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31 Days to More Effective Compliance Programs

One Month to More Effective Compliance on Business Ventures: Introduction

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, franchises, and other forms of business relationships.

The FCPA Resource Guide, 2nd edition, made clear that one of the Hallmarks of An Effective Compliance Program is around M&A in both the pre-and post-acquisition context. A company that does not perform adequate due diligence before a merger or acquisition may face legal and business risks. Perhaps, most commonly, inadequate due diligence can allow a course of bribery to continue – with all the attendant harms to a business’s profitability and reputation and potential civil and criminal liability. In contrast, companies that conduct effective due diligence on their acquisition targets can evaluate each target’s value more and negotiate for the costs of the bribery to be borne by the target. Equally important is that if a company engages in the suggested actions, it will go a long way towards insulating, or at least lessening, the risk of FCPA liability going forward.

The 2020 Update went on to say that “The extent to which a company subjects its acquisition targets to appropriate scrutiny is indicative of whether its compliance program is, as implemented, able to effectively enforce its internal controls and remediate misconduct at all levels of the organization” and posed the following queries.
One of the key themes in this chapter is the integrated nature of compliance and business ventures. Whether the compliance work is seen in the M&A context, JV context, or one of the myriads of other business relationships of the current business world, there is an approach that a CCO or compliance professional should take to assess the risk, monitor the risk and then manage the risk with continued monitoring with feedback of data and information into your risk management strategy.

Three key takeaways: 

  1. Consider the role of compliance in a wide variety of business relationships, including M&A, JV agreements, distributorship, franchises, and other forms of business relationships.
  2. Compliance for M&A should be seen as a unidimensional continuum.
  3. The evaluation focuses on what data your risk monitoring system used and how you utilized it going forward.
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The Hill Country Podcast

Alan Peterson – Riding for MS

Welcome to the award-winning The Hill Country Podcast. The Texas Hill Country is one of the most beautiful places on earth. In this podcast, Hill Country resident Tom Fox visits with the people and organizations that make this a unique area of Texas. Join Tom as he explores the people, places, and activities of the Texas Hill Country. In this episode, I am joined by guest Alan Peterson to discuss the MS 150, an event that sees over 7000 people on their bikes. Alan himself is a rider in this year’s 2023 event and is part of the 300 clubs, where 70% of the money for the MS Society is raised. Alan talks about the event’s history and discusses all the support from the thousands of people involved and the effort the people with MS put in to make the event special by waving flags and counting bills. Alan’s conversation gives a great insight into the event and all that is involved.

Highlights Include

·      Riding the MS150 Challenge: An Inspiring 35-Year Journey [00:04:56]

·      Rider Support Teams for People with Multiple Sclerosis [00:08:50]

·      Participating in Long-Distance Biking Events [00:12:22]

 Notable Quotes

1. “My dad was the one that told me about it.”

2. “The MS Society, of course, has buses to make the contract. But in our case, my dad would drive a van back.”

3. “But he made a mistake and was at this finish line for several hours the first time. And he thought that he was going to be bored, and when we came to find him at the finish line, he was 10 years younger than I saw him at the start line.”

4. “There are people that are along the way with you. There are bicycle police. There’s bicycle EMS. There are ride marshals. Some motorcycle escort folks are either alongside or ahead of you, trying to manage traffic for the riders. There’s rest out personnel, and I’ve been at some rest stops where I thought the people who were passing out the drinks and fruit to a number of the riders, it was just amazing.”

 Resources

1. Support Alan Peterson

2. MS 150 Ride and Registration

3. Donate to the fight against MS

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Great Women in Compliance

Tracy Saale-From Law Enforcement to In-House

Welcome to the Great Women in Compliance Podcast, hosted by Mary Shirley and Lisa Fine. In today’s episode, Lisa speaks with Tracy Saale, who is Conduct Risk Management, Managing Director and Corporate Responsibility Officer at Charles Schwab.

