Companies that operate in Asia must contend with some of the world’s most complex compliance environments. Abigail Rubenstein explores the top concerns of experts across the region

A RECENT STUDY compiled by business services firm TMF Group ranked Indonesia the world’s second-toughest place for multinational companies to keep themselves in step with corporate regulations and legislation. And other Asian nations were not far behind, with five other countries in the Asia-Pacific ranking among the 20 most difficult places for business compliance – namely China, Thailand, Japan, South Korea and Malaysia.

Add to that a foreign perception of the region as a potential hotbed of corruption that leads to extra scrutiny from Western regulators, and maintaining a robust corporate compliance programme starts to look like a pretty heavy burden for companies that do business in Asia.

Yet, even though compliance can sometimes appear to be sucking up valuable company time and resources without helping to boost earnings in the short term, legal experts note that compliance actually helps strengthen the bottom line in the long run by reducing the risk of disruptive government investigations and costly legal battles.

“Rather than view compliance as a burden, a prudent and forward-thinking company should see compliance as something that adds value to the business by improving efficiency and minimizing risk,” P M Thimmaiah of Bangalore, India-based MD&T Partners tells Asia Business Law Journal. “A mature compliance regime results in, inter alia, increase in goodwill of the business, gaining of investor confidence, and avoidance of legal complications.

A prayer for prevention-P M Thimmaiah,

“Companies in the region [both foreign and domestic] must welcome compliance regimes and endeavour not to see them merely as policies, procedures and audits, but as a means for ensuring a more transparent and sagacious corporate environment. This, in turn, will encourage a company to conduct its business freely and with the utmost confidence that its vendors and customers are bound by a well thought out framework.”

In order to reap the benefits of a solid compliance structure, companies cannot grow complacent, but must regularly reassess their policies and practices and keep employees trained to stay in step with changing legal landscapes and enforcement priorities. Here are some of the most pressing issues for companies in Asia to keep in mind as they look to beef up their compliance routines.

INTERNATIONAL ANTI-BRIBERY EFFORTS

Business compliance in Asia can be tricky for multinationals for a host of reasons, from decentralized bureaucracies that produce disjointed regulations that vary by area, to inconsistent application of existing laws, to strict restrictions on the operations of foreign-owned businesses. But one of the most significant compliance burdens still comes from outside Asia, namely from Western anti-bribery statutes.

Both the US Foreign Corrupt Practices Act (FCPA), which forbids US companies or any companies with US-listed securities from bribing foreign officials, and the UK Bribery Act, which takes aim at both government bribery and commercial bribery by any entity with a “close connection” to the UK, have broad extraterritorial reach that can ensnare companies operating in Asia. Regulators in both countries have not been shy about focusing significant enforcement efforts on conduct that has taken place in Asia, and neither looks to be letting up any time soon – especially the US Department of Justice, which has recently hired its first Compliance Counsel to assist prosecutors in evaluating the effectiveness of compliance programmes, and has ramped up staff levels with additional FCPA prosecutors.

A prayer for prevention-Mohammed Reza

With several Asian countries having recently faced major corruption scandals, such as Malaysia and Indonesia, and others like China simply viewed by Western powers as likely breeding grounds for bribery, companies cannot afford to shirk being vigilant.

Even companies doing business in countries with sophisticated business environments, such as Singapore, Hong Kong, Japan and Taiwan, must remain alert, especially since employees may be less familiar with these foreign regulations because there is less focus on corruption in these areas, experts say.

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