Anti-corruption and bribery strategies and adapting to high risk territories

Transcription

1 Anti-corruption and bribery strategies and adapting to high risk territories Yngve Berntsen Chief Procurement Officer Fugro Norway EURO MED E&P EuroMedOffshore 25 September 2012

2 AGENDA Most recent developments in laws and regulations globally Dealing with secondary parties such as agents and consultants Due Diligence and audits of secondary parties to minimize chance of bribery Contractual clauses to battle corruption Adequate Procedures need to comply with anti-bribery laws.

3 Mission Our mission is to be the world s leading service-provider in the collection and interpretation of data relating to the Earth s surface and sub-surface, and in the support of infrastructure developments on land, at the coast and on the seabed.

4 Client Sectors Oil & Gas Mining Building and Infrastructure Sustainable Energy Public Sector Other Sectors We align our service offer with six key client sectors, providing support and resources tailored to the specific needs of each. This enables us to deliver multi-disciplined, cross-divisional solutions anywhere in the world.

5 Resources 13,700 Employees 60 Vessels 75 CPT Trucks 27 Laboratories 29 Jack-up Platforms 60 Aircraft 250 Land-based Drill Rigs 15 Offshore Drill Rigs 150 ROVs 8 AUVs 278 Offices Fugro s people, vessels, equipment and facilities are continually growing in number and capability in order to meet the demand for continuous high quality services in ever-more challenging regions of the globe.

6 Divisions The Fugro organisation comprises three main divisions - Survey, Geoscience and Geotechnical. Each of these incorporates business lines specialising in particular client services.

7 Local Presence Global Integration Through our international network of offices and facilities, we deliver local expertise, specialist disciplines, pioneering technologies and world-class resources that combine to provide unified support for large scale projects.

8 UK BRIBERY ACT 2010 Legal Context Latham & Watkins

9 UK BRIBERY ACT 2010 What is New? It criminalize both active and passive bribery, i.e. both bribing and being bribed It criminalizes not just bribery of public officials, but also bribery entirely in the private sphere It does not require proof of dishonesty or corruption It criminalizes the failure to prevent bribery taking place The offences will have extensive extra-territorial reach, criminalizing activities which may take place entirely outside the UK It also applies to companies carrying on business in the UK, even when the bribery is unconnected with the UK Liability is triggered by a person acting for or on behalf of the organisation paying a bribe, even when done by associated person who have no connection with UK There is no exception for facilitation payment (speed or grease payment) Local customs and practices will not necessarily provide a defense Committing offences could lead to imprisonment for up to 10 years and/or unlimited fines (for individuals and corporations) Only defense is having adequate procedures designed to prevent bribery taking place

10 Laws & Regulations 1977 US Foreign Corrupt Practices Act (FCPA) 1977 ICC Rules on Combating Corruption 1995 European Union Convention on the Protection of European Communities Financial Interests 1996 Inter-American Convention against Corruption (OAS) 1997 OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions 1997 European Union Convention on the Fight against Corruption involving officials of the European Communities or officials of Member States 1997 Resolution of the Committee of Ministers of the Council of Europe: Twenty Guiding Principles for the fight against Corruption 1999 Council of Europe Criminal Law Convention on Corruption 1999 Council of Europe Civil Law Convention on Corruption 1999 Resolution of the Committee of Ministers of the Council of Europe: Agreement Establishing the Group of States against Corruption 2000 Council of Europe Criminal Law Convention on Corruption 2000 United Nations Convention against Transnational Organized Crime (UNTOC) 2000 Southern African Development Community Protocol against Corruption 2001 Economic Community of West African States Protocol on the fight against Corruption 2001 ADB-OECD Action Plan for Asia-Pacific 2002 US Sarbanes-Oxley Act 2003 United Nations Convention Against Corruption (UNCAC) 2003 Transparency International: The Business Principles for Countering Bribery 2003 African Union Convention on Preventing and Combating Corruption 2004 UN Global Compact: Principle 10 on Corruption 2004 World Economic Forum: Partnering Against Corruption Initiative (PACI) 2009 OECD Recommendations for Further Combating Bribery of Foreign Officials in International BusinessTransactions 2010 UK Bribery Act World Bank /International Monetary Fund Investigation of corruption committed by companies and governments Local Laws

