Letter from the Editor: February 2016

In this issue, John Evans from CGI talks about best practice for sanctions compliance. If you would like a copy of our low risk due diligence compliance checklist, please contact us.

We are delighted to offer readers a 10% discount on The Canadian Institute’s 15th annual Forum on Anti-Money Laundering, Canada’s longest running forum on Anti-Money Laundering, on 26 and 27 April in Toronto. Forthcoming amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act mean big changes to compliance obligations. This year’s conference will give attendees everything they need to get a head start on implementing these changes, so risk management programmes won’t miss a beat.  Register by phone on + 1 877 927 7936, or register online with AFN member code: D10-319-319CX01 to save 10% off your registration fee. This rate cannot be combined with any other offer or group discounts.

In addition, Momentum’s 9th ACES Compliance Summit is a free, two day programme specially formatted to provide comprehensive, world-class solutions for navigating the toughest global anti-corruption, export controls and sanctions compliance challenges. This year’s event is taking place on 5 and 6 April in McLean, Virginia, and goes above and beyond benchmarking to take a closer look at government expectations of compliance programmes in the US and abroad. Compliance professionals will find the ACES Summit specialises in exploring regional interests and concerns, technological advancements, and best practices in export controls and anti-corruption topics. Registration for this event is free for Corporate Counsel, International Trade and Compliance Executives.

We are always interested in articles and book reviews written by AFN members and readers. If you would like to contribute to the AFN newsletter or the website, please contact us at info@antifraudnetwork.com.

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Sanctions compliance

John Evans 2016Financial institutions face considerable challenges as they strive to comply with ever-expanding legal requirements for combating money laundering and terrorist financing. The number of global watch lists and sanctioned activities continues to grow, as does pressure for organisations to extend their screening processes across the entire enterprise. Sectoral sanctions and screening for Politically Exposed Persons create additional layers of complexity. Watch list data can change daily, further complicating the task of maintaining an up-to-date, efficient screening operation. Each new watch list requirement increases the compliance burden, while potentially slowing transactions and customer service. Financial institutions now more than ever are caught between their obligation to prevent illegal transactions and the rising costs of compliance.

But scaling back screening controls isn’t an option. Individual corporate executives have been prosecuted and jailed, and banks have been fined hundreds of millions, and even billions, of dollars for alleged dealings with black-listed nations and drug kingpins, and for deliberately or inadvertently helping them launder money and evade sanctions. As the global fight against money laundering and terrorist funding expands, the obligation to monitor transactions is expanding beyond financial institutions to affect large corporations, insurance companies, money management and transfer services, and other types of businesses.

Cost-effective compliance

How can these organisations meet the rising demands of sanctions compliance without disrupting customer service or incurring inordinate costs? Implementing the right filtering software to automatically screen transaction data and identify sanctioned entities, appointing the right people, and establishing effective processes are absolutely crucial to a cost-effective compliance programme.

Each of these three components—technology, people and processes—complements and reinforces the others. Each element must be implemented and maintained with an eye toward continuous learning and improvement, so compliance capabilities can keep pace with a constantly changing compliance landscape. The most successful organisations nurture and support an ability to adapt, learn and improve their capabilities across all three areas.

The following are best practices for managing technology, people and processes to maximise compliance and minimise cost and effort.
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Letter from the Editor, December 2015

In this issue, David Farrell reviews Emerging Risks: A Strategic Management Guide, in which a number of respected authors assess and propose a process for managing emerging risks, and the strategies that need to be put in place, drawing on examples of best practice.

If you would like a copy of our cyber security checklist, please contact us.

If you would like a copy of Emerging Risks: A Strategic Management Guide, Ashgate Publishing is offering AFN members a 10% discount on all titles using code G8ATZ30 – click here. Ashgate has also recently released three new publications: Fraud and Corruption in Public Services by Peter Tickner, In Pursuit of Foresight by Mike Lauder, Security Culture by Hilary Walton and The Changing Face of Compliance by Sharon Ward.

