The Anti-Corruption Handbook E-Book

William P. Olsen

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 265

Veröffentlichungsjahr: 2010

Beschreibung

THE ANTI-CORRUPTION HANDBOOK Today's demanding marketplace expects CFOs, auditors, compliance officers, and forensic accountants to take responsibility for fraud detection. These expectations are buoyed by such legislation as the Foreign Corruption Practices Act (FCPA), which makes it a crime for any U.S. entity or individual to obtain or retain business by paying bribes to foreign government officials. Written by William P. Olsen, the National Practice Leader of Investigations at Grant Thornton, The Anti-Corruption Handbook: How to Protect Your Business in the Global Marketplace provides guidelines addressing the challenges of maintaining business integrity in the global marketplace. Timely and thought provoking, this book reveals the risks of doing business around the world and the precautions organizations can take to deter such activity. Authoritative, comprehensive, and insightful, The Anti-Corruption Handbook provides clear guidance on: * Managing corruption risk in the global marketplace * U.S. laws governing corruption * Internal controls and accounting provisions of FCPA * The human factor of corruption * Corporate governance: the key to unmasking corrupt activity * Navigating the perils of global business * Anti-money laundering * Procurement and construction fraud * Information security * Whistle blower programs Doing business internationally does not need to increase your exposure to fraud and corruption. Filled with case studies, tables, charts, and practical examples, The Anti-Corruption Handbook: How to Protect Your Business in the Global Marketplace equips fraud-fighting professionals--whatever their role or responsibility--with the knowledge and tools needed to obtain a competitive advantage in the global markets of the twenty-first century.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Preface

Organization

How to Use This Book

About the Contributors

CHAPTER 1 - Managing Corruption Risk

You Are Not Alone

Bribery and Kickbacks

Economic Espionage

Money Laundering

Developing Effective Compliance Programs

Performing Due Diligence

CHAPTER 2 - What Is Anti-Corruption?

Anti-Corruption Detection and Prevention

Critical Elements of an Effective Compliance Program

Governance and Oversight

CHAPTER 3 - U.S. Efforts to Combat Global Corruption

The Emergence of Nongovernment Organizations

World Trade Organization

Global Forum on Fighting Corruption

International Financial Institutions

International Chamber of Commerce

Transparency International

Global Corporate Governance Forum

The Role of Civil Society

The Emerging Markets

CHAPTER 4 - U.S. Laws Governing Corruption

Racketeer Influenced and Corrupt Organizations Act

RICO Offenses

Sherman Antitrust Act

Anti-Kickback Act of 1986

Economic Espionage Act of 1996

CHAPTER 5 - The Evolution of the Foreign Corrupt Practices Act

Background

Anti-Bribery Provisions

Third-Party Payments

Facilitating Payments

Sanctions against Bribery

CHAPTER 6 - Internal Controls and Accounting Provisions of the FCPA

FCPA Accounting Provisions

Failed Controls

Controls Assessment

Conclusion

Case Study: Rolling on a River

CHAPTER 7 - Do Not Crimp The Need for Oversight of Foreign Operations

Pitfalls of Emerging Markets

Monitoring Behavior

Education and Communication

Extending the Tone from the Top beyond the Borders

Case Study: Bribes in the USSR

CHAPTER 8 - The Human Factor

Why Focus on Fraud and Corruption Risk?

Behavioral Root Causes of Fraud and Corruption

Psychology of Fraud Perpetrators

Understanding Management Fraud

Approaches to Deterring and Mitigating Financial Fraud Risk

CHAPTER 9 - Corporate Governance The Key to Unmasking Corrupt Activity

Enterprise Risk Management: Create Stronger Governance and Corporate Compliance

Mitigating Risk

Ascertain Risk Areas

Establishing Procedures to Mitigate Risk

Perform a Periodic Assessment

Blowing the Whistle on Corporate Fraud

CHAPTER 10 - Whistle-Blower Programs

Pulling Out the Earplugs

Understanding Stakeholders and Their Needs

Steps of the MACH Process

Monitoring the MACH Process

Conclusion

Appendix

CHAPTER 11 - Document Retention

Create, Communicate, Monitor

Reduce Risk through Technology

Computer Crime

The Most Common Computer-Related Crimes

The Value of Stored Data

CHAPTER 12 - Information Security Intellectual Property Theft Is Often the ...

