November 6th, 2015

Combating Corruption Through Education

educationProfessor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Michelle Kennedy and Cassandra Myers are attending the Sixth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in St. Petersburg, Russia. For more on the opening of the Conference, see here and hereOver the next few days, FCPA Professor will be publishing various posts regarding the proceedings.  

This post is from Michelle Kennedy.

The Anti-Corruption Academic Initiative (“ACAD”) is a collaborative academic project that aims to produce support tools for academic institutions in order to encourage the teaching of anti-corruption issues through several disciplines. On Wednesday, the ACAD Initiative organized a panel discussion that highlighted the importance of using education to combat corruption. The ACAD, which provides its teaching materials free of charge online, has held meetings around the world to bring together professors who have experience in teaching anti-corruption with those have not to discuss lessons learned and provide support.

The panelists expressed the view that the role of academia is central in the fight against corruption. Through his teaching, Professor Nikos Passas at the School of Criminology and Criminal Justice at Northeastern University aims to give meaning to what effective implementation of the UNCAC looks like and to explore sustainable anti-corruption measures. He highlighted the need for educators at the university level to build sustainable initiatives in five central categories. The first is capacity building, which includes a deep awareness of anti-corruption issues and the policy measures necessary to address them. The second is the sustainability of anti-corruption, which requires that educators go beyond the law in order to create a culture of integrity. The third encompasses the understanding of the unique context in which corruption exists, which can be strengthened by including civil society in the discussion. The fourth is the independence of the educators and their ability to be transparent in order to provide pragmatic, realistic expectations rather than overpromising and underperforming. The final category of necessary initiatives is the sharing of results through communication and publication. Professor Gerry Ferguson of the University of Victoria Law in Canada has aided in this initiative by providing a free e-text book entitled Global Corruption: Law, Theory and Practice, available online at the ACAD Initiative website.

In addition to these priorities in anti-corruption education, Professor Speedy Rice of Washington and Lee University School of Law emphasized that teaching must go beyond the formal classroom setting. He connects students in his classroom with students from around the world via video conferencing to enhance the anti-corruption discussion. He has also brought a group of his students to countries in the developing world such as Liberia, where they design and implement anti-corruption workshop programs and interact with community members.

Professor Ligia Maura Costa, who teaches MBA students in Brazil, said that as an educator she is actually thankful for the recent corruption scandals in her country, like that of FIFA, because it shows her students that there are real consequences for violating the UNCAC. She emphasizes to her MBA students that it is possible to earn sustainable profits for a corporation without accepting or making bribes. Moreover, engaging in corruption will cause long-term damage to a company’s reputation and to one’s career that will far outweigh any short-tern benefits of engaging in corrupt practices.

In looking to the future, the ACAD envisions a continued integrated approach to the study of corruption. Corruption issues cannot be divorced from the issues of organized crime, drug trafficking, and international human rights. Because there have been qualitative reports of a significant increase in curricula that includes anti-corruption teachings across disciplines, the ACAD appears to be moving forward in achieving this integrated approach.

Posted by Mike Koehler at 12:04 am. Post Categories: Guest PostsUnited Nations

November 6th, 2015

Increasing Awareness And Cooperation To Thwart Cultural Heritage Corruption

heritageProfessor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Michelle Kennedy and Cassandra Myers are attending the Sixth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in St. Petersburg, Russia. For more on the opening of the Conference, see here and hereOver the next few days, FCPA Professor will be publishing various posts regarding the proceedings.  

This post is from Cassandra Myers.

In an age where governments take broad measures to reduce corruption, the illicit trade of artifacts and cultural pieces is often overlooked. Over a million archaeological relics have been stolen and sold on the black market, and corruption frequently serves as the medium for their illegal export.

Corruption invades the legitimate trading of artifacts and artwork in a variety of circumstances. As a commander of the Carabinieri Department for the Protection of Cultural Heritage, Captain Francesco Provenza stated that public officials may intentionally mislabel important pieces of art as licensed to be exported or forge documentation for private parties falsely declaring that an artistic piece belongs to another country. Corruption among public servants has caused countries to lose invaluable pieces of culture that are fundamental to their history. This cultural trafficking amounts to a loss of between $3.5 and $6.5 billion each year, according to Celso Coracini, a Crime Prevention and Criminal Justice Officer with the Corruption and Economic Crime Branch at UNODC.

