Do Androids Dream of Unethical Sheep?
PEARSON, MENAT Legal Director
Nalan was a senior manager at the Turkey branch of a multi-national company specializing in medical technologies. She was dreaming of a life abroad while enjoying the advantages of her position in her country stirring up with the rising inflation and cost of living.
She woke up to a new day in peace, thinking that another wonderful year has passed by, and she would once again achieve the targets thanks to her talented managers to whom she delegated the tasks. She first took care of her family in the morning as usual and then, reached for her phone to learn about the latest status of the MEDTC stocks traded on the Stock Market in the USA. Her company had provided these stocks to her as an option. What she saw terrified her. The price of the company’s stocks had sharply declined. She wanted to conduct a search on Google to find out the reason. However, the news that came up made her feel even more depressed. The US Department of Justice had made a press release stating that it had established the presence of corruption at the multi-national company’s branches in Turkey, Kuwait and Russia and had therefore initiated a comprehensive investigation. This came as a shock since an internal audit on the new company systems had recently been completed remotely and the successful results were announced to the entire Turkish management with a code green.
She immediately called her most trusted manager Erkan and asked for more information. She was relieved after Erkan’s explanation that there might be certain sensitive issues at some of the institutions to which Erkan made sales but that these were resolved by means of agencies. The agencies had significant connections and Erkan thought there would be no problems concerning the State. At the same time, Nalan was wondering how she got in the radar of the US Department of Justice even though she lived in Turkey. The signal that came to her mobile phone startled her. The French manager abroad, to whom she was reporting, was urgently calling Nalan for a meeting...
Nowadays, the companies have enlarged their domain globally and thereby financial crimes and related investigations have also gone global. The budgets of companies are currently managed on cloud systems and distributed to all over the world as sales and marketing budgets. This pace has positive as well as negative reflections on day-to-day business affairs. Controls as to how the resources are utilized have become more important in a world where such quick resource transfers are possible, and many global consulting firms with expertise in auditing have emerged. Both the States and companies are taking new precautions each day concerning global monetary transfers and for ensuring that these are utilized in compliance with the regulations whilst the consultants in the private sector are establishing new systems to remedy the defects in the current systems and to set forth more effective controls. Accordingly, certain controls are constantly and rapidly being developed concerning the utilization of these resources both in ethical (human rights, bribery, corruption etc.) and financial (misuse of company resources, embezzlement, speculations etc.) terms.
Not only the ethical and financial but also the political control of this rapid globalization trend is becoming increasingly important each day. In the current capitalist economy of the world, the wars are conducted not by artillery but by means of monetary currencies and the controlling of the global monetary markets give the prevailing States a control over the entire world. Hence, these global resources have become a critical audit matter not only for the private sector companies but also for the States. Political and economic sanctions are crucial even in the wars in the Middle Eastern and Russian regions.
All these developments led to the USA passing the Long-Arm Statue in consequence of its resolution that it has jurisdiction concerning the economic crimes in any other country that might have an impact on the USA and enacting the Foreign Corrupt Practices Act (FCPA). This act stipulates that crimes concerning bribery and corruption committed in the foreign branches of companies with a legal presence in the USA will be tried in accordance with the laws of the USA.
Therefore, global companies -especially those based in the USA have drafted various policies to comply with domestic and foreign regulations and to combat bribery and corruption and have established compliance structures taking the precedents created by the USA Department of Justice for the implementation of these policies and have thus began to implement these rules in all their branches around the world. Compliance expertise has been on the rise all over the world as a solution to these requirements of the companies. These professionals work in virtually all sectors to pursue company policies in compliance with the local regulations and strive to develop the compliance stage by deliberating on ethics in professional bodies such as TEID.
The computers and AI becoming a part of business processes have now been added on top of these trends that have been developing since the 1960s, which I attempted to explain in the historical and economic context above, and full automation programs have begun to replace the programs established by humans using semi-automatic systems as a result of the rise of these technologies. Predominantly USA based trainings on ethics and compliance have been designed for the automation efforts and these trainings have subsequently been translated. Then, these have been distributed to all branches throughout the world together with the policies and with the objective of eliminating the compliance officers in the branches and the functions of the compliance officers being carried out by these automation programs and automatized systems containing various financial and procedural controls, the underlying rationale being the ensuring of savings in terms of human resources, which is one of the top priorities of the companies nowadays, as well as the implementation of technological methods in the field of compliance.
However, the issue of whether such automatic compliance programs may be implemented with the same efficiency all over the world or not remains as a question. In our era, federative structures such as the USA or the EU have agreed upon the codes which they will apply internally and have the power to enforce these codes to be implemented in the same manner in all its members.
These countries also represent the most developed side of the world in addition to their power to enforce and thus have a well-established culture of law implementation as well as the suitable legal techniques as a result of this culture and possess well-educated individuals with the necessary ethical values for implementation. Additionally, the economic and technological opportunities required for the implementation of the codes are present. Therefore, it is possible to provide an ethical business culture and to ensure this culture with reminders such as training, testing and compliance activities created by automatic systems as a continuation of education, culture and ethical values tied to each other like a strong chain. For example, a citizen growing up in Canada, is educated ethically from birth by the society s(he) is born into about subject matters such as discrimination, racism, speciesism and bribery. Such a citizen knows that s(he) does not have the opportunity to use crooked methods economically and lives his/her life accordingly. When this person enters the business life, these learnings are already in his/her memory and s(he) will do the right thing without having to spare much effort.
