Anti-Bribery & Third Parties: Converting Recent ... Ethics & Compliance Virtual Conference...

Anti-Bribery & ThirdParties: Converting

Recent Developments Into Good Policy

Presented on

November 15, 2016

Presenters

Randy StephensVice President, Advisory Services, NAVEX Global

Matt KellyCEO, Radical Compliance

• Why Third Parties (3Ps) Matter?

• Guidance From Recent Events

• Standards for Anti-Bribery and Third Party Program Elements

• Critical 3P Due Diligence Practices

• Culture and Workforce Considerations

• Key Takeaways

• Q&A

Agenda

Why Third Parties Matter?

Third Party Risk: A Complex Network of Relationships

Source: Compliance and Ethics Leadership Council

SUPPLIERS IN

EMERGING

MARKETS

TEMPORARY

EMPLOYEES

SUBCONTRACTORS

INT’L

INTERMEDIARIES

DOMESTIC

AGENCIES

OFFSHORE

SERVICE

PROVIDERS

VENDORS

FOREIGN

DISTRIBUTORS

DEALERS /

RESELLERS

LOBBYISTS

AUDITORS

INT’L JOINT

VENTURES

PARTNERSHIPS

SUPPLIERS’

SUPPLIERS

CONTRACTORS

VENDORSDISTRIBUTORS

CONSULTANTS

VENTURES

SUPPLIERS

AGENTS

ORGANIZATION

A High Level of

Complexity

Organizations need to manage

divergent legal relationships

across a multitude of partners,

and gain visibility into

often-hidden risks.

The Use and Risks of Third Parties Is Increasing

‘Forty percent of compliance officers surveyed believe their anti-bribery and corruption

risks will increase this year. Nearly all said they were either as concerned (60 percent) or

more concerned (31 percent) about bribery and corruption risks than in prior years.’

‘The volume of third parties engaged by organizations remains high, but confidence in

identifying third party malfeasance is not strong. Fully one in four respondents were not

confident at all in their company’s current controls to identify third-party violations of

anti- corruption laws.’

2016 Anti-Bribery and Corruption Benchmarking Report: A collaboration between Kroll and Ethisphere

Why The Use of Third Parties by Business is Increasing?

• Economic conditions

− Company cutbacks

− Cost of third parties versus internal development

• Productivity

− Flexibility of workforce

• Globalization

− Companies need representatives all over the world

• Specialization

• Perceived limitation on liability

Recent Events Relating To Third Parties and Anti-Bribery

Announced by the Criminal Fraud Division in April 2016

Launch of the DOJ’s FCPA Pilot Program

• Participation could result in:

− 50 percent reduction in fines, compared with 25 percent reduction for cooperative companies that don’t self-disclose

− Elimination of the potential for the appointment of a compliance monitor

− Declination of prosecution

• One-year pilot is tentatively scheduled to expire in April 2017

Announced by the Criminal Fraud Division in April 2016

Launch of the DOJ’s FCPA Pilot Program

• Requirements for credit under the pilot program include:

- Voluntary self-disclosure and full cooperation

- Timely and appropriate remediation

- Compliance with ‘Yates Memo’ (Sept. 9, 2015) regarding investigations and culpability of individuals within the organization https://www.justice.gov/dag/file/769036/download

1) Corporations must provide all relevant facts about the individuals involved

2) Focus on individuals from the inception of the investigation

3) Criminal and civil attorneys in routine communication

4) No corporate resolution will provide protection from liability for any individuals

5) Corporate cases should not be resolved without a clear plan to resolve related individual cases

6) Evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay

More U.S. Resources Dedicated to Enforcement and Investigations of FCPA Violations

• Will use the resources to:

- Expand data analytics

- Increase staff for triage and pursuit of thousand of tips

• FBI's International Corruption Unit:

- Tripled in size (from 10 to 30)

- Three dedicated squads to combat and investigate foreign corruption

• Internal Revenue Service: Criminal

Investigations Unit

• Special SEC FCPA Fraud unit launched in

• The SEC’s FY 2017 budget requests 52

additional positions for enforcement

− SEC plans to use these additional resources to support its three core functions:

• Intelligence analysis

• Investigation

• Litigation

Greater Cooperation in Global Investigations

“In coordination with the SEC’s Office of International Affairs, the Division has expanded its

efforts to obtain evidence of potential wrongdoing from around the globe. Many of

Enforcement’s FCPA investigations rely on evidence obtained from foreign jurisdictions,

and often are conducted in parallel with foreign governments. Other areas, such as

financial reporting and accounting fraud, asset management, and insider trading, also

often rely on evidence obtained through foreign regulators.”

Andrew Ceresney,SEC Director Division of Enforcement

Heightened Enforcement & Publicity of Anti-Bribery Laws

• More U.S. resources dedicated to enforcement and investigations of

FCPA violations

• More aggressive enforcement overseas

− Increased cooperation with the U.S.

