aml fcpa policies

7/31/2019 Aml Fcpa Policies

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The Dbriefs Transactions & Business Events series presents:

AML and FCPA:

The Intersection of MoneyLaundering and International

Corruption

and Litigation

Robert M. Axelrod, Director, Forensic & Dispute Services, Deloitte Financial Advisory Services LLP

Christopher Georgiou, Partner, Forensic & Dispute Services, Deloitte Financial Advisory Services LLP

David Williams, Chief Executive Officer, Deloitte Financial Advisory Services LLP

May 12, 2010


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Copyright 2010 Deloitte Development LLC. All rights reserved.

Poll Question #1

What industry best describes your company?

Financial Services

Technology, Media and Telecommunications

Retail, Consumer Products or Manufacturing

Life Sciences and Healthcare

Real Estate

Other/NA/Dont know


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Global Focus on Identifying Financial Crimesand Pursuing EnforcementRecent Government and Regulatory Actions or Policy Statements

The Pittsburgh Summit The Leaders statement at the G-20 meeting emphasized(paragraph 15)We are committed to maintain the momentum in dealing with tax havens,money laundering, proceeds of corruption, terrorist financing, and prudential standards.

FINRA Letter to Executive Representatives This letter, signed by three ExVPs frommarket and member regulation, said in pertinent part: This [letter] was written to highlight

new and existing areas of particular significance to FINRAs examination program for2009. We hope you will use [it] to gain valuable insight into some key FINRA examination

topics and to help you assess your firms compliance and supervisory programs.

Recently passed UK Bribery Act of 2010 passed April 8th 2010 covers:

Giving or receiving of a bribe, whether it is given to or received from a private or public official;

Requesting, agreeing to receive or accepting a bribe;

Bribery of a foreign public official (consistent with the FCPA and OECD Convention, with foreignofficial broadly defined); and

Failure by a commercial organization to prevent bribery.

Increased Enforcement U.S., U.K., Germany, China, others bringing significant enforcementactions.


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Global Focus on Identifying Financial Crimesand Pursuing Enforcement (cont.)

Robert Khuzami, Director, Division of Enforcement, SEC 8/5/2009 Wherein he announces that the SEC has a newly established FCPA Unit and that

this Unit:

will focus on new and proactive approaches to identifying violations of the Foreign CorruptPractice Act, which prohibits U.S. companies from bribing foreign officials for governmentcontracts and other business.

He goes on to note that

while we have been active in this area [in the past], more needs to be done, including beingmore proactive in investigations, working more closely with our foreign counterparts, and takinga more global approach to these violations."

Mark Mendelsohn, formerly with the Department of Justice2/24/10 stated:

Its my view that the United States government is going to focus on corruption in a farmore rigorous way than it has in the past, said Mendelsohn. Policy may also furtherreflect that corruption is a national security issue and an impediment to security in

combat areas, like Iraq and Afghanistan.

We are not myopically focused on the FCPA, we have a big fatcriminal code at our disposal


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Prosecutorial Guidelines for EvaluatingMitigation by Potential Defendants

Well established principles from DOJ memoranda andsentencing guidelines apply to corporations under criminalinvestigation, and include:

Seriousness of the offense

Pervasiveness of wrongdoing, including management complicity

Timely and voluntary disclosure, and cooperation in investigation Existence and effectiveness of pre-existing compliance program

Response/remediation efforts to the event(s), including personnelchanges, discipline of employees, enhancements tocompliance program

See, e.g., The Filip Memorandum, setting forth all the principles:http://www.justice.gov/opa/documents/corp-charging-guidelines.pdf

These apply equally to criminal investigations for money launderingor corrupt payments, and reflect concerns common to most

government enforcement agencies
http://www.justice.gov/opa/documents/corp-charging-guidelines.pdfhttp://www.justice.gov/opa/documents/corp-charging-guidelines.pdfhttp://www.justice.gov/opa/documents/corp-charging-guidelines.pdfhttp://www.justice.gov/opa/documents/corp-charging-guidelines.pdfhttp://www.justice.gov/opa/documents/corp-charging-guidelines.pdfhttp://www.justice.gov/opa/documents/corp-charging-guidelines.pdf


7/29Copyright 2010 Deloitte Development LLC. All rights reserved.

