Anti-Corruption Enforcement and Compliance in the US, UK, and China
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Transcript of Anti-Corruption Enforcement and Compliance in the US, UK, and China
© 2015 Baker & McKenzie LLP
GOOD. SMART. BUSINESS. PROFIT.TM
© 2015 Baker & McKenzie LLP
Anti-Corruption Enforcement and Compliance in the US, UK and China: Trends from 2014 and Forecast for 2015
January 30, 2015
© 2015 Baker & McKenzie LLP
Chelsie ChmelaEvents [email protected]
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© 2015 Baker & McKenzie LLP
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SPEAKING TODAY
John P. CunninghamPartner, Washington, DC
Vivian WuSpecial Counsel, Beijing
Geoff MartinAssociate, London, UK/Washington, DC
Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm.© 2015 Baker & McKenzie LLP
Anti-Corruption Enforcement and Compliance in the US, UK and China: Trends from 2014 and Forecast for 2015
January 30, 2015
John P. Cunningham: Washington, DCVivian Wu: Beijing, ChinaGeoff Martin: London, UK; Washington, DC
© 2015 Baker & McKenzie LLP 6
Global Enforcement and Compliance Trends - Overview
‒ Burgeoning global enforcement of anti-corruption laws US, UK, China, Brazil, Russia, Canada
‒ Increased multi-country enforcement actions‒ Proactive cross-border investigative cooperation (sharing) ‒ Keying in on individual prosecutions‒ Heavy involvement by agents or intermediaries (75%) [Source =
OECD Foreign Bribery Report, Dec. 2014]‒ Majority of global matters in four sectors (67%): extractive,
construction, transportation, and information‒ Greater compliance awareness among companies and employees
(e.g., whistleblower risk, monitoring)
© 2015 Baker & McKenzie LLP 7
2014 Transparency Int’l CPI Index*From 1 (least corrupt) to 174 (most corrupt), the countries of particular interest in this specific presentation rank as follows:‒ USA: Rank 17, Score 74 (Score of 100 = least corrupt; 1 = most)‒ UK: Rank 14, Score 78‒ China: Rank 100, Score 36
Other Countries of Note in the TI 2014 CPI Index (i.e., top and bottom rankings) ‒ Denmark (Rank 1, Score 92)‒ New Zealand (Rank 2, Score 91)‒ Note: Singapore (Rank 7, Score 84) is only ASEAN country in top 10‒ North Korea (Rank 174, Score 8)‒ Somalia (Rank 174, Score 8)
*The TI Corruption Perceptions Index (CPI) measures how one country compares to others included in the Index based on the perceived level of public-sector corruption in each country
United States
© 2015 Baker & McKenzie LLP
Top 20 FCPA Settlements (US millions)
Siemens AG $800Alstom S.A. $772KBR/Halliburton $579BAE $400Total S.A. $398Alcoa $384ENI S.p.A. $365Technip S.A. $338JGC Corporation $219Daimler AG $185Weatherford $152Alcatel-Lucent $137Avon $135Hewlett-Packard $108Deutsche / Magyar Telekom $95Marubeni Corporation $88Panalpina $82Johnson & Johnson $70Pfizer / Wyeth $60ABB $58
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2014
© 2015 Baker & McKenzie LLP
US - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview ‒ US ranked 17 out of 174 on TI’s 2014 Corruption Perceptions Index ‒ FCPA still by far most actively enforced anti-corruption law in the world‒ Cost of settling FCPA enforcement actions continues to rise –
accompanied by big global headlines‒ Emergence of more active cross-border cooperation between US
authorities and other countries involving FCPA matters‒ FCPA enforcement against non-US companies continues‒ Self-reporting, cooperation, and remediation increasingly important
factors in reducing anti-corruption settlement penalties‒ Prosecution of individuals involved in FCPA misconduct on the rise‒ Continued emphasis on benefits of an effective compliance program
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US - Key Trends 2014‒ Increased role in global enforcement and cooperation
Sharing information Joint prosecutions More countries: UK, Brazil, China, Russia, Canada
‒ Expanded charges Combining anti-corruption with export violations,
money laundering, mail and wire fraud, other charges
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US - Key Trends 2014‒ Greater corporate awareness
Self-reporting and cooperation Front page media reports Whistleblowers
‒ Higher expectations for compliance programs Third party due diligence M&A, JVs due diligence Investigation protocols and rapid response
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US – Key Trends 2014‒ Aggressive expansion of FCPA jurisdiction to non-
domestic concerns and non-issuers Exerting extra-territorial jurisdiction Enforcement based on abetting and conspiracy theories
‒ Higher expectations for compliance programs to be comprehensive and premised on company-specific risk profile
‒ Immense penalties and collateral consequences (legal fees, compliance program costs, shareholder derivative actions, debarment, negative publicity)
© 2015 Baker & McKenzie LLP 14
US - Key Trends 2014
“The prosecution of individuals – including corporate executives – for white-collar crimes is at the very top of the Criminal Division’s priority list under Assistant Attorney General Caldwell.”
