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Podcast: Culture & Compliance Chronicles: Incorporating Behavioral Science in Audit & Monitoring

In the second episode of Ropes & Gray’s podcast series, Culture & Compliance Chronicles, litigation & enforcement attorneys Tina Yu and Amanda Raad, who co-chairs the firm’s global anti-corruption and international risk practice, continue their conversation with Jules Colborne-Baber, a partner and forensic audit expert at Deloitte UK, and Richard Bistrong, CEO of Front-Line Anti-Bribery LLC, about behavioral science and compliance. The first part of their conversation focused on the importance of incorporating behavioral science in compliance programs. In part two, they turn their attention to the application of behavioral science in compliance testing and monitoring.

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Podcast: ACES Compliance Summit: Conversation with Momentum Events


Time to Listen: 11:47 Practices: Risk Management, Anti-Corruption / International Risk, Government Enforcement / White Collar Criminal Defense, Litigation

In this Ropes & Gray podcast, Ryan Rohlfsen, a litigation & enforcement partner and one of the co-leaders of the firm’s global anti-corruption and international risk practice, is joined by Momentum Events, the organizers of the annual ACES Compliance Summit. This year’s Summit will be hosted at American University’s College of Law on March 17-18, 2020 in Washington, D.C. The program will cover the intersection of anti-corruption, export controls and sanctions, with a focus on discussing practical solutions and cutting-edge strategies for conquering the latest obstacles currently posing a threat to domestic and global corporate operations. Ryan will be moderating a panel at the Summit discussing the five most significant global anti-corruption developments of the past year, including international enforcement actions, emerging regulations and legislation, trends and anti-corruption priorities worldwide.

Risk-Management


Transcript:

Ryan RohlfsenRyan Rohlfsen: Hello, and thank you for joining us for this Ropes & Gray podcast. I'm Ryan Rohlfsen. I'm a litigation & enforcement partner and one of the co-leaders of our global anti-corruption and international risk practice group, based in Ropes & Gray’s Chicago and Washington, D.C. offices. Today, I'll have a conversation with Momentum Events, the organizers of the ACES Compliance Summit – that's an annual event dedicated to discussing practical solutions and cutting-edge strategies for conquering the latest obstacles currently posing a threat to domestic and global corporate operations.

Momentum: Thanks, Ryan. My name is Danielle and I am the Sales Director here at Momentum Events. I am so pleased to have an opportunity to work with you once again on the 13th iteration of the ACES Compliance Summit. For those who may be unaware, the program will cover the intersection of anti-corruption, export controls and sanctions. We are pleased to be hosting it again at American University's College of Law on March 17-18 in Washington, D.C., and registration will be complimentary for all qualified in-house counsel and compliance executives this year. Ryan will be moderating a panel at the Summit discussing the five most significant global anti-corruption developments of the past year, including international enforcement actions, emerging regulations and legislation, trends and anti-corruption priorities worldwide. So Ryan, immediately prior to joining Ropes & Gray, I understand that you held a position of Senior Trial Attorney with the U.S. Department of Justice's Criminal Division – Fraud Section. Reflecting on your current role as an advisor to companies who are often interacting with the Department in the context of investigations and negotiations, what experience would you say you rely on most from your time there, when offering guidance to your current clients?

Ryan Rohlfsen: I think probably the most important thing I learned from being a prosecutor was how to address things very practically and in a very straightforward manner. When you go through and see both sides of a case, not only how you defend it but then also how the cases are brought, you start to understand what is really the most critical and important thing for the prosecutors and for the government to consider, and those are the things that from a defense perspective, generally should focus in on as well. That will help to build your case not only to possibly defend it, but also to possibly reach a resolution or to try to seek a declination if some sort of resolution isn't appropriate. Another thing that I think is also very important is understanding the importance of credibility. Credibility is one of your key assets you bring to a negotiating table or a courtroom table, either with the Department of Justice or a judge. And so I think it's very important from day one to establish credibility with the government, with your client, with any opposing parties you may have or co-counsel you may have, and then really I think that'll help serve your case the best.

Momentum: Now building upon the prior question, Ryan, if you could identify one of the biggest “no-no’s” companies often make when negotiating with the government, what would you say that would be? And conversely, if you could offer one piece of advice to companies when approaching the government in this same regard, what would that be?

Ryan Rohlfsen: Well, I think I'm going to answer that in reverse order. I think what I would first start as is what you must do. Kind of building off the last question we just discussed, I think you really need to make sure that you're genuine, that you're honest, that you're credible. You have to do what you say you'll do. When you're prepared, unless you're prepared to go to war from day one then and there, your credibility is key. You have to build the trust, show that you're a good company, that either perhaps had a rogue or a bad employee, or a good company that made a mistake and is looking to fix it and move forward. So I think credibility is really paramount when you're faced with a government enforcement action. And I think from a “no-no” sort of perspective, don't ever underestimate obviously the power of the federal government. You hear about that, you think about that, but I think it's very important so that you should not try to pull the wool over someone's eyes. Don't try to be disingenuous. Don't try to be fast and loose with the facts. Know it cold, whatever it is that you do, the facts, the law, and present accordingly. And if you don't do that, you will not be serving yourself or your client very well.

Momentum: Thinking now about your interactions with your current clients, what would you say are the top challenges most often voiced as obstacles to achieving effective compliance in their day-to-day operations? And what would your recommendations be for resolving the same?