We are delighted to offer readers a 15% discount on the  Global Anti-Corruption & Compliance in Extractive Industries, Africa  in Johannesburg from 15 to17 February 2016. The event is an opportunity to benchmark industry best practices and gather practical advice from government bodies, NGOs and leading consultants on topics such as strategies for policy compliance, internal programme maintenance and metrics. To see the agenda, click here. To register, click here and use discount code BQ968AFN for the AFN 15% discount.

We are always interested in articles and book reviews written by AFN members and readers. If you would like to contribute to the AFN newsletter or the website, please contact us at info@antifraudnetwork.com.

Nick Burkill

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Book Review: Emerging Risks: A Strategic Management Guide, Catherine Antoinette Raimbault and Anne Barr (Editors)

DavidFarrellManagers are now facing business risks that seem closer to the domain of science fiction than anything one would see in business school texts or case studies. Since I started reading Emerging Risks: a Strategic Management Guide, we have witnessed an automobile commandeered by hackers via its radio (resulting in a 1.4 million vehicle recall in the United States), and an insider trading syndicate indicted for hacking the servers of a public relations firm to exploit the non-public information contained in draft press releases for financial gain.

Emerging Risks: a Strategic Management Guide, edited by Catherine Antoinette Raimbault and Anne Barr, is a relevant read in that it draws the business reader into contemplating a broad range of risks to ensure an analysis of emerging risks is fully integrated into corporate strategy. True business leaders distinguish themselves by thinking about the things others miss, or fail to plan for, and this is also the case with contemplation of emerging risks. By definition, an emergent risk is one that we have yet to fully assess in terms of its impact and probability of occurrence. An important principle set out in the book is that early contemplation facilitates early detection, which in turn facilitates a more effective response, be that by way of diversification, remedial action, market exit, or risk transfer by way of insurance.

The contributors to this volume are subject matter experts in a broad range of specialised risk domains, each contributing a chapter on topics that include nanotechnology, information technology, electromagnetic fields, chemicals, and biological risks. There is also sufficient detail to enable the generalist reader to start asking the right questions about the key risks to their enterprise in each of these areas.

With regard to new information and communication technologies, it is evident that developments in information technology have eclipsed centuries of innovation, as software advances have overtaken precedent technologies at a rapid pace. Risk assessment—and indeed regulatory frameworks—have struggled to keep up. Hacking and denial-of-service attacks by rogue states or criminal gangs come with ever increasing costs, as machine-to-machine communication govern more and more aspects of our lives. The societal impact will be increasingly significant as automation and redesign of work will result in certain enterprises requiring far fewer employees, with even the jobs of knowledge workers under threat.

Adding to the complexity of risk assessment, multinational companies have global supply chains, which introduce the concepts of supply chain and country risk, two additional dimensions to be added to the risk assessment process. Businesses must make a balanced assessment of the benefits of outsourcing, such as lower unit costs and lower inventory carrying costs, against the risks they introduce.

Outsourcing the manufacturing of even a small sub-assembly can cause significant disruption if a high value product cannot be completed or shipped as a result. The example given in Emerging Risks is of a French aircraft carrier immobilised after the sole company with proprietary technology to manufacture its propellers went bankrupt. The author of this chapter, Eric Wieczorek, reminds us that, as each sub-supplier has its own supply chain, there is a multiplicity of overlapping risks, as there are also risks inherent in connecting these supply chains. A company’s supply chain risk analysis should therefore also extend into suppliers’ supply chains if it is to be undertaken thoroughly.

As an example of what to look out for, in the chapter on chemicals, Jean-Pal Fort points out that our concern should be less with chemical producers, whose regulatory obligations are codified and well understood, and more with the downstream users of those chemicals. If those users are sub-suppliers, one must exercise even more caution. If nano materials are used, as Alain Lombard points out in his chapter, we are in somewhat unchartered waters, as the regulatory framework is struggling to keep up with ever-growing applications of nascent technology, let alone able to set the parameters of risk containment. The technology is evolving rapidly, with applications across multiple industries and the long term impact on human health and our environment is not well flagged and, therefore, not well understood. Ill-informed is ill-prepared.

