Thoughtful Risk Assessment – The First Step to Reduce a Company’s Exposure to Bribery Risk in Customs

Thoughtful Risk Assessment – The First Step to Reduce a Company’s Exposure to Bribery Risk in Customs

Share this post

March 01, 2016

Despite the increased international and domestic efforts to improve integrity in customs administrations over the last two decades, this remains a high risk area for businesses that are committed to anti-bribery compliance. Global shipping and logistics companies are particularly at risk for violating anti-bribery laws due to their reliance on numerous local third parties in dealings with government officials in many remotely located customs and ports. The OECD continues to draw international attention to the problem by referring to bribery in customs as “the hidden tariff on global trade” and making it a central theme for discussion at the OECD Integrity Forum this April.  

What can companies do to protect themselves from compliance risks in customs? This post will focus on the very first step that companies are expected (and are increasingly required) to take – risk assessment. A repeatable, credible and actionable risk assessment is not only a fundamental part of any robust compliance program but also a basis for risk-based third party due diligence. Based on TRACE’s experience running its Shipping & Maritime Initiative, there are several practical recommendations that we would like to share with the business community.

First, companies are strongly encouraged to use specialized indices, such as the Global Business Bribery Risk Index -- TRACE Matrix -- and the World Bank’s Logistics Performance Index, to conduct their first-tier review of bribery risks in a particular customs office. This can later be supplemented by a set of facilitating interviews in most “risky” locations.

Second, customs specialists in the company should assess customs functions that are most vulnerable to corruption, such as processing of import, export and transit declarations; assessment of origin, value, and classification of goods; or physical inspection, examination and release of cargo (please see the complete list in Table 4.1 in Integrity in Customs, by Gerard McLinden). While conducting this analysis, it would also be useful to assess to what degree a particular customs administration comply with the recommendations outlined in the Revised Integrity Development Guide issued by the World Customs Organization in December 2012. The Guide contains detailed checklists for assessing current integrity situations in customs in terms of regulatory framework, transparency, automation, relationship with the private sector, and others.

Third, the company’s compliance team should look into the risks posed by company’s third parties, such as customs brokers, port agents, and freight forwarders, and ask the following questions:

  • What do we need from these third parties that is particularly critical to our business?
  • How many such intermediaries do we engage and what do they do for us?
  • How do we pay for various third parties?
  • What incentives does our business model create for third parties?
  • Are we able to interact directly with third parties, or do we rely on other intermediaries to help us find them?

Finally, risk assessment of customs environment should include evaluation of current controls, such as due diligence and approval of third parties, employee and third party training, expenditures reviews, and audits. 

For more on this topic, please see the following resources:

TRACE Matrix - The Global Business Bribery Risk Index
Customs Modernization Handbook
The Revised Arusha Declaration
The WCO Revised Integrity Development Guide
Anti-Bribery Compliance Challenges in Shipping, Freight Forwarding and Logistics (only available on the TRACE Member Resource Center, under Training Resources – Webinars – Industry Specific)
Conducting an Effective Anti-Bribery Risk Assessment (only available on the TRACE Member Resource Center, under Training Resources – Webinars – Compliance Program and Risk Management)

Gray Mail IconClick here to subscribe to TRACE Trends: A Compliance Conversation and receive email notifications as new posts are published.

Strategic Due Diligence - Active Engagement
Eradicating Corruption
Justina Song Thoughtful Risk Assessment – The First Step to Reduce a Company’s Exposure to Bribery Risk in Customs


Leave a Reply

Leave this field empty:

