Corruption of Foreign Public Officials Act Training Course

CORRUPTION OF FOREIGN PUBLIC OFFICIALS ACT in collaboration with

CORRUPTION OF FOREIGN PUBLIC OFFICIALS ACT Welcome This training course was developed by WeComply, a Thomson Reuters business and leading provider of ethics and compliance training. The course is also available online from any Internet-connected computer.WeComply offers 100+ courses on a wide range of business ethics and compliance topics. Each course helps employees spot key compliance issues and respond appropriately.This course is designed and licensed for classroom use in parallel with WeComply's online course on the same topic. This course may not be hosted on a learning management system or distributed to employees individually by electronic or other means without WeComply's prior authorization. Keep in mind that this material is provided for informational purposes only and is not intended as legal advice. For more information about this course or others, whether for classroom use or online access, please e-mail info@wecomply.com or call 1-866-WeComply.

CORRUPTION OF FOREIGN PUBLIC OFFICIALS ACT Introduction Thank you for participating in our Corruption of Foreign Public Officials Act (CFPOA) training course. Whether you work in marketing, sales, operations, business development or finance, you need to know how to spot "corrupt payment" issues and respond appropriately.At the end of the course material, you'll take a quiz that presents hypothetical scenarios for you to analyze. As you answer the multiple-choice questions correctly, you'll move through the quiz and earn a Certificate of Completion. If you have questions about how any of this material applies to your job responsibilities, please direct them to your manager or the Legal Department.

Country Is Redoubling Anti-Bribery Effort • Canada Gets Tough on Bribery In a recent speech, Canadian Foreign Affairs Minister John Baird stated that Canada is redoubling its fight against bribery and corruption. "Canadian companies can compete with the best and win fairly," Baird said. One sign of Canada's tough stance is its ongoing investigation of Montreal-based SNC-Lavalin. In 2013, the Royal Canadian Mounted Police (RCMP) filed bribery charges against SNC-Lavalin's former CEO and, after conducting its own investigation, the World Bank barred the firm from bidding on World Bank development projects for a decade.

Historical Background • CFPOA enacted in 1998 to satisfy Convention on Combating Bribery of Foreign Public Officials • Purposes • Halt bribery of foreign officials • Restore public confidence in business system • Reduce cost of corruption • Promote stronger foreign legal regimes • In 2013, Parliament enacted amendments that provide for stiffer penalties, including up to 14 years in prison

Historical Background (Cont’d) • CFPOA enacted in 1998 to satisfy Convention on Combating Bribery of Foreign Public Officials • Purposes • Halt bribery of foreign officials • Restore public confidence in business system • Reduce cost of corruption • Promote stronger foreign legal regimes • In 2013, Parliament enacted amendments that provide for stiffer penalties, including up to 14 years in prison

The Importance of Compliance • Help us maintain the best anti-corruption compliance program possible • Program can help us avoid or mitigate problems by — • Preventing illegal conduct • Affecting "charging" decision by authorities • Reducing penalties • Be alert for possible "corrupt payment" issues, report them and follow up if there is no response

International Anti-Corruption Unit Gets Involved • Canada Cracks Down on CFPOA Violators As recently as 2009, it was impossible to count the number of CFPOA investigations on one hand —because there were none to count. In 2013, there were 35 active CFPOA investigations. This dramatic increase prompted Transparency International to move Canada from the "little or no enforcement" category to the "moderate enforcement" category. Officials attribute the increase in investigations to creation of the RCMP's International Anti-Corruption Unit in 2008.

The Costs of Non-Compliance • Costs of involvement in corrupt activities include — • Substantial fines and prison terms for employees • Higher fines and penalties for company • Adverse publicity, reputational harm, revenue loss • Significant costs of investigation and defense • Debarment from bidding on government contracts • Threat of civil suits

The Costs of Non-Compliance (Cont’d) • Costs of involvement in corrupt activities include — • Substantial fines and prison terms for employees • Higher fines and penalties for company • Adverse publicity, reputational harm, revenue loss • Significant costs of investigation and defense • Debarment from bidding on government contracts • Threat of civil suits

Agreement To Pay Was Enough for Guilty Verdict • Defendant Convicted Despite Paying No Bribe In the first-ever CFPOA conviction after trial, the Ontario Superior Court found that an agent for an Ottawa-based technology company agreed to pay bribes to a foreign company to secure a contract for the supply of biometric facial recognition technology. The court convicted the agent even though it found no evidence that he offered or paid a bribe. It was enough that the agent agreed with his associates to pay the bribe and believed that it would be paid.

