Section A
Question 1
Read the scenario below and answer the questions that follow.
Rand Water is a water board that was established and is governed in terms of Chapter 6 of the Water Services Act, 1997 (Act No. 108 of 1997). It is listed as a National Government Business Enterprise in Schedule 3b of the Public Finance Management Act, 1999 (Act No.1 of 1999).
The Government of the Republic of South Africa, through the Department of Water and Sanitation (“the Executive Authority”), duly represented by the Minister of Water and Sanitation, is the sole shareholder of Rand Water.
Parliament is considering the following bills introduced by the Minister:
1.1 You have been employed as the Compliance Officer for Rand Water and you are compiling the Regulatory Universe. Your Regulatory Universe Register/Risk Register makes provision for a risk rating (High, Medium, and Low). Risk rate the regulatory instruments above in the Risk Register and provide a reason for each risk rating.
1.2 Identify the two regulatory items that can be categorized as core requirements within the compliance risk profile of Rand Water. Provide a reason why you classified each item as secondary.
1.3 Conduct independent research and recommend any three regulatory items that can be categorised as secondary requirements within the compliance risk profile of Rand Water. Provide a reason why you classified each item as secondary.
Question 2
Read the scenario below and answer the questions that follow.
Gifts and Entertainment Policy
Purpose of this Policy
Business gifts and entertainment of reasonable value are commonly used as a mark of friendship and goodwill, and to strengthen working relationships among business partners.
Providing or accepting occasional meals, small company mementoes, and tickets to sporting and cultural events may be appropriate in certain circumstances.
However, if offers of gifts and entertainment are frequent or of substantial value, they may create the appearance of, or an actual, conflict of interest or illicit payment (including a bribe).
2.1 Identify which four of the six elements of the compliance programme should be used to ensure that the control stipulated in the scenario is effectively implemented and adhered to across the organisation.
2.2 Discuss the role of the Compliance Officer with regard to the policy above and how it differs from the role of the Legal Officer.
2.3 The Head of Risk and Compliance of Tenacity Financial Services (a credit provider providing white-label store cards to low-income consumers) instructed you to assist with the drafting of a Standard Operating Procedure to give practical effect to the Gifts and Entertainment Policy. Conduct independent research and draft a memo to the Head of Risk and Compliance where you outline practical steps to give effect to the Gifts and Entertainment Policy.
Section B - Case Study
Read the case study below and answer the questions that follow:
US fines SAP R4bn in corruption, bribery schemes
German multinational software giant SAP has agreed to pay a criminal fine of over R4.1 billion to the United States (US), following investigations into corruption committed in seven countries, including South Africa (SA).
According to a statement released by the US Justice Department, SAP will pay the fines to both the US Securities and Exchange Commission (SEC) and the US Justice Department following its violations of the Foreign Corrupt Practices Act (FCPA) arising out of corruption and bribery charges in SA, Malawi, Kenya, Tanzania, Ghana, Indonesia, and Azerbaijan.
The Justice Department says SAP has agreed to a payout of $118.8 million in criminal penalties and administrative forfeiture of $103.3 million, as per the department’s resolution, which is coordinated with prosecutorial authorities in SA, as well as with the SEC.
According to the US Justice Department, SAP entered into a three-year deferred prosecution agreement with it, in connection with criminal information filed in the Eastern District of Virginia charging the company with two counts. These are:
SAP paid bribes to officials at state-owned enterprises in South Africa and Indonesia to obtain valuable government business,” says acting assistant attorney general Nicole Argentieri of the Justice Department’s Criminal Division.
“Today’s resolution – our second coordinated resolution with South African authorities in just over a year – marks an important moment in our ongoing fight against foreign bribery and corruption. We look forward to continuing to strengthen our relationship with South African authorities and others around the world.
“This case demonstrates not only the critical importance of coordinated international efforts to combat corruption, but also how our corporate enforcement policies incentivise companies to be good corporate citizens, by cooperating with our investigations and appropriately remediating, so that we can take strong action to address misconduct.”
Falsifying records
According to the US Justice Department, SAP and its co-conspirators made bribe payments and provided other things of value intended for the benefit of South African and Indonesian foreign officials, delivering money in the form of cash payments, political contributions, and wire and other electronic transfers, along with luxury goods purchased during shopping trips.
“Specifically, with respect to South Africa, between 2013 and 2017, SAP, through certain of its agents, engaged in a scheme to bribe South African officials and to falsify SAP’s books, records, and accounts, all with the goal of obtaining improper advantages for SAP in connection with various contracts with South African departments, agencies, and instrumentalities, including the City of Johannesburg, the City of Tshwane, the Department of Water and Sanitation, and Eskom,” notes the statement.
In 2022 ITWeb reported that SAP was fined R263 million by the Special Tribunal SA, which was mandated to recover public funds syphoned from the fiscus through the software company’s corruption, fraud and illicit money flows in SA. This, after the software licence and support agreement between the Department of Water and Sanitation (DWS) and SAP was declared constitutionally invalid and set aside.
Last year the DWS fired a senior official following an internal investigation of the SAP contract.
In a statement published on its website yesterday, SAP confirms it entered into final settlement agreements with the US Department of Justice, the US SEC, and South Africa’s National Prosecuting Authority.
The company further points out it separated from all responsible parties more than five years ago, and has since significantly enhanced its global compliance programme and related internal controls.
“SAP welcomes the conclusion of these matters and will fully comply with the terms of the agreements. As noted in the settlement agreements, SAP conducted a thorough and extensive investigation into historical misconduct and fully cooperated with the authorities.
“SAP has zero tolerance for those who do not adhere to the company’s compliance policies and procedures. SAP remains vigilant in maintaining the highest standards of ethics and compliance,” it states.
Donald Alway, assistant director in charge of the Federal Bureau of Investigation’s (FBI) Los Angeles Field Office, adds: “This successful resolution against SAP is another example of the power of relationships and persistence.
“The sustained diligence by the prosecution team and continuous collaboration with South African law enforcement, regulators, and prosecutors identified corrupt activity in multiple countries. The FBI will continue our non-stop efforts to identify, investigate, and prosecute companies wilfully engaging in corrupt activities around the world.”
Question 1
1.1 Draft a memo to the Board of Directors of SAP and stipulate how the strategic vision and goal of SAP can build a positive culture of compliance within the organisation, with the view of improving its image in Africa and other parts of the world. Substantiate your answer with examples from the case study.
1.2 With reference to the case study, discuss how SAP can benefit from using the three Cs of Compliance to improve the level of compliance culture within its organisation.
1.3 It is evident from the case study that SAP should implement measures to create a culture of compliance. Advise the Board of Directors of SAP on what measures they should implement and provide practical examples of each measurement. In your opinion, what measure will be the most effective?
1.4 Identify and explain the three primary risks experienced by SAP from the case study. Draft a memo to senior management where you highlight these risks. Substantiate your answer with evidence from the case study.
1.5 Create a control that will effectively and efficiently mitigate the risks identified above.
