FCPA Compliance and Ethics Blog

July 10, 2015

How Companies Could Avoid “Paper” Compliance in New Ukraine? Try Acting Rather Than Talking

Picture[2]Ed. Note-today we have a guest post from two noted compliance practitioners from Ukraine, Timur Khasanov-Batirov and Andriy Selepey who discuss the dangers of a paper compliance program. 

Corruption is the main problem of the Ukrainian economy. Both Ukraine and its international donors recognize that absence of an effective antibribery measures prevents attraction of foreign investments and negatively affect’s country’s business environment.

There are positive changes as creation of a brand new anticorruption agencies and adoption of antibribery laws. Would it be enough? While time is needed to get the full the picture, some downsides appear already. This for instance relates to anticorruption programs, a new concept for the local corporate world introduced by “Law on Prevention of Corruption”. The concept is a new one, as historically fighting with corruption in the national legal framework was not linked to corporate compliance.

Since April 2015 major state controlled companies and participants of high – priced state bids are obliged to implement anticorruption program. Sounds as a big step towards transparency. To start with, the law specifies elements of such programs. Among others, the following items are recommended by the law to be included into the corporate compliance program:

  • List of persons covered by its provisions;
  • In house ethics rules for the personnel;
  • Rights and responsibilities of the person responsible for program’s execution (Compliance officer);
  • Rules on imposing disciplinary sanctions for breach of the program;
  • Procedure on regular reporting by the Compliance officer to company’s shareholders;
  • List of corporate antibribery procedures including risk assessment methods;
  • Rules on protection of whistleblowers;
  • Mechanism on informing the Compliance officer by personnel about conflicts of interest;
  • Internal investigations rules.

It should be also specifically noted that the law has established criteria for Compliance officers. Thus, for instance there is a regulatory ban to appoint as a Compliance officer an employee who due to his or her job functions has a conflict of interest regarding execution of compliance functions.

At last but not least, participants of the state bids, which do not have anticorruption programs, are not able to get lucrative contracts.

In reality, things appear to be more complicated. Companies adopt anitbribery programs and appoint Compliance officers but looks that there is no governmental mechanism to evaluate efficiency of these efforts. When we refer to “governmental mechanism of evaluation”, such helpful instruments as the DOJ’s and SEC’s Joint Resource Guide to the U.S. FCPA come to mind. For evaluation these agencies “…employ a common – sense and pragmatic approach to evaluating compliance programs, making inquiries related to three basic questions:

  • Is the company’s compliance program well designed?
  • Is it being applied in good faith?
  • Does it work”?

(p.56 of the Guide). Even though the current Ukrainian regulatory framework does not have analogue of this approach we recommend corporates to utilize it for in-house self-evaluation. Neither there is prescribed penalty in Ukraine for absence of the compliance program nor credits granted for its effectiveness in a course of investigation. As a result, adoption of a corporate compliance program might become a formality, another piece of paper for the package of documents prescribed for state bidding process.

Companies might find themselves in a vulnerable position when compliance program adopted in accordance with local rules is just not enough. Assistant Attorney General Caldwell at the Compliance Week Conference recently announced the “real world” test that the corporates might pass. It was particularly noticed that:

‘’We [Department of Justice] look not just at the written policies, but to other messages otherwise conveyed to employees, including through in-person meetings, emails, telephone calls, incentives/bonuses, etc.; and will make a determination regarding whether the company meaningfully stressed compliance or, when faced with a conflict between compliance and profits, encouraged employees to choose profits.

A company’s policies should be clear and in writing and should easily be understood by employees. But having written policies – even those that appear specific and comprehensive “on paper” – is not enough.’’

What could be done from the practical point of view to avoid “paper” compliance at the corporate level?

Firstly, we recommend companies operating in high-risk markets as, for instance, Ukrainian to build effective compliance frameworks rather than just technically follow written regulations. As Ukrainian saying states (probably about corporate compliance): “One should act rather than talk”.  

Secondly, we urge top managers to re-assess risks of bribery in new era invoked by the situation in Ukraine. Business is facing new and previously unknown challenges raised as consequences of the current economic, political and regulatory changes. Re-assesment of compliance risks will allow companies to effectively address new challenges in Ukraine, a giant but risky market.

