Corruption Crime & Compliance

In this episode of the Crime, Corruption, and Compliance podcast, Michael Volkov forecasts the compliance and ethics trends that will be significant in 2023. He emphasizes the crucial role ethics and compliance play in the corporate governance landscape, the increasing relevance of ESG, and highlights the need for robust ethics and compliance programs even in the C suite. Key ideas in this episode:The need for robust ethics and compliance programs with adequate resources.Boards and CEOs who fail to understand the importance of these programs are “doomed”.Culture and ethics will be top priority in 2023.The importance of C suite risk assessments and third-party risk management. “CCOs need to reach out to internal audit and their CFOs to enlist their support for a simple proposition, and that is that we need to design and implement financial controls applicable to the C Suite that are tailored to the relevant risks,” Michael says.The evolution of third-party risk management to become a more holistic concept. “The ability to address, monitor and collect data on your third parties also with the evolving risk landscape led to this transformation,” Michael points out. “The fast pace of this transformation is going to continue.” CCOs and compliance officers need to ask questions surrounding internal controls and accounting controls.Compliance professionals will participate more deeply in financial control review and responsibility. KEY QUOTES:“CCOs need to reach out to internal audit and their CFOs to enlist their support for a simple proposition, and that is that we need to design and implement financial controls applicable to the C Suite that are tailored to the relevant risks.” - Michael VolkovResources:Michael Volkov on LinkedIn | TwitterThe Volkov Law Group

Trade compliance officers were recognized as the "Person of the Year" in 2022. Michael Volkov welcomes Alex Cotoia, Regulatory Manager, to discuss this development. Alex sheds light on the challenges faced by these professionals over the past year: from navigating the global pandemic to ensuring compliance with sanctions regulations, trade compliance officers have done it all. Alex Cotoia, Regulatory Manager at The Volkov Law Group, is a seasoned trade compliance expert with extensive knowledge across ITAR compliance, BIS compliance of commerce, and opacity sanctions. She brings valuable insights on the crucial role of compliance in the world's rapidly changing landscape.Key ideas you’ll hear Michael and Alex discuss:The unprecedented challenges faced by trade compliance professionals. The global pandemic and the rapid and constant changes in the regulatory climate had a major impact on trade compliance professionals.The importance of trade compliance professionals was demonstrated this year, as they were seen as unsung heroes who played a crucial role in ensuring compliance with regulations.The invasion of Ukraine by Russia led to a more fulsome political response compared to the invasion of Crimea in 2014, which further highlights the significance of trade compliance in today's world.The recommended approach for trade compliance is to consider the market exposure to sanctions risk and adopt measures that are reasonably designed to deter and detect infractions.Increased importance of end-user certificates: The use of end-user certificates became more important in ensuring compliance with regulations in exports to Russia.Michael and Alex emphasize the need for verifying the end use of products purchased from a third party to ensure it's for a permissible purpose. Alex stresses the need for international organizations with broad exposure to invest heavily in trade compliance, including having a trade compliance officer and choosing the right tools. Michael highlights the importance of integrating the overall trade compliance function into the overall ethics and compliance function. This requires a strategic approach for trade compliance and sanctions risks, including education, internal controls, and technology solutions that integrate sanction screening, third-party risk management, incident reporting, and trade compliance.The responsibility for internal controls lies with the leadership team and the board of directors.Trade compliance should be part of compliance education.Trade compliance is an industry that's here to stay.KEY QUOTES:“Consider where the greatest sanction risk lies from a market exposure perspective and then adopt measures that are reasonably designed to deter and detect inflections.” - Alex CotoiaResources:Alex Cotoia on LinkedIn | EmailThe Volkov Law Group

