Welcome to this ACT webinar your third party...Welcome to this ACT webinar Know your third party...
Transcript of Welcome to this ACT webinar your third party...Welcome to this ACT webinar Know your third party...
Welcome to this ACT webinarKnow your third party compliance
22 October 2015 | 12.30-13.15 BST
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Introduction
Stephen Baseby Associate Policy & Technical DirectorACT
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AgendaIntroductionStephen Baseby Associate Policy & Technical Director, ACT
PresentationJames Swenson, Head of Operations and Delivery for Thomson Reuters Enhanced Due Diligence, Thomson Reuters
Discussion and Q&A
Presentation
James Swenson Head of Operations and Delivery for Thomson Reuters Enhanced Due Diligence Thomson Reuters
Know your Third Party Compliance
James Swenson | October 2015
Accelus Enhanced Due Diligence
Key Areas of Risk in the Supply Chain
Customer & 3rd Party Risk• Identify an individual/entity• Understand if you can and should do business with the
individual / entity• Monitor for suspicious activity• Report and disclose to regulators and board
Compliance Risk• Stay current on all regulations• Anticipate how regulations might change and how they could
impact your organisation• Link changing regulations to policies• Report and disclose to regulators and board
Enterprise Risk• Measure and monitor risks related to events and the breakdown
of internal procedures, people and systems• Report and disclose to board
Financial Risk• Understand and optimise exposure to credit, liquidity and market
risk• Comply with financial regulations• Deliver accurate reporting
Corporate Governance and Controls• Build rules, practices and processes for operational
effectiveness• Monitor and test rules, practices and processes to ensure
compliance
KY3P Risk Management
Develop
Build
Identify
Assess
Monitor
Review
Educate
In order to prevent, detect and investigate supplier and third party risk, organisations need to implement a simple framework :
1. Develop your program
2. Build and operate controls
3. Identify the risks
4. Assess the results
5. Monitor and report
6. Review and align
7. Train and educate
Pillars of a ABC Compliance Programme
ProportionateProcedures
Top-Level Commitment
Risk Assessment
Due Diligence
Training
Monitoring & Review
KY3P Risk Management
Third-parties or business associates include:
1. Clients/Customers
2. Joint Venture/Consortium Partners
3. Contractors/Suppliers/Vendors/Distributors
4. Agents/Introducers/Intermediaries/Consultants
Risk Variables
JurisdictionsExposure to
Gov’tOfficials
Business Sector
Relationship Type
Risk-Based Approach
Exposure to Public
Officials?
Relationship Type
Risk RatingBusiness Sector
Location
Low Risk Norway/Canada
Medium Risk Malaysia/Poland
High Risk Venezuela/
Ukraine
Low Risk Consumer
Services, Retail
Medium Risk Pharmaceuticals/
Telecoms
High RiskOil & Gas, Extraction, Defense
Are the principals behind the
company Foreign Public Figures?
Will the business involve gov’t or
public contracts?
Is a gov’t license required for the
operation?
Are the third party goods and services mission-
critical?
Does the supplier deal with proprietary info,
IT systems, security
services?
MEDIUM RISK
HIGH RISK
LOW RISK
Risk-Based Approach
Exposure to Public
Officials?
Relationship Type
Risk RatingBusiness Sector
Location
Low Risk Norway/Canada
Medium Risk Malaysia/Poland
High Risk Venezuela/
Ukraine
Low Risk Consumer
Services, Retail
Medium Risk Pharmaceuticals/
Telecoms
High RiskOil & Gas, Extraction, Defense
Are the principals behind the
company Foreign Public Figures?
Will the business involve gov’t or
public contracts?
Is a gov’t license required for the
operation?
Are the third party goods and services mission-
critical?
Does the supplier deal with proprietary info,
IT systems, security
services?
MEDIUM RISK
HIGH RISK
LOW RISK
Risk-Based Approach
Exposure to Public
Officials?
