Fcpa blog tour bogota v3


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Fcpa blog tour bogota v3

  1. 1.
  2. 2. High-VelocityEnforcement<br />
  3. 3. DOJ / SEC Matters Initiated | 2002 - 2010<br />
  4. 4. Total Criminal and Civil Penalties<br />Imposed on Corporations | 2002 - 2010<br />
  5. 5. WhatHas Not Changed?<br />
  6. 6. Photo © Edgar de Evia<br />WhatHasChanged?<br />
  7. 7.
  8. 8. Total Criminal and Civil Penalties<br />Imposed on Corporations | 2002 - 2010<br />
  9. 9. Current Enforcement Picture<br />Legal Elements of the Offense<br />UK Bribery Act Effective Date<br />Designing and Implementing a Compliance Program<br />Third Party Agents and Due Diligence<br />Overview<br />9<br />9<br />
  10. 10. 10<br />CurrentEnforcementPicture<br />
  11. 11. FCPA Global Enforcement Trends<br />11<br />Corporate mega fines fueled by voluntary disclosure process.<br />DOJ has dedicated additional prosecutors to FCPA cases.<br />FBI has dedicated FCPA squad.<br />Obama administration is continuing focus on FCPA prosecutions.<br />FBI is using aggressive investigative tactics.<br />DOJ is increasing use of industry-wide investigations.<br />
  12. 12. FCPA Enforcement in Latin and Central America<br />12<br />US Department of Justice is increasing prosecution of non-US corporations and individuals in United States Courts.<br />In 2010, 70 percent of the companies prosecuted for criminal FCPA violations were foreign companies<br />Many of the criminal cases involve corruption in Latin and Central America, particularly Brazil, Mexico, Venezuela, and Argentina.<br />US Department of Justice is increasing coordination with Latin and Central America enforcement agencies<br />
  13. 13. Increase in FCPA Enforcement Actions<br />13<br />2010 witnessed an 85% increase in FCPA enforcement actions over 2009, which itself was a record year.<br />60<br />48<br />50<br />40<br />DOJ<br />30<br />26<br />26<br />SEC<br />20<br />20<br />18<br />20<br />14<br />13<br />8<br />10<br />7<br />7<br />5<br />3<br />2<br />0<br />2004<br />2005<br />2006<br />2007<br />2008<br />2009<br />2010<br />
  14. 14. Blockbuster FCPA Settlements<br />14<br />* Eight of the top ten monetary settlements in FCPA history were reached in 2010.<br />$900 <br />2010<br />Siemens<br />$800 <br />2009<br />$700 <br />2008<br />KBR/Halliburton<br />$600 <br />$500 <br />BAE Systems<br />ENI/Snamprogetti<br />$800 <br />$400 <br />Technip<br />$300 <br />$579 <br />Daimler<br />$400 <br />$200 <br />Alcatel-Lucent<br />$365 <br />$338 <br />Panalpina<br />ABB<br />$100 <br />$185 <br />Pride International<br />$137 <br />$82 <br />$58 <br />$52 <br />2010 Total*:<br />$1617<br />$0 <br />
  15. 15. David Kay,American Rice, Inc.<br />37 months<br />John Warwick,Ports EngineeringConsultants Corporation<br />37 months<br />Robert Antoine,Haiti Telco<br />48 months<br />Juan Diaz,Third party consultantto Haiti Telco<br />57 months<br />Douglas Murphy,American Rice, Inc.<br />63 months<br />Albert Jack Stanley,KBR<br />84 months<br />Charles Paul Edward Jumet,Ports EngineeringConsultants Corporation<br />87 months<br />0<br />10<br />20<br />30<br />40<br />50<br />60<br />70<br />80<br />90<br />100<br />Most Severe Jail Sentences for FCPA Violations<br />15<br />
  16. 16. Industry-Wide Investigations<br />16<br /> Oil and Oil-Services Industry – Panalpina Investigation – Vetco settled FCPA case in 2007 based on illegal bribes made through Panalpina. Following settlement, DOJ issued at least 11 letters to oil and oil services companies, requesting information about their dealings with Panalpina. On Nov. 4, 2010, DOJ and the SEC announced settled FCPA enforcement actions against Panalpina plus six of these oil and oil services firms (most of which were Panalpina customers) totaling $236.5 million in disgorgement, fines, and penalties. <br />
  17. 17. Industry-Wide Investigations<br />17<br />Medical Device and Pharmaceutical Industry<br />E.g., Biomet, DePuy, Diagnostic Products, Medtronic, Micrus, Smith & Nephew, Stryker, Syncor, Wright Medical, Zimmer Holdings<br />E.g., Eli Lilly, Merck, Astra Zeneca, Bristol-Myers Squibb, GlaxoSmithKline, SciClone<br />Military and Law Enforcement Products Industry<br />E.g., SHOT Show Sting targets, Armor Holdings, DynCorp, Smith & Wesson, Allied Defense, Blackwater/Xe<br />Telecommunications Industry<br /><ul><li>E.g., Alcatel-Lucent, Haiti Teleco, ITXC, Latin Node, Magyar Telekom, Siemens entities, UTStarcom, Veraz</li></ul>SEC recently launched industry-wide investigation against global financial companies focusing on dealings with sovereign wealth funds<br />
