Monthly Archives: October 2015

The Boss, the Hostess & the Invoice: A Compliance Dilemma

The Boss, the Hostess & the Invoice: A Compliance Dilemma

Today’s guest post is from Anthony Smith-Meyer, Editor-in-Chief, Business Compliance.

Yesterday I was discussing motivation with my undergraduate class students. When you stop to consider this subject, you realise how essential a topic it is. Without motivation, there is no action. Everything we do has a basic, motivational driver behind it; something that disturbs the status quo and inspires a response to seek to satisfy a need, a desire, or calm a fear. In much the same way, ethical choice only happens when there is a disruption to the balance of values that determine our moral consciousness, introducing an anguish, anxiety, disdain or disgust over a personal choice or an observed situation/behaviour.

Ethics only exists when there is a clash of values requiring a rebalancing of choice between what is, or was considered, right or wrong.

In our Journal of Business Compliance, we seek to find the magic formula of good governance, compliance and ethical behaviour; we try to bring these topics alive for our readers in such a way that it might actually influence their future actions through increased knowledge, greater awareness of the consequences of their actions or the provision of inspiring ideas to start tackling our everyday challenges.

In our recent issue of the Journal (issue 05/2015) we introduced a new column: The dilemma. It has two purposes. One is to engender reflection on the nature of real life, front-line pressures facing our staff. We inform, train and otherwise communicate our expectations with regard to performance and behaviour to our employees, but to what extent do leaders and managers actually concern themselves with the choices we force our people to make? When an employee faces a dilemma, how it is dealt with is a measuring rod as to the level of openness, trust and clarity of purpose that exists within an organisation – does anyone believe these are not crucial to long-term success of any firm?

We try to take real life experiences, this first one actually one of my own, and we have asked Richard Bistrong, an anti-corruption consultant who speaks from personal experience and the tragedy that follows making wrong choices, and Dr Fiona Beddoes-Jones, a Chartered Psychologist specialised in business, authentic leadership and executive behaviour to comment on the situation described. Together we try to shine the light of experience on the choices facing the front line, and the interpretation that organisational leaders should attribute to the resolution of The Dilemma, and we hope an inspiration for increased consciousness of the implications of goals set, and expectations signalled in the pursuit of our everyday objectives.

To receive a free copy of “The Dilemma: The Boss, the Hostess and the Invoice” please link here.

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A Holistic Approach to Third-Party Risk & Due Diligence

A Holistic Approach to Third-Party Risk & Due Diligence

The following interview is with  Leas Bachatene, CEO at ethiXbase.

Hi Leas, thank you for participating in today’s Q and A. I have really enjoyed working with the ethiXbase team, including on our recent White Paper and at the September 15th event in Houston on “Crime, Cooperation, and Compliance.” So, Leas, first, perhaps you can share some of your background and experience that led you to ethiXbase.

LB: Thank you, Richard. I must say it has been very enlightening working with you. In fact, your keynote presentation at the Houston event which we hosted last month was key in making the event a success. All attendees commented that they thoroughly enjoyed hearing from you. Particularly your thoughts regarding the ‘circle of lies’ whereby third party intermediaries conspire with company employees to circumvent even the most robust and well-intentioned onboarding and vetting process. 

To your question, my background is like many professionals within the field of compliance. As times have changed, the importance, scope and size of compliance as a professional field has grown. I like many others started my career outside of compliance, namely in the Oil & Gas industry, on an oil rig somewhere in the middle of the North Sea between Scotland and Norway.

Quickly realizing my true calling in life was not to be a Piping Designer in the middle of a freezing ocean, I moved into the information services industry and joined a leading provider of compliance solutions for the financial services industry – the rest is history. I have since found a field that not only am I truly passionate about but much like many professionals in this space, a domain that only increases in scope as regulatory pressure mounts and the need for compliance is recognized across industries and the globe.

 Leas, there is no shortage of third-party due diligence providers, but as you and I have discussed, the approach of ethiXbase is quite unique. Perhaps you can share some of that, including the Ethical Alliance Community.

LB: Well to start, ethiXbase is not just a due diligence provider. We are an organization committed to making a difference by empowering organizations, no matter their size or budget, with compliance solutions to assist them to increase transparency and stamp out corruption.

