Mauricio Almar - Inside Intelligence

2nd Annual Anti-Corruption in
Oil & Gas for the Americas
Mitigating Third Party Risk
in New Frontiers – Mexico
MAURICIO ALMAR
Latin America Regional Compliance Counsel
24 March 2015
Mitigating Third Party Risk in New Frontiers – Mexico
▌ Advanced Local Partner Issues
 What additional compliance measures do you need in order to
operate effectively in Mexico?
▌ Performing Due Diligence in High Risk Regions
 How can you ensure that the information you receive is accurate
and reliable?
▌ Engaging with Third Party Employees
 Should you incorporate specialized training of third party
employees as part of your compliance program in Mexico?
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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Advanced Local Partner Issues
Are enhanced compliance measures needed in Mexico?
▌ Internal Factors
 Individualized risk assessment
 Large footprint and operations or smaller organization
 Interactions with government officials (as clients and regulators)
 Internal resources versus reliance on third parties, particularly
local companies and individuals
 Location of operations
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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Are enhanced compliance measures needed in Mexico?
▌ External Factors
 Transparency International Corruption Perceptions Index
 Gift and entertainment expectations and practices
 Overburdened and inefficient bureaucracies
 Significant enforcement focus from the DOJ and SEC (ex. Key
Energy Services, Banamex, Wal-Mart, Biomet)
 Lack of local enforcement of existing anti-corruption laws
 New anti-corruption legislation in Mexico
 Impact of the Energy Reform on your organization (ex. JVs)
 Communities
 Cartel activity
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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Are enhanced compliance measures needed in Mexico?
▌ Many organizations will reach the conclusion that their
corruption risk exposure in Mexico is heightened.
▌ Enhanced compliance measures
 Dedicated compliance resource that understands local customs
 Limit reliance on third parties
 Partner with established companies, and limit use of gestores
 Procurement processes
 Financial controls: importance of detailed invoicing
 Due diligence does not eliminate risk; ongoing monitoring
 Local personnel must be equipped to recognize warning signs
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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Performing Due Diligence in
High Risk Regions
Accuracy and Reliability of Due Diligence Information
▌ The quality of a due diligence exercise can only be as good as
the quality of the public information available during the
process.
▌ Access to reliable information in Mexico, as in other Latin
America countries, is varied.
▌ Due diligence is not part of the business culture in all of Mexico,
and sometimes there is resistance.
▌ Information is invariably more accurate and reliable when it
comes from more developed areas and cities, as opposed to
local, rural communities.
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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Accuracy and Reliability of Due Diligence Information
▌ How can you be sure that your information is reliable?
 Collect information from both internal and external resources,
including company employees proposing the engagement and
from the third party itself
 Compare that data with public records, social media sources,
and other online resources
 Seek information in major Mexican cities rather than local, rural
areas as much as possible; know that ownership data found
even in major city records may not be up to date
 Consider hiring high-quality investigators with local contacts and
experience for certain business relationships
 Request certifications from the third party being reviewed
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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Specialized Compliance Training
Specialized Compliance Training
▌ Third party employees can
present significant risks
 Legal
 Reputational
 Financial
▌ Critical that they be well-versed
and trained on your company’s
ethics and compliance
expectations
▌ Do not leave it to chance
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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Considerations for an Effective Third Party Training Program
▌ Who should deliver the training?
 Your company, third party company, or an independent instructor
 Legal, business, or a combination
▌ What are the critical compliance topics?
 Corruption
 Fraud & Kickbacks
 Gifts & entertainment
▌ What are the cultural sensitivities?
 Imposition of foreign laws and expectations on a Mexican entity
 Perception of U.S.-centric policies and expectations
 Language barriers
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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Considerations for an Effective Third Party Training Program
▌ What kind of training is necessary?
 Online
 In-Person
 Policy and legal focused
 Red flag training
▌ What should be the tone of the training?
 Coercive view of compliance
 Culture of empowerment
© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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© 2014 HALLIBURTON. ALL RIGHTS RESERVED.
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