Managing Regulatory Change Across Multiple #CW2017

Transcription

1 Managing Regulatory Change Across Multiple #CW2017

2 Speaker Panel Patricia Bailey Compliance Manager MAN Truck & Bus Nicolai Nielsen Director of Tax Compliance Vistra Moderator: Bill Coffin Editor in Chief Compliance Week Pedro De Carvalho Robalo Group Head of Risk Control and Compliance SOCAR Trading #CWE2017

3 MANAGING ANTICORRUPTION REGULATORY CHANGE Patricia M. Bailey MAN Truck & #CW2017

4 MAN Group: Company Structure MAN SE Business areas Commercial Vehicles Power Engineering Divisions MAN Truck & Bus Revenue in 2016: 9,243 mn MAN Latin America Revenue in 2016: 861 mn MAN Diesel & Turbo Revenue in 2016: 3,113 mn Renk (76 %) Revenue in 2016: 496 mn Ø More than 50,000 employees in over 150 countries Ø Nearly 40 colleagues in Compliance organisation (local and central) Ø Languages used at Compliance organisation: German, English, French, Portuguese, Spanish, Italian, Danish, Russian, Polish, Chinese, Turkish Ø Since July 2013: majority-owned by the Volkswagen Group (75% ownership)

5 Compliance at MAN: Compliance Tools Code of Conduct & Policies Compliance Trainings Compliance Risk Assessment Business Partner Approval Compliance Tools Speak up! Helpdesk Continuous Controls Monitoring Audits & ICS Disciplinary #CW2017

6 Challenges of New Legislation & Resources The Challenges: to maintain a global Compliance program in the face of new legislation - Example in France: as of 1 June 2017, French companies of a certain size are required to have a specific Compliance program consisting of eight components. The penalties for the failure to do so are severe. - Example in Spain: as of 1 July 2015, companies of a certain size are required to have a Supervisory Board and to have a prevention structure which includes surveillance and control appropriate to prevent or reduce the risk of criminal offenses. The Resources - Conferences and seminars (such as Compliance Week Europe!) - Local Compliance Champions / Ambassadors - Local attorneys - Free resources on the internet Lexology ( Global Compliance News ( Transparency International ( - Local trade associations or employers confederations (ex: the MEDEF in #CW2017

7 What To Do? Conduct a Compliance Risk Assessment - Standard practice today: the CRA should be regularly updated and designed to identify, analyze and prioritize the risks to which the company is exposed, notably regarding the sector of activity and the geographic zones in which the company exercises its activity Use a matrix to identify the gaps between the national law and your compliance program - Example in France: this made us realize that we needed to improve our supplier due diligence; we had to be certain our whistleblowing system was approved by the CNIL (national DP authority); and we had to strengthen our trainings regarding the protection of the whistleblower and the person accused (identity thereof and the allegations) - Example in Spain: this showed us that we had to create a Supervisory Board and to reinforce our Compliance trainings with a list of the crimes for which the company and employees could be liable Once gaps are identified, make a remediation plan and document what you do! - Example in France: in addition to closing the above gaps, because the authorities can conduct a Dawn Raid simply to verify that you have the required Compliance program, we are creating a secured space on the local server to provide details of the Compliance program - Example in Spain: we established a Supervisory Board that meets several times per year. After finalization, the slides and minutes are stored with multiple persons. We also reinforced our Compliance trainings and conducted multiple presentations regarding the changes to the law. We will also compare the program in Spain to the eight components listed in the French #CW2017

8 Some Specifics of the French AC law ( Sapin II ) Article 17 of Sapin II (the required Compliance program of eight components) applies to companies: - with revenues of over 100M per year (averaged over 3 years); and - more than 500 employees Penalties for failure to have a Compliance program: - Top management: up to 200,000 in administrative penalties - Companies: up to 1 million in penalties - Publication and dissemination of the decision to impose an injunction or monetary sanction - Possible supervision by the ACA for up to five years Penalties for failure to complete the remediation required by the ACA to bring the program in conformity with the eight components: - Top management: up to two years imprisonment and/or a fine of 50,000 - Companies: the company can be fined as much as twice the amount it was previously sanctioned for failing to have a Compliance program in the first place Article 9 of Sapin II requires any organization with more than 50 employees to have a whistleblowing system (now, as of 1 January 2018). Moreover, Sapin II has severe consequences for failure to protect the whistleblower and the person accused (identity thereof and the allegations)

9 The Eight Components of Article 17 of Sapin II 1. A Code of Conduct which defines and illustrates the different types of forbidden behaviour which could characterise facts of corruption or influence peddling. The Code of Conduct must be integrated into the internal rules of the company and must be presented to the works council. 2. A whistle-blowing system designed to receive alerts coming from employees regarding the existence of conduct or situations that violate the Code of Conduct of the company. 3. A risk map which is documented and regularly updated and designed to identify, analyse and prioritise the risks to which the company is exposed regarding external solicitations of corruption, notably regarding the sector of activity and the geographic zones in which the company exercises its activity. 4. Procedures for the evaluation of clients, suppliers and intermediaries that take into account the findings of the risk mapping. 5. Internal or external procedures for accounting controls that are destined to assure that the books, registers and accounts are not used to mask acts of corruption or influence peddling. These controls can be provided by the accounting or financial services of the company itself. 6. A training programme destined for executives and for all persons exposed to risks of corruption or influence peddling. 7. A disciplinary system that permits the sanctioning of employees in the event of violations of the Code of Conduct of the company. 8. A programme of internal evaluation and control of implemented measures.

