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B20 Saudi Arabia – Leadership in Challenging Times through Integrity and Compliance

B20

B20 Saudi Arabia – Leadership in Challenging Times through Integrity and Compliance

As countries around the globe push to reopen in the face of the COVID-19 pandemic, the business community is struggling with the decision to relax compliance standards as a means to remain agile and navigate a pressing shortage of goods and services. Yet these times necessitate an even greater commitment to integrity.

B20 Saudi Arabia, the voice of the global business community to the G20, recognizes the ethical challenge posed by the COVID-19 health and economic crisis to both businesses and governments and has committed to addressing the issue of corruption by recognizing Integrity & Compliance as one of its key priority areas.

Corruption remains a significant risk for businesses across the world. The cost of corruption is estimated to be five percent of the annual global GDP, i.e. US$3.6 trillion, a price we cannot afford in these times. We have also seen corruption is a key barrier to achieving the UN Sustainable Development Goals (SDGs), such as the elimination of poverty and hunger, promoting a peaceful and inclusive society, improving education, quality of life, and the infrastructure of each state. The B20 Integrity & Compliance Taskforce’s work, therefore, aims to advance the global anti-corruption agenda, touching upon key relevant topics such as responsible business conduct, consumer protection, the fight against corruption, and other efforts at the foundation of a healthy business environment.

Recently I had the opportunity to interview Mathad Al-ajmi, Vice President and General Counsel at Saudi Telecom Company (stc) and Chair of the B20 Saudi Arabia Integrity & Compliance Taskforce. As a prominent attorney and business leader, Mr. Al-ajmi has been influential to the Pearl Initiative, a global coalition of business leaders from the Gulf Region aimed at fostering a corporate culture of accountability and transparency to ensure all applicable international laws and frameworks are upheld within Saudi Arabia, throughout the Middle East, and across the globe.

During my interview with Mr. Al-ajmi, he reinforced that integrity is not merely anti-bribery, but rather something much broader. He believes that to create an open, transparent and legitimate world economy, the members of the global marketplace must be in alignment with the terms and conditions of participating in that economy, both for developing and developed countries. The goal of the B20 Integrity & Compliance Taskforce is to ensure a robust compliance and controls program that is sustainable, globally successful across languages, and able to be implemented proactively.

Mr. Al-ajmi also spoke about how developing economies and micro, small and medium-sized enterprises (MSMEs) will bear the brunt of business loss from the pandemic, making it doubly important they are able to access monetary government support through legitimate channels. The most vulnerable populations, most often coming from developing markets, are those who are disproportionately impacted by corruption – corruption costs developing countries US$1.26 trillion every year and represents a major obstacle to investment, further negatively impacting economic growth and job prospects for these markets in the long term.

MSMEs, Mr. Al-ajmi noted, play a pivotal role in jump-starting the economy in that they account for more than half of most countries’ GDP and are responsible for almost seven in every 10 jobs. Often operating in difficult economic environments, MSMEs are highly vulnerable to corruption, although they may be less likely than large companies to be involved in large-scale influence-peddling scandals, which is why they are one of the B20’s cross-cutting focuses. Simultaneously, MSMEs typically lack the resources, knowledge, and experience to implement effective anti-corruption measures and conduct their business in compliance with international standards and the applicable international laws and frameworks, making their engagement a cornerstone of the B20’s Integrity & Compliance taskforce work.

The B20 will present its policy recommendations to the G20 during the B20 Summit scheduled for October in the form of policy papers to be drafted by each taskforce, including Integrity & Compliance. While the recommendations and priorities in those papers are not yet published, Mr. Al-ajmi outlined a number of key themes in our discussion that he and his task force feel are an integral part of supporting transparency in the global business community:

-Leveraging new technologies with regards to the management of corruption and fraud-related risks.

-Proposing an anti-corruption technology roadmap to both the private and public sector as a strategic vision by adopting technological solutions for identified risk areas.

-Developing digital identities and public national registers to reduce anonymity and increase both transparency and accountability of beneficial owners and third parties. The adoption of these solutions will further enable addressing the challenges of cross-border quality data sharing.

