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FRAUD & REGULATORY ENFORCEMENT

A N N UA L R E V I E W 2 0 1 3

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Annual Review • April 2013

Fraud & Regulatory Enforcement

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A N N U A L R E V I E W • F R A U D & R E G U L ATO RY E N F O R C E M E N T

XX • XX • XX

F i n a n c i e r Wo r l d w i d e c a n v a s s e s t h e o p i n i o n s o f l e a d i n g p r o f e s s i o n a l s a r o u n d t h e w o r l d o n t h e l a t e s t t r e n d s i n F r a u d & Re g u l a t o r y E n f o r c e m e n t .

F ra u d & Re g u l a t o r y E n fo rc e m e n tA P R I L 2 0 1 3 • A N N U A L R E V I E W

UNITED STATES ........................... 04Randall WilsonRGL Forensics

CANADA ..................................... 08W. Michael G. OsborneAffleck Greene McMurtry LLP

CAYMAN ISLANDS ...................... 12Martin LivingstonMaples and Calder

BRAZIL ........................................ 16Eduardo SampaioFTI Consulting Brasil

ARGENTINA ................................ 20Andrea ReyErnst & Young Argentina

COLOMBIA .................................. 24Laude FernándezFTI Consulting Colombia

UNITED KINGDOM ...................... 28Lil ia SantosCRI Group

GERMANY ................................... 32Benno SchwarzGibson, Dunn & Crutcher LLP

FRANCE ...................................... 36Philippe GoossensAltana

THE NETHERLANDS ..................... 40Martijn HinBDO Consultants B.V.

SWITZERLAND ............................ 44Marcel MeinhardtLenz & Staehelin

AUSTRIA ..................................... 48Claudine VartianDLA Piper Weiss-Tessbach

LUXEMBOURG ............................. 52Sandrine PeriotKPMG Luxembourg S.à r. l .

AUSTRALIA ................................. 56Owain StoneKordaMentha Forensic

CHINA ........................................ 60Harvey PackhamAlvarez & Marsal Consulting

SINGAPORE ................................ 64Matthew FlemingKordaMentha Forensic

MALAYSIA ................................... 68Joyce Lim Wan CheakErnst & Young

PAKISTAN ................................... 72Muhammad SohaibCRI Group

UNITED ARAB EMIRATES ............. 74Zafar I . AnjumCRI Group

SOUTH AFRICA ........................... 78Pierre Kil ianBDO Risk Advisory Services (Pty) Ltd

KENYA ........................................ 82Peter KahiErnst & Young Kenya


4 • F I N A N C I E R W O R L D W I D E • A P R I L 2 0 1 3

UNITED STATESRANDALL WILSONRGL FORENSICS

WILSON: We have seen a noticeable rise in the discovery and resulting

prosecution of fraud, bribery and corruption cases. Interestingly, with the

increase in awareness of the potential, magnitude and pervasiveness of

these crimes, it is surprising that these crimes continue to be discovered

at alarming rates. One of the primary factors in my view is the continuing

effect of the economic recession in the US that began in the late 2000s.

The lingering slow economic growth since the recession of 2008 and

2009 coupled with the continuation of relatively high unemployment

has provided ongoing motivation for fraud and corruption, especially in

the occupational fraud categories such as misappropriation and financial

statement fraud. Although, greed and need remain as ongoing motives for

the commission of these crimes. Another factor that we have seen as the

fallout of the economy and reductions in workforce that have occurred

since the recession began is the strain on segregation of duties and resulting

reduction in functionality and effectiveness of internal control systems.

WILSON: Fraud appears as it is discovered and investigated. In that

context, we are continuing to see large scale mortgage fraud cases

dominating the landscape. Similar to a bankruptcy situation, the entity

that is upside down due to significant reductions in property values

(or income) as compared to the outstanding debt (or expense) on the

property too often leverages today on the anticipation of tomorrow’s

improvement in property values. When that value or income increase

doesn’t materialise, the result is an inability to meet one’s debts as

they come due and the situation is ripe for the prospect of motive to

commit fraud. Another alarming trend is the continuing discovery of

Ponzi schemes. The incidence of discovery of Ponzi type investment

schemes is seemingly unabated with large magnitude cases continuing

to occur. One such case discovered just last year was a massive internet

Q TO WHAT EXTENT HAVE

YOU SEEN A NOTABLE RISE

IN THE LEVEL OF CORPORATE

FRAUD, BRIBERY AND

CORRUPTION UNCOVERED

IN THE UNITED STATES IN

RECENT YEARS?

Q ARE THERE ANY SPECIFIC

TYPES OF FRAUD THAT

SEEM TO BE APPEARING

MORE FREQUENTLY IN THE

CURRENT CLIMATE?


A P R I L 2 0 1 3 • F I N A N C I E R W O R L D W I D E • 5

continued...

8

UNITED STATES • RANDALL WILSON • RGL FORENSICS

Ponzi scheme that was reportedly in excess of $600m. There also

does not seem to be an abatement in the volume and magnitude of

occupational fraud cases such as embezzlement and financial statement

fraud. Collusion of employees with outside parties such as vendors and

suppliers also continues to be a category of concern.

WILSON: The Dodd-Frank Act continues to dominate the landscape of

regulatory changes in the United States in that it provides the SEC with

the authority to reward tipsters whose information leads to significant

monetary sanctions against entities and individuals committing such

frauds. In addition, mortgage securities fraud has prompted regulatory

changes to address those issues. One such change that is notable is a

renewed vigour and frequency on the part of regulators in enforcing

existing laws such as Antitrust or the Foreign Corrupt Practices Act (FCPA)

which seems to be experiencing an increase in suits and prosecution.

WILSON: The US Justice Department and the current presidential

administration have clearly stated that fraud prevention is a priority,

which has resulted in an observed increase in cases that are filed and

won against perpetrators. The administration created a Financial Fraud

Enforcement Task Force which has augmented the resources in this

area. There is a contemporaneous battle going on in the fight against

cyber-crime, which is a significant threat and corollary to the fight

against fraud and corruption. It appears that these battlegrounds are

testing the available resources of the system to combat them, yet it

appears that the US government has the resolve to continue the fight

with appropriate resources.

Q HAVE THERE BEEN ANY

REGULATORY CHANGES

IMPLEMENTED IN THE

UNITED STATES THAT ARE

DESIGNED TO COMBAT

FRAUD AND CORRUPTION?

Q DO REGULATORS IN

THE UNITED STATES HAVE

SUFFICIENT RESOURCES TO

ENFORCE THE LAW IN THIS

AREA? ARE THEY MAKING

INROADS IN THIS AREA?



continued...


WILSON: With the advent of the Office of the Whistleblower (OWB)

established by the Dodd-Frank Act, companies are clearly at more risk

of regulatory investigation and its resulting probability for prosecution.

Generally speaking, the penalties range from written warnings that

may be released and covered by the media to financial penalties, suits

filed against both corporations and the individuals involved, restrictions

in abilities to operate in non-compliance areas, as well as the subjective

financial consequences that come from high-profile corruption impact

on a company’s reputation and revenues.

WILSON: The Dodd-Frank Act provided the SEC with the authority

to provide financial rewards to whistleblowers and the Office of

Whistleblowers (OWB) has been playing an important role in the fight

against fraud and corruption. As is the case with fraud hotline programs,

reports of suspicious activity or information from the general public

is a viable and cost-effective way to expedite discovery of fraudulent

activity. Given that the OWB is relatively young, having only been

established in 2011, it is actively looking into ways to effectively

encourage these anonymous reports of fraud or questionable activity.

WILSON: We must begin with the premise that fraud cannot be

prevented in its entirety. Where individuals or business owners have a

motive and the propensity to commit fraud they will find opportunity.

Minimising the opportunity to commit fraud as well as maximising

the prospect of discovering fraud or corruption if attempted must be

the objective of any fraud prevention system. This system would of

course be even better where there is ethical management or regulatory

control that takes seriously its steps and action to fight against fraud.

This includes the investigation and prosecution where appropriate of all

Q ARE COMPANIES MORE

AT RISK OF REGULATORY

INVESTIGATION AND

PROSECUTION? WHAT

PENALTIES COULD THEY FACE

FOR FAILURE TO COMPLY?

Q WHAT ROLE ARE

WHISTLEBLOWERS PLAYING

IN THE FIGHT AGAINST

CORPORATE FRAUD? WHAT

IMPACT DO YOU EXPECT

WHISTLEBLOWING TO HAVE

ON BUSINESS PRACTICES

GOING FORWARD?

Q WHAT GENERAL STEPS

CAN COMPANIES TAKE TO

PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?



continued...


suspected incidents of fraud or corruption reported. The best an entity

can hope for is to improve its probability of discovering fraud in the

normal course of business or through anonymous tips from employees,

vendors, suppliers or the public. This requires physical, software and cyber

safeguards, division of duties of employees with access (or constructive

access) to assets, surprise audits as well as routine comparisons of actual

to recorded transactions and other internal control measures designed

to detect fraud. We also see that assertive and ethical leadership within

entities and governments further improves the likelihood that fraud

will be discovered and dealt with assertively thus improving the overall

effectiveness of the fraud prevention program.

RANDALL WILSON

Partner, Director of Fraud and Fidelity Services RGL Forensics+1 636 537 [email protected]

Mr Wilson has been involved in the field of forensic accounting for more than 25 years. He works with

insurance companies and attorneys on matters involving forensic accounting, financial damages and

litigation support. Mr Wilson has testified as an expert witness in state and federal courts, depositions,

arbitrations and mediation on behalf of both plaintiffs and defendants. He has participated in seminars,

presentations and has lectured regarding investigative accounting, fraud, insurance claims analysis and

measurement of damages to members of the insurance and legal profession. He also teaches a graduate

course in forensic accounting at Webster University in St. Louis.






