisticated and globally developed and accepted measures to prevent and combat bribery is an impressive and important movement.

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Jianwei (Jerry) Fang is a partner with the China-based Zhong Lun Law Firm in the firm's Shanghai office. He was a judge in China and later earned LL.M/J.D. at Columbia Law School. He can be reachehere.

Wenpei Yu of the Zhong Lun Law Firm also contributed to this post.