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  1. 1. ANTI-BRIBERY & CORRUPTION FOR EMERGING ECONOMIESCompliance Advisory, Risk Assessment and Due Diligence InvestigationsPRESENTED BYKim Marsh, CFE, CAMSExecutive VP, International Operations33 Cavendish SquareLondon, UK W1G 0PWPhone: 44 (0)
  2. 2. Margin Call “There are three ways to make a living in this business: be first, be smarter or cheat.” John Tuld (Jeremy Irons) CEO of fictional investment bank in Margin Call (2011)
  3. 3. About IPSA International, Inc. IPSA International, Inc. (IPSA) has a 20-year history of successfully completing complex multi-jurisdictional investigations in the areas of: Anti-Money Anti-Bribery & Laundering Corruption Litigation Investigative Support Due Diligence Assignments include large-scale Criminal, White Collar and Financial Investigations for multinational corporations, banking/financial institutions and law firms.
  4. 4. Track Record• Mid-size Firm > Top-tier Experts > Competitive Rates• Preferred AML service provider to 5 major international banks• Research capabilities in 20 languages• Resources in over 75 countries• Emerging markets expertise in Former Soviet Union, Latin America, Middle East, Nigeria, China & Taiwan• Offices in New York, London, Phoenix and Vancouver
  5. 5. TeamDan Wachtler, President & CEO - 20+ yrs industry veteran; large-scale AML remediation for globalfinancial institutions; security program development, international due diligence, off-shore assetlocation.Kenneth (Kim) Marsh, CAMS, CFE, Executive V.P. International Operations - 35+ yrs industryexpert, due diligence investigations, 25 yrs RCMP Organized Crime Unit focus on large-scale moneylaundering.Robert Weiner, JD, CIPP, Managing Director & Regional Counsel - 20+ yrs legal, investigation andcompliance. Former Director BDO consulting; specialist in anti-bribery/corruption, focused on US FCPAand UK Bribery Act, and litigation support.William Goss, CAMS, Senior Director Anti Money Laundering - 25+ yrs AML investigations, duediligence and fraud. Charter officer of RDC, an AML/EDD database by 20 global financial servicescompanies including Goldman Sachs, Morgan Stanley, Citigroup and Bank of America.Jim Oakes, CFCI, CFE, Senior AML Consultant - 30+ yrs experience investigating international fraud,AML and financial crime prevention with Citigroup, Barclays, Standard Chartered Bank, GE Money andAbbey Santander. Regent of the Board of the ACFE.Robert Cone, MBA, Managing Director, Special Projects - 25+ yrs senior manager with internationalbanks in treasury and broker dealer functions, foreign exchange, derivatives and money markets.
  6. 6. ServicesAnti-Money Laundering Intelligence at Work® AML services for a wide array of organizational conditions, business lines, geographic markets, regulatory situations and implementation timetables.Investigative Due Diligence Intelligence at Work® Investigative Due Diligence services deliver credible and timely intelligence to support corporate decision making on acquisitions, investments, business partners, clients, supply chains, competitors, employees and board members.Litigation Support Intelligence at Work® Litigation Support group designs, manages and conducts comprehensive investigative solutions for commercial litigation, financial and fraud investigations, regulatory proceedings and dispute resolution.
  7. 7. ServicesAnti-Bribery & Corruption Due Diligence• Compliance advisory, risk assessment and due diligence investigations for corporations, investment banks, private equity & hedge funds• Defensible procedures for M&A, investments, litigation support and regulatory enforcement proceedings• Initial assessment, key interviews, evidence gathering and analysis, reporting and implementation of remedial action• Conducted in accordance with provisions of the FCPA, the U.K. Bribery Act & anti-corruption laws of OECD signatory countries
  8. 8. ServicesEmerging Economies Due Diligence• Advanced investigative capabilities and established network of well- placed, highly credible in-country resources• Access to expertise and information not readily available - one of the greatest challenges encountered in emerging economies due diligence• Due to the volume of requests from our clients, we excel in the following countries: Argentina, Brazil, Chile, Colombia, Peru, Venezuela and Mexico in Latin America; Russia, Ukraine and Kazakhstan in the Former Soviet Union; China and Taiwan in Asia; Nigeria in Africa; and UAE, Qatar, Saudi Arabia and Egypt in the Middle East.
