www.fugro.com

Anti-corruption and bribery strategies and adapting to high risk territories

Yngve BerntsenChief Procurement Officer

Fugro Norway

EURO MED E&P

EuroMedOffshore

25 September 2012

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AGENDA

� Most recent developments in laws and regulations globally

� Dealing with secondary parties such as agents and consultants

� Due Diligence and audits of secondary parties to minimize chance of bribery

� Contractual clauses to battle corruption

� Adequate Procedures need to comply with anti-bribery laws.

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Mission

Our mission is to be the world’s leading service-provider in the collection and

interpretation of data relating to the Earth’s surface and sub-surface, and in the

support of infrastructure developments on land, at the coast and on the seabed.

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Client Sectors

We align our service offer with six key client sectors, providing support and

resources tailored to the specific needs of each. This enables us to deliver

multi-disciplined, cross-divisional solutions anywhere in the world.

Mining Building and InfrastructureOil & Gas

Sustainable Energy Public Sector Other Sectors

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Resources

Fugro’s people, vessels, equipment and facilities are continually growing in

number and capability in order to meet the demand for continuous high quality

services in ever-more challenging regions of the globe.

60 Vessels 75 CPT Trucks 27 Laboratories 29 Jack-up Platforms13,700 Employees

60 Aircraft250 Land-based Drill Rigs

15 Offshore Drill Rigs278 Offices150 ROVs 8 AUVs

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Divisions

The Fugro organisation comprises three main divisions - Survey, Geoscience and Geotechnical. Each of these incorporates business lines specialising in

particular client services.

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Local Presence – Global Integration

Through our international network of offices and facilities, we deliver local

expertise, specialist disciplines, pioneering technologies and world-class

resources that combine to provide unified support for large scale projects.

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UK BRIBERY ACT 2010 – Legal Context

Latham & Watkins

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UK BRIBERY ACT 2010 – What is New?

� It criminalize both active and passive bribery, i.e. both bribing and being bribed

� It criminalizes not just bribery of public officials, but also bribery entirely in the private sphere

� It does not require proof of dishonesty or corruption

� It criminalizes the failure to prevent bribery taking place

� The offences will have extensive extra-territorial reach, criminalizing activities which may take place entirely outside the UK

� It also applies to companies carrying on business in the UK, even when the bribery is unconnected with the UK

� Liability is triggered by a person acting for or on behalf of the organisation paying a bribe, even when done by associated person who have no connection with UK

� There is no exception for “facilitation payment” (speed or grease payment)

� “Local customs and practices” will not necessarily provide a defense

� Committing offences could lead to imprisonment for up to 10 years and/or unlimited fines (for individuals and corporations)

� Only defense is having “adequate procedures” designed to prevent bribery taking place

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Laws & Regulations

� 1977 US Foreign Corrupt Practices Act (FCPA)� 1977 ICC Rules on Combating Corruption

� 1995 European Union Convention on the Protection of European Communities’ Financial Interests

� 1996 Inter-American Convention against Corruption (OAS)

� 1997 OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions� 1997 European Union Convention on the Fight against Corruption involving officials of the European Communities

or officials of Member States

� 1997 Resolution of the Committee of Ministers of the Council of Europe: Twenty Guiding Principles for the fight

against Corruption

� 1999 Council of Europe Criminal Law Convention on Corruption

� 1999 Council of Europe Civil Law Convention on Corruption

� 1999 Resolution of the Committee of Ministers of the Council of Europe: Agreement Establishing the Group of

States against Corruption

� 2000 Council of Europe Criminal Law Convention on Corruption

� 2000 United Nations Convention against Transnational Organized Crime (UNTOC)

� 2000 Southern African Development Community Protocol against Corruption

� 2001 Economic Community of West African States Protocol on the fight against Corruption

� 2001 ADB-OECD Action Plan for Asia-Pacific

� 2002 US Sarbanes-Oxley Act

� 2003 United Nations Convention Against Corruption (UNCAC)

� 2003 Transparency International: The Business Principles for Countering Bribery

� 2003 African Union Convention on Preventing and Combating Corruption

� 2004 UN Global Compact: Principle 10 on Corruption

� 2004 World Economic Forum: Partnering Against Corruption Initiative (PACI)

� 2009 OECD Recommendations for Further Combating Bribery of Foreign Officials in International BusinessTransactions

� 2010 UK Bribery Act� World Bank /International Monetary Fund Investigation of corruption committed by companies and governments

� Local Laws

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US FCPA vs UK Bribery Act 2010

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US FCPA vs UK Bribery Act 2010 (cont.)