Information Security Audit

Classification of Information

Division of Responsibilities and Duties Is an Effective Strategy in Protecting ...

Information Security Control Officers or Custodians

Use of Confidential or Proprietary Markings

Document Destruction

Education and Training

Background Checks

Confidentiality Agreements

Employee Orientation

Separation Plans

Physical Security

Systems Security

E-Mail Policy

Internet Policy

Solicitations for Information

Seminar/Tradeshow/Off-Site Meetings Policy

Joint Venture/Vendor/Subcontractor Procedures

Contractual Provisions with End Users

Action Plans

International Protection Issues

Information Security Policy

CHAPTER 13 - Anti-Money Laundering The USA PATRIOT Act

Current State of AML in the Global Marketplace

Case Study: The Boys from Brazil

CHAPTER 14 - Procurement Fraud Detecting and Preventing Procurement and ...

Kickbacks

Vendor Fraud

Bid Rigging

Defective Pricing and Price Fixing

Contract Fraud

Cost/Labor Mischarging

Case Study 1: Employee Fraud

Case Study 2: Vendor Kickbacks and Collusion

Conclusion

CHAPTER 15 - Construction Fraud Monitoring, Mitigating, and Investigating ...

Common Construction Company Fraud Schemes

Combating Fraud and Corruption

Strengthen Your Internal Controls

CHAPTER 16 - Special Investigations How to Investigate Allegations of Corruption

An Interested Party: The Auditor

The Special Investigation

Prevention Is Key

CHAPTER 17 - Navigating the Perils of the Global Marketplace

FCPA Enforcement

Record Keeping

Data Collection and Processing

Transborder Data-Flow Issues

CHAPTER 18 - Case for Collective Action The World Bank Initiative

Why Collective Action against Corruption?

Different Views of Corruption

Business Costs of Corruption

Costs of Corruption for Industries, Economies, and Countries

Different Views of the Private Sector

Corruption Dilemma

CHAPTER 19 - Leveling the Playing Field

Book Research Summary

Index

Copyright © 2010 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Olsen, William P.

The anti-corruption handbook : how to protect your business in the global marketplace/William P. Olsen. p. cm.

Includes index.

eISBN : 978-0-470-61311-5

1. Business ethics-United States. 2. Corporations-Corrupt practices-United States-Prevention. 3. Business enterprises-Corrupt practices-United States-Prevention. 4. Fraud-United States-Prevention. 5. Compliance auditing. I. Title.

HF5387.5.U6O47 2010

658.4’7-dc22

2009044662

To my father, whose integrity was always an inspiration

Preface

In many parts of the world, companies and governments alike have recognized that corruption raises the risks of doing business. It has a destructive impact on both market opportunities overseas and the broader business climate. Corruption deters foreign investment, stifles economic growth and sustainable development, distorts prices, and undermines legal and judicial systems.

As a result of this growing problem, my colleagues and I wrote this book as a guide to help fight global corruption. We understand the issues and threats that businesses face, and we wanted to provide a comprehensive publication that describes the risks of doing business in the global marketplace and provides precautions that organizations can take to deter such activity. The book also discusses how to respond to allegations of corruption.

Doing business internationally does not need to increase your exposure to fraud and corruption. Whether you are a general counsel, chief financial officer (CFO), internal auditor, compliance officer, forensic accountant—whatever your role or responsibility—we hope that you find this book to be a valuable weapon in the war on corruption. As a U.S. organization trying to operate globally, you need to protect your company’s assets and reputation, and run your business successfully and ethically. We want to supply you with the knowledge and tools needed to obtain a competitive advantage in the global markets of the 21st century.

Organization

The book provides background information on anti-corruption and laws and efforts on combating corruption. A basic understanding and foundation is essential in order to effectively prevent, detect, and respond to corruption.

