Being protected Using data analytics to detect corruption

Transcription

1 Being protected Using data analytics to detect corruption

2 Anti-corruption enforcement has placed companies on notice FCPA is a United States federal law provisioning accounting and bribery of foreign officials. Any company that has significant operations in the United States falls under the FCPA, regardless of whether the corrupt act, such as a bribe, takes place in the US. The Act also governs indirect payments to a foreign official via a third party, such as an intermediary or agent. These payments are not limited to a monetary form, but may also include anything of value. However, facilitation payments are allowed under the FCPA. FCPA UK Bribery Act Bribery of foreign officials Bribery of foreign non-officials Private and/or commercial bribery Extraterritorial reach Books and records Exceptions for facilitation payments Corporate criminal liability Strict liability Successor liability Credit for compliance programme Credit for self-disclosure UKBA came into force in July It has many similarities to the FCPA and expands the UK s previous anti-bribery laws. UKBA exceeds the scope of the FCPA by far: Bribes are not limited to foreign officials Focus of a bribe is on improper action and not solely to obtain or retain business Addition of passive offense of being bribed Introduction of new strict liability to prevent bribery Organisations that conduct business in the UK No facilitation payments are allowed Only criminal enforcement Potentially unlimited fines and up to 10 years in prison Using data analytics to detect corruption Growing international awareness and expansion into new and unfamiliar territories increases the risk of corruption & bribery. Corporations and executives can be subject to large fines and significant prison sentences. In addition to prosecution by local regulators, the Foreign Corruption Practice Act (FCPA) and UK Bribery Act (UKBA) allow authorities to pursue bribery undertaken overseas by international companies. Globally, a number of issuers are under investigation or have paid multi-million dollar fines that have had a noticeable impact on their reputation at home and in foreign markets. An effective compliance programme is crucial to make sure your controls really do prevent fraud in new, unstructured and developing markets, as well as in established offices. Data analytics can provide insight into possible risks and help you discover corruption early on, before a costly trial. Likewise, an investigative analysis will untangle the web of corruption. Does your company s compliance programme cover your internal controls? Is it adequate to protect you from anti-bribery risks? An independent assessment and forensics investigation based on FCPA, UK Bribery Act and domestic standards can make sure it is. PwC Being protected 2

3 Advanced analytics help reduce costs and increase comfort. Largest fine a company has ever paid to resolve corruption-related charges One of largest fines - $1.6 billion - in the history of the FCPA since it became law in 1977, was paid by a Germany-based manufacturer of industrial and consumer products. It included a $350 million fine to the Securities and Exchange Commission (SEC), $450 million criminal fine to the US Department of Justice and a total fine of $854 million to the Office of the Prosecutor General in Munich. The company was ordered to engage an internal monitor for four years. Between 2001 and 2007, the company had made more than 4,000 payments totaling around $1.4 billion to bribe government officials around the world. In addition, about 1,000 payments were made to third parties for illicit purposes. The SEC s complaint alleges that the company paid bribes to government officials in several countries and earned over $1.1 billion in profits on these transactions. It used elaborate payment schemes to cover up commercial bribery payments and kick-backs and involved employees at all levels. The company s internal controls weren t adequate enough to detect and prevent the payments that were recorded in the books and records. The SEC report states that the investigation revealed that the company created a corporate culture in which bribery was tolerated and even rewarded. In another case, an executive from the company was charged with bribery and agreed to pay a $275,000 civil penalty. PwC Being protected 3

4 The Director of the SFO names several companies currently under investigation and his office is under pressure to produce results. David Green, Director of the SFO; from speech to Cambridge Symposium Sept Data analytics provide insight into your compliance programme How we can help PwC s international multi-disciplinary team has developed an approach to help you assess your risks, plan your response and identify opportunities in compliance. We leverage our global network to create a blacklist of persons of interest and related organisations. Our combination of highly qualified data analysts, accounting experts and forensic investigators link transactions to the entities from the list and investigate these further. Using proven techniques and forensic technology, we can efficiently find, retrieve, preserve, analyse and process a wide array of information. Proactive approach to prevent bribery Preventive measures can help you detect bribery cases before they become an issue, using data analytics to identify suspicious transactions or outliers. We can classify actual relevant cases and false positives and advise on the design of Red Flag tests to efficiently trigger events and prevent bribery. By assessing your corruption risk and compliance programme, we can help you initiate a response plan and protect your reputation at home and abroad. A retrospective investigation into what went wrong We collect vast amounts of electronic information, such as s, log files and financial information from various IT systems, and analyse it to fully process the set of corrupt actions and identify individuals or groups involved, unveiling what really happened. Previous cases have demonstrated that we have the anti-corruption and forensic skills to identify indirect payments to officials via third parties and provide reliable assistance in ongoing investigations. PwC Being protected 4

5 Every transaction leaves a trail of data behind Both the FCPA and UKBA encourage the implementation of compliance programmes and credit the self-disclosure of cases. We can support you in this using our proprietary three-tiered process that uses advanced statistical methods to automatically detect possible corrupt transactions: Step 1: Red Flag tests are performed to detect transactions based on simple rules. These are effective when designed properly using domain knowledge. However, often a large number of hits remain that have to be reviewed manually. Step 2: Statistical methods are used to discover further transactions that appear to be suspicious because they significantly deviate from the norm, such as transactions that don t normally occur together. Finding transactions not previously flagged helps increase comfort. Step 3: Proven advanced analytics or machine-learning solutions automatically classify transactions into clusters. Together, these three steps lead to a reduction of manual review effort, thereby lowering costs. Only samples from clusters need manual review and only samples that turn out to be true positives have to be reviewed in detail. Red Flag tests Statistical methods Advanced analytics PwC Being protected 5

6 How we support you Regulatory responses Coordinate data extraction, remediation and response to meet demanding regulatory deadlines. Remediation/look-back exercises Meet the demands of reviewing or remediating past activity to identify potential system or process failures and confirm integrity and effectiveness. Reduced effort Either manually or using advanced statis tical methods to auto-close alerts, clear false positives and reduce costs. IT expertise Professional experience and knowledge of business standards, ERP systems and business tools. Data integrity and cleansing Review data to ensure it s current, accurate and held in a retrievable and usable form. Operational design Develop an approach and way of working that meet your needs, are fit for purpose and able to respond to current and future regulatory needs. Discovery and investigation Use our experience to implement Red Flag tests which identify possible bribery cases. Let s talk PwC helps organisations and individuals create the value they re looking for. We re a network of firms in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at For additional information, please contact: Rudy Hoskens Partner, Forensic Services Rudy.hoskens@be.pwc.com Sally Trivino Director, Forensic Services Sally.trivino@be.pwc.com PwC Being protected 6

7 2015 PwC Belgium. All rights reserved. PwC firms help organisations and individuals create the value they re looking for. We re a network of firms in 157 countries with over 195,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.