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Executing Effective Monitoring and Risk Assessments

Interview with Arvind Sharma, Senior International Trade Counsel at Flowserve Corporation

 
PRLog - Aug. 30, 2011 - CHICAGO -- With a steady increase in enforcement, organizations need to now move beyond FCPA compliance and embrace a global anti-corruption compliance program. Global companies need to assess their existing anti-corruption compliance programs and adjust them to meet potentially more stringent requirements.

Arvind Sharma is the Senior International Trade Counsel at Flowserve Corporation. He will be a speaker at the marcus evans 7th FCPA & Anti-Corruption Compliance Conference taking place September 14-16, 2011 in San Francisco, CA.

Arvind currently manages the company’s global anti-bribery and FCPA compliance program and serves as legal counsel, supporting the company’s global import and export compliance programs.

Mr. Sharma answered a series of questions written by marcus evans to explain how to execute effective monitoring and risk assessments to safeguard against potential corrupt practices. All responses represent the view of the Mr. Sharma and not necessarily those of Flowserve Corporation.

What does the rapid evolution of anti-corruption enforcement globally mean for US companies?

AS: When conducting training overseas, the most frequent ‘criticism’ most legal/compliance personnel receive is that the information is too US-centric.  Most often, until a significant effort has been made, non-US audiences do not always appreciate the extra-territorial application of US law, specifically the FCPA and they do not want to hear that they must follow US law because “we are a US-based company.”

Thus, increased global enforcement and the development of enhanced anti-bribery laws worldwide (e.g., UK Bribery Act) will provide an opportunity for US companies not to be US-centric.  This should enable companies to more effectively relate/connect with employees across the globe because we are now able to regularly talk about/discuss/train on local laws and local enforcement and, we do not have to just provide information solely from the perspective of the FCPA.

Additionally, the ability to discuss global enforcement and local laws should help overcome issues/questions regarding cultural differences because other countries are enhancing and enforcing their own anti-bribery laws.

Finally, this will also specifically show that efforts to prevent corruption are not just originating from the US and that other countries and international organizations, such as the OECD, are leading efforts to develop a more level playing field for the global business environment - one that does not rely on improper payments and/or activities to develop business opportunities.

What improvements can be made to monitoring and risk assessment programs to help identify high-risk payments?

AS: Ultimately, the ability to identify anti-bribery/FCPA issues, whether related to high-risk payments or other anti-bribery concerns, comes down to people, processes and systems.  First, the people must have enough awareness regarding anti-bribery issues and red flags to be able to spot issues that may arise.  Everyone does not necessarily have to be an FCPA/anti-bribery expert, but they should have the ability to identify red flags and then raise concerns to the legal/compliance department to address in a timely manner.  Targeted training and communication provide the most effective tools to make sure awareness has been raised throughout the company, which facilitates identification of issues by the company’s employees.

Second, the company must develop and implement policies and processes that provide oversight and audit points throughout the transaction.  For example, a third party commission checklist provides support that payments are in accordance with company policy, are for legitimate and specific business purposes, and are aligned with similar commission payments for similar activities.  

Finally, systems are very useful because an IT–based tool may be able to automate certain types of procedures, such as the third party commission checklist described above.  Additionally, certain audit analytic tools are available that can automatically review transactions, accounting information, etc. in the background and can alert the legal/compliance department about any transactions that may fall outside of pre-set parameters.  

However, a program that does not include all elements will not be as effective because overlooking the people aspect, for example, assumes that procedures and IT-based systems can provide all of the necessary tools.  
However, systems can be bypassed and a robust program requires all three elements.

How significant is quick detection of FCPA and other violations and how can this achieved?

AS: Being able to quickly identify potential anti-bribery issues is a critical component to a compliance program, which should include program elements to prevent, detect, and remedy compliance issues.  Being able to quickly identify a potential issue (or an actual issue) may help the company significantly minimize the negative impact, not only from a financial standpoint but also from a publicity aspect which could have more far reaching consequences than fines, penalties, lost sales, etc.

However, in many cases, how a company responds to an anti-bribery/FCPA compliance violation may be more important to avoiding significant fines and penalties when a violation has occurred, than quick detection.

If a company decides that it does not want to operate in a global environment, does not maintain extensive sales channels, does not utilize third parties, does not deal with a large customer base, etc., it may be able to prevent violations from occurring.  However, faced with business realities, the compliance program may not be able to prevent violations from occurring.  Thus, in many cases, how a company responds to a violation may be the most important aspect in reducing negative consequences.


What approach to training internal audit teams should be taken to ensure they understand how to identify violations?

AS: In addition to providing the framework to understand anti-bribery/FCPA guidelines and red flags, I think that the legal/compliance department must reach a mutual understanding with internal audit so both parties fully understand their role and more importantly, acknowledge what skills each group brings to the table.  At the end of the day, most lawyers do not have extensive audit skills and most auditors do not have legal skills and the groups should not try to perform the others functions.  

Based on their experience and the training that has been provided, allow the auditors to audit transactions and let the lawyers perform the legal analysis of the results.

Despite all the useful tools such as compliance matrices and internal controls, the core of a successful compliance program still rests with the tone set by the senior executives. What are your thoughts on this?

AS: Unless a company has the support of senior leaders, such as the executive leadership team and the Board of Directors, the chances of successfully implementing a robust compliance program are significantly diminished.  As long as the executives stand behind their words, the “tone at the top” is often the message that is used to direct compliance efforts to the employees that are conducting the day-to-day business of the company.

However, although I feel that the “tone at the top” is critical to the success of a compliance program, I believe that the tone of middle management may be more critical and has a more direct link to the success of a company’s compliance program in practice.  The vast majority of employees deal directly with middle management and can regularly see how middle management practices what they preach.  Companies can often become stuck in the middle despite a strong tone at the top because the message is not channeled appropriately through middle management and does not effectively reach the employees.

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Marcus evans conferences annually produce over 2,000 high quality events designed to provide key strategic business information, best practice and networking opportunities for senior industry decision-makers.

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Industry:Event, Legal
Tags:fcpa, compliance, corruption, bribery, uk bribery act, ethics
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