-Ensuring heightened integrity and transparency in public procurement through open bidding processes from multiple vendors, with specific certification criteria to ensure compliance with applicable international laws and frameworks.

-Collectively pursuing and legislating the implementation of responsible business on a global basis in each country, leveraging the applicable international laws and frameworks.

-Supporting code-of-conduct compliance programs to monitor capital spending as emerging market infrastructure projects continue.

-Continuing to align government officials with private industrial programs through compliant lobbying programs and monitoring.

-Protecting whistleblowers by adopting mechanisms and practices in line with leading global practices.

-Strengthening corporate governance in public and private sector companies, such as through yearly certifications for all employees to understand governance regulations.

-Widely and publicly prosecuting bribery to set examples.

-Partnering with and leveraging the expertise of global institutions to improve national anti-corruption plans.

-Actively empowering women across the supply chain by promoting their participation in a wide range of public, economic and political spheres in combating corruption.

As Mr. Al-ajmi reinforced to me, none of these efforts will succeed if we are not operating in a transparent, integrity-driven business environment. Ultimately, this is what the B20 hopes to accomplish through the work of this critical taskforce, ensuring integrity is part of the global business community and society writ large. I am confident the B20 and specifically its Integrity & Compliance Taskforce will have a positive influence on the G20 Summit and look forward to the release of the policy recommendations during the B20 Summit scheduled for October.

_________________________________________________________________

If you have any questions or would like help in the area of Compliance and Controls please do not hesitate to contact me at frank@ationadvisory.com or visit my website at www.ationadvisory.com

Frank and his team at Ation Advisory Group have successfully remediated clients from FCPA and British Anti-Bribery investigations. His team has implemented over 45 global FCPA Certification Programs and Compliance and Controls improvement projects which prevented violations and Improved Goodwill and overall value for a domestic or international organizations seeking to sell, partner with a JV or obtain contracts or new business with government officials and private enterprise.

B20

B20 Saudi Arabia – Positively Changing Integrity & Compliance Behaviors Across the Global Business Community

As countries around the globe push to reopen in the face of the COVID-19 pandemic, the business community is struggling with a temptation to relax compliance standards as a means to remaining agile and navigate a pressing shortage of goods and services. And yet these times necessitate an even greater commitment to integrity, one of the priorities the global private sector has set for itself.

The B20 Saudi Arabia, the voice of the global business community to the G20, recognizes the challenge posed by the COVID-19 health and economic crisis to both businesses and governments and has committed to addressing the issue of corruption by recognizing Integrity & Compliance as one of its key priority areas.

We already know the global economy loses US$3.6 trillion to impropriety yearly, a price we cannot afford in these times. We have also seen corruption is a key barrier to achieving the UN Sustainable Development Goals (SDGs), such as the elimination of poverty and hunger, improving education, quality of life, and the infrastructure of each state. The B20 Integrity & Compliance Taskforce’s work, therefore, aims to advance the global anti-corruption agenda, touching upon key relevant topics such as responsible business conduct, consumer protection, the fight against corruption, and other efforts at the foundation of a healthy business environment.

Recently I had the opportunity to interview Mathad Al-ajami, Vice President and General Counsel at Saudi Telecommunication Company (STC) and Chair of the B20 Saudi Arabia Integrity & Compliance Taskforce. As a prominent attorney and business leader, Mr. Al-ajmi has been influential to the Pearl Initiative, a global coalition of business leaders from the Gulf Region aimed at fostering a corporate culture of accountability and transparency, to ensure FCPA and UK Foreign Bribery Compliance are upheld within Saudi Arabia, throughout the Middle East, and across the globe.

During my interview with Mr. Al-ajmi, he reinforced that integrity is not merely anti-bribery, but rather something much broader. He believes that to create an open, transparent and legitimate world economy, the members of the global marketplace must be in alignment with the terms and conditions of participating in that economy, both for developing and developed countries. The goal of the B20 Integrity & Compliance Taskforce is to ensure a robust Compliance and Controls program that is repeatable, successful globally across languages, and able to be implemented proactively.

