Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
Transcript of Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
-
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
1/22
1
January 2011
Bribery Act 2010:Transaction MonitoringSolution Overview
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
2/22
2
Contents
Background
Solution Overview
Implementation
Next Steps
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
3/22
3
Background
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
4/22
4
The Bribery Act 2010
The Bribery Act passed into law in the UK in April 2010
and will apply from April 2011
As well as defining both active and passive bribery
offences, the Act introduces a corporate offence of
failure to prevent bribery
Unlike the FCPA, the Bribery Act is not limited to
bribery of public officials and facilitation payments
are within its scope
If the individual committing the offence is a UK citizen,or is located in the UK, the Act may be triggered
even if the offence took place overseas
Penalties for the corporate offence are severe and may
include unlimited fines and / ordisbarment from
public contracts
Revenue earned by a company as a result of a bribe
may be subject to Proceeds of Crime Act 2002
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
5/22
5
Adequate procedures
Transaction Monitoring can provide an effective solution to these challenges
The Bribery Act introduces a corporate offence offailure to prevent
bribery
Companies must be able to demonstrate adequate procedures if
they are to defend against prosecution
Ongoing monitoring is certain to be a key component of
adequate procedures
Companies need not just design strong anti-bribery policies but also to
be able to demonstrate that they are operating effectively:
How can hard evidence be gathered to substantiate effectiveoperation?
How can tone at the top be demonstrated to a court?
How can monitoring be carried out on a sustainable, reliable and
enterprise-wide basis?
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
6/22
6
Six key principles of adequate procedures
As part of its draft guidanceon adequate procedures,
the Ministry of Justicespecifies six principles thatshould be addressed in abribery preventionprogramme
Transaction Monitoringprincipally addressesPrinciple 6 Monitoring &
ReviewHowever, it also helps with
implementing the other fiveprinciples, as shown inslide 11
Adequate Procedures
Clear, practical, accessible and enforceable, reflecting roles of workforce and others over which firm has control
. &4 PoliciesProceduresPolicies and procedures are embedded and reflect practical business issues
.5 EffectiveImplementation
Covering all business relationships, including supply chain, agents & inte
.3 DueDiligence
Ensure compliance and identify issues as they arise to allow improvements to be implemented
.6 Monitoring& Review
Management is committed to preventing bribery and creates culture in whic
. -2 Top LevelCommitmentRegular and comprehensive assessments of nature and extent of bribery risk exposures
.1 Ris kAssessment
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
7/22
7
Transaction Monitoring:Solution Overview
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
8/22
-
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
9/22
9
Typical focus areas
Transaction monitoring focuses on business activities where the risk of bribery is highest. For
example:
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
10/22
10
Key benefits of Transaction Monitoring
High coverageon the companys ERP system can be examined in every country, in every business unit to detect corrupt activity
Evidenceeports and audit trail produced by the system are invaluable in creating an adequate procedures defence
Holistic viewnon-financial data are examined to create a genuinely enterprise wide monitoring solution that is based on intelligence
No manual interventions are detected objectively, subject to pre-defined characteristics - removing the reliance on humans to report corrupt activity
Easy to implementThe system leverages existing data and does not require specialised software so inf
Tone at the topTransaction Monitoring provides ready-made opportunities to demonstrate that tone at the to
Flexibility and adaptabilityRules and scenarios can be defined on a country-by-country or business unit-by-business unit basis to take ac
Refinement of policyThe intelligence generated by Transaction Monitoring can be used for ongoing refinement of the anti
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
11/22
11
Transaction Monitoring supports all six principles
Although the primary goal ofTransaction Monitoring is
active detection ofevidence of bribery, it alsoenhances the programmeby:
Providing evidenceof operationaleffectiveness
Engaging senior-
levelcommitment
Enhancing duediligence
Facilitating a risk-based approach
Identifying trainingneeds
Providing data points
for ongoingimprovement ofpolicies andprocedures
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
12/22
12
Implementation
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
13/22
13
Review of existing business policies
Draw a bribery assessment plan
Discussions with legal advisors and stake holders
Design a internal review questionnaire
Circulate project plan and sign-offs with timelines
Conduct a pre-implementation validation of design stage