  18. 18. 18<br />Corruption in Latin America <br />
  19. 19. Latin America Economic Trends<br />19<br />Countries in Latin America, such as Brazil, Mexico, Colombia, Peru, Chile and others, are attracting global investment because of significant economic opportunities<br />The region is viewed as attractive for foreign investment<br />At the same time, governments are increasing anti-corruption and other enforcement programs to reduce corruption and anti-competitive activities. <br />
  20. 20. Corruption Risks in Latin America <br />20<br /> CORRUPTION PERCEPTIONS INDEX 2009<br />
  21. 21. Global Perception of Latin America Corruption <br />21<br />Transparency International has reported that 22 of the 32 countries in Latin America are perceived to suffer from high levels of corruption<br />This problem of corruption goes hand in hand with the high level of inequity that has not been overcome by the economic growth experienced by the region in the last few years. <br />Weak government institutions, low levels of governance and the influence of particular interests negatively affect efforts to promote equitable and sustainable human development.<br />
  22. 22. International Efforts to Reduce Corruption<br />22<br />Nearly all Organization of American States (OAS) member states have signed and ratified two key legal instruments that provide a foundation for preventing corruption: the Inter-American Convention against Corruption and the UN Convention against Corruption. <br />Most signatory countries have joined the follow-up mechanism of the Inter-American Convention, a fundamental step for the treaty to become truly effective. <br />Member states have generally been slow to implement meaningful reforms and enforcement program<br />
  23. 23. Level of Anti-Corruption Enforcement<br />23<br /><ul><li>Improvement of Anti-Corruption Laws Applicable to Companies
  24. 24. International pressure to reform laws to comply with international treaty obligations
  25. 25. Slowly, countries have been increasing enforcement efforts with new tools provided by new laws
  26. 26. Dissemination of Compliance Culture among Companies
  27. 27. The Level of Enforcement is Likely to Increase, but at a Slow Pace</li></li></ul><li>Elements of theOffense<br />24<br />
  28. 28. FCPA was first enacted in 1977 but it has acquired new vigor in the post-SOX environment. <br />The FCPA consists of civil and criminal penalties<br />The FCPA has two parts: <br />The anti-bribery provisions<br />The books and records/internal controls provisions (applies to "U.S. issuers") <br />FCPA Violations<br />
  29. 29. Who is liable under the FCPA?<br />26<br />Domestic<br /><ul><li>All US “issuers” and private companies (“domestic concerns”)
  30. 30. Any US corporation or national or any foreign bribery-related conduct
  31. 31. US citizens or foreign nationals operating in the US or using instrumentalities</li></ul>Foreign<br /><ul><li>Foreign corporations subject to SEC regulation (e.g., via ADRs) and using instrumentalities
  32. 32. All foreign persons when in US territory, whether or not they use instrumentalities of interstate commerce</li></ul>Includes directors, officers, employees, and agents of entities subject to the statute<br />
  33. 33. Elements of an FCPA Violation<br />27<br />Accounting / Recordkeeping Provisions:<br />Under the books and records provisions, issuers must keep accurate books and records and maintain adequate internal controls. <br />
  34. 34. Anti-Bribery Provisions<br />28<br />“It is a crime for any U.S. Person or Company to directly or indirectly pay or promise money or anything of value to any foreign official to obtain or retain business or any other improper advantage.”<br />
  35. 35. Money or Anything of Value<br />Cash<br />Gifts (such as expensive meals, wines, merchandizing with the Company logo) <br />Services<br />Travel expenses <br />Business Opportunities; Advantages; Changes in law.<br />Bribe need not to be paid ― the promise of a bribe is also illegal.<br />The terms “obtaining or retaining business” or any “improper advantage” are construed very broadly.<br />
  36. 36. Foreign Official<br />Government officials and employees<br />Political party candidates and employees<br />Employees of government controlled companies or instrumentalities<br />Employees of public international organizations<br />Any others in an official capacity (including honorary positions)<br />
  37. 37. State Owned Enterprises<br />31<br /><ul><li>A “foreign official” includes any officer or employee of a non-U.S. government, and any officer or employee of “any department, agency, or instrumentality” of a non-U.S. government.