11 US FCPA vs UK Bribery Act 2010

12 US FCPA vs UK Bribery Act 2010 (cont.)

13 General Trends Transparency International More Countries sign Conventions More Companies have Anti Corruption programs in place Stricter Enforcement Business integrity matters / Home country governance matters Public is believed to could play an important role No improvement over time Corruption levels increasing around the world, most in N America and EU Political Parties most corrupt Petty bribery is widespread and unchanged, mostly police Government actions seen as ineffective Little trust in formal institutions fight of corruption Clear evidence of bribery between private companies Bribery prevalent across business sectors

14 Trends and Patterns in FCPA Enforcement Department of Justice (DOJ) U.S. Securities and Exchange Commission (SEC) General increase in FCPA enforcement Frequency of enforcement have increased Severity of enforcement have increased (fines and prison) Prosecution of Individuals Parallel International Investigations increase Parallel Litigation increase More creative methods in resolution of criminal cases (non-prosecution/ deferred prosecution agreements) for voluntary disclosure and cooperation Post-proceeding monitors of compliance conduct Self reporting spike partly as part of M&A activity

15 FCPA ENFORCEMENT

16 FCPA ENFORCEMENT

17 ALLEGED FCPA VIOLATION LOCATIONS

18 UK BRIBERY ACT 2010 Adequate Procedures Latham & Watkins

19 UK BRIBERY ACT 2010 RISK ASSESSMENT Country Risk / Culture Risk Transparency International, Corruption Perceptions Index Sectoral Risk Extractive industries Large Scale Infrastructure Transactional Risk Charitable / Political contributions Licenses / Permits Public Procurement Business Opportunity Risk High Value projects Projects with many contractors or intermediaries Projects not apparently done at market market prices Projects without clear legitimate objective Business Partnership Risk Intermediaries / dealings with public officials Relations with prominent public officials linked to proposed business Number and reputation of their clientele Length of contract Tasks and responsibility of counterpart Transparency, openess and control possibilities Use of gifts, hospitality and entertainment activities

20 Transparency International Corruption Perceptions Index (CPI) for perceived levels of public-sector corruption. 183 countries Bribe Payers Index (BPI) perceived likelihood of companies from these countries to pay bribes abroad (including private-to-private). 28 countries Global Corruption Barometer (GCB) General publics view on and experience with corruption level in their country and their government s efforts to fight corruption. 86 countries Global Corruption Report National Integrity Surveys. Business Principles for Countering Bribery

21 Transparency International - COUNTRY RISK

22 2011 Corruption Perception Index Rank Country New Zealand Denmark Finland.. Afghanistan Myanmar North Korea Somalia Score

23 RELATED LAWS & GUIDELINES USA Patriot Act (2001) UNSC Resolution 1373 (2001) UNSC Resolution 1267 (1999) UNSC Resolution 1566 (2004) UK Terrorism Act (2000) (2006) UK Anti-Terrorism Crime and Security Act (2001) UK Prevention of Terrorism Act (2005) UK Regulation of Investigatory Powers Act (2000) US Executive Order (2001) OECD FATF (Financial Action Task Force recommendations) EU 3MLD (2005) (third money laundering directive)

24 COMPLIANCE REQUIREMENTS AML Anti Money Laundering CFT Countering the Financing of Terrorism KYC Know Your Customer CDD Customer Due Diligence CIP Customer Identification Program PEP Politically Exposed Person EDD Enhanced Due Diligence

25 EXAMPLE: WORLD CHECK 12 million Objects (Companies, Individuals, Organizations, Countries, Vessels etc.) 1,6 million high risk Objects Over 400 sanctions, warnings and watch lists 0,8 million PEP Update on more than 360 official sources in more than 200 countries every day for new sanctions and updates.