Chapter 1: Managing Corruption Risk Chapter 2: What is Anti-Corruption? Chapter 3: U.S. Efforts to Combat Global Corruption Chapter 4: U.S. Laws Governing Corruption Chapter 5: The Evolution of the Foreign Corrupt Practices Act Chapter 6: Internal Controls and Accounting Provisions of FCPA

The book looks closely at certain aspects of the fight against corruption. From governance to whistle-blower programs and information security, we provide details that you should know to protect your organization.

Chapter 7: Do Not Crimp Chapter 8: The Human Factor Chapter 9: Corporate Chapter 10: Whistle-Blower Programs Chapter 11: Document Retention Chapter 12: Information Security

There are special areas of anti-corruption that warrant close attention, and these chapters walk you through them.

Chapter 13: Anti-Money Laundering Chapter 14: Procurement Fraud Chapter 15: Construction Fraud

So what can you do? Looking at allegations of fraud or the whole playing field overall, there are actions you can take to win the war on corruption.

Chapter 16: Special Investigations Chapter 17: Navigating the Perils of the Global Marketplace Chapter 18: Case for Collective Action Chapter 19: Leveling the Playing Field

How to Use This Book

You can read this book sequentially to gain the necessary background on corruption, learn more details on specific issues and areas of corruption, and then arm yourself with knowledge and advice on how to fight it. Alternatively, you can turn to the chapters covering topics with which you and your business are particularly concerned. This book contains a lot of valuable information at your fingertips and serves as a convenient guide on global corruption.

This book also includes several case studies, tables, charts, and sample work plans to help illustrate the knowledge with practical examples.

Finally, we want you to use the book as a main resource that complements other training and information you receive. While some progress is being achieved globally in this battle, it is an ongoing challenge and a lot of work remains to be done. Add this book to your arsenal to help you and your organization fight the war on corruption.

About the Contributors

William P. Olsen is a principal in the advisory services practice of Grant Thornton LLP and the national practice leader for forensics and investigations. Bill has performed numerous investigations involving management fraud, organized crime, and corruption. He has consulted various organizations in developing policies, controls, and procedures to assure compliance with government regulations. He specializes in the area of anti-corruption and anti-money laundering services.

Dorsey Baskin is a regional partner in charge of professional standards at Grant Thornton LLP, responsible for the central region of the United States. He is consulted on complex accounting, auditing, and risk management matters. In his role, he is directly accessible to engagement teams and available to clients as needed to effectively and timely address matters as they arise.

Danette Edwards is a member of Venable’s SEC and White Collar Defense practice group. Her practice is particularly focused on white collar criminal defense, complex civil cases, and corporate compliance and internal control issues, including records management policies and a range of Sarbanes-Oxley-related matters. She also focuses on environmental criminal defense and internal investigations.

Trent Gazzaway is the National Audit Practice Leader and the partner in charge of public policy and corporate governance for Grant Thornton LLP. He collaborates with members of Congress, regulators, and key policy groups to shape policy affecting the accounting profession, investors, businesses, and the global capital markets. He also is a key resource in training Grant Thornton personnel to audit internal controls over financial reporting in accordance with newly established auditing standards.

Kelly Gentenaar is a senior manager in the advisory services practice of Grant Thornton LLP. Kelly has conducted and managed numerous Foreign Corrupt Practices Act (FCPA) investigations and compliance reviews, as well as forensic accounting investigations. Her experience also includes anti-money laundering investigations and background investigations.

Sterl Greenhalgh is a principal in the London, England, office of Grant Thornton UK. He has focused on international investigations, customs violations, global corruption, and serious fraud. He is a frequent speaker on various subjects involving corruption and FCPA matters.

Nancy R. Grunberg is the head of Venable’s Securities and Exchange Commission (SEC) and White Collar Defense practice group. She focuses her practice on securities law and financial disclosure matters. Nancy helps clients address and resolve situations when there may be financial fraud, securities violations, accounting manipulation, or other financial wrongdoing.

