Compliance in 2017: Key themes and developments

15 May 2020 13:21

At the start of 2017, we look at key trends and developments in regulatory compliance this year.

Beneficial ownership

Beneficial ownership will remain a major issue in corporate transparency in 2017. Countries will face increasing pressure from intergovernmental bodies to improve the availability of beneficial ownership information. The Financial Action Task Force (FATF) will continue to monitor and report on how well countries are complying with their standards on beneficial ownership. The FATF intends to hold discussions on the evaluations they carried out on countries such as Portugal, Panama, Ireland and Nigeria in 2017. An update on countries' progress on beneficial ownership will also be given to the G20 at its summit in Hamburg on 7-8 July 2017.

Countries are already acting on this increased pressure. For example, the FATF's September 2016 report on Singapore found that the country's measures to ensure the timely availability of accurate and updated information on beneficial owners were not sufficient. So at the end of 2016,  Singapore's Ministry of Finance and Accounting and Corporate Regulatory Authority proposed changes "to ensure Singapore's transparency levels are in line with international standards".

The UK, France, Nigeria, Afghanistan and the Netherlands committed to establishing registers of beneficial ownership at the London Anti-Corruption Summit in May 2016, and every country in the European Economic Area (EEA) must implement a register of beneficial ownership for corporate entities by June 2017, as part of the EU's Fourth Anti-Money Laundering Directive. The US Extractive Industries Transparency Initiative has published a 'roadmap' which proposes to conduct a review of the "legal barriers and enablers to public disclosure of beneficial ownership information under US law" in 2017.

Continued focus on supply chain transparency

In 2017 companies will face increasing scrutiny on their supply chains to ensure they do not engage in unethical sourcing practices, modern slavery or human trafficking. The UK's 2015 Modern Slavery Act requires companies with an annual turnover of £36 million or more to submit a statement showing that their supply chain is free of modern slavery. This law has a global impact because it applies to any company that has a subsidiary based in the UK.

There are currently no punitive sanctions for not complying with this requirement, but late last year the UK's Independent Anti-Slavery Commissioner Kevin Hyland said such sanctions could not be ruled out in the future.

Global regulatory standards and enforcement activity set to increase

2016 was another record breaking year for enforcement against bribery, and there were numerous high-profile enforcement actions against bribery, money laundering and sanctions breaches. Enforcement of the US Foreign and Corrupt Practices Act (FCPA) alone led to 26 companies paying about $2.48 billion to resolve cases in 2016.

The focus on tackling financial crime, corruption, and sanctions breaches will continue in 2017. This remains an ongoing priority at a time of heightened security and government agencies and authorities will continue to share intelligence and pursue mutual legal assistance.

Some of the main legislative impacts include:

  • In April, the US Department of Justice's (DOJ) pilot scheme to encourage firms to self-disclose FCPA misconduct comes to an end and the DOJ will decide whether to extend or modify this initiative
  • Australia is also considering introducing legislation which would allow enforcement agencies to enter into Deferred Prosecution Agreements with companies who have self-reported evidence of financial crime.
  • In June, the EU's Fourth Anti-Money Laundering Directive will come into force, which will require EU countries to meet stronger standards to counter money laundering and terrorist financing.
  • Late last year, France's Sapin II legislation was adopted, which will create an anti-corruption agency, give more protection to whistleblowers, and allow for companies to enter into negotiated settlements.

Alongside new legislation will be the opportunity for companies to adopt the new international standard targeted at defining best practices for managing the risks of corruption and bribery. The Anti-Bribery Management Systems Standard, ISO 37001, was introduced in October 2016. Certification will help companies assure their customers, business associates and potential investors that they are taking reasonable steps to prevent bribery.

Further changes in sanctions are also expected in 2017, fuelled in part by political changes in a number of countries including the US.

Technology continues to bring efficiencies to the compliance process
The pace of progress in technology will increase in 2017, which will create even more opportunities for companies to realise efficiencies in their due diligence and monitoring process through automation. The development of Blockchain technology in helping to address compliance tasks will continue. Blockchain allows companies to provide a secure network between third parties to help facilitate transparent and safe transactions and automation document creation. .

But even with sophisticated automated compliance systems, an Oxford University study on the future of employment found that the job of a compliance officer faces only a very small risk of being automated in the next 20 years.

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