− More sanctions, settlements seen by U.K. Serious Fraud Office

− Sapin II anti-corruption law in France arriving this fall

− More anti-corruption adoption in Mexico, Argentina, elsewhere

Standards for Anti-Bribery and Third-Party Program Elements

Similar Guidance on Effective Practices

Many Third-Party Standards

• World Bank Group Integrity Compliance Guidelines (2010)

• OECD Good Practice Guidance on Internal Controls, Ethics and Compliance (2010)

• OECD Guidelines for Multinational Enterprises – Part VII on ‘Combating Bribery, Bribe Solicitation and Extortion’ (2011)

• Resource Guide to the U.S. Foreign Corrupt Practices Act (SEC and DOJ 2012)

• International Chamber of Commerce Anti-Corruption Third-Party Due Diligence Guide: A Guide for Small and Medium-Sized Business (2015)

• ISO 37001 (proposed for late 2016)

DOJ and SEC FCPA Guidance From 20121

Third-Party Due Diligence and Payments

• Regulators assess

− Risk-based

− Appropriateness: One size does not fit all

• Program expectations

− Understand the qualifications and associations of 3Ps

− Have an understanding of the business rationale for including 3Ps

− Include some form of ongoing monitoring of 3P relationships

− Communicate the organization’s commitment to ethical business practices

1 A Resource Guide to the U.S. Foreign Corrupt Practices Act

“…Risk-based due diligence is particularly important with third parties and will also be considered by the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in assessing the effectiveness of a company’s compliance program.

Although the degree of appropriate due diligence may vary based on industry, county, size and nature of the transaction , and historical relationships with the third party, some guiding principles always apply.”

Proposed Guidance Likely To Be Published Late 2016

ISO 37001 Standard for Bribery and Corruption

• ‘Reasonable and proportionate’ risk-based approach for developing

compliance programs

• Organizations instructed to consider the following factors:

− Size and structure of the organization

− Locations and sectors in which the organization operates or anticipates operating

− Nature, scale and complexity of the organization’s activities and operations

− Entities over which the organization has control

− The organization’s business associates

− Nature and the extent of interactions with public officials

− Applicable statutory, regulatory, contractual and professional obligations and duties

The consistent theme of all guidance

Due diligence

‘Due diligence is key to managing corruption risks associated with engaging third parties. It

is a process of investigating their background. This will be particularly necessary when one

considers retaining the services of an agent or other intermediary, who could be tempted

to pay bribes in order to obtain business and thereby garner more easily a commission.’

ICC ANTI-CORRUPTION THIRD-PARTY DUE DILIGENCE: A GUIDE FOR SMALL AND MEDIUM SIZE ENTERPRISES 2015

The Role of Third-Party Due Diligence

3P Due Diligence Practices

The State of Due Diligence

• NAVEX Global’s recent 3P Survey shows large number of organizations still don’t

perform 3P due diligence

Program Challenges and Solutions

• What are the programmatic challenges, and how do organizations

resolve them?

− How to establish clear, written policies on anti-bribery and third parties?

− Can the organization identify and manage the universe of 3Ps?

− How does the organization create a system to risk-rank third parties and set risk appetites?

− Who owns and operationalizes 3P due diligence?

− How to develop training and policy certifications?

− How to safeguard and document complete due diligence records?

Automating 3P Due Diligence Practices

IMPROVING EFFECTIVENESS THROUGH AUTOMATION

The Role of Automation

• Automating third party due diligence

• Populates risk profiles

• Organize and consolidate data on 3Ps for analysis

• Maximizes existing resources

− Redeploy to issues and red flags needing personal evaluation

• Consistency

− Applies correct policies, procedures for collecting data

• Escalation and investigation alerts, procedures

• Simplifies continuous monitoring

What to Consider When Automating 3P

• Risk management process

• Scope of third parties

• Types of risk to manage

• Focus

− Risk event

− Program management

• Design factors

• What can and can’t be automated

Organizations Rating Program Components ‘Good’ or ‘Very Good’

Culture and Workforce Issues

Culture Trumps Compliance

• Organizational challenges to anti-bribery and third-party compliance:

− Employee pressure to meet revenue and performance goals

• Culture clashes with 3Ps

− Training

− Compliance

− Reporting and record keeping

• Culture understanding or acceptance of third-party actions considered bribery

• Language barriers

Key Takeaways

Takeaways and Best Practices• Set clear policies on anti-bribery and corruption

• Communicate with and train employees and third parties

• Establish risk-based assessments of third parties

• Conduct reasonable due diligence of all third parties

• Continuously monitor third parties

• Document the process

• Update the processes and documentation as necessary and appropriate

• Automate when possible

• Recognize and address cultural differences

What’s Next on the Schedule?

Enjoy a 30-minute break! • See NAVEX Global solutions in action and live-chat with booth

staff in the Solutions Hall • Participate in topical forums in the Networking Lounge• Download assets in the Resource Library• Explore more about our Industry Partners

Don’t miss the next 3 sessions at 11:00am PT / 2:00pm ET• Data You Can Use in Your Program Today: Insights from Across

Our Benchmarking Reports• Harnessing the Power of Your Code of Conduct: Zap Life Back

Into Your Program• Keeping Pace With the Regulations That Affect Your Workforce

Anti-Bribery & Third Parties: Converting Recent ... Ethics & Compliance Virtual Conference...

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