Category: General

Managing High-Risk Distributor Risks (Part I of II)

Companies will often rely on a network of distributors to help sell their products in emerging markets.  From a business economics standpoint, engaging a distributor is often more cost efficient than investing in a sales force in a new market.  As a result, companies may enter a new market by relying on distributors, and if successful, may invest in the future by establishing its own...

Five Common Weaknesses in OFAC Sanctions Compliance Programs

As companies elevate their “game” in sanctions compliance, it is important that compliance officers critically examine the strengths and weaknesses of their compliance programs.  Many companies already have a screening technology but little else beyond a basic screening process. From my vantage point, I have observed some common weaknesses: Segregation of Duties and Control Process:  Many companies maintain a screening program and assign the responsibility...

Corrupt Intent and Bribery

In my showcase of profound but obvious points, let me add to my collection – an illegal bribe often turns on the actor’s state of mind.  Did he or she act with corrupt intent? The actor’s state of mind is a common element to many criminal offenses.  In most cases, the government has strong evidence of such corrupt intent.  In some cases, the government is...

Five Lessons for Third-Party Distributor Risk Management from Microsoft FCPA Settlement (Part III of III)

The Microsoft FCPA settlement, while not significant in the total penalty of approximately $25 million, provides some important instructions concerning distributor and re-seller risks and mitigation strategies.  Here are five important lessons learned:  Discount Controls and Customer/End User Pricing: Microsoft agreed to provide significant discounts based on false justifications.  Microsoft failed to confirm the justification for the discounts that permitted the bad actors to create...

Microsoft FCPA Settlement Underscores Third-Party Risks (Part II of III)

Microsoft’s bribery and controls violations reflect significant risks facing companies that rely on distributor and reseller networks to sell their products.  Companies often enter and operate in emerging markets through complex networks of third parties.  Such distribution systems create significant anti-corruption risks that have to be managed and mitigated. It is worth taking the time to examine the precise outlines of the conduct at issue...

Microsoft Pays DOJ and SEC $25 Million to Resolve FCPA Violations (Part I of III)

Microsoft finally resolved its FCPA enforcement action with a whimper.  Notwithstanding prior suggestions that Microsoft’s investigation uncovered global conduct, Microsoft’s liability focused primarily on Microsoft’s conduct in Hungary.  Even with the tailored settlement agreement,  DOJ and the SEC reiterated robust expectations surrounding third-party distributor networks, particularly in the software industry. To resolve a lengthy six and one-half year investigation, Microsoft entered into a non-prosecution agreement...

Data, Data and Data – How to Collect and Measure Data for Your Compliance Program?

As compliance strategies evolve and improve, more attention is being paid to data and measurement of a compliance program.  Like every task associated with compliance, professionals have to be smart when it comes to this issue.  A compliance program generates (or has access to) a vast amount of data and it is easy to get lost in the morass of data without any appreciable benefit....

The Overwhelmed CCO

Chief compliance officers have a hard job.  CCOs know that fact and them fully embrace the challenges of their positions.  At the same time, CCOs have extraordinary expectations placed on their shoulders – they are rarely complemented about their programs while the company avoids any major controversies, but they are one of the first to be questioned when a compliance breakdown occurs.  CCOs are always...

Five Important Mandates from OFAC Compliance Framework

Based on its aggressive enforcement program and its recently issued Framework for Sanctions Compliance Programs, OFAC has established a new era in sanctions compliance.  Trade compliance is often siloed into its own operation, sometimes in, and other times outside of, the compliance function.  Over the next five years, we will witness a sea-change in sanctions compliance programs (or at least we better witness such a...

Ethical Culture Begins with Senior Management

I tend to repeat myself and when it comes to corporate cultured and ethics, I admit it.  A company without an ethical culture, or at least a commitment to an ethical culture, will be unable to achieve an effective ethics and compliance program. NAVEX Global’s recent benchmarking report was an important confirmation that successful compliance programs often have two strong characteristics – senior level buy...