Identification of Legal and Regulatory Risks: Gap Analysis with the Supply Chain Management Department

Ed. Note-today we are pleased to host our colleague, Mary Shaddock Jones in her continuing series on identification of risk. Today she writes on the Supply Chain.

On July 21st I wrote a blog titled “Identification of Legal and Regulatory Risks: Gap Analysis with the Human Resources Department”. Today I turn my attention to the Supply Chain Management Department. There is no question but that international trade is more prevalent now than ever before. In many industries, international trade is more of a necessity than a luxury. The ability of a company to compete and financially grow in a particular industry may depend upon tailoring a program to buy and sell goods and services from and to companies and consumers in other countries.

There are numerous laws (international, federal, state and local) that employees within the Supply Chain Management (“SCM”) Department are required to comply with in order to perform the responsibilities inherent in their jobs. How does the Compliance Department make certain that the Supply Chain Management Department as a “risk center” and the employees as “risk owners” have a system in place to know, abide by and monitor the compliance of the laws under their domain? Here are a few questions that the Compliance Officer may pose to the SCM department in order to perform a gap analysis regarding policies and procedures: (Note: many of the questions listed below are similar, if not identical, to the ones I posed for dealing with the HR department. Obviously, there are overlapping questions, but it is important to document that the question has been asked and answered with all “risk centers’).

1. Does the SCM department have an inventory of policies, procedures, laws and regulations covering supply chain related matters applicable to the company’s business?

2. If yes, do you have a specified person who is in charge of updating the inventory?

3. If no, what system does the SCM department utilize to ensure that it is aware of the various laws and regulations and has a process to comply with them?

4. What evidence would the SCM department be able to produce to the government to support a finding that the company has a solid compliance program for applicable supply chain laws and regulations?

5. What types of enforcement actions are predominate in the supply chain arena? How does the SCM department track such actions? (i.e. import and export requirements; customs; freight forwarding, port clearances, “deemed exports”, blocked persons; etc.)

6. Are employees within the SCM department specifically trained to understand compliance requirements applicable to the supply chain arena?

7. Does the SCM department provide senior management with periodic updates on the monitoring of results, key risks, and compliance violations within SCM?

8. Has the SCM department established some type of escalation criteria to ensure that high-risk issues are reviewed at the corporate level?

9. Does the SCM department have compliance monitoring standards in place? Does the SCM department perform periodic audits to ensure that the policies and procedures are being complied with?

10. Do any of the following laws impact the SCM department? Foreign Corrupt Practices Act; Embargo; Anti-Boycott; Anti-Money Laundering; Export Administration (such as ITAR, EAR and OFAC or “deemed exports”?); Custom and Import laws?

These are only a few of the questions that you may want to ask to begin the process of assessing what laws and regulations applicable to the Supply Chain Management Department apply to your company. In addition, I am always looking for good resources so that I don’t have to recreate the wheel. Here are a few that I found searching the Internet that may be of assistance in identifying legal and regulatory requirements applicable to SCM department.
• “Getting the Deal Through Online” http://www.gettingthedealthrough.com/
This website (free for in-house counsel according to the website) provides international guides to law and regulation in 45 practice areas and more than 100 jurisdictions. There are books addressing Public Procurement, Anti-Corruption; Mining; Oil; and Gas Regulation to name a few. Each book is written in a question and answer format addressing many common issues that arise with the particular topic of the book. Each chapter focuses on one of the various international jurisdictions highlighted.
• Gregory Husisian, Foley & Lardner, LLP, wrote a great article in January 2009 “Coping with U.S. Regulation of International conduct: Compliance Strategies for the Foreign Corrupt Practices Act, Export Controls, Sanctions, and Anti-Money Laundering Laws and Regulations”.

My final suggestion is to work with the Supply Chain Management Department (and possibly the Audit) department to have a consolidated “Supply Chain Management Compliance Audit Checklist” that can be used to audit (and document) the company’s SCM Compliance Program.

When in doubt, contact a good attorney both in the U.S. and locally in whatever foreign country you are operating, and have them review the SCM Compliance Audit Checklist. Enlist their help in keeping you advised of changes in the applicable laws and regulations, which apply to the SCM department of your company.

The key to compliance, in my opinion, is having the proper structure to identify the issues, implement policies and procedures to address the issues, audit for compliance and document, document, document.

Mary Shaddock Jones, Attorney at Law can be reached at 1202 Kirkman St. Suite C, Lake Charles, LA 70601 or via email at msjones@msjllc.com or via phone at 337-515-8527.