FRAUD, BRIBERY AND


IN CANADA IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

OSBORNE: Increased anti-corruption and anti-fraud enforcement by

Canadian federal and provincial governments has had a dramatic impact.

In recent times, Griffiths Energy International has been fined $10.35m

and Nikko Resources, $9.5m, for bribing foreign officials. Engineering

giant SNC-Lavallin was raided twice in connection with investigations

into alleged bribery of foreign officials, and its former CEO has been

charged with domestic corruption. A judicial commission in Quebec

is investigating allegations of corruption and kick-backs in Quebec

municipal contracts, and the Competition Bureau is investigating and

prosecuting alleged bid-rigging in the construction industry in Quebec

and Ontario. In addition, frauds aimed at businesses have been targeted

by the Competition Bureau, including the operators of the ‘Yellow Page’

international scam, who were fined $8m.

OSBORNE: Corruption, both domestic and international, has recently

received a lot of attention from enforcers and the public in Canada.

Other types of fraud that have been encountered in the current climate

include: retail securities frauds that have come to light as a result of

falling markets; financing scams aimed at start-up businesses; business

directory scams, and other scams that bill businesses for services they

did not order or are of little or no value; and frauds aimed at lawyers.

CANADAW. MICHAEL G. OSBORNEAFFLECK GREENE MCMURTRY LLP



continued...

8

Q DO REGULATORS IN

CANADA HAVE SUFFICIENT

RESOURCES TO ENFORCE

THE LAW IN THIS AREA? ARE

THEY MAKING INROADS IN

THIS AREA?


REGULATORY CHANGES

IMPLEMENTED IN CANADA

THAT ARE DESIGNED TO

COMBAT FRAUD AND

CORRUPTION?

OSBORNE: Major regulatory changes have recently been proposed

or enacted, including a bill currently before Parliament that proposes

amending Canada’s Corruption of Foreign Public Officials Act by

assuming nationality jurisdiction; including dealings by not-for-profit

entities; creating an offence for falsifying books and records to hide

bribes; repealing the facilitation payments exception; and increasing the

maximum sentence to 14 years. A new offence of making misleading

representations in an electronic message will also shortly be added to

the Competition Act. The legislation has received Royal Assent but is

not yet in force. In addition, penalties for certain white-collar crimes,

including price fixing, bid rigging, and misleading advertising, have been

raised to a maximum 14 years in jail. Tough penalties for importing and

selling counterfeit goods have also been proposed in a bill currently

before Parliament.

OSBORNE: In 2008, the Royal Canadian Mounted Police set up an

International Anti-Corruption Unit. This unit has already had a number

of notable successes, including the successful prosecution of Nikko

Resources and Griffiths Environmental, and the laying of charges

against a business executive for allegedly bribing an Indian cabinet

minister. However, in the current environment of government spending

restraints, enforcement agencies are either experiencing cutbacks or

tighter spending controls, which can affect how many cases they are

able to investigate fully.

CANADA • W. MICHAEL G. OSBORNE • AFFLECK GREENE MCMURTRY LLP


1 0 • F I N A N C I E R W O R L D W I D E • A P R I L 2 0 1 3

continued...




INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

OSBORNE: The risks of getting caught have probably never been

higher. Enforcement is aggressive, and penalties are severe and rapidly

becoming more severe. Penalties for white-collar offences in Canada

include maximum custodial sentences of five years for corruption

of foreign and domestic public officials, and maximum custodial

sentences of 14 years for conspiracy, bid rigging, false advertising, and

fraud greater than $5000. For each of these offences, maximum fines

are at the discretion of the court, except for conspiracy, which fetches

a maximum fine of C$25m.

OSBORNE: Whistleblowing can take several forms. For internal

whistleblowing, when an employee reports a fraud or another offence

internally, a whistleblowing hotline can be an effective way for companies

to fight corporate fraud. External whistleblowing, where employees

report a corporate fraud to the authorities, is protected in the Criminal

Code and the Competition Act, both of which make it an offence to take

reprisals against whistleblowers. Corporate whistleblowing, where a

corporation reports on itself and other associated with it, is encouraged

by the Competition Bureau, which offers immunity for the first to report

a price-fixing conspiracy but authorities generally do not offer formal

incentive programs for other corporate wrongdoing.


A P R I L 2 0 1 3 • F I N A N C I E R W O R L D W I D E • 1 1

continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

W. MICHAEL G. OSBORNE

PartnerAffleck Greene McMurtry LLP+1 416 360 [email protected]

Michael Osborne leads Affleck Greene McMurtry’s competition and regulatory law team. His practice

also includes commercial litigation and arbitration. Mr Osborne advises and represents clients involved

in competition and regulatory inquiries, criminal and administrative prosecutions, class actions and

complex commercial litigation. He has acted as counsel in numerous trials and administrative hearings,

including the first successful actions against fraudulent grey marketing. Mr Osborne was called to the

Bar in 1998, after clerking for Justice John Sopinka of the Supreme Court of Canada. He received his LL.B.

from Dalhousie University in 1996. He lectures and writes frequently on competition, regulatory, and

commercial law topics.

OSBORNE: Companies should maintain clear anti-corruption policies,

based on a risk analysis, as part of their program of compliance with all

relevant legislation, train employees in these policies, and enforce them

through disciplinary sanction. They should also make timely advice

available to employees in the field who face questionable situations.

Firms must maintain and enforce robust accounting standards designed

to detect corruption and fraud, and consider an internal whistleblower

tip line. Finally, firms can require partners, suppliers, and agents to

comply with anti-corruption laws and best practices, and include anti-

corruption clauses in their contracts.




CAYMAN ISLANDS

LIVINGSTON: We have seen an increase in detected corporate fraud,

bribery and corruption in past years, but this may not necessarily equate to

an increase in the incidence of fraud, etc. Although there have been some

notable allegations of fraud involving investment funds, virtually all of the

alleged fraudulent conduct is committed, usually by the fund manager,

outside of the Cayman Islands. Similarly, over the past 12 months there

have been some significant actions brought locally in relation to domestic

corruption and abuse of office, including the recent arrest and charging of

the ex-Premier for theft, misconduct in public office and breach of trust,

offences under the Penal Code (2010 Revision) and Anti-Corruption Law,

2008.

LIVINGSTON: Since the financial crisis, there has been a marked

increase in board and investor diligence, as well as regulatory supervision

and investigation. The crisis unveiled a number of elaborate fraudulent

schemes that essentially boiled down to a misappropriation of company, or

counterparty, assets. Most simply involve theft or conversion of property,

whereas some (fewer now than before) involve elements of a Ponzi scheme.

On the domestic front, a variety of schemes have been detected recently

ranging from credit card fraud, internet and email fraud, through to the

attempted forgery online of Cayman incorporated companies’ registration

documents.




FRAUD, BRIBERY AND


IN THE CAYMAN ISLANDS IN

RECENT YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

MARTIN LIVINGSTONMAPLES AND CALDER



continued...

8

LIVINGSTON: The most significant development would be the introduction

of the Anti-Corruption Law, 2008, which came into force in 2010. The

Anti-Corruption Commission (ACC) created under the law has been very

active in vetting reports of potential misconduct and offences involving

domestic and foreign corruption. These reports have led to investigations

and criminal proceedings against the public officers involved. Cayman

Islands residents, including corporate vehicles, also need to be wary of

the extra-territorial provisions of the UK Bribery Act and the US Foreign

Corrupt Practices Act (FCPA). On the regulatory front, there were recent

amendments to the Monetary Authority Law (2010 Revision) to permit

the Cayman Islands Monetary Authority (CIMA) to, first, apply to the

Grand Court for an order to protect the interest of investors, depositors,

policy holders or beneficiaries of trusts, including orders to freeze assets

or accounts, or suspend dealings with equity interests; and, secondly, to

permit overseas regulatory authorities to carry out on-site inspections in

relation to an entity in the Cayman Islands that is subject to its supervision.

These amendments support the provisions agreed in memoranda of

understanding entered between CIMA and foreign regulators, including

the SEC, FDIC, OSFI and the PRA/FCA and the Bank of England, as the

prudential regulatory successors to the FSA.

LIVINGSTON: The Cayman Islands is well placed to demonstrate

compliance with internationally accepted principles on the detection

of fraud, money laundering, bribery or corruption. This is the case for

criminal purposes, where the ACC, the Cayman Islands Financial Reporting

Authority and the Royal Cayman Islands Police may take action, as well as

for civil/regulatory purposes, in which case CIMA or the TIA may handle

matters. Each of these agencies has sufficient powers under their enabling

legislation to, where necessary, investigate, compel production of and


REGULATORY CHANGES

IMPLEMENTED IN THE

CAYMAN ISLANDS THAT

ARE DESIGNED TO COMBAT


Q DO REGULATORS IN THE

CAYMAN ISLANDS HAVE





CAYMAN ISLANDS • MARTIN LIVINGSTON • MAPLES AND CALDER



continued...

share information, freeze and seize the proceeds of these crimes, as well as

to assist in the prosecution of subjects involved in the commission of such

crimes by the newly formed Office of the Director of Public Prosecutions.

