First the Bribery Act, now the Banking Reform Act reverses the burden of proof. What can companies do to ensure robust compliance, pre-empt liability, and gain a distinct competitive advantage?

October 2014

Abstract

Rob Mason, Becky Stones, Derek Patterson and Toby Duthie at Forensic Risk Alliance in London examine ‘reasonable steps’ companies can take to affirmatively evidence compliance as they face a broadening regulatory drive to reverse the ‘Burden of Proof’. In July this year , in response to the Banking Reform Act the Financial Conduct Authority (‘FCA’) and Prudential Regulatory Authority (‘PRA’) published a joint consultation paper on the proposed Senior Management Regime (‘SMR’), Certification Regime and Conduct Rules. While this regulatory focus is on the financial services sector, it touches on wider themes applicable to many sectors and, along with ever larger and often duplicative fines, is part of a wider US-led international enforcement trend.

Authors

Toby Duthie

Partner, Forensic Risk Alliance, UK

Toby Duthie is one of FRA's co-founders and heads its London office. With experience in cases involving government enforcement in the UK and the US, his expertise lies in internal and regulatory investigations, data protection and complex financial modeling, with particular experience in global, multi-jurisdictional cases. Toby was instrumental in the development of FRA's service in the anti-corruption and white-collar defense arena across Europe. He spent more than five years in the US, gaining extensive experience advising on damages amounts in a number of complex civil and criminal litigations and in connection with a number of high-profile FCPA enforcement actions (e.g. Panalpina, Bonny Island LNG and Oil for Food). He has also worked on matters involving the UK, Swiss and French regulators. His experience spans a number of areas. He has worked on pre- and post-acquisition due diligence for a number of multinational corporations. He has provided damages modeling and prepared expert reports relating to a dispute involving the acquisition of a major financial institution. He has advised on trust fund and restitution work for the International Criminal Court, involving all aspects of document and evidence management, reparation processes, asset identification and seizure. After graduating with honors from University College London, Toby worked for two years as a steel trader in Hong Kong and China. He then moved to the investment banking division of Deutsche Bank/Morgan Grenfell for seven years, where he focused on infrastructure finance and structured trade finance. This has provided Toby with a strong understanding of financial modelling, financial risk assessment and mitigation as well as deal structuring in both Europe and the Emerging Markets.

Derek Patterson

Principal, Forensic Risk Alliance, UK

Derek Patterson is a forensic accountant with over 20 years’ experience in reviewing complex financial facts, fraud and corruption, evaluating financial losses, and in matters requiring internal investigation. Derek is currently involved in a number of complex financial reconstructions, multi-jurisdiction corruption investigations and pre-emptive reviews under a variety of anti-corruption regimes, including the US FCPA, the Swiss federal prosecutor, and the UK SFO. Derek has recently undertaken compliance reviews and internal investigations for US and European clients in the Extractive sector, the Infrastructure sector, and in the Medical Devices sector. For example, as part of a compliance enhancement initiative for a US-listed Oil Services company, Derek was responsible for the transactional sampling, testing and review of certain higher-risk West African operations. This included an especially detailed review of customs and logistics controls and transactions. Derek has also recently carried out a complex financial investigation into securities and real-estate transactions in Central and Eastern Europe, assisting the Claimant and Counsel to construct potential claims in a €2 billion Commercial Court case against a financial institution and a former management team. Prior to joining FRA, Derek gained extensive experience in commercial finance positions in the Aviation, Finance, and Motor industries. He has over nine years’ experience in the Aviation industry including time as Group Treasurer for Easyjet Plc. In his role as Group Treasurer he successfully operated in the investments and Capital Markets arena to secure funding structures of over USD 3 billion, in part required for one of the largest aircraft orders of the time. He was a senior member of the MBO team which bought and sold the low cost airline “GO” and worked with Ford production and manufacturing finance areas after spending several years in the Internal Audit function. Derek completed his training as an accountant and auditor with PricewaterhouseCoopers and holds a Bachelor of Accountancy degree from the University of Glasgow. He joined FRA in 2007 and shares his time between London and Switzerland.

