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.”
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
On Wednesday, September 23. 2020, the SEC voted to adopt amendments to the rules governing its whistleblower program. According to the SEC, the amendments are meant to “provide greater transparency, efficiency and clarity, and to strengthen and bolster the program.”
The amendments were proposed for public comment in June 2018 and have been adopted with some changes.» Read More
Our experience conducting fraud investigations, domestically and globally, allows us to advise our clients on measures they can take to prevent fraud from occurring and detect issues before they expand. Our clients look to us to design anti-fraud programs and controls, perform anti-bribery and anti-corruption compliance assessments, and perform proactive fraud examinations to identify possible red flags or indicators of fraudulent activity. Because of our collective skills and the depth and breadth of our experiences, we are also able to design and enhance compliance programs and serve as integrity monitors.
Correcting deficiencies, addressing gaps in controls, and remediation of specific issues is important at the end of every investigation to prevent the same or similar frauds from recurring.
We address these important client needs at the end of our investigations and can assist with implementing remedial actions.» 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
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
Today’s fraudster is clever and operates in an environment ripe for criminal activity. Economic unrest is making it easier for employees to find ways to set fraud in motion – and a new breed of offenders is finding cunning ways to do so. After more than 60 years, the classic fraud triangle of three elements or events that motivate an employee to cross the line has morphed into the Fraud Pentagon.
Company boards and senior management must take an offensive stance against the five conditions that precipitate fraud with a clear plan that limits the opportunity for fraud and minimizes the impact when fraud does occur.» 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
The risk of fraud is a serious concern for all types of enterprises, but fraud can be particularly damaging to a nonprofit or not-for-profit organization, for which a damaged reputation can have devastating consequences.» 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 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.
On November 20th, 2019, The Department of Justice (“DOJ”) announced updates to its Foreign Corrupt Practices Act (“FCPA”) Corporate Enforcement Policy. While the changes were relatively minor, the modifications underscored important principles surrounding the FCPA Corporate Enforcement Policy.
This latest update follows extensive revisions made in March of this year and the announcement that the FCPA Policy will apply as non-binding guidance for all criminal cases; all reflect DOJ’s continued efforts to promote self-disclosures and provide clarity on DOJ’s approach for companies deciding whether to self-disclose. There is little doubt the DOJ has landed on a Corporate Enforcement Policy that took years to develop. The FCPA Corporate Enforcement Policy now applies to all corporate criminal prosecutions except Antirust Division criminal prosecutions that are guided by the Leniency Program. The DOJ is consistently applying the principles and appears to be very comfortable with the results.» Read More
Welcome to my site. I have spoken and been the keynote speaker for many conferences, including the ABA, ACC, ACFE, IIA, and IMA to name a few. I have designed customized training for the board, senior leadership, legal, compliance, internal audit, and others for some of the world’s largest organizations.» Read More
“Trust but verify” could be a downright dangerous approach when applied to audit procedures in particular. A much better slogan for fraud deterrence would be, “Trust is a professional hazard.”
The implication is that because financial management plays a leading role in detecting financial fraud, it is incumbent on executives – not just auditors – to exercise appropriate levels of professional skepticism. Board members and particularly audit committee members also must take care to exercise a skeptical approach to financial reports and supporting information.» 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
Some boards of directors and executive leadership teams are not able to deal with crisis effectively! Learn why?» Read More