Avoiding Corruption: Compliance for Legal Professionals An Overview - - PowerPoint PPT Presentation

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Avoiding Corruption: Compliance for Legal Professionals

Alessandro Volcic | Head | Russia & CIS

19 March 2015

An Overview of Challenges and Practices

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Global Coverage

2,000 Employees in 55 Offices Across 26 Countries

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Challenges

• Legal services professionals are under tremendous strain in the current

climate – driven by competition, market conditions, complex laws and processes, and increasing client demands

• Given familiarity and proximity to clients and client needs – from disputes to

risk management, legal services professionals often have “tunnel vision” - only looking at issues impacting clients, not themselves

• Important to understand how legal professionals are at risk – and how one

mitigates risks in our competitive and challenging environment

Legal professionals are so busy helping others, often forget to help themselves

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Key Risks

• There are many areas where a legal professional is exposed to risk, whether

far reaching such as the UK Bribery Act, established and robust such as the FCPA, or increasingly important local bribery and corruption enforcement

• Kroll identified three key areas where legal professionals are exposed:
• High risk clients
• High risk transactions
• Failure to maintain adequate processes to mitigate risks

Where are legal professionals most at risk?

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High Risk Clients

• High profile clients with sophisticated legal goals and significant net worth are
• ften among the more lucrative ones to work for. However, such clients pose

heightened risks – either because they can attract the wrong type of attention

• r because the nature of their work has a higher probability of opening one to

corruption violations.

• High risk clients can include:
• Politicians and government officials and their families (PEPs)
• High Influence Individuals, such as oligarchs, high net worth families, or key

executives at major companies

• Clients with little profile or track record and “red flags”, such as originating from a

fiduciary industry or from a place where money laundering or corruption is commonplace

• The key risks associated with high risk clients are:
• Their work tends to attract government attention, particularly from regulators or law

enforcement agencies

• High risk clients tend to get involved in complex legal proceedings

Lucrative but risky clients pose substantial threats

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High Risk Transactions

• Kroll’s experience is that certain transactions, even when done in good faith,

may lead to risky behaviour

• In the past, law firms have asked us to:
• Attempts to obtain non-public information on behalf of clients, such as bank

accounts or assets

• Attempts to gain intelligence into client competitors, legal adversaries, or

government investigations

• Issue of off-shore entities and beneficial owners

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Risk Mitigation

• It is impossible to run a risk-free business, but implementing the right

processes, hiring the right people, and making smart decisions will greatly mitigate risks and often attracts the right type of clients

• Kroll’s key risk mitigation strategies are:
• Implementation of Know Your Client (KYC) due diligence systems
• Implementation of internal ethics standards and training
• Implementation of a Risk Committee
• Awareness of general money laundering issues and geographical and sectorial risk

Mitigating the risk goes a long way to keeping one’s business reputation intact and doing business intelligently

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Know Your Client

• Many clients implement KYC programs to understand their clients
• KYC programs should be implemented wisely – not all clients require

extensive due diligence, and high risk clients should get more scrutiny than regular clients

• Kroll champions idea of “risk based approach” – increasing depth of due

diligence with level of risk

• Good KYC process allows for the management of bribery and corruption,

reputational, as well as commercial risks

• Spectrum of risk-based due diligence on following slide

A good KYC program can let you get ahead of the risk

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Different levels of KYC DD for different needs

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Ethics and Risk Management

• Annual or bi-annual training to all staff at all levels helpful – not only do people

become aware of the risks, but such a program also allows the company to show regulators and enforcement officials evidence that staff were trained and the company was proactive in mitigating bribery and corruption issues

• Each company should have a clearly worded and easily available policy on

compliance issues such as money laundering, corruption, and fraud. A nominated compliance person, preferably at a senior level, should be appointed to “champion” the cause

• Crucial to have a “tone from the top” about compliance and transparency to

establish a culture of doing things appropriately

• To protect employees, companies may consider establishing Risk Committees

to discuss certain clients, cases, and/or processes to ensure the company is comfortable with employee behavior before action is taken

The implementation of internal processes to mitigate risk helps to put in place systematic controls

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Key Strategies for an Effective Compliance Program

• Ensure that you have a clearly articulated corporate policy that is widely

available to all staff

• A mechanism, such as a hotline, for employees to seek guidance and report

wrongdoing

• A nominated figure, at a senior level, to act as the compliance “go to” person
• KYC and due diligence processes, preferably based on a risk-weighted

approach

• Checks and balances between various stakeholders, to include the business

team, the compliance figure, and internal legal/finance teams

• Anti-bribery language in contracts and relevant internal documents
• Strong internal accounting controls
• Systematic and substantive training for all employees

Key elements - summary

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An effective compliance cycle

Training

Should be systematic and encompass all employees

Communication

Need to communicate clearly and have communication readily accessible. Critical to augment with internal reporting and ability to seek guidance.

Risk Committee and Internal Decision Making Systems

Cases should be brought before risk committees and the company should be able to decide on on- boarding clients or using certain methods

Investigation and Enforcement

An ability to investigate and take action against those who are actively violating company policies

Management-led Compliance and Anti-Bribery

• Company management to set clear

guidelines and champion anti- corruption and anti-bribery from the top

Due Diligence

On risky clients or third parties

Policies and Checks and Balances

Ability to effective navigate through the relevant stakeholders and ensure that compliance plays a role in commercial decisions

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Alessandro Volcic

Alessandro “Alex” Volcic is an Associate Managing Director in Kroll’s Investigation & Disputes Team, and has oversight over work in Central Eastern Europe for the firm. Alex joined Kroll in 2004 in the London office. He has led due diligences, complex international fraud investigations, internal investigations and investigations into potential Foreign Corrupt Practices Act

• breaches. Alex has conducted cases in Germany, CEE, Russia and the Middle East. In 2011, Alex left Kroll

to work in BP’s Fraud and Misconduct Investigations team. This role focused on internal investigations in the Caspian. Prior to joining Kroll, Alex worked in a public affairs consultancy, conducting research and lobbying European politicians. He has also worked at the European Parliament and taught politics at the London School of Economics. Head of Russia & CIS Kroll Investigations & Disputes

avolcic@kroll.com