Thirdly, for companies which run FCPA based compliance program with presence in that country we recommend to check out Ukrainian requirements as well. The reason to do that is defined by the Guide (p.56): “…Although the focus [of DOJ and SEC] is on compliance with the FCPA, given the existence of anti-corruption laws in many other countries, business should consider designing programs focused on anti-corruption compliance more broadly.”  Besides that, FCPA covered corporations with operations in Ukraine might find useful to add Ukrainian compliance elements to their existing programs in order to strengthen them and adjust to local regulatory framework.

There is one more important signal for compliance practitioners and managers responsible for operations in Ukraine. Local anticorruption landscape has been changing very rapidly, almost daily so to say. Myriads of legal initiatives in the anticorruption area for different industries have been discussed by the political elite and civil society. In their turn, new anticorruption bodies are about to proceed with criminal investigations and checks. To be on the safe side we recommend corporates to monitor local regulatory and legislative developments.

Finally, we find useful to re-inforce in – house communication and training efforts for local personnel to stress firmness of corporate ethical values in any location and under any circumstances. We believe these efforts complemented with the embedding of Ukrainian anticorruption rules will allow companies to effectively respond to new challenges and avoid “paper” compliance.


Andriy Selepey, Managing Partner of “Selepey, Volkovetsky & Partners”, law firm (http://svpartners.com.ua/en/firm)

Timur Khasanov-Batirov, Co-Chair of the Compliance Club of the American Chamber of Commerce in Ukraine

October 30, 2014

Compliance at the front lines in Ukraine-interview with Timur Khasanov-Batirov

Picture 1Ed. Note- a couple of weeks ago, I had a guest post from Timur Khasanov-Batirov about some of the challenges in the doing of compliance in his native Ukraine. He certainly had an interesting and most welcome perspective. I asked Tim if he might tell us a bit more about his background and talk about some of the things a US or other western company needs to consider when opening a business enterprise in Ukraine or eastern Europe for the first time. This interview is his response. 

  1. Where did you grow up and what is your university or college training in?

I grew up in Tashkent, a vibrant southern megalopolis of the former Soviet Union. The city is known for mixture of various cultures and traditions. Probably that is the reason why I feel myself comfortable working in different countries and corporate environments.

I was fortunate to get scholarships for my legal studies twice. Thanks to Muskie Program I got a chance to do LLM program in the University of Minnesota Law School. Our library being in 2003 time among Top 10 in the nation (hope it is still in the list) was a perfect source to frame personal attitude to corporate ethics. The memory of the Program and Land of 10 000 Lakes will be enshrined in my heart.

  1. What jobs have you held after graduation from college?

My path is associated with embedding international standards into ‘fabrics’ of organizations I worked for. You must develop processes which improve efficiency and engage people in doing right things. I like to hear these words or to repeat them to myself. Sounds like music. Having such melody in my head (which hopefully is not too strange) I made my way with roles of in house counsel at US owned mobile operator, regional business trainer for CIPA Network, and legal advisor to various international corporations. I like to remember intensive period spent in capacity of attorney at Baker and McKenzie. Work for the Firm has polished an important technique for compliance person. I mean the skill to align legal requirements of different jurisdictions to produce a solid legal advice.

  1. How did you get into the field of compliance?

Back to 2006 I got awesome assignment. As person responsible for Legal & Controls at international FMCG company in Kazakhstan I was asked to lead the project on obtaining ISO 9001 quality management standard. After one year of deliberations and resistance we came to finishing tape with almost 60 described business processes and allocated responsibilities among key managers. So the next step looked natural for me. It should be compliance which assembles risk management, law, and communications into single and powerful managerial tool.

In 2007 compliance philosophy was ‘terra incognita’ in the former Soviet Union. Almost everyone was convincing me that the concept would never survive in that region. Today it is obvious that compliance is extensively developing. I have no regrets about taken decision.