26 ANTI-BRIBERY POLICIES - GUIDELINES Bribery Extortion Solicitation / Kick Backs Trading in Influence Laundering Political Contributions Contact with Public Officials Charitable Contributions and Sponsorships Gifts Hospitality, Entertainment and Expenses Travel costs Facilitation Payments Conflicts of Interests Human Resources Financial and Accounting

27 BUSINESS PARTNERS Suppliers / (Sub-)Contractors Joint Ventures and Consortia relationships Related Entities (Subsidiaries, Partly owned companies) Agents or other intermediaries Customers Business Development Consultants Sales Representatives Resellers Custom Agents General Consultants Franchisees Lawyers Accountants Distributors Mergers & Acquisitions (due diligence) Entities in which it has a significant investment Entities with which it has significant business relationships

28 BUSINESS PARTNERS Authorities Related Entity Supplier Contractor SubContractor Customer Agent JV Partner

29 SELECTION OF BUSINESS PARTNER Integrity Due Diligence is the systematic collection and analysis of information, properly documented, to assess the integrity risk involved in doing business with your Business Partners. Qualifications Past performance Reputation Background Reputation for quality work and compliance with law

30 BASIC INFORMATION COLLECTION AND VERIFICATION Ownership information, corporate structure, place of incorporation and names of officers and directors. Ownership and interests in other organizations: company, key management personnel and their immediate families, that might result in conflicts of interest. Business, government and political affiliations: company, key management personnel and their immediate families, including any relationship with a Government Official. Business and financial references, records: The company or individual associate should be asked to provide these. If audited financial records for the previous years are not available, a third party financial referee may be requested to state the length of the relationship and provide an opinion of reliability, financial capabilities and probity. Obtain independent confirmation of information and verification of written references. Legal disclosures: The company or key management personnel in previous insolvency proceedings, criminal convictions or investigations, or civil litigation (previous, pending or potential, in all cases). Compensation: Local market rates should be obtained for the goods or services to be supplied and compared with the quoted rates from the prospective associate. Qualifications, corporate membership of professional bodies. Credit rating: Use reputable commercial source to check the credit rating for the associate. Debarred or restricted parties lists: prospective associate not appear on any local, national or international listing, of restricted parties (pursuant to trade regulations imposed by the US, UK or other nations) or of organizations debarred from bidding (eg World Bank) or international organizations or companies.

31 OWNERS RELATED ENTITIES KEY PERSONNEL

32 BUSINESS PARTNER INTEGRITY DUE DILIGENCE Fraud Audit (Red Flags) Payments to Political Exposed Persons Payments according to contracts Payments to tax havens Periodical payments of round figures Cash payments Compliance Review Ruling documents, routines and procedures, implementation (compliance, anti-corruption, travels, gifts, donations) Internal audits, Yearly reports Contracts with Agents and Consultants Overview of contracts with the Authorities in high risk countries

33 RED FLAGS From Applicant s Information A public official holds company shares or other interests in the company in his own right. (Note: It is not unusual for a public official to hold an interest in a company in his official capacity.) A foreign official has recommended the applicant, particularly if that official has discretionary authority over the business at issue. An officer, senior executive or key employee of the company has an interest in another company that might be considered to be a competitor. An officer, senior executive or key employee of the company is related to an officer, senior executive or key employee of a company that might be considered to be a competitor. There are uncertainties in the business or financial references. The normal terms of business quoted by the company or individual differ to a material extent to local business terms and conditions. Payment instructions quoted by the company or individual include split payments, payments to an apparently unrelated third party, or to a bank account in an off shore tax regime. The company auditors have qualified the accounts produced by the applicant for reasons that are relevant to the application.

