One of the FCPA themes for 2020 has been hiding in plain sight all along. The FCPA requirement that “reporting companies to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that, among other things, transactions are executed following management’s general or specific authorizations, and access to assets is permitted only in accordance with management’s general or specific authorization.” But what if the violation of this requirement occurs in a non-foreign (IE., the U.S.) and in a non-bribery situation.» Read More
There have been significant releases of information by the federal government which directly impacted compliance professionals. Two came from the Department of Justice and one came from the Department
On December 11, 2020, the Senate passed the Anti-Money Laundering Act of 2020 (“AMLA” or the “Act”) – DIVISION F of the National Defense Authorization Act for the fiscal year 2021 (the “NDAA”). The House of Representatives had previously passed the measure on December 8, 2020.» Read More
Happy New Year, and thank you to the more than 100,000 people that visited Board and Fraud in 2020!
With everything that happened last year, fraud, compliance, and risk management have arguably become more important than ever.
The Securities and Exchange Commission (”SEC”) announced an award of more than $300,000 to a whistleblower whose high-quality information and continuing assistance significantly contributed to a successful enforcement
Adapted from Robin Burton’s Article in the Anti-Corruption Report, November 11, 2020
Since the passing of Sarbanes-Oxley in 2002, I have noticed that Boards of Directors have become more
Do You Know Why Your Employees are Leaving?
Exit interviews (“EI”) are usually conducted when an employee terminates. However, many interviews are not designed to unearth potential issues and information
Herbalife’s business relationship in China was committed to illegal activity, which it knew or should have known violated the FCPA. Specifically, beginning in late 2006, Herbalife China provided improper benefits and payments to government officials to obtain direct selling licenses for two cities. Herbalife paid out millions of dollars in bribes. Fraudulent expense reimbursements were used to fund the bribes, which is is a common tactic for these types of bribes.
Specifically, the SEC found that Herbalife China paid bribes through extravagant meals, gifts, and other benefits given to Chinese officials to obtain sales licenses and remove negative media coverage in China. Managers at the subsidiary asked employees to falsify expense report documents, for example, adding names to meal receipts to get below the company’s per head spending limit. It also found that the payments and benefits were inaccurately recorded and that Herbalife failed to maintain a sound system of internal controls.» Read More
The U.S. Commodity Futures Trading Commission (“CFTC”) will be issuing its Guidance similar to the DOJ’s recent writing on Evaluating Corporate Compliance Programs, which sends a clear message
According to evidence presented at trial, Aleksandr Pikus, 45, of Brooklyn, New York, and his co-conspirators perpetrated a scheme through a series of medical clinics in Brooklyn and Queens over nearly a decade. The clinics employed doctors, physical and occupational therapists, and other medical professionals who were enrolled in the Medicare and Medicaid programs. In return for illegal kickbacks, Pikus referred beneficiaries to these health care providers, who submitted claims to the Medicare and Medicaid programs.
Pikus and his co-conspirators then laundered a substantial portion of the proceeds of these claims through companies he controlled, including by cashing checks at several New York City check-cashing businesses. Pikus then failed to report that cash income to the IRS. Instead, Pikus used the cash to enrich himself and others and to pay kickbacks to patient recruiters, who, in turn, paid beneficiaries to receive treatment at the medical clinics. The evidence further established that Pikus and his co-conspirators used sham shell companies and fake invoices to conceal their illegal activities.» Read More
Soon all public and private organizations in the EU with more than fifty (50) employees will soon be required to comply with a new EU Whistleblower Protection law. The new law highlights the importance of responsive, transparent, and timely whistleblowing case management. So just implementing a hotline is not enough. Organizations must consider confidentiality, acknowledgment of the tip or compliant, response times, the competence of persons receiving the reports, communication with the whistleblower, and feedback on how the case is being processed. The new law also includes the right to report concerns externally while remaining legally protected. That’s a risk organizations must avoid. With the December 2021 deadline fast approaching, there is no better time for management and boards to act.
Read more!» Read More
In July 2020, The Institute of Internal Auditors (“IIA”) updated its Three Lines of Defense Model (“Model”) to emphasize more active forms of risk management and governance that appear to go beyond merely defensive maneuvers made by the internal audit function.
Some believed the old model sent a message that we should fear risk. I never saw it that way. I understood the subliminal message was the model was about achieving objectives, which requires both the creation and the protection of value. The new model does a much better job of confirming that risk management contributes “to achieving objectives and creating value, as well as to matters of “defense” and protecting value.”
Learn why the Enterprise Risk Resilient Model might be a better choice.» Read More
In this pandemic era, global companies have been challenged to maintain a reliable and effective internal investigation program. Companies have relied on remote investigation strategies to collect and review documents and conduct interviews. In conducting remote investigations, companies have to ensure that they follow investigation requirements, maintain the confidentiality of the process, and comply with applicable data privacy rules and security requirements.
In this webinar, Jessica Sanderson, Partner at The Volkov Law Group, and Jonathan T. Marks, Partner| Leader of the Global Forensic Investigation, COmpliance & Integrity Practice at Baker Tilly, will discuss best practices for conducting remote internal investigations. They will outline strategies for collecting and reviewing documents, analyzing financial data, and conducting interviews using remote technologies.» Read More
In 2019 and 2020, the federal government released significant information which directly impacted compliance professionals. We cover all three releases in this eBook, the 2020 Evaluation of Corporate Compliance Programs – Guidance Document, the 2019 Framework for OFAC Compliance Commitments, and the 2019 Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations.
These three documents provided not only the government’s refreshed thinking on what constitutes a best practices compliance program. I have combined all three onto a best practices document.» Read More
The SEC and DOJ Resource Guide is intended to provide information for businesses and individuals regarding the U.S. Foreign Corrupt Practices Act (FCPA). The guide has been prepared by the staff of the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission.