  1. What are some of the biggest compliance challenges that you face in your current role?

As in house compliance person and participant of the regional professional community I enjoy the opportunity to monitor challenges from different angles. The good thing is that the idea of ethical conduct is becoming popular among business leaders, legal and audit professionals. You can feel tremendous difference in attitudes to compliance at the corporate boardroom in last 5 years.

There is some progress with setting adequate regulatory environments by the countries in the region. In the very same time local enforcement practices are expected to become more consistent with relevant laws.

There is a curious phenomenon worth mentioning. Issues which have been raised by local professional community these days include questions associated both with early stage of compliance development along with inquiries associated with advanced level like for instance questions on the best ways to protect whistleblower from retaliation in a long term period. Thus from my prospective the main challenge in the region is the necessity to manage compliance risks based on sophisticated Western framework in a business environment where compliance is a relatively new concept.

There is also challenge which I believe is on the agenda for our profession globally. It is about integrating compliance into corporate strategic planning. I am also sure that our mission is to change minds of the corporates. Here comes to mind the meme of the day by Matt Kelly which depicts Kermit saying ‘I saw the manager to fire you for calling the hotline. But that’s none of my business’.

  1. What advice would you provide to an American or western European company doing business in Ukraine or eastern Europe for the first time regarding compliance?

I would highlight Top 6 practical actions:

Code of Ethics

To ensure that the Code of Ethics will work in the region please check if it is translated into local language(s). Just have in mind that English is a second language for your employees (in the best case). Local JV partners, distributors, and agents might not speak English at all. The reality shows importance of getting professional translation to avoid phrases ‘lost in translation’. It happens when the Code is written in heavy legal language or translation is not reflecting the real meaning of the text.

Based on my practice I would recommend investing some money in publishing hard copies of the Code rather than relying on the e-version only. At minimum hard copies of the Code should be distributed to C-level staff and key managers. It is vital to appoint a person (normally a Compliance officer) who could be approached by the employee for explanation of the Code’s provisions.

Regulatory Standards

The team should consist of experts who are aware of both FCPA/UKBA requirements and nuances of local regulatory developments. I suggest having folks who will be able not only to update you on new Ukrainian anticorruption laws or regional pitfalls like ban on facilitation payments but to independently manage such risks in the organization.

Assessment of the Program by Top Management

It might be disputable but I would advise using the US Sentencing Commission Guidelines Manual as a comprehensive tool for detailed self-assessment of the Regional Compliance initiatives. I also believe there are just 4 simple questions answers on which can precisely illustrate the situation with corporate ethics for the Top management:

  • How we evaluate efficiency of the compliance activities?
  • Does Compliance Officer have resources and adequate power to prevent unethical behavior?
  • Are we sure that our internal investigations are effective and impartial?
  • At what extent top management is engaged in compliance program?


Whistleblower line

It could be a sophisticated web-based system with global coverage in ideal case or just sole person which acts as a contact for personnel (looks provocative but still could be effective) to raise concern. The mechanism of tipping should exist in the form which your budget and corporate structure allows. Local experiences confirm that the effectiveness of the line will rise when personnel is duly communicated about actions taken as result of corporate investigations.

Consultants and Intermediaries

You may want to review contracts concluded in the region with consultants, distributors or corporate representatives. There are two reasons why it could be a good idea. Firstly, you will be able to check whether there are any FCPA risks if your representative interacts on your behalf with the local authorities. Secondly, what we see in this region is that contractual arrangements on ‘providing services’, ‘marketing activities’ and so on are often become veils for occupational fraud.

Conflicts of Interest

Conflict of interest or simply situation when decision of the employee might be impaired by his personal interest poses two risks. The first risk is of FCPA nature. The second type of risk is in the area of occupational fraud. Widespread practice at emerging markets includes getting expensive gifts from the counterparties or contracting affiliated entities. I would recommend launching the internal system on declaring conflicts of interest which could be done by utilizing for instance the corporate intranet platform.