In this episode, host Michael Volkov takes a closer look at the Honeywell FCPA case. The Justice Department and the FCC had a strong year in FCPA enforcement; they closed out the year with two important cases, ABB and Honeywell. Last week's episode covered the ABB case, and this episode will focus on the Honeywell UOP case, which resulted in a $160,000,000 settlement. Honeywell was involved in a bribery scheme in Brazil and Algeria to secure contracts with state-owned oil companies.Honeywell conspired to offer a $4 million bribe to a high-ranking executive of Petrobras in Brazil in an attempt to secure a valuable $425 million contract to design and build a refinery.Honeywell's use of third-party agents, such as sales agents, to facilitate bribery payments was done without proper controls and oversight, leading to a lack of proper invoicing, description of services, and confirmation of payment arrangements which facilitated illegal payments.Honeywell's senior management was complicit in the scheme and there was a lack of commitment to corporate ethics and compliance culture within the company.The case serves as a reminder of the risks to companies of engaging in bribery and the importance of having a strong compliance culture and third-party risk management program.KEY QUOTE:"Honeywell's actions occurred in an environment where no one raised a question about the bribery scheme. The … narrow focus on winning the project through whatever means possible was clear." - Michael VolkovRESOURCESHoneywell UOP to Pay Over $160 Million to Resolve Foreign Bribery Investigations in U.S. and BrazilSEC Charges Honeywell with Bribery Schemes in Algeria and BrazilEmail Michael: mvolkov@volkovlaw.com

ABB is a three-time loser in foreign bribery enforcement, but still agreed to pay $315 million to settle FCPA charges. The company also resolved SEC charges for $75 million.ABB's criminal history includes bid rigging and bribery violations in multiple countries. However, the DOJ cited ABB's extraordinary cooperation and extensive remediation when they announced the settlement. Michael Volkov explores ABB’s history of FCPA violations, leading up to their most recent, in this week’s show.ABB paid a settlement of $315,000,000 for its extensive criminal history record, including multiple violations of the Foreign Corrupt Practices Act and a prior conviction for price fixing. The settlement raised questions about the effectiveness of the Justice Department's new FCPA enforcement program, which is designed to prevent benefits for recidivists.The case involved two ABB subsidiaries in South Africa and Switzerland, and the parent company agreed to a three-year deferred prosecution agreement. The company also resolved SEC charges for $75 million and faced foreign prosecutions in South Africa, Switzerland, and Germany.ABB was also involved in a bribery scheme between 2014 and 2017 to obtain confidential information and win lucrative contracts with South Korea's state-owned energy company, ESCOM Holdings. They engaged multiple subcontractors who were linked to a high-ranking ESCOM official and made payments to these subcontractors despite their poor qualifications and lack of experience. In exchange for these bribery payments, ABB secured improper confidential information needed for the bidding process and securing the valuable contracts.ABB established a relationship with an additional subcontractor. This subcontractor failed various portions of the ABB due diligence process, including its financial stability and qualifications. ABB required a specific waiver of due diligence requirements to be approved, which they did. On its face, the approval of a waiver creates significant red flags. ABB took important first steps on learning about the potential violation by immediately scheduling a meeting with the DOJ and committing to change. However, the settlement papers did not give any detail as to what made ABB's cooperation extraordinary.KEY QUOTE“For companies that have to decide whether to disclose and may hesitate because of their criminal histories, the answer now is fairly clear that it is a better idea in many cases to voluntarily disclose, remediate and cooperate.” - Michael VolkovResourcesABB Agrees to Pay Over $315 Million to Resolve Coordinated Global Foreign Bribery Case | OPA | Department of JusticeABB Settles SEC Charges That It Engaged in Bribery Scheme in South Africa Email Michael: mvolkov@volkovlaw.com

2022 saw higher numbers of FCPA enforcement actions, settlements, and criminal prosecutions of individuals. One of the most important developments was the update of policy in the Monaco Doctrine, which was elaborated on in the Monaco Memo, providing important guidance for compliance professionals. Tom Fox joins Michael Volkov to discuss some of the more interesting cases from the past year.Tom Fox is hailed as the Voice of Compliance, serving and evangelizing for the compliance community for over 15 years. He is the founder and creator of the Compliance Podcast Network where he hosts various podcasts, such as Innovation In Compliance and the ESG Report, and the Executive Leader at the C-Suite Network. Some ideas you’ll hear them explore are:The DOJ is getting better at communicating with the compliance community through resolution documents like DPA, NPA, and, occasionally, declinations. These documents provide insight into the DOJ's thinking and approach to cases, which compliance professionals can use to gain a better understanding of how to approach compliance issues.In Tom’s upcoming book, “FCPA Year in Review 2022,” he highlights the KT Corp bribery case, which went back to the basics in its old-school rendition of corruption: bags of cash money. The lesson here is that bribery can be as simple as a $50 slipped into a handshake.In the curious case of Glencore, the FCPA enforcement action taken against them reflects the DOJ’s focus on defective cultures within companies. This case involved multiple enforcement agencies across multiple countries and multiple bribery schemes, rounding up fines and penalties totalling up to $1.1 billion, with $700M for FCPA violations, and $441M for price and market manipulation. Glencore had a culture that was committed to profit at any cost, and the company paid over $100M to third parties knowing that some of the money would be used to bribe officials in various countries.The Oracle case involving bribery and corruption involving gifts, travel, and entertainment should serve as a reminder to companies to review their gift, travel, and entertainment policies and ensure they are aware of how their business officials are spending their travel, per diem, and entertainment money.Avoid hiring third-parties recommended by or at the direction of a state-owned official or executive.The Lisa Monaco memorandum emphasizes the need for effective compliance programs and the benefits of voluntary disclosure, full cooperation, and timely and appropriate remediation. KEY QUOTE“Internal controls are not simply due diligence, distributors, et cetera. It goes down to your payments, schemes and how you pay your vendors should all be a part of your internal controls.” - Tom FoxResourcesTom Fox on the Web | LinkedIn | Twitter | Blog

