Presentation by Anton Kabakov (Partner, Hellevig, Klein & Usov) on topic: Anti-corruption compliance in Russia. Overview and Implementation”. International Compliance Conference on the Level of Implementation During and After The Sanctions, October 27th

1. Anti-corruption compliance in Russia
Overview and Implementation
by Anton Kabakov Hellevig, Klein & Usov October 27, 2014
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2. 2
Criminal law
convention on
corruption ratified
Ministry of
Labor guidelines
Amendments to
Administrative Offenses
and Criminal Codes
UN Convention on
Corruption ratified
Criminal law
convention on
corruption ratified
Russian Anti- Corruption Law
Amendments to
anti-corruption law
Ministry of
Labor guidelines
Amendments to
Administrative
Offenses and
Criminal Codes
National anti-
corruption strategy
and roadmap
2006
2008
2011-2014

3. •Whistleblowers protection
•Law on lobbying
•Extending application of Russian administrative liability for crimes outside Russia to foreign companies?
•Monitoring the adoption of anti-corruption measures by companies through prosecutors. Checks?
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4. 4
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May apply to wrongdoings committed by Russians
FCPA
UK BRIBERY ACT
Applies to
•US company or citizen
•Any person while in the US
•companies listed in the US
•Officers, directors, employees, agents, and shareholders of the above listed entities
•UK companies
•Companies carrying out part of their business in the UK
Examples
HQ or subsidiary in the US, listed in the US, etc.
HQ or subsidiary in the UK, rep office or branch, UK sales agent, etc.

5. CASE STUDIES (May apply to Russian subsidiary misconduct)
Pfizer was prosecuted by the U.S. government for illegal payments made by its subsidiaries to foreign officials in Russia and other countries to obtain regulatory approvals, sales, and a greater number of prescriptions for its products
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6. CASE STUDIES (May apply to Russian subsidiary misconduct)
Daimler AG paid $185 million to the U.S. government for violation of FCPA by bribing officials in several countries, including Russia
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7. “Organizations must develop
and
take anti-corruption measures.”
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8. Measures
Russian anti- corruption law
FCPA
UKBA
Appointing responsible officers
+
+
+ (Top level commitment)
Introducing standards and procedures
+
+
+ (Top level commitment)
Code of ethics and other special policies
+
+
+ (Communication)
Preventing conflict of interest
+
+
+ (Due diligence)
Preventing false reporting
+
+
+ (Risk assessment)
Cooperating with the authorities
+
+
+ (Communication)
Whistleblowers protection
+
+
+ (Top level commitment)
Continuous improvement
Implied
+
+ (Monitoring and review)
Passing compliance tests as a condition for promotion
-
-
+
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9. 9
Designation of responsible officers
Code of ethics and other special policies
Cooperation with authorities
Continuous improvement

10. STANDARDS AND PROCEDURES
Analysis of business processes
Corruption risk assessment
Mapping corruption risks
List of possible violations
Establishing preventive
procedures
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11. Mandatory for all companies (Article 19 Law on Accounting)
Risk Mapping and Assessment
Subjecting
risky transactions
to authorization
Checking the Economic Feasibility
Monitoring of
Accounting Data
External Audits
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12. DDs and Vetting Procedures
Reporting conflict of interest
Conflict of interest standards
Preventing Conflicts of Interest
The Supreme Commercial Court upholds that DDs and vetting procedures are preconditions for deductibility of VAT and payments made to suppliers
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13. Hotline, reporting
procedures
Protection of whistleblowers
Investigation
procedures
Disciplinary procedures and actions
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14. Employment Agreements
POAs and Proxies
Contracts with Suppliers and Distributors
Standard Anti-Corruption Clauses
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15. Risks
Penalties for Companies
Criminal Charges for Management
From RUB 1 million to several billion
(Article 19.28(1) Code of Administrative Offenses)
“The illegal transfer, offer or promise on behalf of or for the benefit of a legal entity of money, securities or other property, the provision of services, or granting of property rights to an official manager in commercial or other company (including foreign official and officials in international organizations) for the commission of actions (inactions) associated with his/her position... "
Failure to implement anti- corruption measures could be interpreted as involvement or support of corrupt practices by company employees (?). Criminal liability for concealing corruption (Article 316 Criminal Code)
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16. CASE STUDY (1)
(Saratov Regional Court Decision dated 28.05.2013 Case N 7-297/13)
The court ruled as follows:
"... imposition of an administrative fine of 1 million rubles with confiscation of funds in the amount of 8,000 rubles ...“ and stated that "... transferring money amounting to 8,000 rubles as a bribe ... the lawyer attempted to obtain funds in enforcement proceedings ..."
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17. Volgatorg:
The court ruled in favor of "... an administrative penalty in the form of a fine of 1 million rubles ...." and stated that "... The deputy store manager acting on behalf of the company... committed a crime - attempted bribery ... "
(Saratov Regional Court Decision N 7-478/13 of dated 12.09.2013)
CASE STUDY (2)
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18. Management to compensate penalties imposed on the company?
Risks
•Directors are to act
•conscientiously (duty of loyalty)
•reasonably (duty to care)
•Compensation of losses in case of violation
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19. Supreme Commercial Court on the liability of management bodies
(Ruling No.62 dated July 30, 2013)
Risks
If a legal entity is brought to administrative liability due to unfair and/or unreasonable behavior of its director (e.g. failure to comply with legal requirement), the losses incurred by the legal entity as a result of such behavior could be recovered from the director.
In cases of unfair or unreasonable performance of duties by choice and control over the actions of representatives, contractors, the director will be liable to the company for the losses incurred in such cases
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20. Establish real procedures
Policies and standards
How can your company protect itself?
“A legal entity is guilty of an administrative offense if it had the opportunity to comply with the rules and regulations the violation of which results in administrative liability, but it did not take all possible measures to comply with them.” (Article 2.1(2) Code of Administrative Offenses)
Take all possible measures to comply with anti-corruption regulations:
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21. The court ruled: "... An investigation and court proceedings should determined whether the company had an opportunity to prevent corrupt payment by an official on behalf of the company ...”
CASE STUDY (1)
(Ruling N 2360-O of the Constitutional Court of the Russian Federation dated 24.12.2012)
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22. The court did not impose a fine and stated: “... the facts supporting the offense ... have not been established ... [since] ... sufficient measures were taken by the company... namely ... job description was developed..."
(Supreme Commercial Court ruling N 16234/06 dated March 20, 2007)
CASE STUDY (2)
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23. ZAO Intrace-Avto:
The court did not impose a fine and stated: “... the Court concluded that the company was not at fault as it had taken all the necessary measures to comply with the law: adopted internal policies ...”
(Decision of Moscow Federal District Court dated July 5,
2004 in Case N KA- A40/5421-04)
CASE STUDY (3)
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24. RECOMMENDATIONS
Review processes to assess, map and mitigate risks
Monitor effectiveness of compliance programs on a regular basis
Review current anti-corruption policy and prepare the following anti-corruption documents:
Standard supplemental employment agreement
Standard anti-corruption clause for agreements with clients and suppliers
Standard anti-corruption clause for power of attorney
Internal control policy and procedures
Whistleblowers protection
Introduce IT systems aimed at making processes transparent (automatic recording, clear authorization matrix, reporting)
Staff trainings
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25. 15.1.2012
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Offices in 3 countries:
Russia
Ukraine
Finland
150 professionals
at your service
Partnerships:
AEB
AmCham
AHK
SVKK
SPIBA

26. Call-center for all offices:
+7 495 225 30 38
Anton Kabakov
Anton.Kabakov@awaragroup.com
+7 (921) 397 1193
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