ACCELUS FOR ANTI-CORRUPTION

THOMSON REUTERS ACCELUS™

In the 2012 Cost of Compliance survey by Thomson Reuters, it was noted that over 11,000 updates were made to global anti-corruption legislation in 2011 alone.

EXECUTIVE SUMMARYINCREASED INTERNATIONAL ACTION AGAINST CORRUPTIONOrganizations are constantly challenged by changing legislative demands. Authorities everywhere are stepping up their enforcement activities, new legislation with a stronger global reach has been implemented, and there are continual updates to existing anti-corruption legislation.

Some organizations may be more at risk than others because they operate in unfamiliar locations and territories where local practices can cause the organization to unwittingly transgress international legislation.

To keep up, organizations need to regularly revise their compliance programs, and this requires dedicated, and costly, resources.

A PROACTIVE APPROACHAccelus for Anti-Corruption is chosen by organizations around the world to substantiate their compliance program. Our solution supports the client’s risk-based approach by offering a consistent understanding of business associates through screening, geopolitical risk ranking, and due diligence reporting:

WHY ACCELUS FOR ANTI-CORRUPTION?

• Ethical, legal, and discreet

• Cost-effective

• Rapid turnaround times

• Negative media coverage

• In-house skills ensure high quality and protection of data

• Global coverage, local knowledge

UNDERSTANDING INTERNATIONAL RISK

SCREEN – All businessassociates screened against specializedintelligence databases

REPORT – Indepthinvestigation and duediligence reporting onhigher risk relationships

SET OBJECTIVES ASSESS TAKE ACTION RESCREEN

Regular rescreening,depending onrisk-based approachand changes inrisk factors

Define scope,parameters andattitude based onbusiness needs

Individuals and entitiesassessed and gradedfor possible risk injurisdiction, businesssector, relationshipand operations

The significant increase in legislation and enforcement action is spearheaded by the U.S. Foreign Corrupt Practices Act 1977 (FCPA) and the UK Bribery Act 2010 (UKBA). In most respects, the UKBA, viewed by many as a gold standard, matches existing legislation although there are key differences in certain areas.

The UKBA creates a corporate offense of failing to prevent bribery, reiterating the critical importance of an anti-corruption program that is auditable, comprehensive and consistently applied.

Typically, the program will apply to all third parties performing services on behalf of the organization, wherever the services are carried out. Only where “adequate procedures” can be demonstrated to be in place and consistently applied can this be used as a defense against prosecution.

$100 000 fine or5 years imprisonment

Individuals

FCPARisks

Face fines up to $2 million

Companies

Disqualification fromtendering on governmentcontracts

Disqualification

Shareholder lawsuitsSevere reputationaldamage

Shareholders

Individuals face unlimitedfines on conviction or up to 10 years imprisonment

Individuals

UK Bribery ActRisks

Companies face unlimitedfines on conviction

Companies

Disqualification fromtendering on governmentcontracts

Disqualification

Shareholder lawsuitsSevere reputationaldamage

Shareholders

“…it will not be too long before we see Court activity [under the UKBA]. The impact of this will be very considerable.”

Richard Alderman Director, Serious Fraud Office (SFO)

Many countries are reissuing and enhancing their anti-corruption legislation or are in the process of updating existing statutes. Under these tightening regimes, regional enforcement actions are on the rise. The UK Serious Fraud Office (SFO) has several ongoing investigations under the old UK bribery laws and the trend in FCPA enforcement actions continues to rise. While the January 2009 fine of Aon Limited (£5.25m) was the largest corruption-related fine imposed by the UK Financial Services Authority to that point, the SFO subsequently levied similar amounts against Mabey & Johnson (£6.6m fine) and AMEC plc (£5m civil recovery order plus costs).

Faced with this growing challenge, organizations with an international and national footprint are implementing proven best-practice control procedures to reduce their risk.

