Subject: Anti-Corruption Guidelines Have Changed in the US and UK
From: "Jeremy M. Kroll" <[email-masked]>
To: "Hunter" <[email-masked]>
Date: Thu, 13 Dec 2012 21:30:02 +0000

December Newsletter

** Anti-Corruption Guidelines Have Changed
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Dear Friends,

It’s not a scientific survey but my phone and email traffic is buzzing with General Counsels redoubling their focus on their anti-corruption programs.

We know that here in the US the Department of Justice (DoJ) has been putting more focus on violations of US Foreign Corrupt Practices Act. You may have seen the news around Wal-Mart expanding its own internal investigation of possible bribery in Mexico to include inquiries in China, India and Brazil.

Wal-Mart has employed 300 outside lawyers and accountants on this investigation, spending nearly $100 million so far.

In London, client interest in the UK Bribery Act is just as robust. And that’s not solely because of my colleague Charlie Carr’s big win for ALBA (http://www.ft.com/intl/cms/s/0/8c239d00-1230-11e2-868d-00144feabdc0.html%23axzz2ENl5dZHI)   earlier this Fall. [Too much?]

Most of our clients are simply calling to take their anti-corruption programs “to the next level” where we show them how to go beyond creating a policy that works in theory to institutionalizing practices that work within the context of their business. At the same time, these practices also help improve their competitiveness.

New Guidelines

One reason for the increased focus has been the announcement of some changes to the enforcement guidelines for both the FCPA and UK Bribery Act.

In November, the DoJ and SEC issued a 120-page resource guide which emphasizes the importance of effective compliance over formal policies. Some of the recommendations include having a commitment from senior management which means oversight from a senior executive with adequate autonomy (generally understood to be independent access to the company’s board of directors.)

Among the other guidelines are comments on the importance of risk assessment, training and continuing advice, third-party due diligence and, perhaps most important, the continuing importance the DoJ and SEC place upon a firm’s having a strong compliance program and the value of self-reporting any violations.

Self-Reporting and the SFO

This last point on self-reporting has become an important and unresolved question in the UK. Under the previous guidance, self-reporting was understood to be a gateway to more lenient treatment from prosecutors and—critically—avoiding a public procurement ban by agreeing to a civil settlement rather than face a criminal prosecution.

Earlier this year, the Organization for Economic Co-operation and Development (OECD) criticized self-reporting and expressed a preference for criminal sanctions.

In October, the UK’s Serious Fraud Office and its new director, David Green followed suit replacing the guidance around self-reporting with a statement that “…self-reporting is no guarantee a prosecution will not follow.”

Does this mean UK firms should aviod self-reporting, as some have suggested?

We think not.

First of all, the SFO (and DoJ/SEC in the US) affirm that effective compliance programs will count in a company’s favor when a prosecution is being considered. So self-reporting after a thorough anti-corruption review should be in the company’s favor.

Secondly, the guidance remains clear that any delay in reporting a breach will count against a firm.

We feel the solution is a First-to-Know policy where a corporation deals with the matter internally, under the direction of  professional advisers, before involving enforcement agencies.

Even though we remain in a period of uncertainty, requiring advice from lawyers and investigative consultants on a case-by-case basis, this balance will likely shift again in 2014 with the UK introduction of Deferred Prosecution Agreements (DPAs) which will renew the appeal co-operating with the SFO and alleviate some of the uncertainty around self-reporting.

How K2 Can Help

While the SFO unravels this confusion, we suggest you stress test your existing compliance procedures for areas of weakness. Not only do we provide independent conclusions on the robustness of your systems, but in over a third of the tests we have conducted, operational concerns, including fraud and bribery, have been identified.

I'm happy to discuss these changes in greater detail with you. Feel free to get in touch directly (mailto:[email-masked]) .

Best,

Jeremy M. Kroll
CEO and Co-Founder
K2 Intelligence, LLC (http://www.k2intelligence.com/)

K2Intelligence.com (http://www.k2intelligence.com/)

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