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General Trends – Transparency International

� More Countries sign Conventions

� More Companies have Anti Corruption programs in place

� Stricter Enforcement

� Business integrity matters / Home country governance matters

� Public is believed to could play an important role

� No improvement over time

� Corruption levels increasing around the world, most in N America and EU

� Political Parties most corrupt

� Petty bribery is widespread and unchanged, mostly police

� Government actions seen as ineffective

� Little trust in formal institutions fight of corruption

� Clear evidence of bribery between private companies

� Bribery prevalent across business sectors

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Trends and Patterns in FCPA Enforcement

Department of Justice (DOJ) – U.S. Securities and Exchange Commission (SEC)

� General increase in FCPA enforcement

– Frequency of enforcement have increased

– Severity of enforcement have increased (fines and prison)

� Prosecution of Individuals

� Parallel International Investigations increase

� Parallel Litigation increase

� More creative methods in resolution of criminal cases (non-prosecution/ deferred prosecution agreements) for voluntary disclosure and cooperation

� Post-proceeding monitors of compliance conduct

� Self reporting spike partly as part of M&A activity

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FCPA ENFORCEMENT

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FCPA ENFORCEMENT

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ALLEGED FCPA VIOLATION LOCATIONS

2011 2006-2010

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UK BRIBERY ACT 2010 – Adequate Procedures

Latham & Watkins

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UK BRIBERY ACT 2010 – RISK ASSESSMENT

� Country RiskCountry RiskCountry RiskCountry Risk / Culture Risk– Transparency International , Corruption Perceptions Index

� Sectoral RiskSectoral RiskSectoral RiskSectoral Risk– Extractive industries– Large Scale Infrastructure

� Transactional RiskTransactional RiskTransactional RiskTransactional Risk– Charitable / Political contributions– Licenses / Permits– Public Procurement

� Business Opportunity RiskBusiness Opportunity RiskBusiness Opportunity RiskBusiness Opportunity Risk– High Value projects– Projects with many contractors or intermediaries– Projects not apparently done at market market prices– Projects without clear legitimate objective

� Business Partnership RiskBusiness Partnership RiskBusiness Partnership RiskBusiness Partnership Risk– Intermediaries / dealings with public officials– Relations with prominent public officials linked to proposed business– Number and reputation of their clientele– Length of contract– Tasks and responsibility of counterpart– Transparency, openess and control possibilities– Use of gifts, hospitality and entertainment activities

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Transparency International

� Corruption Perceptions Index (CPI) for perceived levels of public-sector

corruption. 183 countries

� Bribe Payers Index (BPI) perceived likelihood of companies from these

countries to pay bribes abroad (including private-to-private). 28 countries

� Global Corruption Barometer (GCB) General publics view on and

experience with corruption level in their country and their government’s

efforts to fight corruption. 86 countries

� Global Corruption Report

� National Integrity Surveys.

� Business Principles for Countering Bribery

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Transparency International - COUNTRY RISK

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2011 Corruption Perception Index

Rank Country Score

1 New Zealand 9.5

2 Denmark 9.4

2 Finland 9.4

……..

180 Afghanistan 1.5

180 Myanmar 1.5

182 North Korea 1.0

182 Somalia 1.0

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RELATED LAWS & GUIDELINES

� USA Patriot Act (2001)

� UNSC – Resolution 1373 (2001)

� UNSC – Resolution 1267 (1999)

� UNSC – Resolution 1566 (2004)

� UK Terrorism Act (2000) (2006)

� UK Anti-Terrorism Crime and Security Act (2001)

� UK Prevention of Terrorism Act (2005)

� UK Regulation of Investigatory Powers Act (2000)

� US Executive Order 13224 (2001)

� OECD – FATF (Financial Action Task Force 40 + 9 recommendations)

� EU – 3MLD (2005) (third money laundering directive)

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COMPLIANCE REQUIREMENTS

� AML – Anti Money Laundering

� CFT – Countering the Financing of Terrorism

� KYC – Know Your Customer

� CDD – Customer Due Diligence

� CIP – Customer Identification Program

� PEP – Politically Exposed Person

� EDD – Enhanced Due Diligence

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EXAMPLE: “WORLD CHECK”

� 12 million “Objects” (Companies, Individuals, Organizations, Countries,

Vessels etc.)