LIVINGSTON: Although some of powers under this legislation are

relatively new, the agencies have had fundamental powers of investigation

and enforcement for some time. It may be that we are now seeing an

evolution in the use of the enforcement powers, so as to better assist in

cross-border investigations involving Cayman vehicles. Each of the relevant

laws have serious penalties where liable for an offence, which may include

the failure to report an offence to the relevant authorities. Such penalties

may include imprisonment or the imposition of a substantial fine. Each

of these laws have provisions for personal liability and vicarious liability,

which includes offences by consent or connivance of a director or officer

of a company. The Proceeds of Crime Law also permits civil proceedings

to freeze and recover assets. As a regulatory matter, CIMA have a full suite

of enforcement powers available for regulatory infringements, including

suspensions of directors or senior management, fines and restrictions,

suspension or revocation of licences.

LIVINGSTON: Each of the relevant laws will have a mandatory reporting

obligation on Cayman residents where knowledge or suspicion of an offence

arises. Most of the investigations and prosecutions have arisen from such

reports being made to the appropriate authorities, and the cooperation

of domestic and external authorities in the matter. There are specific

provisions protecting whistleblowers in the Proceeds of Crime Law and

Anti-Corruption Law. If the recent use of the Anti-Corruption Commission

as the reporting authority under that law is anything to go by, we should

see a distinct increase in the number of reports made under each of these

laws. It is important that businesses ensure that the mandatory reporting

obligations are made clear to all staff in their policy and procedure manuals,

as it could avoid costly investigations in the future.

Q WHAT ROLE ARE







GOING FORWARD?



INVESTIGATION AND

PROSECUTION? WHAT






continued...

LIVINGSTON: Fraud is incredibly difficult to detect, especially when

merely relying upon fundamental anti-money laundering procedures.

Although each financial service provider should have a set of internal

control procedures tailored to detect and prevent fraud and other criminal

conduct, certain publications may be of assistance in starting the process

– for example, for anti-corruption or bribery, the US Department of

Justice and SEC recently issued a Guide on the FCPA in November 2012,

Transparency International issued a Guide on Anti-Bribery Due Diligence

for Transactions in May 2012, and Guidance on the UK Bribery Act has

been issued by the British Bankers Association in December 2011, and

the Ministry of Justice in March 2011. Once the policies and procedures

have been finalised it is imperative to train all staff on their statutory

obligations, as well as some practical typologies relevant to their line of

business.



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

MARTIN LIVINGSTON

PartnerMaples and Calder +1 345 814 5263 [email protected]

Martin Livingston specialises in all aspects of regulatory, licensing, risk management and anti-money

laundering. He also advises on duties of confidentiality and information exchange. Mr Livingston joined

Maples and Calder in 2002 and was made partner in 2008. He previously worked for Phillips Fox, Deloitte

& Touche and Barclays. He is a graduate of the University of Otago, New Zealand. Mr Livingston has been

President of the Cayman Islands’ Compliance Association since 2004 and is a regular contributor and

speaker on regulatory matters affecting the offshore market.




BRAZIL




FRAUD, BRIBERY AND


IN BRAZIL IN RECENT YEARS?

EDUARDO SAMPAIOFTI CONSULTING BRASIL

SAMPAIO: Corruption remains a hot topic in Brazil. Certainly a lot of

recent activity has marred the Brazilian landscape, but it is difficult to

establish a clear path. On the one hand, Brazilians have enjoyed some

unquestionable gains in the country’s fight against corruption and the

move towards greater transparency. Some of these victories include

the Mensalão judgement at the Supreme Court; the final hearings of

this very high profile case made daily headlines, as well as prime time

TV for most of the second half of 2012. After almost eight years of

investigation, 31 individuals were judged, the majority of whom were

found guilty and faced long-term sentences. The group included former

ministers, directors of commercial banks, congressmen and shareholders

of advertisement agencies, who were used as middlemen. Equally,

since 2010 congress has been discussing a new anti-corruption law

that will create tougher sentences. International pressure is increasing,

demanding laws with similar principles as the US FCPA and UK Bribery

Act. The Portal Transparencia is another significant step; in November

2011 the federal government enacted a new law which increases the

level of transparency in its public expenses. However, despite these

gains, we have, unfortunately, seen an increase in indicators which

still point to strong levels of corruption. In December 2012 the NGO

Transparency International (TI), which ranks perceived corruption in

the public sector, ranked Brazil 69th among 176 countries surveyed.

In TI’s 2011 Corruption Perceptions rankings, Brazil ranked 73rd out of

183 countries. In another ranking that lists bribes paid, the country

was in 14th out of 28 countries analysed. The fact that Brazil occupies

intermediate positions in corruption and bribery rankings clearly reflects

what is happening in the country: there are many cases of corruption,

but also many attempts to fight it. The perception of corruption in the

public sector has improved slightly year on year, but the problem is

still endemic according to TI’s analysis. Several powerful congressmen,

many of whom were involved in corruption scandals in the recent past,



continued...

8


TYPES OF FRAUD THAT



CURRENT CLIMATE?

BRAZIL • EDUARDO SAMPAIO • FTI CONSULTING BRASIL

still wield enormous prestige and power in congress. The current head

of the Senate, Senator Renan Calheiros, is often cited as one of these

figures. Several cases investigated by US authorities in recent years

have included Brazil as one of the countries where crimes of corruption

have been committed. Pharmaceutical company Eli Lilly and retail giant

WalMart are two such companies. Furthermore, the US Department of

Justice is also investigating Brazilian aircraft manufacturer Embraer.

SAMPAIO: This is hard to define precisely, given the limited amount of

available information. That said, crimes involving infrastructure projects

remain a highly debated topic. There are tens of billions of dollars worth

of projects being carried out across the country. Some of those relate to

sporting events due to be held in Brazil in the coming years, namely the

FIFA World Cup in 2014 and the Olympic Games in Rio de Janeiro in

2016. Others relate to basic infrastructure projects, such as sanitation,

roads, ports and so on. Moreover, in the case of these sporting events,

the Brazilian law that regulates the public bidding process was replaced

by a weaker law in terms of controls.

SAMPAIO: After 1.3 million Brazilian voters signed a public petition,

which was later approved by congress and upheld by the Supreme Court

last year, Brazilian voters have benefited from the Ficha Limpa – or

clean record – anti-corruption law. The law, which prohibits politicians

with criminal convictions or a record of political charges from taking

office for eight years, first came out in 2010.


REGULATORY CHANGES

IMPLEMENTED IN BRAZIL


COMBAT FRAUD AND

CORRUPTION?



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

SAMPAIO: The pioneers on this front remain the public prosecutors,

particularly at the federal level. The 1988 federal constitution granted

enormous rights and latitude to allow public prosecutors to seek

and investigate cases with great autonomy. Further enforcement of

transparency has been carried out by the National Justice Council (CNJ),

a federal advisory council presided over by Supreme Court ministers.

SAMPAIO: Compared to previous years, it is probably fair to say that

the UK and US anti-corruption laws, which often reach companies

not headquartered in these countries, have increased in terms of their

enforcement, including against companies with operations in Brazil.

There are several industries that have specific regulatory agencies able

to issue penalties that can be very significant in terms of the impact on

operations and the size of fines. It is also worth mentioning that local

environmental laws are very strict and often carry large penalties for

firms. Curiously, environmental crimes are the only crimes that can be

committed by a corporation under the law, as all other crimes described

in the local penal code refer to individuals.

SAMPAIO: A number of firms have expanded their compliance

and transparency practices to include anonymous channels of

communication. Also, the recent change in the US FCPA processes that

reward whistleblowers financially is likely to have an impact in Brazil.

Some experts argue that this change is more likely to impact negatively

on corporations, as individuals with information about illicit acts now

have an economic incentive to report to public authorities at a later

stage, rather than internally and in order to prevent malfeasance at an

early stage.


Q DO REGULATORS IN

BRAZIL HAVE SUFFICIENT




THIS AREA?



continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

SAMPAIO: A strong compliance program remains the best preventive

tool. Some of the elements include: adherence to local laws;

understanding local business practices; a strong and continuous

message from the top; strong channels of communications; involving

other stakeholders, such as vendors and clients; and adequate staff

training.

EDUARDO SAMPAIO

Senior Managing DirectorFTI Consulting Brasil+55 11 3165 [email protected]

Eduardo Sampaio is a senior managing director, leading the Brazil office’s forensic and litigation consulting

practice, and is based in Sao Paulo. Mr Sampaio has more than 15 years experience at risk and business

consulting firms in Brazil and abroad. Before joining FTI, he was managing director of i2Integrity in Brazil,

general manager of Marsh Risk Consulting in Australia, and managing director and country manager of Kroll

in Brazil, among other positions. Mr Sampaio has performed work on matters ranging from competitive

intelligence to internal investigations, business restructuring and corporate turnaround, corporate disputes,

litigation support, financial fraud, asset searches, due diligence, insurance dealings, among many others.




ARGENTINAANDREA REYERNST & YOUNG ARGENTINA




FRAUD, BRIBERY AND


IN ARGENTINA IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

REY: During the global financial crisis, Argentina demonstrated a high

degree of flexibility. The country has shifted from facing a crisis to

encountering and creating great business opportunities for both local

and international operators. However, within this context, the level

of acceptance of occurrences of bribery and corruption has increased

significantly in our market, standing at 68 percent in Argentina,

compared with 39 percent globally and 14 percent in the US. We are

aware that a growing market brings new risks, particularly in relation

to corruption and bribery. This is a view held by international business

people, 81 percent of whom see Argentina as a high-risk market. However,

local executives take a more optimistic view, with only 56 percent sharing

the views of the international business community. The economy is not

the only reason for these sentiments. The prevailing business culture,

coupled with a distinct lack of policies and mechanisms designed to

detect and prevent fraud, have also played a significant role.

