PRESENTED BY

Kim Marsh, CFE, CAMSExecutive VP, International Operations

33 Cavendish SquareLondon, UK W1G 0PWPhone: 44 (0) 207.182.4098 kmarsh@ipsaintl.com

ANTI-BRIBERY & CORRUPTION FOR EMERGING ECONOMIESCompliance Advisory, Risk Assessment and Due Diligence Investigations

Margin Call

“There are three ways to make a living in this business: be first, be smarter or cheat.”

John Tuld (Jeremy Irons)CEO of fictional investment bank

in Margin Call (2011)

About IPSA International, Inc.

IPSA International, Inc. (IPSA) has a 20-year history of successfully completing complex multi-jurisdictional investigations in the areas of:

Anti-Bribery &Corruption

Litigation Support

InvestigativeDue Diligence

Anti-Money Laundering

Assignments include large-scale Criminal, White Collar and Financial Investigations for multinational corporations, banking/financial institutions and law firms.

Track Record

• Mid-size Firm > Top-tier Experts > Competitive Rates

• Preferred AML service provider to 5 major international banks

• Research capabilities in 20 languages

• Resources in over 75 countries

• Emerging markets expertise in Former Soviet Union, Latin America, Middle East, Nigeria, China & Taiwan

• Offices in New York, London, Phoenix and Vancouver

TeamDan Wachtler, President & CEO - 20+ yrs industry veteran; large-scale AML remediation for global financial institutions; security program development, international due diligence, off-shore asset location.

Kenneth (Kim) Marsh, CAMS, CFE, Executive V.P. International Operations - 35+ yrs industry expert, due diligence investigations, 25 yrs RCMP Organized Crime Unit focus on large-scale money laundering.

Robert Weiner, JD, CIPP, Managing Director & Regional Counsel - 20+ yrs legal, investigation and compliance. Former Director BDO consulting; specialist in anti-bribery/corruption, focused on US FCPA and UK Bribery Act, and litigation support.

William Goss, CAMS, Senior Director Anti Money Laundering - 25+ yrs AML investigations, due diligence and fraud. Charter officer of RDC, an AML/EDD database by 20 global financial services companies including Goldman Sachs, Morgan Stanley, Citigroup and Bank of America.

Jim Oakes, CFCI, CFE, Senior AML Consultant - 30+ yrs experience investigating international fraud, AML and financial crime prevention with Citigroup, Barclays, Standard Chartered Bank, GE Money and Abbey Santander. Regent of the Board of the ACFE.

Robert Cone, MBA, Managing Director, Special Projects - 25+ yrs senior manager with international banks in treasury and broker dealer functions, foreign exchange, derivatives and money markets.

Services

Anti-Money LaunderingIntelligence at Work® AML services for a wide array of organizational conditions, business lines, geographic markets, regulatory situations and implementation timetables.

Investigative Due DiligenceIntelligence at Work® Investigative Due Diligence services deliver credible and timely intelligence to support corporate decision making on acquisitions, investments, business partners, clients, supply chains, competitors, employees and board members.

Litigation SupportIntelligence at Work® Litigation Support group designs, manages and conducts comprehensive investigative solutions for commercial litigation, financial and fraud investigations, regulatory proceedings and dispute resolution.

Services

Anti-Bribery & Corruption Due Diligence

• Compliance advisory, risk assessment and due diligence investigations for corporations, investment banks, private equity & hedge funds

• Defensible procedures for M&A, investments, litigation support and regulatory enforcement proceedings

• Initial assessment, key interviews, evidence gathering and analysis, reporting and implementation of remedial action

• Conducted in accordance with provisions of the FCPA, the U.K. Bribery Act & anti-corruption laws of OECD signatory countries

Services

Emerging Economies Due Diligence

• Advanced investigative capabilities and established network of well-placed, highly credible in-country resources

• Access to expertise and information not readily available - one of the greatest challenges encountered in emerging economies due diligence

• Due to the volume of requests from our clients, we excel in the following countries:

Argentina, Brazil, Chile, Colombia, Peru, Venezuela and Mexico in Latin America; Russia, Ukraine and Kazakhstan in the Former Soviet Union; China and Taiwan in Asia; Nigeria in Africa; and UAE, Qatar, Saudi Arabia and Egypt in the Middle East.

