How to Keep Risk Assessment Proportionate and Relevant Kevin Braine - PowerPoint PPT Presentation

How to Keep Risk Assessment Proportionate and Relevant Kevin Braine www.aicp.im

February 2020 Integrity Due Diligence Douglas How stay on the right side of ABAC and AML regulatory requirements

About Kroll and Duff & Phelps Dedicated to protect, restore and maximize value Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 3

About Kroll Compliance Risk & Diligence Trusted intelligence, investigations and advisory services Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 4

Rise of Global Anti-Corruption Laws (graphic below not exhaustive) Source: Gibson Dunn Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 5

Tougher laws – new opportunities? Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 6

Increased transparency requirements • Luxembourg – UBO Register (August 2019) – New requirement to make UBO information publicly available – Covers all Luxembourg registered companies, including foreign funds and SPVs • Denmark – Central Business Register (December 2017) – UBO information and nature of ownership – 25% stakes or more to be disclosed • France – Sapin 2 (June 2017) – Strengthens French ABC law – Increases ownership disclosure and UBO identification requirements • Germany - Geldwäschegesetz (GwG June 2017) – Transparency register (Transparenzregister) – fines of up to EUR 1 million • Isle of Man – Beneficial Ownership Act (April 2017) – Restricted access database of corporate beneficial ownership – Criminal offence not to comply with the Act • UK – Person of Significant Control (April 2016) – Disclosure of “Persons with Significant Control” – Applicable for all UK private companies and partnerships Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 7

5th EU Anti-Money Laundering Directive Built on 4th EU MLD and continues trend towards more obligation to conduct due diligence  Key features of EU MLD UBO registers – Some exemptions – including exposure to “fraud, kidnapping, blackmail, violence or intimidation” • Increased PEP controls • Risk-based approach to DD • Cash payment threshold • More oversight of higher risk country transactions • New requirements for Gaming companies and Virtual Currencies • New sanctions – From € 5m or 10% of total annual turnover for corporate entities – at least € 5m for individuals Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 8

Increase in Personal Liability 2015 - Start of US shift Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 9

Yates Memo Marked the start of increased targeting of individuals in ABC enforcement • DOJ Deputy Attorney General Sally Yates • September 2015 speech “Individual Accountability for Corporate Wrongdoing” – Full disclosure on individual’s action in order to qualify for “cooperation credits” – Focus of criminal and civil corporate investigations must be on individuals – DOJ will look at both civil and criminal proceedings more routinely – Corporate resolutions will not protect individuals – Delays in corporate prosecutions should not allow individuals to benefit from statutes of limitation – Civil proceeding against individuals “based on considerations beyond that individual’s ability to pay” • DOJ 2015: 9 FCPA cases against individuals, 2 against corporates (SEC 9 corporate cases, 2 individuals) soure: http://fcpaprofessor.com/the-yates-memo/ Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 10

UK regulatory enforcement New priorities? 11

International Sanctions Constantly evolving sanctions environment requires constant monitoring Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 12

US Sanctions An Ever-Changing Global Landscape Source: https://labs.enigma.com/sanctions-tracker/ accessed 27 Sept 2019; US sanctions list visually reflected. Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 13

Sanctions Challenges Constantly evolving sanctions environment requires constant monitoring  Sanctioned countries and individuals » US OFAC sanctions against Belarus, Burma, Cote D'Ivoire, Cuba, Democratic Republic of Congo, Iran, Iraq, Liberia, North Korea, Sudan, Syria, Venezuela and Zimbabwe » EU sanctions against Afghanistan, Bosnia and Herzegovina, Burundi, Haiti and Yemen  Sectoral Sanction » US SSI restrictions target oil & gas sector in Russia and Ukraine  Export control lists » Armament / weapons » Nuclear technology » ‘Dual use’ restricted goods and services Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 14

UBO / PSC How far do you go?  Regulatory expectations » Proportionate » Systematic » Auditable  Practical challenges » Opaque jurisdictions » Commercial pressures » Unreliable data  Risk Assessments » De-risking third parties » Self disclosure » Risk-based triage Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 15

Monitoring How regularly do you need to update your due diligence? Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 16

How deep do you need to go? When is due diligence “adequate”? Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 17

Source of funds What assurances do you need to have? Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 18

Watch out for false showstoppers How to handle false and malicious information? Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 19

Beware of Media bias Context and awareness Kroll, A division of Duff & Phelps. Proprietary and Confidential. These slides have been prepared for October 1, 2019 general information purposes only and do not constitute legal or other professional advice. 20

For more information about our global locations and services, please visit: www.kroll.com Kevin Braine Regional Managing Director EMEA 25 Farringdon Street, London EC4A 4AB T +44 207 029 5151 M +44 788 047 5264 kevin.braine@kroll.com About Kroll Kroll is the leading global provider of risk solutions. For more than 45 years, Kroll has helped clients make confident risk management decisions about people, assets, operations and security through a wide range of investigations, cyber security, due diligence and compliance, physical and operational security, and data and information management services. For more information, visit www.kroll.com. About Duff & Phelps Duff & Phelps is the global advisor that protects, restores and maximizes value for clients in the areas of valuation, corporate finance, investigations, disputes, cyber security, compliance and regulatory matters, and other governance-related issues. We work with clients across diverse sectors, mitigating risk to assets, operations and people. With Kroll, a division of Duff & Phelps since 2018, our firm has nearly 3,500 professionals in 28 countries around the world. For more information, visit www.duffandphelps.com.