Bribery and Corruption (FCPA): What Auditors Need to Know
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Bribery and Corruption (FCPA): What Auditors Need to Know

on

  • 483 views

Webinar series from FraudResourceNet LLC on Preventing and Detecting Fraud in a High Crime Climate. Recordings of these Webinars are available for purchase from our Website ...

Webinar series from FraudResourceNet LLC on Preventing and Detecting Fraud in a High Crime Climate. Recordings of these Webinars are available for purchase from our Website
This Webinar focused on the subject in the title
FraudResourceNet (FRN) is the only searchable portal of practical, expert fraud prevention, detection and audit information on the Web.
FRN combines the high quality, authoritative anti-fraud and audit content from the leading providers, AuditNet ® LLC and White-Collar Crime 101 LLC/FraudAware.

Statistics

Views

Total Views
483
Views on SlideShare
483
Embed Views
0

Actions

Likes
0
Downloads
17
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Bribery and Corruption (FCPA): What Auditors Need to Know Document Transcript

  • 1. FraudResourceNet Knowledge Center for Enhanced Fraud Detection, Prevention, and Audit Bribery and Corruption (FCPA): What Auditors Need to Know July 24, 2013 James Tillen Marc Alain Bohn Copyright © 2013 FraudResourceNet™ LLC About Peter Goldmann, MSc., CFE  President and Founder of White Collar Crime 101  Publisher of White-Collar Crime Fighter  Developer of FraudAware® Anti-Fraud Training Monthly Columnist, The Fraud Examiner, ACFE Newsletter  Member of Editorial Advisory Board, ACFE  Author of “Fraud in the Markets” Explains how fraud fueled the financial crisis. Copyright © 2013 FraudResourceNet™ LLC
  • 2. About Jim Kaplan, MSc, CIA, CFE  President and Founder of AuditNet®, the global resource for auditors  Auditor, Web Site Guru, Internet for Auditors Pioneer  Recipient of the IIA’s 2007 Bradford Cadmus Memorial Award.  Author of “The Auditor’s Guide to Internet Resources” 2nd Edition Copyright © 2013 FraudResourceNet™ LLC James Tillen  Vice Chair of the Miller & Chevalier’s International Department  Practice focuses on FCPA and money laundering matters  Experience includes FCPA investigations, enforcement actions, compliance programs, training, M&A due diligence, audits, and assessments  Vice-Chair of Anti-Corruption Committee, International Bar Association Copyright © 2013 FraudResourceNet™ LLC
  • 3. Marc Alain Bohn  Focuses primarily on FCPA and anti-corruption  Advises U.S. and internal companies on compliance and enforcement matters  Works with companies to develop tailored forward-looking compliance programs and effective systems of internal control  Publishes frequently on anticorruption matters and serves as contributing editor to FCPA Blog Copyright © 2013 FraudResourceNet™ LLC Webinar Housekeeping This webinar and its material are the property of AuditNet® and FraudAware®. Unauthorized usage or recording of this webinar or any of its material is strictly forbidden. We will be recording the webinar and if you paid the registration fee you will be provided access to that recording within two business days after the webinar. Downloading or otherwise duplicating the webinar recording is expressly prohibited. Webinar will be recorded and will be made available within 48 hours. Please complete the evaluation to help us continuously improve our Webinars. Unless you are participating as part of a group viewing a single computer screen, you must answer the polling questions to qualify for CPE per NASBA. Submit questions via the chat box on your screen and we will answer them either during or at the conclusion. If GTW stops working you may need to close and restart. You can always dial in and listen and follow along with the handout. Copyright © 2013 FraudResourceNet™ LLC
  • 4. Disclaimers The views expressed by the presenters do not necessarily represent the views, positions, or opinions of FraudResourceNet LLC (FRN) or the presenters’ respective organizations. These materials, and the oral presentation accompanying them, are for educational purposes only and do not constitute accounting or legal advice or create an accountant-client relationship. While FRN makes every effort to ensure information is accurate and complete, FRN makes no representations, guarantees, or warranties as to the accuracy or completeness of the information provided via this presentation. FRN specifically disclaims all liability for any claims or damages that may result from the information contained in this presentation, including any websites maintained by third parties and linked to the FRN website Any mention of commercial products is for information only; it does not imply recommendation or endorsement by FraudResourceNet LLC Copyright © 2013 FraudResourceNet™ LLC 6 Today’s Agenda         Introduction: The Growing Fraud Threat Auditing for Fraud: Standards & Essentials FCPA Basics Enforcement Trends Case Examples Compliance, Prevention, Detection and Response International Enforcement Landscape Practical Steps to Prevent Violations and Seek Guidance  Your Questions  Conclusion Copyright © 2013 FraudResourceNet™ LLC
