anti-bribery & third parties: converting recent ... ethics & compliance virtual conference...
TRANSCRIPT
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 0
Anti-Bribery & ThirdParties: Converting
Recent Developments Into Good Policy
Presented on
November 15, 2016
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 12016 Ethics & Compliance Virtual Conference
Presenters
Randy StephensVice President, Advisory Services, NAVEX Global
Matt KellyCEO, Radical Compliance
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 22016 Ethics & Compliance Virtual Conference
• 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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 2
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 32016 Ethics & Compliance Virtual Conference
Why Third Parties Matter?
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 42016 Ethics & Compliance Virtual Conference
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
DATA
VENDORS
FOREIGN
DISTRIBUTORS
DEALERS /
RESELLERS
LOBBYISTS
AUDITORS
INT’L JOINT
VENTURES
PARTNERSHIPS
SUPPLIERS’
SUPPLIERS
CONTRACTORS
VENDORSDISTRIBUTORS
CONSULTANTS
JOINT
VENTURES
SUPPLIERS
AGENTS
YOUR
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.
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 52016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 62016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 72016 Ethics & Compliance Virtual Conference
Recent Events Relating To Third Parties and Anti-Bribery
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 82016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 92016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 102016 Ethics & Compliance Virtual Conference
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
2010
• 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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 112016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 122016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 132016 Ethics & Compliance Virtual Conference
Standards for Anti-Bribery and Third-Party Program Elements
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 142016 Ethics & Compliance Virtual Conference
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)
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 152016 Ethics & Compliance Virtual Conference
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.”
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 162016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 172016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 182016 Ethics & Compliance Virtual Conference
The Role of Third-Party Due Diligence
3P Due Diligence Practices
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 192016 Ethics & Compliance Virtual Conference
The State of Due Diligence
• NAVEX Global’s recent 3P Survey shows large number of organizations still don’t
perform 3P due diligence
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 202016 Ethics & Compliance Virtual Conference
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?
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 212016 Ethics & Compliance Virtual Conference
Automating 3P Due Diligence Practices
IMPROVING EFFECTIVENESS THROUGH AUTOMATION
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 222016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 232016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 242016 Ethics & Compliance Virtual Conference
Organizations Rating Program Components ‘Good’ or ‘Very Good’
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 252016 Ethics & Compliance Virtual Conference
Culture and Workforce Issues
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 262016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 272016 Ethics & Compliance Virtual Conference
Key Takeaways
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 282016 Ethics & Compliance Virtual Conference
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
Copyright © 2016 NAVEX Global, Inc. All Rights Reserved. | Page 292016 Ethics & Compliance Virtual Conference
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