BRIBERY IN INTERNATIONAL BUSINESS TRANSACTIONS GLOBAL Headquarters the gregor building 716 West Ave Austin, TX 78701-2727 USA
TABLE OF CONTENTS I. INTRODUCTION 1BCourse Overview... 2 94BMajor International Initiatives... 2 05BImplementing Legislation... 3 15BMoney Laundering... 3 25BCorporate Compliance... 3 II. THE EMERGING GLOBAL ANTI-CORRUPTION ENVIRONMENT: THE MAIN INTERNATIONAL INITIATIVES AGAINST CORRUPTION Introduction... 5 The Organization for Economic Cooperation and Development... 5 The Recommendation on Combating Bribery in International Business... 6 The Tax Recommendation and Revised Recommendation... 7 The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions... 8 The Recommendations for Further Combating Bribery of Foreign Officials... 10 The Guidelines for Multinational Enterprises... 11 The Recommendation on Principles for Transparency and Integrity in Lobbying... 11 The Good Practice Guidance on Internal Controls, Ethics, and Compliance... 12 The Guidelines to Protect Human Rights and Social Development... 13 United Nations Convention Against Corruption... 13 Prevention... 14 Criminalization... 14 Asset Recovery... 15 International Cooperation... 16 Major Regional Initiatives Against Corruption... 16 The Inter-American Convention Against Corruption... 16 European Union Convention on the Fight Against Corruption Involving Officials of the European Communities or Officials of Member States... 16 Council of Europe Criminal Law Convention on Corruption... 17 African Union Convention on Preventing and Combating Corruption... 17 Review Questions... 19 III. IMPLEMENTATION OF INTERNATIONAL STANDARDS Introduction... 23 U.S. Foreign Corrupt Practices Act... 23 Anti-Bribery Provisions... 24 Exception for Facilitating Payments... 26 Affirmative Defenses... 26 Department of Justice Recommendations... 27 Criminal Enforcement of Anti-Bribery Provisions... 29 Civil Enforcement of Anti-Bribery Provisions... 29 Accounting Provisions... 30 Enforcement of the Accounting Provisions... 32 Indicators of FCPA Risks... 35 Implications of the Sarbanes-Oxley Act... 36 i
III. IMPLEMENTATION OF INTERNATIONAL STANDARDS (CONT.) Implications of the Dodd-Frank Act... 38 UK Bribery Act... 38 Scope of the UK Bribery Act... 39 Three Categories of Offenses... 39 Bribery of Foreign Public Officials... 40 No Facilitating Payments Exception... 41 Prosecution and Penalties... 41 FCPA Versus UK Bribery Act... 41 Other National Implementing Legislation... 42 Review Questions... 44 IV. CONCEALING CORRUPTION: MONEY LAUNDERING SCHEMES Introduction... 47 The Money Laundering Process... 47 Placement... 47 Layering... 48 Integration... 48 Money Laundering Methods... 49 Using a Front Business to Launder Funds... 49 The Real Estate Industry... 54 Emerging Payment Methods and Schemes... 56 Banks and Other Depository Financial Institutions... 61 Money Services Businesses... 62 Insurance Companies... 63 Casinos... 63 Shell Companies... 64 Charities and Nonprofit Organizations... 64 Calling in a Specialist... 65 Alternative Remittance Systems... 65 International Anti-Money Laundering Efforts... 69 The Financial Action Task Force... 69 Other International Anti-Money Laundering Organizations and Initiatives... 76 Anti-Money Laundering Legislation... 78 U.S. Anti-Money Laundering Laws... 78 UK Anti-Money Laundering Laws... 81 The U.S. State Department Country Reports... 83 Money Laundering Vulnerability Factors... 84 SEC/DOJ Bribery Red Flags... 85 General Red Flags... 86 Transaction-Specific Red Flags... 86 Payments Request Red Flags... 86 Red Flags Associated with the Suspect Individual... 86 The Corrupt Recipient... 86 The Corrupt Payer... 87 Enforcement and Prevention Strategies... 88 Policy Statement... 88 ii
IV. CONCEALING CORRUPTION: MONEY LAUNDERING SCHEMES (CONT.) Know-Your-Customer Programs... 88 Monitoring Accounts... 90 Special Problems for Insurance Companies... 90 Review Questions... 93 V. LIMITING LIABILITY: CORPORATE GOVERNANCE AND FRAUD PREVENTION STRATEGIES Introduction... 97 International Corporate Governance Initiatives... 97 OECD Principles of Corporate Governance... 97 UN Guidance on Good Practices in Corporate Governance Disclosure... 100 Corporate Compliance and Fraud Prevention... 101 General Elements of an Effective Corporate Compliance Program... 102 Corporate Fraud Prevention Strategies... 104 Creating a Culture of Honesty and High Ethics... 105 Setting the Tone at the Top... 105 Due Diligence... 106 Training... 109 Confirmation... 109 Discipline... 109 Evaluating Anti-Fraud Processes and Controls... 110 Identifying and Measuring Fraud Risks... 110 Mitigating Fraud Risks... 123 Implementing and Monitoring Appropriate Internal Controls... 123 Developing an Appropriate Oversight Process... 125 Audit Committee or Board of Directors... 125 Management... 126 Internal Auditors... 126 Independent Auditors... 126 Fraud Examiners... 126 Bribery Prevention Initiatives... 127 Transparency International Business Principles for Countering Bribery... 127 The Committee of Sponsoring Organizations Internal Controls Integrated Framework... 129 Control Environment... 129 Risk Assessment... 130 Control Activities... 130 Information and Communication... 131 Monitoring... 131 Anti-Money Laundering Measures... 132 The FATF Nine Special Recommendations... 132 The USA PATRIOT Act... 132 Mandatory Anti-Money Laundering Programs... 133 Identification and Verification of Accountholders... 133 Restrictions on Shell Banks and Foreign Accounts... 133 Suspicious Activity Reports... 133 Review Questions... 135 iii
VI. APPENDIX A: THE ACFE S FRAUD PREVENTION CHECK-UP... 139 VII. APPENDIX B: SAMPLE FRAUD POLICY... 147 VIII. APPENDIX C: SAMPLE CODE OF BUSINESS ETHICS AND CONDUCT... 153 IV. SOLUTIONS TO REVIEW QUESTIONS II. The Emerging Global Anti-Corruption Environment: The Main International Initiatives Against Corruption... 171 III. Implementation of International Standards: Domestic Anti-Bribery Legislation... 176 IV. Concealing Corruption: Money Laundering Schemes... 182 V. Limiting Liability: Corporate Governance and Fraud Prevention Strategies... 187 X. BRIBERY IN INTERNATIONAL BUSINESS TRANSACTIONS FINAL EXAMINATION... E-1 XI. INDEX... I-1 iv