Setting Up a Demonstrable Anti-Bribery

Management System (ABMS)

Vidya Rajaro, CFE, CA

ACFE Regent
Grant Thornton
Anti-Bribery
Management System
ISO 37001 : ABMS

ACFE Fraud Conference – Asia Pacific

September 2017

©2017 Grant Thornton India LLP. All rights reserved.

 Contents
I. Introduction
• What is corruption
• Common corruption challenges in Asia
• How Asian companies fare in the global scenario?
• Leading corruption laws of the world
II. ABMS
• What is management system?
• Approach to implementation of best practices
• Benefits of ABMS
• ISO 37001 & methodology to implement

III. Case studies

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Introduction

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 What is corruption?
• A term used to describe various types of wrongful acts designed to cause an unfair advantage;

• Denotes something spoilt – deeply rooted, cancerous, contaminating and almost impossible to eradicate.

• It is a global phenomenon and is as old as governance itself;

• Corruption can take many forms – Conflicts of interest (Purchasing and Sales Schemes), Bribery (Invoice kickbacks and
Bid Rigging), Illegal Gratuities, Economic Extortion.

• The various forms of corruption are often used in combination, which reinforces the schemes’ potency and makes them
more difficult to combat;

• Can be found in any business or organisation and it is one of the three major categories of occupational fraud and
abuse (along with asset misappropriation and fraudulent statements);

• Despite the multitude of anti-corruption legislation and increased enforcement efforts around the world, corruption is still
rampant.

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 Common Corruption Challenges in Asia
• Extensive and pervasive role of Government, SOE’s

• Nature, extent and volume of interactions with Government/SOE’s

• Prolific use of third party intermediaries: various types, nomenclature, type of services etc.

• Cultural issues re: relationships, chai pani, gifts, entertainment, sponsorships, donations etc.

• Multiple set of books

• Nature and extent of ‘speed money’, ‘small bribes’ and ‘facilitation payments’

• Poor corporate governance

• Industry specific challenges: Construction, Real Estate, Infrastructure etc.

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How Asian Companies Fare in the Global
Scenario?
Anti-Corruption Laws in India
• the
As per Asia Pacific
Prevention - 2017 Global
of Corruption Act, Corruption
1980 Barometer, Corruption is increasingly cited as a key cause to stall a
• country’s development
Prevention of Money Laundering Act, 2002 and weakening the rule of law.
• Central Vigilance Commission Act
• Right to Information Act, 2005
• Indian Penal Code, 1860

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How Asian Companies Fare in the Global Scenario?

A typical organisation loses 5% of Among the cases from Southern

revenues in a given year as a result of
fraud.
Globally, Corruption fraud occurred in
35.4% cases, causing a median loss of
$200,000.
Organisations of larger size face
higher risk of corruption when
compared to smaller organisations.
Asia, in the study conducted by ACFE,
corruption was more than three times
as common as any other type of
occupational fraud.
In China, one of the issues found is
corruption fueled scope creep in the
construction industry

Source : 2016 Report to the Nations on Occupational Fraud and Abuse

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How Asian Companies Fare in the Global Scenario?
Frequency & Median Loss of Corruption Cases by Region*
Eastern Europe and
Western Western/Central Asia
Canada Europe 55.1%
26.7% $200,000
40.0%
$250,000 $300,000

24.9% 67.3%
57.0%
$112,000
$200,000 48.4%
$500,000
$285,000
Southern Asia
United States
45.5%
Middle East and Asia-Pacific
North Africa
$400,000
48.4%
$150,000

Latin America and

the Caribbean Sub-Saharan Africa

*For each region, the percentage shown indicates the proportion of cases in the region that involved corruption, and the dollar figure represents
median loss for the corruption cases in the region.
(Source: ACFE: 2016 Report to the Nations on Occupational Fraud & Abuse)

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Global perception
Country 2016 Rank 2016 score

New Zealand 1 90
Singapore 7 84
Australia 13 79

Hong Kong 15 77

Japan 20 72

China 79 40
Malaysia 55 49
India 79 40

Highlights from the Asia-Pacific – Global Corruption Barometer

• India had the highest bribery rate of all the countries surveyed, where nearly seven in ten people who had accessed public services had paid a
bribe
• Japan had the lowest bribery rate, with 0.2% of respondents reporting paying a bribe.
• Only 7% of the bribe payers in the survey said that they had actually reported it to the authorities.
• Malaysia and Vietnam are seen as having the most severe corruption problems.
Source: Transparency International - Corruption Perception Index, 2016 and Global Corruption Barometer, 2015/16

