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An Interview with Dr Klaus Moosmayer, Chief Compliance Officer, Siemens
5 September, 2014 by Ben Sharples (firstname.lastname@example.org), Senior Conference Producer, Legal Division, C5 Communications
Q1. – What would you say have been the key changes in the compliance officers’ role in the last 12-18 months?
What I see in Europe, and the US to an extent, is the growing topic about the potential liability of compliance officers. The question is how are compliance officers protected in companies and what is their level of personal liability. In Europe, the role of a compliance officer was not known as a profession 10 years ago, and has now significantly developed. So this has raised new questions as to what is the status, role, protection, and liability of compliance officers? Do we need a specific insurance protection? This is a big point of discussion currently.
Q2. – Have you encountered any challenges in getting buy-in of the value of compliance from top to bottom?
What I always say is for me, the famous “tone from the top” concept is a prerequisite for any effective compliance culture in a company. If this is not there we won’t even talk about operational compliance and business partner issues. The major day-to-day challenge of a compliance officer, and many colleagues agree with me, is getting support from middle management. They have challenging business targets in decreasing markets, and are close enough to their employees to set the tone day to day of the operations. Given the current economic situation where companies are certainly facing challenges in places such as China and Russia, there is I think a great need for attention on this issue (getting the backing of middle management).
Q3. - In your opinion, are companies now taking compliance more seriously and seeing the value it adds to their business?
We are on the way. I am optimistic, but I’m not naïve, so we are certainly not at the end of the way to achieve this fully. It has developed significantly over the last 10 years, but this is largely due to pressure from the outside; court rulings, famous cases like the Siemens case, changing level of expectations from shareholders, analysts, investment funds, and also journalists. For example, anti-corruption has picked up all over the globe – if something happens in – for example and with no prejudice – Bangladesh it can really affect the headquarters in Munich or London. But the question of whether it is seen as a business value is a developing topic, and again, you have to convince the middle management of the value of compliance and the support it gives the business.
Q4. – AML seems to be increasingly on the radar for non-financial sector companies. How are companies in this space dealing with regulations that were often written with the financial sector in mind?
This is certainly a developing risk that I see. Traditionally it was only considered for the financial sector, but now there are new authorities appointed who are now focussing on AML in Germany. It is a risk in transactions from real estate to M&A transactions, and my assessment is that the authorities are increasingly taking this up. With the prosecutors if there is an AML investigation, they have a huge level of power, and can do things like secret taping because there is a severe crime. So you have all the tools as a prosecutor to investigate and prosecute, and this is new for the industry. It has to be discussed and is definitely an emerging risk.
Q5. – What are you currently busy with?
From October 1 we have a new company structure in Siemens and are completely adapting our compliance structure, so I am extremely busy with this new set-up. We at Siemens have put a much bigger focus on the analytics of risks in the compliance organisation, with a special focus on risk assessment and strategies. Taking a “Compliance 2020” approach, the question is how can we better prevent or mitigate risk in difficult markets such as Asia? Another key focus is on the professional development of our compliance officers, making sure we promote and develop our compliance experts internally
Q6. – In light of this, what are the main objectives you are setting for yourself and your team in the next 12 months?
The goal is to really make this new organisational setup work, and offer our compliance people in the company encouraging career paths and a future of compliance. This will enable us to even better support our board and management to prevent risks in difficult markets.
As a result, legal counsel and compliance officers whose responsibility it is to report to, adequately inform and protect the board are increasingly challenged to answer to their CEO, board, regulators, and investors.
What does this mean for the compliance officers who are now viewed as the watchdogs of their company? Are they really all that stands between the company and potentially costly compliance breaches?
Comprehensive industry research recently conducted by C5’s legal division with compliance officers and legal counsel from across Europe’s leading multinational and up-and-coming SME companies delved into the evolution of the compliance role, revealing the key challenges keeping them awake at night.
“Under-Resourced and Over-Exposed”
The rapid development of the compliance role has led compliance officers to question the remit of their job description in light of increased responsibilities, liabilities, and internationally accepted standards.
Speaking on condition of anonymity, a senior compliance officer from an MDAX-listed company expressed concern that they are “under-resourced and over-exposed”.