François Bricaire’s chapter on biological risk reminds us of the threat posed by bioterrorism, and the recent incidences of SARS, MERS and Ebola, all highly contagious diseases with high fatality rates, the speed and spread of contagion of which is enabled by global travel. As the world becomes more interconnected, the business impact can be both swift and significant. Thankfully, at the same time, the risk response has shifted to early identification of potential risks, prevention, more rapid intervention, and better harmonisation of international responses. Evolved businesses’ responses to biological risk include better business continuity planning, facilitated in part by the technologies that permit, amongst other things, remote working.

In mapping the probability and impact of emerging risks, the authors of the chapter on country risk, Olivia Hassid and Lidija Milasinovic, remind readers to pay attention to reputational risk, giving the specific examples of the consequences of intervening in another country’s natural resources, or via outsourced contract manufacturing, its labour market and regulatory regime.

The anticipation and detection of emerging risks are integral to the risk management process. From a governance standpoint, it is very much the responsibility of the board to ensure that, in discharging its oversight with respect to risk management and internal control, emergent risks are regularly reviewed and assessed. As this book makes clear, emergent risks are complex and frequently interact, so a multidisciplinary approach is required. There are some useful examples of emergent risk mapping from the insurance industry discussed in the final chapter.

By covering a broad range of disciplines, Emerging Risks: A Strategic Management Guide  puts the reader in the frame of mind to anticipate the unexpected and to contemplate new risks, their consequences, and how these risks can be mitigated or transferred.

Emerging Risks: A Strategic Management Guide, can be ordered direct from Gower Publishing.

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Letter from the Editor, November 2015

In this issue, Frank Hong examines the phenomenon of CEO fraud, in which a fraudster persuades a member of a company’s finance team to make an “extremely urgent” or “highly confidential” payment to a new recipient.

If you would like a copy of our CEO Fraud Checklist, please contact us.

We are delighted to be able to offer readers a 10% discount on the Compliance & Ethics International Conference 2015. More than 100 speakers are coming together for genuine, open and honest discussions about “real world” compliance and corruption issues; there’ll be no sugar-coating the challenges companies face. Through a combination of closed door confidential sessions, innovative formats and streamed sessions, the speakers and attendees will focus on the realities of not only creating and implementing successful ethics & compliance programmes, but also effecting cultural change at a grass roots level in their organisations.

To see the agenda, please click here. To register, click here and use VIP code: FKW82583AFEM for the AFN 10% discount.

We are always interested in articles and book reviews written by AFN members and readers. If you would like to contribute to the AFN newsletter or the website, please contact us at info@antifraudnetwork.com.

Nick Burkill

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A new fraud: the impersonation of CEOs

FrankHongRobinWeirOne of the newest trends in fraud is the impersonation of a senior executive, such as a CEO, to induce an employee to bypass the usual procedures and transfer company money to a fraudulent recipient. CEO fraud preys on cultural and linguistic gaps between trading partners, and has become particularly common in trade between China and the United States. This is despite the fact that China requires all adults to obtain resident identification cards, and despite bank requirements that a resident ID be presented when the account is opened.

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Posted in 2015-11, Newsletter | Tagged |

Letter from the Editor, October 2015

In this issue Richard Bistrong, CEO of Front-Line Anti-Bribery LLC, talks about his experiences as a sales executive active in countries identified as having corruption problems, and as someone who has served a sentence of imprisonment in the US for a corruption offence.

The problem of ensuring that sales staff far from home comply with anti-corruption policies and procedures is an ongoing one.  If you would like a copy of our International Executives Checklist, please contact us.

We are always interested in articles and book reviews written by AFN members and readers. If you would like to contribute to the AFN newsletter or the website, please contact us at info@antifraudnetwork.com.