We do this firstly by connecting individuals through the global Ethical Alliance community where like-minded professionals can actively exchange ideas on knowledge and best practices while benefiting from our Anti-Bribery & Corruption certification and the expert guidance of the Ethical Alliance Advisory Council.

Secondly, we work closely with our clients to partner with them through every stage of their corruption risk life cycle. Working as their extended compliance arm, we support the entire third party management process from surveying to onboarding, benchmarking, verifying, monitoring, reporting, educating and certifying. In Asia for example, we work with multinational organizations to manage their third parties through a connected approach involving due diligence, ongoing monitoring, and classroom training.

I recently read a few ethiXbase White Papers, including “The Problem with Supply Chains Today,” which I thought was extremely relevant and engaging.  You talk up front of the “challenge of knowing who you’re doing business with” and go on to highlight the increasing risk as senior executives are now being held responsible should come to light that the company associated with an individual or entity involved in corrupt practices. In the context of today’s enforcement environment what are companies getting ‘wrong’ with respect to this risk?

LB: I believe there is a broader issue here. Instead of examining what companies are getting ‘wrong’, we need to address what regulatory authorities, stakeholders, and multinationals can do more of to motivate compliant behaviour and practices within the industry. Having come from a background in Financial Services, there is no question that the financial services industry is far more regulated than non-financial corporates. The gap between these two ‘industries’ if you will is too wide. This leaves corporates and their third parties crying out for guidance as regulatory scrutiny steadily increases.

The paper states that “there needs to be an understanding of where high risks lie and a decision made as to what corporate goals are worth pursuing, changing or abandoning in the face of this risk.” I think that presents a very real-world challenge, in terms of operating in high-risk, low-integrity regions, where perhaps a clear-eyed view is required before committing personnel and resources. Do you see companies making these hard choices, or is it more of an incremental approach where risk is analyzed once boots are ‘on the ground.’

LB: This is a challenge we see constantly as organizations seek out new territories and regions for greater business potential or cost saving opportunities. As businesses expand into new areas, compliance considerations are often a secondary to the perceived potential for economic gain. However, just because a region is perceived to be ‘high-risk, low-integrity’ does not mean that a business relationship cannot be formed if an organization has the right compliance framework in place. I firmly believe we all need to ask ourselves what can be done at an individual, organizational and/or government level to increase transparency in these ‘high-risk, low-integrity’ environments. Authoritative measures are needed to drive a bigger influence at a nation-wide level in these regions to change what is currently a way of life.

As large organizations move into these territories they bring with them a certain amount of influence, whether it be through employment or contracts, or the boost to a regional economy. Organizations must consider not only the risk of doing business in these regions based on the potential for corruption (as an example) but also their ability to uplift the community’s business culture and mindset. We have seen this being driven throughout Asia, not just by government bodies but also large multinational firms.

At ethiXbase, we support these activities through the Ethical Alliance Anti-Corruption Program, assisting organizations not only to set a strong tone from the top when it comes to ethics and compliance but also to know who they are doing business with, manage those relationships and ensure their staff and third parties are being trained on the ground in what may be now be considered ‘high-risk, low-integrity’ regions. Though we hope through this activity, this will not always be the case and I have no doubt many share our aspirations as well.

Thank you, Leas. Is there anything you would like to add?

LB: Only to thank you for this opportunity Richard and to encourage your readers to visit our website at ethiXbase.com and join the Ethical Alliance as a free Associate Member. I personally believe we are doing a lot of exciting things and with close to 40,000 Associate members we are rapidly gaining traction. I can also be reached directly at [email protected] should your readers have any questions in regards to what we have discussed today.

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The World Bank: Lending & Developing without Corruption

The World Bank: Lending & Developing without Corruption

The World Bank recently assessed a project relating to the funding of power stations in South Africa. The World Bank’s initial assessment appears to have cascaded from an SEC enforcement action with respect to Hitachi Ltd. According to Andrew Ceresney of the SEC’s enforcement division, and as reported in the FCPA Blog, “Hitachi’s lax internal control environment enabled its subsidiary to pay millions of dollars to a politically-connected front company for the ANC to win contracts with the South African government.”