  • 5. Fraud: The Big Picture According to major accounting firms, professional fraud examiners and law enforcement:  Fraud jumps significantly during tough economic times  Business losses due to fraud increased 20% in last 12 months, from $1.4 million to $1.7 million per billion dollars of sales. (Kroll 2010/2011 Global Fraud Report)  Illicit financial flows, including corruption, bribery, theft and tax evasion, cost developing countries US $1.26 trillion per year, which is equivalent to the economies of Switzerland, South Africa and Belgium combined. (TI) Copyright © 2013 FraudResourceNet™ LLC The Auditor’s Role  1200: Proficiency and Due Professional Care  1220: Due Professional Care  2060: Reporting to Senior Management and the Board  2120: Risk Management  2210: Engagement Objectives Copyright © 2013 FraudResourceNet™ LLC
  • 6. The US Foreign Corrupt Practices Act Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Two Primary FCPA Elements  Anti-Bribery Provisions  Accounting Provisions  Books and Records Requirements  Internal Controls Requirements Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 7. FCPA Anti-Bribery Provisions: Elements of a Violation  No issuer, domestic concern, person with a U.S. nexus  May corruptly  Take any action in furtherance of payment or a promise, offer, or authorization of payment  Of a bribe or anything of value  Directly or indirectly (with “knowledge”)  To a foreign official  To obtain or retain business or improper advantage Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Why it’s a Hot Topic  Cases more frequent, penalties higher  More criminal prosecutions  More individual prosecutions  International cooperation / enforcement abroad  Industry-focused investigations  Continually evolving compliance requirements Copyright © 2013 FraudResourceNet™ LLC 13 Copyright © 2013 Miller & Chevalier Chartered
  • 8. Sustained Increase in FCPA Enforcement Total  Resolved FCPA Enforcement Actions  (DOJ and SEC) 1977 through 2012 © Miller & Chevalier Chartered. Please do not reprint or reuse without permission. 120 100 80 60 40 20 0 Note: The 2012-13 totals are estimated based off of the current pace of enforcement through 2012. Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Significant Penalties Under the FCPA Largest FCPA Settlements  (Combined Penalties/Disgorgement) $900 $800 $700 Millions $600 $500 $400 $300 $200 $100 $0 Amount in Millions $137 M Alcatel‐ Lucent (2010) $149 M Jeffrey Tesler (2011) $185 M Daimler (2010) $218.8 M JGC (2011) $338 M Technip (2010) $365 M Snamproget ti / ENI (2010) $398 M Total SA (2013) $400 M BAE (FCPA‐ related) (2010) $579 M Halliburton / KBR (2009) $137 $149 $185 $219 $338 $365 $398 $400 $579 $800 M Siemens (2008) $800 © Miller & Chevalier Chartered. Please do not reprint or reuse without permission. Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 9. Polling Question 1 Two primary elements of the FCPA are Bribery provisions and Kickback provisions A. True B. False Copyright © 2013 FraudResourceNet™ LLC New FCPA Guidance An unprecedented, substantial effort  120 pages, > 400 footnotes  General principles, case summaries, discussions of issues, examples, hypotheticals, “practical tips”  First systematic discussion of compliance  A joint DOJ-SEC document  Clarifications and elaborations, confirmation of prior policies, some reassurances  No surprises, no changes in law or practice Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 10. Broad Coverage  U.S. companies, citizens, resident aliens – anywhere  Foreign companies, listed on U.S. exchanges  Foreign companies and individuals with sufficient nexus to U.S. Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Foreign Subsidiaries Applicability to Foreign Subsidiaries  Anti-bribery provisions apply to foreign branches, but not directly to foreign subs  Subs may nonetheless become subject to anti-bribery provisions  As agent or intermediary  As co-conspirator  By taking any action within U.S. territory (like any other foreign company)  Subs of “issuers” are indirectly subject to accounting provisions (parent liable if sub doesn’t meet FCPA standards)  Enforcement incentive to find jurisdictional hook Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 11. Purpose  Items given with a corrupt intent  Secretively, surreptitiously  To obtain some quid pro quo  Contrary to local law The “Wall Street Journal” Test  With intention to influence improperly Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Anything of Value Not just money:  Non-essential, lavish travel expenses  Lavish gifts or entertainment  Up-front, lump sum per diem  Travel for family members  Complimentary services / favors  Scholarships and internships  Improper campaign contributions  Overpayment or discounts  “Psychic Benefit Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 12. Promotional Expenses FCPA allows legitimate promotional expenses, including nominal gifts and reasonable meals, entertainment and travel, but only if ALL these conditions are met:  The expense is directly related to a promotional activity or performance of an existing contract  The expense is reasonable. This means that it is not lavish, extravagant, or too frequent for the stated purpose or the spending level of the local economy  The expense is not incurred in secret and gives no appearance of impropriety  The expense is accurately and completely recorded in company records, regardless of value  The expense is consistent with local law Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Gifts and Entertainment  Recent FCPA Guidance  Rejects claims that modest gifts – coffee, taxi fares – would violate the FCPA  Violations don’t occur without corrupt intent  Incidental hospitality not inappropriate  A bit less expansive, however, than official guidance on UK Bribery Act  No bright lines; “reasonableness” is key Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 13. Foreign Official FCPA defines “foreign official” very broadly, to include:  Employee of any agency or instrumentality, customs official  Judge or legislator  Officer or employee of government-controlled company or joint venture  Private person acting officially  Official of public international organization  Tribal leader or Member of Royal Family  Political party, party official, or candidate for public office  Relative or dependent of an official Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Foreign Official (cont’d)  This issue is about “instrumentalities”  Importance relates to gifts, hospitality (local rules)  New Guidance adopts courts’ “fact-specific,” 11-factor test for instrumentalities  This test can be cumbersome, impractical  New Guidance does give primary weight to share ownership  Some practical implications for compliance Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 14. Liability for Bribery by Third Parties  Companies can be liable for bribery by a third party, if they:  Authorized the payment  Paid the third party “while knowing” there is a “high probability” that the payment will pass through to an official  Failed to investigate third party risks and ignored “red flags”  Hired a third party who was likely to pay Important: Companies may be liable even if they did not have actual knowledge of the payment Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Know Your Partners Due Diligence  Business rationale  Qualifications  Ownership  Relationships with officials  Reasonableness of compensation Safeguards  Contract terms  Certifications  Monitoring Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 15. Polling Question 2 Choose from the following the items that are ILLEGAL under FCPA A. Up-front, lump sum per diem B. Travel for family members C. Complimentary services / favors D. Scholarships and internships E. All of the above Copyright © 2013 FraudResourceNet™ LLC Limited Exception Facilitating Payments  Small amounts  To expedite or secure “routine governmental action”  Secure basic services (telephone, water, mail)  Schedule (but not pass!) inspections  Speed paperwork  Official action must be non-discretionary, i.e., official has no legal basis to refuse to provide the service  ALL payments must be accurately recorded as such  But is it legal under local laws, or other international anticorruption laws? Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 16. FCPA – Accounting Provisions Require “Issuers” (public companies) to:  Maintain books, records, and accounts that, in reasonable detail, accurately reflect transactions and assets  Maintain a system of internal accounting controls sufficient to reasonably assure accountability for assets Provide far-reaching basis for liability:  Strict civil liability over parents for subsidiaries’ inaccurate books and records, even when anti-bribery elements not present  Obligations automatically flow down to majority-owned or controlled subsidiaries  Good-faith obligation for non-controlled subsidiaries SEC: Any illicit payment is “material” per se Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered FCPA – Accounting Provisions (cont’d) Common books and records issues:  Mischaracterized payments (e.g., “commissions”) (Biomet)  Recording an invoice that incorporates bribes (Triton)  Misrecording “facilitating payments” (BJ Services) Common internal controls issues:  Payments contrary to company policies (Chiquita)  Payments without adequate due diligence (Parker Drilling)  Failure to document payments (Titan)  Failure to provide FCPA training (Ralph Lauren)  Series of payments just under DOA limit (Schering-Plough)  Maintenance of off-book