  9. 9. Regulation & Enforcement• Increasing globalization of Anti-Bribery & Corruption regulations• Collaborative cross-border investigations and aggressive international Enforcement• Requirements to Conduct Anti-Bribery and Corruption Due Diligence Across Multiple Jurisdictions• Risk of Criminal & Civil Penalties for Corporations, Directors, Management and Individuals• Fines, Litigation, Debarment, Reputational and Financial Damage• See Appendix for Comparison of U.K. Bribery Act & U.S. FCPA
  10. 10. Global RegulationU.S. Foreign OECD Anti- Council of Africa Union Russian Anti- U.S. SEC Dodd-Corrupt Bribery Europe Convention on Bribery Laws Frank ExtractionPractices Act Convention Convention Preventing & (Amended – Issuers/ Conflict OECD(1977) (1999) on Corruption Combating 2011) Minerals (2012) (2002-2003) Corruption (2006) 1977 . . . . 1997 1999 2002 2005 2006 2010 2011 2012 . . 2013 Inter-American Canada UN Convention U.K. Bribery Chinese Anti- Convention Corruption of Against Act (2010) Bribery Laws Against Foreign Public Corruption (Amended – Corruption Officials Act (UNCAC) 2011) (1997) (1999) (2005)
  11. 11. Commonly Encountered RisksCountry RiskPerceived high levels of corruption, absence of effectively implemented anti-bribery legislation andfailure of foreign government, media, local business community and civil society to promotetransparent procurement and investment policies.Sectoral RiskSome sectors are higher risk than others. Higher risk sectors include the extractive industries and largescale infrastructure sector.Transaction RiskCertain types of transaction give rise to higher risks, for example, M&A transactions, licences andpermits, transactions relating to public procurement and charitable or political contributions.Business Opportunity RiskSuch risks might arise in high value projects or projects involving many contractors or intermediaries;or projects not apparently undertaken at market prices, or which do not have a clear legitimateobjective.Business Partnership RiskCertain relationships may involve higher risk, for example, the use of intermediaries in transactionswith foreign public officials; consortia or joint venture partners; and relationships with politicallyexposed persons where the proposed business relationship involves, or is linked to, a prominent publicofficial.
  12. 12. Emerging Markets Risk• Dependence on large government contracts, critical licenses and permits• Reliance on agents, distributors and third-party intermediaries to obtain business or secure licenses/permits• Off-the-record payments to facilitate contracts & licensing• Foreign public officials associated with intermediaries & customers• Unusual payment arrangements and excessive commission structures for subsidiaries, intermediaries & third-parties• Payments made to offshore entities• Differing cultural values and social realities
  13. 13. Third Party RiskThird party intermediaries have been identified as the greatest risk toenforcement of anti-bribery and corruption regulations. (Source: KPMG, 2012)Analysis of U.S. SEC and DOJ enforcement actions indicate alleged use ofthird-party intermediaries to pay bribes to foreign governments increasedto: 100% of U.S. FCPA enforcement actions, from 42% in 2005. (Source: Sherman & Sterling, 2012) Conducting „adequate due diligence‟ on third party intermediaries is one of the six guiding principles of the U.K. Bribery Act. (Source: SFO, 2010)
  14. 14. IPSA International, Inc. Compliance Advisory, Risk Assessment and Due Diligence Investigations • In-depth investigation of principals, management, subsidiaries, supply chains and intermediaries • Background and reputational checks to establish prior association with bribery, corruption, money laundering and fraud • Payments to host governments, off-shore entities and related-party transactions • Arrangements for securing high-value licenses, permits and contracts • Use of middlemen and off-shore vehicles to hide beneficial ownership and financial information
  15. 15. Third Party Due DiligenceRisk Assessment determines Identifythe extent of Due Diligence Reviewrequired.Six Stages for conductingDue Diligence on: Due Diligence Risk• M&A Targets Assessment• JV Partners Monitor - High Level -• Investors Process• Principals• Management• Board Members• Subsidiaries Audit Research• Supply Chains• Intermediaries
  16. 16. Third Party Due Diligence Process Review Third-Party Collect documents from third- Identify party (incorporation docs, etc) Risk Assessment Simplified Due Diligence High Level Due Diligence (Low Risk) (High Risk) Company Check Person Check Company Check Person Check Key company data ID Verification Key Company Data ID verificationSanctions & Watchlists PEPs Sanctions & Watchlists PEPs Senior Executives Sanctions & Watchlists Negative News Associates Person Checks on all Sanctions & Watchlists Directors Directorships Person Checks on Key Shareholdings Shareholders Negative News Report Monitoring and Review
  17. 17. Summary• Industry leader in risk management• Senior multi-disciplinary team with deep emerging markets expertise• Decades of experience conducting complex white collar crime, anti-bribery and corruption, and AML investigations across high risk sectors and geographic regions• Network in 75 countries, research capabilities in 20 languages• Ready access to expertise and resources not available in-house• Offices in U.S., U.K. and Canada
  18. 18. Contact UsPRESENTED BYKim Marsh, CFE, CAMSExecutive VP International OperationsIPSA International, Inc.33 Cavendish SquareLondon, UK W1G 0PWPhone: 44 (0) 207 182 4098Email: New York | London | Phoenix | Vancouver 800-997-4772 |
  19. 19. Appendix
  20. 20. Transparency International :: 2011 Corruption Index VERY CLEAN HIGHLY CORRUPT Natural resources are often located in countries that rank as ‘highly corrupt’ on Transparency International’s Corruption Index. For example Venezuela, Russia, Guinea, Democratic Republic of Congo, Nigeria, Nicaragua, Mongolia and Kazakhstan all scored less than 2.9 on the 2011 Corruption Index. By contrast, the U.K. scored 7.8
  21. 21. Extractives IndustryExtractive Industries Transparency U.S. Dodd-Frank Wall Street Reform Act (2011)Initiative (EITI, 2002) SEC approval of Section 1504Voluntary regime of 35 participating countries Oil, gas and mining companies listed on a U.S.calling for disclosure by oil and gas, mining exchange are required to disclose what they payand timber companies of payments made to to foreign governments as part of their annualgovernments to further the commercial filings to the Securities and Exchange Commission.development of their resource projects. U.S. Foreign Corrupt Practices Act (1977)UK Bribery Act (2011) U.S. headquartered multinational companies areCovers overseas operations of firms doing held to a higher standard of forgoing bribery evenbusiness in the UK, requires companies to have in countries where it is commonplace.„adequate‟ provisions against bribery Kimberley Process (2003)“Any company that carries on a business in the UKcan now incur liability for the corrupt actions As of January 2012, 76 countries committed to KP(anywhere) of rogue employees or associated which sets out requirements for controlling roughthird parties, even if the company’s management diamond production and trade to stem the flow ofknew nothing about the bribery.” conflict diamonds.