Relationship Type
Risk RatingBusiness Sector
Location
Low Risk Norway/Canada
Medium Risk Malaysia/Poland
High Risk Venezuela/
Ukraine
Low Risk Consumer
Services, Retail
Medium Risk Pharmaceuticals/
Telecoms
High RiskOil & Gas, Extraction, Defense
Are the principals behind the
company Foreign Public Figures?
Will the business involve gov’t or
public contracts?
Is a gov’t license required for the
operation?
Are the third party goods and services mission-
critical?
Does the supplier deal with proprietary info,
IT systems, security
services?
MEDIUM RISK
HIGH RISK
LOW RISK
KY3P Risk Management
Lower Risk Medium Risk Higher Risk Sanctions Screening Sanctions Screening Sanctions Screening
Black & Watch Lists Black & Watch Lists Black & Watch Lists PEPs/Heightened Risk PEPs/Heightened Risk PEPs/Heightened Risk
Adverse Media Search Adverse Media Search Adverse Media Search
Company status verification Company status verification
Directors/Shareholders Directors/ShareholdersIn-country database and local language media check
In-country database and local language media check In-depth reputational assessmentSource interviews and reference checks
Drivers for Due Diligence
• Foreign Corrupt Practices Act (FCPA)
• UK Bribery Act (UKBA)
• OECD Good Practices Guidance
• US Patriot Act
• EU Money Laundering Directives
• Reputation
• Ethical Business Practices
• Sanctions Compliance
• Ultimate Beneficial Ownership Obligations
Drivers for Due Diligence
• Does the company exist?
• Who owns it?
• Where is the office and who manages it?
• Physical office location?
• Is it well established?
• Is it owned or managed by entities connected to political figures?
• Is it newly incorporated?
• Is it established offshore? Who are the Ultimate Beneficial Owners (UBOs)?
• Are the principals criminals or money launderers?
• Are they a risk to your reputation and your business?
• What is their track record?
• Do they pay or accept bribes?
Sources of Information
Open Sources
Databases
Public Records/Official
Gov’t Sites
PEP/Sanctions/Blacklists
Court Records
Company Registrars/Tax Bureaus/Gov’t Ministries
Litigation/Regulatory /Bankruptcy Databases
Commercial Information Databases
Media Monitoring
Internet/News Aggregators/Foreign Press/Social media
EMERGING RISKS IN THE SUPPLY CHAIN
• Forced Labour
• Bonded Labour
• Modern-Day Slavery
• Child Labour
“Supply Web”
“Supply Web”
Direct Supplier
HOW SIGNIFICANT IS THE PROBLEM?
• Forced/Bonded/Child Labour in the Private Sector generates an estimated USD 150 million in profits.
• More than 21 million people worldwide are currently in conditions of forced or bonded labour.
• Most common industries: cottons, tobacco, sugarcane, cattle and coffee
• Also prevalent in garments, electronics and construction.
• Controversial issue in Qatar.
RECENT EXAMPLES
• Electronics Section in Malaysia– Recruitment firms in Nepal/Myanmar – Confiscation of Travel Documents– Conditions of Indentured Servitude
• Seafood Industry and Thailand– Family Members Forced to Sign Agreements– Living Wages– Market Backlash
DRIVERS
• California – Supply Chain Transparency – CA Companies with Revenues over USD 100 million– Must Disclose Efforts Though These are not Regulated– Conditions of Indentured Servitude
• US Federal Government Executive Order
• Modern Slavery Bill 2014/2015 (UK)– Committee Stage in the House of Lords– Similar to the California Legislation
Any Questions?
The panel
ChairStephen Baseby Associate Policy & Technical Director, ACT
Speaker
James SwensonHead of Operations and Delivery for Thomson Reuters Enhanced Due Diligence, Thomson Reuters
Chair’s closing remarks
Stephen Baseby Associate Policy & DirectorACT
FORTHCOMING EVENTS
treasurers.org/events
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ACT Annual Dinner11 November 2015 | London
ACT Middle East Annual Conference23-24 November 2015 | Dubai
ACT Cash Management Conference10-11 February 2016 | London
ACT Annual Conference18-20 May 2016 | Liverpool
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