Welcome to Episode 6 of Compliance Man Goes Global podcast of FCPA Compliance Report International Edition. In this episode, we will focus on typical concepts (or probably myths) on Know Your Client -probably the most important process in corporate Compliance portfolio. We will do it in plain language so to say and in the simple game form. Moreover, to make the podcast handy and more appealing we attach respective illustration from the Compliance Man illustrated series, created by Timur Khasanov-Batirov.

For those of our listeners who are not aware about our format, in each podcast, we take two typical concepts from in-house compliance reality. We check out if these concepts work at emerging jurisdictions. For each podcast, we divide roles with Timur, a practitioner who focuses on embedding compliance programs at high-risk markets. One of us will advocate the concept identifying pros. The second compliance man will provide arguments finding cons and trying to convince audience that that we face a pure myth. As a result, we hopefully will be able to come up with some practical solutions for in-house compliance practitioners.

Tom Fox: To start with, Tim, probably we should explain to our listeners why we called our today’s episode ‘Compliancebury Tales’?

Tim Khasanov-Batirov: We call today’s episode “Compliancebury Tales” alluding to The Canterbury Tales, a classical text of Geoffrey Chaucer, which many people heard of but never read. This is a very close analogue to our today’s topic.  

Tom: OK, Tim, let’s get started with the first tale so to say.

Myth #1 In practice there is no problem with definition of politically exposed person.  Tim, do you agree with this statement?

Tim Khasanov-Batirov: I would strongly disagree with this statement, Tom:  

Argument #1.

To start with, different legislations might have various definition for group, which we traditionally call Politically Exposed Persons. Thus, you might have a conflict of laws trying to prove that particular person is a PEP per US definition as used in FCPA enforcement for instance, while per local legislation outside the US, the person clearly is not considered a PEP.

Argument #2.

Even if we take legislation issued by international organizations like FATF guidance or for instance the EU’s directive, you still will have more questions than answers. In plain language in the end of the day, you never know for sure if daughter of former justice should be considered as a PEP.

Tom Fox:  I think, Tim that there are some pros here as well:

Argument #1

Business people always know if person behind the contracting party has a power to influence things being affiliated with governmental or political establishment. So probably, it might be a good idea to approach manager in charge to understand the real credentials and affiliations of the potential counterpart.

Argument #2

It is about risk management. Based on applicable legislations and internal rules the organization can define in internal regulations categories of individuals, which fall into PEP definition for this particular company.

Argument #3

Of course this does not directly address the issue of family members or a relationship which can be even more difficult to ascertain, close personal friends.

Tim Khasanov-Batirov: Tom, I fully agree with you. Considering your second argument, I would add that it is very important from practical view to define precise definition of PEP in a plain and non-legalized language in the corporate policy. This will allow avoiding myriads of questions at implementation stage.

Tom Fox: OK let’s go further on, Tim. We can formulate the next concept or maybe misconception in the following way:

Myth #2. We do KYC requesting many documents from potential business partner. We ask for incorporation documents, tax certificates, and much more. We do it for several years and it looks to be an adequate KYC format. Please do not complicate things by referring to just trendy but unclear terms as “justification of partner’s engagement” or “fair market value of remuneration to potential business partner.” Tim, will you agree with this statement?

To read the full story please visit FCPA Compliance Report’s website at: http://fcpacompliancereport.com/2017/12/compliance-man-goes-global-episode-6/

Related Articles

Leave a comment

Your email address will not be published. Required fields are marked *