  38. 38. FCPA applies to interactions between businesses and state-owned companies owned by foreign governments (e.g. Ecopetrol in Colombia)
  39. 39. To determine whether employees of a state-owned enterprise are “foreign officials”, SEC and DOJ consider the percentage of government ownership in the enterprise and the amount of control the non-U.S. government exerts over the entity in question. </li></li></ul><li>Knowledge and Intent<br />It is unlawful to make a payment to any third party while “knowing” that all or a portion of such payment will go directly or indirectly to a foreign official.<br />“Knowledge” is broader than “actual knowledge,” and includes “conscious disregard” and “willful ignorance.”<br />“Firm belief” that an illegal payment is “substantially certain to occur.”<br />Any third party – Agents; consultants; contractors; representatives; partners in a joint venture; subsidiaries<br /> KBR (2009)<br />
  40. 40. Civil Penalties<br />33<br /><ul><li>In the civil context, the SEC and DOJ can impose a $10,000 fine per violation upon individuals and companies.
  41. 41. The SEC may also impose further civil penalties ranging between $7,500 to $150,000 upon individuals and $75,000 to $725,000 upon companies.
  42. 42. Alternatively, the SEC may impose a civil penalty equal to the gross pecuniary gain to an individual or company and equitable relief, such as disgorgement of profits.</li></li></ul><li>Criminal Penalties<br />34<br /><ul><li>For companies, criminal violations can result in:
  43. 43. $2 million fine for an anti-bribery violation; and
  44. 44. $25 million fine for a books and records violation.
  45. 45. Individuals face up to:
  46. 46. 5 years in jail with a maximum $250,000 fine for an anti-bribery violation; and
  47. 47. up to 20 years in jail with a maximum $5 million fine for a books and records violation.
  48. 48. Under a federal alternative fine provision, companies and individuals may be fined up to twice the benefit sought or received.</li></li></ul><li>Exceptions and Affirmative Defenses<br />It is NOT a defense that “everyone else is doing it.”<br />This, unfortunately, can give a sense of false security, but will provide absolutely no protection in the event the underlying activities are not in compliance.<br />Use thoughtful common sense, and don’t be lulled into thinking it’s OK because “That’s the way XX does it” or “Its always been done that way here in XXX.”<br />
  49. 49. Affirmative Defenses:<br />36<br />Reasonable Bona Fide Marketing and Promotion Payments and Payments Authorized Under Written Language of the Foreign County<br /><ul><li>Reasonable and bona fide expenditures, such as travel and lodging expenses directly related to (A) the promotion, demonstration, or explanation of products or services, or (B) the execution or performance of a contract with a foreign government or performances of a contract with a foreign government or agency thereof.
  50. 50. Travel expenses to United States (FCPA Op. Proc. Rel. 07-01)
  51. 51. Product samples for testing (FCPA Op. Proc. Rel. 09-01)
  52. 52. Journalist stipends (FCPA Op. Proc. Rel. 08-03)
  53. 53. Trips to tourist destinations (US v. Metcalf & Eddy, Inc)</li></li></ul><li>UTStarcom Incorporated (2009)<br />37<br /><ul><li>Arranged and paid employees of Chinese state-owned telecommunications companies to travel to popular tourist destinations in the United States, including Hawaii, Las Vegas and New York City, and making improper payments to consultants in China and Mongolia while knowing that they would be used to pay bribes to foreign government officials.