Mr. Al-ajmi also spoke about how developing economies and micro, small and medium-sized enterprises (MSMEs) will bear the brunt of business loss from the pandemic, making it doubly important they are able to access monetary government support through legitimate channels. The most vulnerable populations, most often coming from developing markets, are those who are disproportionately impacted by corruption – corruption costs developing countries US$1.26 trillion every year and represents a major obstacle to investment, further negatively impacting economic growth and job prospects for these markets in the long term.

MSMEs, Mr. Al-ajmi noted, play a pivotal role in jump-starting the economy in that they account for more than half of most countries’ GDP and are responsible for almost seven in every 10 jobs. Often operating in difficult economic environments, MSMEs are highly vulnerable to corruption, although they may be less likely than large companies to be involved in large-scale influence-peddling scandals, which is why they are one of the B20’s cross-cutting focuses. Simultaneously, MSMEs typically lack the resources, knowledge, and experience to implement effective anti-corruption measures and conduct their business in compliance with international standards and the applicable legal rules, making their engagement a cornerstone of the B20’s integrity & compliance work.

The B20 will release its policy recommendations to the G20 in July in the form of policy papers to be drafted by each taskforce, including Integrity & Compliance. While the recommendations and priorities in those papers are not yet published, Mr. Al-ajmi outlined a number of key themes in our discussion that he and his task force feel are an integral part of supporting transparency in the global business community:

-Leveraging new technologies in managing the risk of corruption and fraud – this includes computer-based training and certifications in all languages using “real world” case studies that are language and market-specific.

-Leveraging Artificial Intelligence programs to monitor large amounts of data for specific corruption and integrity violations.

-Ensuring heightened integrity and transparency in public procurement through open bidding processes from multiple vendors, with specific certification criteria to ensure compliance with key laws internationally such as the Foreign Corrupt Practices Act in the U.S. or the UK’s Bribery Act of 2010.

-Collectively pursuing and legislating the implementation of responsible business on a global basis in each country, leveraging the frameworks provided by FCPA and the UK’s Bribery Act.

-Supporting code-of-conduct compliance programs to monitor capital spending as emerging market infrastructure projects continue.

-Continuing to align government officials with private industrial programs through compliant lobbying programs and monitoring.

-Protecting and encouraging whistleblowers but protecting businesses by ensuring disgruntled workers cannot destroy shareholder value through false claims.

-Strengthening corporate governance centrally and in global subsidiaries, such as through yearly certifications for all employees to understand governance regulations.

-Widely and publicly prosecuting bribery to set examples.

As Mr. Al-Ajmi reinforced to me, none of these efforts will succeed if we are not operating in a transparent, integrity-driven business environment. Ultimately, this is what the B20 hopes to accomplish through the work of this critical taskforce, ensuring integrity is part of the global business community and society writ large. I am confident the B20 and specifically its Integrity & Compliance Taskforce will have a positive influence on the G20 Summit and look forward to the release of the policy recommendations in July.

___________________________________________________________________

If you have any questions or would like help in the area of Compliance and Controls please do not hesitate to contact me at frank@ationadvisory.com or visit his website at www.ationadvisory.com

Frank and his team at Ation Advisory Group have successfully remediated clients from FCPA and British Anti-Bribery investigations. His team has implemented over 45 global FCPA Certification Programs and Compliance and Controls improvement projects which prevented violations and Improved Goodwill and overall value for domestic or international organizations seeking to sell, partner with a JV, or obtain contracts or new business with government officials and private enterprise.

Frank Orlowski is an accomplished Senior Finance Executive and Board Member with more than 25 years of success in the pharmaceutical, medical devices, contract manufacturing, and healthcare industries. Leveraging extensive experience leading manufacturing, operational, and financial strategies across 35 countries.  Frank has also implemented over 30 FCPA Compliance/ Controls Remediation and Certification Programs across 25 countries.

human

A Human Perspective – Global Business in the Post COVID-19 World and The New Norm

There is little doubt that our economy will not be the same in the post novel coronavirus world. American businesses long have shown the scars of national trauma: Devastating fires, for example, spawned major factory regulations. World War II hastened the entrance of women into the workforce. September 11th drastically heightened security protocols. Analysts say the novel coronavirus pandemic could push broad societal shifts and human behavior. There will essentially be a “new norm” where new businesses will start, others will thrive, and many will disappear. As human beings in this New Era, this article will identify how the human perspective will influence business and consumer trends.