“We are increasingly being seen as a proactive job function, whereas in prior years it could be said that the role of the compliance officer was to react to legal and regulatory developments.”
This is the result of ever-expanding responsibilities that have seen them tasked with managing and harmonising a diverse range of corporate governance issues such as “human resources, environmental, human rights, data protection, anti-trust, and anti-bribery”.
The international nature of modern business only exacerbates the problem, having to work through a myriad of potential regulatory issues in “every country they operate in”.
Top 5 Challenges Keeping Compliance Officers Awake at Night
As a key focus of the research, over 50 cross-industry compliance officers and legal counsel were asked: “what are the top 5 compliance challenges keeping you awake at night?” Their revealing answers and select quotes are below:
- Anti-trust and competition: “This area is very interesting because of the level of enforcement and penalties potentially exceeding that of FCPA breaches”
- Data privacy: “The NSA scandal has heightened awareness of this issue in Germany, and it is an area we could use extra definition and discussion”
- Personal liability of compliance officers: “This really hits where it hurts… extradition is possible!”
- Labour law & HR compliance: “Arguably the biggest issue on the horizon, and we still don’t know who in the company wears responsibility for it”International trade sanctions: “We have recently begun exploring operations in Russia, so this is currently an incredibly problematic issue to determine what we can and can’t do”
An over-arching challenge faced by compliance officers was revealed to be establishing the critical importance that compliance plays within a company, and therefore securing buy-in from a board questioning whether compliance really does create additional value; “without the board taking this seriously, how do we get the financial and internal support we need?”
Implications for Compliance Officers?
With the avoidance of reputational damage a key motivating factor for companies, it is absolutely business critical that risk assessments are conducted and robust compliance programmes are implemented as a result. These programmes need to reflect a broad range of diverse regulations, and must translate a company’s values and principles into day to day operations and behaviour.
However, this process requires a business-specific tailored approach, and when compliance officers are faced with limited resources and budget, how can you efficiently install a compliance programme without sacrificing any efficiency?
Unsurprisingly and unfortunately, there are no easy answers. What works for any given company will differ based on size, geographical scope, and inherent corporate cultures and values. Simply put, benchmarks vary.
The good news is that companies are increasingly seeing the value in a robust compliance programme, if for no other reason than to protect against the heightened risk of individual liability for board members.
Based on our research, the role and responsibilities of compliance officers and legal counsel have expanded quicker than expected, and it will be some time until the support afforded them matches what is expected of them. In the meantime, they will be left looking for insight wherever they can find it, with a hope to establishing a best practice approach suitable for their company.
Article written by Ben Sharples, Senior Legal Conference Producer – B.Sharples@C5-Online.com
Comment: Australia must strike a higher note on anti-corruption, by Fleur Johns and David Hertzberg, Posted on SBS
Australia’s anti-corruption legislative framework is meek compared to the US and the UK, with concerning implications for our global business dealings and diplomatic relations. Renewed claims before the Victorian Supreme Court that Leighton Holdings engaged in corrupt practices, allegedly paying a $42 million kickback to Iraqi officials, have once again called into question the scope and effectiveness of Australia’s anti-corruption laws. [Read More...]
A former deputy minister of the interior in Poland is among a group of officials to have been arrested on bribery charges in the “biggest scandal in the history of Polish kickbacks”. His arrest concerns contracts for the purchase of IT equipment for the ministry of the interior, as well as for the country’s Police Headquarters (KGP). A top official at Poland’s statistical office (GUS) has also been arrested. “This is the biggest scandal in the history of Polish kickbacks,” spokesman for Poland’s anti-corruption unit (CBA) Jacek Dobrzynski told the Gazeta Wyborcza daily. [Read More...]
Eastern Partnership: is fighting corruption in eastern europe compromised? By Nienke Palstra, Posted on TransparencyInternational.eu
The European Union summit planned for 28-29 November in Vilnius, Lithuania was supposed to see four eastern European countries embrace a reform process that leads to greater integration with western economies and progress in the fight against corruption. [Read More...]