This is her second career, and while we often hear from attorneys who have gone in-house, or were assigned to compliance, Tracy started out as a prosecutor and then at the U.S. Federal Bureau of Investigations (FBI), where she worked all over the globe, and advised in ethics and compliance during her career there. She discusses the importance of advising law enforcement officials on what is – or is not – permissible, particularly when they are dealing with criminal behavior and security issues. When she started at the FBI, they had approximately 14% women agents, and while that has increased into the 20% range, there is a way to go, so she recounts her experiences.

While Tracy was a bit guarded given her experiences with corporate malfeasance, she also was impressed with Charles Schwab, and joined them in part for that. In her in-house career, she is now seeing what so many of us see – that the majority of people are trying to do the right things – a more positive side of corporate life.

The Great Women in Compliance Podcast is on the Compliance Podcast Network with a selection of other Compliance related offerings to listen in to.  If you are enjoying this episode, please rate it on your preferred podcast player to help other likeminded Ethics and Compliance professionals find it.  If you have a moment to leave a review at the same time, Mary and Lisa would be so grateful.  You can also find the GWIC podcast on Corporate Compliance Insights where Lisa and Mary have a landing page with additional information about them and the story of the podcast.  Corporate Compliance Insights is a much-appreciated sponsor and supporter of GWIC, including affiliate organization CCI Press publishing the related book; Sending the Elevator Back Down, What We’ve Learned from Great Women in Compliance (CCI Press, 2020).

If you enjoyed the book, the GWIC team would be very grateful if you would consider rating it on Goodreads and Amazon and leaving a short review.  Don’t forget to send the elevator back down by passing on your copy to someone who you think might enjoy reading it when you’re done, or if you can’t bear parting with your copy, consider it as a holiday or appreciation gift for someone in Compliance who deserves a treat.

You can subscribe to the Great Women in Compliance podcast on any podcast player by searching for it and we welcome new subscribers to our podcast.

Join the Great Women in Compliance community on LinkedIn here.

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Career Can D0

Transforming Corporate Culture with Inclusion and Leadership with Eddie Turner

Mary Ann Faremouth hosts Eddie Turner, a principal consultant and executive coach at Linkage Inc, an international leadership development firm. He is a Certified Speaking Professional and ranked number six on the Top 30 list of motivational speakers by Global Gurus. Eddie is a preeminent authority on emerging leaders and is in the top 25 thought leaders in leadership. In this episode, Eddie and Mary Ann discuss the current demand for strong leadership in organizations and how it has increased over the years. Employees stay or leave based on the type of leader they work for, so effective leadership is necessary for retaining talented employees. Eddie helps organizations develop purposeful leadership by working with senior leaders in the C-suite and emerging leaders. He also identifies clear metrics for how leaders can engage and hold employees accountable.

Leaders need to adapt to a post-pandemic world that demands effective leadership for both in-office and remote employees. Eddie highlights the importance of inclusivity and how more inclusive organizations statistically outperform less inclusive ones. He notes that it is important to create a vision that can rally people across five generations and that each generation has something that is inherently valuable to them. Data and research is crucial in convincing organizations to adopt inclusion as a profitable way of doing business. 

 

Eddie’s book, 140 Simple Messages to Guide Emerging Leaders, emphasizes that everyone should be emerging as a leader, even those in top positions. He stresses the importance of continuously working to improve your leadership skills.

 

Resources

Eddie Turner LinkedIn | Twitter | Instagram | 140 Simple Messages to Guide Emerging Leaders

Eddie at Linkage, Inc (A SHRM Company)

Faremouth.com

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Compliance Into the Weeds

Creating a Data Analytics Program

The award winning, Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt and I take a deep dive into data analytics. Tom and Matt provide information on how to capture the data within the enterprise and create a road map within the framework of DOJ’s guidance. Additionally, they cover how Excel can be used and suggest giving the data “spit and polish” in order to run it through analytics programs. Compliance into the Weed’s podcast is a must-listen for anyone needing information and strategies to excel in their work.