--Marshall Miller, US Principal Deputy Assistant Attorney General for the Criminal Division, September 17, 2014
© 2015 Baker & McKenzie LLP 15
US – Key Trends 2014: Increased Focus on Asia‒ Of the five 2014 settlements in the top 20:
Alstom and Marubeni both relate to corrupt payments in Indonesia -- schemes to procure officials’ assistance in securing power projects for Alstom and its subsidiaries; and to secure a contract to provide power-related services in Indonesia (Marubeni)
Avon involved allegations of corrupt conduct in China, including improper gifts, entertainment, and hospitality provided to public officials
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US – Key Trends 2014:Increased Focus on Asia (cont’d)‒ Other 2013 and 2014 FCPA resolutions with allegations
of corrupt payments to officials in SEA / Asian countries include: Bio-Rad Products (Vietnam & Thailand) Smith & Wesson Holding Corporation (Indonesia) Bruker Corporation (China) Diebold Inc (China)
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US – Looking Ahead in 2015‒ Hiring practices abroad
US government investigating major financial firms including Morgan Stanley and Citigroup, Inc.
‒ Travel issues Recent FCPA matters demonstrate continued interest
and significantly increased fines in connection with travel-related improprieties
‒ Third parties 70-80% of FCPA cases involve third parties committing
violations on or behalf of main corporate entity
© 2015 Baker & McKenzie LLP 18
US – Looking Ahead in 2015‒ M&A
DOJ opinion release: DOJ will not penalize a company subject to the FCPA for acquiring a foreign target with corruption issues, provided certain conditions were met
‒ Commercial bribery Diebold (2013) – SEC folding commercial bribery into its
FCPA enforcement realm
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US – Looking Ahead in 2015‒ Sep. 2014 – $30 million USD award to a foreign
whistleblower in a fraud case (largest ever) ‒ November, 2014: SEC released annual Dodd Frank
whistleblower report covering FY’14: 3,620 tips, 20% increase over two years 9 whistleblower awards (5 in all previous years
combined)
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US – Looking Ahead in 2015‒ Increased prosecution against individuals
DOJ: Corporate cooperation credit will depend on disclosure of evidence of individual culpability, more aggressive tactics will be used to investigate individuals
Creation of 3 new and dedicated FBI units to focus on FCPA matters
United Kingdom
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UK - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview ‒ Tooling-up for corporate prosecutions‒ Building a head of steam - more cases brought‒ Significant firsts on the horizon? ‒ A pipeline of cases for 2015‒ The future of the Serious Fraud Office
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UK – Gearing Up for Corporate Prosecutions‒ Introduction of Deferred Prosecution Agreements‒ New Sentencing Guidelines‒ Proposals for a broader ranging Corporate Offence of a
Failure to Prevent Fraud/Economic Crimes‒ UK Anti-Corruption Plan
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UK - Building a Head of Steam in 2014‒ Enforcement of pre-Bribery Act legislation
Smith and Ouzman (December) Innospec (August) Alstom - Charged (July) Bruce Hall (July)
‒ Bribery Act enforcement Bio Fuel fraud & bribery convictions (December)
© 2015 Baker & McKenzie LLP 25
UK - Significant Firsts on the Horizon? ‒ First Deferred Prosecution Agreement ‒ First corporate conviction under Bribery Act s.7 ‒ First Bribery Act conviction for foreign bribery
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UK - Pipeline of Cases for 2015 (selected)‒ Rolls Royce‒ GlaxoSmithKline‒ Alstrom‒ Barclays
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UK - Future of the Serious Fraud Office‒ Continued challenges
Tchenguiz and Dahdaleh cases HM Crown Prosecution Service Inspectorate
report (November 2014)‒ Home Office considers disbanding SFO and rolling into
the National Crime Agency
China
© 2015 Baker & McKenzie LLP 29
China - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview
‒ Greater scrutiny from Chinese authorities‒ Surge in prosecutions and higher penalties‒ Strengthened administrative enforcement ‒ New legislation focusing on bribery
© 2015 Baker & McKenzie LLP 30
China - PRC Anti-Bribery LawPRC law prohibits and penalizes both the giving and receiving of “bribes” in exchange for “improper benefits”.