Potential Risks for Corporations -Corrupt PaymentsA tangled web of risk direct and indirect involvement in corruption

Enforcement in both areas is rising significantly, framing the task of integratinganti-corruption monitoring and compliance controls with anti-money laundering

programs for financial institutions and creating a necessity for others to evaluatethe risks associated with certain financial transactions more closely.

DirectFCPA/

Anti-CorruptionViolation

1. The corporation through an authorized employee or agent, engages directly in bribery to gainbusiness advantage

For example, an employee provides a bribe to a government official to obtain an underwritingmandate, a large sales agreement with a governmental entity

Employees and Company have direct financial incentive to violate law

Potential liability under the FCPA or its foreign counterparts

Indirect

AML ComplianceObligations

2. The corporations third party service provider or distributor is engaged in corruption, one leg ofwhich is supported by the corporation

The corporations third party service provider or distributor financial institutions client is engaged incorruption that touches a financial institution through payment or use of financial institutionsproducts/services

Corrupt payments are discovered by prosecutor, creating at least reputational risk

A financial institutions AML reporting obligations, help prosecutors discover FCPA events for a nonfinancial institution

If the financial institution fails to reasonably recognize a transaction as corrupt, it may itself be subjectto civil and criminal penalties

If the corporation knowingly enables corrupt activity ofits clients, it and its employees may face prosecutorial scrutiny

related to FCPA and potentially money laundering violations


8/29Copyright 2010 Deloitte Development LLC. All rights reserved.

The Foreign Corrupt Practices ActWhat is the FCPA?

Two main provisions

Anti-Bribery Provisions Prohibits the promise, authorization, payment, or offer ofmoney or anything of value, corruptly, directly or indirectly, to any foreign official forthe purpose of influencing an official or securing any improper advantage, in order toobtain or retain business. 15 U.S.C. 78dd-1(a), 78dd-2(a).

Accounting Provisions Issuers (companies whose securities are traded on a U.S.exchange) are required to make and keep accurate and reasonably detailed books,records, and accounts, as well as maintain adequate internal controls.15 U.S.C. 78m.

The FCPA is jointly enforced by the Securities Exchange Commission

and the U.S. Department of Justice


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Poll Question #2

Compared to one year ago, how concerned are you about your

company being targeted by government and regulatory actions

related to financial crimes such as corrupt payments and

money laundering?

More concerned

Same level of concern

Less concerned

NA/Dont know


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Basics of Money Laundering

Money Laundering concept

Moving proceeds of illegal activity to accomplish legal andillegal purposes.

Moving illegal proceeds to obscure their origin or reportingabout them.

(1) Placement, (2) layering and (3) integration

(1) Entering funds into the legal system.

(2) Making the tracing of the funds difficult.

(3) Integrating the funds into mainstream commerce.


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Basics of Money Laundering (cont.)

Obscuring the origin of funds

Sell drugs, worry about how to hold, how to account for source.

Bright idea buy annuity for $1MM, now free of the funds.

Brighter idea cancel annuity during free look period.

Result account for money source as insurance company who

wrote check for return of funds. Covered under current AML Insurance Regulations.

Money laundering reporting

Far broader than money laundering itself, but part of complianceand testing.

Concept of deputizing financial/covered institutions to spotpotential crime.

Non-money laundering reportable events.

Suspicious activity reporting.

Willful blindness.


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Synergy of Money Laundering and CorruptPayments

Bourke/Omega Scenario

Place investment funds in an overseas company.

Allegedly know or willfully blind to the fact company is bribing foreign officials.

Company in fact uses its funds to bribe foreign officials and therefore violatesthe FCPA.