To stem the tide of illegal artifacts trafficking, several state parties have established dedicated police forces to oversee the administration, investigate potential crimes, and enforce the proper regulations for the artistic relics in their countries. Italy serves as the example with their dedicated Carabinieri Department for the Protection of Cultural Heritage, which is a branch of the Ministry of Culture. The country is described as the “national center of gravity for analysis and intelligence, on behalf of all the national police forces.” Members of the Carabinieri work with university academics, scientists, and archaeologists to identify priceless heritage pieces, develop archaeological maps to preserve sites, and classify pieces for a comprehensive database.

Italy’s database supplements Interpol’s own records and serves as one of the most innovative responses to curbing corruption in the trading of historical pieces. It keeps track of all cultural items stolen from their proper country and contains information accurately identifying the artifacts to combat corruption. Currently, over 45,000 objects are catalogued. The data includes entries reported by 129 member countries, and proponents are seeking to expand its reach.

Because of the inherent international character of arts smuggling, even dedicated police forces can face difficulties in recovering significant pieces. Support among countries can be difficult to coordinate. Commander Provenza asserted that “to fight these forms of crime, international cooperation has always been fundamental” in returning historical pieces to their proper origins. The lack of a coherent strategy spanning all state parties hurts the recovery effort of every country.

As a direct result, the existing database contains many informational holes—almost all the entries describe European art, though historical theft occurs all over the globe. A comprehensive database has an “important preventative aspect,” as smugglers frequently focus their efforts on uninventoried items to avoid detection. The world “need[s] databases that are accurate and comprehensive,” because the absence of one “presents a number of challenges to our law enforcement and border protection,” according to Jason Reichelt, the Crime Prevention and Criminal Justice Officer of the Corruption and Economic Crime Branch at UNODC.

Increasing international cooperation could largely minimize the black market for artifacts. This would mean more countries incorporating their artwork into the database and assisting with individual investigations. Likewise, each nation should begin training their customs authority employees in taking preventative measures against smuggling and corruption in general.

The remedies can only be implemented if member countries acknowledge the broader problem of the cultural smuggling market according to Arkan El Seblani, a manager of the Regional Project on Anti-Corruption and Integrity in Arab Countries of the United Nations Development Programme. He insisted that raising awareness was necessary and that effective solutions are “about the community of people who take [the] tools and use them.”

Preserving the world’s history means eliminating the theft of significant works of art and culture. It can only be achieved through international cooperation.

Posted by Mike Koehler at 12:02 am. Post Categories: Guest PostsUnited Nations

November 5th, 2015

Enforcement Officials Speak On Compliance And Individual Accountability

SoapboxThis post summarizes two recent speeches by DOJ/SEC enforcement officials that touched upon topics relevant to Foreign Corrupt Practices Act enforcement.

In the first speech, Assistant Attorney General Leslie Caldwell, speaking at a financial industry event, focused her comments on compliance and the DOJ’s new compliance attorney position.

In the second speech, SEC Chair Mary Jo White talked about SEC enforcement strategies.

Caldwell’s Speech

As indicated above, Caldwell focused her comments on compliance and the DOJ’s new compliance attorney position.  For prior posts on these topics, see here and here including why the DOJ should be in favor of a compliance defense.  See also “Revisiting a Foreign Corrupt Practices Act Compliance Defense.”

Caldwell stated in pertinent part:

Internal Compliance Officers Perform a Critical Function

[Compliance officers] are often the first line of defense against [legal violations]  Prosecutors cannot be everywhere, and by the time the Criminal Division gets involved, it’s usually too late to stop criminal activity.  Well before a grand jury subpoena is served or a witness is interviewed, compliance officers like you can and do step in and stop issues from becoming problems down the road.

As much as full-throated compliance programs are essential to preventing fraud and corruption, the quality and effectiveness of a compliance program is also an important factor that prosecutors consider in determining whether to bring charges against a business entity that has engaged in some form of criminal conduct.

In this after the fact review, the department looks closely at whether compliance programs are simply “paper programs,” or whether the institution and its culture actually support compliance.  We look at pre-existing programs, as well as what remedial measures a company took after discovering misconduct – including efforts to implement or improve a compliance program.

Criminal Division’s Compliance Counsel

Over the past twenty years or so, the very notion of “compliance” has been evolving rapidly.  Most companies, and maybe especially in the financial sector, have placed more and more emphasis on building strong compliance structures.  Programs have become more sophisticated and more industry and company-specific.

Companies increasingly have tailored compliance programs that make sense not just for their industries but also for their business lines, their risk factors, their geographic regions and the nature of their work force, to name a few.

Unfortunately, a surprising number of companies still lack rigorous compliance programs.  And even more companies have what appear to be good structures on paper, but fail in practice to devote adequate resources and management attention to compliance.

Still other companies fail to consider obvious risks, even in important parts of their businesses.  [...]

