Preface ...................................................... xiii
About the Contributors ....................................... xvii
CHAPTER 1 Managing Corruption Risk ............................. 1
You Are Not Alone ............................................... 2
Bribery and Kickbacks ........................................... 2
Economic Espionage .............................................. 2
Money Laundering ................................................ 3
Developing Effective Compliance Programs ........................ 3
Performing Due Diligence ........................................ 4
CHAPTER 2 What Is Anti-Corruption? ............................. 5
Anti-Corruption Detection and Prevention ........................ 5
Critical Elements of an Effective Compliance Program ............ 6
Governance and Oversight ........................................ 9
CHAPTER 3 U.S. Efforts to Combat Global Corruption ............ 11
The Emergence of Nongovernment Organizations ................... 12
World Trade Organization ....................................... 13
Global Forum on Fighting Corruption ............................ 13
International Financial Institutions ........................... 14
International Chamber of Commerce .............................. 15
Transparency International ..................................... 15
Global Corporate Governance Forum .............................. 15
The Role of Civil Society ...................................... 16
The Emerging Markets ........................................... 16
CHAPTER 4 U.S. Laws Governing Corruption ...................... 19
Racketeer Influenced and Corrupt Organizations Act ............. 19
RICO Offenses .................................................. 20
Sherman Antitrust Act .......................................... 21
Anti-Kickback Act of 1986 ...................................... 22
Economic Espionage Act of 1996 ................................. 23
CHAPTER 5 The Evolution of the Foreign Corrupt Practices
Act ................................................. 27
Background ..................................................... 27
Anti-Bribery Provisions ........................................ 29
Third-Party Payments ........................................... 31
Facilitating Payments .......................................... 32
Sanctions against Bribery ...................................... 33
CHAPTER 6 Internal Controls and Accounting Provisions of
the FCPA ............................................ 35
FCPA Accounting Provisions ..................................... 36
Failed Controls ................................................ 36
Controls Assessment ............................................ 37
Conclusion ..................................................... 38
Case Study: Rolling on a River ................................. 39
CHAPTER 7 Do Not Crimp: The Need for Oversight of Foreign
Operations .......................................... 43
Pitfalls of Emerging Markets ................................... 44
Monitoring Behavior ............................................ 45
Education and Communication .................................... 46
Extending the Tone from the Top beyond the Borders ............. 47
Case Study: Bribes in the USSR ................................. 47
CHAPTER 8 The Human Factor ..................................... 49
Why Focus on Fraud and Corruption Risk? ........................ 50
Behavioral Root Causes of Fraud and Corruption ................. 50
Psychology of Fraud Perpetrators ............................... 51
Understanding Management Fraud ................................. 51
Approaches to Deterring and Mitigating Financial Fraud Risk .... 52
CHAPTER 9 Corporate Governance: The Key to Unmasking
Corrupt Activity .................................... 55
Enterprise Risk Management: Create Stronger Governance and
Corporate Compliance ........................................... 55
Mitigating Risk ................................................ 57
Ascertain Risk Areas ........................................... 58
Establishing Procedures to Mitigate Risk ....................... 59
Perform a Periodic Assessment .................................. 60
Blowing the Whisde on Corporate Fraud .......................... 60
CHAPTER 10 Whisde-Blower Programs .............................. 6l
Pulling Out the Earplugs ....................................... 62
Understanding Stakeholders and Their Needs ..................... 63
Steps of the MACH Process ...................................... 67
Monitoring the MACH Process .................................... 78
Conclusion ..................................................... 79
Appendix ....................................................... 81
CHAPTER 11 Document Retention .................................. 83
Create, Communicate, Monitor ................................... 84
Reduce Risk through Technology ................................. 84
Computer Crime ................................................. 85
The Most Common Computer-Related Crimes ........................ 85
The Value of Stored Data ....................................... 86
CHAPTER 12 Information Security: Intellectual Property Theft
Is Often the Result of Government Corruption ........ 87
Information Security Audit ..................................... 89
Classification of Information .................................. 89
Division of Responsibilities and Duties Is an Effective
Strategy in Protecting Trade Secrets ........................... 90
Information Security Control Officers or Custodians ............ 90
Use of Confidential or Proprietary Markings .................... 91
Document Destruction ........................................... 91
Education and Training ......................................... 91
Background Checks .............................................. 92
Confidentiality Agreements ..................................... 92
Employee Orientation ........................................... 92
Separation Plans ............................................... 93
Physical Security .............................................. 94
Systems Security ............................................... 95
E-Mail Policy .................................................. 99
Internet Policy ............................................... 100
Solicitations for Information ................................. 100
Seminar/Tradeshow/Off-Site Meetings Policy .................... 101
Joint Venture/Vendor/Subcontractor Procedures ................. 101
Contractual Provisions with End Users ......................... 102
Action Plans .................................................. 103
International Protection Issues ............................... 104
Information Security Policy ................................... 104
CHAPTER 13 Anti-Money Laundering: The USA PATRIOT Act ......... 105
Current State of AML in the Global Marketplace ................ 106
Case Study: The Boys from Brazil .............................. 109
CHAPTER 14 Procurement Fraud: Detecting and Preventing
Procurement and Related Fraud ...................... 111
Kickbacks ..................................................... 112
Vendor Fraud .................................................. 113
Bid Rigging ................................................... 113
Defective Pricing and Price Fixing ............................ 114
Contract Fraud ................................................ 116
Cost/Labor Mischarging ........................................ 118
Case Study 1: Employee Fraud .................................. 120
Case Study 2: Vendor Kickbacks and Collusion .................. 121
Conclusion .................................................... 121
CHAPTER 15 Construction Fraud: Monitoring, Mitigating, and
Investigating Construction Fraud ................... 123
Common Construction Company Fraud Schemes ..................... 124
Combating Fraud and Corruption ................................ 126
Strengthen Your Internal Controls ............................. 126
CHAPTER 16 Special Investigations: How to Investigate
Allegations of Corruption .......................... 129
An Interested Party: The Auditor .............................. 130
The Special Investigation ..................................... 132
CHAPTER 17 Navigating the Perils of the Global Marketplace .... 135
FCPA Enforcement .............................................. 135
Record Keeping ................................................ 138
Data Collection and Processing ................................ 139
Transborder Data-Flow Issues .................................. 139
CHAPTER 18 Case for Collective Action: The World Bank
Initiative ......................................... 143
Why Collective Action against Corruption? ..................... 143
Different Views of Corruption ................................. 144
Business Costs of Corruption .................................. 144
Costs of Corruption for Industries, Economies, and
Countries ..................................................... 145
Different Views of the Private Sector ......................... 145
Corruption Dilemma ............................................ 146
CHAPTER 19 Leveling the Playing Field ......................... 157
Book Research Summary ......................................... 161
Index ......................................................... 165
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