Consequences for Parties Involved

The investors are criminally responsible for the FCPA violation. Moving money overseas for criminal purposes may violate money

laundering laws.

The foreign official recipients of bribes tend to invest or otherwise move thecorrupt proceeds into different forms and places to lose the taint of ill gotten

funds. That would be the foreign official laundering money. The covered institutions that handle the transactions need to have system to

reasonably recognize corrupt payments, and to report them.


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FCPA Enforcement Trends

Green - September 2009 - Gerald and Patricia Green were found guiltyof conspiring to violate the Foreign Corrupt Practices Act, violating theFCPA and money laundering. The Greens had made improper paymentsto obtain film festival rights. The foreign official receiving the money wascharged with money laundering.

Natures Sunshine - July 2009 - charged with illegal payments to Brazilcustoms officials to get unregistered product in country.

Parent company judged $600,000 for payments made by Braziliansubsidiary

CEO and CFO judged $25,000 each in their capacity as controlpersons under the 1934 Exchange Act failure to keep books andrecords and maintain adequate system of internal controls they werenot charged with actual knowledge.


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Poll Question #3

Do you think that your company is aware that individualexecutives can be prosecuted for FCPA violations?

Yes

No NA/Dont know


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FCPA Risk Areas for Corporations

Q: Where are Corporations at risk of violating the FCPA?

A: Anywhere there is a Touchpoint with a government official ortheir agent, either:

Directly by the Corporation's officials or employees

Indirectly through agents, intermediaries, finders or consultants

Obtaining aBusinessLicense

Governmentalor State Owned

EnterpriseCustomers

PayingForeign TaxCollectors

Dealing withCountry

Regulators

Corporation


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FCPA Risk Areas for Corporations (cont.)

Developing business of any kind with state owned or controlled entities,

regarded as state instrumentalities under the FCPA. Use of Agents, Finders, and Consultants Finders and consultants prevalent in international banking

Agents to resolve business issues with government agencies

Intermediaries may be essential to carrying out ordinary business in country

Attaining Critical Approvals: Applying for licenses and permits, etc.

Dealing with foreign regulators

Engaging in joint ventures

Participating in M&A activities or other deals

Hiring former regulators

Tax payments Delegation trips

Many corporations have policies and controls related to gifts,entertainment or any payments made to government agencies, butpay little attention to commercial arrangements with clients who

are themselves government officials under the FCPA.


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Poll Question #4

Whose behavior are you more concerned about when

conducting business in a foreign country?

Behavior of own employees

Behavior of intermediaries

Equally concerned about behavior of own employees andintermediaries

NA/Dont know


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AML Risk and Corruption

A suspected bribe may start an investigation. Once the investigation is

successful, prosecutors naturally look to investigate the parties who wereconnected to the bribe in some way. Banks, payment processors and other intermediaries can come under the scope of the

investigation, and reporting obligations, aiding and abetting and conspiracy and other indirecttheories of criminal or civil liability can come into play.

FCPA investigations may lead to scrutiny of the financial institutions customers,their assets, and/or payments being processed by the financial institution potentially raising questions about quality of KYC and monitoring programsrequired by AML regulations, and what the financial institution should havereasonably known.

Once the bank finds a corrupt payment, it must document and determinecontinuation of business decisions, in addition to filing appropriate SARs.

A company making an illegal payment will generally use a bank that, by law ofmost jurisdictions, must have systems to recognize and report the payment assuch.


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FCPA Compliance ABB Test

Clearly articulated policy

Standards and procedures apply toall: ALL directors, officers,employees, agents, andbusiness partners

Compliance chief who reports to

Compliance or Audit Committee Periodic training and

annual certification

Reporting system and helpline

Disciplinary process

Articulated standards regardingbusiness relationships withreputable partners

Due diligence pre-retention/post-retention oversight of ALL agentsand business partners

Inclusion in all agreements ofrepresentations, certifications,independent internal audits of

agents and business partners System of internal controls and

accurate books and records

Independent audits to ensurecompliance code is implemented


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Poll Question #5

Do you think your company has an effective FCPA compliance

program?

