Corruption Crime & Compliance Michael Volkov

Is the progress itself enough to consider the battle won? Are the ongoing scandals casting a shadow over the hard work against corruption? Despite challenges (such as limited resources due to the ongoing war) and recent scandals (such as overpriced eggs for the military), Ukraine maintains multiple institutions committed to transparency and integrity, crucially supported by international partnerships aimed at enhancing its anti-corruption infrastructure.
Listen to this conversation between Michael Volkov and Halyna Senyk in which they focus on Ukraine's anti-corruption efforts amidst the backdrop of its ongoing war with Russia. Halyna Senyk, an expert from the CEELI Institute, details Ukraine's progress since 2014, highlighting the establishment of key anti-corruption agencies and reforms and how, over 10 years, it moved from 144 to 104 place in the Transparency International Corruption Perception Index.
You can listen to how, despite these advancements, Senyk acknowledges persistent challenges, including recent setbacks and scandals that have tested the country's resolve.
You’ll hear them discuss:
Historically pervasive and deeply rooted corruption at various levels of government and the reality of society that remains a critical challenge. Despite reforms and the establishment of anti-corruption agencies, the implementation and effectiveness of these measures are often undermined by systemic issues.The conflict with Russia that started in 2014 leading to military, economic, and social destabilization. This conflict has strained Ukraine's resources and governance capabilities, posing obstacles to effective governance and reform efforts.The volatile political landscape in Ukraine is characterized by frequent changes in leadership and political alliances that hamper consistent policy implementation and reform progress.The ongoing conflict and systemic corruption and how they contribute to economic challenges, including reduced investor confidence, economic uncertainty, and financial strain on public institutions.Ukraine's geopolitical position and how relations with neighboring countries and international allies, particularly with regard to Russia and the European Union, influence its ability to implement reforms and receive international support effectively.Resources
Halyna Senyk on LinkedInEmail: Halyna.Senyk@ceeli.euCEELI Institute (Central and Eastern European Law Initiative)Michael Volkov on LinkedIn | TwitterThe Volkov Law Group

Bryn Sedlacek, Vice President and Product Manager at Aravo, joins us on the podcast to discuss third-party risk management focusing on holistic risks and unified visibility. In a wide-ranging discussion, Mike Volkov and Bryn Sedlacek discuss the challenges in implementing a third-party risk management program that captures holistic risks and maintains a consistent, unified line of sight across the organization's risk profile. They focus on sanctions, capturing the source and ultimate destination of products/services and including those in screening, leveraging how to handle conflict minerals as a model, and how data intelligence providers can help. Additionally, Bryn discusses unified visibility, which provides comprehensive visibility to executives and decision-makers across risk domains and performance. Finally, they discuss InfoSec risk with third parties, where to start, and the future of risk - technology and alternative risk strategies. Join Michael and Bryn as they navigate the complexities of compliance in today's corporate landscape.

Bryn discusses how crucial it is to start with a realistic approach to building a compliance program and continually improve compliance programs to mitigate risks effectively.Having a platform like Arvao’s is valuable for companies as it is highly configurable and tailored to meet the unique needs of each client’s business structure and risk management requirements.The partnership between IT and cyber security in a compliance program is vital for addressing cybersecurity risks effectively within organizations. It is a growing trend for IT and cyber security to focus on collaboration and meeting the unique needs of each department.Unified visibility across different risk domains and third-party activities is essential for making informed decisions and managing risks effectively. Continuous monitoring and auditing are crucial in compliance programs, with a risk-based approach to optimize resources and ensure proactive risk management.Sanctions compliance is a growing area of focus, requiring proactive monitoring, risk-based approaches, and continuous updates to mitigate risks effectively.
Resources

Bryn Sedlaceck on the Web

Email: bsedlacek@arvavo.com

Michael Volkov on LinkedIn | Twitter
The Volkov Law Group

In this episode of Corruption, Crime and Compliance, we delve into the complex world of sanctions compliance and enforcement. In this new era of aggressive sanctions enforcement, companies have to understand the red lines that define where criminal and civil enforcement risk increases. In contrast to the history of FCPA enforcement, DOJ and OFAC have provided helpful guidance to alert companies where risks are likely to increase. Join host Michael Volkov as he navigates the intricate landscape of voluntary disclosures, criminal and civil enforcement risks, and the evolving strategies of regulatory agencies like OFAC and the Department of Justice.