Basic Principles • Activities that seem commonplace can be considered "corrupt" under the CFPOA • Consider these basic principles: • Corrupt Intent: A payment to a foreign official is illegal if intended to secure an improper business advantage • Payment: Payment does not actually have to be given or accepted • Anything of Value: Payment doesn't have to be money; it can be anything of value • Actions of Intermediaries: Payment to a third party is illegal if we know that the third party will make a corrupt payment on our behalf

Basic Principles (Cont’d) • Activities that seem commonplace can be considered "corrupt" under the CFPOA • Consider these basic principles: • Corrupt Intent: A payment to a foreign official is illegal if intended to secure an improper business advantage • Payment: Payment does not actually have to be given or accepted • Anything of Value: Payment doesn't have to be money; it can be anything of value • Actions of Intermediaries: Payment to a third party is illegal if we know that the third party will make a corrupt payment on our behalf

Who Is Covered? • CFPOA is broad enough to reach almost any individual or company • Nationality Jurisdiction: CFPOA applies to all Canadian citizens and businesses organized under Canadian law, and covers their actions anywhere in the world • Territorial Acts: CFPOA applies to foreign individuals or entities if significant portion of activities constituting offence occurred in Canada

XYZ Inc. (Canada) entered into an agreement with DEF plc (UK) to submit a joint bid to build a factory in Iraq. At a meeting in Toronto, XYZ and DEF agreed to hire an Iraqi consulting firm, NOP, and have it use part of its "commission" to bribe high-ranking Iraqi officials. • The plan was a huge success — until the RCMP began an investigation. Which (if any) of the parties is probably not within the reach of the CFPOA? • XYZ, because the CFPOA applies only to foreign-government officials. • DEF, because it is subject to the UK Bribery Act, rather than the CFPOA. • NOP, because it did nothing in Canada. • None of the above.

Who Is a "Foreign Official"? • CFPOA prohibits corrupt payments to any person who performs public duties for a foreign state • Prohibited recipients include — • Foreign officials • Third parties seeking to influence foreign officials • Foreign official includes — • Officers/employees of international organizations • Officers/employees of state-owned enterprises • Persons who hold a legislative, administrative or judicial position

Who Is a "Foreign Official"? (Cont’d) • CFPOA prohibits corrupt payments to any person who performs public duties for a foreign state • Prohibited recipients include — • Foreign officials • Third parties seeking to influence foreign officials • Foreign official includes — • Officers/employees of international organizations • Officers/employees of state-owned enterprises • Persons who hold a legislative, administrative or judicial position

What Is "Corrupt Intent"? • Payment to government official violates CFPOA if made "corruptly“ • Intent is to induce government official to misuse official position • Payment need not be successful, received or accepted • Mere offer, promise or authorization of corrupt payment is illegal • Offeror need not know identity of intended recipient

Monetary Payments • Direct cash payments are most obvious type of bribe • Payments by agents present more difficult challenges • If agent used part of consulting fee to pay bribe, bribe may be imputed to us • CFPOA provides limited exception for facilitating payments, but it is being phased out • We treat all cash payments the same • We must know how much we paid, to whom we paid it, and that it was for permissible purpose

Monetary Payments (Cont’d) • Direct cash payments are most obvious type of bribe • Payments by agents present more difficult challenges • If agent used part of consulting fee to pay bribe, bribe may be imputed to us • CFPOA provides limited exception for facilitating payments, but it is being phased out • We treat all cash payments the same • We must know how much we paid, to whom we paid it, and that it was for permissible purpose

XYZ Inc. sold two baggage-screening machines to an airport in the Philippines through a local sales agent, to whom it paid a $100,000 commission. The sales agent then tried to sell additional machines to other area airports. XYZ learned that the sales agent might be using part of his commission to buy gifts for airport officials to induce them to purchase the additional machines. Is there a "corrupt payment" issue here for XYZ? • No, because XYZ didn't make any gifts or have direct knowledge that its sales agent did either. • Maybe, if the sales agent was giving gifts of cash to the airport officials. • Yes.

Gifts • Giving gifts raises "corrupt payments" issues • Guidelines: • You may never give gifts of high value • Culturally appropriate and reasonably priced gifts are permissible • Don't give cash or cash equivalents • Company logo does not make expensive gift permissible • You must know to whom your staff is giving gifts and what the gifts are

Gifts: Do's and Don'ts • Give reasonably priced (small value) and culturally appropriate gifts that are not intended to influence the recipient improperly. • Tailor the value of the gift, meal or other payment to the standard of living in the country where it is made. • Give gifts with a ceremonial value that is greater than their intrinsic value. • Be sure the value of the gift is commensurate with the legitimate and generally accepted local custom for such expenses by private business persons in the country. • Do not give cash or cash equivalents — even if that is the local tradition. • Do not attempt to make an otherwise impermissible gift permissible by putting a company logo on it. • Record all gifts, including the amount spent per person. • Before offering any gifts to officials, check with our company's Legal Department or Compliance Officer.

