A JOB FOR THE LAW
Not surprisingly, many companies have a sharply different view. Spokesman Cox says that attitude is exactly why Bell is fighting the seizure of its money. “We have been accused of knowingly being involved in an illegal activity,” he says. “It is a shame to have a name like Bell besmirched by something that is very malleable in its interpretation.”
Many companies note that while they support the law, they are not in the business of enforcing it. “First and foremost, contraband is a problem of law enforcement, and the fight against it will remain a police and government function,” notes Cathy Leiber, vice president of corporate affairs for the Latin American region of Philip Morris. In Spain, she adds, the government reduced cigarette smuggling “without feeling the need either to attack manufacturers or impose responsibility on them.”
Asked if he thinks finance organizations are responsible for detecting BMPE payments, Stephen Key, the former CFO of Bell parent Textron, said, “Unless you employ a bevy of clairvoyants in your organization, I don’t know how you could control that.” Adds Cox, “You have to stop short of making businesses [into] law enforcement agencies.” Even GE and Whirlpool, cited by law enforcement officials as model corporate citizens, admit that the system is challenging. “There are many cases when customers have a legitimate reason to pay by third- party check,” notes GE attorney Scott Gilbert, who is responsible for the company’s anti-money-laundering program. Whirlpool attorney Debra Clawson adds that retail appliance dealers often finance their showroom and warehouse inventories, which results in a third-party payment from the finance company. “That kind of third-party check is welcome, but trying to explain that to the government has gotten confusing,” she notes.
As leading members of the Association of Home Appliance Manufacturers, a Washington, D.C.-based lobbying group, GE and Whirlpool take an active role in explaining their position to the BMPE Working Group–a consortium of law enforcement agencies with jurisdiction over drugs and money-laundering. They’ve also gone further than many companies in adopting the guidelines that result from those discussions.
GE already had a know-your-customer policy and payment restrictions in place in 1994, when executives began hearing complaints from a Colombian distributor who claimed contraband goods were undercutting his sales. A closer look at GE’s U.S. distributors revealed that some of them were violating provisions of their contracts that prohibited export of GE products. “We found some violations, and either educated, warned, or, in some cases, terminated dealer agreements,” notes Gilbert. The company also began to educate its distributors about proper know-your-customer policies.
Compliance came with a price. “There was a significant reduction of sales in the South Florida market,” says Gilbert. Between 1995 and 1999, he says, GE’s compliance program caused a 20 to 25 percent market- share loss in the area. While some of the lost sales were unauthorized exports, he says, “we also lost domestic sales by talking to [distributors] about the need for their own internal controls. I think we tried their patience.” Whirlpool also prohibited its dealers from exporting its products. “There were sales lost as a result,” notes Clawson. “It was a big change, and it was not easy for some of these dealers to accept.”