REY: The most common types of fraud in Argentina are corruption,

through the payment of undocumented expenses or fees in order to

attract a business or to maintain the presence of a business; asset

misappropriation incurred by employees; and the misstatement

of financial statements or performance indicators. Though many

companies have intensified their efforts to combat bribery and

corruption, our research shows that one in four executives acknowledges

the possibility of accepting ‘cash payments’ as a way of injecting more

sustainability into businesses, reflecting the strong pressures exerted

by corporate goals. Even though the misappropriation of assets is a very

common type of fraud, fraudulent booking entails the highest costs for

companies.



continued...

8

Q HAVE THERE BEEN

ANY REGULATORY

CHANGES IMPLEMENTED

IN ARGENTINA THAT ARE

DESIGNED TO COMBAT


Q DO REGULATORS

IN ARGENTINA HAVE





REY: There have been some regulatory changes to fight fraud and

corruption in Argentina. Many international anti-corruption agreements

have been signed over the years. For example, the Inter-American

Convention Against Corruption was approved by the Organisation of

American States. Also, Argentina signed the Convention on Combating

Bribery of Foreign Public Officials in International Business Transactions

in 1997. The most significant, recent developments were related to anti-

money laundering laws, in keeping with the Financial Action Task Force

on Money Laundering and its relevant agency in Argentina. According

to local executives, domestic laws and local enforcement agencies are

not harsh enough. Furthermore, 80 percent of executives believe that

local enforcement agencies are not effective in their research processes

or in the determination and application of penalties.

REY: Local enforcement agencies have not carried out any major

initiatives in this regard. The most significant corruption cases involving

local companies were investigated and penalised by international

enforcement agencies. Government agencies do not allocate enough

resources to enforce the law in these areas, however, this does not

mean that government action is entirely missing. The emphasis falls

on tax avoidance and money laundering through new regulations and

prevention campaigns. It should be pointed out that over the past few

years there has been a strong increase in government intervention in

foreign trade transactions, payments and collections abroad, and the

setting of price caps, among others. However, these measures have

reduced the transparency of the overall economy and increased the

possibility of obtaining governmental approvals or authorisations on

a discretionary basis, thus increasing the risk of occurrence of illegal

ARGENTINA • ANDREA REY • ERNST & YOUNG ARGENTINA



continued...

activities to avoid such controls. This is a pending issue that will

probably be addressed in the next few years as a result of increased

international pressure.

REY: As previously mentioned, governmental agencies focus on tax

avoidance and money laundering. However, the Argentine criminal

code imposes a two to six year custodial sentence on any person

who offers money or any other gift to, or accepts a direct or indirect

promise to exercise undue influence on, a public official so that the

latter performs, delays or refrains from doing something related to his

or her official duties. There are no local regulations such as the Foreign

Corrupt Practices Act or the UK Bribery Act establishing any other type

of requirements or penalties.

REY: Hotlines to report and warn about potential fraud in Argentina

are commonly used but are not widespread among employees. Better

internal communication and a greater awareness among employees

of the importance of those hotlines are paramount in the battle to

turn whistleblowing into a truly effective weapon against corporate

fraud. Based on our own experience, hotlines were the basis for an

investigation in only a few cases. There is much left to do. If hotlines

can be improved as an instrument, many potential fraud risks could

be identified and avoided. Whistleblowing is becoming more widely

accepted among businesspeople in Argentina and, it will, undoubtedly,

contribute strongly to more transparent business practices in the

future.



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

ANDREA REY

PartnerErnst & Young Argentina+54 11 [email protected]

Andrea Rey is a partner at Ernst & Young Argentina. She is in charge of the Fraud Investigation & Dispute

Services (FIDS) practice of the firm. Ms Rey has over 25 years of experience and specialises in services related

to fraud investigation, anti-bribery & corruption (FCPA and UKBA), third-party due diligence, transaction

forensics, forensic technology and discovery services, compliance assistance, and dispute services. She has

provided assistance to several industries, such as the financial services, telecommunications, automotive,

consumer products, and more. Besides the FIDS practice, she has been partner in charge of financial

statement audits, internal control processes, risk assessment and business reviews for multinational

companies.

REY: Knowledge is the key to preventing fraud. Therefore it is

fundamental that corporations, from boards and c-suite executives to

associates, be deeply aware of anti-corruption policies and the risks

that entail. The development of policies and procedures, ongoing

control and prevention programs, as well as training programs, are the

proper tools to help prevent corruption and fraud. Although companies

are increasingly aware of the risks posed by these practices and most

of them are implementing a wide range of procedures to help mitigate

such risks, they are still strongly exposed to them. Accordingly, our firm

has designed new tools and technologies to help identify corruption

practices, and to enhance prevention and control techniques. Effective

corporate due diligence and oversight programs will also help clarify

these issues and pave the way for best practices.




COLOMBIALAUDE FERNANDEZFTI CONSULTING COLOMBIA




FRAUD, BRIBERY AND


IN COLOMBIA IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

FERNANDEZ: Over the last five years there has been a noticeable

rise in the number of cases relating to bribery and corruption in both

the public and private sector. This trend is influenced by two notable

factors: an increased interest in the subject on the part of investigative

journalists and a growing presence of entities specialised in conducting

complex investigations. Journalists have been able to document

and divulge major corruption cases, thereby supporting government

activities related to this as well as fuelling the public opinion pressure

necessary to make corruption a priority. Specialised firms have in turn

provided expert advice on the development of both individual cases

and government units dedicated to addressing these crimes. Colombia’s

improved security situation has allowed the government to reallocate

law enforcement resources to address previously ignored white-collar

crimes. Given this, an increase in corporate fraud reports may actually

be understood to be a sign of the country’s improving fortunes.

FERNANDEZ: I will limit myself to outlining four types of fraud

which, due to their recurrence and severity, pose the greatest risk to

Colombia’s private sector and to the judicial authorities. The first of

these is technology-enabled internal fraud. This involves company

employees accessing privileged data which can be used to, among

other things, illegally transfer money from company accounts. We have

also seen a rise in the manipulation of company accounting records to

reflect a more solid financial footing. This is typically a precondition to

participate in certain government bids, and in some cases the practice

is a precursor to committing further frauds related to these contracts.

Additionally, we have identified asset management scams which rely

on complicated investment structures and lax accounting practices to

defraud investors. Equally worrying is the prevalence of complicity on

the part of public sector employees to rig public bidding processes.



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN COLOMBIA


COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS IN

COLOMBIA HAVE SUFFICIENT




THIS AREA?

FERNANDEZ: Absolutely, and these have been very positive. There are

now harsher penalties for white-collar crimes; a number of laws have

been passed to criminalise additional activities associated with this

phenomenon; and restrictions have been put in place to make it harder

for those accused and convicted of white-collar crimes to serve their

sentences under house arrest. The current administration has adopted

three specific measures which have further facilitated investigations

of this nature. The first of these is the modification of the criminal

code to allow for negotiations between the prosecutor and defendants;

this seeks to facilitate white-collar investigations through voluntary

confessions and plea bargains. The Santos government has also

centralised a government strategy called Anti-Corruption Statutes to

review previous anti-corruption laws and implement modifications to

these. Lastly, the Attorney General recently created a Specialised Unit

to carry out data analysis relating to the matrix of criminal activity in

Colombia, which seeks to map out the most prevalent forms of fraud.

FERNANDEZ: Government resources in this area are lacking, and we

foresee this deficit will continue for some years to come. However, we

believe the country not only needs a greater deployment of resources in

this area, but a smarter one. There are still significant improvements to

be made regarding administrative techniques and personnel selection

processes in government departments and agencies that investigate

white-collar crime. Lack of communication between entities occasionally

leads to parallel investigations – such a waste of resources highlights the

need for these entities to seek a more cooperative working relationship.

On the other hand, we have seen valuable advances with regards to the

incorporation of technology tools in the investigative process as well as

vast improvements in accountability practices.

COLOMBIA • LAUDE FERNANDEZ • FTI CONSULTING COLOMBIA



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

FERNANDEZ: At present, companies operating in Colombia

undoubtedly face a higher risk of being investigated by the authorities.

The aforementioned Anti-Corruption Statutes are a good example

of this; in addition to extending the number of activities covered under

white-collar crime laws, the statutes make it obligatory for the ‘revisor

fiscal’ – a figure in Colombian companies who acts as an internal

accounting auditor appointed by the board of directors, or ideally by

shareholders – to disclose any internal accountancy improprieties

he or she finds to the pertinent authorities. Failure to adhere to the

Anti-Corruption Statutes may result in penalties for a company’s

legal representative, its board of directors, and for the company itself.

Depending on the severity of the crime, these may lead to fines,

imprisonment for the individuals involved, revocation of professional

accreditations for lawyers, accountants, etc., and in extreme cases, the

forced closure of a company.

FERNANDEZ: This is currently a highly sensitive topic in Colombia.

The recent discovery of witness ‘cartels’, which specialised in the

fabrication of testimonies to be used in trials, has led to a discussion

on the overreliance of these as proof in all trials. Human intelligence is

undeniably valuable in any investigation or judicial process. However,

the measure of its effectiveness is the extent to which these are

administered correctly, built on solid grounds, and – to the extent

possible – corroborated through other means. If these three principles

are followed, whistleblowers may be more confidently relied upon to

guide investigations.