Meals and Entertainment • Whether we can pay for meals/entertainment depends on circumstances • Are you trying to influence the recipient improperly? • Would others infer that you are trying to corrupt decision-making process? • What is value of meal relative to recipient's financial position and country's living standards? • Have we paid for recipient's meals multiple times? • Is there a business purpose for the event?

Meals and Entertainment: Do's and Don'ts • Paying for a meal or entertainment of a foreign official or other third party is permissible in appropriate circumstances — but never if your intent is to influence the decision-making process improperly. • Even though your intent may be entirely proper, it is dangerous to pay for a meal or entertainment if others would perceive it as an attempt to influence the decision-making process improperly. • The payment should be made directly to the restaurant or entertainment provider and should be of a reasonable value. • Paying for a meal or entertainment will appear to be a "corrupt payment" if the value of the meal or entertainment is high in relation to the recipient's financial position and the living standards in the country. • Record all payments accurately, including the amount spent per person and the number of people at the event. • Be sure to aggregate all amounts paid for the same party to assess their permissibility. • Don't pay for the meals or entertainment of the other party's family members unless doing so is necessary to a legitimate business purpose.

Travel Expenses • Paying travel expenses requires legitimate business purpose • Guidelines: • Limit non-business activities on itinerary • Limit time spent at non-business events • Treat attendees same as colleagues • Pay directly, rather than by reimbursements • Consult with Legal Department regarding any questionable payments/activities

Travel Expenses: Do's and Don'ts • Be sure that all third-party travel expenses paid for by the company are for a legitimate business purpose. • Limit the number of non-business activities on the itinerary and the time that attendees spend at non-business events. • Treat the attendees the same as you treat your colleagues in terms of the types of airline tickets and hotels that you pay for. • Pay directly for airline tickets, hotels, etc., rather than reimbursing the other party for his/her expenses. • Don't arrange for the other party's lodging for more days/nights than necessary to attend the business event. • Don't pay for golf outings, side trips to sightseeing destinations, etc. — even if business is discussed — if the primary purpose of these events is simply "relationship-building.“ • Don't pay for the travel expenses of the other party's family members. • Record all payments accurately, including the amount spent per person and the number of third parties at the event.

Last year XYZ Inc. recorded $100,000 in travel expenses for 100 government customers as "travel for training." It turned out that most of the trips were to locations where XYZ had no facilities - e.g., Bermuda and Aruba. If enforcement authorities investigated these expenses, which of the following would be XYZ's best argument that the travel expenses were notcorrupt payments: • The customers did not need to be near an XYZ facility to receive training. • The number of trips was reasonable, given the large size of the prospective purchase. • The amount of the expenses - $1,000 per trip - was reasonable.

Actions of Agents • We are responsible for actions that third parties take on our behalf • Guidelines: • Obtain diligence questionnaire and conduct background check on new agents • Have written contract with anti-corruption certification for all agents • Require specificity about fees and services • Insist on detailed invoicing • You must know with whom we are doing business and what agent is doing to earn fee

Actions of Agents (Cont’d) • We are responsible for actions that third parties take on our behalf • Guidelines: • Obtain diligence questionnaire and conduct background check on new agents • Have written contract with anti-corruption certification for all agents • Require specificity about fees and services • Insist on detailed invoicing • You must know with whom we are doing business and what agent is doing to earn fee

Agents: Do's and Don'ts • Conduct careful diligence into a new agent's business, history and third-party relationships. • Obtain annual certifications from agents that they will comply with all applicable anti-corruption laws. • Require agents to obtain certifications from anyone they engage to work on our behalf. • Use written contracts whenever possible. • Be sure that our company has the right to audit the agent's books and records. • Don't agree to pay retainers or advances for unspecified services. • Don't do business with agents who refuse to provide compliance certifications or audit rights. • Don't hire an agent who is related to (or otherwise has a close relationship with) a foreign government official without prior approval of our Legal Department.

XYZ Inc. was expanding its operations into a foreign country. XYZ hired a customs broker to help it import goods and equipment into the country, for which XYZ agreed to pay the broker local processing fees. What additional questions should you ask to assess the legality of this arrangement? • What country is it? • How much will the broker be paid? • What do the "local processing fees" consist of? • All of the above.

