Anti-Corruption Compliance Program
As financial systems become more automated, companies are turning more to analytics as a tool for compliance monitoring.
Monitoring is a critical component of an effective anti-corruption compliance program.
Anti-Corruption Compliance Program
The U.S. Department of Justice (DOJ) has consistently stated that one of the minimum requirements of an effective anti-corruption compliance program is having a system monitoring the effectiveness of the compliance program, including anti-corruption compliance audits, to identify any potential "red flags" in the business operations.
Compliance programs that are not monitored are generally not very effective. Anti-corruption audits have a powerful deterrent effect. They send a message that the senior management is committed to compliance and that they are testing to make sure compliance is achieved. Appropriate follow-up and disciplinary action are crucial to creating an anti-corruption culture.
Building an anti-corruption monitoring program
Monitoring enables a company to understand the effectiveness of its anti-corruption compliance program and where future efforts should focus to minimize risks. It can, however, be a challenge to determine what to measure, how to do it, and how to report the results in a way that stimulates action rather than fosters bureaucracy.
Key steps include:
- Develop monitoring plan - The monitoring plan should be based on a thorough risk assessment. The risk assessment will add efficiency and credibility.
- Define roles and responsibilities - Organizations tailor the roles and responsibilities for the anti-corruption monitoring program based on the structure, resources, size, and particular risks where the companies operate. A common approach is tasking the compliance department with enforcing the program, and tasking the internal audit department to perform periodic audits of the program.
- Plan the Anti-corruption compliance audit - The primary objectives of the audit are to test the effectiveness of the current anti-corruption compliance program and identify potential bribery and corruption risks to the organization.
Conducting the anti-corruption compliance audit
When conducting an anti-corruption compliance audit, activities focus around the review of policies and procedures, the general ledger and accounting system, detailed testing on certain areas such as cash disbursements and third-party intermediaries.
- Policies and procedures - Given that a large part of conducting the audit relates to testing compliance with the policies and procedures in place, it is important that the audit team obtain all anti-corruption related policies and procedures in advance to familiarize themselves prior to commencing fieldwork.
- General ledger account review - The chart of accounts and trial balance for the business unit under review should be obtained and the team should request transaction-level detail of selected G/L accounts and, on a judgmental basis, select a sample of transactions for testing and request supporting documentation.
- Cash disbursements - The audit team should obtain a disbursements schedule by vendor with total dollar amounts spent for the years under review.
- Payments to third-party sales intermediaries - An area of special focus for the audit team are payments to third-party intermediaries, sales representatives, agents, and consultants.
- Transaction testing - Testing should focus on adequate documentation as to the nature and purpose of the transactions, payment approvals, agreement with the underlying contracts, and proper recording of the transaction in the company's books and records.
- Interviews - Conducting interviews with individuals in key roles related to anti-corruption compliance is often the most critical part of the audit.
- Anti-corruption training compliance - The audit should also test compliance with required anti-corruption training.
- Reporting - The results of an anti-corruption audit are generally documented in a report which would include the scope of work performed, time frame of the testing, interviews conducted, detail incidents of non-compliance and recommendations for improvements.
As financial systems become more automated, companies are turning more to analytics as a tool for compliance monitoring. Analytics can be a very useful tool to complement a robust anti-corruption compliance program, and can be used in several ways as a monitoring tool—including as part of pre fieldwork for transaction testing related to an anti-corruption audit, as well as ongoing analysis of certain accounts or payments on a recurring basis.
Where companies have implemented financial software on a global basis, there are many analytical tools that may be used to identify and assess risk areas without leaving the confines of the corporate headquarters.
To detect bribery and corruption, new tools can be integrated into the anti-corruption monitoring program that incorporate model based statistical and textmining analysis, coupled with visual analytics. In other words, let the data speak for itself in terms of anomalies, rather than trying to identify the anomaly or rule being violated.
These analytics are known as anti-bribery and corruption analytics or ABC analytics and have the following characteristics:
- Diagnostic in nature
- Use advanced technology
- An interactive and intuitive process
- Increase audit efficiency
- Cost effective
- Repeatable and transferrable
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