Hear Michael discuss:

Sanctions enforcement involves a mix of civil and criminal line drawing.On the civil side, OFAC has explained that sanctions violations can be found based on strict liability with aggravating factors that turn the actor's state of mind. Third-party liability for distributors extends to situations where a principal company knew or reasonably should have known that products sold to a third party were intended for shipment to a prohibited entity or individual or a prohibited country. Third-party liability for violations occurring in a company's supply chain requires companies to break down its supply chain and learn the sourcing for all companies in its supply chain. It is clear that a failure to examine and assess your supply chain can lead to civil liability. In defining where criminal enforcement picks up on the culpability spectrum, DOJ and OFAC have defined potential criminal conduct based on the term "willful," meaning when an actor knew that its conduct was wrong but did not necessarily know the specific law that her/she was violating. Applying the "you know it when you see it" standard, companies have to weigh the evidence of surrounding circumstances to determine if an individual actor or actors possessed the requisite intent. Criminal enforcement determination will turn on the attribution of individual conduct to a company based on respondeat superior principles -- that is, whether the conduct was committed in the course of an individual's duties and in furtherance of a legitimate business purpose. Enforcement examples to track where the precise line falls between criminal and civil are few—a good start is by reviewing a meaningful record of DOJ enforcement actions against sanctions violations. The situation is akin to the early days of aggressive FCPA enforcement, where enforcement and settlement cases were reviewed for important precedents and explanations. DOJ's record here is about to be defined and companies, commentators and trade compliance professionals will be reading tea leaves and looking for patterns.
Resources
Michael Volkov on LinkedIn | Twitter
The Volkov Law Group

LRN has issued another important report. In its latest report, The 2024 Benchmark of Ethical Culture Report, LRN has focused on the critical issue of corporate culture. LRN is a pacesetter and the leader in reliable studies on complex ethics and compliance issues. If not properly promoted or maintained, a defective culture can lead to serious misconduct, government investigation, reputational damage, and collateral harm. On the other hand, a positive and effective culture is a company's most valuable intangible asset, as it is tied directly to increased financial performance and sustainable growth. Over the past few years, business leaders have embraced what compliance and governance professionals already knew: companies with strong ethical cultures outperform other companies with weaker cultures. Employees at ethical companies are more productive, more satisfied, less likely to seek a new job, and more committed to the company's mission.

Hear Michael discuss:


LRN's 2024 Benchmark of Ethical Culture Report underscores the importance of ethical culture in driving financial performance and reducing misconduct rates.Generation Z shows a higher tolerance for unethical conduct, with nearly a quarter admitting to engaging in such behavior to get the job done.Hybrid workers who alternate between working from home and the office exhibit lower rates of misconduct and are more likely to report observed misconduct due to increased job satisfaction.Organizations with strong ethical cultures outperform those with moderate to weak cultures by at least 50% across various business performance measures.Employees at companies with strong ethical cultures are 1.5 times more likely to report observed misconduct, emphasizing the value of a positive work environment.Senior leaders often have more favorable perceptions of their organization's culture than middle management and frontline workers, highlighting the need for consistent messaging.LRN's research shows that nearly 70% of the variance in business performance is linked to an organization's ethical culture, emphasizing the critical role of culture in success.