Bryan Moser is a director in the advisory services practice of Grant Thornton LLP. Bryan has assisted clients for more than 15 years with a variety of investigations and forensic accounting matters. Client issues have included earnings management, employee embezzlement, improper vendor arrangements, tax evasion using offshore entities, misappropriation of grant and other government funding, and compliance with governmental policies.

Dr. Djordjija Petkoski is a lead enterprise structuring specialist and head of private sector development at the World Bank Institute. Since joining the bank, he has worked in Europe, Asia, Latin America, and Africa. Djordjija has authored or coauthored 15 books and more than 120 articles and has delivered lectures at leading universities and international organizations around the world.

Brad Preber is a partner in the advisory services of Grant Thornton LLP. Brad oversees forensics, investigations, and litigation services provided in the western United States and is the office managing partner of the Phoenix office. He has more than 25 years of experience serving as a litigation consultant, expert witness, forensic accountant, and fraud investigator. He specializes in complex claims and events, with a particular emphasis on class actions, commercial disputes, and fraud claims.

Sri Ramamoorti is a corporate governance consultant and thought leader. He has advised on Sarbanes-Oxley, professional standards, and other technical matters, and contributed to professional development programs. He has published extensively in research and professional journals and is a frequent speaker at academic and professional conferences.

James Schmid is the national construction advisory practice leader for Grant Thornton LLP. He is the practice leader in the Detroit area for forensics, investigations, and litigation. Jim provides economic and damage analysis as an expert witness and litigation support consultant. He also provides fraud investigation services for property and financial statement fraud.

R. Kirt West is the assistant inspector general for Iraq reconstruction. His 20+-year career includes roles such as inspector general of a D.C. not-for-profit organization, assistant inspector general for investigations for the United States Postal Service, and inspector general counsel at the Central Intelligence Agency and the Department of Labor. Kirt has an extensive background in investigating pension fraud, money laundering, contract fraud, false claims, bribery, and criminal conflicts of interest.

CHAPTER 1

Managing Corruption Risk

William P. Olsen

I magine that you are the chief financial officer (CFO) of a Global 1000 company. You are a large and quickly growing company with worldwide operations. Recognizing the risks inherent in conducting business on a global scale, you previously instituted various controls to minimize risks due to unethical and illegal business practices. In spite of this, some concerns have now been raised about the integrity of management at your Latin American operation. In response, you initiate a special investigation to look into the matter. The findings are shocking.

In the course of a few short days, you discover that, despite the controls you installed, a legal minefield of unethical business practices has been uncovered. Over the course of the investigation, the investigative auditors have uncovered a scheme between local management and outside agents to bribe employees of competitors to obtain their proprietary information. They also uncovered a scheme whereby payments were made to government officials overseeing a bid that your company was participating in. The investigation also uncovers evidence of massive vendor kickbacks as well as substantial conflicts of interest in your subsidiary’s business dealings. If that is not enough, it is also discovered that the organization was infiltrated by individuals with close ties to organized crime. You now have two questions: (1) how did this happen?, and (2) how can I prevent it from happening again?

The scenario you have just read is based on an actual investigation. As one can see, virtually every element of business corruption was uncovered. The fact that these events took place despite the existence of a corporate code of conduct underscores the need for ongoing monitoring and auditing to assure adherence to the policies and procedures included in the code of conduct and ethics program. In fact, if a program that required proper compliance monitoring had been instituted, the investigation described in the foregoing scenario could have been avoided and the illegal activity certainly would have been discovered earlier.

You Are Not Alone

A recent survey performed by a global business consulting firm discovered that only 50 percent of senior corporate executives are “highly confident” that business control systems are managing their organizations’ business risks effectively.

The survey also revealed that fewer than 10 percent of these senior executives rated their control systems as “excellent” in providing early warning signs to catastrophic risks. In an increasingly competitive global marketplace, this could mean trouble for U.S. businesses competing on an uneven international playing field, where foreign competition does not have to adhere to such laws as the Foreign Corrupt Practices Act (FCPA). In fact, there are still many countries that allow “grease payments” as business tax deductions. In addition, there are several other federal initiatives that highlight other areas in which U.S. corporations must address compliance risks.