  54. 54. UTSI voluntarily disclosed the violations, and agreed to pay a $1.5 million penalty to the DOJ, plus $1.5 million to the SEC.</li></li></ul><li>Exception:<br />Facilitating or Expediting Payments<br />Small payments for the purpose of expediting or securing the performance of a routine AND non-discretionary governmental action (something for which the Payor is already entitled).<br />Facilitating payments need to be properly recorded and identified as such. <br />Facilitating payments are usually illegal under local laws.<br />Vetco Gray – average $5,550 (378 payments in 2 years = $2.1M)<br />Current trend/Best practices: limit facilitating payments to life threatening situations or eliminate completely.<br />
  55. 55. Mergers and Acquisitions:Buying an FCPA Violation<br />39<br /><ul><li>Acquiring company can buy liability for FCPA violations which occurred prior to the acquisition unless the acquiring company conducts a “due diligence” review.
  56. 56. Due diligence review will identify the past FCPA violations and the target might need to make a disclosure to the Justice Department.
  57. 57. Companies will have to address past FCPA violations: change in price, structure, additional warranties and indemnifications; deal could terminate or be delayed.
  58. 58. Similar procedure occurs in joint ventures.</li></li></ul><li>UK Bribery Act:Effective this Year<br />40<br />
  59. 59. UK Bribery Act Basics<br />41<br /><ul><li>Two general offenses for bribing or taking a bribe
  60. 60. A discrete offense of bribing a foreign public official
  61. 61. A new corporate offense for failure to prevent bribery</li></li></ul><li>UK Bribery Act:Corporation’s Failure to Prevent Bribery<br />42<br /><ul><li>Person associatedwith a commercial organization bribes another:</li></ul>The term “associated persons” includes any person who “performs services for or on behalf of the relevant commercial organisation” – and may include subsidiaries, employees, agents, JV partners, consortium members.<br /><ul><li>Defense to liability if the commercial organization has “adequate procedures” to prevent such bribery from occurring:</li></ul>A “commercial organization” includes UK entities and those companies and partnerships incorporated or formed overseas that “carry on a business or part of a business in the UK.” <br /><ul><li>The bribery may occur anywhere in the world – a conviction for bribery in the local jurisdiction is not required.</li></li></ul><li>UK Bribery Act: Delay in Implementation<br />43<br /><ul><li>UK Bribery Act effective date of April 2011 recently delayed for second time until guidance is issued (3-month lag between guidance and effective date).
  62. 62. UK government is conducting “review” of law because of UK business complaints.
  63. 63. UK prosecutors have stated they intend to aggressively enforce the Act against global companies “doing business” in UK.
  64. 64. Guidance on “adequate procedures” defense and prosecution policies are supposed to be issued three months before new effective date.</li></li></ul><li>FCPA & Bribery Act<br />Similarities:<br />FCPA v. Bribery Act: Comparison<br />44<br /> payment of money or anything of value; Bribery Act: “financial or other advantage”<br />Covered:<br />third parties (agents, consultants and distributors)and have broad extraterritorial reach <br />BroadlyApplied to:<br />FCPA<br />Bribery Act<br />Distinctions:<br />public and private<br />Persons:<br />bribery of foreign official<br />“corrupt intent”<br />Intent:<br />“intention to influence”<br />corporate offense for failing to prevent bribery; affirmative defense: had “adequate procedures”<br />facilitation exception for “grease payment”, affirmative defenses for reasonable bona fide expenses or legal under written local law.<br />Exceptions and Defenses:<br />
  65. 65. The Risks ofFCPA and UK Bribery Act Enforcement Action<br />45<br /><ul><li>DOJ intends to increase “joint” enforcement actions; will coordinate information sharing and enforcement actions.
  66. 66. No company wants to be the “guinea pig” for initial UK Bribery Act enforcement actions.
  67. 67. Companies need to review and revise FCPA compliance programs to address Bribery Act.