accounts (Allianz)  Misuse of petty cash (Willbros)  Failure to conduct audits/detect violations (Oracle)  Absence of adequate controls (Total) Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 17. FCPA Guide on the Accounting Provisions  Notes that bribes are often concealed in records as legitimate payments, and includes long list of past mischaracterizations  Confirms that “design of a company’s operational controls must take into account the operational realities and risks attendant to the company’s business”  Summarizes different types of schemes resulting in internal controls “failures” in Siemens, Daimler cases  Emphasizes key role of “targeted audits to make certain controls on paper are working in practice”  SEC officials speaking during rollout repeatedly emphasized important role of internal audit functions in ensuring compliance program and controls integrity and effectiveness Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Case Examples Bribes in Connection with Regulatory Approvals • • • • 2012 Paid nearly $5 million in bribes in dozens of countries to, among other things, secure regulatory approvals Bribes disguised as legitimate expenses (e.g. ‘consulting fees”) Secured more than $10 million in illicit gains $26,7 million penalty 2012 • Subsidiaries (including recently acquired Wyeth) made millions in illegal payments to government officials in eight countries (e.g., China, Kazakhstan, Italy and Russia) to obtain regulatory approvals and sales. • Bribes included entertainment, travel, gifts, and cash kickbacks • $60.2 million penalty Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered 33
  • 18. Case Examples Bribes in Connection with Taxes and Customs 2013 • Provided $593K in improper payments and benefits to tax and customs officials in Argentina (e.g., money, perfume, dresses, handbags). • Payments made through customs broker to obtain paperwork, permit clearance of items, and/or avoid inspection • $1.6 million in penalties 2013 • Paid an agent over $1.25 million while knowing that a portion would be used to corruptly influence a panel in Nigeria reviewing company’s adherence to Nigerian customs and tax laws. • Agent secured over $3 million reduction in panel assessment • $15.85 million in penalties Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Polling Question 3 FCPA’s accounting provisions require companies to maintain a system of internal accounting _________ sufficient to reasonably assure accountability for assets (Choose the word the best fills in the blank) A. Principles B. Standards C. Controls D. None of the above Copyright © 2013 FraudResourceNet™ LLC
  • 19. FraudResourceNet Knowledge Center for Enhanced Fraud Detection, Prevention, and Audit Compliance, Prevention, Detection and Response Compliance  This extra-statutory issue gets full discussion in new Guidance  Guidance lists 10 “hallmarks” of an effective compliance program  Investigations will assess compliance program  Continued emphasis on compliance “culture”  Due diligence and testing listed as best practices  Compliance as an affirmative defense: rejected Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 20. “Hallmarks” of Effective Compliance Program  DOJ and SEC have “no formulaic requirements” -employ “common-sense and pragmatic approach” to evaluating compliance programs  Agencies make inquiries related to three basic questions:  Is the company’s compliance program well designed and tailored to “specific needs, risks, and challenges”?  Is it being “implemented earnestly and enforced fairly”?  Does it detect violations and “remediate them promptly and appropriately”? Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered “Hallmarks” of Effective Compliance Program (cont’d) Key elements:  Commitment from senior management and strong ethical culture of compliance  Clearly articulated policy against corruption  Code of Conduct and compliance policies and procedures (including internal controls)  Senior-level oversight, adequate autonomy, and appropriate resources for compliance and internal controls functions  Regular risk assessments that underlie compliance program design and implementation  Training of applicable employees and mechanisms for continuing and timely compliance advice Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 21. “Hallmarks” of Effective Compliance Program (cont’d) Key elements (cont’d):  Positive incentives (financial and otherwise) and appropriate disciplinary measures  Third-party due diligence and monitoring  Mechanism for confidential reporting of issues and violations and “efficient, reliable and properly funded process” for documenting and investigating such reports  Processes for pre-acquisition due diligence and postacquisition integration of new entities into compliance program and internal controls  “Continuous improvement – periodic testing and review” of program in light of changing business risks and identified