RED FLAG INVESTIGATION
A Red Flag investigation is conducted to identify whether there are sufficient gaps in a company’s controls which could result in an FCPA violation but no violations per se are found or investigated.
WHEN YOU NEED THIS
A compliance investigation should be conducted as a proactive vulnerability test, or as a remediation effort after an FCPA settlement or ruling.
Some of our services include the identification of the common “Red Flag” triggers, their subsequent investigation and independent reporting of our findings:
Operations in Red Flag Countries
- Transparency International rates countries based on the level of corruption. The lower the rating, the higher the likelihood that bribery is a common practice in that country. Examples include Nigeria, Haiti, and Myanmar. China, some Eastern European countries, other African countries, and many parts of South and Latin America still have low rankings.
- The UN, World Bank, EU and other international organizations have reports that indicate whether corruption is a problem in a country.
- The US does not rely on any one ranking, but considers doing business in such a country to indicate a likelihood that a violation is occurring and that the U.S. company is at least ignoring it.
Whether the U.S. company is paying more for assistance in a country than the going rate for honest alternatives.
- The theory is that the U.S. company is obviously over-paying to provide extra funds to the agent to use to secure an improper advantage.
Payments made to one-time vendors, individuals, consultants or unverifiable recipients, payments made from cash accounts without receipts or other back-up, or unsupported invoices
- The lack of rules governing this sort of behavior, even if the acts cannot be found or verified, is an indication that a problem probably does exist.
Background Checks on Agents or Partners
- Are they allowed to perform this business in the country?
- Are they owned, even indirectly, for a foreign official?
- Are the principals connected with foreign officials?
- Have they been or are they currently under investigation for paying bribes?
- Do they have any controls or policies preventing their people from paying bribes?
Policies or Training
Training & Education
Of the foreign agents, representatives, management, and especially sales and accounting personnel, on what constitutes a violation of the FCPA
Contract Language & Execution
- No written contract
- No FCPA language in existing contracts
INTERNAL CONTROLS AND COMPLIANCE VERIFICATION
WHEN YOU NEED THIS
If a Red Flag investigation yields evidence that internal controls are weak or nonexistent.
Internal controls review and remediation recommendations
Improved internal controls and processes are one by-product of a Sarbanes-Oxley investigation, which is where UHY Advisors' unique FCPA skill set can help. Our internal audit professionals have been working with the COSO (the rules upon which Sarbanes-Oxley regulations were built) since their inception in the early 1990’s. Their investigative and process skills honed with hundreds of Sarbanes-Oxley and internal audit engagements are ideally suited for FCPA investigatory engagements.
These controls can help prevent future violations, and can be a positive signal to the Department of Justice or foreign government that the company in question is taking steps to remedy the situation.
For more information, please contact Chris Lozier at email@example.com.