Yes

Somewhat effective, but there are areas that could be improved

No

NA/Dont know


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Effective AML and FCPA Compliance Programs ComparisonAttributes of an effective FCPA Compliance

Program Generally Include:

A Tone at the Top demonstrated and communicated bysenior management.

Articulating values, policies, and procedures to be usedto prevent bribery under its effective control.

A policy that is consistent with all laws relevant tocountering bribery in all pertinent jurisdictions and whichprohibits bribery in any form and provides a broadoverview of the FCPA and define & give examples of keyterms (such as foreign official or "anything of value").

Designating a Chief Compliance Officer with specific

responsibility and accountability for FCPA compliance. Addressing high risk areas including gifts, political or

charitable contributions, sponsorships, commissionpayments, consulting payments, travel andentertainment, and facilitation payments.

Providing for due diligence process on agents andbusiness partners, periodic certification, and requireddocumentation.

A training program that identifies employees or agentswho may interact with government officials.

Requiring proper internal accounting controls andaccurate and detailed record-keeping of all transactionsand disposition of assets.

Confirmation of understanding and compliance, and

enforcements including reporting violations, periodic audits,investigations, and disciplinary measures

Incorporating Sentencing Guidelines and amendments. Involving periodic compliance reviews and internal audit

testing.

Attributes of an effective AML Compliance

Program Generally Include:

A Tone at the Top demonstrated and communicated bysenior management.

A formal set of policies, procedures and internal controls,including due diligence for customers, counterparties,vendors, employees. Because of significant stream ofregulations, interpretations and guidance, both nationaland international, program should be dynamic.

Designating an AML compliance officer with specificresponsibility and accountability for AML compliance.

A comprehensive risk assessment of customers,

products, channels, geographies and other factors.Program is to be risk based and should be tailored to thefirm as products and markets change, so should theprogram.

A training program that identifies employees or agentswho may encounter money laundering risks, andcoordinates regular generic and specialized training.

A surveillance and investigation process to recognize

and report potential suspicious transactions orcircumstances to law enforcement.

As a practical matter, an ongoing relationship with lawenforcement officials.

Because of the criminal prospects from potentialviolations, AML programs are also based on SentencingGuidelines and Filip Memorandum considerations.

Program creates a highly evolved investigative unit that

utilizes high technology.



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Poll Question #6

Are you interested in receiving follow-up articles and white

papers on this topic from Deloitte?

Yes

No

NA


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Questions & Answers



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Join us on June 29th at 2 PM ETas our Transactions & BusinessEvents series presents:

Corporate DevelopmentEffectiveness:Establishing a CompetitiveAdvantage through M&A



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Thank you for joiningtodays webcast.

To request CPE credit,click the link below.


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Contact info

Robert M. Axelrod

Director, Forensic and Dispute ServicesDeloitte Financial Advisory Services LLP+1 212 436 [email protected]

Christopher GeorgiouPartner, Forensic and Dispute ServicesDeloitte Financial Advisory Services LLP+1 212 436 [email protected]

David WilliamsChief Executive OfficerDeloitte Financial Advisory Services LLP+1 212 492 [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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This presentation contains general information only and is based on the experiences and

research of Deloitte and its practitioners. Deloitte is not, by means of this presentation,rendering business, financial, investment, or other professional advice or services. Thispresentation is not a substitute for such professional advice or services, nor should it beused as a basis for any decision or action that may affect your business. Before making anydecision or taking any action that may affect your business, you should consult a qualifiedprofessional advisor. Deloitte, its affiliates, and related entities shall not be responsible forany loss sustained by any person who relies on this presentation.


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About Deloitte

As used in this document, Deloitte means Deloitte LLP and its subsidiaries. Please seewww.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.
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C i ht 2010 D l itt D l t LLC All i ht d

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