Mitigating FCPA Risk and Maximizing Opportunities in a Global Economy

In today’s global economy, finding the right avenues to maximize opportunities and mitigate risks is crucial to protecting your most important assets. Whether you are looking to enter an emerging market or grow in an existing market, understanding the local political, economic and social cultures is critical to success.

Mexico, Canada, and China are the top three U.S. trading partners, according to the U.S. Census Bureau. These three countries account for nearly 45 percent of all trade. But what about a country with a rich history and exciting future – Greece? Something to consider for those looking beyond the obvious destinations. Greece offers opportunity for investors, but it also poses corruption and bribery risks that must be addressed through solid compliance planning and programs.

Located in the southernmost part of the Balkan Peninsula, Greece is the 61st largest export economy in the world. In 2018, the country completed its third bailout program, marking the end of an admittedly long financial crisis. As the country continues to move forward, it offers plenty of enticing possibilities for global companies; however, there are still structural problems in government that create some difficulties.

Maximizing Opportunities

Surrounded by the Aegean, Mediterranean and Ionian seas, Greece is situated in a prime location for trade. The country operates five substantial freight ports that serve European, Middle Eastern and African countries. Germany and Italy are Greece’s primary import and export trading partners. This geography makes Greece an enticing possibility for the shipping, ship building, textile, food and tobacco, mining and petroleum industries.

The Greek economy is less competitive for global companies, which can give rise to opportunities to grow, expand current products or acquire new businesses.

Investor sentiment is positive. Greece’s 10 year-government bond yield is a healthy 3.69 percent. This bond yield is reflective of investors’ faith in the Greek markets and the belief in the country’s ability to fulfill its debt obligations. More advanced and larger economies, like China, have only slightly lower government bond yields. Countries with massive corruption, like Russia, have low yields, showing that investors have less trust in bond repayments.

Greece is showing great objective indicators of an economy on the rebound.

Considered a high-income and high standard of living society, Greece benefits from tourism and the 2013 adoption of the Golden Visas real estate program. The service industry accounts for 73 percent of the country’s GDP. Greece scores very well on the ease-of-doing-business index due to the lack of competition. There have been discussions about the tax codes being restructured, yet the 29 percent corporate tax rate is unlikely to rise, because it is already higher than most countries.

Greece’s prime trading location, stable economy and business incentives are all advantages for companies looking to enter the region. Taxes are high, however, and this is due in part to widespread tax evasion common in the region. And there are other potential threats that could affect your company.

Mitigating Risks

Corruption and bribery are common in Greece, both in commerce and within the government. “Fakelaki,” which translates to “small envelope,” is a form of bribery prevalent in Greece that involves sending parcels stuffed with money to government agencies to expedite services. It is said by consumers and businesses owners alike to be the most effective way to obtain public services.

Panagiotis Nikoloudis, Greek Minister of State for Combating Corruption, found most contracts between the state and companies included kickbacks of around 2 to 2.5 percent. This is not egregious compared to other high-risk countries like Russia and Brazil, but this creates potential Foreign Corrupt Practices Act and other risks for global companies.

Last year, Greece’s former health minister was charged in a transatlantic corruption investigation for taking payments from pharmaceutical companies. The bribes paid totaled millions of euros. The former health minister has denied the claims, stating that he wants the accuser to be publicly identified.

Additionally, the prime minister recently appointed a close advisor to serve in an independent regulatory role to combat government malfeasance.

Greece ranked 67 out of 180 countries in the 2018 Transparency International Corruption Perceptions Index, which focuses on corruption and bribery. European nations are pushing for restructured tax regulations, with the goal of achieving fairness and prosperity in Greece. As a member of the eurozone, Greece is expected to improve its legal framework and enforcement in 2019.

Recommendations

Before expanding business operations into Greece, it’s imperative to develop a robust compliance strategy that includes identifying risks, creating a plan and monitoring for change.

Due diligence is a must both for FCPA compliance and also to avoid being defrauded. Identifying contacts between a business or people and the government should be researched thoroughly to ensure they are reputable and trustworthy.

Part of any good program should be having a robust reporting hotline. One industry study found that more than 40 percent of fraud and misconduct is detected through hotline reports made by employees compared to all other controls.

Finally, be prepared for change. Threats are always evolving. Constant vigilance is necessary to ensure an organization’s safety in global expansion.