Bribery and Kickbacks

The greatest threat of business corruption to U.S. companies exists in the emerging markets and developing countries. Corruption and cronyism can have a paralyzing effect on a developing country. The FCPA was adopted in response to scandals involving bribery of foreign officials by U.S. multinational corporations. The FCPA makes it a crime for any U.S. entity or individual to obtain or retain business by paying bribes to foreign government officials. Until recently, the United States was alone in prohibiting such actions. However, groups such as the Organization for Economic Cooperation and Development (OECD) have become more involved in the fight against corruption. In fact, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions has had the effect of causing many more countries to have criminalized improper payments made to public officials. However, U.S. organizations cannot expect government agencies or international organizations to protect their interests. It is up to the private sector to set the tone and create an environment for integrity.

Economic Espionage

The Economic Espionage Act criminalizes the unauthorized use, access, copying, purchase, sale, and theft of trade secrets, so long as the owner took reasonable steps to protect them. An effective compliance program coupled with sound procedures that are routinely monitored and updated is the most effective tool to limit an organization’s potential liability under the act and also an important first step in protecting proprietary information. Organizations must protect against the illicit outflow of their own information as well as the inflow of information from their competitors.

Money Laundering

In an effort to crack down on money laundering transactions, since 9/11 the federal government has enacted new reporting regulations for the banking and financial industry and is planning to extend such regulations to cover money brokers and other businesses and organizations involved in the transfer of large sums of money. The “Suspicious Activity Report” requires financial institutions and other businesses that transfer large amounts of cash to report patterns of suspicious activity by customers. New proposed regulations also call for the development of “Customer Identification Programs,” which call for financial institutions to establish procedures and adopt steps to reduce the risk of money laundering under the Bank Secrecy Act, Patriot Act, and other anti-money laundering laws. If implemented correctly, these preventive measures should help financial institutions prevent and detect illegal activity being perpetrated against their organization. It will also assist them in complying with government regulations.

Developing Effective Compliance Programs

These federal initiatives, along with the Sentencing Guidelines for Organizations, have applied increased pressure on all U.S. organizations to develop effective business ethics and anti-corruption programs. The problem, as illustrated at the outset of this chapter, is that many organizations have a false sense of security from current programs that are inadequate.

In the event of a potential violation, the existence of an effective compliance program has proved to be effective in fending off further government inquiry. An effective anti-corruption program must have the foundation of a strong code of conduct that communicates the organization’s position on conflicts of interest, bribery, kickbacks, confidentiality of proprietary information, and compliance with all applicable laws and regulations. To be effective, the program must have the support and oversight of top management. The communication of the organization’s policies and procedures is also critical in this type of program. Employees need to be constantly apprised of industry trends and new regulations through ongoing training programs.

Once a program is in place, ongoing monitoring is essential. This will not only ensure adherence to established policies and procedures, but will also help prevent fraudulent activity and detect patterns typical of money laundering and other suspicious or corrupt activity when it occurs. Auditors should look for strange or unusual patterns and vary their audit approach so as not to become predictable. The use of exception reporting audit software is becoming a basic tool utilized by auditors to detect patterns of suspicious activity.

Performing Due Diligence

Auditors should utilize a risk-based approach when preparing their audit plans. They should be able to identify the “red flags” of fraud and plan their audit tests accordingly. Companies doing business in countries that are havens for money laundering operations or where bribery and kickbacks are accepted business practice should be extra vigilant.

The performance of background checks to screen key employees, customers, agents, potential partners, and vendors is also an effective tool to identify conflicts of interests, identify government officials, and deter fraudulent activity. What better way to assess the risk of a merger or acquisition than to review the business history of the company and its principal officers for indicators of fraudulent activity, bankruptcy, pending litigation, or even ties to organized crime. Vendor and consulting contracts should point out clearly the organization’s expectation that they adhere to all company policies and procedures with regard to business ethics. A “right to audit clause” in the contracts can be a valuable tool if there are ever any allegations of wrongdoing.