30 November 2013 – The rule of law, governance, profits and livelihoods all suffer from corruption’s corrosive effects, a senior United Nations official said at the conclusion of the world’s largest biennial anti-corruption gathering, which this year took place in Panama City. “We all have a stake in ending corruption,” a declared John Sandage, Director of the Division for Treaty Affairs of the UN Office on Drugs and Crime (UNODC), underscoring that the resolutions passed during the Fifth Session of the Conference of the States Parties to the United Nations Convention against Corruption would help lay the groundwork for strengthening partnerships to prevent and combat the scourge. [Read More...]
The Transparency International Secretariat in Berlin today released its annual Global Corruption Perceptions Index. The Index, which ranks the public sector of 177 countries across the world, has consistently shown New Zealand as a country with a strong reputation for clean government. In 2013, New Zealand ties with Denmark for first place due to strong access to information systems and rules governing the behaviour of those in public positions. [Read More...]
A key global survey of international perceptions of official corruption has put Spain down six points to 40th place after a series of recent scandals. Only Syria, in the middle of a civil war, lost more points in the survey, carried out by the Berlin-based Transparency International. The list of 177 countries put Denmark and New Zealand top with 91 out of 100. The UK is ranked in 14th place, up from 17 last year, with a score of 76 points out of 100. [Read More...]
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WARSAW, Poland (AP) — Eighteen people including current and former state officials were detained in Poland on Tuesday on suspicion of large-scale corruption, investigators said. The detentions are a blow to the government of Prime Minister Donald Tusk, which is seeking to improve its image halfway through its second term. A government reshuffle is expected Wednesday. [Read More...]
Romania, Moldova strengthen anti-corruption efforts, By Paul Ciocoiu, Posted on Southeast European Times
Moldova and Romania are strengthening co-operation against corruption to help the former Soviet republic in its EU accession process. Romania’s National Anticorruption Department and Moldova’s National Anticorruption Centre (CNA) ran a joint anti-corruption operation last month, arresting more than 50 customs officials and border police officers on both sides. Authorities and experts say the operation was the largest joint anti-corruption action so far between the two countries and that professionals on both sides have intensified co-operation, exchanging information and experience. [Read More...]
In the final hours of the parliamentary year, the Queensland Government sacked the entire committee that oversees the state’s corruption watchdog. It follows a bitter dispute between the Government and the committee after the committee questioned the independence of the Crime and Misconduct Commission boss, who has publicly backed Queensland’s tough new anti-bikie laws. [Listen to the audio file]
OECD Draws on Siemens Corruption Experience With Force Head, By Alex Webb, Posted on Bloomberg Business Week
Siemens AG (SIE)’s Klaus Moosmayer has been appointed by the Organization for Economic Co-operation and Development’s business advisory committee as its anti-corruption taskforce head, drawing on the German company’s experience fighting graft. Moosmayer, Siemens’s chief counsel for compliance issues since 2010, will co-ordinate the Business and Industry Advisory Committee’s efforts to tackle corruption, the Munich-based company said in a statement. He was first given a role tackling sleaze at Europe’s largest engineering company in 2007, the same year a new chief executive officer was hired to clean up after a bribery scandal. [Read More...]
three-year investigation conducted by the Central Anti-corruption Bureau (CBA) and international police forces has revealed a gigantic network of corruption, including slush funds used by several international IT firms to bribe ministry officials responsible for awarding IT tenders, reports Rzeczpospolita. [Read More...]
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Only 17% of UK accountants believe the UK Bribery Act 2010 has given confidence to small and medium-sized businesses (SMBs) that they will not have to compete with or encounter corrupt business practices, a research report from ACCA (the Association of Chartered Certified Accountants) reveals today (Tuesday). Combating bribery in the SME sector: the UK findings polled ACCA’s UK membership to revisit original research conducted in 2007. [Read More...]
UK bribery: construction in the cross-hairs, By Eoin O’Shea, Charles Hewetson, Rosanne Kay and George Brown, Posted on Lexology
The UK’s Serious Fraud Office has made clear that its anti-bribery investigations are focussed on two industries in particular: construction and energy. Construction firms especially are under-prepared for the risks which this new approach will bring, and need to take action quickly. Making a Clean Sweep In a recent speech, David Green, Director of the SFO, said that the agency would adopt a “sweep” approach and focus on specific industries. The sweep approach involves seeking out intelligence, including by covert means, to identify businesses which might be breaking the law. [Read More...]