Resources
LRN’s 2024 Benchmark of Ethical Culture Report
Michael Volkov on LinkedIn | Twitter
The Volkov Law Group

Dottie Schindlinger is Executive Director of Diligent Institute, the global corporate governance research arm of Diligent - the largest SaaS software company in the Governance, Risk, Compliance (GRC), and ESG space. She co-authored the book Governance in the Digital Age: A Guide for the Modern Corporate Board Director, co-hosts “The Corporate Director Podcast,” and co-created Diligent Institute’s Certification programs for directors and executives, including AI Ethics & Board Oversight. Dottie was a founding team member of the tech start-up BoardEffect, acquired by Diligent in 2016. She graduated from the University of Pennsylvania and is a Fellow of the Salzburg Global Seminar Corporate Governance Forum. Diligent and Bitsight recently issued an important report on corporate board oversight of cybersecurity risks. 
Dottie Schindlinger, Executive Director of Diligent Institute, joins Michael Volkov to discuss the important findings of Diligent's report.

You'll hear Dottie and Michael discuss:

Companies with advanced security ratings create nearly four times the amount of value for shareholders as companies with basic security ratings. On average, the Total Shareholders’ Return (TSR) over three and five years for companies in the advanced security performance range is approximately 372% and 91% higher, respectively, than their peers in the basic security performance range.Companies with a specialized risk or audit committee had higher security performance ratings on average. Companies falling within these two categories have an average security rating of 710, whereas companies lacking both committees have an average security rating of 650.The findings also suggest that the distribution of security ratings among companies with specialized risk and audit committees tends to skew towards the advanced security performance range, whereas companies lacking either of these committees tend to skew toward the basic security performance range.Having a cybersecurity expert on the board is not enough. Integrating a cybersecurity expert into the board committee tasked with cybersecurity risk oversight makes a significant difference in an organization’s performance.Merely having a cybersecurity expert on the board does not correlate to having a higher security performance rating. Highly regulated industries tend to outperform other industries in terms of cybersecurity performance. Of the companies with advanced-level security performance ratings, a full third (33%) came from the financial services sector – with an average rating of 720. The sector with the highest average rating overall was healthcare at 730. Nearly a quarter (24%) of companies with basic security performance ratings came from the industrial sector. 

Resources
Dottie Schindlinger on LinkedIn

Diligent Institute | Diligent | Board Effect

The Report can be downloaded at: Cybersecurity, Audit and the Board Report

Michael Volkov on LinkedIn | Twitter
The Volkov Law Group

A new compliance cottage industry surrounds artificial intelligence. We are at such an early stage of AI development, and companies are still figuring out how they can employ the technology. However, some industries, such as financial institutions, have been using AI for fraud detection and other issues. These early adopters will likely set the tone for AI compliance practices. There is no question that AI holds terrific promise. The hype surrounding AI is just that -- hype. Until there is more certainty surrounding AI technology, we will witness a lot of bloviating. But this aside, corporate boards, senior executives, and business developers need to pay attention until the dust settles. The AI industry is moving so fast that the sooner we start to focus, the nimbler our response will be.

Luckily, ethics and compliance principles are easily adaptable to AI risks. In this episode of Corruption, Crime, and Compliance, Michael Volkov discusses how the compliance profession is more than capable of building effective compliance programs around AI operations.


Financial institutions have been using AI for fraud detection and other issues. They are at the forefront of developing compliance practices around AI.Companies need to embrace AI's promise and not get overwhelmed by all the hype. Corporate boards, senior executives, and business developers must pay attention until the dust settles.The AI industry is moving fast, and companies need to focus on what’s happening. Compliance has to be nimble and quick, just like the technology.Like every aspect of a business, any new technology presents risks, and AI certainly presents risks that need to be mitigated. This, in turn, leads to the necessary question: How should a company structure its AI risk and compliance program?AI can be a very productive tool. It can easily end up reducing costs and increasing efficiency. More efficient companies can help the economy expand and create new opportunities for growth.Financial institutions, tech companies, pharmaceutical, medical device and transportation logistics industries are likely to be significant users of AI technology.Generative AI use may increase the risk of fraud and will need to incorporate risk mitigation costs and capabilities.Compliance professionals have the intelligence, professional capabilities, and integrity to rise to the challenge of AI technology and onboard a third party.
Resources
Michael Volkov on LinkedIn | Twitter
The Volkov Law Group