34 RED FLAGS From Applicant s Information (2) There has been a criminal conviction of a current employee of the company for bribery, corruption or a similar criminal offence, or a civil action regarding bribery or corruption has been unsuccessfully defended by the company. There is a current or outstanding criminal case regarding bribery, corruption or a similar criminal offence, or a current or outstanding civil action regarding bribery or corruption, against a current employee of the company. The individual has been convicted of bribery, or a similar criminal offence, or has appeared as a defendant in a civil case of a similar nature. The company or individual discloses previous involvement in insolvency proceedings. There is a significant difference between the remuneration rate quoted by the company or individual and local market rates for similar goods or services. The applicant advises that he is unable to sign that he will abide by all local and international laws regarding bribery and corruption and that he cannot abide by the principal s business ethics policy. The applicant requires that his identity, or if the applicant is a company, the identity of the directors, owners or employees, not be disclosed.

35 RED FLAGS from Verification or Research Qualifications claimed by the company or individual are denied by the issuing body. The issuing body for the claimed qualifications is not a bona fide educational establishment or professional body, eg the company or individual can simply purchase the qualification without sitting examinations or proving standards of competency. The applicant is found to have had little or no experience in the industry concerned. There are significant variances between the written business and employment references and the interview of the referees. Financial referees express reservations regarding the financial probity of the company or individual in question. Due diligence reveals that the applicant is a shell company or has some other unorthodox corporate structure.

36 RED FLAGS from Verification or Research (2) The records from the official registry of companies do not agree with the information given by the applicant regarding ownership of the company, directorships or details in any of the other required official documentation filed regarding the organization. The company or its immediate or ultimate holding company are registered in an off shore tax haven renowned for its lack of corporate or banking transparency. The owners and/or directors of the company are discovered to be nominees and the applicant refuses to disclose the real owners/directors. Electoral or local business records show a different location for the company or individual. (Note: This may simply mean that the official records are not up-to-date). An official body advises a criminal or civil/administrative conviction and this conviction has not been disclosed by the individual. (Note: This information is not legally available in all jurisdictions).

37 RED FLAGS from Verification or Research (3) Official checks reveal a criminal conviction for bribery, corruption or a similar offence, or a civil action where the company or individual has unsuccessfully defended their actions and the applicant has not disclosed this case. Official checks reveal a current or outstanding criminal case involving bribery, corruption or a similar offence, or a current or outstanding civil action, which has not been disclosed by the applicant. A reputable credit agency has provided a poor credit rating on the company or individual or has advised previous liquidity problems not disclosed by the applicant. The individual or company appears on a list of those debarred from bidding on local, national or international contracts. Media searches reveal potentially damaging information regarding the applicant. Research work uncovers close associations with local or national politicians, potential competitors, criminal or political activists, etc.

38 RED FLAGS British Bankers Association The associated person insists on operating in anonymity There are persons involved in the transactions who have no substantive commercial role The associated person does not reside or have significant business presence in the country where the customer or project is located Excessive or disproportionate gifts and hospitality, offered, received and declined Relocation of third party/supplier/contractor/agents to countries with higher bribery risk Large/frequent fourth-quarter adjustments to contractual payments by associated persons.

39 CONTRACT TERMS Services: All services and result expectations to be provided by all parties under the contract should be legitimate and should be expressly stated and described in the contract. Fees: All fees or other compensation payable in respect of the contractual services should be expressly stated in the contract and should be proportionate to the services being provided. Fees or compensation which appear to be larger than is warranted by the services specified in the contract may indicate that the fees or compensation are being used to conceal a bribe. Payments: Payment methods for fees or other compensation should be expressly stated in the contract and must be capable of legitimate justification. In particular, bank accounts for receiving payments should clearly belong to the relevant party and should, unless there is good reason to the contrary, be located in the country of residence/incorporation of the relevant party, country of HQ or country where work is performed. Any payment in a currency or into an account which cannot be properly justified (for example, payment into an off-shore bank account) may facilitate a corrupt transaction or, at the very least, may give rise to suspicion of a corrupt transaction. The principle that no payments be made other than in strict accordance with the terms of the agreement. No cash payments. Definition of corruption: Corruption should be defined to include bribery, extortion, fraud, deception, collusion, cartels, abuse of power, embezzlement, trading in influence, money laundering, and any similar criminal activity.