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Leading Corruption Laws of the world

• United States Foreign Corrupt Practices Act (FCPA)

• United Kingdom Bribery Act (UKBA)
• The UN Convention against Corruption
• OECD Anti-Bribery Convention
• Chinese Anti-Corruption Laws
• Unfair Competition Prevention Act (UCPA), Japan
• Kim Young-Ran Act, South Korea
• Prevention of Bribery Ordinance (POBO), Hong Kong
• Malaysian Anti-Corruption Commission Act (MACC)
• Prevention of Corruption Activities Act (PoCA), India

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Anti-bribery management system (ABMS)

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What is management system?
• A management system is the way in which an organisation manages the inter-related parts of its business in
order to achieve its objectives.

• These objectives can relate to a number of different topics, including product or service quality, operational
efficiency, environmental performance, health and safety in the workplace and many more;

• ISO 37001 (ABMS) is the new international standard designed to help organizations implement an anti-
bribery management system.

• It specifies a series of measures your organization can implement to help prevent, detect and address
bribery.

• The requirements specified by ISO 37001 address two key areas:

- Bribery by the organisation, its personnel or business associates for its own gain; and

- Bribery of the organisation, its personnel or business associates in relation to its activities

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The standard ISO 37001 addresses
Bribery by the
Bribery by the
Bribery in the public, organisation’s business
Bribery by the organization’s personnel
private and non-for-profit associates acting on the
organisation acting on organisation’s
sectors organisation’s behalf or
behalf or for its benefit
for its benefit

Bribery of the
Bribery of the
organisation’s
Bribery of the organisation’s personnel Direct and indirect
businesses associates
organisation in relation to the bribery
in relation to the
organisation’s activities
organisation’s activities

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Global applicability
ISO 37001 applies to all types and sizes of organizations that wish to:

Implement the necessary Promote trust and confidence for

measures designed to prevent, shareholders, key stakeholders, and
detect and address bribery potential investors

Avoid and/or minimise the cost, Mitigate risks and achieve reputational
risk and damage of involvement excellence by implementing Anti-bribery
in bribery Management System

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ISO 37001 (ABMS) certification
ISO 37001 (Anti-Bribery Management System) certification will enable organisations to

A compliant organization
Reduce bribery risks by Perform continuous
Gain competitive requires that suppliers
implementing financial improvement of anti-
advantage and customers adhere to
controls in early stages bribery practices
the requisite environment

Prevent, detect and Entering into league of Promote trust and

Attract new business
address bribery risks respected organisations confidence

Prevent conflict of Promote an anti-bribery

Reduce cost
interest culture

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Benefits of ABMS
 Strong, visible and explicit demonstration on anti-bribery compliance;

 Implementation of a robust ABMS assists compliance with major anti-bribery compliance regulatory
requirements;

 Ensures enactment of adequate internal control measures and structures;

 Assists the organization through conduct of periodical risk assessment and continuous monitoring

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Implementation of ABMS
1

Implementation of the
management system (10 2
clauses per the standard)
through PDCA Internal Audit (quality team) and
Methodology review of ABMS by compliance, top
management and governing body Selection of the
3
certification body
(Registrar)
Stage I audit
(also called Pre-assessment
documentation / audit (optional) – A
walkthrough gap audit by
check) 5 Consultants
4

Confirmation of Continual
Stage II audit 6 Follow up audit registration improvement and
(Include testing (optional) (certification) surveillance audit
through sampling)
7 8 9

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PDCA Methodology for ISO 37001 ABMS
Step 1 Step 2 Step 3 Step 4
Act
Plan Do Check
(Implement, Operate and
(Assess) (Design) (Construct)
Review)

Initiating ABMS Organisational Structure Monitoring and Measurement Treatment of non-conformities

Understanding the Organization Document Management Internal Audit Continual Improvement

Analysis of the existing system Operations Management Management Review

Leadership and project approval Training and Awareness Review by ABMS Compliance
Function
ABMS Scope Communication

Anti-bribery Policy Operational Procedures

Risk Assessment

ABMS Compliance function

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More on PDCA Methodology
Step 1 Step 2 Step 3 Step 4
Act
Plan Do Check
(Implement, Operate and
(Assess) (Design) (Construct)
Review)

Conduct anti-bribery risk Review procedures and controls Assist in implementation of Carry out gap remediation arising
assessment that prevent, detect, correct and policies from stage I audit
mitigate the risks per the
Identify Gaps standard’s requirement Conduct periodical mock Test operating effectiveness of
Audit, Conduct training (including controls and conduct root cause
Prepare remedial plans Review and frame controls list , for all third parties) analysis for deviations
per the Statement of Applicability
required by the Standard Handhold for stage II audit and
obtain certifications
Hand hold for BSI stage I audit
(Walk through of controls,
Documentation requirements)