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

FERNANDEZ: The most important element to prevent these incidents

is the full support of the board of directors and the management

team in the implementation of preventive measures against white-

collar crime. Although we often hear business leaders expound on

the corrosive nature of fraud and internal corruption, when presented

with tangible and comprehensive fraud-prevention measures, they

often choose watered-down versions of these – usually with a heavy

emphasis on incident response measures. Such reactive measures fail

to deal with the nature of the problem, being limited to a ‘firefighting’

capacity each time a crisis arises. In Colombia there is not an engrained

culture of executive accountability, and this is still reflected in the lack

of legal requirements on the subject. For this reason, companies – and

more specifically shareholders – should require accountability practices

that go above and beyond the local norm in order to create safeguards

against white-collar crime.


LAUDE FERNANDEZ

Managing Director, Forensic and Litigation ConsultingFTI Consulting Colombia+57 1 610 [email protected]

Laude Fernández is a Managing Director at FTI Consulting, leading the firm’s Forensic and Litigation

Consulting Division in Bogota, Colombia. He previously served as Director of Counterintelligence at

Colombia’s Department of Administrative Security. He has over 25 years of experience in investigations,

intelligence, and security matters.






FRAUD, BRIBERY AND


IN THE UNITED KINGDOM IN

RECENT YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

SANTOS: Recent months have seen numerous headlines about cases

of corporate corruption – both within the UK and globally involving

UK-based companies. This alone does not mean that corruption is

on the rise, only that stronger measures are being implemented. The

UK Bribery Act has now been implemented and is delivering daily

results. At present we can see a real increase in the detection of acts

of corruption, resulting in severe penalties for the companies involved.

Transparency International UK (TI-UK) says that, currently, 38,000

people are estimated to be involved in organised crime in the UK, and

that such activities cost the economy anywhere between £20bn and

£30bn per year.

SANTOS: According to the PwC global economic crime survey 2011,

cyber-crime is emerging as a serious threat to organisations. The report

contains some interesting highlights. Thirty-four percent of respondents

experienced economic crime in the last 12 months, a 13 percent increase

from 2009. Almost 1 in 10 who reported fraud suffered losses of more

than US$5m. Cyber-crime now ranks as one of the top four economic

crimes. Reputational damage resulting from cyber-crime is the biggest

fear for 40 percent of respondents. Forty percent of respondents don’t

have the capability to detect and prevent cyber-crime. Fifty-six percent

of respondents said the most serious fraud was an ‘inside job’. Senior

executives made up almost half of the respondents who didn’t know if

their organisation had suffered a fraud.

LILIA SANTOSCRI GROUP

UNITED KINGDOM



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN THE

UNITED KINGDOM THAT

ARE DESIGNED TO COMBAT


SANTOS: The UK Bribery Act’s implementation and reinforcement

of control measures, guarantees that the law is deeply seated in the

day-to-day operations of most UK companies. The main regulatory

change in the UK has been the enactment of the Bribery Act which

came into force on 1 July 2011. The Act creates offences in relation to

offering, promising or giving a bribe; requesting, agreeing to receive or

accepting a bribe; bribing a foreign official to obtain or retain business;

and failure by an organisation to prevent bribery by those acting on its

behalf. Also the SFO has increased its focus on bribery and corruption

over the last four years. In addition, there has been an increase in joint

investigations taking place with authorities in different jurisdictions

working together through the framework of mutual legal assistance

to investigate and prosecute instances of fraud and corruption. One

notable development in the UK has been the recent consultation on

Deferred Prosecution Agreements, which have been used for some time

in the US, whereby companies could avoid prosecution by agreeing to

pay penalties and take remedial actions as an alternative to contested

criminal proceedings.

SANTOS: The introduction of the UK Bribery Act raises the risk that

corrupt companies will be caught in the act when engaged in criminal

activity. The most common penalties that firms face are large fines

that can impact company cash flow and jail time for managers and

employees. Firms found to be connected with criminal conduct may

even find themselves being blocked from specific markets, curtailing

their firms ability to grow and expand. Since the SFO is adopting the

stance of putting the onus on companies where bribery and corruption

UNITED KINGDOM • LILIA SANTOS • CRI GROUP



INVESTIGATION AND

PROSECUTION? WHAT





continued...

Q WHAT ROLE ARE







GOING FORWARD?

are concerned, it seems that that they would be more under the

spotlight in respect to investigation and also prosecution. So far there

has been one prosecution of an individual for domestic bribery, R v

Innospec which remains the leading authority on how companies will

be treated for bribery offences under the Bribery Act 2010 and as at

the end of June 2012, the SFO was investigating four corporate self-

referrals and 11 other bribery cases.

SANTOS: We don’t have to look too far back to find examples of

criminal business cases brought to public knowledge by whistleblowers

– just think on the impact of the News Corp phone-hacking case. In light

of this case, the UK government seems to be developing legislation that

will regulate the confidentiality of investigative journalism. On the other

hand, some experts advise that UK law should become more in line with

that of the US following the Dodd-Frank Wall Street Reform Act, and

that formal protection for whistleblowers should be implemented. An

important issue to consider in the UK is whistleblower reward policies,

which at present are non-existent. Once again, US policy is under the

scrutiny of UK regulators and a decision will probably be made in the

near future. Since fraud is more likely to be detected by an insider – that

is, an employee within a firm – rather than external auditors, regulators

and the media, whistleblowers play a key role in rooting out fraud. So

a study in the Journal of Finance stipulates. The study examined a total

of 216 cases of alleged corporate fraud. Employee whistleblowers were

responsible for revealing the fraud in 17 percent of cases — more than

any other type of source — in which the fraud was not first brought to

light by a firm’s management.






PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

SANTOS: The following steps must always be remembered: prevention;

detection; response; and following-up and updating. In the end, all

the details matter, even if they are not relevant at the moment, they

may become important in the future. Actively listen to employees

on the ground and check thoroughly through all documentation.

Understand the procedures and the actors involved. Executives should

attempt, where possible, to segregate responsibilities; implement

fraud awareness training; and maintain and up-to-date registry of all

employees, their positions, responsibilities and current projects. To

reduce the risk of prosecution under the Act, companies need to ensure

that they have adequate procedures in place to avoid falling foul of the

corporate offence of failing to prevent bribery. Devising an appropriate

and proportionate policy is not enough. Training is essential as is

commitment to it from the top, and a company will have to review and

overhaul its policies after seeing how they work in practice.

LILIA SANTOS

ManagerCorporate Research and Investigations Pvt. Limited+44 (0)207 038 [email protected]

Currently managing business development for CRI Group in European and North American markets, Lilia

Santos has consolidated experience in fraud, corruption and money-laundering detection. As a forensic

accountant specialist, Ms Santos has carried several due diligences in important insolvency and M&A

processes. Now, focusing on delivering the correct tailor-made investigative services to CRI Group clients,

Ms Santos has wide knowledge on market trends and state of art in our line of services.




GERMANYBENNO SCHWARZGIBSON, DUNN & CRUTCHER LLP

SCHWARZ: The published figures analysing the development of

corporate fraud, bribery, and corruption for Germany suggest a slight

decline in this category of crime. However, surveys show that the overall

amount of damages caused by these crimes has risen significantly. The

reason for this is that, in addition to the immediate damage caused by

the fraud itself, there are higher collateral damages. These collateral

damages result from the heightened scrutiny of the public and

enforcement agencies seeking full remediation or penalties.

SCHWARZ: Fraud committed by using or manipulating digitised

information has become a serious threat for businesses across all

industries. However, statistical data, which points to an increase in

both the number of crimes committed and the overall damage caused,

allows only a limited assessment of how widespread the problem

has become. Many companies are reluctant to report these crimes

for fear of the significant reputational damage they may suffer if

the data loss becomes public knowledge. However, companies rarely

report attempts to breach these systems, although attempted data

theft itself constitutes a crime. In the case of corruption, the fact that

many companies now operate compliance management and reporting

systems has led to a significant increase in reported corruption cases.

This has been reflected in a dramatic increase in corruption enforcement

in the past few years.

SCHWARZ: The Federal Chamber of Parliament resolved to amend

the Administrative Offences Act from 1 January onwards. First, it has

pledged to increase the current statutory maximum fines for offences




FRAUD, BRIBERY AND


IN GERMANY IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?


REGULATORY CHANGES



continued...

8

Q DO REGULATORS IN

GERMANY HAVE SUFFICIENT




THIS AREA?

stemming from a lack of management oversight, from €1m to €10m

for intentional conduct, and €500,000 to €1m for negligent conduct.

Second, in cases of universal succession or partial universal succession

under the German Transformation Act, it will permit administrative

fines to be imposed on the legal successors of a corporation, up to

the value of the assets assumed by the legal successor. Third, with

regard to assets of corporations, which are subject to administrative

fine proceedings, it will allow that these assets be confiscated as

soon as a regulatory authority has issued the administrative order for

such fines. The German legislature has rejected suggestions it should

acknowledge effective compliance management systems as a defence

or mitigating factor to decrease the amount of the fines. Rather, the

individual regulatory authority will retain discretion in each case, to

consider a company’s compliance efforts in mitigation. Since their

introduction, the proposed amendments have stalled due to objections

from the Regional Chamber of Parliament to other provisions contained

within the same legislation. In mid-December 2012, the Conciliation

Committee adjourned the matter to an as-yet undetermined session

in 2013. While it is uncertain exactly when the new provisions will

take effect, exposure for companies and management will most likely

increase significantly in the near future.

