Australian Launch of Transparency International’s 2013 Corruption Perceptions Index

1. Australian Launch of Transparency International’s 2013 Corruption Perceptions Index • 3 December 2013

2. Welcome • Grahame Leonard – Transparency International

3. Structure • Overview of 2013 Corruption Perception Index • How Vulnerable Are You? • Value of Compliance Programs • Application of Index with Boards and Senior Management

4. What is the CPI? • The Corruption Perception Index (CPI) scores and ranks 177 countries and territories from around the world on the perceived level of corruption in the public sector • Presented on a scale of 0-100 • 0 (Highly Corrupt) • 100 (Very Clean)

5. What is the CPI? • A global(177 countries/territories) • aggregate Index (up to 13 different data sources) • capturing perceptions(experts/business people) • of corruption(abuse of power for private gain) • in the public sector (public officials and institutions)

6. What does the CPI do? • Raise awareness at the global level • Incentive for governments to improve • Cross country and over-time comparison of corruption risks in the public sector • Data contribution to analysis and research

7. 2013 CPI The perceived levels of public sector corruption in 177 countries/territories around the world. GLOBAL 70% of countries score lessthan 50 out of 100. 43 istheaverage score worldwide.

8. CPI 2013 – The Top • Denmark and New Zealand tie for first place with scores of 91, helped by strong access to information systems and rules governing the behaviour of those in public positions.

9. CPI 2013 – The Bottom • Afghanistan, North Korea and Somalia once again cling to the bottom rung of the index. In these countries the lack of leaders who are accountable and effective public institutions underscore the need to take a much stronger stance against corruption.

10. Why Ignorance is not Bliss? • An effective compliance program is a critical component of an issuer’s internal controls. • An organisation that can prove it has adequate procedures in place to prevent persons associated with it from bribing will have a defence… • You may be guilty of an offence if a corporate culture existed within your company that directed, encouraged, tolerated or led to non-compliance with the foreign bribery provisions in the Australian Criminal Code!

11. Better practice anti-corruption compliance • DOJ and SEC have no “formulaic requirements” regarding compliance programs and that one size does not fit all but they will assess such a program on: • Is the compliance program well designed? • Is it being applied in good faith? • Does it work? • The 10 hallmarks - insight into the design aspects of compliance programs that DOJ and SEC assess.

12. Hallmarks- effective compliance program Hallmark Examples for a high risk location 1. Commitment from senior management and a clearly articulated policy against corruption • The commitment of the company’s leaders to a culture of compliance – how senior management articulate company standards, communicate them in unambiguous terms, adhere to them scrupulously, and disseminate them throughout the organization. • The high-level commitment is reinforced by middle-management and employees at all levels of the company • Senior Management brief local employees on company’s requirements for doing business in an ethical manner. 2. Code of conduct and compliance policies and procedures • The company should have a clear and concise code of conduct that is accessible to all employees and to those conducting business on behalf of the company. • The company should have policies and procedures that outline responsibilities for anti-bribery and corruption compliance within the company and detail proper internal controls. • Translate policies into local language. • Develop in-country guidance for business conduct.

13. Hallmarks - effective compliance program Hallmark Examples for a high risk location 3. Oversight, autonomy and resources • The company should assign responsibility for the oversight and implementation of the anti-corruption compliance program to one or more specific executives within the organisation. • Day-to-day operational responsibility for compliance should be delegated to other specific individuals within the company. • Engage local anti-corruption officer to implement and co-ordinate program. 4. Risk assessment • The company should conduct regular risk assessments that consider how and where the company conducts business – this should include country and industry sector, the business opportunity, potential business partners, level of involvement with governments, amount of government regulation and oversight, exposure to customs and immigration in conducting business affairs. • Conduct in-country risk assessment: • how the organisation does business (use of local agents and third parties) • which employees are exposed to corruption risk.

14. Hallmarks - effective compliance program Hallmark Examples for a high risk location 5. Training and continuing advice • The steps the company has taken to ensure that relevant policies and procedures have been communicated throughout the organisation, including through periodic training and certification for all directors, officers, relevant employees, and, where appropriate, agents and business partners. • The company should also develop appropriate measures to provide guidance and advice on complying with the company’s ethics and compliance program, including when such advice is urgently needed. • Conduct live in-country training sessions. • Standardise training content with hypothetical examples of local bribery and corruption risks. • Focus on definition of a government official (e.g. state-owned entities, tribal and village chiefs). 6. Incentives and disciplinary measures • There should be appropriate discipline in place and administered for any violation of the company’s anti-corruption compliance program and applicable international anti-corruption legislation. • Positive incentives can also drive compliant behavior and include personnel evaluations and promotions, rewards for improving and developing the company’s anti-corruption compliance program and rewards for ethics and compliance leadership. • Reward local employees for examples of compliant behaviour.

15. Hallmarks - effective compliance program Hallmark Examples for a high risk location 7. Third party due diligence and payments • The company must engage in risk-based due diligence to understand the qualifications and associations of its third-party partners, including business reputation, and relationship, if any, with foreign officials. • The company should articulate the business rational for use of the third-party, including an evaluation of the reasonableness of the compensation and that it will not be used for corrupt payments. • There should be ongoing monitoring of third-parties. • Make use of local intelligence sources. • Appropriate head office oversight of local third party arrangements. 8. Confidential reporting and internal investigation • The company should include a mechanism for its employees and others to report suspected or actual misconduct or violations of the company’s policies on a confidential basis and without fear of retaliation. This can be by way of anonymous hotline or ombudsman. • Once an allegation is made, the company should have in place an efficient, reliable and properly funded process for investigating the allegation and documenting the company’s response, including any disciplinary or remediation measures taken. • The company also needs to consider the ‘lessons learned’ from incidents. • Make hotline available in local language. • Advertise hotline at local site (e.g. posters). • Develop investigation response protocol that considers in-country specifics (e.g. translator, collection of electronic evidence, dealing with local authorities).

16. Hallmarks - effective compliance program Hallmark Examples for a high risk location 9. Continuous improvement and periodic testing and review • The compliance framework should constantly evolve. Frameworks that do not just exist on paper but are followed in practice will inevitably uncover compliance weaknesses and require enhancements. • A company should take the time to review and test its controls, and it should think critically about its potential weaknesses and risk areas. • Conduct in-country reviews (consider conducting in conjunction with Hallmark 4 – Risk assessment). 10. Mergers and acquisitions, pre-acquisition due diligence and post-acquistion integration • Pre-acquisition, the company should conduct substantive compliance due diligence. • Post-acquisition, the company should perform an anti-corruption review, train senior management and employees and integrate the acquired company into the company’s ABC Program. • Make use of local intelligence sources. • Deploy in-country anti-corruption due diligence team to follow-up on red flags identified.

17. CPI at Board and Senior Mgt Level • Correlation between the locations that organisation operates and the positioning of those countries on the Transparency International Corruption Index

18. Thank you Robert CockerellKordaMentha Forensic • +61 3 8623 3355rcockerell@kordamentha.com Tom McLeodMcLeod Governance • +61 419 301 860tom.mcleod@mcleodgovernance.com