Nick Burkill

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Interview with Richard Bistrong

Nick BurkillNick Burkill: Richard, you have become well-known as an anti-corruption compliance consultant and speaker on the strength of your own personal experience as a sales executive selling in many parts of the world identified as having corruption problems, and as someone who has served a sentence of imprisonment in the US for a corruption offence.  Your background provides a unique insight for people responsible for corporate anti-corruption initiatives. Thank you for doing this interview for the Anti-Fraud Network and thank you for your posts on the AFN’s LinkedIn group.

RichaRichardBistrongrd Bistrong:

Thank you Nick for the kind words and for the opportunity to address the Anti-Fraud network in this Q and A, as well as the opportunity to be a part of your Linkedin group, which has been the source of very positive discourse and engagement.


Q: You have previously said that you didn’t think you would get caught – how were you caught?

A: In what is a cautionary example for other individuals and multinationals, I was an offshoot of a UN investigation by the Chief of the UN Procurement Task Force (PTF), Robert (Bob) Appleton, where he was investigating (2006-2007) a third-party for potential fraud on a UN contract for the provision of food services. In the course of his investigation, Bob saw my name on e-mails with that same third-party as also indicating involvement in a conspiracy to bribe UN officials on a different (Defence) contract. Thus, the nexus of the investigation was not my own conduct, but that of the agent, which caused investigators to look at other contracts, including the one where I was involved.

In part, as a result of that investigation, I was terminated from my former employer, and was subsequently targeted by the US Justice Department. Almost ten years later, Bob and I are engaged in a number of compliance events, where he now discusses how he shared the findings of his investigation with the Justice Department. Again, another real-world example of how investigators are working together and the real teeth of international law enforcement cooperation.

In addition, UK enforcement authorities, as a result of conduct that occurred while I was living in Manchester, also targeted me as the subject of a criminal probe. Had I not ended up cooperating with the City of London Police and the Crown Prosecution Service, I might have ended up facing extradition to the UK after serving a sentence in the US. Front-line personnel who might weigh the risks and consequences of getting caught should think about those risks across all the jurisdictions in which they operate. Carbon copy prosecution is not just theory; it is very much a real-world dynamic.
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Posted in 2015-10, Newsletter | Tagged , , , , , |

Letter from the Editor, September 2015

Nick BurkillWelcome back after the summer beak.

In this issue, Nicholas Blank and Hsiang-Chien Hsu, both from Blackpeak, take a look at how best to manage relationships with whistleblowers in China.

This is an issue that affects companies all over the world  and it is vital to ensure that policies and best practices are effective. If you would like a copy of our Whistleblower Checklist, please contact us.

We are always interested in articles and book reviews written by AFN members and readers. If you would like to contribute to the AFN newsletter or the website, please contact us at info@antifraudnetwork.com.

Nick Burkill

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Managing whistleblowers to benefit investigations in China

Nick BlankHsiang-Chien Hsu







Under the table cash kickbacks and conflict of interest relationships involving family members are notoriously difficult to prove in China. Investigators may find only a small number of witnesses, and even these may be reluctant to go on record, for example, if they are junior employees who fear retaliation, or investigators find they are restricted as to who they are allowed to interview, as senior corporate management is often reluctant to offend a high performing manager by launching an investigation without guaranteed results.

Computer forensics is a powerful tool that can find incriminating e-mails in company laptops and hand held devices, but it isn’t a useful tool when managers are very careful and avoid any hint of wrongdoing on their electronic devices.  In addition, they tend to operate with cash only, putting nothing in writing and making use of proxy shareholdings.

To compound these difficulties, there are no short cuts to make investigations easy as China has strict privacy laws. Companies should therefore avoid investigators who offer to retrieve family files, telephone records, and other personal records that are protected under PRC privacy laws.

Considering the difficulties, in many cases it is the third party suppliers, distributors or end customers who have stepped forward as whistleblowers who can be the most reliable source of concrete evidence.  Why?  Because they have often participated in the fraud and are therefore well placed to provide details and evidence.  Managing the relationship with these whistleblowers is an important part of the investigative process.
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Posted in 2015-09, Newsletter | Tagged , , , , , |