SCHWARZ: Under the German federal system, individual federal states

are responsible for enforcement. There are differences in the level of

enforcement activities among the states. Looking at the latest available

statistics from the Federal Criminal Agency, the number of corruption

enforcement cases ranged from six in the state of Mecklenburg-

Vorpommern to 313 in North-Rhine-Westfalia. Therefore, states’

experience in dealing with complicated corruption cases and the

GERMANY • BENNO SCHWARZ • GIBSON, DUNN & CRUTCHER LLP

IMPLEMENTED IN GERMANY


COMBAT FRAUD AND

CORRUPTION?



continued...




INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

sensitivity local prosecutors have developed in handling such issues

obviously varies. In many states, such as in Bavaria and Hesse, the

prosecutor’s offices have created centralised departments within one

prosecutor’s office, in order to bundle corruption enforcement cases

and thereby increase the level of expertise and efficiency in enforcing

these crimes in one state. Munich-Bavaria and Frankfurt-Hesse are

known to be highly experienced and effective – but also aggressive

– enforcers of corruption matters.

SCHWARZ: In Germany, only individuals, and not companies, can be

the subject of a criminal offence. Companies are so called ‘affected

parties’ in the criminal enforcement procedures against the individual.

In this capacity, if the crime was directed by a representative of the

company – normally its management – or if the crime was a result

of a negligent lack of supervision by management, then the company

may face administrative fines. Administrative fines can have a penal

quality, or serve to ensure the disgorgement of any illicitly made profits.

Penalties for fines with a penal character are capped at €1m – soon to

be increased to €10m. The amount of the disgorgement is not capped

and is calculated on the basis of the full amount of the benefits received

as a consequence of the violation.

SCHWARZ: Whistleblowing is still the single-most effective way to

detect complicated fraud schemes. With many companies now having

in place compliance management systems, whistleblower hotlines have

become more frequent in larger German enterprises. However, there is

still some cultural reluctance to accept whistleblowing as a way to report

issues. This is largely to Germany’s past which, in the last century, saw

millions of people suffer under political regimes that frequently used

undercover police, agents, and whistleblowers to identify and prosecute

people for their political opinions or religious beliefs.



continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

SCHWARZ: The most effective and least expensive way to prevent

corruption is a strong tone at the top, which cascades through middle

management into all branches of the corporation. This tone must

be heard loud and clear, and employees should perceive it to be

uncompromising, strict and fair. To ensure that the tone from the top

drives a culture of compliance, violations of company policies must

be adequately sanctioned. Also, the robust and thoughtfully-planned

auditing of those company departments that are prone to corruption

is a strong deterrent for violators. Finally, regular rotation of employees

operating in sensitive areas will make it more difficult to create

fiefdoms within a company undetected by the corporate functions. A

company will never be able to completely rule out individual violations,

but proactively preventing systematic corrupt behaviour has become

manageable with today’s tools and experience.

BENNO SCHWARZ

PartnerGibson, Dunn & Crutcher LLP +49 89 189 33 [email protected]

Benno Schwarz is a partner in the Munich office of Gibson, Dunn & Crutcher LLP. He is also a member

of the firm’s International Corporate Transactions and White Collar Defence and Investigations Practice

Group. Having been admitted as a lawyer in 1993, Mr Schwarz has nearly 20 years of experience advising

companies on national and international M&A, private equity transactions, joint ventures and other

investments. He also specialises in anti-bribery compliance, notably around the enforcement of the US

FCPA and the UK Bribery Act. Mr Schwarz regularly publishes articles and speaks at conferences about

issues of compliance.




FRANCEPHILIPPE GOOSSENSALTANA




FRAUD, BRIBERY AND


IN FRANCE IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

GOOSSENS: It is difficult to know exactly how much financial crime

has increased in recent years due to the confidentiality of investigations.

However, if we refer to the statistics of the Ministry of Justice, less

than 5 percent of penal matters are related to this type of offence.

Moreover, the number of crimes reported to investigating judges has

decreased, when compared to the number of preliminary investigations.

Nevertheless, the low number of this kind of matter is proportional to

the matter’s relative importance, and everything would suggest that

the economic crisis, combined with a reinforcement of the fight against

some financial crimes, has caused a significant increase in the number

of cases.

GOOSSENS: When it comes to criminal jurisdictions, some authorities

such as the AMF, the French Data Protection Commission (CNIL) and

the Competition Authority have developed a significant ‘almost penal’

approach, which impacts companies. For example, if there were few

cases related to unlawful agreements in front of the penal judge, their

case becomes stronger in front of the French and European authorities,

and the severity of any penalties becomes increasingly important.

Otherwise, anti-money laundering rules linked to embargos also

influence the functionality of companies. Finally, instances of computer

fraud or fraud committed on the internet have increased strongly. Their

greater number and the modus operandi of the crimes mean that they

impact both private individuals and companies alike.



continued...

8

FRANCE • PHILIPPE GOOSSENS • ALTANA


REGULATORY CHANGES

IMPLEMENTED IN FRANCE


COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS IN

FRANCE HAVE SUFFICIENT




THIS AREA?

GOOSSENS: Indisputably, anti-bribery legislation has been

strengthened in France in recent years. Besides the changes

implemented in this area, the extension of the application of bribery to

European or non-foreign agents has considerably modified legislation

as far as international trade is concerned.

GOOSSENS: The current state of public finances does not afford the

government the opportunity to provide resources to the prosecuting

authorities. Importantly however, this funding deficit is offset by the

number of vastly experienced investigators and magistrates who

specialise in the subject. Furthermore, we have seen in certain cases, a

tendency by regulators to move closer to the French and Anglo-Saxon

systems. The introduction of the system of leniency or plea-bargaining,

for example, is indicative of this shift.



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

GOOSSENS: Since the institution of the criminal liability of legal

persons in France, companies can now be tried in criminal courts

and risk fines which are up to five times greater than those faced by

individuals. In the event of repeat offences, these fines can be up to 10

times greater. Companies can also face much more severe punishments,

such as the dissolution of the company, under the ‘death penalty’ or

article 131-39 of the French criminal code. Although the logic of the

UK Bribery Act has not yet been adopted by French law, everything

suggests that the slide towards penalties for non-compliance is more

than hypothetical. It remains to be seen whether such penalties will be

coupled with bonuses for effective compliance.

GOOSSENS: French law has protections, enshrined in labour legislation,

for any person who engages in whistleblowing when it comes to

instances of bribery or fraud. However, whistleblowing is not natural in

France. Our judicial culture does not lend itself to the process because

we can imagine the reaction of a French prosecutor to an individual

that has come to denounce an offence committed by his manager,

particularly if that individual is the only one witness to the criminal

activity. In France, the saying ‘fault confessed half forgiven’ does not

easily apply.




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

GOOSSENS: Companies must set up internal systems to fight against

acts of bribery. The first stage should consist of the implementation

of a code of ethics, firmly establishing the company’s position on the

matter. The second stage should consist of internal measures put in

place by the companies own fraud and bribery prevention agents.

Moreover, the structure of the company’s prevention protocols, as

experienced by employees, is an essential tool in the battle against

bribery and fraud because it enables employees to discover flaws in the

system. Finally, firms should ask themselves a delicate question: What

do we do if an offence is discovered?

PHILIPPE GOOSSENS

LawyerAltana+33 01 79 97 92 [email protected]

Philippe Goossens has extensive experience in litigation cases. He has developed a recognised expertise

in white-collar crime and assists his clients during all the pre-trial and trial stages, particularly on matters

involving white-collar crimes related to finance, labour and other business matters. Mr Goossens has

been a lawyer since 1995, after earning his double Masters’ degree in Business Law and Judicial Careers at

the University of Paris I-Panthéon Sorbonne. He is one of the pre-eminent practitioners in the world and

features in the Best Lawyers 2012 guide.




THE NETHERLANDS




FRAUD, BRIBERY AND


IN THE NETHERLANDS IN

RECENT YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?


REGULATORY CHANGES

IMPLEMENTED IN THE

NETHERLANDS THAT ARE

DESIGNED TO COMBAT


HIN: Due to the financial crisis, companies’ profit margins are under

pressure. Therefore, firms are reviewing their financial results in more

depth. This results in more identified cases of financial statement fraud

and the misappropriation of assets.

HIN: In at least 80 percent of investigated fraud cases, the organisation’s

employees are involved. Financial statement fraud is mainly carried out

by management. Financial statement fraud by management is often

motivated by increased pressure to improve a company’s financial

performance. However, employees also play an important role in cases

involving the misappropriation of assets. In these instances a fraudster

might rationalise his unethical behaviour based on a change in the work

climate arising as a consequence of the financial crisis. The absence of

bonuses and increased working pressure are important factors. With

respect to bribery and corruption we have observed a significant increase

in the number of investigations of Dutch companies carried out by

supervisory authorities in the US and UK.

HIN: The increased international focus of supervisory authorities has

resulted in Dutch and European regulations being brought in line with

those from the US and UK. In the short term, the impact of international

investigations carried out by supervisory authorities has been

underestimated by Dutch companies. Dutch organisations do not realise

they are susceptible to international scrutiny, nor do they fully comprehend

the size of the potential fines they will face for non-compliance with

MARTIJN HINBDO CONSULTANTS B.V.



continued...

8

Q DO REGULATORS IN

THE NETHERLANDS HAVE





THE NETHERLANDS • MARTIJN HIN • BDO CONSULTANTS B.V.

regulations. Other more specific developments are discussions about tax

issues like tax evasion and tax avoidance. In case of bankruptcy fraud,

offenders can also be banned from being directors for five years.