February 2, 2012

Final Jeopardy and July 1, 2011

It’s Final Jeopardy and the category is “Compliance”. As your company’s Compliance Officer you are positively salivating at the prospect. So you go all in and bet everything you have on this last question. You stand abated as Host Alex Trebek poses the following question: “Which two countries had anti-corruption laws go into effect on July 1, 2011?” The Union Jack is firmly planted in your mind (if not a picture of the Bribery Act guys) so you confidently write down “What is the United Kingdom…” but then you realize you cannot think of that second country. You stumble and as the iconic tick, tock of the Final Jeopardy theme runs down…all you can think of is one of the BRIC countries. You know you are close but then the buzzer sounds. You dejectedly show your final answer and and Alex says, “Sorry, but it is the UK and Ukraine.”

So why couldn’t you think of the answer? It might be that corruption is so endemic in Ukraine that is difficult to imagine the government would have the brass to tackle the problem. In 2011, Ukraine ranked number 152 out of 182 countries listed on the Transparency International Corruption Perceptions Index (TI-CPI). You recall that corruption in the Ukraine actually got worse from 2010 when the country ranked 134 out of 178 countries listed on the TI-CPI. Perhaps you recall that corruption has been termed “Problem No. 1” for the country and that even the President of Ukraine has called corruption in his country, “a shameful phenomenon.”

Nevertheless you take your winnings from your second place finish in Jeopardy and go home to find out more this new law. In your Google search you find a law entitled, “On the Prevention and Counteraction against Corrupt Practices”. In your research you find that the Ukraine law has three main components: (1) it defines corruption and corruptive defenses; (2) it sets forth the relevant persons who may be held liable for corruption offenses; and (3) it imposes restriction on these relevant persons, while also setting out the liability factors.

Corruption and Corruptive Offense

Corruption is defined as the use of authority to offer, grant or receive improper benefits as well as requesting such activity. Corruptive offense is defined as an intentional act, not only involving governmental officials, as in the US Foreign Corrupt Practices Act (FCPA), but also between private actors, as is prohibited by the UK Bribery Act. The law includes the offering, granting or receiving of improper benefits, either directly or through a third party.

Parties Covered by Law

The Ukraine law has the same public/private dichotomy set forth in the UK Bribery Act. It defines government officials as those in both the federal, state or local authorities but adds an additional category of person equal to governmental officials. This new category includes officers of public law legal entities who receive wages or a salary from the state, even though they may not be a ‘governmental official’. Both of these categories of persons are covered regarding restrictions imposed as measures aimed at preventing and counteracting corruption.

Restrictions and Liability Factors

Not only can such persons, as noted above, not accept gratuities but their immediate families cannot profit from their positions. Lastly these restrictions hold for up to one year after such persons may have left the government. In addition to these restrictions, the following also apply.

  • Gifts and Hospitalities – A person covered may not receive any gift in exchange for any decision, act or non-act. However, the law does allow a one-time gift, restricted to a value of 51% of one month’s salary. It should be noted that there were no restrictions on hospitality, such as travel, accommodation or meals.
  • Special Screening – The law requires that all job applicants must declare any criminal history and make an annual declaration of property and income. However, there are notable exclusions to this requirement.
  • Financial Control – With the annual declarations, as noted above, the information will be made publicly available. Government officials must also declare any foreign banks accounts they or their immediate family members may hold.
  • Reporting Requirements – Government officials just declare all charitable amounts which they receive as gifts allowed under the law.
  • Conflict of Interest – A covered official must take action to prevent any conflict of interest from arising but if such conflict does arise, it must be immediately disclosed.
  • Code of Conduct – The law requires that a written professional ethics standard exist.
  • Duty to Report Corruption – All persons covered by the law have a duty to report any corruption of which they may become aware. The law also has whistleblower protection.

You have now completed your review of this new Ukrainian law. As a Compliance Officer, you are pleased that Ukraine has entered the group of nations fighting corruption. You only wish you would have known about the law when it became effective and you would have not humiliated yourself on Final Jeopardy.


The blog was based upon the article, “Ukraine’s New Anti-Corruption Law: Will it Really Stop Corruption in Ukraine?” by James T. Hitch, III and Yuliya Kuchma, published in the Fall 2011, Volume 45, Number 3 edition of The International Lawyer.


This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

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