� 1,6 million high risk “Objects”

� Over 400 sanctions, warnings and watch lists

� 0,8 million PEP

� Update on more than 360 official sources in more than 200 countries every

day for new sanctions and updates.

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ANTI-BRIBERY POLICIES - GUIDELINES

� Bribery

� Extortion

� Solicitation / “Kick Backs”

� Trading in Influence

� Laundering

� Political Contributions

� Contact with Public Officials

� Charitable Contributions and Sponsorships

� Gifts

� Hospitality, Entertainment and Expenses

� Travel costs

� Facilitation Payments

� Conflicts of Interests

� Human Resources

� Financial and Accounting

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BUSINESS PARTNERS

� Suppliers / (Sub-)Contractors

� Joint Ventures and Consortia relationships

� Related Entities (Subsidiaries, Partly owned companies)

� Agents or other intermediaries

� Customers

� Business Development Consultants

� Sales Representatives

� Resellers

� Custom Agents

� General Consultants

� Franchisees

� Lawyers

� Accountants

� Distributors

� Mergers & Acquisitions (due diligence)

� Entities in which it has a significant investment

� Entities with which it has significant business relationships

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BUSINESS PARTNERS

ContractorCustomer

Agent

Related Entity

SubContractor

Supplier

Authorities

JV Partner

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SELECTION OF BUSINESS PARTNER

Integrity Due Diligence is the systematic collection and analysis of information, properly documented, to assess the integrity risk involved in doing business with your Business Partners.

�Qualifications

�Past performance

�Reputation

�Background

�Reputation for quality work and compliance with law

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BASIC INFORMATION COLLECTION AND VERIFICATION

� Ownership information, corporate structure, place of incorporation and names of officers and directors.

� Ownership and interests in other organizations: company, key management personnel and their immediate families, that might result in conflicts of interest.

� Business, government and political affiliations: company, key management personnel and their immediate families, including any relationship with a Government Official.

� Business and financial references, records: The company or individual associate should be asked to provide these. If audited financial records for the previous years are not available, a third party financial referee may be requested to state the length of the relationship and provide an opinion of reliability, financial capabilities and probity. Obtain independent confirmation of information and verification of written references.

� Legal disclosures: The company or key management personnel in previous insolvency proceedings, criminal convictions or investigations, or civil litigation (previous, pending or potential, in all cases).

� Compensation: Local market rates should be obtained for the goods or services to be supplied and compared with the quoted rates from the prospective associate.

� Qualifications, corporate membership of professional bodies.

� Credit rating: Use reputable commercial source to check the credit rating for the associate.

� Debarred or restricted parties lists: prospective associate not appear on any local, national or international listing, of restricted parties (pursuant to trade regulations imposed by the US, UK or other nations) or of organizations debarred from bidding (eg World Bank) or international organizations or companies.

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OWNERS – RELATED ENTITIES – KEY PERSONNEL

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BUSINESS PARTNER INTEGRITY DUE DILIGENCE

� Fraud Audit (Red Flags)

– Payments to Political Exposed Persons

– Payments according to contracts

– Payments to tax havens

– Periodical payments of round figures

– Cash payments

� Compliance Review

– Ruling documents, routines and procedures, implementation

(compliance, anti-corruption, travels, gifts, donations)

– Internal audits, Yearly reports

– Contracts with Agents and Consultants

– Overview of contracts with the Authorities in high risk countries

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RED FLAGS – From Applicant’s Information

� A public official holds company shares or other interests in the company in

his own right. (Note: It is not unusual for a public official to hold an interest

in a company in his official capacity.)

� A foreign official has recommended the applicant, particularly if that official

has discretionary authority over the business at issue.

� An officer, senior executive or key employee of the company has an interest

in another company that might be considered to be a competitor.

� An officer, senior executive or key employee of the company is related to an

officer, senior executive or key employee of a company that might be

considered to be a competitor.

� There are uncertainties in the business or financial references.

� The normal terms of business quoted by the company or individual differ to

a material extent to local business terms and conditions.

� Payment instructions quoted by the company or individual include split

payments, payments to an apparently unrelated third party, or to a bank

account in an off shore tax regime.

� The company auditors have qualified the accounts produced by the

applicant for reasons that are relevant to the application.