  68. 68. Enforcement and interpretation of Bribery Act will be dynamic and require companies to keep up with requirements.</li></li></ul><li>Designing andImplementing anAnti-CorruptionCompliance Program<br />46<br />
  69. 69. FCPA Compliance Policy and Tone at the Top. The Company should develop and promulgate a clearly articulated and visible corporate policy against violations of the FCPA and a strong commitment from senior management.<br />Strong policy statement should be adopted by the Board.<br />Board and senior management should be required to make commitment to anti-corruption compliance.<br />Compliance commitment must be demonstrated by actions.<br />Basic Elements of FCPA Compliance Program<br />47<br />
  70. 70. The Company should develop and promulgate compliance standards and procedures which shall include policies governing:<br /> gifts;<br /> hospitality, entertainment, and expenses;<br /> customer travel;<br /> political contributions;<br /> charitable donations and sponsorships;<br /> facilitation payments; and<br /> solicitation and extortion.<br />Anti-Corruption Policies and Procedures<br />48<br />
  71. 71. The Company should develop its compliance standards and procedures using a risk assessment.<br />The risk assessment should be a formal and documented review which examines:<br /><ul><li>the nature and extent of corruption in each country in which the company does business relying on public and internal sources of information (Transparency International, OECD, etc);
  72. 72. the extent of government interactions and the persons in the company responsible for such interactions; and
  73. 73. the use of third-party agents, consultants in each country.</li></ul>Use of Risk Assessment<br />49<br />
  74. 74. Annual Review. The Company should review its anti-corruption compliance standards and procedures, on no less than an annual basis to ensure they are working.<br />Ongoing Assessment. The Company should conduct ongoing assessments of its FCPA compliance program. <br /><ul><li>During the year, Spot checks and quarterly audits of the compliance program should be conducted.
  75. 75. Dynamic process for modifying the compliance program should be made as new information is learned.</li></ul>Ongoing Assessment<br />50<br />
  76. 76. The Company should assign responsibility to one or more senior corporate executives of the Company for the implementation and oversight of its Company's anti-corruption policies.<br />Company should designate a compliance officer in senior management and provide adequate resources to compliance office.<br />Compliance officer should be separate from General Counsel and internal auditing functions.<br />Senior Management Oversight and Reporting<br />51<br />
  77. 77. The Company should ensure that it has a system of internal controls for the purpose of foreign bribery or concealing bribery.<br />Internal controls are key to identifying and preventing bribery.<br />Internal audits must be supplemented with forensic audits since internal audits hinge on “materiality” and may not catch bribery schemes.<br />Every expenditure of money where bribery may occur should have specific controls and management procedures to prevent bribery (e.g. gifts and hospitality, review form for certain amounts and review by compliance and legal offices).<br />Internal Controls<br />52<br />
  78. 78. FCPA training which shall include: (a) training for all directors and officers, and, where necessary and appropriate, employees, agents, and business partners; and (b) annual certifications, certifying compliance with the training requirements.<br />Training programs should be tailored to different audiences and risks. Offices that have interactions (sales and regulatory) with foreign officials should have different program from senior management.<br />Legal and compliance staff throughout organization should have separate training program. <br />Training<br />53<br />
  79. 79. The Company should establish or maintain an effective system for<br />Providing Guidance; <br />Internal Reporting; and <br />Response to such internal reporting.<br />Internet-based guidance and reporting systems <br />Hot-line reporting system for employees to make anonymous reports<br />Detailed procedure for review and response to internet and hot-line reports<br />Ongoing Advice and Internal Reporting<br />54<br />
  80. 80. The Company should have appropriate disciplinary procedures to address violations of the anti-corruption laws and the Company's anti-corruption compliance code, policies, and procedures.<br />Specific disciplinary procedure should be adopted for employees who commit corruption offense.<br />No tolerance policy should be adopted and enforced.<br />Discipline<br />55<br />