To be sure, it’s important for institutions to be mindful of regulatory priorities and guidance in devising and carrying out a tailored, risk-based compliance program.  But a narrow, cramped view of compliance – that it requires only adherence to specific regulations – ultimately will inure to the company’s detriment.  [...]

I believe that the Criminal Division has gotten much better at evaluating compliance programs over the years.  We understand that there is no “one size fits all” compliance program.  We understand that there are vast differences in the quality and effectiveness of programs, even among similar companies.   We have gotten better at suggesting tailored reforms to compliance programs when we resolve a corporate matter.

But we are prosecutors, not compliance professionals.  So, as you may be aware from press coverage, the Criminal Division has hired a compliance counsel to work in the Fraud Section.  While it’s too early to talk about specifics – her first day in the office is tomorrow – I can tell you generally what we’re thinking about.

We want to get the benefit of the expertise of someone with significant high-level compliance experience across a variety of industries, which this person has.  Our goal is to have someone who can provide what I’ll call a “reality check.”

First, the compliance counsel will help us assess a company’s program, as well as test the validity of its claims about its program, such as whether the compliance program truly is thoughtfully designed and sufficiently resourced to address the company’s compliance risks, or essentially window dressing.

Second, she will help guide Fraud Section prosecutors when they are seeking remedial compliance measures as part of a resolution with a company, whether by prosecution or otherwise.  We don’t want to impose unrealistic, unnecessary or unduly burdensome requirements on companies.  At the same time, we want to make sure that appropriate compliance enhancements are included when they are needed.

We understand that no compliance program is foolproof.  We also appreciate that the challenges of implementing an effective compliance program are compounded by the ever-increasing cross-border nature of business and of criminal activity.

Many [companies] operate all over the world.  They are creating products and delivering services not only here in the United States but overseas and are operating across many different legal regimes and cultures.

For this reason, we have chosen a compliance counsel who has the experience and expertise to examine a compliance program on a more global and a more granular level.

I want to correct one impression that has been expressed elsewhere.  Some have suggested that our retention of a compliance counsel is an indication that the department is moving toward recognizing or instituting a “compliance defense.”  That is not the case.

Rather, the Criminal Division will continue to review companies’ compliance programs as one of the many factors to be considered when deciding whether to criminally charge a company or how to resolve criminal charges.  Our hiring of a compliance counsel should be an indication to companies about just how seriously we take compliance.

Hallmarks of an Effective Compliance Program

You’re likely wondering what metrics this compliance counsel will use to assess a particular program.  And I’ll talk about that in a moment, but first I want to put your mind at ease about something.

The vast majority of compliance violations do not result in criminal prosecution.  Rather, the Criminal Division pursues charges when the offending conduct is intentional and particularly egregious or pervasive.

We’re not interested in prosecuting mistakes or accidents, or bad business judgments.  And we are not looking to prosecute compliance professionals.  To the contrary, we view you as the good guys and as our allies.  And we want to make sure that when we review a pre-existing compliance program, or suggest remedial measures, that we get it right.

So, what will the compliance counsel do?  She will help us evaluate each compliance program on a case-by-case basis – just as the department always has – but with a more expert eye, and she will work with our prosecutors to assess:

  • Does the institution ensure that its directors and senior managers provide strong, explicit and visible support for its corporate compliance policies?
  • Do the people who are responsible for compliance have stature within the company?  Do compliance teams get adequate funding and access to necessary resources?  Of course, we won’t expect that a smaller company has the same compliance resources as a Fortune-50 company.
  • Are the institution’s compliance policies clear and in writing?  Are they easily understood by employees?  Are the policies translated into languages spoken by the company’s employees?
  • Does the institution ensure that its compliance policies are effectively communicated to all employees?  Are its written policies easy for employees to find?  Do employees have repeated training, which should include direction regarding what to do or with whom to consult when issues arise?
  • Does the institution review its policies and practices to keep them up to date with evolving risks and circumstances?  This is especially important if a U.S.-based entity acquires or merges with another business, especially a foreign one.
  • Are there mechanisms to enforce compliance policies?  Those include both incentivizing good compliance and disciplining violations.  Is discipline even handed?  The department does not look favorably on situations in which low-level employees who may have engaged in misconduct are terminated, but the more senior people who either directed or deliberately turned a blind eye to the conduct suffer no consequences.  Such action sends the wrong message – to other employees, to the market and to the government – about the institution’s commitment to compliance.
  • Does the institution sensitize third parties like vendors, agents or consultants to the company’s expectation that its partners are also serious about compliance?  This means more than including boilerplate language in a contract.  It means taking action – including termination of a business relationship – if a partner demonstrates a lack of respect for laws and policies.  And that attitude toward partner compliance must exist regardless of geographic location.