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RED FLAGS – From Applicant’s Information (2)

� There has been a criminal conviction of a current employee of the company

for bribery, corruption or a similar criminal offence, or a civil action regarding

bribery or corruption has been unsuccessfully defended by the company.

� There is a current or outstanding criminal case regarding bribery, corruption

or a similar criminal offence, or a current or outstanding civil action

regarding bribery or corruption, against a current employee of the company.

� The individual has been convicted of bribery, or a similar criminal offence, or

has appeared as a defendant in a civil case of a similar nature.

� The company or individual discloses previous involvement in insolvency

proceedings.

� There is a significant difference between the remuneration rate quoted by

the company or individual and local market rates for similar goods or

services.

� The applicant advises that he is unable to sign that he will abide by all local

and international laws regarding bribery and corruption and that he cannot

abide by the principal’s business ethics policy.

� The applicant requires that his identity, or if the applicant is a company, the

identity of the directors, owners or employees, not be disclosed.

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RED FLAGS – from Verification or Research

� Qualifications claimed by the company or individual are denied by the issuing body.

� The issuing body for the claimed qualifications is not a bona fide educational establishment or professional body, eg the company or individual can simply purchase the qualification without sitting examinations or proving standards of competency.

� The applicant is found to have had little or no experience in the industry concerned.

� There are significant variances between the written business and employment references and the interview of the referees.

� Financial referees express reservations regarding the financial probity of the company or individual in question.

� Due diligence reveals that the applicant is a shell company or has some other unorthodox corporate structure.

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RED FLAGS – from Verification or Research (2)

� The records from the official registry of companies do not agree with the information given by the applicant regarding ownership of the company, directorships or details in any of the other required official documentation filed regarding the organization.

� The company or its immediate or ultimate holding company are registered in an off shore tax haven renowned for its lack of corporate or banking transparency.

� The owners and/or directors of the company are discovered to be nominees and the applicant refuses to disclose the real owners/directors.

� Electoral or local business records show a different location for the company or individual. (Note: This may simply mean that the official records are not up-to-date).

� An official body advises a criminal or civil/administrative convictionand this conviction has not been disclosed by the individual. (Note: This information is not legally available in all jurisdictions).

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RED FLAGS – from Verification or Research (3)

� Official checks reveal a criminal conviction for bribery, corruption or a similar offence, or a civil action where the company or individual has unsuccessfully defended their actions and the applicant has not disclosed this case.

� Official checks reveal a current or outstanding criminal caseinvolving bribery, corruption or a similar offence, or a current or outstanding civil action, which has not been disclosed by the applicant.

� A reputable credit agency has provided a poor credit rating on the company or individual or has advised previous liquidity problems not disclosed by the applicant.

� The individual or company appears on a list of those debarred from bidding on local, national or international contracts.

� Media searches reveal potentially damaging information regarding the applicant.

� Research work uncovers close associations with local or national politicians, potential competitors, criminal or political activists, etc.

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RED FLAGS – British Bankers’ Association

� The associated person insists on operating in anonymity

� There are persons involved in the transactions who have no substantive

commercial role

� The associated person does not reside or have significant business

presence in the country where the customer or project is located

� Excessive or disproportionate gifts and hospitality, offered, received and

declined

� Relocation of third party/supplier/contractor/agents to countries with higher

bribery risk

� Large/frequent fourth-quarter adjustments to contractual payments by

associated persons.

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CONTRACT TERMS

� Services: All services and result expectations to be provided by all parties under the

contract should be legitimate and should be expressly stated and described in the

contract.

� Fees: All fees or other compensation payable in respect of the contractual services

should be expressly stated in the contract and should be proportionate to the services

being provided. Fees or compensation which appear to be larger than is warranted by

the services specified in the contract may indicate that the fees or compensation are

being used to conceal a bribe.

� Payments: Payment methods for fees or other compensation should be expressly

stated in the contract and must be capable of legitimate justification. In particular,

bank accounts for receiving payments should clearly belong to the relevant party and

should, unless there is good reason to the contrary, be located in the country of

residence/incorporation of the relevant party, country of HQ or country where work is

performed. Any payment in a currency or into an account which cannot be properly

justified (for example, payment into an off-shore bank account) may facilitate a

corrupt transaction or, at the very least, may give rise to suspicion of a corrupt

transaction. The principle that no payments be made other than in strict accordance

with the terms of the agreement. No cash payments.