Regulation & Enforcement

• Increasing globalization of Anti-Bribery & Corruption regulations

• Collaborative cross-border investigations and aggressive international Enforcement

• Requirements to Conduct Anti-Bribery and Corruption Due Diligence Across Multiple Jurisdictions

• Risk of Criminal & Civil Penalties for Corporations, Directors, Management and Individuals

• Fines, Litigation, Debarment, Reputational and Financial Damage

• See Appendix for Comparison of U.K. Bribery Act & U.S. FCPA

OECD

U.S. Foreign Corrupt Practices Act (1977)

Inter-American Convention Against Corruption (1997)

OECD Anti-Bribery Convention (1999)

Canada Corruption of Foreign Public Officials Act (1999)

1977 . . . . 1997

Council of Europe Convention on Corruption (2002-2003)

Africa Union Convention on Preventing & Combating Corruption (2006)

Russian Anti-Bribery Laws (Amended – 2011)

UN Convention Against Corruption (UNCAC) (2005)

1999 2002

U.K. Bribery Act (2010)

2005 20102006

Chinese Anti-Bribery Laws (Amended – 2011)

2011

U.S. SEC Dodd-Frank Extraction Issuers/ Conflict Minerals (2012)

2012 . . 2013

Global Regulation

Commonly Encountered RisksCountry RiskPerceived high levels of corruption, absence of effectively implemented anti-bribery legislation and failure of foreign government, media, local business community and civil society to promote transparent procurement and investment policies.

Sectoral RiskSome sectors are higher risk than others. Higher risk sectors include the extractive industries and large scale infrastructure sector.

Transaction RiskCertain types of transaction give rise to higher risks, for example, M&A transactions, licences and permits, transactions relating to public procurement and charitable or political contributions.

Business Opportunity RiskSuch risks might arise in high value projects or projects involving many contractors or intermediaries; or projects not apparently undertaken at market prices, or which do not have a clear legitimate objective.

Business Partnership RiskCertain relationships may involve higher risk, for example, the use of intermediaries in transactions with foreign public officials; consortia or joint venture partners; and relationships with politically exposed persons where the proposed business relationship involves, or is linked to, a prominent public official.

Emerging Markets Risk

• Dependence on large government contracts, critical licenses and permits

• Reliance on agents, distributors and third-party intermediaries to obtain business or secure licenses/permits

• Off-the-record payments to facilitate contracts & licensing

• Foreign public officials associated with intermediaries & customers

• Unusual payment arrangements and excessive commission structures for subsidiaries, intermediaries & third-parties

• Payments made to offshore entities

• Differing cultural values and social realities

Third Party Risk

Third party intermediaries have been identified as the greatest risk to enforcement of anti-bribery and corruption regulations. (Source: KPMG, 2012)

Analysis of U.S. SEC and DOJ enforcement actions indicate alleged use of third-party intermediaries to pay bribes to foreign governments increased to:

100% of U.S. FCPA enforcement actions, from 42% in 2005.(Source: Sherman & Sterling, 2012)

Conducting ‘adequate due diligence’ on third party intermediaries is one of the six guiding principles of the U.K. Bribery Act.

(Source: SFO, 2010)

IPSA International, Inc.

Compliance Advisory, Risk Assessment and Due Diligence Investigations

• In-depth investigation of principals, management, subsidiaries, supply chains and intermediaries

• Background and reputational checks to establish prior association with bribery, corruption, money laundering and fraud

• Payments to host governments, off-shore entities and related-party transactions

• Arrangements for securing high-value licenses, permits and contracts

• Use of middlemen and off-shore vehicles to hide beneficial ownership and financial information

Risk Assessment determines the extent of Due Diligence required.

Six Stages for conducting Due Diligence on:• M&A Targets• JV Partners• Investors • Principals• Management• Board Members• Subsidiaries• Supply Chains • Intermediaries

ReviewIdentify

RiskAssessment

ResearchAudit

Monitor

Due Diligence- High Level -

Process

Review

Third Party Due Diligence

Third Party Due Diligence Process Review

Identify

Risk Assessment

Company CheckKey company data

Sanctions & WatchlistsSenior Executives

Person CheckID Verification

PEPsSanctions & Watchlists

Company CheckKey Company Data

Sanctions & WatchlistsNegative News

Person Checks on all Directors

Person Checks on Key Shareholders

Person CheckID verification

PEPsAssociates

Sanctions & WatchlistsDirectorshipsShareholdingsNegative News

Simplified Due Diligence(Low Risk)

Collect documents from third-party (incorporation docs, etc)

High Level Due Diligence(High Risk)

Monitoring and Review

Third-Party

Report

Summary

• Industry leader in risk management

• Senior multi-disciplinary team with deep emerging markets expertise

• Decades of experience conducting complex white collar crime, anti-bribery and corruption, and AML investigations across high risk sectors and geographic regions

• Network in 75 countries, research capabilities in 20 languages

• Ready access to expertise and resources not available in-house

• Offices in U.S., U.K. and Canada

Contact Us

New York | London | Phoenix | Vancouver

800-997-4772 | www.ipsaintl.com

PRESENTED BY

Kim Marsh, CFE, CAMSExecutive VP International Operations

IPSA International, Inc.33 Cavendish SquareLondon, UK W1G 0PW

Phone: 44 (0) 207 182 4098 Email: kmarsh@ipsaintl.com

Appendix

Natural resources are often located in countries that rank as ‘highly corrupt’

on Transparency International’s Corruption

Index. For example Venezuela, Russia, Guinea, Democratic Republic of Congo, Nigeria, Nicaragua, Mongolia and Kazakhstan all scored

less than 2.9 on the 2011 Corruption Index. By contrast, the U.K. scored 7.8

Transparency International :: 2011 Corruption Index

VERY CLEAN

HIGHLY CORRUPT

Extractive Industries Transparency Initiative (EITI, 2002)

Voluntary regime of 35 participating countries calling for disclosure by oil and gas, mining and timber companies of payments made to governments to further the commercial development of their resource projects.