Many organizations provide an “ethics hotline” for employees to report suspicions of illegal or unethical activity. If this type of activity becomes apparent, an organization must be prepared to investigate each allegation or suspicion of fraud and take the appropriate action based on results of the investigation.

In summary, the benefits of an effective anti-corruption program are unmistakable: a reduction in the risk of fraud; mitigation of fines and penalties; increased control over business risks; and peace of mind in an increasingly competitive global marketplace.

CHAPTER 2

What Is Anti-Corruption?

William P. Olsen

Corruption has a corrosive impact on both overseas market opportunities and the broader business climate. It also deters foreign investment, stifles economic growth and sustainable development, distorts prices, and undermines legal and judicial systems. More specifically, corruption is a problem in international business transactions, economic development projects, and government procurement activities.

As a result of this problem, and to obtain a competitive advantage in the global markets of the 21st century, a growing number of businesses are taking proactive steps to detect and prevent corruption.

Anti-Corruption Detection and Prevention

Since the Foreign Corrupt Practices Act (FCPA) was enacted in 1977, U.S. law has prohibited offers, promises, or payments to foreign officials, political parties, political officials, and candidates to secure business. A company running afoul of the FCPA, or recently enacted anti-corruption laws of other countries, may subject itself to criminal charges and substantial fines.

Companies in these situations may also face loss of financing and insurance from national or international institutions and debarment from public contracting. Companies committing FCPA violations may also sustain damage to their reputations and their ability to compete for international business. The financial losses incurred due to the loss in reputation can be far more costly than the fine and penalties leveled against companies for FCPA violations.

Developing a comprehensive “anti-corruption” compliance program as part of your company’s standard business practice—and that of your foreign subsidiaries—may limit your company’s risk and help avoid potential costs. An anti-corruption compliance strategy can also help to protect your company’s reputation, minimize its liability, and maintain its long-term viability.

Critical Elements of an Effective Compliance Program

An effective corporate compliance program, according to the U.S. State Department, is one that ultimately yields intended results: education, detection, and deterrence.

In structuring your corporate compliance program, you may want to consider the following general elements typically found in successful compliance programs. The Federal Sentencing Guidelines for Organizations that were established in 1991 are the benchmark that most organizations utilize to develop compliance programs. The following steps are critical to a successful program.

Tone from the Top

• It is crucial that all of the elements of your company’s corporate compliance program receive the full support of upper management.

• The corporate compliance program must be enforced at all levels within the company.

• If upper-level management does not take efforts to combat corruption seriously, then neither will employees.

Code of Conduct

• Corporate directors, officers, employees, and agents put themselves at risk of incurring criminal or civil liability when they do not adhere to the FCPA or similar anti-corruption laws of other countries.

• A corporate code of conduct generally consists of a clearly written set of legal and ethical guidelines for employees to follow.

• A comprehensive and clearly articulated code of conduct, as well as clear policies and procedures relative to seeking guidance and making disclosures, may reduce the likelihood of actionable misconduct by your employees.

• It is important that a company’s code of conduct be distributed to everyone in the company and, if necessary, translated into the languages of the countries abroad where your company operates.

• Finally, developing a code of conduct should not be the final act. The code must be effectively implemented and enforced at all times.

Compliance Monitoring

• A compliance program may be run by one person or a team of compliance or ethics officers, depending on the size of your business.

• Implementation and responsibility for a corporate compliance program by high-level management employees are vital for accountability.

• Corporate compliance officers and committees can play key roles in drafting codes of conduct and educating and training employees on compliance procedures. Committee compliance members may include senior vice presidents for marketing and sales, auditing, operations, human resources, and other key offices.

• Past experience has shown that empowering compliance officers with access to senior members of management and with the capacity to influence overall company policy on integrity issues can be of utmost importance.

Training and Communication

• The overall success of a compliance program depends on promoting legal and ethics training at every level of the company.

• Regular ethics and compliance training programs should be held for all company employees, including board members and senior management officials.

• Compliance programs should educate employees at all levels of the company about the FCPA and, when necessary, other countries’ anti-corruption laws.