10 Cross Border Impacts in Financial Regulations Pedro de Carvalho, Group Head of Risk Control and Compliance SOCAR #CW2017

11 Commodity Trading Firms «Commodity trading firms (CTFs) add value by identifying and optimizing transformations in commodities that reconcile mismatches between supply and demand: in space - using logistics in time - through storage in form - with processing Physical and regulatory bottlenecks may act as constraints on these transformations. CTFs undertake physical arbitrage activities, which involve the simultaneous purchase and sale of a commodity in different forms.» In The Economics of Commodity Trading Firms, Prof. Craig Pirrong, University of Houston SOCAR Trading is a global CTF trading Crude, Refined Products and LNG Geneva, CH London, UK Dubai, UA Singapore, SG Calgary, CA Houston, US

12 Inside, Trans, Fundamental, Non-Std Contracts directly to ACER IT System Inside Information Transparency Info Fundamental Data OMP ACER REMIT Energy Market Participant Power Gas LNG Orders to Trade «Wholesale Energy Products» RRMs Std. Contracts RRMs ICE TV CME TR EFETNet Mitigation of Operational Risk ESMA EMIR FINFRAG FMIA Clearing Threshold Clearing Threshold NFC-, TC FC, NFC+ TC+ FCM FC+, NFC+ FC- NFC- OTC Derivatives In 5 Asset Classes IR, Credit Equity, FX Commodities OTC Derivatives In 5 Asset Classes IR, Credit Securities, FX Commodities NON-CLEARED CLEARED Hedging Definition IFRS IAS39, IFRS9 CLEARED NON-CLEARED Delegated Reporting Double - Sided Single - Sided CCP Margin Requirements Trade Repositories DTCC Regis TR ICE TV CME TR FCM Trade Repositories Regis TR SIX IM VM Collateral MTM Valuation Timely Confirm Portfolio Reconc Portfolio Comp Dispute Resolut FINMA MiFID II Trading Venues DMA, HFT burden of proof Exchange, OTF, MTF «Commodity Derivatives» Definition by ESMA Hedging Definition IFRS IAS39, IFRS9 Ancillary Calculation Trade Report Pos Limits Report FCM Exchange EEOTC and Non EU EEETD (?) Pos Limits Exemption Request EU NCA MAR ecomms Monitoring «Market Soundings» Trade Patterns Monitoring (Wash, Spoof, Layer) STORs

13 The Spirit, the Letter (of the Law) and the Cross Border Reality FINFRAG/FMIA Single-Side Trade Reporting NFC- has NO REPORTING OBLIGATIONS IF Counterparts are based in Switzerland When counterparts are not based in Switzerland NFC- HAS ALL THE REPORTING OBLIGATIONS* (incl trades with FCM and non recognized CCP) *Assuming counterpart will not agree to report to CH Trade Repositories APPROACH Comply CH Regulator (FINMA) requirements Absorb the regulatory cost Wait for full EMIR/FINFRAH equivalence Wait for EU Trade repositiories: to adopt data format required by FINMA to give direct access to FINMA No timeline expectations

14 Where to Report the Abuse (Market)? EU MAR (Market Abuse Regulation) Covers trading and instruments in EU venues or related instruments EU and local regulators established civil and criminal offences for market abuse actions STOR includes very specific information e.g details and action of natural person EU entities to report to NCA STORs («Suspicious Trade and Order Report») What about reporting by non-eu entities (e.g CH)? CH entities trade in EU trading venues THUS subject to EU MAR FCA expects STOR to be subject to entity s regulator BUT CH regulator will not handle STORs AND CH entity subject to Swiss Data Protection Laws and Swiss Penal Code (Art 271) APPROACH Request legal opinion Document the reasoning to report/not report Perform your MAR Obligations and document/investigate internally CH supervisory authorities may grant administrative assistance to foreign supervisory authorities

15 Where to Report the Abuse (Market)?

16 Managing FATCA/CRS Nicolai Nielsen Trust, Fiduciary, Fund and Corporate #CW2017

17 The International Exchange of Tax Information FATCA CRS Tax Rulings CbC DAC6 Who reports Financial Institutions Financial Institutions MNE with consolidated Tax revenues Administration exceeding 750 million Intermediaries like law / accounting firms advising / implementing aggressive tax structures What Account Holders/ Controlling Persons Account Holders/ Controlling Persons APAs, tax rulings Key business metrics on a country by country basis Aggressive tax structures and specific transactions

18 The International Exchange of Tax Information FATCA,CRS Foreign Tax Administration Foreign Tax Administration Domestic Tax Administration Foreign Tax Administration Reporting #CW2017

19 The International Exchange of Tax Information Challenges Collection of information Cooperation of different departments across the globe Responsibilities for collecting/storing/providing what pieces of information Unclear #CW2017

20 The International Exchange of Tax Information Solutions Predictable Procedures Automate is not the solution Need centralized system, providing real time information on status of collection of #CW2017

21 DISCUSSION

22 Thank you! Your feedback is much appreciated! Please remember to complete the feedback survey, available in the conference app and at the registration #CWE2017