� Definition of corruption: Corruption should be defined to include bribery, extortion,

fraud, deception, collusion, cartels, abuse of power, embezzlement, trading in

influence, money laundering, and any similar criminal activity.

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CONTRACT TERMS (2)

� Warranties: Each party should provide anti-corruption warranties that:

– It has not participated in any corrupt practices in the past

– it will not participate in any corrupt practices in relation to the contract or project;

– it will ensure that its officers and employees, subsidiary and related companies, do not participate in any corrupt practices;

– it will take reasonable steps to ensure that its agents, joint venture and consortium partners, sub-contractors, suppliers and consultants do not participate in any corrupt practices.

� Passing on obligations: The contract should pass on to the other party any relevant anti-corruption obligations assumed by the party in its other contracts in relation to the same project or transaction. For example, if a contractor has given any anti-corruption warranties to a project owner, then it should require similar warranties from all of its subsidiary and related companies, sub-contractors, suppliers, agents and consultants.

� Claims: Each party should undertake that, in the event of claims between the parties, it will comply with a claims code which requires integrity in the event of contract claims. The code would oblige claimants to take reasonable steps to ensure that all claims submitted by it are genuine and accurate. The recipients of claims would be obliged to take reasonable steps to review the claims diligently, objectively and in good faith.

� Compensation: Each party should be entitled to compensation in the event of any loss or damage suffered as a result of corrupt activity by the other party.

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CONTRACT TERMS (3)

� Termination: Each party should be entitled to suspend/terminate the contract in the event of a corrupt act by another contracting party where the corrupt activity goes to the root of the contract. For example, a project owner should be entitled to terminate a contract which has been won through bribery. Similarly, a contractor should be entitled to terminate a contract with the project owner if it discovers that the whole purpose of the project is corrupt. The sanction of termination without compensation in the event of the associate violating applicable anti-bribery laws or breaching the company’s ethics policy.

� Legitimacy of terms: Parties should test the legitimacy of each contract term by asking whether, if it was being prosecuted for corruption, it could legitimately justify the existence or omission of a particular detail from the contract.

� Laws: The requirement of both parties to comply with all applicable laws and regulations and specifically anti-bribery laws – except to the extent that such compliance would subject a party to liabilities or penalties under the law of its home country.

� Policies: Confirmation from the associate that he has been provided with a copy of the company’s ethics policy, and applicable guidelines on gifts, hospitality, entertainment and donations or equivalent document, that he has read and understood the policy and guidelines and will comply with it.

� Annual Certification: Also consider a requirement for annual certification by the associate that he has complied with all laws and regulations and with the company’s ethics policy and guidelines.

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CONTRACT TERMS (4)

� Internal Control: The associate should be required to maintain adequate internal

management controls and to properly record and report all transactions in its books

and records, properly, completely and fairly for transparency. No “off the books” or

secret accounts.

� Audit Rights: The company should have audit rights concerning all income and

expenditure managed by the associate on its behalf, and compliance review to verify

no bribery payment.

� Assignment: The associate is prohibited from the assignment of rights to, or

employment of, a third party without approval from the company.

� Appearance: Commitment by the associate to avoid even the appearance of an

unethical payment or Conflict of Interest and to report any requests for such

payments.

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RED FLAGS – After the Contract signature

Payments:

� Payment instructions on incoming invoices are frequently amended.

� Payment on incoming invoices is requested in cash.

� Payment is requested to a third party, off shore or numbered bank account.

� Payments in advance are frequently requested.

� Amendments are requested to issued invoices over the telephone and with little explanation.

� Complex payment instructions are given, possibly including split payments.

� A significant increase in remuneration is requested within the first year of operation of the contract.

� Urgent requests are made for the payment of large unspecified expenses.

� Payment on inflated invoices is requested with credit notes “to follow”.

Other operational red flags:

� A number of complaints regarding non-payment or ethical standards are received from sub-contractors.

� Reliable sources or media reports suggest inappropriate payments made on behalf of the principal.

� The associate is unable to handle the principal’s business with the quality and quantity of resources at his command.

� The associate proves to be ignorant of local laws and customs regarding the principal’s business.

� The associate giving or receiving extravagant gifts hosting lavish events to public officials or Company before contract renewal.

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IGNORANCE IS NO EXCUSE

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Thank You!

Questions?