  22. 22. U.K. Bribery Act versus U.S. FCPA Provision U.K. Bribery Act U.S. FCPA Bribe Not limited to foreign officials Only bribes (anything of value), Prohibits bribes paid to any person to paid or offered to a foreign induce them to act “improperly” official are prohibited Advantage Obtained Focuses on Improper action rather Payments must be to than commercial advantage or “obtain or retain business” benefit (except in strict corporate liability). Active vs. Passive Two offenses: (1) “Active Offense” Passive Offense – only the act of Offense of bribing another; and (2) “Passive payment, rather than the Offense” of being bribed receipt/acceptance of payment is prohibited Corporate Strict A new strict liability corporate Strict Liability only under Liability offense for failure of a commercial accounting provisions for public entity to prevent bribery - subject to companies – failure to maintain defence of having “adequate adequate systems of internal procedures” designed to prevent controls. bribery in place.
  23. 23. Continued… Provision U.K. Bribery Act U.S. FCPA Jurisdiction Organizations that are either U.S. citizens and companies, foreign established in the UK or conduct companies listed on a U.S. stock some part of their business in the exchange, or any individual acting UK; and individuals who are UK while in the U.S. nationals or are ordinarily residents in the UK Enforcement – Criminal enforcement only by the Both criminal and civil proceedings Civil / Criminal UK Serious Fraud Office (SFO) can be brought by SEC and DOJ Potential Penalties For individuals, up to 10 years‟ Bribery: for individuals, up to five imprisonment and potentially years‟ imprisonment and fines of up unlimited fines; for entities, to $250,000; for entities, fines of up potentially unlimited fines to $2 million. Books and records/internal control violations: for individuals, up to 20 years‟ imprisonment and fines of up to $5 million; for entities, fines of up to $25 million. Source: VistaLaw
  24. 24. Continued… Provision U.K. Bribery Act U.S. FCPA Facilitation Payments No facilitation payments Exception for payment to a exception, although guidance is foreign official to expedite or likely to provide that payments of secure the performance of a small amounts of money are routine (non-discretionary) unlikely to be prosecuted government action Promotion Such expenditures are arguably Affirmative defence for Expenditures not “improper” and therefore not reasonably and bona fide a Bribery Act violation. No similar expenditure directly related to defence to FCPA the business promotion or contract performance Allowable Under No violation if payments Affirmative defence if payment is Local Law permissible under written laws of lawful under written foreign country – applies only in laws/regulations of foreign cases of bribery of foreign public country official; otherwise a factor to be considered Source: VistaLaw
  25. 25. Global Regulation• U.S. Foreign Corrupt Practices Act (1977)• Inter-American Convention Against Corruption (1997)• OECD Anti-Bribery Convention (1999)• Canada Corruption of Foreign Public Officials Act (1999)• Council of Europe Convention on Corruption (2002-2003)• UN Convention Against Corruption (UNCAC) (2005)• Africa Union Convention on Preventing & Combating Corruption (2006)• UK Bribery Act (2010)• Russian Anti-Bribery Laws (amended – 2011)• Chinese Anti-Bribery Laws (amended – 2011)• U.S. SEC Dodd-Frank Extraction Issuers / Conflict Minerals (2012)
  26. 26. Transparency International (2010)“Anti-bribery due diligence is the research, investigation, assessmentand monitoring that the company will carry out on businessrelationships to ensure that it is associated with companies andpersonnel that will behave in a manner consistent with the company‟santi-bribery programme.” Source: The U.K. 2010 Bribery Act Adequate Procedures (Transparency International)