The cryptocurrency industry is a young and rapidly growing one fraught with legal and economic risks. These risks can be exploited by ill-intentioned parties to fill their pockets and fund their lavish lifestyles. One such party is the disgraced founder of FTX, Sam Bankman-Fried (commonly called “SBF”), former darling of Silicon Valley and Wall Street. The FTX exchange was hailed as the gold standard for cryptocurrency, but a series of events led to a bank run and exposed the fraudulent scheme behind-the-scenes. Matt Stankiewicz joins Michael Volkov to discuss the legal ramifications of the fall of FTX and SBF.Matt Stankiewicz is Partner at the Volkov Law Group, specializing in anti-bribery & corruption controls and compliance programs. Recently, he was responsible for conducting a global anti-corruption compliance audit and testing of Fortune 100 medical device company's activities in ten countries. Some ideas you’ll hear them explore are:Having well over 100 subsidiaries across the globe, FTX was the go-to cryptocurrency exchange, even allowing users to trade various derivative products. At its height, the peak daily trading volume on FTX was over $20 billion. As it turned out, FTX was closely linked to a crypto trading firm called Alameda Research, founded by SBF, who owned 90% of it when it collapsed. It was a crypto hedge fund, Matt comments. Alameda used FTX to do all their trading and investments, and enjoyed special privileges that were not revealed to the public or to investors. One such privilege was  exemption from FTX’s risk management software that required users to use some of their assets as collateral if they were trading on margin.Lack of regulatory clarity is a major risk in the cryptocurrency industry. This lack of clarity creates opportunities for fraud, as well as challenges for companies trying to comply with regulations. Companies that adopt strong ethics and compliance programs can mitigate the risks of cryptocurrency and be more successful than those who do not.One of the biggest appeals of cryptocurrency is that you don't have to deal with an intermediary when transacting.KEY QUOTE“One of the benefits of cryptocurrency, which could have prevented a lot of this, is the fact that you can self-custody your assets.” ResourcesMatt Stankiewicz on LinkedInEmail Matt: mstankiewicz@volkovlaw.com The Fall of FTX: The Legal Ramifications of the Collapse of Sam Bankman-Fried’s Cryptocurrency Empire (I of IV)

The Curious FCPA Case of Asante BerkoIn 2020, Asante Berko settled a case with the SEC by agreeing to pay $329,000. A criminal indictment was filed in Brooklyn, New York shortly after the settlement. In November of 2022, Berko arrived in London at Heathrow Airport and was then arrested; charged with conspiring with two Ghanaian officials and four other individuals to benefit Goldman Sachs, himself, and a Turkish energy company. The scheme began to unravel when Goldman Sachs discovered the payments. Join Michael Volkov as he examines the recidivist case of Asante Berko’s FCPA violations.Berko orchestrated the bribery scheme between 2014 and 2017 to secure an electrical power contract from the Ghanaian government for the Turkish energy company. They were attempting to secure a power purchase agreement (PPA) or an emergency power agreement (EPA) with Ghana, which required the approval of certain Ghanian officials and entities, including a senior Ghanaian official as well as the Executive Cabinet and Parliament.In seeking reimbursement for the bribes paid out by Berko and his conspirators, he falsified invoices for consulting services allegedly provided by a Ghanian consulting company, which were then paid by the Turkish energy company. The payments were routed through correspondent banks in the US. Violators of FCPA often act with flagrant disregard of the laws and delusions that their obvious crimes will remain undiscovered and uninvestigated, Michael comments.Goldman Sachs officials began questioning the Turkish energy company about the payments to the Ghana consulting Company that appeared in their financial analysis. Despite the reassurance of Co-conspirator Number 3, Goldman Sachs conducted a due diligence review of the transaction and various email accounts and communications, including personal accounts used by Berko and others for incriminating conversations.ResourcesGoldman Sachs Official Indicted Over Ghana Bribery SchemeEmail Michael: mvolkov@volkovlaw.com