  81. 81. Foreign Business Representatives. The Company shall:<br />Perform appropriate due diligence on foreign business representatives; <br />Inform foreign business partners of its FCPA compliance program; <br />Seek reciprocal written anti-corruption and anti-bribery commitments from its foreign business partners.<br />Compliance Terms and Conditions. The Company should include FCPA terms and conditions in its contracts with foreign business partners.<br />Foreign Business<br />56<br />
  82. 82. Third Party Agentsand Due Diligence<br />57<br />
  83. 83. Due Diligence Screening of Third Party Agents<br />58<br />Screen the Initial Terms of Relationship with Third Party:<br />Review the creation of relationship, or any subsequent changes to responsibilities or countries where agent operates.<br />Establish procedure for centralized review of contracts to ensure consistent standards.<br />Depending on size of company, should establish review at highest level within the company.<br />Develop a Different Screening Procedures for Review of Individual Transactions.<br />
  84. 84. Guidelines for Due Diligence Process <br />59<br />Do not over-standardize procedure.<br />Need to tailor to individual circumstances in each country based on risk.<br />Need to conduct background check to determine (5-10 year history).<br />Existence of ties to foreign government officials and employees.<br />Existence of any pending or prior investigations of bribery or other criminal conduct or civil violations.<br />Create written package and record of review and approval process to demonstrate compliance.<br />
  85. 85. Basic Issues to Cover<br />60<br />Existence of Relationships with Foreign Government Officials<br />Purchasing Authority<br />Licensing or other regulatory authorities<br />Prior History of Bribery and other Crimes<br />Nature of Services, Compensation and Payment Method<br />Written contract<br />Representations and warranties on compliance<br />Right to inspect and audit third-party books<br />Right to terminate contract if believe violation has or will occur<br />
  86. 86. Red Flags<br />61<br />Due diligence review of relationship or individual transactions must include red flags which require additional investigation before approval.<br />Red flags are facts and circumstances that raise serious questions of an FCPA violation. <br />Companies which ignore red flags run the risk of FCPA enforcement actions, criminal fines and the need for costly remedial measures.  <br />A red flag only means that further scrutiny is warranted.<br />
  87. 87. Red Flag Procedure<br />62<br />Red flags should be tailored to each country and the relevant risks. <br />Red flags should be categorized based on risk factors (e.g. some are significant and require more investigation than others).<br />
  88. 88. A few thoughts - The perfect FCPA program<br />Elements of a program that stands up to the Justice Department: <br />The settlement in late 2010 between RAE Industries and the Justice Department and SEC included a detailed outline of “best practices” for a forward-looking FCPA compliance program.  <br /> Code of Conduct, <br /> Tone at the top, <br /> Anti-Corruption Policies and Procedures, <br /> Use of Risk Assessment, <br /> Annual Review, <br /> Oversight and Reporting, <br /> Internal Controls, <br /> Training, <br /> Ongoing Advice and Guidance, <br /> Discipline, <br />Use of Agents and Business Partners, <br /> Contractual Terms And Conditions, <br /> Ongoing Assessment<br />75% of the 1.8 Billion related to failure in the Due Diligence process<br />
  89. 89. A few thoughts - The perfect FCPA program<br />Elements of a program that stands up to the Justice Department: <br />Bullet point 11:<br />Exercise appropriate due diligence and<br />implement compliance requirements to ensure<br />proper oversight of agents and business<br />partners. These requirements should include:<br /> performing risk-based due diligence for “the<br />hiring and appropriate and regular oversight<br />of agents and business partners”;<br /> informing agents and business partners of<br />the company’s commitment to follow the<br />laws against foreign bribery and of the<br />standards, procedures and other measures<br />the company has in place to detect and<br />prevent bribery; and<br /> seeking a reciprocal commitment from<br />agents and business partners.<br />Bullet point 12:<br />Include standard provisions in agreements and<br />contracts with agents and business partners<br />that are designed to prevent violations of the<br />anti-corruption laws. These provisions might<br />include, depending on the circumstances:<br /> anti-corruption representations and<br />undertakings;<br /> rights for the company to conduct audits of<br />the books and records of the agent of<br />business partner;<br /> rights for the company to terminate its<br />relationship with an agent or business<br />partner as a result of any breach of anticorruption laws. <br /> Conduct periodic review and testing of thetionship with an agent or business<br />partner as a result of any breach of anticorruption laws<br />
