Tag: Compliance

Board of Directors Oversight

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 – “Quis Custodiet Ipsos Custodes” – Translated: Who Will Guard the Guards Themselves, or Who will Watch the Watchmen?

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.

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Donut Holes! Dunkin’ Data Breach Settlement

Dunkin’ was repeatedly alerted to attackers’ ongoing attempts to log in to customer accounts by a third-party app developer. The app developer even provided Dunkin’ with a list of nearly 20,000 accounts that had been compromised by attackers over just a sample five-day period. “Yet, Dunkin’ failed to investigate the attacks to identify other customer accounts that had been compromised, determine what customer information had been acquired, or whether customer funds had been stolen.

Dunkin agreed to pay $650,000 as penalty settlement costs for the lawsuit over its failure to respond to credential stuffing attacks.

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Tipsters – SEC Adds Clarity, Efficiency and Transparency to Its Whistleblower Award Program

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.

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FCPA – Mergers & Acquisition Due Diligence

When a company acquires another company, the successor company can be liable for the acquired company’s activities before acquisition. The U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) have administered Foreign Corrupt Practices Act (“FCPA”) enforcement actions against successor companies in cases involving egregious and sustained violations, where the successor company directly participated in the violations, or where the successor company failed to stop the misconduct from continuing after the acquisition.

This writing explores some key steps that should be taken pre and post acquisition.

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Erasing the “Lines” to Enhance Risk Management

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.

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Baker Tilly US LLP Global Forensic Investigations, Compliance & Integrity Practice Continues to Impress and Grow!

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.

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The Continued Evolution of Best Practices for Compliance Programs

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.

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Fraud On The Rise is No Surprise!

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.

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DOJ Revises its Guidance on the Evaluation of Corporate Compliance Programs

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. 

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Whistleblowers: A Fraud Triage System

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.

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Bribery Schemes and Their Compliance Responses

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.

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DOJ Updates FCPA Corporate Enforcement Policy

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.

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Speaking and Training on Fraud, Compliance, Ethics, and 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.

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Fraud: Department of Justice (DOJ) Announces Procurement Collusion Strike Force

On November 5th, the Department of Justice announced the formation of the new Procurement Collusion Strike Force (PCSF) “focusing on deterring, detecting, investigating and prosecuting antitrust crimes, such as bid-rigging conspiracies and related fraudulent schemes, which undermine competition in government procurement, grant and program funding”.

The Strike Force is an inter-agency partnership comprised of prosecutors from the Antitrust Division, and prosecutors from thirteen (13) U.S. Attorneys’ Offices.  Aiding in the prosecutors’ efforts are investigation partners such as the Offices of Inspector Generals from the Department of Justice, Department of Defense, U.S. Postal Service, and General Services Administration Office. The Department of Justice’s announcement proclaimed that investigating and prosecuting those who “cheat, collude and seek to undermine the integrity of government procurement” will have more to concern themselves with when executing their crimes. Prosecutors and investigators alike expressed enthusiasm to be working as a part of this new team.

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Compliance Thought Leaders You Should Be Following by Matt Kelly

Compiling a list of thought leaders in ethics and compliance is fun, but so challenging. There are simply too many thoughtful people in this field — which is itself enormous and wide-ranging — to call out everyone worth following. So below is a small slice of the thinkers in corporate ethics and compliance that I try to follow.
How should we define a thought leader, exactly? I define it literally. First, someone who thinks about corporate compliance issues, and puts those thoughts into words. Some bloggers and tweeters, for example, do a superb job passing along what happened, but not why or how it happened. 

Second, thought leaders lead. They raise questions about what should or could happen in ethics and compliance, even if practical obstacles today make achieving those goals difficult right now. Thought leaders provide context around the events of today to suggest what might be possible tomorrow.

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