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1、“Just One Rotten Apple”Leader Marie-Louise Rossi,FIRMHead of Insurance and Risk Management,New Security Foundation andJohn Burbidge-King WB MCMICEO Interchange Solutions,IRM Risk Forum 2008raising the game,Background,Post 9/11 heightened international inter-governmental concern about bribery and mon
2、ey launderingConcerted development of anti bribery/anti money laundering compliance regimeLinks to terrorist fundingLinks to kidnap and ransom as well as other political/terrorist risks,Overview,Implications for corporate governance at all levels,but especially the Board and risk management,Overall
3、Proposition,Notwithstanding corporate commitment to compliance,how dynamic/holistic/?enterprise is the risk management function/culture?Implications for cultural change,training and remuneration structuresInsured Risks,eg:Directors&OfficersEmployers LiabilityTerrorism/K&R coverProperty and business
4、continuity,Overall Proposition(cont),Management of Uninsured/“Uninsurable”Risks,eg:Reputational riskBrand valueShareholder valueCorporate survivalCRIMINAL PENALTIES?,Interchange Solutions Limited,Anti-corruption audit AbcSure audit tool to determine the level of corruption risk mitigation in a compa
5、nys compliance policies and business processesRisk assessment and specific research for markets and projectsReputational due diligence for third parties in context of applicable law,market and the corruption environmentConsultancy and training Delivering tailored anti-corruption mitigation processes
6、,both internal and external,All content,AbcSure and the Interchange Solutions logo are registered trade marks in the UK.,Our journey,Definitions,backgound and law People riskThe corporate dimensionCriminality and terrorismDiscoveryRisk downside and upsides References,Some definitions,Corruption canv
7、as“But this is the way you have to do business to win the contract in”,Financial pressures(individual and corporate)Banking systemMortgage fraud Competition level playing fieldEconomic cost of corruptionAssociated with other crime Emerging pacts and industry agreementsUK SMEs and weakness in the sup
8、ply chain.,Legal and regulatory landscape,United Kingdom(L)Prevention of Corruption Acts 1906 and 1916(L)Anti Terrorism Crime and Security Act 2001(L)Proceeds of Crime Act 2002(L)Fraud Act 2006(L)Companys Act 2006(L)3rd EU Money Laundering Directive and UK AML(P/R)Listing and FSA RulesNational laws
9、in other jurisdictions(including Scotland)Foreign Corrupt Practices Act(USA)ConventionsOECD ConventionUN Convention Against CorruptionUN Global CompactNB UK Law Commission drafting a new anti bribery and corruption bill,Our journey,Definitions,backgound and law People riskThe corporate dimensionCrim
10、inality and terrorismDiscoveryRisk downside and upsides References,People bribe not companies,What is this?,Grooming,23 year old graduate Ben has worked for Sharpes Media plc for 4 months.The regional manager of Dynamedia,a long standing key supplier,phoned Ben to tell him how much he enjoyed the bu
11、siness relationship.Ben is flattered.A week later,Ben received an unmarked case of wine,delivered to his home.Inside he discovers an envelope marked“With Thanks”containing a cheque for 100.Ben assumes the gift is from Dynamedia,although theres nothing on the box to indicate this.A little naive and u
12、nsure whether this is normal he considers reporting the gift to his operations manager,a slightly remote lady in her late 50s.He falters and asks a colleague more his age.Linda told him“Oh you too?Well,theres no rule against it;it would be rude not to accept.Besides,keeping the suppliers on-side mea
13、ns we can get better rates for our clients so its a win-win situation all round”.Ben banks the cheque.He places increasingly more business with Dynamedia,encouraged by their matching generosity and what he perceives as their recognition of his building a good personal relationship.Ben and his collea
14、gues are being groomed to receive and accept bribes.They have been enticed into placing more business with Dynamedia through the receipt of increasingly disproportionate incentives.These would probably be viewed as bribes by the authorities.,Risk behaviour,IndividualThe CBRN TeamGroupSiemensCorporat
15、eEnronMarketUK Premier League footballDenialWembley plc,Examples:,Our journey,Definitions,backgound and law People riskThe corporate dimensionCriminality and terrorismDiscoveryRisk downside and upsides References,Companies may provide the framework,Tone from the top,Board,Management,At Risk Transact
16、ions,Direct/indirect sales channels,Procurement,Supply Chain,XYZ plc,ManagementOperations,Board,Strategy&M&A,Financials&performance,Regulation,Governance,D&O weak link,Where can bribery occur?,Employees,Joint Ventures&Offset,Supply chain sensitivities,Provides KeyComponent,SMEs at risk,ABC Limited i
17、s a small Borders based manufacturer of specialised encrypted circuit boards,only used by a small number of aerospace,defence and military customers.One of the companys key customers is Grantham plc,a prime supplier of communications equipment to the UK Ministry of Defence.ABC is investigated by the
18、 City of London and MOD Police after a tip off by a disaffected employee about paying bribes to a foreign defence official to win a tender to supply a part government owned military electronics plant.The Operations Director suffers serious depression after his home is searched at 0500 and is sent on
19、 sick leave.The investigation completely disrupts ABCs production schedule;the legal and other costs quickly escalate.The board discovers that their legal costs insurance is insufficient and due to an oversight,the Director and Officer Liability(D ABC is unable to meet its commitments to its bankers
20、 who have become unhelpful in present economic circumstances.Critical deliveries fall behind and as a consequence,Grantham plc fails to deliver a crucial order of infantry radios to the MOD as the alternative supplier to ABC,based in Canada,cannot respond to Granthams urgent demand.Within two months
21、 of the allegation,ABC is forced into bankruptcy and supplies to Grantham plc,now struggling to meet its commitments to the MOD,have stopped.,Our journey,Definitions,backgound and law People riskThe corporate dimensionCriminality and terrorismDiscoveryRisk downside and upsides References,Criminals a
22、nd terrorists?,Triangle of corporate crime,Bribery/corruption/extortion,“A blurring of the lines between terrorism,organised crime,bribery and corruption,money laundering and fraud is already apparent.Organisations will need totake a more holistic approach to what is becoming a single area of risk.”