One of the most apparent human factors consumer impacts from the coronavirus outbreak is a shortage of toilet paper stemming from panic buying originating from video’s that went viral such as this one from Australia.

However, upon a human perspective evaluation, there is a supply chain shortage of toilet paper, not an inventory shortage. Consumers are now buying for their homes as the toilet paper supply in offices, restaurants, airports, hotels, and schools go unused.

Other observed human factor trends are a shortage of Viagra where Pfizer is allegedly at full production capacity of Sildenafil at its Amboise France Facility (Now managed by Fereva). Lastly, figuratively related, in Food Science, packets of yeast are also at shortage levels as homebound bakers now have more time on their hands to take the time required to bake fresh bread.

Lastly, the best performing commodity during this epidemic has been frozen concentrated orange juice rising over 20% (Akin to the 1983 film Trading Places)

The most significant impact economists say will likely be dramatic losses in local retail and dining options, with millions of jobs disappearing as the most prominent and wealthiest companies — especially those that do much of their business online — extend their gains. Giants such as Amazon, Walmart, Target, and Costco — and the rest of the industry. Companies selling groceries and staples are thriving, while the rest are barely hanging on.

Telework, online education, and streaming video services have grown sharply, while movie theaters, schools, and traditional workplaces close their doors. Some will never reopen in a world where the shift from real to virtual suddenly has gone into overdrive. In the entertainment industry, Universal Pictures announced this week that its animated adventure “Trolls World Tour,” due for release in April, instead will be available for streaming. Such shifts, if they take hold long term, could imperil movie theaters, especially small and independent ones that run on narrow margins based heavily on concession revenue.

Virtually any business practices, such as remote work and the online medical visits or telehealth, which were slow to win widespread adoption because of behavioral inertia, will now speed adoption of such unfamiliar ways of doing business. Any traditional face-to-face encounter — going to an accountant’s office, sending children to class, traveling for a business meeting — will seem less necessary as more remote options become publicly acceptable and widespread.

An economic silver lining will emerge for janitors, child-care workers, grocery store clerks, and servers who will be able to demand higher pay and better working conditions in the post-coronavirus world, some analysts predict. Many have called these workers “heroes” in the crisis.

It’s impossible to say what ripple effects these massive disruptions could cause. One analyst pointed to groceries: When few people opted for home delivery, the scale of the enterprise ensured the costs were high, and availability was low. But as crowds of people opt for delivery, the route drivers will grow denser, and customers will expect everything is dropped off at home. Deliveries of items that were generally in-store purchases — fresh foods, prescription drugs — could usher in new economies of scale.

Businesses dependent on prime real estate and bringing people together could be especially vulnerable as people opt against public gatherings, including shopping at malls. That could have other impacts, too: One analyst said he suspected conspicuous consumption — high fashion, expensive sneakers, sparkling jewelry — might suffer when people “don’t have anywhere to parade.”

Other firms may become winners, too. Blue Apron, the food-delivery service, struggled for months to convince investors that people would pay $60 a box for all of the ingredients they need to make home-cooked meals. But the firm saw its stock price skyrocket more than 500 percent last week amid a flurry of new interest. The company said it is hiring workers at its fulfillment centers in California and New Jersey to meet demand.

But as surgical masks become desperately desired items, schools from Japan to Ireland sit closed, airlines scrap flights, trade shows are canceled, and stock markets plunge, the pandemic seems likely to alter the contours of globalization and human behavior. However, one thing we all can agree is human beings will prevail over the virus. As the Great Winston Churchill said: If you are going through hell, keep going.”

_________________________________________________________________

Frank Orlowski is an accomplished Senior Finance Executive and Board Member with more than 25 years of success in the pharmaceutical, medical devices, contract manufacturing, and healthcare industries. Leveraging extensive experience leading manufacturing, operational, and financial strategies across 35 countries.  Frank has also implemented over 30 FCPA Compliance/ Controls Remediation and Certification Programs across 25 countries.