HIN: In the Netherlands, financial economic crime is mainly combated

by the police’s financial criminal investigation department and the Fiscal

Information and Investigation Service (FIOD). In addition to the police

and FIOD, other authorities focus on specific types of fraud. As a result of

this fragmentation, fraud detection could be improved by using a more

efficient approach. A significant amount of information can be of interest

to multiple authorities; however, information is rarely shared due to

legal constraints. Lately, the police and FIOD have invested in hiring new

investigators with fraud and financial specific knowledge. Furthermore, a

large reorganisation took place within the Dutch police force last year.

HIN: There has been an increase in interest in Dutch multinationals

from foreign supervisory authorities. These foreign authorities currently

impose higher administrative fines than EU or domestic authorities. The

impact of the administrative fines from foreign authorities can be up to

10 percent of annual turnover. Therefore, the consequences of corruption

can be enormous in comparison to the misappropriation of assets or

financial statement fraud. Beside reputational risks, directors can be held

personally liable if the organisation did not implement adequate measures

to prevent bribery and corruption. Another trend is the increasing scope

of the European supervisory authority. The financial economic crisis has

made it necessary for stronger international supervision of financial

institutions and the financial system. Currently the European Union is

establishing European supervision of the financial markets through, for

example, the European Banking Authority (EBA) and the European and



INVESTIGATION AND

PROSECUTION? WHAT





continued...

Securities Market Authority (ESMA). European regulation is harmonised

with current international standards from the US and UK. We expect that

foreign supervisors will extend their focus to multinational financial and

non-financial organisations and that the increased activity of European

supervisory authorities will lead to more administrative penalties.

HIN: In general, whistleblowing is one of the main means of detecting

fraud, bribery or corruption. Therefore, all organisations should have

whistleblowing procedures in place. A whistleblower’s report should be

followed up by an independent department within an organisation with

a direct reporting line to the supervisory board in order to prevent any

conflict of interest. Information is becoming more readily available and

is easily shared via the internet and social media. Disgruntled employees

may express their dissatisfaction via the digital highway. People are able

to inform a huge amount of users in a split second. As a result, the number

of company complaints, tips and anonymous reports will continue to

increase, leading to information being shared at the risk of reputational

damage. We advise our clients to mitigate these reputation risks and take

the exposure of digital information seriously. Companies should react

promptly to information that is exposed via social media.

HIN: Organisations should implement adequate measures to prevent

corruption and fraud. In the case of fraud risk assessment, companies

should evaluate the three types of fraud: financial statement fraud,

misappropriation of assets and corruption and bribery. When designing

and implementing controls, we advise companies to pay special attention

to striking a balance between hard and soft controls. Hard controls can

be identified by reviewing procedures and effectiveness can be identified

by checking specifically recorded transactions. Besides the establishment

of hard controls, issues such as culture, leadership and integrity play an

increasingly prominent role within the effectiveness of the organisational

structure. The effectiveness of hard controls within organisations depends

on the presence and operation of soft controls and the characteristics of



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

Q WHAT ROLE ARE







GOING FORWARD?




continued...

individual employees. It is a challenge for firms to identify existing soft

controls and to adjust them accordingly. Perception measurement among

employees and managers provides an insight into the effectiveness of soft

controls. For example, the perception of the soft control ‘tone at the top’

is assessed from the perspective of both employees and managers. Is the

behaviour of management in line with established rules of conduct? Is it

consistent? Do employees feel that their ethical behaviour is appreciated?

The extent to which soft controls can support the organisation in their

prevention, detection and response functions depends on how they

are perceived by employees. One of the most important preventative

measures for external fraud is to identify and verify the company’s

business partners. We advise companies to implement customer due

diligence and integrity due diligence on their business partners. As a

result, third-parties are identified and the company is made aware of any

undesirable behaviour.


MARTIJN HIN

Head of Forensics & Litigation SupportBDO Consultants B.V.+31 (0)30 284 [email protected]

Martijn Hin is a chartered accountant, working for 15 years as a forensic accountant, and has solid

expertise in dealing with (cross-border) investigations and litigation support. He has completed a wide

variety of engagements for (multinational) corporations, lawyers, government, Dutch courts and arbiters.

His main focus within client cases is to investigate relevant facts and circumstances to provide answers on

questions related to: possible irregular transactions, potential breaches of procedures and/or regulations

and the potential misconduct of individuals. Mr Hin’s work spans many economic sectors, with particular

emphasis on financial services, NGOs, real estate and healthcare.



SWITZERLANDMARCEL MEINHARDTLENZ & STAEHELIN




FRAUD, BRIBERY AND


IN SWITZERLAND IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

MEINHARDT: Since 2008 we have noted a significant increase in white-

collar cases. This rise was caused on the one hand by an amended, more

rigid regulatory regime on bribery, corruption and white-collar crimes

in general. On the other hand, enforcement activities have increased

and specialised divisions for white-collar crimes within the public

prosecutors’ offices have been created. Today, Swiss public prosecutors

also investigate cases with an international dimension. In this context,

it is worth noting that approximately one year ago an international

group of companies was fined CHF 2.5m by the Swiss federal public

prosecutor due to bribery abroad. In this specific case, the corporation

had entered into agency agreements with third-party consultants,

namely in Latvia, Malaysia and Tunisia. These agency agreements

provided for contingency fees. In the case at hand, these contingency

fees were used to bribe foreign public servants.

MEINHARDT: The specific type of fraud varies based on the size of

the company, its geographic footprint and its business activities. Larger

corporations more often face cyber-crime – data theft and data abuse.

Many of these cases concern the financial industry as France, the US and

most notably Germany are increasingly active in pursuing tax. Foreign

whistleblower regimes incentivise employees to transfer protected data

to foreign authorities, but also to report on corruption and bribery. Also,

violations of trade and industrial secrets tend to occur more often within

larger corporations, in our experience. Within small and medium sized

companies, these types of white-collar crimes seem to be less frequent.

SMEs are typically faced with fraud and embezzlement cases.



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN

SWITZERLAND THAT ARE

DESIGNED TO COMBAT


Q DO REGULATORS IN

SWITZERLAND HAVE





MEINHARDT: The white-collar regime in general and corruption and

bribery laws in Switzerland specifically have changed, becoming more

rigid. Revision points included the introduction of corporate criminal

liability for certain white-collar crimes and bribery in the private sector.

In cases of bribery and corruption, the company can be held liable if it

did not have the necessary and reasonable systems in place to prevent

crime. Because it is not only unlawful to bribe Swiss public officers, but

also foreign public officers, the scope of the regime is broad. Despite

these broad rules Swiss law does not specify what organisational

measures are ‘necessary and reasonable’. In the case of the company

fined CHF 2.5m, the international group of companies had a compliance

program in place; however, the federal public prosecutor found that

the compliance department was understaffed, too inexperienced and

insufficiently educated.

MEINHARDT: Swiss public prosecutors still lack sufficient resources.

However, organisational measures have led to higher efficiency.

Specialised divisions within the public prosecutor’s offices and

also within police forces have been carved out. Also, the fact that

the authorities can outsource the time consuming e-search and e-

assessment processes to private IT experts has increased efficiency.

Efficient allocation of resources is key, as Swiss public prosecutors

have broad investigative powers, such as the right to question accused

individuals or corporations, potential witnesses and other informants,

and to obtain access to documents, reports and other written or

electronic information. The authorities may also involve experts,

conduct on-site inspections, surveillance or hidden observations, seize

assets, and monitor bank accounts.

SWITZERLAND • MARCEL MEINHARDT • LENZ & STAEHELIN



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

MEINHARDT: Given the revised bribery and anti-corruption regimes

in particular, internationally active companies are more at risk of

prosecution. Agency or consultancy arrangements may trigger such

exposure. Based on our experience, this has led certain international

companies to stop doing business in certain foreign countries. Not only

are the fines issued in these circumstances high, reaching millions of

Swiss Francs, but it is also almost impossible to have a compliance

program in place that can completely prevent violations in certain

countries. Failure to comply may involve criminal, administrative and

civil liability, which results in various sanctions. Criminal liability lies

not only with management and staff, but also on those individuals

that otherwise act on behalf of the company. Criminal sanctions

are custodial sentence and penalties. Penalties may include fines or

disqualification from certain professions, businesses or industries.

Courts may order the confiscation of assets. Administrative sanctions

may include occupational bans, or the withdrawal of licences. Finally, a

civil damage claim may be brought against the perpetrator.

MEINHARDT: Many, typically larger, Swiss corporations have introduced

whistleblower tools into their organisations and compliance programs.

These tools have already had an impact on detecting violations. As a

matter of fact, more law firms are maintaining whistleblower hotlines for

their clients, and in our experience this tool is rather effective and likely

to gain even more importance. Despite private whistleblower ‘rules’,

the Swiss legal system does not provide for a specific regime. The Swiss

government had submitted to the legislator two proposals for amending

the current system. The goal was to specifically protect whistleblowers

under Swiss employment law and to increase compensation for

wrongful dismissal, such as in the case of whistleblowing.




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

MEINHARDT: Most Swiss companies apply a wide range of preventative

measures. However, the larger and more international the organisation

in question, the more complex the set of preventative tools. Often,

companies define their principles through codes of conduct. Such

codes of conduct are typically part and parcel of the employment

agreement, establishing direct consequences in the event of a violation.

Compliance programs and internal compliance organisations are

another widespread prevention tool. As the precedent mentioned above

shows, compliance is key in order to defend the company in a white-

collar case. Adequate staffing with experienced employees and constant

education are required. Today, such education often takes place via

face-to-face training as well as with e-learning tools. Additionally, we

see a tendency for regular inspections, random tests and mock dawn

raids in order to test compliance.