While the World Bank’s assessment ultimately concluded that none of their funds were at risk since the contract was not financed with World Bank resources, international aid and finance institutions are not immune from corruption, nor do they operate in investigatory isolation. As Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit announced in the SEC press release, “We particularly appreciate the assistance we received from the African Development Bank’s Integrity and Anti-Corruption Department and hope this is the first in a series of collaborations.”

The corruption challenges which aid and development institutions face in their projects was something I addressed in a recent event hosted by The World Bank, Vice Presidency for Integrity (INT), on October 7th, 2015 titled “Why Break the Law: The Misuse of Public Assets and Development Resources.” As stated in the program, “Why are people tempted to corrupt decisions and how do they do it? Are there red flags to help identify things before they happen?”

The World Bank is tasked with the challenge of lending, developing, and policing, all to ensure that programs and funding are delivered those who need it most: the societies that are deprived of some of the most basic sustenance and infrastructure needs. . This is not just a banking and finance endeavor. Rather, as shared on the World Bank website, it is “a unique partnership to reduce poverty and support development,” and often in high-risk and low integrity regions.

And therein lies the challenge: the locales which are in desperate need of  aid and financial support are often the one’s where governance is  at its worst; thus, the need to carefully calibrate projects to address the hardships of the populous while staying fraud free from those who want to capture those funds for their own benefit.

Such dynamics presents The World Bank with an enormous challenge, as bribery and fraud (including collusion and coercion) distorts and dilutes the delivery of aid and development to the front lines of society. In other words, corruption in World Bank projects steals from the poor. While the World Bank has one of the most robust debarment regimes, which is respected and reciprocated by other development organizations, the conditions and environment in which corruption interferes with projects is a long way from the home offices where these programs are reviewed, funded and managed. It is the INT which is tasked with reducing fraud and corruption, in order to, as stated on their website, “ensure that Bank funds are used for their intended purposes: to alleviate poverty and increase prosperity and stability in our borrowing countries.”

But even with robust investigatory, audit, and compliance  teams, the initiatives needed to keep projects corruption free confront tremendous peril, where implementation occurs among what might be a destructive mix of corrupt third parties, commercial entities, and public officials. It is at this ‘table’ where development agencies often ‘don’t have a seat’ and where well-intentioned projects can be derailed by corrupt commercial employees and public officials.

The World Bank has demonstrated an awareness of this risk at the evaluation and assessment stages, where teams review and analyze proposals that might be prone to foreign corruption and fraud through its Preventive Services Unit (PSU). The PSU, as stated on the World Bank website, works “in partnership with operational teams, turn(ing) the unique knowledge gained from INT investigations into practical measures that can deter or stop corruption in World Bank-financed projects.”

The ‘table’ is where I focused my discussion, including an exchange with Stephen Zimmermann (pictured), Director of Operations, INT,  The World Bank,  as well as with the audience. We talked about the commercial mindset of those on the front lines, and how corporate personnel, third parties,  and government officials engage in corruption, addressing how legitimate projects can turn corrupt due to a number of well-hidden red-flags. Thus, we not only focused on potential red flags at a project’s evaluation stages, but also concentrated on corruption risks during implementation. I ‘drilled down’ into my own corrupt transactions as a discussion point for how attendees can shape their own initiatives and preventative measures to avoid such risk.

I also addressed my own experience with how investigators cooperate, where the UN Procurement Task Force, Chaired by Robert Appleton, shared the findings of his investigation with the Justice Department in 2007. We also discussed how real-world corruption risk remains strong, as the same Mr. Appleton recently focused upon when he wrote (link here) that in these high-risk regions, “the criminal laws of the vast majority of countries are not keeping pace with the expansion of global commerce.” Furthermore, he added that corruption risk is compounded in these regions where “there is also a lack of legislation addressing the problem, a lack of resources and, most importantly, a lack of will and energy to do so.” These are many of the same places where World Bank projects are needed most.

Thus, all the more reason to express my appreciation to the World Bank INT for their openness and willingness to bring the front lines of international commerce to their teams during the October 7th event, as a potential learning moment and a basis for discussion.