Unions that mismanage members’ money could face fines of more than $1 million under new federal legislation to crack down on bad behaviour. The coalition government had foreshadowed the move, saying union officials should face the same penalties as company directors. Government house leader Christopher Pyne introduced the legislation on Thursday in parliament and linked the move to allegations of misuse of Health Services Union member’s funds against former Labor MP Craig Thomson and party boss Michael Williamson.[Read More...]
Plea to foreign anti-corruption agencies: Do your homework on Ukraine, By Halyna Senyk, Posted on Kyiv Post
The release of the Organized Crime Observatory interim report on corruption and organized crime in Ukraine earlier this month makes one wonder whether at least some foreign experts help or hurt fighting corruption. The Organized Crime Observatory is a Swiss-based nongovernmental organization commissioned by the European Commission to do a thorough research on corruption and organized crime in Ukraine in order to inform the European Union on the readiness of Ukraine to sign the association agreement. Those who knew about the world-class experts engaged in this report, such as Louise Shelley, Judith Deane or Pedro Gomez Pereira, were dying in anticipation to see it. [Read More...]
World Bank President Jim Yong Kim Makes Pitch To CEOs For Africa Investment: WSJ CEO Council, By Nat Rudarakanchana, Posted on International Business Times
World Bank President Jim Yong Kim touted African economies and investments on Tuesday, inviting dozens of U.S. CEOs to explore African investment opportunities with him at an annual summit of business executives. “If you look back, over the last five or six years, even Africa had over 5 percent growth rates,” said Kim at the Wall Street Journal’s CEO Council in Washington, D.C., on Tuesday, highlighting bright spots among emerging economies. He pointed to the West African nation of Burkina Faso as one interesting spot, with “great” leadership and a growing private sector. [Read More...]
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When: Tuesday, October 23 to Wednesday, October 24, 2012
Where: Hotel Lutetia, Paris, France
Attend C5’s forum Managing Third Party Relationship Risks, and join over 30 leading in-house counsel, ethics and compliance executives, and internal auditors from some of the largest multinational companies who will take you through the essential do’s and don’ts for detecting and minimising all risks associated with engaging third parties. Hear new insights on maintaining strict controls through the duration of the contract by taking into account different potential risks according to the third party’s location, function and industry.
- You will get a cross-industry perspective on the best practices your company should use to spot potential risks including Corruption and Bribery, Economic Sanctions, Export Controls, Anti-Trust as well as general financial, commercial and reputational risks at the beginning of the relationship.
- You will learn how global organisations are revisiting their third parties’ risks profiles, mid-relationship, and doing more focused due diligence and monitoring exercises on areas of potential exposure.
- You will gain practical pointers on how to test and detect whether your third party programmes have properly captured all possible risks and how to maintain adequate checks throughout the life of the relationship.
Have your questions answered and gain practical guidance from leading compliance executives who have seen it all, including:
- Timur Khasanov-Batirov, Chief Compliance Officer, DTEK (Ukraine)
- Deniz Kuban, Head of Legal, Genel Energy (Turkey)
- Jean-Daniel Lainé, Senior Vice-President, Ethics & Compliance, Altsom (France)
- Amanda Wiltshire, Group Third Party Partner, Director, De La Rue plc (UK)
- Richard Battaglia, Former Senior Counsel, BP (USA)
- Jean Claude Najar, General Counsel France & Senior Counsel EMEA, GE (France)
- Johanne Peyre, Head of Antitrust Europe, Michelin (France)
- Gary Parkin, Chief Financial Crime & Regional Sanctions Officer, Europe, Chartis Insurance
- Simon Jenvey, Global Life Compliance Officer, Group Compliance, Zurich Insurance Company
- Kees van Ophem, General Counsel & VP – Corporate Management, Leica Microsystems GmbH
- Sam Tate, Managing Counsel, Legal and Regulatory, BP plc
- John Lowe, General Counsel and Communications Director, Qioptiq
- Christophe Celerier, Associate General Counsel, Trust & Compliance Officer, IBM Europe
- Daniel Sandmann, Head of Compliance Policy, Communications & Regulatory Affairs, Group Compliance, Allianz SE (Germany)
- Poju Adedeji, Legal and Compliance Officer, Baker Hughes (France)
- Caroline Visser, VP Global Head of FICS Fraud Investigations and Compliance Services, Philips Internal Audit (The Netherlands)
Plus! To enhance your learning experience, do not forget to sign up for our Pre Conference Interactive Workshops, Monday 22nd October 2012:
- WORKSHOP A
Responding to Red Flags Mid-Relationship: How to Conduct an Effective Investigation and Extricate your Company from Potential Exposure
- WORKSHOP B
Top Techniques for Performing Thorough Due Diligence Checks in Preparation for Completing a Merger & Acquisition (M&A) or Forming a Joint Venture
For more details please download the BROCHURE
What are the methods to assess the risks of your Supply Chain vendors? Other than perhaps financial due diligence, such as through Dun & Bradstreet or quality control through your QHSE group, the Supply Chain probably does not command your Compliance Department attention as do other types of third party business partners such as agents, distributors and joint venture partners. This may be coming to an end as most Compliance Professionals recognize that third parties which supply goods or services to a company should be scrutinized similarly to other third party business partners. In the recently released Deferred Prosecution Agreement with Panalpina and six other oil-field service companies, the Department of Justice specifically noted that regarding business partners, such as Supply Chain vendors, a company should, ”it should institute appropriate due diligence” so as to help ensure compliance with the FCPA.