Collate Data sources
Construct anti-bribery and fraud scripts with red flags
Run pilot tests and reduce false positives
Expand the scenarios to sensitive business areas and locations
Refine and review scenarios and alerts
Continuous monitoring and refinement
Exception monitoring and disambiguation
Weekly/Fortnightly meetings with compliance and legal te
Present areas of progress / status tracker
Periodic reporting and audits
Approach to implementation
Design Implement On-going monitoring
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
14/22
14
Three-step methodology
mpany stands in terms of anti-bribery compliance
e filled in order to achieve compliance
ption Indices
ann, Heritage Foundation, Global Integrity databases to assess country risks
ministered on site
ed into the system for analysis
.1 DiagnosticsKey tasks:
Develop analytic queries focusing on sources of bribery risk
Have scenarios validated by legal advisors
Data sources:
Country Risk Ratings
Stock Exchange databases and other sources (D&B, Edgar, One Source, Accurint etc.)
Country PEP databases
Approach:
Data gathered through questionnaires analysed off site
Analytics leverage existing software wherever possible
. &2 Data Capture AnalysisKey tasks:
Exceptions disambiguated for false positives through Level 1 and Level 2 rev
Cases sent to Legal / Compliance for further investigation
Data sources:
Negative news databases (World-Check, OFAC, Factiva, Complinet, Dow Jo
Legal databases
Approach:Transactions monitored by automated system
Alerts generated and suspicious transactions identified
. &3 Disambiguation Review
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
15/22
15
The first step in the implementation of a transaction monitoring solution uses an exhaustive
questionnaire administered to senior management and process heads
1. Diagnostics
Approach Scope Typical questionslicies and procedures documents
r analytics tests questionnaire
cts and other data and perform analytics
ponses to the questionnaires
reports
e findings to senior management / project management group
Questions broadly in the following areas:
Cash
PaymentsPurchase / Procurement
Vendor Management
Internal Controls
Sales
Questionnaire administered to senior management, compliance personnel and process heads
Do you have a data analytics team to aid in audit and compliance?
Have you conducted diligence of your business and processes for anti bribe
Do you have defined and documented steps to be taken in case an incidenDo you operate in high risk industries and / or countries?
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
16/22
16
The second implementation step involvesthe development, validation and implementation of analytics
queries designed to throw up indicators of suspicious transactions. For instance:
2. Analytics 1/3
Example One: Vendor Payments
Scenario Ensure vendors not being unduly favouredby key personnel
Red flags
Suspicious invoice sequenceInvoices falling below approval limitsRepeat payment to same vendor with sameinvoice numberRepeat payment with same invoice numberto different vendorsPayment made on holidays
Example Two: Sales
Scenario Ensure kickbacks not being offered in orderto close sales
Red flags
Sales price lower than list price Preferential pricing for onecustomer Credit analysis and trend
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
17/22
17
The second implementation step involves the development, validation and implementation of analytics
queries designed to throw up indicators of suspicious transactions. For instance:
2. Analytics 2/3
Example Three: Payments to govt officials
Scenario Ensure funds form the firm not being used tobribe public officials for acquiring licencesand other matters
Red flags Repeat gifts to single person or organisationGifts and entertainment expenses nearing orcrossing the threshold per firm policyPayments without referenced invoices
Example Four: Cash Payments
Scenario Ensure cash not being used to acquire
business or sales targetsRed flags Sudden rise in cash expenses
Amounts of cash payments higher thanaverageCash payment without authorizationPayments made just below thresholdUnrecorded cash payments
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
18/22
18
The second implementation step involvesthe development, validation and implementation of analytics
queries designed to throw up indicators of suspicious transactions. For instance:
2. Analytics 3/3
Example Five: Internal control lapses
Scenario Ensure bribery controls and policies areeffectively implemented
Red flags
Sudden rise in amount and frequencyof bonus payments Expenses not pertaining to a person
,but claimed such as MarketingExpenses claimed by Execution
Officer &Recalculation of E O analysis Excessive inventory write offs Fictitious employees
Example Six: Accounts Payable
Scenario Payments made to maintain business
relationshipsRed flags Payments made in countries other
than the country of operation Payments made through bank accounts
outside the country of operationPayments to Vendor done before timeDummy / suspense payable accounts
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
19/22
19
3. Disambiguation & Review
of hits that exceed pre-defined rules and thresholds yet
ns / scenarios are further investigated for true match or negative match
y conducting background screening (name, negative news etc.)