The UK’s BS 10500* defines business associates as any party with whom the organization contracts, including but not limited to:

Clients

Customers

Joint venture partners

Consortium partners

Contractors

Consultants

Subcontractors

Suppliers

Vendors

Advisors

Agents

Distributors

Representatives

Intermediaries

*Specification for an anti-bribery management system, issued by the British Standards Institute in November 2011

NEW MARKETS PRESENT GREAT RISKThe majority of global anti-corruption enforcement actions arise from exposure in emerging and frontier markets where local custom, weaker rule of law, and distance from centralized control functions increase the likelihood of noncompliance. Only through disciplined, consistent screening of all business associates, along with proper training and communication, can an organization hope to remain compliant.

KNOW YOUR FOREIGN BUSINESS ASSOCIATES The increasing sophistication of white-collar criminals around the globe has made it harder to trace illicit payments by employees and associates. Conversely, technology enables international enforcement agencies to receive tipoffs from whistleblowers when corrupt activities take place no matter where they happen. The SFO confidential hotline received over 2,000 calls in its first month of operation and the U.S. Dodd-Frank Act incentivises whistleblowing.

At the 2012 U.S. FCPA Conference, Deputy Chief of the U.S. Department of Justice (DOJ) Criminal Division, Charles Duross, pointed out that third parties were involved in all of the most recent FCPA cases and that they pose a significant risk to organizations.

The compliance process becomes more challenging with operations in markets where access to public information can be difficult, the business environment tends to be more opaque, and information is only available in the local language. Organizations rely on Thomson Reuters Accelus for this local expertise.

FCPA proceedings brought by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) – cases between 2004-2011 Source: Gibson, Dunn & Crutcher

DOJActions

SECActions

48

23

75

78

1820

2013

2614

26

2325

0 10 20 30 40 50

2004

2005

2006

2007

2008

2009

2010

2011

“… the world is smaller from a communications and media perspective. Problems in a faraway country are more likely to be learned by us – sitting here in Washington – than ever before.”

Mark Mendelsohn, U.S. Department of Justice

THE SOLUTION PROCESSAccelus for Anti-Corruption is a structured approach intended to support compliance with relevant global legislation and is in line with international best practice. The solution adapts to your risk-based approach and can be used for most sectors, size, or type of organization.

STEP 1 – SET OBJECTIVESWhile it is the responsibility of the organization to establish the best approach, the scope and parameters will tend to be guided by your particular business type, goals, jurisdiction and sector.

STEP 2 – ASSESSAssess, score, and grade all business associates for risk-based on key factors, after the word factors, for example:

Annual Spending Risk – Among other factors, regulators use annual spending as a guideline when assessing risk. The higher the spend, the higher the risk. This is a subjective category because what is considered high spend tends to vary by jurisdiction, but a starting point for many regulators nonetheless.

Jurisdictional and Geopolitical Risk – Because operations based in certain countries carry significantly higher risk than in others, country risk-ranking will score the country in which the business associates and vendors originate from or operate in.

Operational Risk – Some business partners and their operations may be more critical to your organization’s survival than others, for example those who:

• Handle your intellectual property

• Have access to your IT systems

• Work onsite at your premises

• Provide unique products or services to your company

• Provide high-value goods or services

• Are your sole supplier of good and services

Payment Risk – Vendors who require payment for goods or services in advance, and are unwilling to enter standard, normal payment terms, may be graded as high risk. This behaviour may reveal a questionable financial status and credit risk, with issues ranging from large debts and strained cash-flow to lack of commitment to your future financial relationship.

Business Sector Risk – Certain business sectors can be more prone to corruption. Typical examples are, but are not limited to:

• High Risk: Extractive industries like oil and gas, import/export, construction, defense and aerospace,

telecommunications, pharmaceuticals, and automotive. Suppliers with access to client buildings and systems,

major technology providers and those dealing with cash advances and vouchers, e.g., security services, cleaning

contractors, courier and taxi contracts, and IT suppliers, especially in sectors where there may be competition for

government tenders.

MERGER, ACQUISITION & JOINT VENTURE DUE DILIGENCEThe traditional approach to legal and financial due diligence preceding a deal has proved on occasion to be insufficient to identify potential corruption liability within the target company. Successor liability increases vulnerability as target companies with inadequate compliance processes may bring significant hidden risk. This in turn greatly affects the value of the deal and may cause a cancellation of the transaction.