These are just some of the elements of a strong compliance program.  When the Criminal Division evaluates a company’s compliance policy during an investigation, we look not only at how the policy reads on paper, but also at the messages conveyed to employees, including through in-person meetings, emails, telephone calls and compensation.  We look at whether, as a whole, a company tolerated compliance failures year after year because the alternative would have meant a reduction in revenues or profits.”

White’s Speech

Regarding individual prosecutions, White stated:

“Any discussion of strong enforcement tools must include a discussion of our priority of pursuing individuals.  Personal accountability, of course, is a basic tenet of law enforcement.  And individual accountability, particularly at the most senior levels, is a core part of our enforcement program because firms can only act through their people and it is people to whom we are trying to send our strong message of deterrence.  While some cases, because of the available evidence or charges, are appropriate to bring only against companies, we must always look to identify and charge those people who are responsible for their company’s wrongdoing.  In Fiscal Year 2015, about two-thirds of our substantive actions included charges against individuals.

Redress for wrongdoing can never be seen merely as a cost of doing business made good by cutting a corporate check.  When people fear for their own reputations, careers, or pocketbooks, they are more likely to stay in line.  So when investigating misconduct, our staff first looks at the individual conduct and works out to the entity, rather than starting with the entity as a whole and working in.

And when we do bring charges against individuals, we consider, in addition to tough charges and penalties, our remedies to prevent future wrongs as well.  One of our most potent tools is an order imposing a bar on an individual – a bar from, for example, working in the securities industry or serving on the board of a public company.  Such an order can reduce the likelihood that the defendant can defraud and victimize the public again.”

As detailed in this post, approximately 80% of corporate SEC FCPA enforcement actions since 2008 have not resulted in any related enforcement action against a company employee.

Posted by Mike Koehler at 12:03 am. Post Categories: Enforcement Agency PolicyEnforcement Agency SpeechesIndividual Enforcement ActionSEC

November 4th, 2015

International Efforts in Support of the Recovery of Stolen Assets

Asset RecoveryProfessor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Michelle Kennedy and Cassandra Myers are attending the Sixth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in St. Petersburg, Russia. For more on the opening of the Conference, see here and hereOver the next few days, FCPA Professor will be publishing various posts regarding the proceedings.  

This post is from Michelle Kennedy.


A central challenge to addressing corruption is the recovery of assets that were stolen through the course of the corrupt activity. This process, which requires complex international cooperation when the assets are secreted overseas, was explored in depth at an all-day special event that joined several important actors.

The Stolen Asset Recovery Initiative (“StAR”), a partnership between the World Bank Group and the UN Office on Drugs and Crime, facilitates the return of stolen assets by setting international standards and enhancing communication among countries. In order to act as an effective intermediary, StAR must receive an official request from the country itself, not from private parties. Surprisingly, the average time that StAR takes to respond to country requests ranges between just twenty-one days and four and a half months. StAR also provides case-based technical training to enable the participating countries to effectively deal with the asset recovery issues themselves. A common critique of the program, however, is that developing countries do not have the necessary resources to retain and maintain the components of an effective domestic asset recovery program, such as investigators and experts. StAR’s response that its purpose is to aid countries in asset recovery, not to do the job for them.

A central challenge StAR faces involves countries that have and continue to undergo dramatic changes in governance, which disrupts any programs StAR has helped implement. Similarly, a lack of mobilization and good will from certain countries creates roadblocks for compliant countries to effectively recover stolen assets. Overall though, StAR has successfully returned $28.8 million in stolen assets as well as $58 million worth of physical assets. In two examples discussed today, StAR aided Tunisia in overcoming the influx of corruption after its 2011 revolution by organizing meetings between Tunisian judges and their foreign counterparts to aid them in dealing with corruption cases. It also recently helped Mongolia in equipping its domestic law enforcement organizations with the necessary tools to trace, identify, and recover stolen assets as well as draft a handbook that is to be formally approved within the month.

In terms of available resources, the UNODC has created a Digest of Asset Recovery Cases, which highlights notable corruption cases and traces the recovery of the stolen assets involved. Within the next year, the UNODC will release a new resource, entitled the Effective Management and Disposal of Seized/Frozen and Confiscated Assets, to help states strengthen their domestic management of assets that are seized from corrupt networks. Countries who manage asset recovery funds in a transparent manner are more likely to receive support from other countries, which highlights the prominent theme that international cooperation is essential to improving the overall recovery of stolen assets. Another new resource is the “Silver Notice” now issued by Interpol, which aids countries in locating, identifying, monitoring, and seizing or freezing the confiscation of assets. This provides countries the opportunity to alert one another of any movement of illicit assets and thus enhance the speed of international cooperation.