  90. 90. How do you recognize a Red Flag?<br />Definition: a flag that serves as a warning signal<br />“Existence of Relationships with Foreign Government Officials”<br />-Gather the name of the owners/executives of the 3rd Parties<br />-Compare against a reputable database of Foreign Officials – Screening<br />“Prior History of Bribery and other Crimes”<br />-On average Google finds 500 new articles on “corruption investigation”<br />-Company or Person with history of fraud or money laundering may be a precursor to corruption risk <br />65<br />
  91. 91. Who they are<br />Who “they” are – Identity Verification<br /><ul><li>They – any agent, distributor, M & A </li></ul> partner, client and vendor (TiPS)<br /><ul><li>Verification confirms they are “who we thought they were”
  92. 92. Works well in 10 Countries, other places…
  93. 93. “Who they are” is just half the pie</li></ul>William Kelleher - Reseller in Ireland<br />CarraignabhFear<br />Cork City, Ireland <br />DOB 1/15/1972<br />66<br />
  94. 94. Who they aren’t…<br />Due diligence confirms <br />Who they aren’t - Negative Database<br /><ul><li>3rd Party is not affiliated with a foreign government, SOE, purchasing decision for a government entity
  95. 95. 3rd party is not being investigated for corruption (or fraud, or money laundering, etc.)</li></ul>William Kelleher Billy Kelleher<br />President, XYZ FO Mstr. of State ,Trade and Commerce<br />CarraignabhFear 1st Street<br />Cork City, Ireland  Dublin, Ireland <br />DOB 1/15/1960 DOB 1/20/1968<br />67<br />
  96. 96. Unsystematic Due Diligence<br />Systematic Due Diligence<br />High Risk<br />Agents<br />Partners<br />TIPs in high risk jurisdiction<br />Medium<br />Distributors<br />Resellers<br />Low Risk<br />Suppliers<br />Vendors<br />High Risk<br />Medium risk<br />Low Risk<br />
  97. 97. Building Blocks of Systematic Due Diligence<br />Take out the Garbage - Validate your information, gather critical data such as owners Details<br />Knock down the silos – create a central database that is consistent for all 3rd parties <br />Screen – Prove who they aren’t, investigate<br />Corruption happens every day, so should your due diligence<br />Document, Document, Document<br />69<br />
  98. 98. GIGO - “Check the Box” is not a sound policy<br />Company: ABC Corporation<br />Location: Hong Kong<br />Owner: 唐老鸭<br />TLI – Too Little Information<br />You can’t prove “who they aren’t” without the proper information:<br />WorldCompliance has 140 Foreign Officials or their contacts containing “Juan and Ramirez” <br />Without a UI, Unique Identifier, you can waste valuable time and money proving who they are<br />70<br />
  99. 99. Building Blocks of Systematic Due Diligence<br />Take out the Garbage - Validate your information, gather critical data such as owners Details<br />Knock down the silos – create a central database that is consistent for all 3rd parties <br />Screen – Prove who they aren’t, investigate<br />Corruption happens every day, so should your due diligence<br />Document, Document, Document<br />71<br />
  100. 100. Decentralized Vetting Process<br />Deconflicting<br /><ul><li>First Line of defense
  101. 101. Important mechanism of controls
  102. 102. Only part of your program that protects you continuously</li></ul>72<br />
  103. 103. Decentralized Vetting Process<br />Deconflicting<br /><ul><li>First Line of defense
  104. 104. Important mechanism of controls
  105. 105. Only part of your program that protects you continuously</li></ul>?<br />73<br />
  106. 106. Building Blocks of Systematic Due Diligence<br />Take out the Garbage - Validate your information, gather critical data such as owners Details<br />Knock down the silos – create a central database that is consistent for all 3rd parties <br />Screen – Prove who they aren’t, investigate<br />Corruption happens every day, so should your due diligence<br />Document, Document, Document<br />74<br />
