Siemens, a German electrical and electronics company, is considered as a model company practicing compliance
and business ethics. Siemens not only builds and operates the related system and program internally but also has been supporting various projects around the world that call for integrity with the World Bank since 2009.

2018 Fair Player Club Summit & Pledge Ceremony which was held on Wednesday, March 7, 2018, at Grand Ballroom, Grand Hyatt Seoul, Seoul, Republic of Korea was one of them. Fair Player Club (FPC), hosted by UN Global Compact Network Korea (UNGC) and organized by Global Competitiveness Empowerment Forum (GCEF), is the public-private sector platform promoting collective action for anti-corruption. It has introduced anti-corruption laws and regulations and helped companies in various countries and industries strengthen their capacity during the last three years.

The background of Siemens' leading compliance and business ethics is based on the series of events that took place in the 2000s and the lessons learned from them. At the time, Siemens had a bribery giving culture, allocating tens of millions of dollars as bribery budget each year. Finally, in 2006, German prosecution office’s investigation found allegations of spending a large amount of bribes in order to gain business and profits from all over the world, including China, Russia, and Greece. Siemens had to give penalty about 800 million dollars. Another penalty of 800 million dollars should be paid to the U.S. Department of Justice and Securities and Exchange Commission (SEC) in 2008 due to violation of the Foreign Corrupt Practices Act (FCPA). The FCPA specifies that all companies listed on the U.S. stock market, even foreign companies, belong to its scope of application. The corporate image of Siemens was severely hit by being recognized as a representative bribery enterprise as well as a huge penalty. However, it was reborn with the effort of cutting down the bones by replacing 80% of the top management after the scandal.

As corruption crimes such as that of Siemens are increasingly punished, many companies are increasingly aware of the importance of adopting a compliance and business ethics system. However, on the other hand, there are still many companies that do not have basic systems yet because they don’t result in immediate profits. Some companies have systems, but do not constantly check whether they are implemented well or reflect the updated laws and systems.

Biz Times of Maeil Economy had an interview with Mr. Drago Kos, Chair of the OECD Working Group on Bribery and a chance to listen from Mr. Ephraim (Fry) Wernick, Assistant Chief, FCPA Unit, Criminal Division, Fraud Section, U.S. Department of Justice, who visited Republic of Korea as a keynote speaker and a session speaker of 2018 Fair Player Club Summit & Pledge Ceremony which was held on March 7, 2018, about the trends and importance of compliance and business ethics spreading around the world.

Mr. Kos, in the interview and Mr. Wernick, at the session, emphasized that “Compliance and business ethics have been strengthened more than ever, in all aspects of administration and judiciary ministries, corporations, and institutions. They are substantially helpful to companies”.

Mr. Wernick explained the recent trends related to FCPA application and their linkage with the Kim Young-Ran law in Republic of Korea. Although the FCPA has been widely known in Republic of Korea, it is the first time for a person who actually in charge of its implementation to visit Republic of Korea and explain its specific application policy directly. The contents of the session that Mr. Wernick spoke were summarized below with for Q & A format.

First of all, Mr. Kos said that “It is known that the most ethical companies in the world are 20% more profitable than S & P 500 companies.” and pointed out the prejudice that investing in compliance and business ethics is a waste of money. Also, he explained that “Administration and judiciary ministries around the world are also changing their laws and regulations in alignment with the direction that provides substantial benefits to the companies operating compliance and business ethics well. Italy is the most representative example to ban a company from participating in public procurement, if the company does not operate compliance and business ethics properly. Mr. Kos also said that “The trend of U.S. FCPA application is also changing in the way that establishes and develops the future standards for companies to comply as well as investigate and punish bribery crimes, when it comes to corruption crimes”.

Mr. Wernick also acknowledged this in the session. It is well known that the degree of cooperation of a company who violates the FCPA and existence of a compliance and business ethics system affect calculation of the amount of fines and the type of prosecution. Mr. Wernick explained that “Companies can reduce their fines to tens of millions of dollars”. Also, he additional explained that recently, the policy that does not punish a company was adopted, if the company discovers its bribe supply case through its compliance and business ethics system and does self-reporting”. He reiterated the importance of compliance and business ethics by mentioning that “There as a large increase of the number of prosecutors in the FCPA department more than ever. In the last few years, the largest amount of fines and the highest number of indictments from the companies which violated the FCPA were recorded”.

Regarding Republic of Korea, the opinion was appeared that “Republic of Korea has good laws and systems to prevent corruption, but its applications such as punishment and sanctions are not strict enough”. Mr. Kos said that “The Korean judicial system has to be improved”. One of the questions was that while there is a global trend that companies recognize sins and reach agreement about sentencing with judicial authorities, there are many cases that South Korean companies continue to claim innocence until the end. He answered that “It may be because the sentence could not become high if a company continues to claim its innocence till the end. However, since the application of the law in U.S. is strict, a company may end up disappearance if the company insists its innocence until the end”.

Mr. Wernick drew attention from the audience at the session by mentioning about applicability of the FCPA to South Korean companies. First of all, regarding the South Korean companies such as Samsung Electronics and Lotte Group, which were involved in the case of former President Park Geun-hye and Choi Soon-sil last year, he said “Very important influence, but it's difficult to talk about specific cases”.

One of the questions was regarding applicability of the FCPA when they used U.S. e-mail accounts including Google's Gmail in their criminal acts. He answered that “In principle, applicable if U.S. based email accounts are used”. However, he added that “Investigation does not happen only with the fact of usage of email accounts. There should be more specific evidences of application”. The FCPA applies when foreign companies use U.S. bank accounts and U.S. based emails in their bribery criminal actions. For this reason, some of legal community and media once have raised possibility of applying the FCPA to Samsung Electronics and Lotte Group.

Regarding the linkage between the Kim Young-ran Law (The Improper Solicitation and Graft Act) which has been enacted since 2016 and the FCPA, he said that “The Kim Young-Ran law has very strict standard of amount limitation. I think violating this law is not enough to consider applicability of the FCPA. However, if violation of the Kim Young-Ran law is judged to be linked to more frauds and corruption, probability is open”.