Becky Stones

Partner, Forensic Risk Alliance, UK

Becky has over 20 years of industry experience in the Investment Bank at Credit Suisse, most of which was at managing director level. Becky is one of the leading professionals in valuation, regulation, risk, control and associated strategic design with deep experience and knowledge in all these areas. Becky was Head of Strategic Valuation Management at Credit Suisse for four years and a leading advisor to, and member of the bank's Executive Valuation Committee. She played a key role advising the Executive Valuation Committee on how to respond to the credit crisis and adapt both the valuations and pricing post the crisis. This work included in-depth reviews and analysis by her team of the bank's unobservable Level III portfolios, to reassess their valuation subsequent to the market changes and breakdown in various well known assumptions such as LIBOR discounting and certain modelling assumptions. The work involved re-modelling to take account of new cost of funding requirements (such as OIS discounting and Funding Valuation Adjustment) and other risks that required potential adjustment across the market. The role required the development and proposal of solutions and the presentation of complex information and recommendation in a simple and concise way for executive management, regulators, legal counsel, and audit committees. Becky spent the past two years advising senior and executive committees on industry leading risk aggregation and the design and implementation of mandatory "Too Big to Fail" regulatory requirements, including stress testing revaluation scenarios (such as CCAR); bilateral margining for derivatives; real time risk, P&L and capital calculation. Becky was part of cross industry forums, such as the ISDA SIMM committee on derivative margin requirements, on many of these evolving areas and has gained a strong depth of expertise and industry knowledge. She played a leading role in the initial design decisions and project set up around bilateral margining for derivatives. Becky spent three years leading major forensic investigations across front office and control groups for Credit Suisse including the investigation of one of the largest and most complex synthetic CDO portfolios. Additionally, Becky spent more than four years leading the post-acquisition valuation and control due diligence, reporting to members of the Executive Board, for the purchase of two large size banks, (Donaldson Lufkin & Jenrette and Garantia) and the integration of Credit Suisse Financial Products and Credit Suisse First Boston. This work involved the independent revaluation and review of large complex portfolios such as structured derivatives, emerging market portfolios, RMBS, CMBS, leverage finance, real estate, distressed debt together with the assessment of the reserving framework and the overall control and processing environment. Becky was promoted to Managing Director, as one of the youngest Managing Directors, in part on the back of this high profile due diligence review work. During her career, Becky has managed teams of up to 700 people. She has been Business Support Officer for Fixed Income (reporting to the Head of Trading), Head of Strategic Valuation Management, Head of Fixed Income Product Control, Head of Quants Valuations and Head of Front to Back Support for Fund Linked Products whilst it transitioned to Risk Magazine's Fund Linked House of the Year. Becky has been recognized as a market leader in valuation (particularly Level III Valuation), risk, regulatory and control and has been approached frequently to present at high profile risk and valuation seminars. She has received outstanding performance rewards during her career including an award from the Chief Financial Officer in recognition of her valuation advisory work and structuring innovation post the recent credit crisis. Becky has an MA in Mathematics from Oxford University and is a member of the Institute of Chartered Accountants. Her main hobby is the breeding and training of show jumpers up to Olympic level where her stallion was part of the 2008 British Olympic Show Jumping Team. She is currently aiming two of her young horses at the 2016 Olympics.

Rob Mason

Partner, Forensic Risk Alliance, UK

Rob Mason prior to joining FRA, spent over 20 years in research, structuring and trading at leading American and European investment banks.

Companies

Forensic Risk Alliance

FRA Founded in 1999, Forensic Risk Alliance (FRA) is a full service consulting firm specializing in Forensic Accounting, Financial Investigation, Litigation Support, and Electronic Discovery. FRA is comprised of forensic accountants, financial analysts, database & IT experts, and litigation support specialists. We have fluency in German, Chinese, French, Spanish, Italian, Portuguese, and English. FRA assists businesses and institutions to resolve complex and high risk financial, legal and regulatory challenges. We offer a variety of solutions that encompasses the complete e-discovery life cycle. We offer collection services, data culling, a custom review platform, jurisdictional processing and hosting, data privacy, and dedicated project management. From our offices in the United States and Europe we have serviced and supported clients in nearly every major jurisdiction across the globe. Recent projects have taken us to Canada, Israel, Germany, Switzerland, France, the Netherlands, the UK, the US, Spain, Denmark, Norway, Sweden, Belgium, the Philippines, Indonesia, Thailand, the PRC, Nigeria, Iraq, the UAE, Jordan, Brazil and Australia.

First the Bribery Act, now the Banking Reform Act reverses the burden of proof. What can companies do to ensure robust compliance, pre-empt liability, and gain a distinct competitive advantage?

Abstract

Authors

Companies

Forensic Risk Alliance

Forensic Risk Alliance

Forensic Risk Alliance

Forensic Risk Alliance

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