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Elements of “Planning”
Plan

Context of organization Leadership Planning Support

Organization and its context Leadership and Commitment Options to address ABMS Risks Resources
and Opportunities
Needs and expectations of Governing Body Competence
stakeholders ABMS Objectives and Planning
Top Management General
Scope of ABMS

Anti-Bribery Policy Employment process

Anti-bribery management system

Roles, Responsibilities and Awareness and training

Bribery Risk Assessment authorities
Communication
Roles and Responsibilities
Documented information
Anti-bribery compliance function
Creating and updating
Delegated Decision making
Control of documented
information

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Elements of “Do” “Check” and “Act”
Do Check Act
Operation Performance Evaluation
Improvement

Operation planning and control Monitoring measurement Non conformity and corrective
analysis & Evaluation action
Due diligence
Internal Audit Continual improvement
Financial/Non-financial Controls
Top management review
Anti-Bribery controls
Governing body review
Anti-Bribery commitments
Review by Anti-bribery
Gifts, Hospitality, Donations and Compliance function
similar benefits

Managing inadequacy of AB
Controls

Raising Controls

Investigating and Dealing with

bribery

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 Continuous Improvement

Assist in conducting Additional interviews Develop anti-bribery

Conduct periodical
route cause analysis for to check the pattern / training strategy and
mock audits
non-conformities behaviour time plan

Provide materials,
scenarios, exercises and
Prepare designs for face
Run a training design training approaches that Run a train the trainer
to face and computer
workshop work and develop them to workshop
based training
meet Client’s needs to
scale up on maturity

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Case Studies

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 ISO 37001 certification for its anti-bribery
management system obtained by Alstom
• Alstom obtained the first AFAQ ISO 37001 certification awarded by AFNOR Certification following an audit carried out
between March and May 2017 at seven sites in France and Europe;
• The audit focused on:
 adequacy of Alstom's anti-bribery system on a European scale according to the standard ISO 37001;
 in particular its Ethics & Compliance policy,
 the Group's Code of Ethics issued to all its employees since 2001, and
 the various instructions relating to existing anti-corruption procedures and numerous associated training tools.

• AFNOR Certification highlighted

 strong desire of the management to instill an ethical culture within the company;
 procedures that are well adapted to risks, particularly at the purchasing level, and
 the direct involvement of employees through a network of 260 E&C ambassadors spread across all Alstom sites around the
world.

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We are very proud to be among the first companies in the world to
receive this certification. It demonstrates our strong commitment to
ethics and validates the considerable efforts made internally to
increase communication and awareness of our ethical procedures
and values, implemented by our Ethics and Compliance
Department
Henri Poupart-Lafarge, Chief Executive Officer, Alstom

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 Why Microsoft is adopting the new
international anti-bribery standard?
Excerpts by David Howard, deputy general counsel, litigation, competition law and compliance

Problem of consistency
Companies must tailor their anti-bribery programs to satisfy the legal requirements of different jurisdictions, including trying
to comply with a patchwork of often inconsistent guidance from different government agencies as well as nongovernmental
organizations and non-government experts;
A common language
• Microsoft was deeply involved in the U.S. Technical Advisory Group;
• The standard when published in late 2016, created a common terminology and provided an objective yardstick for
organizations to measure their own program, as well as the programs of the partners in their value chain;
• Established a rigorous process for the accreditation of independent third parties who would be charged with evaluating
and potentially certifying compliance with the standard.

Microsoft, also invites other U.S. companies to collaborate on a new Technical Advisory Group to ensure that the ISO
37001standard remains relevant and effective.
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 Why Wal-mart is adopting the new
international anti-bribery standard?

• Jay Jorgensen, Wal-Mart's Executive Vice President and Global Chief Ethics and Compliance Officer in May 2017
stated that his company is seeking ISO 37001 certification.

• "We have begun looking for a company that would certify us,”

• Microsoft and Wal-Mart’s recent announcements show that these international companies recognize the value of
having a uniform international standard across their organization to combat bribery

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Thank You
Vidya Rajarao
Board of Regent
Tel: +91 99004 59932
Email: Vidya.Rajarao@in.gt.com

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Setting Up a Demonstrable Anti-Bribery
Management System (ABMS)

Vidya Rajaro, CFE, CA

ACFE Regent
Grant Thornton