Your email address will not be published. Required fields are marked *

    Good morning, ladies and gentlemen. I am delighted to start the second panel this morning of the Council on Foreign Relations workshop on the intersection of corruption and U.S. national interests. Today I will be leading the second panel, which is going to deal...
    Recent News Feed 4/6/2017 Read More
    Last week, TRACE held its 13th Forum at the St. Regis Hotel in Washington, D.C. Over 100 member companies contributed to a lively and extended exchange of best practices across the two-day event.
    Interestingly, for the first time, men and women were represented in...
    Recent News Feed 4/4/2017 Read More
    After years of struggling with excess capacity and tight profit margins, the breakbulk industry facesa tough competitive climate. In these circumstances, one needs to be careful about any temptation to cut corners. Given the industry’s global characterand high degree...
    Recent News Feed 4/3/2017 Read More
    US government officials have said that when assessing company culture as part of an FCPA investigation, they are looking for much more than just “tone at the top.”
    To read the full article, click here.
    Recent News Feed 3/30/2017 Read More
    A current trend in compliance training is gamification, or adding gaming elements to training modules, to encourage learning and engagement. You don’t have to overhaul your entire training program in order to participate in this trend. Below are three ways to...
    Recent News Feed 3/29/2017 Read More
    On March 7 and 8, General Dynamics, joined by TRACE International and the Romanian Chamber of Commerce and Industry, found 150 participants eager to hear about business ethics in Romania, which has been swept by anti-corruption protests in recent months.
    To read the...
    Recent News Feed 3/28/2017 Read More
    A nova “lista do Janot”, derivada das delações premiadas dos executivos da Odebrecht, além de deixar os políticos com as barbas de molho, também deve reforçar uma recente distinção adquirida pelo Brasil: a...
    Recent News Feed 3/23/2017 Read More
    Foreign companies should always maintain close contacts with their local embassies should they need assistance in avoiding extortionate demands. Trade commissions, chambers of commerce and local business councils also may offer support in this domain.
    To read the full...
    Recent News Feed 3/23/2017 Read More
    It is a formula as old as business itself – the bribe, the backhander that greases the wheels of commerce. Rolls-Royce has recently learned to its great cost, however, that nowadays it is also a ticket to massive fines and reputational damage.
    As Brexit...
    Recent News Feed 3/21/2017 Read More
    Corruption-based allegations can be crippling for any company. Compliance in this area of the law is of particular importance to companies who regularly use international consultants and sales representatives, commonly referred to as “intermediaries,” to develop...
    Recent News Feed 3/15/2017 Read More
    These dinner dates aren’t like handing over briefcases filled with money. But it’s an issue, Wrage says, that keeps executives up at night worrying about the consequences of possible wrongdoing.
    How times have changed since November 2001, when Wrage founded...
    Recent News Feed 3/15/2017 Read More
    Anti-bribery enforcement actions increased dramatically on a global scale over the past year, with the extractive industry facing the brunt of that activity.
    Those are just a couple of findings from the 2016 Global Enforcement Report (GER) conducted by anti-bribery...
    Recent News Feed 3/14/2017 Read More
    Heydar Aliyev Prospekti, a broad avenue in Baku, the capital of Azerbaijan, connects the airport to the city. The road is meant to highlight Baku’s recent modernization, and it is lined with sleek new buildings. The Heydar Aliyev Center, an undulating wave of concrete...
    Recent News Feed 3/13/2017 Read More
    The Foreign Corrupt Practices Act is the jewel in the crown of America’s fight against international business bribes and corporate favors. Intended to promote American business and foreign-policy ideals around the world, and give US companies a tool to battle...
    Recent News Feed 3/13/2017 Read More
    Frauen spielen an der Spitze von Sportorganisationen allenfalls eine kleine Rolle. Dabei würde ihre Präsenz den Verbänden mehr als gut tun, sagt Alexandra Wrage von Trace International. Allerdings aus anderen Gründen als man denkt.
    To read the full...
    Recent News Feed 3/7/2017 Read More
    TRACE International has published its latest review of global anti-corruption enforcement, touting a dramatic increase in enforcement last year, led by U.S. authorities.
    Enforcement activity essentially doubled last year, according to the organization’s annual...
    Recent News Feed 3/3/2017 Read More
    Known as an attractive manufacturing hub for labour-intensive and less capital-intensive industries, Vietnam provides trade and investment opportunities for Canadian companies in several sectors including aerospace, agriculture and agri-food, construction and...
    Recent News Feed 3/2/2017 Read More
    Donald Trump has reiterated his promise to reform banking regulation in a meeting with 50 business leaders in Washington this week.Trump told a room of top execs that he still plans to go ahead with overhauling Dodd-Frank – the act brought into existence during the...
    Recent News Feed 3/2/2017 Read More
    Global enforcement actions from bribery charges increased dramatically last year, according to a report released today by TRACE International, an anti-bribery organization.
    To read the full article, click here.
    Recent News Feed 3/2/2017 Read More
    The U.K.’s Serious Fraud Office is reluctant to provide information to investigators in […]
    To read the full article, click here.
    Recent News Feed 3/2/2017 Read More
    A new report by TRACE International finds that enforcement actions against bribing government officials are rising globally. In its 2016 Global Enforcement Report, the anti-bribery organization observes a doubling in US enforcements last year and non-US actions doubled...
    Recent News Feed 3/2/2017 Read More
    TRACE’s annualGlobal Enforcement Report(GER) provides graphic and textual analyses of all known enforcement events (including investigations as well as enforcement actions*) since the first bribery cases were prosecuted in the United States following the enactment of...
    Recent News Feed 3/2/2017 Read More
    There was a sharp rise in both US and non-US foreign bribery enforcement actions in 2016, according to a newly released report by Trace International.
    To read the full article, click here.
    Recent News Feed 3/2/2017 Read More