As mentioned above, legal compliance programs that are consistent and functional sound logical in developed countries but unfortunately, it is not possible to put such a bold face on the world as a whole. The well-educated minority mentioned above does not correspond to even a quarter of the world population. Even though their economies dominate the world, they are not the majority of the world population. For this reason, it would be useful to scrutinize whether the countries selected as the countries of origin of the said automation processes can devise rules that can cover the entire world or not.
For instance, in terms of Turkey and the Middle East, national governmental structures are dominant in these regions and the integration of the local culture to the global values is extremely limited except for economic and financial matters. Furthermore, each country has different regulations and even though these regulations fundamentally contain provisions stating that bribery is a crime, they follow quite different methods in terms of implementation. Therefore, it is almost impossible for these two diverse cultures to understand each other without a decoder. In other words, in Turkey and the Middle East, each country has a unique understanding of ethics and interpretation of the law and usually, these values are in complete contrast with the Western ethics. For instance, criticizing the T-shirt worn by a female employee may be perceived as interfering with the basic freedoms in a Western country while the same criticism may be found to be just in a country governed by sharia. In a Western economy, the culture of tipping in government bodies in strictly prohibited while in an Eastern society, the same act can be considered a requirement, an auspicious act or a must.
Another problem regarding the automation compliance programs is the language barrier. Even though English compliance programs can be translated into any language, it is incredibly difficult to fully grasp the gist of the ethical values expressed by the original text using the translated versions. Language is a historical and cultural heritage and solely bringing words together does not create a cohesive whole and the verbatim translation of a text in a foreign language may not have the same impact. Communication and information transfer are essential for today’s business world and a legal opinion or an ethical value transfer that cannot be comprehended by the counter-party will be devoid of any value.
Another issue which is confronted in global automated compliance programs concerns implementation because an ethical rule created by the headquarters can sound logical and implementable but its implementation not being understood sufficiently may be a drawback. Most companies have as few as possible employees in their branches and the compliance perception of these employees -including the managers- may be limited. Local managements, which try to set methods suitable for them because of this barrier, can lead to complexities that bypass the rule and choke up the system.
Finally, another technical problem in automatic compliance programs concern the updates. Technological developments cause a new violation method to be invented each day and thus the requirement for counter measures. For example, the concept of personal data, which attracted no attention at all in year 2000, can cause numerous legal issues at the present or internet sales give rise to the possibility of product sales to embargoed countries. Updates for such matters can only be possible as a result of the creation of an active network of compliance professionals on a global scale and the professionals who are a part of this network constantly updating the documents which they have in their possession and transferring them to their peers with whom they work.
In terms of the monitoring of the ethical violations by automatized systems, it is possible to state that the automatic financial reports prepared by scanning the company big data do not suffice on their own to detect the financial crimes unless an audit is carried out by expert auditors. Indeed, in the investigations announced by the USA Department of Justice throughout the years, it is observed that the greatest financial corrupt acts have arisen as a result of funds which are distributed to foreign branches as sales and marketing budgets and which are then used other than for their intended purposes. It is almost impossible to assess the purpose of these fund transfers in terms of ethics and compliance and therefore it is essential to have a compliance officer controlling this distribution being performed ethically. However, even if a compliance officer is assigned at companies, it may not be remarkably effective in terms of the utilization of human resources to audit the compliance of each fund transfer one by one. Therefore, an automated system may be used semi-automatically in case the same distribution is made several times to migrate the workload of the said audit. However, all audits being performed by automatic systems will give a great freedom of movement to violators.
It is possible to give many more examples but to summarize, it can be said that even though uniform compliance trainings being given to employees and the controlling of the violations using automated systems seems like an attractive and effective course of action for the companies, the chaotic solutions that are not of a logical nature invented by the human brains are of a level that cannot be comprehended by the automated systems when the automation programs are evaluated from a human/robot competition perspective that has been ongoing for years. For this reason, a fully automated compliance program can only achieve success in geographies where each individual has a similar culture, but the success of such compliance programs will be limited when implemented all over the world. It is also possible to state that the localization of these programs and the human resources necessary for such localization are essential.
As can be understood from the foregoing explanations, all dominant States, primarily the USA, are decisive regarding sanctions on bribery and corruption. A brief search on the internet will reveal that numerous institutions, including government institutions, are tried by the USA as a result of corrupt acts and sanction violations abroad and that they have paid hefty penalties as a result. Therefore, company owners and senior managers of global companies, including but not limited to the ones that have branches in the USA, must take their financial obligations and reputations into consideration and create an internal compliance program. Then, they must assign a compliance officer for the implementation of this program and provide full support to this officer. This will render the company and its persons immune from financial risks and serve to ensure a company culture of full compliance.