weaknesses Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Prevention            Early issue identification Risk assessments Convincing tone at the top Business decisions that reflect compliance commitment Believers: tone at the middle Policies, user-friendly guidelines Due diligence – pre-acquisition; third parties Accountability of business managers for compliance failures Practical training (including individual liability risks) Expertise in red flags Anticipation of certain discipline Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 22. Detection  Frequent discussions of risks and compliance  Feedback from in-person training  Knowledgeable financial audits  Compliance audits  Hotlines, whistleblower protections, reporting channels  Due diligence, especially post-closing (M&A)  Field visits  Surveys, questionnaires, certifications  Monitoring third parties, third-party audits Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Detection: Agencies’ Expectations for Financial Audits  Review of books and records for detail and accuracy (no materiality test)  Review system of internal accounting controls  Recorded assets are compared with existing assets at reasonable intervals  Audit sites chosen based on objective, riskbased factors (including corruption) Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 23. Polling Question 4 DOJ and SEC have “no formulaic requirements” to evaluating compliance programs. Instead, they employ a “common-sense and pragmatic approach” A. True B. False Copyright © 2013 FraudResourceNet™ LLC Detection: Modus Operandi of Corrupt Official  Direct cash payments  Gifts, travel, and entertainment  Payments through agents/consultants/reps  Payments through contractors  Payments by partners  Doing business w/companies owned by officials  Charitable contributions, social bonuses  Family members: hiring, tuition, indirect payments Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 24. Detection: Spotting FCPA Issues in Transactions Compliance with Policies and Procedures  Failures to comply with Code of Conduct or other policies  Failures to abide by notification and approval procedures  Consolidated responsibility for authorizing, recording, controlling, and reviewing of payments  Failure of an affiliate to obtain sign-offs or auditor opinions General Ledger  Off-book accounts or multiple accounting records  Failure of general ledger account reconciliations  References to facilitating payments Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Detection: Spotting FCPA Issues in Transactions (cont’d) Accounts Payable – Vendors  Improper recording of A/P liabilities or purchases  Incorrect amounts recorded for A/P liabilities or purchases Cash Disbursements  Inadequate controls over cash disbursements or manual checks  Consolidated responsibility for cash, checks or bank reconciliation  Cash payments from other than imprest petty cash  Suspicious petty cash activity (e.g., excessive use; lack of documentation; unusually large payments) Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 25. Detection: Spotting FCPA Issues in Transactions (cont’d) Travel and Expense Reports  Red flags related to employee expenses/reimbursements (e.g., inadequate supporting documentation or recordkeeping; suspicious expenses; lack of proper approval)  Excessive per diem for officials or expenses for family members Third Party Contracts (consultants, sales agents)  Inadequate due diligence on third party  Written contract is missing or payments do not match terms  Unusually high commissions or compensation  Otherwise suspicious payments (e.g., off-shore payments; payments to 3rd parties; invoices lacking support)  Requests for payment in cash  Noncompliance with required contract compliance terms Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Response  Assess potential issues promptly  Independent investigations of potentially serious issues     Preserving documents and evidence (e.g., document holds) Establish privilege, as appropriate Discussing issues and potential issues in audit reports Informing audit committee or outside auditors  Strong, prompt remediation  Certain discipline when warranted  Negative feedback  Accountability affecting promotions and compensation  Rewards for compliance-strengthening actions  Voluntary disclosure? Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 26. Polling Question 5 Detecting violations of FCPA requires use of numerous techniques. Choose all of the following that would qualify… A. Frequent discussions of risks and compliance B. Feedback from in-person training C. Compliance audits D. Field visits E. All of the above Copyright © 2013 FraudResourceNet™ LLC FraudResourceNet Knowledge Center for Enhanced Fraud Detection, Prevention, and Audit Practical Steps to Prevent Violations and Seek Guidance
