The Anti-Corruption Handbook: How to Protect Your Business in the Global Marketplace

Preface xiii

About the Contributors xvii

Chapter 1 Managing Corruption Risk 1

You are Not Alone 2

Bribery and Kickbacks 2

Economic Espionage 2

Money Laundering 3

Developing Effective Compliance Programs 3

Performing Due Diligence 4

Chapter 2 What is Anti-Corruption? 5

Anti-Corruption Detection and Prevention 5

Critical Elements of an Effective Compliance Program 6

Governance and Oversight 9

Chapter 3 U.S. Efforts to Combat Global Corruption 11

The Emergence of Nongovernment Organizations 12

World Trade Organization 13

Global Forum on Fighting Corruption 13

International Financial Institutions 14

International Chamber of Commerce 15

Transparency International 15

Global Corporate Governance Forum 15

The Role of Civil Society 16

The Emerging Markets 16

Chapter 4 U.S. Laws Governing Corruption 19

Racketeer Influenced and Corrupt Organizations Act 19

RICO Offenses 20

Sherman Antitrust Act 21

Anti-Kickback Act of 1986 22

Economic Espionage Act of 1996 23

Chapter 5 The Evolution of the Foreign Corrupt Practices Act 27

Background 27

Anti-Bribery Provisions 29

Third-Party Payments 31

Facilitating Payments 32

Sanctions against Bribery 33

Chapter 6 Internal Controls and Accounting Provisions of the FCPA 35

FCPA Accounting Provisions 36

Failed Controls 36

Controls Assessment 37

Conclusion 38

Case Study: Rolling on a River 39

Chapter 7 Do Not Crimp: The Need for Oversight of Foreign Operations 43

Pitfalls of Emerging Markets 44

Monitoring Behavior 45

Education and Communication 46

Extending the Tone from the Top beyond the Borders 47

Case Study: Bribes in the USSR 47

Chapter 8 The Human Factor 49

Why Focus on Fraud and Corruption Risk? 50

Behavioral Root Causes of Fraud and Corruption 50

Psychology of Fraud Perpetrators 51

Understanding Management Fraud 51

Approaches to Deterring and Mitigating Financial Fraud Risk 52

Chapter 9 Corporate Governance: The Key to Unmasking Corrupt Activity 55

Enterprise Risk Management: Create Stronger Governance and Corporate Compliance 55

Mitigating Risk 57

Ascertain Risk Areas 58

Establishing Procedures to Mitigate Risk 59

Perform a Periodic Assessment 60

Blowing the Whistle on Corporate Fraud 60

Chapter 10 Whistle-Blower Programs 61

Pulling Out the Earplugs 62

Understanding Stakeholders and Their Needs 63

Steps of the MACH Process 67

Monitoring the MACH Process 78

Conclusion 79

Appendix 81

Chapter 11 Document Retention 83

Create, Communicate, Monitor 84

Reduce Risk through Technology 84

Computer Crime 85

The Most Common Computer-Related Crimes 85

The Value of Stored Data 86

Chapter 12 Information Security: Intellectual Property Theft is Often the Result of Government Corruption 87

Information Security Audit 89

Classification of Information 89

Division of Responsibilities and Duties is an Effective Strategy in Protecting Trade Secrets 90

Information Security Control Officers or Custodians 90

Use of Confidential or Proprietary Markings 91

Document Destruction 91

Education and Training 91

Background Checks 92

Confidentiality Agreements 92

Employee Orientation 92

Separation Plans 93

Physical Security 94

Systems Security 95

E-Mail Policy 99

Internet Policy 100

Solicitations for Information 100

Seminar/Tradeshow/Off-Site Meetings Policy 101

Joint Venture/Vendor/Subcontractor Procedures 101

Contractual Provisions with End Users 102

Action Plans 103

International Protection Issues 104

Information Security Policy 104

Chapter 13 Anti–Money Laundering: The USA PATRIOT Act 105

Current State of AML in the Global Marketplace 106

Case Study: The Boys from Brazil 109

Chapter 14 Procurement Fraud: Detecting and Preventing Procurement and Related Fraud 111

Kickbacks 112

Vendor Fraud 113

Bid Rigging 113

Defective Pricing and Price Fixing 114

Contract Fraud 116

Cost/Labor Mischarging 118

Case Study 1: Employee Fraud 120

Case Study 2: Vendor Kickbacks and Collusion 121

Conclusion 121

Chapter 15 Construction Fraud: Monitoring, Mitigating, and Investigating Construction Fraud 123

Common Construction Company Fraud Schemes 124

Combating Fraud and Corruption 126

Strengthen Your Internal Controls 126

Chapter 16 Special Investigations: How to Investigate Allegations of Corruption 129

An Interested Party: The Auditor 130

The Special Investigation 132

Chapter 17 Navigating the Perils of the Global Marketplace 135

FCPA Enforcement 135

Record Keeping 138

Data Collection and Processing 139

Transborder Data-Flow Issues 139

Chapter 18 Case for Collective Action: The World Bank Initiative 143

Why Collective Action against Corruption? 143

Different Views of Corruption 144

Business Costs of Corruption 144

Costs of Corruption for Industries, Economies, and Countries 145

Different Views of the Private Sector 145

Corruption Dilemma 146

Chapter 19 Leveling the Playing Field 157

Book Research Summary 161

Index 165