I recently asked Stephen Zimmermann about his impressions of the session, including our audience Q & A, and if he thought the event brought value to the work of his unit and team. He replied, “Richard, our work is to protect the integrity of the projects the World Bank finances. Corruption in a development context steals from the poor. Your personal and professional reflections from the front lines of international business raised awareness of how corruption actually arises and the consequences that result, especially to those societies who need our help the most. The Bank’s mandate is to support client countries in their efforts to end poverty but without simultaneously confronting corruption; our ability and that of client countries to achieve that goal is at risk. Thank you again for your frank and often emotional discussion and for putting us in the room where it happens.”

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The Challenge of Hiring Anti-Bribery Compliance Leaders

The Challenge of Hiring Anti-Bribery Compliance Leaders

A few weeks ago I had the pleasure of meeting Maurice Gilbert, Managing Partner of Conselium Executive Search in Dallas. I have been a contributor to his other organization, Corporate Compliance Insights (link here) for quite some time, but wanted to know more about his search business. Accordingly, here is a guest post where Maurice shares his thoughts about the issues which executives face when trying to hire anti-bribery compliance leaders. Here is his post: 

As stated in a recent article (link here) in Bloomberg Magazine, The Rise of the Compliance Guru—and Banker Ire “To hear Jamie Dimon tell it, regulation and the cost of compliance are becoming a threat to the American dream.” But if you are in the C-Suite or a compliance executive tasked with hiring someone on your compliance team, legal, audit or otherwise, the costs of failure could not be higher in these times of increased enforcement and regulation.

While my discussion here is somewhat philosophical, I’m also a recruiter. Now that I’ve told you that, go ahead and ask me why you should use a search professional when hiring anti-bribery compliance leader. Believe me, I get asked this all the time, and I’m used to the protests: “We’ve always done it internally.” And, “We want to do this cheaply” and, my personal favorite, “We’re going to put it on the job boards and see what we get, then maybe we’ll call you if we need you.”

Go ahead and protest, but I’ve spent 20 years reading resumes, representing thousands of multinationals and placing anti-bribery compliance professionals in top posts around the globe, so I know why using a recruiter is always easier, cheaper, faster and – most important – results in the best hires, reducing the risk to your company by a wrong hire. Here’s why:

Recruiters Find the Best

Do you think you can land a top candidate by posting your job online? I’m sorry, you can’t. The top performers are busy working at their current jobs – they’re not cruising job boards. You’ll post your job, and you’ll get 300 resumes from unemployed, unqualified candidates. In contrast, use a recruiter and you’ll get immediate access to a “hidden network” of qualified candidates who are open to change but aren’t actively looking. These are the people you want, they’re also in my database and they will take my call. Your HR department might be the best at what they do – but high-level search and maintaining networks are not HR’s primary focus.

Recruiters Really Know People

If I don’t personally know a candidate, my network does. The leaders that I liaise with on a regular basis have insights into the “good, bad and ugly” among the multitudes of candidates “looking for a change.” That is where a recruiter takes the risk out of the onboarding process. Hiring the wrong anti-bribery compliance executive cascades that bad decision down the org chart, as lower level personnel are taking misdirected cues from the new executive. That’s a mistake that can cost you dearly in terms of financial and reputational risk.

Also, interviewing is a complex process, and I have even seen HR leaders get it wrong. Candidates will tell me things they won’t tell you in an interview: like why they’re really looking to either change professions or employer, and what it would take to get them to make a move. Recruiters gather intelligence and act as a negotiator to bring the parties together in a way which is highly nuanced.

You Don’t Have Time for This

Often by the time a company brings in a recruiter their own attempts to fill the post have failed, and they’re months behind in the process. Meanwhile, either part of the whole of your compliance program goes rudderless. Is that a risk you can afford to take in today’s environment? Really, how well are you sleeping at night when you know you have a vacancy in anti-bribery compliance? Do you want your organization focused on ethical business development or on distractions like recruiting and interviewing.