A RISK-BASED APPROACH IS ESSENTIALBest practice typically includes a thorough and consistent risk-based approach to identify risk by understanding new business associates before agreements are entered into. In particular, supply chains, vendors, acquisition targets, joint ventures, new or high net worth clients, and geopolitical uncertainty can present unknown risks to an organization. Accelus for Anti-Corruption supports this goal and is an effective solution that supports compliance with global anti-corruption legislation, on-boarding protocols, and best practice.

“As a minimum, a company should have in place … “ Appropriate due diligence requirements pertaining to the retention and oversight of agents and business partners.”

Schedule C of Magyar Telekom deferred prosecution agreement - U.S. Department of Justice

STEP 3 – TAKE ACTIONIf your assessment reveals risk, Accelus for Anti-Corruption suggests an indepth due diligence report on all medium and high risk matches, as well as a high level screen of all low risk matches against our specialised risk

intelligence databases.

Due Diligence Reporting

IntegraScreen™ Reports deliver a detailed background check on any entity or individual, no matter where in the world they are located. They are structured and designed to be easily navigated, so that critical public domain information is accessed quickly.

The reports focus on the company, its owners, and its operating and litigation history, and if desired can include management and key decision makers. They can include an assessment of their background, track records, real competencies, potential conflicts of interest, and political and criminal links. Business conduct and reputation history can be analysed and a thorough search made for unseen liabilities. Business intelligence is gathered from regulators, industry observers, suppliers, competitors, distributors, and customers both current and former.

Report coverage:

Coverage IntegraScreen Report IntegraScreen Premium Report

Executive Risk Summary Table √ √

Global Compliance Searches √ √

Comprehensive International English Language Media Searches √ √

Comprehensive Local Language Media Searches √ √

Company Background Analysis √ √

Background Analysis of Subject Individuals √ √

Civil Litigation, Regulatory, and Bankruptcy Searches √ √

Narrative In-Depth Executive Summary and Analysis √

Business Intelligence √

Risk Screening

Entities are rigorously screened appropriate to their risk grading. We focus on heightened-risk individuals and entities involved in or associated with organized crime, terrorism, sanctions and watch lists, shipping, drug cartels, negative media, and other similar categories. We also cover Politically Exposed Persons (PEPs). Hundreds of research analysts, covering more than 240 countries in over 60 local languages, derive this intelligence from:

• Over 300 sanction and watch lists

• Local and international government records

• Country-specific data sources

• International derogatory electronic and physical media searches

• English and foreign-language data sources

• Relevant industry sources

• Global compliance databases

• Our extensive network of sources

• Archived data from our proprietary databases

The screening process potentially results in information about your organization’s involvement with a heightened-risk individual or entity, which leads to noncompliance and brand damage.

• Medium Risk: Suppliers with limited access to client sites, contracts, and ongoing relationships with

contractors that may have access to your premises for extended periods, e.g., gardening contractors, catering

suppliers, and contracted suppliers.

• Low Risk: Providers of consumable and one-off items, e.g., hotels, training courses, and stationery.

STEP 4 - RESCREENThe risk profile of business associates and vendors changes over time. World events often result in unforeseen changes. Proving your compliance program is adequate and complies to regulator demands means often revisiting risk ratings throughout the year. Accelus for Anti-Corruption enables regular rechecking to ensure information remains current and demonstrates that compliance procedures are operating effectively.

SAMPLE RISK EVALUATION

RESCREEN

ASSESS SCREEN ASSESS REPORT & SCREEN

Annual spending

U.S.$

Goods/services received before

payment is madeLocation of vendor Business sector Risk rating

HIGH RISK

1 mil+

MEDIUM RISK

100-999k

LOW RISK

0-99k

NO

Higher risk

YES

Lower risk

Country-Check score:

HIGH RISK

<5

MEDIUM RISK

5 – 6.9

LOW RISK

7>

HIGH RISK

MEDIUM RISK

LOW RISK

HIGH RISK

IntegraScreen Premium

MEDIUM RISK

IntegraScreen Report

LOW RISK

Risk Screening

“I want to be able to say that we shall take no action at the corporate level provided that the corporate sorts out the corruption culture in the target company.”

