In-house lawyers can provide valuable compliance advice if brought in at the right time. DujinGeneral Counsel and Deputy Chairman of China-based Hytera Communications, shares his insights for companies facing increased regulation in China and abroad
IIndependent R&D and compliance management are two effective business tools that enable their holders to achieve healthy and high-quality development. In the process of globalization and development of Hytera to become a leading provider of dedicated communications and solutions, we have come to appreciate them warmly.
Therefore, over the past decade, while strengthening our R&D capabilities and improving our product competitiveness, we have also been committed to improving our compliance management in high-risk areas. This article shares our compliance methods and strategies from two main perspectives – anti-corruption and fraud, and export control compliance – based on Hytera’s proven practical experience.
Anti-corruption and anti-fraud
The fight against corruption and fraud mainly involves the implementation of a compliance check, the conduct of a compliance inspection, the collection of information on violations, the investigation of incidents or behavior of violation and the treatment of offenders.
General Counsel and Deputy Chairman
Hytera Communications
After gathering past cases of regulatory penalties for violations, as well as high-risk issues in industry practice, companies should establish their own compliance systems and guidelines in accordance with compliance requirements, and implement them. works in real-world business processes such as customer onboarding, expense reimbursement, travel management and corporate donations to ensure that every step of the business is supported by a strong and well-enforced regulatory foundation .
Establish a complaints and reporting mechanism. Past cases indicate that the majority of anti-corruption investigations are initiated following reports from employees or third parties. Therefore, encouraging employees and third parties to report known corrupt policies and conduct is an important part of any corporate anti-corruption and anti-fraud compliance system. Companies can provide internal reporting hotlines and require employees to indicate the reporting method in the signature box when sending external emails.
Reporting mechanisms of multinational enterprises should be established in both Chinese and English, or multiple languages, in order to receive reporting information worldwide. Upon receipt of these reports, the audit department should immediately investigate and verify relevant information, keep the identity of the whistleblower strictly confidential, and enhance both whistleblower protection and reward.
After investigating all the cases reflected in the reports, the audit department shall submit the results of the investigation of the confirmed cases to the company executives, and the employees involved will be punished in the form of dismissal, demotion or of public criticism depending on the gravity of the circumstances. Proper operation and guarantee mechanism, forming a closed internal loop, can effectively educate all employees on anti-corruption and anti-fraud compliance.
Advertise and provide anti-corruption compliance training. Multi-level and multi-position compliance training should fully cover the management, business departments and functional departments of the company in order to create a clear understanding of the importance of building an anti-corruption compliance system and to shed light on the existing compliance structure and operating mechanism, effectively sensitize the collective of employees to the issue.
Create a compliance ecosystem. While striving to educate employees about integrity and compliance, companies must also actively guide customers, suppliers and other stakeholders to act honestly and compete fairly. Any form of bribery or corruption should be rejected, and there should be zero tolerance for bribery and corruption by employees or company-related entities. Taking Hytera as an example, we have issued an anti-bribery and anti-corruption commitment letter for external suppliers, which is signed together with supply contracts.
In these documents, the companies may require their suppliers to undertake to comply strictly with the laws and regulations applicable to the cooperation, not to engage in acts that violate these laws and regulations, and to not solicit, accept, offer or give benefits from or to companies and their representatives other than those agreed upon in the contracts, including, but not limited to, discounts, rebates and financial benefits. In case of violation of these regulations, companies must immediately stop cooperating with the supplier concerned and take other reasonable measures.
Export Control Compliance
The importance of export control for national security, social public interest and sound business development is obvious. Setting up a solid and comprehensive compliance management system specifically for export control also requires years of dedicated practice.
Build a three-way compliance management and control system. With respect to business partners, companies must conduct trade sanctions screening on all individuals and entities such as customers, suppliers, service providers, employees, subcontractors, carriers, temporary workers , trainees and visitors; and, where applicable, perform due diligence on the compliance of universities, research institutes and others with access to company products, software or technology. In addition, relevant documents should be properly maintained to ensure company and partner compliance throughout export transactions and business cooperation.
In terms of products, companies are advised to systematically sort and analyze the controlled status of company product components, mark them according to controlled and restricted categories, and synchronously develop and implement a Internal IT system control process for controlled components. It is necessary to apply means of compliance control at several levels in the processes of supply, R&D and production, in order to effectively identify and strictly control the potential impact of these components on development and manufacturing. products, and communicate relevant compliance requirements to our sales staff. .
In terms of target markets, an adequate sales compliance process should be established to identify the risk level of foreign jurisdictions and the possible use of products after export. Within the restrictions of applicable laws and regulations on export control levels for different countries and corresponding licensing policies, companies should unify overall risk preference with compliance control requirements, and strictly enforce sanctions and embargo policies of target jurisdictions and the UN; build a multi-node interception and control mechanism and strictly prohibit the export of products to high-risk countries or regions without compliance review and approval by company management.
Integrate compliance requirements into business processes. From the origin of company materials, components and products, complete written records must be established for restricted items, including import price, export control information, use and intended method of use; and quantity of items used to manufacture or integrate products. In addition, it is recommended to record the purchase price of items to support analysis and judgment on products in later business processes.
Once the materials, components, or products have been processed and transformed into company products and the compliance analysis of those products is completed, whether restricted products or products comprised of or incorporated into restricted items will be sold or exported to foreign jurisdictions, the marketing department, when negotiating business cooperation opportunities, should first consider the risks of exporting to these countries and regions, and collect and organize all information about distributors and end users involved in the transaction process, which should be submitted to the Legal Department for review with cooperation agreements, sales agreements or other similar contracts.
When the marketing department signs a sales agreement, they must also sign an import and export control commitment letter with the counterparty, or use the company’s contract template containing trade compliance provisions, properly retain all signed sales agreements and their annexes, and strictly enforce records management requirements.
The legal department is responsible for reviewing the compliance of the company’s overseas customers, distributors and end users, and reporting the results of the review to the marketing department.
Globally promote the building of a culture of export control compliance. An end-to-end review of the company’s export control compliance process should be performed while export control compliance policies should be incorporated into the scope of mandatory know-how for all employees. A series of focused and targeted compliance trainings can be delivered on an ongoing basis to ensure employees are aware of export and import control policies, as well as compliance operations standards, related to their positions.
Fully implement breach reporting and investigation. All temporary and permanent employees are required to prevent violations from occurring and to report to the Legal Department when they become aware of violating events or behavior. Employees can report potential violations through their department’s Compliance Liaisons or directly to the Legal Department. In addition to anti-corruption, anti-fraud, and export control, a strong corporate compliance system also includes cybersecurity, data compliance, and many other important aspects.
A strong compliance-driven business ecosystem goes a long way toward ensuring a sustainable business future.
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