  107. 107. Who they aren’t<br />1 of a million documented foreign officials or <br />their contacts<br />1 of tens of thousand of persons investigated for corruption<br />1 of thousands known corrupt foreign officials<br />
  108. 108. Building Blocks of Systematic Due Diligence<br />Take out the Garbage - Validate your information, gather critical data such as owners Details<br />Knock down the silos – create a central database that is consistent for all 3rd parties <br />Screen – Prove who they aren’t, investigate<br />Corruption happens every day, so should your due diligence<br />Document, Document, Document<br />76<br />
  109. 109. Building Blocks of Systematic Due Diligence<br />Carl Ahlgrimm – Mayor of small town in Germany – Appointed 2010<br />NereuAlves De Moura – Member of Chamber of Deputies, newly elected<br />Mohammed Abul-Enein – Chairman of Group Cleopatra, largest producer in the world of Ceramic Tiles, founded 1983 <br />77<br />
  110. 110. Due diligence is continuous<br />78<br />
  111. 111. Document your process and decisions<br />Stopped using XYZ Company in Romania as of March 3, 2011 for logistics as owner was brother of Mr. Teselena<br />79<br />
  112. 112. Systematic Due Diligence <br />Your Checklist should used to gather information, not checking boxes <br />Not a one time check <br />There is no DOJ “anti corruption” certificate, yet<br />Training is a component of your program, not the program<br />Is a process that is continuous, and covers all TiPs not just the top of the pyramid<br />80<br />
  113. 113. Metawatch License<br />(Initial Due Diligence/Investigations)<br /><ul><li>Manual Search
  114. 114. Multilingual Web Interface
  115. 115. Multilingual Name Matching</li></ul>Zyng monitoring application<br />(Ongoing Due Diligence)<br /><ul><li>Enables continuous screening of all relationships
  116. 116. Advanced Name Matching intelligence
  117. 117. Advanced reporting</li></ul>FCPAForce (Systematic Due Diligence)<br /><ul><li>Wco verifies critical information for client
  118. 118. No IT involvement
  119. 119. Wcodeconflicts
  120. 120. Due diligence is completely hands </li></ul>free<br />Solutions<br />WorldCompliance<br />
  121. 121. Third Element of Third Party Due Diligence<br />WorldCompliance<br />Luis Fernando Jamarillo<br />
  122. 122. Third Element of Third Party Due Diligence<br />WorldCompliance<br />
  123. 123. Fourth Element of Third Party Due Diligence<br />WorldCompliance<br />
  124. 124. Ongoing Due Diligence: periodic scanning of your business contacts<br />World Compliance Global Database GSL, GPL, GEL, GAL,GIL<br />WorldCompliance<br />Match Report based on the following:<br /><ul><li>Name
  125. 125. Dates of Birth
  126. 126. Passport/National ID Number
  127. 127. Country</li></ul>Zyng Name Matching Tool<br />Your database of current relationships<br />Vendors/Agents<br />Distributors<br />Customers <br />M&A Partners<br />
  128. 128. ZYNG Match Report<br />WorldCompliance<br />
  129. 129. ZYNG Match Report<br />WorldCompliance<br />
  130. 130. Deciding who is a true match or no match has never been easier<br />WorldCompliance<br />
  131. 131. Monitoring – risk profiles for relationships change over time<br />Vendors/<br />Agents<br />World Compliance Global Database GSL, GPL, GEL, GAL,GIL<br />Employees<br />Alerts<br />Customers <br />Partners<br />Name Matching Software<br />Name Matching Report<br />
  132. 132. FCPA Force A New Solutions <br /><ul><li>Gather and clean your information on your Tips
  133. 133. Create central registration site for your company
  134. 134. Screen against the largest database of FOS, bad guys
  135. 135. Monitor your TiPS and alert you to new risk
  136. 136. Create an audit trail that tracks all decisions, and documents</li></ul>90<br />
  137. 137. Review <br />WorldCompliance<br />With the FCPA, the “long arm” of the US Justice System just got longer…..<br />Due diligence is the cornerstone of your Anti Corruption and Anti Fraud programs<br />WorldCompliance offers the largest database of Foreign Officials, the largest and most comprehensive database of high risk persons = the most protection<br />With FCPA Force, we can offer all 4 pieces to providing complete protection for your organization in Latin Am and overseas<br />
  138. 138. Contact<br />Ryan Morgan Pablo Ferrante<br />Direct: +1 305.579.2298 Ext. 262 Direct: +1-713-238-2662<br />RyanM@worldcompliance.com Cell: +1-713-240-5202 <br /> pferrante@mayerbrown.com<br />Richard L. Cassin<br />info@cassinlaw.comBruno Werneck<br /> Direct: +55-11-2504-4245<br />Michael Volkov Cell: +55-11-9104-1185<br />Direct: (202) 263-3288 bwerneck@mayerbrown.com<br />Cell: (240) 505-1992<br />mvolkov@mayerbrown.com<br />