PwC Presentation and MISC.

Foreign Corrupt Practices Act (FCPA)

Enacted in 1977 Attempt to ensure commercial fair dealing, government integrity and accountability, and the efficient and equitable distribution of limited economic resources. Enforced by two U.S. government agencies: The DOJ and the SEC Has anti-bribery provisions, accounting requirements, and internal control requirements

SAS 99

SAS no. 99 describes a process in which the auditor (1) gathers information needed to identify risks of material misstatement due to fraud, (2) assesses these risks after taking into account an evaluation of the entity's programs and controls and (3) responds to the results. gather more info to assess fraud risk requires brainstorming session

UK Bribery Act vs. FCPA

See slide 23

UK Bribery Act

• A consolidated, extra-territorial and far-reaching piece of legislation that came into force in July 2011 • "The toughest anti-corruption legislation in the world" • Goes beyond the FCPA in certain ways including that it applies to private sector bribery in addition to public sector bribery • Applies to non-UK companies carrying on business in the UK • Four key offenses: - Bribing another person - Being bribed - Bribing a foreign public official - Failure of a commercial organization to prevent bribery • Criminal offence if a company fails to prevent a person associated with it from bribing another person with the intention of obtaining or retaining business or an advantage • Applies to non-UK companies if they carry on business, or part of a business, in the UK, even where the underlying conduct takes place outside the UK - but having a UK subsidiary will not, in itself, mean a parent company is carrying on business in the UK, since a subsidiary may act independently • Strict liability with only one defense: the company proves it had "adequate procedures" in place designed to prevent persons who are associated with it from bribing

US FCPA

• Contains both antibribery and books & records provisions • Applies to any company with SEC-registered securities, any US domestic concern or where relevant conduct takes place in the US • Offense to corruptly offer or make a payment to foreign officials with the intent to obtain/retain business • Must keep books & records that accurately and fairly reflect transactions and maintain an adequate system of internal accounting controls • Recent years have seen a general uptick in enforcement by the DOJ and the SEC Costs of resolving actions are going up Average cost in 2013 was US$80 million • Trend is for less cases being resolved for relatively small costs

US FCPA: Enforcement Trends

• Increasing focus on enforcement against individuals (and not just corporations) - DOJ has led the way; SEC has catch-up work to do • Industry Sweeps - investigations leading to follow-ups of competitors - certain industries seen as high risk: defense, energy, pharma, telecoms

UK Bribery Act vs US FCPA

• No public vs private sector distinction - UKBA covers private sector and UK/non-UK officials - FCPA only applies to foreign public officials outside the US • Bribe recipient is liable - FCPA only covers offering/giving a bribe • No "corrupt" element required - FCPA requires "corrupt" intent • Strict liability for failure to prevent bribery - FCPA does not have an equivalent to the "Corporate Offense" Adequate procedures defense - compliance programs are not a full defense under the FCPA (merely a factor to be considered) No exception for facilitation payments - FCPA permits payments to facilitate routine governmental action by a foreign official; UKBA does not No affirmative evidence for reasonable and bona fide business expenses - FCPA contains a defense for reasonable, bona fide business expenses related to promotion/explanation of products or services; UKBA does not

UK Bribery Act of 2010

• Provisions **- Section 1 - Offenses related to bribing another person (commercial bribery) **- Section 2 - Offenses related to being bribed - Section 3 - Function or activity to which bribe relates - Section 4 - Improper performance to which bribe relates - Section 5 - Expectation test **- Section 6 - Bribery of foreign public officials **- Section 7 - Failure of commercial organizations to prevent bribery (Relates to Provisions 1 & 6) - Section 8 - Meaning of associated person - Section 9 - Guidance about commercial organizations preventing bribery - Section 10 - Consent to prosecution - Section 11 - Penalties

UK Bribery Act In Practice

• There have been only 3 prosecutions • Some regard this as showing the UKBA had a limited effect - small number likely reflects (i) UKBA only applies to offenses after July 1, 2011, and (ii) time needed to gather evidence