However to initiate “appropriate due diligence” a company must first rate the compliance risk of any third party, such as a Supply Chain vendor. The risk rating will inform the level of due diligence required. There are several methods that could be used to assess risk in the area of supply chain and vendors. The approach suggested by the UK’s Financial Services Authority (FSA) in its settlement of the enforcement action against the insurance giant AON would refer “to an internationally accepted corruption perceptions index” such as is available through Transparency International or other recognized authority. The approach suggested by the Department of Justice, in Release Opinion 08-02 would provide categories of “High Risk, Medium Risk and Low Risk”. Finally, writing in the FCPA Blog, Scott Moritz of Daylight Forensic & Advisory LLC has suggested an approach that incorporates a variety of risk-assessment tools, including, “the strategic use of information technology, tracking and sorting the critical elements”.
This commentary proposes an approach which would incorporate all three of the above cited analogous compliance areas into one risk-based assessment program for supply chain vendors. Based upon the assessed risk, an appropriate level of due diligence would then be required. The categories suggested are as follows:
1. High Risk Suppliers;
2. Low Risk Suppliers;
3. Nominal Risk Suppliers; and
4. Suppliers of General Goods and Products
A. High-Risk Suppliers
A High-Risk Supplier is defined as a supplier which presents a higher level of compliance risk because of the presence of one or more of the following factors:
1. It is based in or supplies goods/services from a high risk country;
2. It has a reputation in the business community for questionable business practices or ethics; or
3. It has been convicted of, or is alleged to have been involved in, illegal conduct and has failed to undertake effective remedial actions.
B. Low-Risk Suppliers
A Low-Risk Supplier is defined as an individual or private entity located in a Low-Risk Country which:
1. Supplies goods or services in a Low-Risk Country;
2. Is based in a low risk country where the goods or services are delivered, it has no involvement with any foreign government, government entity, or Government Official; or
3. Is subject to the US FCPA and/or Sarbanes-Oxley compliance
C. Minimal-Risk Suppliers
A Minimal-Risk Supplier is an individual or entity which provides goods or services that are non-specific to a particular job or assignment and the value of each transaction is USD $10,000 or less. These types of vendors include office and industrial suppliers, equipment leasing companies and such entities which supply such routinely used services.
D. Suppliers of General Goods and Products
A Supplier of General Goods and Products is an individual or entity which provides goods or services that are widely available to the general public and do not fall under the definition of Minimal-Risk Supplier. These types of vendors include transportation, food services and educational services providers.
This proposed rating is but one method to allow a company to assess its risks involving its Supply Chain vendors. As has been noted in both the Consultative Guidance to the United Kingdom Bribery Act and in the Panalpina settlements, both documents list the risk rating as a key component of a best practices anti-corruption and anti-bribery compliance program. A company need not engage in full due diligence for all Supply Chain vendors. However it must implement and follow a system to rate each vendor for that vendor’s FCPA compliance risk and evaluate and manage that relationship accordinglyThis publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at email@example.com.
© Thomas R. Fox, 2010