Key Highlights

·      The Implementation of Data Analytics Programs [00:03:21]

·      The Business Relationships and Risk Assessment of Data Collection [00:07:17]

·      The Benefits of Utilizing Internal Resources for Compliance Analytics [00:10:48]

·      Organizing and Utilizing Compliance Data [00:14:42]

·      Creating a Road Map with Excel [00:18:04]

Notable Quotes

1.     “We all talk about data handling. We all say it’s important. We go here a justice department official at some conference. He or she will talk about how important data analytics is how they use data analytics. And of course, if they in the public sector can afford to do it, then certainly, we in the private sector must be able to do it. Because government has no money and if they can do it, we must be able to do it.”

2.     “It’s easy to think it’s important in the abstract, but how are you actually going to do it? That’s the part that compliance officers need to think through.”

3.     “We’re really looking for outlier transactions. We’re looking for anomalous events of some kind. We’re also looking for trend analysis to see if big huge swaths of transactions are moving in a certain direction that might be troublesome.”

4.     “You need to be, I think, maybe more on your game with devising a good business case for data analytics. It’s easy to think it’s important in the abstract, but how are you actually going to do it?”

 Resources

Matt Kelly in Radical Compliance

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Daily Compliance News

March 1, 2023 – The We Are Not Corrupt Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen to the Daily Compliance News. All from the Compliance Podcast Network. Each day we consider four stories from the business world, compliance, ethics, risk management, leadership, or general interest for the compliance professional.

Stories we are following in today’s edition of Daily Compliance News:

  • Swiss regulator finds fault with Credit Suisse but no penalty. (WSJ)
  • Stanley Black & Decker discloses possible FCPA violations. (WSJ)
  • Turkish firm demands retraction of ‘inferred’ corruption allegation. (Bloomberg)
  • TD Bank to pay $1.2bn in 14-year-old Ponzi scheme. (NYT)
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Blog

Levels of Due Diligence-Part 1

Due diligence will always be a basis of any best practices compliance program. Over the next couple of days, I will consider the levels of due diligence and detail how each category will help to inform your compliance program.

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 to the Evaluation of Corporate Compliance Programs 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.

A three-step approach was discussed in Opinion Release 10-02, in which the DOJ discussed the due diligence that the requesting entity performed:

First, it [the requestor] conducted an initial screening of six potential grant recipients by obtaining publicly available information and information from third-party sources … Second, the Eurasian Subsidiary undertook further due diligence on the remaining three potential grant recipients. This due diligence was designed to learn about each organization’s ownership, management structure and operations; it involved requesting and reviewing key operating and assessment documents for each organization, as well as conducting interviews with representatives of each MFI [microfinance institution] to ask questions about each organization’s relationships with the government and to elicit information about potential corruption risk. As a third round of due diligence, the Eurasian Subsidiary undertook targeted due diligence on the remaining potential grant recipient, the Local MFI. This diligence was designed to identify any ties to specific government officials, determine whether the organization had faced any criminal prosecutions or investigations, and assess the organization’s reputation for integrity.

This Opinion Release sets out a clear break which every compliance practitioner should use in considering an appropriate level of due diligence to engage with your third-party risk management process or when considering the level of due diligence required on a potential business venture partner. A very good description of the three levels of due diligence was presented by Candice Tal, Founder and CEO of Infortal Worldwide, in an article entitled, Deep Level Due Diligence: What You Need to Know.

Level I. First level due diligence typically consists of checking individual names and company names through several hundred Global Watch lists comprised of AML, anti-bribery, sanctions lists, coupled with other financial corruption and criminal databases. These global lists create a useful first-level screening tool to detect potential red flags for corrupt activities. It is also a very inexpensive first step in compliance from an investigative viewpoint. Tal believes that this basic Level I due diligence is extremely important for companies to complement their compliance policies and procedures; demonstrating a broad intent to actively comply with international regulatory requirements.

Level I should also consider beneficial ownership records where available, and company tax information to assess whether the third party is financially sound and in compliance with tax payments as required within its primary country of business, plus a check of perceived business risks in that country. Additionally, the third party’s website should also be reviewed; it is unusual for a company to not have a website and this can be a preliminary flag that there are issues. Tal recommends verifying that the company address also exists; a non-verifiable address should be considered a potential red flag which would indicate the need for a deeper level due diligence investigation.

Join us tomorrow as we explain Levels 2 & 3 of due diligence and conclude this blog post series.