Red Flags • "Red flags" to watch for: • Transaction involves high-risk country or region • A party is related to a government official • Agent won't disclose commission-sharing plans • Agent appears to lack resources/qualifications • Agent won't specify what he/she will be doing for us • Agent has a reputation for paying bribes • Agent won't certify compliance with anti-corruption laws • Agent is charging unusually high fees • Agent wants payments to third parties or cash

Red Flags (Cont’d) • "Red flags" to watch for: • Transaction involves high-risk country or region • A party is related to a government official • Agent won't disclose commission-sharing plans • Agent appears to lack resources/qualifications • Agent won't specify what he/she will be doing for us • Agent has a reputation for paying bribes • Agent won't certify compliance with anti-corruption laws • Agent is charging unusually high fees • Agent wants payments to third parties or cash

XYZ Inc. is bidding on a huge contract for which it needs a special license from the United States Department of Interior. It so happens that one of XYZ's employees went to college with the Department of Interior Secretary's daughter. She has offered to "make the right introductions" that would help XYZ secure the license, but she has asked for a $20,000 payment to be deposited into a Bermuda bank account. How many red flags, if any, do you see in this offer? • None. • One. • Two. • Three. • Four.

Defences • Individual or company may assert as defence that — • Payment was "permitted or required" under laws of foreign country • "Permitted or required" defence • Payment was spent on demonstrating product or performing contract • "Reasonable and bona fide business expenditure" defence

Defences (Cont’d) • Individual or company may assert as defence that — • Payment was "permitted or required" under laws of foreign country • "Permitted or required" defence • Payment was spent on demonstrating product or performing contract • "Reasonable and bona fide business expenditure" defence

Recordkeeping • We have established financial and other controls • Our records must accurately reflect alltransactions • Enforcement authorities focus on these issues • Failure to record improper transactions • Falsification of records to make improper transactions appear proper • Records without enough information to determine if payments were proper

Recordkeeping: Concealment of Bribes • Bribes are often concealed under the guise of legitimate payments, such as — • Commissions or consulting fees; • Sales and marketing expenses; • Travel and entertainment expenses; • Petty-cash withdrawals; • Supplier/vendor payments; and • Miscellaneous expenses.

Penalties • Penalties for CFPOA violations are significant • Individuals and companies are subject to unlimited fines • Individuals may also be imprisoned for up to 14 years for bribery or recordkeeping violations • Company may be debarred from — • Doing business with the Canadian government • Working on World Bank-funded projects

Nigel, an XYZ Inc. customs clerk, devised a way to reduce XYZ's customs duties by using Twitter to make "micro-payments" to foreign customs officials. It was a new and untested approach that could save XYZ huge amounts of money. Should Nigel try it? • Yes, because enforcement authorities would be lenient on something new and untested. • No, unless he gets prior approval from the Legal Department. • Maybe, as long as no anti-corruption laws make it clearly illegal.

If You Spot an Issue... • We are counting on you! • It is your duty to inform your manager or Legal Department of red flags/issues • Company will conduct prompt and thorough investigation • We will not retaliate for — • Making good-faith report • Refusing to comply with violation of law • Participating in investigation

FINAL QUIZ

CORRUPTION OF FOREIGN PUBLIC OFFICIALS ACT About WeComply 1-866-WeComply • WeComply, a Thomson Reuters business, is a leading provider of customized ethics and compliance training solutions. We are committed to providing the best-of-breed training content, technology and customer service. • Specializing in ethics and compliance training since 1999 • 100+ ethics and compliance training courses in 42 languages • Exclusive compliance training partner of the Association of Corporate Counsel (ACC) • 1,000+ clients of all sizes and in all industries

CORRUPTION OF FOREIGN PUBLIC OFFICIALS ACT Course-Delivery Options 1-866-WeComply • WeComply offers training courses in multiple delivery formats to reach all employees -- not just those with computers: • Online – available 24/7 from any computer • Mobile – tablets and smartphones • Offline options when Internet access is unavailable: • PowerPoint with presenter notes for classroom training • PDF booklets with tear-off certifications • CD-ROM/intranet with tracking via e-mail • Phone-based training and certification

CORRUPTION OF FOREIGN PUBLIC OFFICIALS ACT Online Training Benefits Blended Benefits Get the best of both worlds by providing classroom training where feasible and online training elsewhere – all centrally tracked and organized for easy monitoring and reporting. • While classroom training has certain advantages, it can be challenging to implement in large and/or geographically dispersed companies. Consider these advantages of online training: • Better Attendance • Higher Completion Rates • Less Impact on Productivity • Perfect for New Hires • Convenient for Remote Locations • Available in 42 Foreign Languages • Easy Access to Courses • Periodic Refreshers

Corruption of Foreign Public Officials Act Training Course