• More specific legal and ethical training may be necessary for employees in high-risk areas.

• A company should also take reasonable measures to communicate its values and procedures in an open environment to encourage participation and feedback.

• Employees should be informed as to whom they should contact to report violations or ask questions.

• Training materials that are both interactive and cost effective can help build employee support for a compliance program.

• Most importantly, compliance issues should not be limited to training classes and the compliance team: compliance should be stressed as an integral part of the company’s way of doing business.

Due Diligence

• Conducting prompt and thorough due diligence reviews is vital for ensuring that a compliance program is efficient and effective. Due diligence reviews are also key for preventing potential harm to the company’s reputation.

• Self-monitoring, monitoring of suppliers, government relations consultants, and reports to the board of directors are all good tools for ensuring that a compliance program is being followed. Moreover, from vetting new hires, agents, or business partners to assessing risks in international business dealings (e.g., mergers, acquisitions, or joint ventures), due diligence reviews can uncover questionable conduct and limit liability.

Auditing and Internal Controls

• Auditing and monitoring of systems of internal accounting controls contribute to building an effective compliance program by the early detection of inaccuracies and misconduct (e.g., bribery, fraud, or other corporate malfeasance). Financial disclosure and reporting should be an integral part of a company’s internal accounting controls.

• Companies should have a clear and concise accounting policy that prohibits off-the-books accounts or inadequately identified transactions.

• Companies should monitor their accounts for inaccuracies and for ambiguous or deceptive bookkeeping entries that may disguise illegal bribery payments made by or on behalf of a company. The FCPA requires compliance with various accounting and record-keeping provisions.

We will talk more about accounting controls in Chapter 6.

Reporting Mechanism

• Enforcement of a company’s code of conduct is critical. Compliance officers should be accessible so that employees will feel comfortable discussing any of their compliance questions or concerns.

• Creating reporting mechanisms with adequate policies on confidentiality and nonretaliation, as well as other safeguards related to reporting, is extremely important.

• Whistle-blowing protections, confidential reporting mechanisms, and “hotlines” facilitate detection and reporting of questionable conduct.

• Companies should provide guidance to assist employees and agents on how to cope with and resolve difficult situations. Such counseling not only protects the person in the field, it also protects the company.

We will discuss whistle-blower programs more in Chapter 10.

Appropiate Response

• A company should ensure that all employees understand that failure to comply with its compliance policy and procedures will result in disciplinary action, ranging from minor sanctions to more severe punishment, including termination of employment.

• In instances of noncompliance, a company should take the necessary preventive steps to ensure that the questionable conduct does not recur in the future.

The measures listed here are general elements for developing an anti-corruption corporate compliance program. Note that compliance programs’ emphasis on specific elements will vary from one company to another, depending on the particular risks engendered by the company’s business (e.g., antitrust, health care fraud, construction fraud, or environmental issues). You should seek the advice of legal counsel to learn more about what kind of corporate compliance program is most appropriate for your business.

Governance and Oversight

The emphasis on good governance is timely. Globalization has put a premium on developing the incentives and adjustments necessary to attract investments and capital in foreign markets.

You are the most effective advocate in the fight against corruption because you play a part in controlling jobs and investment in the global economy. Good governance starts with a culture of integrity. Culture comes down from the top.

Good corporate governance procedures provide fair, reliable, and transparent rules that foster trust and confidence for doing business. As corporate citizens, businesspeople are members of and leaders in their communities. Your efforts to establish and adhere to corporate codes of conduct and personal ethical standards have a beneficial effect that ripples through the community. By working with governments and civil society to promote good governance in global economies, your company will help foster a synergy between economic goals and social progress.

Good governance principles for governments also benefit their economies. Good governance reduces market volatility, encourages foreign direct investment and capital inflows, promotes sustainable economic growth, and produces a more equitable distribution of resources to the people and creates an atmosphere of fair competition in the marketplace.

While it is increasingly clear that corporate governance and sound business practices are generally good for business, good governance practices by governments also enhance the integrity of the international markets and promote the integration of economies into the global trading system.