Contact:

Email: frank@ationadvisory.com

Website: www.ationadvisory.com

COVID-19

The Human Factor of the Novel Coronavirus (COVID-19) and Corruption

With the explosive spread of Coronavirus (COVID-19) hospitals, healthcare providers and all citizens are finding a shortage of goods and services and employees are under increased pressure to preserve and excel in their current roles.

Unfortunately, in this time of crisis corruption is thriving and some aim to profit from others’ misfortune and push companies to the brink to maintain profits.

Around the world, countries are reporting shortages in both medicines and medical supplies due to COVID-19. All of these factors put additional strain on already fragile procurement processes and increases the risk that suppliers, knowing that government and individuals have little choice but to pay, demand higher prices.

In these challenging times having open and transparent contracting processes in place helps mitigate these risks. With nowhere to hide, corrupt actors are unable to practice price gouging and must charge governments and individuals reasonable prices.

The stockpiling of supplies such as masks, gloves, and hand sanitizers are also contributing to shortages in medical supplies. In attempts to profit from public panic, some traders have been inflating prices for ordinary consumers.

After pressure from the Department of Justice, Amazon has implemented an effort to remove tens of thousands of deals from merchants that it said attempted to price-gouge customers. The world’s largest online retailer has faced scrutiny over the health-related offers on its platform, and earlier this week, Italy launched a probe into surging prices around the internet for sanitizing gels and hygiene masks. At the same time, Italy battles the biggest outbreak in Europe.

There are lessons to be learned in health-sector Corruption elsewhere from prior epidemics such as Ebola and SARS where procurement and contracting wrongdoing led to deadly consequences. In prior epidemics, Corruption compromised containment efforts, when corrupt actors used petty bribes and other favors to avoid quarantines, roadblocks, and safe body collection procedures. Even ventilators and other medical oxygen-related equipment have been the subject of bribes and kickbacks, sometimes leading to the tragic deaths of patients. These examples demonstrate the worst case of what can happen without resilient anti-corruption policies.

In the first federal action against fraud involving the coronavirus outbreak, the DOJ obtained a temporary restraining order against a website selling a bogus vaccine.

The DOJ said Sunday, March 21st, that operators of the website “coronavirusmedicalkit.com” were engaging in an alleged wire fraud scheme to profit from the confusion and fear surrounding COVID-19.

The website claimed to offer customers access to the World Health Organization (WHO) vaccine kits in exchange for a shipping charge of $4.95. There are currently no legitimate COVID-19 vaccines, and the WHO is not distributing any such vaccine.

Besides compliance issues with third party business practices with goods and services, companies are experiencing enormous business pressure. Many companies have salespeople who cannot travel due to precautions taken, canceled flights, or, worse, quarantines. They cannot visit customers or partners, leading to slower sales. Global supply chains are disrupted, with shortages of parts and products. Company events and conferences are being canceled, resulting in fewer opportunities to build relationships with customers and market products. Customer demand for company products may be falling, and companies may be declining to make revenue projections during this time of uncertainty about the spread and effects of the coronavirus.

These disruptions can increase the pressure on salespeople to meet their sales targets. Salespeople may feel additional pressure now, when sales may be sluggish, and again when business gets back to normal, and they want to make up for the time lost. That pressure can lead some people to make the wrong choices—to engage in bribery or other misconduct—to generate business. Besides, the heightened emphasis on business priorities due to the losses from the coronavirus can push anti-corruption compliance further down on the priority list.

If/when the DOJ and SEC discover bribery or Corruption, they assuredly will not be accepting a “coronavirus defense” from companies. Compliance officers should be aware of situations like the coronavirus that could raise corruption risks and try to guard against them. Compliance officers should refer explicitly to the disruption caused by the coronavirus and emphasize that the company is committed to complying with anti-corruption laws. The communications must be to the employees who need to see them, such as salespeople who interact with customers, or “gatekeeper” functions like finance who review financial transactions.

