The Cascade Effect

The Cascade Effect

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January 21, 2016

spotlight Compliance Champion Spotlight

What is a Compliance Champion? A Compliance Champion is an individual or organization committed to fostering and raising the standards of anti-bribery compliance. TRACE Trends will include posts featuring Compliance Champions from time to time.

We hope you enjoy the following entry from this week’s Compliance Champion, and TRACE Partner Law Firm!

Today’s guest blog post is written by Mr. Bruce Horowitz of Paz Horowitz, TRACE’s Partner Law Firm in Ecuador.  Paz Horowitz provides support, advice, training and intervention services to international clients on compliance with local and foreign anti-corruption laws.  Mr. Horowitz previously co-chaired the Anti-Corruption Committee of the International Section of the American Bar Association and has been advising clients on FCPA issues and local bureaucratic practices since 1989.


In Ecuador, and probably all over the world, international enterprises are contractually requiring their foreign subsidiaries, agents, and suppliers to confirm that their own subsidiaries, agents, and suppliers are also complying with the anti-corruption laws of the principal's home country.  More and more local companies are taking these requirements seriously, and passing the same anti-corruption contract clauses, certification forms, and questionnaires, and even training events, on to their subsidiaries, agents, and suppliers, creating a cascade effect of contractual anti-bribery obligations.

This cascade effect will lead to a few important results.  First, many more company owners, representatives, and individual agents will realize that they have an economic interest in not paying bribes, even if the anti-corruption laws in their own countries are rarely enforced.

Second, a goodly number of those owners, representatives, and agents will see that being compliant, and being able to show that your company is compliant, delivers a market advantage vis-a-vis competitors who have not yet moved into the compliance circle.

Third, the market for expensive gifts, hospitality, and misguided charitable donations will suffer to some degree all over the world, as it has already done in China.

However, in order for this cascade effect to move through the world's agent and supply chain networks fully, we may need a “grok” moment.1

TRACE Trends readers, do you believe that the cascade effect of contractual anti-bribery obligations will lead to less bribery?  Let us hear your thoughts in the comments below.

1 From Wikipedia:  “Grok /ˈɡrɒk/ is a word coined by Robert A. Heinlein for his 1961 science-fiction novel, Stranger in a Strange Land, where it is defined as follows: Grok means to understand so thoroughly that the observer becomes a part of the observed—to merge, blend, intermarry, lose identity in group experience."

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

President Xi Jinping Pledges to Revamp China’s Sweeping Anti-Corruption Campaign
Standardizing Contract Language: A Compliance Adventure
Anti-Bribery Compliance Resources That Are Free

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