ns to the identified suspicious transactions are then analysed for their volume and behaviour, based on such factors as:
of the transactionndor
ducts or services for which the payment has been made
High / Medium / Low category
All identified high risk transactions, mismatches or close hits are escalated during the review exercise
In many instances, specific cases may be sent to Legal / Compliance team for further investigation
Summary report of results of hits and false positives is periodically presented to the Management / Stee
The review process involves close coordination between the analytics team, Business Units and Legal /
Review Report
Finally, disambiguation of false positives takes place to isolate cases that require further review and
provide management with the intelligence needed to determine how to respond:
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
20/22
20
Programme management
Team Leader(Analytics Team)
Team Leader(Diagnostic Team)
Team Leader(Review Team)
Project Coordinator
Senior Management Team /Steering Committee
Conduct interviews,
questionnaire assessments
with key stakeholders
Assess
Key control gapsScope of workProcess efficiency
issuesTraining needs
Capture data from internal
and external sources
Conduct data cleansing,
massaging to perform
analyticsReport suspicious
transactions based on set
thresholds
Review alerts / red flag
transactions received fromAnalytics Team
Conduct further review of
false positives and classify
suspicious transactions into
H/M/L
Report summary /
MIS to Management
Onshore Location
Offshore Location
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
21/22
21
Technology
Using a base of existing CCM tools, an entire module of
bribery diagnostics and analytics has been developed
The tools / analytics have been designed to integrateseamlessly with existing ERP systems and are compatible
with most standard software
Able to extract required data from the following modules:
FI Accounts Receivable, Accounts Payable etcCO Cost Elements, Internal Orders etcHR Employment History, Payroll etcMM Accounts Payable, Inventory Management
etcPP - Master Production Scheduling etcSD Sales Orders, Pricing etc
Program flexible enough to run on:
Data sources
Through a remote connection (web based)
Or through a data dump extracted by the
company and provided to us
Most scripts and algorithms are derived from standard AML
and CCM implementations so have been tested and proven
Vend
ors
Purchases
Sales
Cash
Paym
ents
Procurement
Continuous Monitoring of Transactions Analytics
For a pilot implementation, the data dump method will be the most practic
http://www.bmradvisors.com/ -
8/7/2019 Transaction Monitoring for Bribery Act compliance v2.0 12Jan 11
22/22
22
Challenge Us
All information contained in this presentation is the intellectual property of BMR Advisors. This presentation is meant only forCLIENT. No part of thisdocument may be reproduced / shared / divulged or referred to in part or in full without the prior written consent of BMR Advisors. The ideas / viewspresented in this document are those of BMR Advisors and may not be replicated or used without the written consent of BMR Advisors. While considerablecare has been taken in gathering the thoughts/ information included in this document, BMR Advisors has not validated such information and hence doesnot confirm accuracy of such information. This document is preliminary in nature and is purely indicative of the approach recommended by BMR Advisors.
http://www.bmradvisors.com/http://www.bmradvisors.com/