Most importantly, senior executives and the board, if appropriate, need to make sure that the business pressures resulting from the coronavirus do not overshadow the company’s commitment to compliance and that values and ethics are maintained.

_______________________________________________________________

For more information or questions, please contact Frank Orlowski at frank@ationadvisory.com or +1917-821-2147 and please visit our website at www.ationadvisory.com

FCPA

The Corruption Index: How it Relates to FCPA

The Corruption Perceptions Index (CPI) is an index published annually by Transparency International since 1995, which ranks countries “by their perceived levels of corruption, as determined by “expert assessments”  and opinion surveys.

The CPI currently ranks 176 countries “on a scale from 100 (very clean) to 0 (highly corrupt)”. Denmark and New Zealand are perceived as the least corrupt countries in the world, ranking consistently high among international financial transparency, while the most perceived corrupt country in the world is Somalia, ranking at 9–10 out of 100 since 2017.

The estimated cost of corruption from Transparency International is over One Trillion Dollars or 2% of GDP. This represents an amount larger than most of the world’s economies

The top 10 least corrupt countries in the latest publication are:

-New Zealand

-Denmark

-Finland

-Norway

-Switzerland

-Singapore

-Sweden

-Canada

-Netherlands

-United Kingdom

It should also be noted that the top five on the list have some of the smallest populations on the planet potentially skewing the results as the index is not weighted. Additional smaller countries like Syria,  South Sudan and Somalia are at the bottom of the list (178-180). However, they are considered war tourn countries. Larger population countries like China is ranked 77, and  India is 81

Emerging Markets like Brazil is ranked 96, and Russia is 135. It is estimated that one in four people in Asian and Eastern European Societies have paid what is classified as a bribe multiple times in a  year.  It has also been estimated that law enforcement officers and government officials were most likely to receive a bribe where young people (under the age of 25) were most likely to pay a bribe. However, bribing is not limited to Emerging Markets.  It is estimated that 13%  of European Public Works Projects include the cost of bribing. This includes major infrastructure projects such as airport and rail construction, roads and government hospital or administrative buildings

One could argue that there could be a direct correlation between the number of FCPA Violations and how high a country rank on the Corruption Perception Index (CPI). Upon analysis, there is no such association and therefore the reliance by Chief Compliance Officers on the CPI as published each year by Transparency International comes into question

Upon further investigation of the survey developers – Transparency International (TI)  based in Berlin Germany, it becomes clearer why the survey cannot be relied upon

The Corruption Perceptions Index has received criticism over the years. The main one stems from the difficulty in measuring corruption, which happens behind the scenes. The Corruption Perceptions Index, therefore, needs to rely on the third-party survey which has been criticized as potentially unreliable. Data can vary widely depending on the public perception of a country, the completeness of the surveys and the methodology used. The second issue is that data cannot be compared from year to year because Transparency International uses different methods and samples every year. This makes it difficult to evaluate the result.

Another issue is historically funded since its inception in 1993 by large multinationals – Exxon/ Mobil,  Shell, and Hedge Fund KKR being the most significant donors. One cannot help but question the objectivity of the survey with large private donors.

TI’s  International Board of Directors reacted to this conflict of interest by stripping its US affiliate – Transparency International USA – of its accreditation as the National Chapter in the United States.

TI Headquarters reported that  TI-USA came to be seen in the United States as a corporate front group, funded by multinational corporations given the large donor base.

Secondly, the surveys themselves are conducted by organizations such as Freedom House, which have known biases. In August 2019 whistleblower accounts from seven current and former TI Secretariat staff emerged, describing a “toxic” workplace culture under the current Managing Director, Patricia Moreira. Reported in The Guardian, the misconduct reported ranged from gagging orders in termination agreements to bullying and harassment of critical internal voices.

Although the Corruption Perception Index remains popular with its audience as it is unveiled each year, it becomes more clear after digging deeper into Transparency International why there’s not a more robust correlation between FCPA Violations as identified by the SEC and DOJ and the faltered Corruption Perception Index. In addition, the index is not relied on by any public or private enforcement agency for compliance purposes. If anything it brings to light an unconscious or conscious bias against certain developing countries. One can argue its prejudice.