23、Fraud Advisory Panel 10th Annual Review June 2008.,The global village,Business“Trust”,Crime&Terrorism“Advantage”,Law enforcement“Evidence based”,Criminal and terrorist riskLinks to the criminal network,Fraud,Moneylaundering,Bribery&Extortion,Terrorism,Organisedcrime,Drugs,People Trafficking,Prostitu
24、tion/Pornography,Weapons,Counterfeiting/IPR Theft,Commission and contracts(some simple maths!),=12,500 for the agent,Mountain highway 250 million 5%commission,=12,500,000 for the agent,5 ambulances 50,000 each 5%commission,Follow the money scenario“British company wins major road contract in Bolivia
25、”,12,500,000 for the agent,Nice chap,company helps set up bank account(s)Salesman gets kick-back from agentAgent has cousin in Colombia and supports familyUnbeknown to agent family close to FARC Agent wire transfers$500,000 through forex shopTransfer picked up by US Secret ServiceCollection of funds
26、 in MedellinFunds buy explosives expert/materials from ETAETA uses part funds for drugs ring in BilbaoHead of ring arrested by UK police at Heathrow Extradited to Spain:cooperation UK/Spain/USAfter 12 months,out of the blue,Scottish company and their bankers raided by Strathclyde Police,IPR theft,Th
27、oughts so far,Relationship between corruption and money launderingRelationship between corruption and tax evasionRelationship between corruption and organised criminal groups at leastExposure to criminal prosecutionExposure to civil liability in an action to recover corrupt paymentsRisk to insurers
28、whats the potential cost,especially in USA,Our journey,Definitions,backgound and law People riskThe corporate dimensionCriminality and terrorismDiscoveryRisk downside and upsides References,They wont get me!,“The more I got away with the more a gameit became,a game I knew I would ultimately lose”Fra
29、nk W Abagnale Jnr,Enforcement net,POLICE,Discovery,Third party,whistleblowing,disclosureMoney laundering suspicious activity reports(SARs)Dawn raid business premisescompany professional advisorsdirectors homesDuring searches,individuals(including staff)may be questionedSpecific intelligence(profilin
30、g and research)International co-operation By happenstance and loopholesOops!,Enforcement radar screen,CountriesOperation/ExportAssociationPatterns travel and bankingPress and NGO,ProfileCase FitIndustry Sector Industry Reports,Whistle blowingReports,AllegationSARs&AML PEP connectionSupply chain expo
31、sureUS and other intelligence,Our journey,Definitions,backgound and law People riskThe corporate dimensionCriminality and terrorismDiscoveryRisk downside and upsides References,Reputation,“It takes twenty years to build a reputation and five minutes to ruin it.If you think about that,you will do thi
32、ngs differently”Warren Buffet,TRUST,At what risk to company?,Reputation and public opinionCatalyst for other corporate crime and vice versaShare volatility,loans,covenantsAdverse ratings and risk of contract blacklistingDiversion of resource and employee moraleImpact on customers,suppliers and partn
33、ersCosts,legal,accounting,IT support,PR management etcUS dimensionCriminal conviction,Headlines,“Bribery probe for DaimlerChrysler”Aug 2005,Paradigm BV fined$1m for$12,500 bribe 2007,Birmingham City FC“Corruption raid on Premier League club”March 2008,“ABB discloses possible bribery”Feb 2006,“Compas
34、s profit halved as UN investigation continues”Nov 2005,“AWB chief grilled on bribe plan”Jan 2006,“BHP Billiton denies trying to bribe Saddam with wheat”March 2006,“Siemens“fined 201m by German court in bribery case”Oct 2007,“Weir Group pledges fresh inquiry into 2.5 million bribes to Saddam”Oct 2005
35、,Sainsbury“Potato buyer arrested over alleged3m bribe from Greenvale”March 2008,“WSP International faces Indonesia graft inquiry”Aug 2006,De La Rue confirms that a police investigation is being conducted at the Company(July 2007),“Former Wembley chief jailed for bribery attempt”Oct 2005,“Vetco hit b
36、y record fine for bribes”Feb 2007,“The CBRN Team MD admits bribery and awaits sentence”Aug 2008,=24%decline between Aug 05 and Oct 05and did not recover value until June 06,Share volatility:Compass Group,UN and SFO investigations commence Sept 05,Share volatility:Industry comparison(main competitor)