  • 27. The Proposal SCENARIO: PLAYERS: Saskia Acme Co. VP Acme Co. is pursuing a large project in RoX, where it hopes to establish a subsidiary. Mary arranges a lunch meeting at the Four Seasons for Saskia with Daniel to discuss. Daniel is very happy about the project's potential, but he sees some obstacles: “Our procurement process takes forever, and you know they just look at the bottom line. We need to be creative to get you in." Daniel Minister of Finance, Republic of X Mary Saskia’s former colleague, now advising the Republic of X on trade matters After a long, complex discussion about local content and existing contracts between the Ministry and Mary's local consulting firm, Daniel proposes that Acme Co. partner with Mary's firm, which would receive a share of revenues, but not interfere with Acme Co.’s work. Mary's firm would help satisfy local content requirements and make sure things go smoothly with government relations. Maybe it's the jet lag, but this plan sounds sketchy. Copyright © 2013 FraudResourceNet™ LLC How Can I Help Prevent a Violation? Remember FCPA’s broad definition of official:  Any employee of a government controlled company, including public companies controlled by local or national government, is an official  Any employee of a government owned university, hospital, or research institute is an official Gifts, travel and entertainment, which must be:  directly related to a valid purpose (e.g., building relationships or contract negotiation, but NOT in in exchange for a benefit)  reasonable under the circumstances (customary and modest in value)  accurately recorded  permitted under local law Vet and monitor third parties Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 28. How Can I Help Prevent a Violation? If you hear rumors of improper payments or see other warning signs (“red flags”), don’t ignore them:  Suggestion that gifts, travel, entertainment or something else of value could secure an improper benefit for your company  An official offering inappropriate assistance  An official directing you to retain a particular company  An official directing payments to accounts not in government’s name  Entertainment that is extravagant (luxury bars or golf resorts) or impropriate (adult or illegal), or travel that is unrelated to an engagement (leisure or family travel)  Lack of accuracy or detail in expenses (e.g., misreporting purpose)  Using personal accounts or third party accounts (rather than co. accounts)  Payment patterns or fin. arrangements that prevent expense tracking or accounting, such as cash, gift or debit cards, fake receipts, etc.  Suspicion that a client is making improper payments Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered How Can I Help Prevent a Violation? If an official requests an improper payment, you should:  Refuse to make the payment; explain that your company does not make such payments  If a business partner or third party is involved, explain that they are not authorized to make the payment on your company’s behalf, instruct them not to do so and explain that the company cannot continue to work with them if they make the payment  Be clear that refusals are absolute and do not come with a “wink and a nod”  Immediately report the request to the legal or compliance function at your company Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 29. The Proposal: Revisited SCENARIO: Risks presented by partnering with Mary's local firm  Mary could use her share of revenues to pay bribes  Daniel may have an interest in Mary's firm  Mary may be related to Daniel, so payments to her could be viewed as benefitting Daniel  Beyond anti-corruption compliance, your company may face reputational risk if perceived to have dodged procurement process How should Saskia respond to Daniel's proposal?  Explain that these types of arrangements need to be syndicated by a broad group of stakeholders, including your company’s Legal department  Immediately contact your company’s Legal department for guidance © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered Copyright Coming Up….  ”Fraud Risk Assessment: Key to Effective Internal Controls” July 26,, 2013  "Quick Response Fraud Detection using Data Analytics: Hitting the Ground Running using Technology in a Suspected Fraud Case”, July 31 Copyright © 2013 FraudResourceNet™ LLC
  • 30. Questions? Any Questions? Don’t be Shy! Copyright © 2013 FraudResourceNet™ LLC Contact Information Marc Alain Bohn James G. Tillen Miller & Chevalier 655 Fifteenth Street, N.W. Suite 900 Washington, D.C. 20005 Miller & Chevalier 655 Fifteenth Street, N.W. Suite 900 Washington, D.C. 20005 (202) 626-5559 mbohn@milchev.com (202) 626-6068 jtillen@milchev.com Copyright © 2013 FraudResourceNet™ LLC Copyright © 2013 Miller & Chevalier Chartered
  • 31. Thank You! Website: http://www.fraudresourcenet.com Jim Kaplan FraudResourceNet™ 800-385-1625 jkaplan@fraudresourcenet.com Peter Goldmann FraudResourceNet™ 800-440-2261 pgoldmann@fraudresourcenet.com Copyright © 2013 FraudResourceNet™ LLC