Compliance Insider

Issue 21 > Compliance Alerts

State Street acknowledges integrity deficiencies with settlement

Financial Institutions have significant obligations to act with integrity, particularly since the global financial crisis of 2008. While this means screening new customers and counter parties and reviewing them periodically, it also means applying the same rigour internally. This includes conducting background checks and pre-employment screening methods to avoid hiring and training new employees who are not suitable for the job. State Street Bank recently acknowledged that it had integrity issues when it agreed to pay US$382 million to settle allegations of fraudulent foreign currency exchange (FX) practices.

Issue 21 > Compliance Alerts

Failure to meet sustainability requirements has serious consequences

Sustainability is important to making sure that we have, and will continue to have, the water, materials and resources to protect human health and our environment. Companies and their supply chains now play a role in ensuring that they also protect the social, economic and other requirements that will allow them to support future generations. Tesco’s announcement that it is removing a number of John West tuna products from its shelves after the company failed to meet its sustainability standards is therefore welcome.

Issue 21 > Compliance Alerts

FCPA settlement by LATAM Airlines confirms dominant role of intermediaries

Third party intermediaries such as agents, distributors and brokers, and even corporate vehicles such as subsidiaries, offshore tax shelters and consulting firms, are often involved in bribery. The importance of this for compliance officers should not be underestimated given the potential legal repercussions that their conduct can have for companies. LATAM Airlines Group is learning this to its cost after agreeing to settle Foreign Corrupt Practices Act (FCPA) investigations with the United States Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).

Issue 21 > Compliance Alerts

Software startup settlement reinforces value of compliance training

Relevant, concise and engaging compliance training benefits both companies and their employees. Training content that is tailored to your organisation is more readily remembered by employees, who can then easily apply it to their daily activities. Simple, direct messaging that is free of legalese creates actionable intelligence, and it is important that employees are able to relate to any training characters and content in order for them to feel engaged. The attributes of effective compliance training are currently being considered by troubled software startup Zenefits, after it settled with the state of Tennessee for violating insurance requirements.

Issue 21 > Compliance Alerts

Overtime fraud schemes showcase need for rigorous audits

Companies often lack the internal resources or expertise to conduct their own compliance audits. Many therefore seek a cost effective and high quality alternative to the old fashioned, less nimble approach delivered by the traditional accounting firms. Whether requiring an in-country export compliance audit or an exploratory anti-corruption compliance audit focused on the petty cash transactions recorded by an important supply chain vendor, it is vital that companies develop a robust compliance and integrity audit programme.

Issue 21 > Compliance Alerts

1MDB investigation exposes weaknesses in KYC policies in Singapore financial institutions

A joint statement regarding the ongoing investigation into the 1MDB money trail throughout Singapore has recently been released by the Monetary Authority of Singapore (MAS), the Attorney-General’s Chambers and the Commercial Affairs Department of the Singapore Police Force.

Issue 21 > Compliance Alerts

Use the proper level of due diligence for high risk targets

Conducting due diligence is an essential part of any compliance programme and companies often feel the strain of reduced compliance budgets and resources. It can be tempting to cut corners by ordering cursory due diligence on high risk entities but the implied risks should not be ignored.

Issue 21 > Compliance Alerts

Oil refiner settlements show need for environmental compliance

A recent settlement by two oil refiners with the United States Department of Justice (DOJ) and Environmental Protection Agency (EPA) has once again highlighted the integrity and compliance risks that can emanate from environmental misconduct. Every organisation needs to make sure that their suppliers are not polluting the environment while providing products and services to them. In addition, no organisation wants to be associated with a supplier that engages in environmental misconduct, even if it has nothing to do with the products or services that are being provided to them.

Issue 21 > Compliance Alerts

What Privacy Shield means for your company going forward

What does the new Privacy Shield mean going forward? About the best I can say now is that I am cautiously optimistic that it may bring some certainty. The new Privacy Shield affords companies the opportunity to enlist in the legal right to transfer data to the United States from European Union (EU) member states without breaking privacy laws. This is designed to replace the prior Safe Harbor, which was struck down by the European Court of Justice in its Schrems decision in October 2015.

Issue 21 > Compliance Alerts

Theranos and Ethical Leadership

What is ethical leadership? When does pushing the mechanical envelope around what is and what is not technically possible move from possible to wishful thinking to downright fraud? Is it the responsibility of a leader to accurately represent his or her company’s technical capabilities when they fall short of all measurable standards?

Issue 21 > Compliance Alerts

Hackers target US fast food chain

Hackers and criminals are not selective on the type of organisations they will attack. They are opportunists and will take full advantage of any vulnerable database that could contain valuable data. This has been confirmed once again when a popular US fast food chain was hit by a massive cyber attack.

Issue 21 > Compliance Alerts

Bangladesh's garment industry shaken in the wake of Dhaka attack

Natural disaster, accidents, loss of information, labour strikes and other disruptions can unexpectedly stop or slow the sourcing of materials required for the manufacture of products. For example, the recent attack in Dhaka, Bangladesh has raised concerns over the future of the country's garment industry.

Issue 21 > Compliance Alerts

Hackers not picky when selecting victims of cyberattacks, reinforces need for security

A slew of cyber intrusions in different business sectors in North America have once again highlighted the necessity for companies to implement more secure information storage solutions. The healthcare industry is one industry that has seen data breaches in the past few months and just recently, the Stamford Podiatry Group in Connecticut has fallen victim to an attack.

Issue 21 > Compliance Alerts

Malta banks named in Panama Papers deny links to fraudulent law firm

The effects of the Panama Papers scandal continue to be felt in various industries around the world. Many companies and individuals that were previously identified have taken steps to mitigate reputational damage and distance themselves from Mossack Fonseca. Three banks in Malta have released statements about their relationships with Mossack Fonseca, the law firm that allegedly helped international corporations open shell corporations and offshore accounts in order to hide ill-gotten wealth.

Issue 21 > Compliance Alerts

Google’s recent diversity report underscores improvements, pushes diversity for tech

Businesses are aware that having a diverse supplier pool or employee base is a major competitive advantage, which is why many tech companies are making the effort to improve diversity in the work place. Google is displaying its progress with diversity and the fruits of a US$150 million investment made in 2015 by way of an official blog post regarding the recent improvements.

Issue 21 > Compliance Alerts

United States demotes Myanmar on human trafficking list

Myanmar is known as a high risk country for conducting business due to a poor human trafficking record and abusive labour practices. Myanmar was recently demoted to "Tier 3" in the United States' global list of worst offenders in human trafficking, officially putting the country alongside Iran, North Korea and Syria.

Issue 21 > Compliance Alerts

How compliance firms can partner with law firms to reduce risk

The demand for individuals and companies who are well-versed in various state, federal and international regulations and research regarding third party risk management is increasing. This dictates an increased need for legal professionals as well as specialised professional services firms. Companies have a growing need for compliance services due to increased regulation and legislation related to supply chain transparency and third party accountability. This includes the United Kingdom Modern Slavery Act, Conflict Minerals Act and the California Transparency in Supply Chains Act, along with high profile scandals such as the Panama Papers and Unaoil. Existing compliance consulting firms are starting to gain prominence with large, multinational companies that need to know more about their third parties, the risks they present and how to mitigate that risk.