_____________________________________________________________

Frank is an accomplished Senior Finance Executive and Board Member with more than 25 years of success in the pharmaceutical, medical devices, contract manufacturing, and healthcare industries. Leveraging extensive experience leading manufacturing, operational, and financial strategies across 35 countries.  Frank has also implemented over 30 FCPA Compliance/ Controls Remediation and Certification Programs across 25 countries.

corruption

The Corruption Index: An In-Depth Look at What it Means & How it Relates to FCPA

The Corruption Perceptions Index (CPI) is an index published annually by Transparency International since 1995 which ranks countries “by their perceived levels of corruption, as determined by “expert assessments”  and opinion surveys.

The CPI currently ranks 176 countries “on a scale from 100 (very clean) to 0 (highly corrupt).” Denmark and New Zealand are perceived as the least corrupt countries in the world, ranking consistently high among international financial transparency, while the most perceived corrupt country in the world is Somalia, ranking at 9–10 out of 100 since 2017.

This short video link below provides an overview of the Corruption Perception Index.

One could argue that there could be a direct correlation between the number of FCPA Violations and how high a country ranks on the Corruption Perception Index (CPI).  Upon analysis, there is no such correlation and therefore the reliance by Chief Compliance Officers on the CPI as published each year by Transparency International comes into question

Upon further investigation of the survey developers – Transparency International (TI)  based in Berlin Germany, it becomes clearer why the survey cannot be relied on.

The Corruption Perceptions Index has received criticism over the years. The main one stems from the difficulty in measuring corruption, which by definition happens behind the scenes. The Corruption Perceptions Index, therefore, needs to rely on third-party surveys which have been criticized as potentially unreliable. Data can vary widely depending on the public perception of a country, the completeness of the surveys and the methodology used. The second issue is that data cannot be compared from year to year because Transparency International uses different methodologies and samples every year. This makes it difficult to evaluate the result of the new policies.

Another issue is historically been funded since its inception in 1993 by large multinationals – Exxon/ Mobil,  Shell, and Hedge Fund KKR being the largest donors. One cannot help but question the objectivity of the survey with large private donors. TI’s International Board of Directors reacted to this conflict of interest by stripping its US affiliate – Transparency International USA – of its accreditation as the National Chapter in the United States and it was reported by TI Headquarters that  TI-USA came to be seen in the United States as a corporate front group, funded by multinational corporation given the large donor base.

Secondly, the surveys themselves are conducted by organizations such as Freedom House, which have known biases. In August 2019 whistleblower accounts from seven current and former TI Secretariat staff emerged describing a “toxic” workplace culture under the current Managing Director, Patricia Moreira. Reported in The Guardian, the misconduct reported ranged from gagging orders in termination agreements to bullying and harassment of critical internal voices

Although the Corruption Perception Index remains popular with its audience as it is unveiled each year, it becomes more clear after digging deeper into Transparency International why there \’s not a more robust correlation between FCPA Violations as identified by the SEC and DOJ and the faltered Corruption Perception Index.

FCPA

How You can Certify 100% FCPA Compliance Based on New SEC/DOJ Requirements

Now that the SEC has gotten involved with FCPA along with the DOJ they have interpreted the FPCA statute to mean that a company must maintain a system of internal accounting controls that monitors FCPA Compliance not only internally within the organization, but for all its third parties including customers and  suppliers

With the average Fortune 50 company having over 75,000 suppliers and 300,000 large customers the enforcement is nearly impossible and deemed as “sneaky.”

Even former DOJ Leadership acknowledges the incredible challenge around FCPA Compliance, especially now that the SEC is stepped up its enforcement (See video like below at around the 14:40 mark).

https://youtu.be/xpo9d4CbHG0

However, there is a solution to avoid or mitigate FCPA  fines/actions as well as damaging public press-releases by the DOJ/SEC due to third party violations.  A robust but straightforward certification program can significantly mitigate this risk.

A Certification Program is primarily an attestation or assertion document that is acknowledged or signed by an employee/and all third parties delivered by email, a simple workflow software or even post mail. It is generally language-specific but is translators are not available English only works. The attestation or assertion document is asking an individual/entity/official to certify that they are Understand FCPA, Are FCPA Compliant, and Unaware of any violations.