In early October, the BIS announced two rules imposing significant export controls on semiconductor chips transactions for supercomputer end uses. This week’s show discusses recent developments in the sphere of export controls and sanctions. Alexander Cotoia, Regulatory Compliance Manager at the Volkov Law Group, joins Michael Volkov to explore the BIS’ ramping up of export control enforcement, including the new restrictions on China and Russia.Some ideas you’ll hear them explore are:The SQE route for experienced legal professionals aims to democratize the legal profession to include underrepresented minorities and other people who might not have access to the typical training contract required for being a solicitor. In early October, the BIS announced two rules imposing significant export controls on semiconductor chips transactions for supercomputer end uses. Their aim is to obstruct China’s ability to use these supercomputers to upgrade their military capabilities and the propagation of WMDs. Within these new rules, controls on the export of semiconductor manufacturing technology in certain transactions for integrated circuitry were also imposed.Much of the dissent from professionals over these new restrictions stems from a fundamental disagreement in terms of policy rather than implementation, Alexander shares. Many professionals have become accustomed to the free-trade arrangement with China to export sophisticated technologies for integration end uses, and fear that the more stringent controls will compromise that arrangement.The aftermath of Russia’s invasion into Ukraine saw coordinated efforts at the highest levels of US government designed to prevent Russia from acquiring assets and commodities that could be used for military purposes.Alexander believes Matt Axelrod’s guidance about changing the way some administrative violations of EAR99 will be viewed was very instructive. One of the premises underlying that change was using non-monetary resolutions for less serious violations, but also imposing more stringent financial penalties on those who engage in culpable acts.If you have government contracts, or are in the telecommunications industry, you’re not allowed to have Huawei products on your premises.ResourcesBureau of Industry Security Ramping Up Export Control EnforcementAlexander Cotoia on LinkedInEmail Alex:  acotoia@volkovlaw.comEmail Michael: mvolkov@volkovlaw.com Volkov Law Group

Oracle Corporation settled its second FCPA case in ten years. It agreed to pay the SEC $23 million to resolve allegations that its subsidiaries in Turkey, India and the United Arab Emirates maintained slush funds to bribe foreign officials. Ten years ago in 2012, Oracle paid the SEC $2 million for creating millions of dollars in off-the-books accounts at its India subsidiary. Join Michael Volkov as he takes a deep dive in the Oracle case and provides valuable lessons for managing third-party corruption risks.In the SEC’s mind, Oracle is a recidivist, having its second enforcement action case in 10 years.The settlement for $23 million underscored the power of the FCPA provisions, which mandate effective internal controls and accurate books and records, and can be applied to a wide range of conduct beyond foreign bribery, Michael remarks. The controls that Oracle put in place to prevent improper use of discounts and marketing reimbursements were not effective because there was a lack of compliance culture within the business.The Oracle case is one that should be studied by compliance professionals, Michael believes. It reminds you to look at your own controls that surround discounting and ensure that the necessary documentation is carried out. “No matter what controls you have in place, they still have to be adhered to with a true culture of compliance underneath it as a foundation,” he adds.ResourcesSEC Oracle CaseEmail Michael: mvolkov@volkovlaw.com 

In this episode, cryptocurrency expert Matt Stankiewicz discusses why sanctions and AML compliance need to be taken seriously in the cryptocurrency industry.Matt Stankiewicz, a Partner at Volkov Law, is a leading industry expert on cryptocurrency. Bittrex, a leading cryptocurrency exchange, suffered twin enforcement actions for AML and Sanctions Compliance deficiencies. Matt takes a deep dive on the enforcement actions and outlines practical compliance steps that every cryptocurrency exchange should implement.Join us as we discuss:The enforcement action on Bittrex led by OFAC and FinCENWhy compliance risks are increasing in the cryptocurrency industryPractical steps that all cryptocurrency exchanges should implement  To reach Matt email him at: mstankiewicz@volkovlaw.com