Legislation Context Authority
Criminal Law • Criminal Law Judiciary Interpretation • Regulates both official bribery and
commercial bribery
Public Security BureauProcuratorate; People’s courts;
Anti-Unfair Competition Law (AUCL)
• Regulations Concerning the Prohibition of Commercial Bribery Acts
• Regulates commercial bribery
State Administration for Industry and Commerce and its local counterparts
CPC Rules • Communist Party of China (CPC) polices and rules
Commission for Discipline and Inspection of the Central Committee of CPC (CCDI)
© 2015 Baker & McKenzie LLP 31
China - General Enforcement Trends ‒ Increasing scrutiny of SOEs ‒ Industry sweeps
Energy Telecommunications Media Automobile Banking
‒ Dawn raids frequently used by regulators Criminal prosecution Administrative enforcement
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China - Highlights in Anti-Corruption Campaign‒ Enforcement against Chinese government officials
‒ Prosecution against foreign invested enterprises GSK – a record fine of US$489 million
“Tigers”30 transferred to criminal charges
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“Flies”penalized for breaking disciplinary rules
71,748
“Fox Hunt”illegal assets recovered from abroad
US$ 500million
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China - Legislation Development‒ New rule on enterprise information publication ‒ Draft 9th Amendment to Criminal Law
New crime of offering bribes to close relatives of government officials
Impose fines to corruption/bribery related crimes Replacement of amount-based standards for sentencing
bribe-taking crimes with more general criteria‒ Intensified international cooperation
2014 APEC Beijing Declaration on Fighting Corruption
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China – Looking Ahead in 2015‒ Continuation of the country’s anti-corruption compaign
Establish and Improve Punishment and Prevention of Corruption System Work Plan (2013-2017)
‒ Strengthen prosecution of bribery crimes A new anti-corruption agency within the Supreme
People’s Procuratorate is to be established in 2015‒ Industry sweeps
Industries concerning people’s livelihood will continue to be enforcement targets
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Baker & McKenzie - Additional ResourcesFollow ongoing developments in global anti-corruption enforcement and compliance via:
http://globalcompliancenews.com/
Baker & McKenzie’s acclaimed “Inside the FCPA” Newsletter http://www.bakermckenzie.com/insidethefcpa/
Thank you!Any questions?
© 2015 Baker & McKenzie LLP 37
Contact Information for Presenters
John P. Cunningham, Partner, Washington, DC Email: [email protected] Phone: + 1 202 835 6148
Vivian Wu, Special Counsel, Beijing Email: [email protected] Phone: + 86 10 6535 3860
Geoff Martin, Associate, London, UK/Washington, DC Email: [email protected] Phone: + 1 202 835 1677
© 2015 Baker & McKenzie LLP
Wednesday, February 4, 2015Corruption and Corporate Risk: How to Integrate Anti-Corruption Practices into Existing Business
Operations
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