You might be asking yourself that there is no way that all of my hundreds of thousands of suppliers/customers/colleagues will comply, and we will have with exposure? 

In the case of colleagues, its a more straightforward answer as the certification process should be mandatory using internal email or workflow tools driven from the top of the organization. In the case of third parties where there is less control, the recommendation is to send the certification communication (via email/post) up to three times in  90 days.  If there is no response, this is OK!

The key to this entire process is a robust documentation and controls process over the certifications – this includes the third parties that have not responded despite three attempts.

Essential elements to an FCPA  Certification process are:

-How the Certification is written ensuring that there is an emphasis on full disclosure and awareness and understanding of the FCPA Statute and any potential violations

-Process for Disseminating to third parties and internal employees

-Tracking and reporting

-Frequency

It is proven that a robust Certification Program implemented in advance of a certification program has lead to reduced penalties and even eliminated penalties as well as damaging Public Relations from the announcement of an SEC/DOJ Investigation.

A robust FCPA certification program may be the most significant cost avoidance and reputation damaging you can implement within your organization.

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For more information and learning more please contact Ation Advisory Group  (www.ationadvisory.com) or at (917) 821-2147.

FCPA

FCPA Can Provide a Favorable Competitive Edge for Your Business

FCPA can be used as a useful business development tool when dealing with government officials and customers in international markets by conducting a valuable training awareness program or seminar.

 In 1977 FCPA Regulations were implanted in response to revelations of widespread bribery of foreign officials by U.S. companies. The US Regulation was intended to halt those corrupt practices, create a level playing field for honest businesses, and restore public confidence in the integrity of the marketplace. More recently, the Securities Exchange Commission has joined the Department of Justice is expanding the scope of what an FCPA violation means with vague, broad guidelines.

If one thinks US Multinationals are confused by the new regulation in nature and scope, one can only imagine the confusion of customers, vendors, government officials, and other stakeholders within over 80 International markets.

In many markets, the word “bribe” in business is not a negative reactionary term but respected and expected. In fact, in most emerging markets across Asia, Latin America, The Middle East, or Eastern Europe require this.  If some form of a gift, payment, or consideration is not part of the agreement, it is considered rude and disrespectful, and business negotiation will stall.

Emerging Markets are even finding themselves in a position where they are reluctant to do business with US Multinationals for not respecting local customs and norms and not understanding the FCPA Regulation itself due to the complexity. US Multinationals under FCPA jurisdiction are losing billions of dollars in business opportunities within these markets since their “hands are tied” when it comes to ensuring strict FCPA Compliance. All of which has led to a significant loss in revenue.

However, there is a solution with a win-win for all parties, including the SEC and DOJ.

A robust  FCPA/ Compliance and Controls Training Program delivered by US Companies to Emerging Markets customers, vendors, government officials,  and other third parties to help third party markets better understand US Regulations and has led to a measurable increase in local sales/revenue.

Locally, language adapted, simple, effectively delivered (and maybe even “fun”) training programs using case study interactive examples in a classroom setting provided to local clients/customers/government officials/vendors provides an essential need of US FCPA and Compliance and Controls Requirements.

Private and Public Sector examples show that across Emerging Markets a robust, custom-developed FCPA Training Program, in the local language with interactive case studies  successfully delivered in a hotel or meeting room including modest meals and beverages,  will lead to increased sales/revenue and cost avoidance  in the areas of  Government Tender revenue, ease of custom clearings,  and accelerated regulatory approvals of product or services.

The bottom line benefits are:

-FCPA Regulators appreciate the training and awareness of programs delivered throughout Emerging Markets avoiding subsequent fines and actions

-In-country clients/third parties and government officials enjoy learning about FCPA and how it might differ from their local country norms around bribing

-US Multi-Nationals could significantly increase revenue within emerging markets while complying with FCPA Regulations.

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If you would like to find out more, please contact Frank Orlowski, Founder Ation Advisory Group at 917-821-2147.