In today’s edition of Daily Compliance News:
Day: January 18, 2021
Due diligence is generally recognized in three levels: Level I, Level II and Level III. Each level is appropriate for a different level of corruption risk. The key is to develop a mechanism to determine the appropriate level of due diligence and then implement that going forward.
The 2020 Update stated, “A well-designed compliance program should apply risk-based due diligence to its third- party relationships. Although the need for, and degree of, appropriate due diligence may vary based on the size and nature of the company, transaction, and third party, prosecutors should assess the extent to which the company has an understanding of the qualifications and associations of third-party partners, including the agents, consultants, and distributors that are commonly used to conceal misconduct, such as the payment of bribes to foreign officials in international business transactions.”
The question becomes how you use the information you obtained in the business justification and the questionnaire to determine an appropriate level of due diligence for the next step in the five-step process of third-party management. A three-step approach of varying levels of due diligence is the appropriate analysis to take going forward.
There are many different approaches to the specifics of due diligence. By laying out some of the approaches, you can craft the relevant portions into your program. The Level I, II and III trichotomy appears to have the greatest favor and one that you should be able to implement in a straightforward manner. But the key is that you must assess your company’s risk and then manage that risk. If you need to perform additional due diligence to answer questions or clear red flags you should do so. And do not forget to “Document, Document, and Document” all your due diligence.
Three key takeaways:
- A Level I due diligence should only be used where there is a low risk of corruption.
- A Level II due diligence is sufficient in a high-risk jurisdiction if there are no red flags to be cleared.
- Level III due diligence is deep dive, boots on the ground investigation.
Categories
Episode 047–Steven Butera
On this episode of The Ethics Experts, Gio welcomes Steve Butera, Director of Compliance, QI, and Privacy at Pathways Health & Community Support, to the show! They discuss the “why” of compliance, the complexity of it, and how to start E&C from the interview process.
In this episode, CSS’s Executive Director Jackie Hallihan sits down with Senior Consultant Adam DiPaolo to read the tea leaves on 2021. The compliance duo discusses changes to the SEC itself to regulations, rule-making, examination and enforcement trends and how to prepare for the predictability and unpredictability of compliance in the new year.
A CSS RegTech podcast series on moving from a tactical to strategic approach to regulatory compliance. The global regulatory space is complex and fragmented. Financial firms can address this problem through tactical responses to regulatory deadlines or think more strategically on how to optimize their compliance data, operations and technology. The CSS weekly podcast features regulatory experts, former Chief Compliance Officers, cybersecurity specialists, industry partners and RegTech collaborators to help prepare investment management firms for changes on the regulatory horizon. For more information on CSS, visit: www.cssregtech.com
About Our Guest Speakers:
Jackie Hallihan is the Co-Executive Director of CSS’s Compliance Services team and has over 25 years’ regulatory and risk management experience. She was the founder of National Regulatory Services (NRS) which started the compliance resource business and served as its President for over 20 years. She also founded the National Society of Compliance Professionals (NSCP), a non-profit organization for compliance officers, staff and lawyers serving the compliance industry. It now boasts over 2000 memberships. Jackie has been a leading speaker to compliance professionals, including in-house training programs and various other industry association conferences, and has received numerous industry awards. Jackie also serves as Director, Clerk of the New England Broker Dealer Investment Adviser Association (NEBDIAA), a non-profit organization, incorporated in 1997. The purpose of NEBDIAA is to provide a forum for the professional exchange of information among investment advisers, broker dealers, and persons who provide services to investment advisers and broker dealers, and to direct communication among its members which will improve their ability to serve the needs of their respective clients. The forum will help NEBDIAA’s members meet the increased regulatory demands placed on investment advisers, broker dealers, and persons who provide services to investment advisers and broker dealers.
Adam DiPaolo CISA, CRISC is a Section 13 Reporting Manager, Senior Consultant and Associate General Counsel, designing practical solutions to manage regulatory challenges faced by hedge funds, private equity funds, funds of funds, and other investment advisers. In addition to providing compliance services such as annual compliance program reviews, risk assessments and acquisition due diligence, Adam established Section 13 reporting capabilities and EDGAR filing agent services for CSS’s Ascendant compliance services division. He drafts and maintains corporate filings ranging from Forms ADV and PF to Forms 13F and 13H.