40 CONTRACT TERMS (2) Warranties: Each party should provide anti-corruption warranties that: It has not participated in any corrupt practices in the past it will not participate in any corrupt practices in relation to the contract or project; it will ensure that its officers and employees, subsidiary and related companies, do not participate in any corrupt practices; it will take reasonable steps to ensure that its agents, joint venture and consortium partners, sub-contractors, suppliers and consultants do not participate in any corrupt practices. Passing on obligations: The contract should pass on to the other party any relevant anti-corruption obligations assumed by the party in its other contracts in relation to the same project or transaction. For example, if a contractor has given any anticorruption warranties to a project owner, then it should require similar warranties from all of its subsidiary and related companies, sub-contractors, suppliers, agents and consultants. Claims: Each party should undertake that, in the event of claims between the parties, it will comply with a claims code which requires integrity in the event of contract claims. The code would oblige claimants to take reasonable steps to ensure that all claims submitted by it are genuine and accurate. The recipients of claims would be obliged to take reasonable steps to review the claims diligently, objectively and in good faith. Compensation: Each party should be entitled to compensation in the event of any loss or damage suffered as a result of corrupt activity by the other party.

41 CONTRACT TERMS (3) Termination: Each party should be entitled to suspend/terminate the contract in the event of a corrupt act by another contracting party where the corrupt activity goes to the root of the contract. For example, a project owner should be entitled to terminate a contract which has been won through bribery. Similarly, a contractor should be entitled to terminate a contract with the project owner if it discovers that the whole purpose of the project is corrupt. The sanction of termination without compensation in the event of the associate violating applicable anti-bribery laws or breaching the company s ethics policy. Legitimacy of terms: Parties should test the legitimacy of each contract term by asking whether, if it was being prosecuted for corruption, it could legitimately justify the existence or omission of a particular detail from the contract. Laws: The requirement of both parties to comply with all applicable laws and regulations and specifically anti-bribery laws except to the extent that such compliance would subject a party to liabilities or penalties under the law of its home country. Policies: Confirmation from the associate that he has been provided with a copy of the company s ethics policy, and applicable guidelines on gifts, hospitality, entertainment and donations or equivalent document, that he has read and understood the policy and guidelines and will comply with it. Annual Certification: Also consider a requirement for annual certification by the associate that he has complied with all laws and regulations and with the company s ethics policy and guidelines.

42 CONTRACT TERMS (4) Internal Control: The associate should be required to maintain adequate internal management controls and to properly record and report all transactions in its books and records, properly, completely and fairly for transparency. No off the books or secret accounts. Audit Rights: The company should have audit rights concerning all income and expenditure managed by the associate on its behalf, and compliance review to verify no bribery payment. Assignment: The associate is prohibited from the assignment of rights to, or employment of, a third party without approval from the company. Appearance: Commitment by the associate to avoid even the appearance of an unethical payment or Conflict of Interest and to report any requests for such payments.

43 RED FLAGS After the Contract signature Payments: Payment instructions on incoming invoices are frequently amended. Payment on incoming invoices is requested in cash. Payment is requested to a third party, off shore or numbered bank account. Payments in advance are frequently requested. Amendments are requested to issued invoices over the telephone and with little explanation. Complex payment instructions are given, possibly including split payments. A significant increase in remuneration is requested within the first year of operation of the contract. Urgent requests are made for the payment of large unspecified expenses. Payment on inflated invoices is requested with credit notes to follow. Other operational red flags: A number of complaints regarding non-payment or ethical standards are received from subcontractors. Reliable sources or media reports suggest inappropriate payments made on behalf of the principal. The associate is unable to handle the principal s business with the quality and quantity of resources at his command. The associate proves to be ignorant of local laws and customs regarding the principal s business. The associate giving or receiving extravagant gifts hosting lavish events to public officials or Company before contract renewal.

44 IGNORANCE IS NO EXCUSE

45 Thank You! Questions?