UK Bribery Act (2011)

Covers overseas operations of firms doing business in the UK, requires companies to have ‘adequate’ provisions against bribery

“Any company that carries on a business in the UK can now incur liability for the corrupt actions (anywhere) of rogue employees or associated third parties, even if the company’s management knew nothing about the bribery.”

U.S. Dodd-Frank Wall Street Reform Act (2011)SEC approval of Section 1504

Oil, gas and mining companies listed on a U.S. exchange are required to disclose what they pay to foreign governments as part of their annual filings to the Securities and Exchange Commission.

U.S. Foreign Corrupt Practices Act (1977)

U.S. headquartered multinational companies are held to a higher standard of forgoing bribery even in countries where it is commonplace.

Kimberley Process (2003)

As of January 2012, 76 countries committed to KP which sets out requirements for controlling rough diamond production and trade to stem the flow of conflict diamonds.

Extractives Industry

Provision U.K. Bribery Act U.S. FCPA

Bribe Not limited to foreign officialsProhibits bribes paid to any person to induce them to act “improperly”

Only bribes (anything of value), paid or offered to a foreign official are prohibited

Advantage Obtained

Focuses on Improper action rather than commercial advantage or benefit (except in strict corporate liability).

Payments must be to “obtain or retain business”

Active vs. Passive Offense

Two offenses: (1) “Active Offense” of bribing another; and (2) “Passive Offense” of being bribed

Passive Offense – only the act of payment, rather than the receipt/acceptance of payment is prohibited

Corporate Strict Liability

A new strict liability corporate offense for failure of a commercial entity to prevent bribery - subject to defence of having “adequate procedures” designed to prevent bribery in place.

Strict Liability only under accounting provisions for public companies – failure to maintain adequate systems of internal controls.

U.K. Bribery Act versus U.S. FCPA

Continued…

Provision U.K. Bribery Act U.S. FCPA

Jurisdiction Organizations that are either established in the UK or conduct some part of their business in the UK; and individuals who are UK nationals or are ordinarily residents in the UK

U.S. citizens and companies, foreign companies listed on a U.S. stock exchange, or any individual acting while in the U.S.

Enforcement – Civil / Criminal

Criminal enforcement only by the UK Serious Fraud Office (SFO)

Both criminal and civil proceedings can be brought by SEC and DOJ

Potential Penalties

For individuals, up to 10 years’ imprisonment and potentially unlimited fines; for entities, potentially unlimited fines

Bribery: for individuals, up to five years’ imprisonment and fines of up to $250,000; for entities, fines of up to $2 million. Books and records/internal control violations: for individuals, up to 20 years’ imprisonment and fines of up to $5 million; for entities, fines of up to $25 million. Source: VistaLaw

Provision U.K. Bribery Act U.S. FCPA

Facilitation Payments

No facilitation payments exception, although guidance is likely to provide that payments of small amounts of money are unlikely to be prosecuted

Exception for payment to a foreign official to expedite or secure the performance of a routine (non-discretionary) government action

Promotion Expenditures

Such expenditures are arguably not “improper” and therefore not a Bribery Act violation. No similar defence to FCPA

Affirmative defence for reasonably and bona fide expenditure directly related to the business promotion or contract performance

Allowable Under Local Law

No violation if payments permissible under written laws of foreign country – applies only in cases of bribery of foreign public official; otherwise a factor to be considered

Affirmative defence if payment is lawful under written laws/regulations of foreign country

Source: VistaLaw

Continued…

• U.S. Foreign Corrupt Practices Act (1977)

• Inter-American Convention Against Corruption (1997)

• OECD Anti-Bribery Convention (1999)

• Canada Corruption of Foreign Public Officials Act (1999)

• Council of Europe Convention on Corruption (2002-2003)

• UN Convention Against Corruption (UNCAC) (2005)

• Africa Union Convention on Preventing & Combating Corruption (2006)

• UK Bribery Act (2010)

• Russian Anti-Bribery Laws (amended – 2011)

• Chinese Anti-Bribery Laws (amended – 2011)

• U.S. SEC Dodd-Frank Extraction Issuers / Conflict Minerals (2012)

Global Regulation

“Anti-bribery due diligence is the research, investigation, assessment and monitoring that the company will carry out on business relationships to ensure that it is associated with companies and personnel that will behave in a manner consistent with the company’s anti-bribery programme.”

Source: The U.K. 2010 Bribery Act Adequate Procedures(Transparency International)

Transparency International (2010)