Identifying and Preventing Corruption Risks When Doing Business Overseas: Compliance Program and Due Diligence Best Practices

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1 NASBITE International 31st Annual Conference Identifying and Preventing Corruption Risks When Doing Business Overseas: Compliance Program and Due Diligence Best Practices Pia Vining Senior Director TRACE International 23 March 2018 Raising the Standard of Anti Bribery Compliance Worldwide 2017 TRACE International, Inc.

2 About TRACE The world s leading anti bribery standard setting organization. Internationally recognized and respected provider of third party due diligence and shared cost anti bribery compliance solutions. Hundreds of multinational members and thousands of TRACE Certified small & medium sized enterprises around the world. Continuously benchmarking to provide actionable information. Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 2

3 Risks Associated with Third Parties Substantive Risks Corruption and bribery International sanctions International crime Moneylaundering Forced and trafficked labor Conflict mineral usage Practical Risks Increasing number of international business partners Expanding risks: companies held accountable for a growing number of compliance issues Organizations are struggling to remain within best practices Third parties that want to embrace compliance are often confused about conflicting messages Cumulative effect: expense & waste Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 3

4 What do you view as your company s most significant anti bribery compliance challenge? 9.5% 5.4% 8.1% 18.9% 58.1% Understanding government expectations when evaluating adequacy of compliance programs Gifts, hospitality and entertainment Third party due diligence 58.1% Supply and marketing chain compliance Dealing with state owned enterprises Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 4

5 Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 5

6 Which Third Parties are in scope? Depends on what they do Train on scope, process & definition of governmental Continuous review Eliminate guesswork Integrate with finance systems Database of cleared/barred 3Ps Third parties can include: Suppliers Freight forwarders Agents, Traders Consultants Resellers Distributors Channel Partners System Integrators Subcontractors Customs Brokers Legal/Accounting Firms PR Companies Travel Agents JV Partners, etc. Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 6

7 Where to Begin? Take inventory Budget analysis Internal resources Company policies Technology solutions What are the steps to a Risk Based Approach? Identifying high risk third parties Risks of ignoring low risk third parties Verifying and collecting information Red flags and deal breakers Regular review tailor to risk Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 7

8 Third Parties Levels of Risks Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 8

9 How much diligence is due? Finite resources identify consistent risk categories Verifying and collecting information Red flags and deal breakers Documented process Risk Assessment: Countries of operation Services performed Governmental interaction Amount & type of compensation Contract with/ invoice customer Sole product source Industry trends Other? Customised & Consistent Simple Interface Automation Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 9

10 Third Party Red Flags Family members who are government officials Payment outside of territory or through a third party Refusal to sign on to company s code of conduct or undergo due diligence Bankruptcy or other financial difficulty Request for an unusually large commission The intermediary is recommended by a government official Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 10

11 More Third Party Red Flags Reference to political or charitable contributions as a way of influencing official action Personal or business relationship with a foreign government official Lack of credentials or experience you would expect for the services being offered Requests for reimbursement for poorly documented or last minute expenses Credible rumors or media reports of corrupt behavior Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 11

12 Collaborative Approach Goes beyond publicly available information by engaging third parties Brings discipline to third party entities that may have lower levels of corporate formality Keeps the business relationship collaborative Resolution of false positives Limits the amount of missing or incomplete information Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 12

13 Keys to a Successful Review Third party should know that: 1. We are not questioning your integrity 2. We know this is a burden on you 3. Resisting slows things down and may make it seem like you have something to hide 4. There is a business advantage to handling compliance well Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 13

14 Scope of a Robust Review Detailed company information, including information on subsidiaries and affiliated entities Business registrations, as applicable Corporate literature or a company description One financial reference or audited financial statement Beneficial ownership (except for shareholders owning less than 5% of publicly traded companies) Identification of directors and key employees Curriculum vitae for owners, directors and key employees Additional ownerships, directorships and employment of all owners, directors and key employees Current and previous government employment of owners, directors and key employees Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 14

15 Scope of a Robust Review (continued) Business references Media search dating back seven years in a comprehensive international database Local language media searches Denied party screening Internet based searches Code of conduct Anti bribery training in local language Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 15

16 What is Portable Due Diligence? Portable reporting represents an evolution in due diligence. Third parties complete due diligence process to a high standard one time per year at the entity s expense. Monitors and certifies entities for transparent conduct. Achieves collective action goal of finding practical and standard setting solutions. Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 16

17 Duplication of Effort Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 17

18 The Solution A single annual review Reflecting internationally recognized best practices Paid for only once Available immediately Without duplication of effort Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 18

19 No Duplication of Effort Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 19

20 Intermediary Directory The TRACE Intermediary Directory is a searchable database of pre vetted and trained third parties for hire containing thousands of small and medium sized enterprises in almost every country. The Intermediary Directory streamlines the process for identifying and contacting potential new business partners, saving companies the time and expense of a lengthy review process. Only intermediaries that have completed TRACEcertified due diligence within the last year are included in the database. Access to the TRACE Intermediary Directory is complimentary. TRACE members enjoy additional search features. Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc.

21 What Are the Advantages of Being Certified? Gain a valuable compliance credential that differentiates you from competitors and is widely recognized in the international business/development community. Receive a copy of your verified due diligence report to share with an unlimited number of existing and prospective business partners Include your name, or company s name, in the TRACE Intermediary Directory, a publicly searchable database of potential business partners Train up to 40 employees using TRACE s multilingual online training modules Display the TRACE logo in your marketing materials and on your website to showcase your commitment to transparency and supply chain integrity. Attend TRACE Anti Bribery Workshops at no cost. Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 21

22 Visit us online at facebook.com/traceinternational linkedin.com/company/ TRACE international inctwitter.com/trace_inc Questions? youtube.com/traceinternational Pia Vining Raising the Standard of Anti Bribery Compliance Worldwide 4/5/ TRACE International, Inc. 22