3 Countries, 3 Approaches, 1 Powerful Bribery Act

Ed. Note-today we are pleased to host our the newest addition to i-sight.com, Dawn Lomer for a guest posting. 

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As the implications of the News Corp scandal wend their way across the pond with a real possibility of US charges being filed, the global reach of anti-corruption legislation becomes more and more evident. A UK, US or Canadian company has to be concerned not only about abiding by the laws of its own country, but also the laws of any country under whose jurisdiction some of its activities may fall. This is especially true today, in light of the new UK Bribery Act, with power to prosecute some foreign companies for bribery that takes place anywhere the world.

At the same time, there’s considerable pressure, from the OECD for example, for countries with weak anti-corruption legislation and enforcement to step up to the plate and take responsibility for preventing and prosecuting corruption on a global scale. Canada has come under recent scrutiny for its weak anti-corruption laws and dearth of prosecutions.

Canada Tackles Corruption

This criticism may be about to change, however, says Anthony Cole, a UK lawyer practicing in Calgary with Christine Silverberg, retired Chief of Police and lawyer of the firm Wolch, Hursh, deWit, Silverberg & Watts.  He cites the establishment of two RCMP overseas anti-corruption teams inOttawaandCalgaryas a positive sign for strengthening anti-corruption measures in the country. “This is especially so in light of the statement by representatives of those teams that they have over 20 active investigations,” he says.

Cole compares the situation in Canada to that of the UK several years ago, when law enforcement agencies in the UK, led by the Serious Fraud Office, realized that the UK Proceeds of Crime Act, and in particular the civil recovery powers created under that Act, could be a powerful tool in tackling corruption.

Long Arm of the UK Bribery Act

“The new UK Bribery Act will provideUKlaw enforcement authorities with a far more effective means of ensuring the successful criminal prosecution of companies and individuals who engage in, or indeed fail to prevent, bribery overseas,” he says.

“It will be interesting to see whether the Proceeds of Crime Act will continue to be used frequently in overseas bribery cases, or whether the favored approach will be to prosecute solely under the Bribery Act whenever possible. I think that, at least initially, there will be a desire to use the new Bribery Act, but what happens in the long term will probably be determined by the success of the prosecutions in the early stages of the Act being in force”, says Cole.

US is the Global Champion in Anti-Corruption

A fundamental difference between theUKandUSlegislation governs overseas corruption: in contrast to theUS, the UK Bribery Act is not restricted to the corruption of public officials, but also applies to purely private sector bribery. “In this regard, its scope is significantly wider than the US Foreign Corrupt Practices Act (FCPA),” says Cole. “That said, theUShas a remarkable track record in handling overseas anti-corruption cases, and is, at present, the unquestioned global champion in the fight against corruption. The means through which theUShandles such cases, though, is different.”

Cole explains that most overseas corruption cases handled by US authorities do not result in criminal convictions following trial, but rather are dealt with as civil violations or are resolved by plea agreements or deferred prosecution agreements at a very early stage.

“The favored approach ofUSlaw enforcement agencies dealing with corporate overseas corruption cases seems to be to encourage self-reporting and an early plea or settlement by the corporation, resulting in a huge fine or disgorgement, but often allowing the corporation the opportunity to issue a face-saving joint press-release with the relevant law enforcement agency,” he says. Law enforcement agencies, in this way, can secure a high-profile victory without committing vast resources to each case, so they can deal with a much larger number of cases.

Serious Bribery as a Serious Crime

The settling of bribery and corruption cases by what might be described as plea bargaining, and the frequent  use of civil settlements of civil recovery proceedings (which might involve a joint press-release), was adopted by the Serious Fraud Office in the UK, says Cole, but it received withering criticism from one of the UK’s most senior criminal judges, who appeared to suggest that the criminal justice procedure applied to perpetrators of serious bribery should be no different  from that applied to burglars or rapists. The Serious Fraud Office vowed to change its practices, reflecting the preference of the English Courts to see serious bribery and corruption dealt with by criminal process, rather than by civil process and plea bargaining, as appears to be favored by US authorities.

Dawn Lomer the Corporate Journalist at Customer Expressions, developers of i-Sight investigative case management software. With 20 years of experience as a writer and editor in Canada, the Caribbean and the Middle East, she brings a global perspective to the subjects she covers. She joins Lindsay Walker in writing for the company’s blog i-Sight.com.

Ed. Note-The prior post of this blog incorrectly miss-spelled the name of the author. The correct spelling is Lomer.