Richard Alderman Director, SFO. From ‘Approach of the SFO to dealing with Overseas Corruption’ report of July 2009

Rigorous Methodology and Superior QualityClients depend on our intelligence for critical decision making, so our output requires a high level of accuracy, thoroughness, and consistency that totals thousands of research hours a year. Dedicated database maintenance teams ensure that both intelligence and workflow processes are regularly reviewed and kept up to date.

Specialized Research TeamsOffering depth of insight into global crime trends, they include Sanctions and Watch Lists, Organized Crime, Middle East, Politically Exposed Persons (PEPs), and Terrorism and Insurgency.

Negative Media CoverageWe canvas thousands of media sources from around the world in our daily research activity for reports of crimes that fall within our remit. If the reports are deemed credible, we profile individuals or entities that are accused, questioned, investigated, arrested, charged, or convicted for these crimes.

Public Domain Information OnlyOur risk intelligence and due diligence reports are compiled from numerous corroborating public sources, including local and international media, regional and country regulatory bodies, and court records. Research analysts check that the intelligence held about an individual or entity is accurate, up to date and not kept for longer than necessary.

Ethical, Legal, and DiscreetWe use only ethical and nonintrusive research methods and are committed to principles of integrity and accountability. Subjects are not made aware of a due diligence reporting investigation and we do not misrepresent our activities when undertaking research assignments.

Cost-Effective Due DiligenceDespite the depth of investigation and comprehensive nature of IntegraScreen Reports, our approach is cost-effective and transparent. We do not outsource preparation of our reports to subcontractors, protecting confidentiality.

The Human Element – Key to the Quality of Our DataRaw data is gathered by researchers and automated programs and is processed through a series of rigorous guidelines that have been developed as the industry has matured over the last decade. This ensures that the structured intelligence you receive is a product of both advanced software and a carefully considered review by human interaction. It is this human element that allows us to make further connections between subjects and other business or family relationships, uncover terror networks, and generally increase the relevance of the intelligence offered. Even the best software cannot offer this level of research sophistication, because people find what machines overlook.

Rapid Turnaround TimesOur sophisticated workflow and global infrastructure ensure that IntegraScreen Reports are generated in the shortest possible time without sacrificing quality. Turnaround times are clear, predictable, consistent and fast: available within 10 working days and in some cases in as little as 24 hours.

In-House SkillsDue diligence reporting and risk intelligence gathering of all prepared in-house, using our own research analysts. This ensures that we can produce consistent, high-quality output fast, without the risk of leaking proprietary information.

Global Coverage, Local KnowledgeOur research analysts are strategically located around the world and speak over 60 local languages. Most information contained in our reports is sourced from primary data sources in the relevant country and in the prevailing local language. Native speaking analysts pick up on the subtleties in the text in a way that non-native speakers do not.

Strength in Emerging MarketsWe were among the first to offer due diligence reports in emerging and frontier markets, and over the years we have continued to develop our expertise in this area.

THE ACCELUS DIFFERENCEAccelus for Anti-Corruption is selected by leading multinational organizations as part of their anti-corruption legislation compliance program.

© 2012 Thomson Reuters W-310203/4-12

Visit accelus.thomsonreuters.com

For more information,contact your representative

or visit us online.

Thomson Reuters Governance, Risk & Compliance (GRC) business unit provides comprehensive solutions that connect our customers’ business to the ever-changing regulatory environment. GRC serves audit, compliance, finance, legal, and risk professionals in financial services, law firms, insurance, and other industries impacted by regulatory change.

The Accelus suite of products provides powerful tools and information that enable proactive insights, dynamic connections, and informed choices that drive overall business performance. Accelus is the combination of the market-leading solutions provided by the heritage businesses of Complinet, IntegraScreen™, Northland Solutions, Oden®, Paisley®, West’s Capitol Watch®, Westlaw® Business, Westlaw Compliance Advisor® , and World-Check® .

THOMSON REUTERS ACCELUS™

For more information, visit accelus.thomsonreuters.com