37、,Compass Group,Sodexho Alliance,Investigations commence,Share volatility:FTSE 100 comparison,Compass Group,FTSE 100,Investigations commence,Corporate attitudesApproach to anti-corruption,In denial,UnawareNo leadershipPoor administrationBanks rely on AML,?,X,Actions for companiesChecklist for insurer
38、s,The Best Practicecorporation,Policy:,Process:,People:,Communications:,Robust with accountability Auditable,internal and externalM&A,IPO,JVs,OffsetPart of strategy and normal business processBenchmark,Single messageCross culture,across organisation Disclosure in reportsOpenness in businessSuppliers
39、 and customersKnown for high standard of integrity,Tone from the topZero tolerance of corruptionBoard responsibilitiesIndependent due diligence/screening Risk register and monitoringTrain,educate and train again,EthicsCompliance Code of conduct Gifts and hospitalityKnow your customer Oversight,Minim
40、ising the risks,Anti-corruption systems,review,monitor,audit(NB Woolf Committee Report:sales and supply chains)Maintain adequate dawn raid response procedures in force,review them,Train staff globally common approachEnsure business continuity specialist legal,accountancy,IT,media supportCheck extent
41、 of D&O insurance policy does it cover proceedings in the US?What cover is in directors and key executive contracts?Is bribery and corruption on the risk registerHow is the board organised to address this risk?,Benefits of anti-corruption policy and process,Enhances reputation a business with integr
42、ityIncreases investor attractiveness sustainabilityEnter new markets with more confidently Better supplier and manufacturing choicesAvoids contract blacklists and sanction(World Bank,EBRD etc)Embedded as a business practice and company cultureReflected in bottom lineKeeps you on the right side of th
43、e lawRisk reduction and lower premium opportunityAnd Significantly less costly than an investigation/prosecutionAnd Do You REALLY Know Your Customer and Suppliers?,Our journey,Definitions,backgound and law People riskThe corporate dimensionCriminality and terrorismDiscoveryRisk downside and upsides
44、References,Key reference materials,1997 OECD Conventionhttp:/www.oecd.org/document/21/0,3343,en_2649_34855_2017813_1_1_1_1,00.htmlhttp:/www.oecd.org/dataoecd/4/18/38028044.pdfUN Convention against Corruptionhttp:/www.unodc.org/unodc/en/treaties/CAC/index.htmlUS Foreign Corrupt Practices Acthttp:/www
45、.usdoj.gov/criminal/fraud/fcpa/Other useful websites:http:/www.iccwbo.org/policy/anticorruption/http:/www.ibe.org.uk/http:/www.transparency.org/http:/www.traceinternational.org/http:/www.ethic-useful sources:World Bank/Transparency International Corruption Perceptions Index,Q&A,Conclusion,Next steps
46、OpportunitiesThreats,Marie-Louise Rossi,Over a nearly 30 year career,Marie-Louise has specialised in political,(including terrorism),credit and export credit risks,as a broker and as a management consultant.She has also had extensive experience in the fields of regulation and compliance.She was,for
47、11 years,Chief Executive of the International Underwriting Association(IUA)(and its predecessor,London International Insurance and Reinsurance Market Association(LIRMA),representing an over 11bn pa international insurance and reinsurance market to governments,regulators and the international institu
48、tions worldwide.,John Burbidge-King WB,MCMI Founder and CEO of London based Interchange Solutions,specialists in business reputation and risk management.Operational service in the Royal Marines included Yemen,Oman,Ethiopia,the Far East and Northern Ireland;his international business experience range
49、s from banking electronics,biometrics to security printing.He was an active participantof the World Economic Forum,especially on preventing the counterfeiting of goods(paper discussed at Davos 2004)and on anti-corruption.He has interacted with all levels of government and companies around the world;
50、lived in the Far East,Arabian Gulf and California;a member of the UK Fraud Advisory Panel,a consultant on Middle East culture,speaks Arabic and is a Court Assistant to the Company of World Traders.Interchange is a member of the Society of British Aerospace Companies.E:jbkinterchange-solutions.co.ukT