To conclude the panel, Switzerland presented its 2014 draft of Proposed Practical Guidelines for Efficient Asset Recovery, which has yet to be officially adopted. The overall message was that the preliminary investigation phase of asset recovery is the most important, given that corrupt individuals are becoming increasingly clever and more aware of when they are suspected of possessing illegal proceeds or fruits of crime. States must therefore carefully identify their targets, create a clear strategy, and exhibit patience to ensure that their investigation of stolen assets and eventual recovery proves successful.

Posted by Mike Koehler at 12:10 am. Post Categories: Asset RecoveryGuest PostsUnited Nations

November 4th, 2015

Finding A Solution To The Public – Private Corruption Dichotomy

public-privateProfessor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Michelle Kennedy and Cassandra Myers are attending the Sixth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in St. Petersburg, Russia. For more on the opening of the Conference, see here and hereOver the next few days, FCPA Professor will be publishing various posts regarding the proceedings.  

This post is from Cassandra Myers.


In the context of the international market, anticorruption measures are a necessary component to cultivating a thriving public and private economy.

As Alexander Govorunov, the vice-governor of St. Petersburg, simply put it: “Corruption is evil . . . The whole arsenal needs to be put into work here.” During the Convention Against Corruption’s special event on partnerships between the public and private center in combating corruption, Russia outlined its strategies for becoming a world leader in bridging the private/public sector gap.

Encouraging countries to adopt legislation wherein cooperation between public and private sectors can flourish increases the anticorruption movement’s credibility and impact. The way to do this, according to the Executive Director of the United Nations Office on Drugs and Crime Yuri Fedotov, is to make anticorruption measures part of an overall management scheme to be implemented, rather than a compliance exercise to be fulfilled. Proponents aim to show the private sector that “combatting corruption is good for business,” as it lowers prices, enhances reputations among consumers, and creates meaningful competition.

A significant management program serves as the blueprint for a strong anticorruption foundation; it must include partnerships between private companies and local governments in their countries. This “joining [of] forces” entails both parties investing in strengthening and sustaining public infrastructure as well as skills development training for employees. While anticorruption initiatives are helpful, effective cooperation where all parties are invested will yield the ideal results.

For Russia, in its hope to become an example to the world and enhance its global reach, the public-private partnership plan focuses on four factors: openness, transparency, prevention of conflicts of interest, and responsibility. Oleg Plokhoy, the head of the Department on Combating Corruption of the Presidential Administration of Russia, outlined how their plan translates from the public to the private sector, noting that while corruption is “mostly associated with public servants,” it remains widespread in private business. In the current anticorruption measures, 1.5 million public employees are covered, but in the 1000 criminal cases of public corruption filed, nearly 1/3 include criminal corruption activity with a private business. This shows the pivotal need for private anticorruption measures.

By reducing the presence of conflicts of interest between public and private employees and increasing enforcement while stiffening penalties for private corruption, Russia intends to combat corruption from both the “acquaintance” route, that is, relationship-based governance, and the profit, or “thing of value” route.  Thorough conflicts checks will deter patronage, and increased criminal and administrative penalties for private businesses will make corruption less profitable and thus, less appealing to private business.

All of the speakers cited the standards articulated in Article 12 of the UNCAC treaty, which includes recommendations for better implementation and enforcement of anticorruption policies for private businesses. The Dean and Executive Secretary of the International Anti-Corruption Academy, Martin Kreutner, pointed out that “For every contract globally, [at least] 10% of the expenses go to corruption.” It’s time the parties to the convention adopted more specific resolutions focusing on the private sector. The last time any such resolutions were adopted was at the 2013 Convention Against Corruption in Panama City, Panama.

The final question broached by panelists considered just how much involvement private actors—businesses and NGOs alike—could have in the discussion and implementation of anticorruption measures. On one hand, allowing businesses to be involved in the decision-making process encourages greater accountability and responsibility in the partnerships. On the other, the practice may encourage lobbying efforts, something that the member countries may want to deter. Anatoly Vyborniy, Chairman of the Russian Chamber of Commerce for Business Security, called for more regulation of lobbying efforts, as the practice hurts mutual trust and undermines the value of high level dialogue between the public and private sectors.

The member countries will continue to foster public and private cooperation and craft solutions to that end, with Russia aiming to lead by example.

Posted by Mike Koehler at 12:03 am. Post Categories: Guest PostsUnited Nations