The key changes to the Second Edition reflect developments and issues that are well-known to experienced practitioners. Nevertheless, the updated Guide emphasizes the importance of effective (and “adequately resourced”) compliance programs, risk-based diligence efforts, and voluntary self-disclosures.» Read More
Last week, the Association of Certified Fraud Examiners (” ACFE”) published the results of a survey taken by more than 1,800 anti-fraud professionals in late April and early May 2020, while we were deep into the Covid-19 crisis. The findings, for the most part, are not surprising, but does reveal some disappointing information. While I have not seen a raw copy of the survey, I was surprised the ACFE didn’t ask if the company’s fraud risk assessment was reviewed and modified accordingly.
In addition, the survey highlights trends in the overall level of fraud. Survey respondents provided information about their current observations and expected changes regarding ten (10) specific types of fraud.» Read More
Without any fanfare, the U.S. Department of Justice Criminal Division has once again revised its Evaluation of Corporate Compliance Programs (“ECCP”). The ECCP remains organized around three overarching questions that prosecutors ask when evaluating compliance programs, with some revisions, which are in bold text below:
Is the corporation’s compliance program well designed?
Is the program being applied earnestly and in good faith? In other words, is the program being implemented adequately resourced and empowered to function effectively?
Does the corporation’s compliance program work in practice?
While most of the document is identical to the 2019 Guidance, there are subtle and noticeable revisions. The revisions appear to be designed to help provide additional clarity when answering the above three questions.» Read More
Leaders must find ways to engage with their people to motivate them, and this becomes increasingly important during uncertain or trying times. If done correctly, talking can be incredibly powerful. It can help relieve anxiety and help people find the strength they didn’t know was in them. Studies have shown that talking shuts down the brain’s fear center.
As Dr. Judson A. Brewer stated in a recent New York Times article, “Anxiety is a strange beast. As a psychiatrist, I have learned that anxiety and its close cousin, panic, are both born from fear.”
Fear and anxiety can be debilitating. Without proper communication in a crisis, it’s easy for people to spin and spread stories of fear, creating social contagion. To balance this tendency, in a crisis, leaders need to take their “tone from the top” to the next level.» Read More
Whistleblowers: Tipsters not trusting the system? Here’s how to win them back.
Anonymous hotlines and tip-reporting structures are useless, of course, if informants don’t trust them. Employees won’t blow the whistle if they fear reprisals. So, their concerns often don’t enter case-management systems and frauds continue. Here’s how to earn back their trust, take them seriously and transform raw tips into valuable fraud examinations.
Ovem lupo commitere!» Read More
As the use of whistleblower programs continues to grow, many organizations find themselves struggling to manage burgeoning caseloads. As a result, serious fraud investigations can be delayed (with mounting losses) while less consequential complaints are being investigated. The lack of a timely, systematic and repeatable process for evaluating and prioritizing whistleblower tips that contain allegations of ethical breaches can also expose an organization to increased regulatory risk.
While there is no single, “right” method for following up on whistleblower complaints, the most effective approaches often resemble the medical triage programs that hospitals and first responders use to allocate limited resources during emergencies, or a crisis situation.
Here are some useful guidelines for designing and implementing a fraud triage system.» Read More
Under the U.S. Federal Sentencing Guidelines, in order to receive credit for having an effective compliance program, and thereby reduce the fines imposed on the organization, a Board of Directors must be “knowledgeable about the content and operation of the compliance and ethics program,” and must “exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program.” In addition, in criminal actions against a business organization, including the FCPA, the DOJ’s Justice Manual instructs prosecutors to ask and answer several questions, including: 1) Do the Directors exercise independent review of the company’s compliance program? and 2) Are Directors provided timely and accurate information sufficient to enable the exercise of independent judgment?» Read More
Where is compliance headed in the 2020’s? Certainly, technological solutions will be a big part of the future of compliance programs and controls. Compliance is rapidly emerging and being viewed as a critical business process. Moving away from the days in which it was driven by legalese and where lawyers are responsible for crafting compliance policies and procedures. These advances provide opportunity for innovation, and enable compliance to recede from being viewed as a cost center led by the “head of business denial”, to being viewed as value added function to the business. Simply put, a more effective compliance program contributes to more efficient business processes, which leads to greater profitability.» Read More
As a crisis unfolds, like Coronavirus, and markets decline globally, fraudsters will be adapting and new risks will emerge and some risks will increase.
Remember, white collar criminals adapt by profiling us, so they can exploit our weaknesses. That being said, companies need to develop a strategy that enables the deployment of appropriate tactics to manage these new or increasing risks.
This writing explores some fraud, compliance, and integrity risks and is intended to provoke discussion.» Read More
This one-day fraud symposium, sponsored by Baker Tilly’s Global Forensic, Compliance and Integrity Services, and Solutions Practice Group and hosted by the Institute of Internal Auditors, Philadelphia Chapter, will include topics such as:
•Current trends in white-collar crime
•Tone is the middle
•Case study on a local fraud
Discover who will be speaking and register for the event!» Read More
This writing will highlight some of the more unusual bribery schemes described in 2019 Foreign Corrupt Practices Act (FCPA) enforcement actions and also consider their impact on compliance programs, what they mean for the compliance professional and how the government could potentially use these cases to require more effective compliance programs going forward.
Fraudsters are always looking for loopholes and weak spots to exploit. The same is true for those engaged in bribery and corruption. The role of every compliance professional is to prevent, detect and remediate. By following some of the approaches I have outlined, you can move towards more robust detection.