 We Save You Money

When you use a recruiter, you know what your hiring costs are up front, and you save money by getting it right the first time. If you hire the wrong person on your own and they leave in less than a year, you’re right back where you started with a full year of loaded salary and benefits not to mention a potential severance package. Like many recruiters, I provide a guarantee to my clients, which gives you time to evaluate your hiring decision. Hiring is risky; a guarantee protects your investment.

We Know Your Competition

Recruiters have their finger on the pulse of industry in terms of compensation and incentive packages: By geography, size of company and industry. We know who’s doing what, who’s going where and what they’re getting paid. We help you put together the right package to convince a high-performer to come to work for you.

We Can Help You Even After the Job is Filled

Why stop recruiting after you fill the job? If you and your staff focus on the core business but have a recruiter who is always looking to fill gaps in your team, you will be on a path to continuous improvement. Don’t hire one at a time, hire always. Recruiters allow you this potential. 

Nothing makes me happier than seeing the perfect “marriage” of employer and candidate, particularly in anti-bribery compliance. Watching companies put resources in this valuable area and seeing professionals succeed in their careers is such a satisfying aspect of my work. I hope to hear from you soon – and yes, I’ll be happy to answer all of these questions again.

Maurice Gilbert is Managing Partner of Conselium Executive Search, which specializes in placing Compliance Officers and Legal Counsel for clients in the U.S., Europe, Latin America and Asia Pacific. Maurice is also CEO of Corporate Compliance Insights, a worldwide publication devoted to governance, risk and compliance issues. Maurice can be reached at [email protected].

 

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The World Bank: Confronting Poverty without Corruption

The World Bank: Confronting Poverty without Corruption

I was recently reading an article about a former UN consultant who was convicted and sentenced for conspiring to inflate prices for a UN contract to distribute pharmaceuticals to the DNC. As part of the investigation, e-mail was discovered in which the consultant wrote (link here), “Let’s make loads of cash now…Clearly, supplying small amounts of grossly overpriced drugs to dying and starving Africans is a very good start.” As someone who was charged with foreign bribery offenses including a UN defense contract, it is clear that aid agencies are not immune from corruption. As the e-mail demonstrates in the extreme, the illusion and distortion from the front lines of business, including my own when I was in the field, and where the UN actually saved money due to the bribe, is too often:  “corruption is a victimless crime.”

However, regardless of the financial consequences, the victims of corruption remain numerous, including the aid and development organizations which are then compromised in terms of process and resources, and in most cases, societies and communities at large. Aid and development organizations are tasked with lifting the standards of living in many regions where extreme poverty is the norm. We know that corruption robs those who need it most. Sub-standard products and services are often selected due to corruption, or prices are so wildly inflated that there is less of the actual product or service being procured, as the budget is now consumed by corruption; thus, less of the funding ends up in the hands of those who might desperately require such assistance.

Conversely, when funding and aid is granted, devoid of fraud and corruption, the beneficiaries are many, and this is something I will address on October 7th in a presentation, at the invitation of the Integrity Vice Presidency of the World Bank, titled “Why Break the Law: The Misuse of Public Assets and Development Resources.”

The World Bank has the responsibility of financing projects that are designed to further, economic development and deliver services with the ultimate goal of ending poverty. The projects are also designed to promote good governance and ensure that funds and services reach their intended beneficiaries. In other words, it serves as both a global finance institution and development agency.

As is the case with any global operation, the touch points of implementation multiply across the intersection of commercial entities, third parties, and public officials. Thus, the potential for corrupt conduct is not unrealistic, particularly when projects are implemented in high-risk  and/or weak governance contexts. In this mix of foreign officials, commercial entities and third parties, the corruption risks, and investigatory challenges multiply. And here we speak of corruption beyond bribery, as the risks include financial fraud, collision,  and coercion.

When I recently asked Steve Zimmerman, Director of Operations, at the World Bank Integrity Vice Presidency where he thought my experience and perspective might bring value to the work of his unit, he replied “Richard, our work is to protect the integrity of the projects we finance. Corruption in a development context steals from the poor, and I think sharing your perspective and your first-hand experiences from the front lines will help our organization raise awareness of how corruption actually arises. The Bank’s mandate is to support client countries in their efforts to end poverty but without simultaneously confronting corruption; our ability and that of client countries to achieve that goal is at risk.”

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