Eluding sanction-related risks through compliance

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Multilateral Development Banks (MDBs) are dedicated to making grants and loans to help countries drive their economic growth. However, fraud and corruption have emerged as a serious impediment to such initiatives. MDBs have thus increased their efforts to identify and weed out unethical practices. They have put in place a sanctions framework to penalize delinquent organizations and ensure compliance with integrity in the corporate environment.

Imposition of sanctions by development banks can be detrimental to companies’ growth prospects. Therefore, it is imperative for organizations to be cognizant of the consequences if they are found liable of any violation.

How an effective compliance program can help

An effective compliance program is part of the overall internal control system of a company and provides reasonable assurance to its management and stakeholders on its compliance with applicable laws. Various regulators, government agencies and MDBs suggest best practices for companies to put in place and implement corporate compliance programs. A good program should have the following elements:

  • A strong tone at the top with board of directors and senior management’s oversight of the program
  • A clearly articulated and visible corporate policy prohibiting sanctionable practices including an emphasis on individual employee responsibility for compliance
  • Specific guidance on high-risk activities
  • Strong internal controls in place to ensure accurate record-keeping and prevention of concealment of sanctionable practices
  • Risk assessment and monitoring
  • Communication and training
  • Support of whistle-blowing activity
  • Appropriate disciplinary measures