Ryan Rohlfsen: So I think there are two main areas that I hear the most about in terms of challenges from an in-house perspective: I think those are 1) internal, and then 2) external. From an internal perspective, I think we always hear that the grass is a bit greener. Compliance officers I speak with often feel that other companies are better resourced or have more corporate backing than they do from time to time. And my perception across a number of different companies and industries is that that often is not the case, that in fact everyone is in a struggle for limited and scarce resources. And that might be in a number of different forms – that might be in terms of head count, that might be in terms of new technology platforms or even older technology platforms, it may also just be in terms of statures in the company. And these are all things that I think are important to a compliance program and require balancing, and frankly speaking, it's something that the government will be looking at if you're ever in enforcement action is to understand are you as a company striking at an appropriate balance. So I think that's one of the struggles I hear about fairly regularly from an internal perspective.

From an external perspective, I think one of the most challenging things is really dealing with third-party interaction. Third parties are obviously bread-and-butter and a lifeline for many companies, whether it's sales agents, important consultants, suppliers, a whole host of others, those are the ones that particularly in higher-risk jurisdictions, present the most risk, particularly from an anti-corruption compliance standpoint and sanctions and export control standpoint. So I think really trying to think through and trying to make sure that you have an effective approach for managing those third parties, recognizing you do not have unlimited resources and really trying to best target the resources you have in a manner that mitigates the risk – in other words, “getting the most bang for your compliance buck” if you will. Two other areas that I think are external as well in addition to third parties, are joint ventures and mergers and acquisitions, managing the diligence process, the contract and the onboarding process, and the ongoing monitoring process. Those are all things that I think most companies struggle with from day-to-day and there's not an exact solution or formula to getting it right, but requires a customized approach to every situation.

Momentum: Going one step further, honing in on the investigations specifically, have you discovered any commonalities or trends in compliance loopholes that you've uncovered during the course of an internal investigation? And if so, what trends have you found and what advice would you give to companies to “get ahead” of these issues?

Ryan Rohlfsen: I'm going to call this less of a loophole and more of a commonality. And that is that in virtually every case I've ever seen where someone at the company has authorized corrupt conduct, they've also authorized some sort of other fraud, whether that's stealing from the company (as is often the case), skimming, whether it's cooking the books a little bit to kind of meet their numbers in order to get bonuses or to keep their job – all these things ultimately get to fraud and that's a really difficult thing to detect. And it's even more difficult to detect when you have more than one bad actor engaged in the conduct and you have collusion, particularly if it's at a relatively higher level, perhaps in a subsidiary, perhaps a foreign subsidiary where the books and records might not be in English or a large part of the records are not in English – the local language is different. It's more complicated to audit. It's more complicated to monitor. And that's one of the things I think we see a fair amount of is when you have the fraud in that, then that really is difficult. So what do you do about that? Obviously, a few things. With looking internally, you want to make sure to hire the right people, which is easy to say, but in practice that means particularly for the higher-level people, doing appropriate diligence checks. Checking references, doing some of the bread-and-butter things that sometimes get lost in the shuffle when deadlines are tight and money is scarce, trying to leverage internal audit, trying to leverage technology platforms that might detect fraud and abuse in a way that human eyes can't detect patterns over time that you may not detect by yourself. Those sort of things can all be considered to help mitigate those risks. And same thing for third parties as well – I mentioned earlier, third parties is a big risk. So how do you think about trying to mitigate that risk given that's sort of a big issue that pops up from across company, whatever size it is, whatever industry. And really, it gets the selection with them really trying to spend I think more time upfront and having high-quality less third parties. Less is more in this I think to the extent it's possible and it makes sense with your business and your industry. And then having reasonable and sensible monitoring ongoing and really asking yourself down the road, “Does this relationship still make sense?” So I think those are a few things that I would think about if I was at the company making these decisions.

Momentum: Alright, thank you very much. And once again, I am so delighted to be working with you on the 13th iteration of this event and to hear your insight in person, But for those listening, I'm curious, do you find any one industry over another is more or less prone to compliance challenges at the intersection of anti-corruption and trade-related matters?

Ryan Rohlfsen: Well, clearly when you have trade issues, those that tend to involve international are going to be very important. That said, I've certainly seen cases and had clients where they've only had international being a very, very small component of their business, and they're still subject to these sort of risks. So I don't know that there's really any particular geography or industry that is more or less subject to these risks. Certainly, industries that tend to be higher regulated have compounding risks from government enforcement – so obviously, life sciences, banking and alike are going to be subject to multiple regulators and that obviously creates enhanced risk. But from a pure anti-corruption and sanctions standpoint, I think almost any industry is potentially vulnerable.

Momentum: Well, Ryan, I cannot thank you enough for your time today. It's been such a pleasure speaking with you, and we look forward to seeing you in a few weeks at the ACES event.

Ryan Rohlfsen: Thank you so much for joining me today. I'm really looking forward to participating in the summit yet again this year. And thanks again to our listeners. To learn more about the ACES Compliance Summit or to register online, please go to www.theacesummit.com. For more information about the topics we discussed, please visit Ropes & Gray's website at www.ropesgray.com. You can also subscribe and listen to the series wherever you listen to podcasts, including on Apple, Google and Spotify. Thanks again for listening.

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