“Do we need to invest in an anti-corruption program?” & Three Questions with Douglas Veivia

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Should we be investing in an anti-corruption program?

Anti-corruption risk is a “high severity/low likelihood” risk for nearly all organizations.  But, if it does happen it can be very serious.  Eric will look at data between the Department of Justice and various corporate defendants.

If you are asking, “Should we be investing in an anti-corruption program?” it’s probably not the question you should be asking. There are more important questions– “What are the compliance risks for this organization?” “Have you done a compliance risk assessment? “Have you evaluated what risks you face as an organization?” “How have you done that and how recently?” “How comfortable are you with that risk assessment?

You also have to ask before you get to a more specific question about anti-corruption is “What are we doing about those risks?” “What is in-place to address those risks at this point?”

The Upshot

While anti-corruption is a very serious risk it is one with very low likelihood for many organizations. Every organization needs to understand their own particular risks. By doing that you will know if you need to have an anti-corruption program.

Three Questions with Douglas Veivia, VP, International Compliance at Prudential Financial Inc.

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Should we be investing in an anti-corruption program?

Anti-corruption risk is a “high severity/low likelihood” risk for nearly all organizations. This means that if it happens it can be very serious, can impact the company for many years, cost millions of dollars, and may mean that individual employees spend time in federal prison. This is very high severity. Low likelihood risk means that the actual overall risk is not as “highly likely” as is often perceived by the compliance community-at-large.

Looking at enforcement numbers from 2015, the last full year of available data, there were 100 non-prosecution (NPA) and deferred prosecution (DPA) settlements entered between the Department of Justice and various corporate defendants. For those of you who understand anti-corruption, or the Foreign Corrupt Practices Act (FCPA), you already know that NPA and DPA agreements are the mechanism by which the Department of Justice and defendants can settle a potential criminal case without it ever being filed, or by deferring the case for a period of time until the company can complete the terms-of-agreements made in the settlement.

These NPAs and DPAs have become very popular over the last decade or so as a way to resolve corporate cases that could otherwise result in potential criminal charges for the organization. They are perhaps best known for resolving FCPA cases but they are used in many other types of cases. In fact, of the 100 cases in 2015 only two of the cases, just 2%, were for FCPA.

If we look at the 2015 U.S. Sentencing Commission’s data on organizational sentencing, i.e. companies who pled guilty to felony offenses in federal court and received sentences, there are 181 organizations. None of these involved FCPA cases.

FCPA stalwarts will point out that the Securities and Exchange Commission can also settle civil FCPA claims. In 2015 there were nine. The Environmental Protection Agency also has civil authority to bring cases against organizations. In 2015 the EPA referred 141 cases to the Department of Justice for criminal proceedings. (These cases include individual as well as companies. For comparison sake, eight individuals were prosecuted criminally under the FCPA. Regarding the enforcement taken by the EPA, there were 132 civil judicial cases and 1400 administrative cases that concluded in 2015).

I am not providing this data to suggest that somehow environmental enforcement is being overlooked or that it is more important to your organization than anti-corruption. The whole point here is to understand that there is data to look at, both externally and internally.

There are a myriad of other regulatory entities that provide for corporate integrity agreements civil settlements, and penalties. We all know this; in the compliance industry we deal with it every day. I just want to suggest that FCPA enforcement and anti-corruption enforcement is no different than the other compliance risk topics that individual compliance officers and individual organizations have to consider. This means that--

Because if you are asking this you probably don't have a program to speak of or you wouldn't be asking the questioning the first place. You need to be able to answer the question yes or no but you must first answer a few basic questions. The most important question you must ask is “What are the compliance risks for this organization?” “Have you done a compliance risk assessment? “Have you evaluated what risks you face as an organization?” “How have you done that and how recently?” “How comfortable are you with that risk assessment?

The second question you have to ask before you get to a more specific question about anti-corruption is “What are we doing about those risks?” “What is in-place to address those risks at this point?”

None of this is imply that the FCPA and anti-corruption is a non-issue. It's an important issue and I understand this as well as anyone. Over ten years ago I stood next to a man sentenced to 63 months in federal prison for violating the Foreign Corrupt Practices Act. I understand the severity and significance of the statute and the risks that are involved in corruption and bribery. I'm not minimizing it at all. I'm just suggesting that if the question is “Should we be investing in anti-corruption?” that it probably not the appropriate question.

The Upshot

While anti-corruption is a very serious risk it is one with very low likelihood for many organizations. Every organization needs to understand their own particular risks. By doing that you will know if you need to have an anti-corruption program.

Three Questions with Douglas Veivia, VP, International Compliance at Prudential Financial Inc.

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