31 Days to a More Effective Compliance Program

JVs provide many FCPA risks that other types of business relationships do not bring. For instance, the JV may interact with foreign government officials or employees of a state-owned enterprise; then leverage those relationships for an improper benefit relating to contracts, regulatory licenses, permits or customs approvals. It is difficult to regulate a JVs interaction with foreign government off...

Numerous U.S. companies have come to FCPA grief for their overseas JVs and this continues to be a bane for many companies under the FCPA. There are some basic compliance terms and conditions which should be considered for any foreign JV agreement to help U.S. companies manage these compliance risks. As a starting point, it is important to have compliance terms and conditions, these reasons can inc...

When you bring two entities together to operate jointly, there are several difficult issues to analyze. For the U.S. company operating under the FCPA, there must be an adequate business justification for a JV with a specific partner, all in writing and approved by an appropriate level of the organization. This is where the due diligence process comes into play. The due diligence process should be...

Just as the FCPA enforcement field is covered with actions centering around M&A, there are multiple actions involving JVs. JVs continue to plague many U.S. companies up to this day. In many ways, JVs present more difficult issues for the compliance practitioner than M&A because of the control issues present in JVs with foreign governments or state-owned enterprises ownership. There are other risks...

One of my favorite words in the context of FCPA enforcement is dis-link. It a useful adjective in explaining how certain conduct by a company must be separated from the winning of business and more broadly it works on many different levels when discussing the FCPA. This concept of dis-linking was most prominently laid out in Opinion Release 14-02. It provided one of the most concrete statements fr...

What are some of the key FCPA enforcement actions involving M&A? These enforcement actions, FCPA Resource Guide and the Evaluation of Corporate Compliance Program (and Update) have all made clear that the DOJ and SEC will vigorously prosecute companies which allow bribery and corruption to continue after a merger or purchase occurs. The key point to remember is that if a company was engaging in br...

For the month of March, we will be considering how to create a more effective compliance program involving business ventures. This will include the role of compliance in M&A, JV agreements, distributorships, teaming agreements and franchises as well as other forms of business relationships. The FCPA Resource Guide, 2nd edition made clear that one of the Hallmarks of An Effective Compliance Program...

To conclude this month's series on Internal Controls, I am joined by Vin DiCianni, Founder and CEO of AMI. We discuss how corporate culture is a foundational internal control. It is a fascinating topic that is not discussed enough by compliance professionals. 3 Key Takeaways. It must start at the top. Hiring is critical to creating and sustaining an ethical culture. Creative internal controls arou...

One of the specific requirements laid out in the 2020 Update, is around internal controls and more specifically control testing. It stated: Control Testing – Has the company reviewed and audited its compliance program in the area relating to the misconduct? More generally, what testing of controls, collection and analysis of compliance data, and interviews of employees and third-parties does the c...

The fifth and final Objective is Monitoring Activities and as with all other components of the COSO Cube, Monitoring Activities are part of an inter-related whole and cannot be taken singularly. For the CCO or compliance practitioner, Monitoring Activities has been growing in importance over the past few years and will continue to do so in the future as is reinforced in the COSO 2013 Internal Cont...

As with the other components of the COSO Cube, the objective of Information and Communication is not to be taken in a vacuum. Indeed, one of the more interesting aspects of this objective is that it runs not only vertically but also horizontally. Principle 13: Use of relevant and quality information. Principle 14: Communicate internally. Principle 15: Communicate externally. Obviously, there must...

In its Framework Volume, COSO Control Activities “are the actions established through policies and procedures that help ensure that management’s directives to mitigate risks to the achievement of objectives are carried out.” They should be performed at all levels in an organization’s process cycle. Principle 10: Selects and develops controls activities. Principle 11: Selects and develops general c...

Objective II is designed to provide a company with a “dynamic and iterative process for identifying and assessing risks.” For the compliance practitioner, none of this will sound new or even insightful, however the Framework requires a component of management input and oversight that was perhaps not as well understood. The objective of Risk Assessment consists of four principles. Principle 6: Suit...

Both Board of Directors’ independence and Compliance Committee (or other applicable committees) oversight issue are essential to this Objective because the Compliance Committee needs to be actively engaged to be comfortable that the company has implemented the internal controls under Sarbanes-Oxley (SOX) 404(a); as required under Principles 1 & 2. The external auditors must then be comfortable tha...

COSO was adopted in 1992 as a framework for basis to design and then test the effectiveness of internal controls. In 2010, it was deemed necessary to update this more than 20-year old COSO Framework, to provide a more supportable approach when adversarial third parties challenged whether a company has effective internal controls (such as the SEC). , I believe that the SEC will use this to review a...

In 2016, one of the most interesting non-international-focused FCPA enforcement actions was announced by the SEC. It involved a clear quid pro quo benefit paid out by United Airlines, Inc. to David Samson, the former chairman of the Board of Directors of the Port Authority of New York and New Jersey, the public government entity which has authority over, among other things, United’s operations at...

Is a Board of Directors a compliance internal control? The clear answer is yes. In the 2020 FCPA Resource Guide, Hallmarks of an Effective Compliance Program, there are two specific references to the obligations of a Board in a best practices compliance program. One states, “Within a business organization, compliance begins with the Board of Directors and senior executives setting the proper tone...

While many compliance practitioners believe that employee expense reports are a sufficient internal control of gifts because there are other ways in which a gift can be presented, other controls must be considered. Once your company policy on gifts has been finalized, the internal controls over expense reports fall into three primary areas: The expense report format, including what information it...

Bribery built into the fabric of Chinese healthcare system”, reporters Jamil Anderlini and Tom Mitchell wrote about the ‘nuts and bolts of how bribery occurs in the healthcare industry in China. The authors quoted Shaun Rein, a Shanghai-based consultant and author of “The End of Cheap China,” for the following “This is a systemic problem and foreign pharmaceutical companies are in a conundrum. If...

The SEC has continued to emphasize the accounting provisions of the FCPA, specifically the internal controls provisions. The reason is straightforward; a company with rigorous internal compliance controls is better able to prevent, detect and remedy any FCPA violations that may occur. What can you do around the FCPA’s requirements for internal controls and continued SEC enforcement emphasis? You s...

Today, I consider some ways in which a compliance professional can work to implement internal controls in a multi-national organization. The first step is to convert your company’s compliance risks into internal control objectives. The internal control objectives are then given to each business unit with instructions to develop controls, which meet the objectives. This process should allow more of...

Today, I will review how to use the risk assessment you have performed as a tool to provide a structured approach to establishing effective internal controls. After preparation of the risk assessment, the next step is to prioritize the listing of the risks and which locations they are common. This begins by mapping existing internal controls to risks and then assessing whether the internal control...

How should you assess your internal controls regime for international operations? It is incumbent that you need to review as much information as you can to understand the financial and operational structure of an entity and how it is integrated with the corporate headquarters, or the U.S. business unit’s financial and operation structure, if the foreign operation is part of a U.S. business unit. Y...

While a CCO should expect (or at least hope) that internal controls at locations outside the U.S. are of the same effectiveness as internal controls within U.S. business units and at the U.S. corporate office; unfortunately, that might not always be the case. It is often the case that corporate level internal controls are stronger than those in foreign business units. There may well be several rea...

There are four significant controls that every compliance program should have in it. They are: 1) DOA; 2) maintenance of the vendor master file; 3) contracts with third parties; and 4) movement of cash/currency. Your DOA should reflect the impact of compliance risk including both transactions and geographic location so that a higher level of approval for matters involving third parties, for fund t...