MARCEL MEINHARDT

Head of Internal Investigation, Competition and Regulated MarketsLenz & Staehelin +41 58 450 80 00

[email protected]

Dr Marcel Meinhardt is a leading expert in anti-trust law and internal investigations. He specialises in

all areas of Swiss and European anti-trust law, in compliance and internal investigations in these fields,

as well as in the context of white-collar crimes. He has broad experience in both contentious and non-

contentious matters.




AUSTRIACLAUDINE VARTIANDLA PIPER WEISS-TESSBACH




FRAUD, BRIBERY AND


IN AUSTRIA IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

VARTIAN: We have noticed a considerable increase in our daily practice

as a law firm as well as in media coverage. There is a new sensibility in

Austria regarding corporate fraud, bribery and corruption. Numerous

cases, more than in the past, are pending at the courts. Former politicians,

directors, board members, and officers have all been affected as well

as executive staff of private companies. More and more frequently,

companies themselves, as legal entities, are drawing the focus of the

authorities and are facing painful criminal proceedings. Legislation and

criminal authorities are trying, through their joint efforts, to create a

new and clean culture of business and administration. It is remarkable

that criminal proceedings regarding corporate fraud, bribery and

corruption are leading to more severe penalties in Austria. There was

a time when bribery and corruption were treated as trivial offences by

the authorities. These times are certainly over.

VARTIAN: Aside from the ‘traditional’ types of fraud, we are more often

engaged in cases of corruption in the private sector – the business to

business area. A possible reason for this is that in the field of corruption

in the business to business sector, a sense of justice and existing

legislation are a long way away from each other. Old-established

business practices are no longer tolerated by the Austrian Criminal Act

and are punishable. We have also seen that corruption in connection

with procurement processes is being prosecuted more frequently and

that antitrust laws are enforced more vigorously.



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN AUSTRIA


COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS IN

AUSTRIA HAVE SUFFICIENT




THIS AREA?

VARTIAN: A remarkable amendment to the Austrian Criminal Act

came into force on 1 January 2013. The whole regulatory framework

of anti-bribery and anti-corruption was readjusted. In a nutshell, the

national legal framework to avoid bribery and corruption was seriously

intensified. The definition of a public officer was widely extended and

penalties increased. There have also been changes to the legal norms

for corruption in the private sector. These new amendments to the

Austrian criminal act aim to give a clear distinction between permitted

and non-permitted business practices with the hope of removing the

existing legal uncertainty in this area. It will take some time to find

out if this can be achieved via the new legislation. Furthermore, in

the context of the recent amendments to the Austrian Cartel Act, the

procedural competences of the Federal Competition Authority have been

strengthened and the fight against market abuse has been reinforced

with the introduction of a provision of collective dominance.

VARTIAN: Along with the changes to the legal anti-corruption

framework, Austrian regulators have been provided with more extensive

resources. A separate unit within the public prosecutor’s office was

established – the Wirtschafts- und Korruptionsstaatsanwaltschaft in

Vienna – where public prosecutors with an economic background, either

academic or in practice, are working exclusively on cases concerning

corporate fraud, bribery and corruption. They are definitely making

inroads in this area and are provided with additional manpower almost

every year. Perhaps because this administrative regulatory body is quite

new, it has exerted a great deal of effort in exposing criminal activities.

Additionally, the Federal Competition Authority recently assumed more

procedural capabilities, especially in the context of dawn raids and

information requests.

AUSTRIA • CLAUDINE VARTIAN • DLA PIPER WEISS-TESSBACH



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

VARTIAN: Companies doing business in Austria certainly face more

risks today. The Corporate Criminal Liability Act (VbVG), established

in Austria in 2006, enables authorities to punish companies as legal

entities under Austrian criminal law – similar to the FCPA or UK Bribery

Act. In the beginning, the VbVG was largely neglected, with precious

few cases pending. Recently, this situation has changed enormously.

Whenever a new corporate fraud, bribery or corruption scandal is

uncovered, prosecutors endeavour to pursue the companies at fault. In

case of emergency, it is very helpful for companies to be in a position

to provide the authorities with evidence that an effective compliance

system has been installed. Failure to comply could lead to painful

financial consequences. Also, in the context of competition law, public

awareness has increased and infringements are prosecuted more

strictly. If proceedings are initiated, the companies involved may face

high penalties.

VARTIAN: Within the Austrian legal system, whistleblowing does not

have the fundamental importance it has in the legal systems of the US

or the UK. However, we recognise the importance of whistleblowing

and company standards regarding whistleblowing are improving. New

provisions regarding leniencies have been implemented in the Austrian

Criminal Proceedings Act (StPO). The aim is to encourage whistleblowers

to share their cognitions with the criminal authorities and in return

receive the promise of immunity from criminal prosecution. Although

field reports regarding these new provisions have to be awaited, there is a

clear indication that whistleblowing will become much more important

than it has been previously. Leniency proceedings do, however, already

have an important role in Austrian Competition Law as the Austrian

legislation on competition provides for a system of whistleblowing.




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

VARTIAN: Many multinational companies doing business in Austria

already have an extensive compliance framework regarding corporate

crime, bribery and corruption as they are familiar with FCPA and the

UK Bribery Act. Compliance training and frameworks often cover

competition law aspects and provide the mechanisms needed to

avoid the infringement of antitrust laws. However, it is important

to understand that the whole range of national provisions has to be

covered. In general, a zero-tolerance business culture needs to be

implemented. Our experience has shown that the legal framework

regarding corporate crime, bribery and corruption changes frequently.

Therefore, up-to-date business guidelines, internal policies and codes of

conduct are of significant relevance. Every company should implement

effective training programs that are both comprehensible and practical

for staff, and effectively protect the company.

CLAUDINE VARTIAN

PartnerDLA Piper Weiss-Tessbach+43 1 531 78 [email protected]

Claudine Vartian is the country managing partner of DLA Piper’s office in Vienna, Austria, where she

also heads the firm’s Litigation and Regulatory practice. She is a recognised legal expert in the fields

of banking litigation and related white collar crime, European and Austrian competition law, antitrust

and regulatory law. Her clients include regional and international banking groups, and global industrial

corporations which she supports with inter alia, internal and external investigations, the implementation

of compliance systems and anti-bribery monitoring. Dr Vartian is recommended as a practitioner by

leading international publications and is a regular author of legal publications.




LUXEMBOURGSANDRINE PERIOTKPMG LUXEMBOURG S.À R.L.




FRAUD, BRIBERY AND


IN LUXEMBOURG IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

PERIOT: With a score of 80, Luxembourg has been ranked the 12th least

corrupt country by the 2012 Corruption Perception Index among the

176 countries and territories assessed. However, there are no official

statistics to really quantify and determine the exact level of economic

and financial crime perpetrated. It must be noted that in the tough

economic climate, where maintaining earnings and survival are the key

priorities for organisations, fraud continues to affect all business. There has

been significant enforcement of the existing legislation in Luxembourg

in the last three years. Public and private professionals are aware of the

regulatory framework and the risks regarding non-compliance, which

include penal, financial and reputational risks. Integrity and transparency

are still relevant to Luxembourg which was the first country through the

Private Banking Group Luxembourg (PBGL) and the Luxembourg Bankers’

Association (ABBL) to sign the International Capital Market Association’s

(ICMA) charter of quality for private wealth management in October

2012, the main principles of which are integrity in business relationships

as well as transparency towards clients and the regulatory environment.

PERIOT: Fraud in Luxembourg is the same as in other countries within

Europe, and includes the diversion and theft of goods, financial statement

fraud, misappropriation of assets, corruption, money laundering, VAT

fraud, and cyber-crime, amongst others. We are not aware of any specific

type of fraud occurring more frequently. An economic environment

where there is continuing pressure to reduce costs clearly offers

opportunities for employees to commit fraud, as the level of controls

might also be reduced. This does not mean that perpetrators of fraud

will be restricted to people with the lowest level of authority within the

organisation. The KPMG UK fraud barometer for January 2012 to June

2012 revealed that the largest group of perpetrators is management. It

should be noted that there is also a correlation between the perpetrator’s



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN

LUXEMBOURG THAT ARE

DESIGNED TO COMBAT


Q DO REGULATORS IN

LUXEMBOURG HAVE





level of authority and the losses generated by the fraud.

PERIOT: Luxembourg has amended its anti-bribery and corruption

legislation to respond to recommendations made by the OECD working

group on bribery, as well as by GRECO, especially with the introduction

of the criminal liability of legal entities law – Law of March 2010 –

and protection measures for whistleblowers – Law of February 2011.

These changes have impacted directly upon existing regulation such

as labour laws, and the penal and criminal codes. The financial sector

remains undoubtedly the main pillar of the national economy, attracting

massive capital flows. As a consequence, and in parallel to these changes,

Luxembourg has continued to strengthen its framework in the fight

against money laundering and terrorist financing. Luxembourg made

significant efforts to respond to the recommendations made by the FATF

following its assessment in 2009. The definition of a money laundering

offence and the list of predicated offences, including public and private

corruption as well as the professional categories concerned, have been

extended. In 2011, according to the activity report of the Financial

Intelligence Unit (FIU) published in September 2012, the number of

suspicious declarations reported by professionals to the FIU, with

corruption as the underlying offence, was 25 compared with 6 in 2010.

PERIOT: Since the 2010 amendment of the modified law of November

2004, combating money laundering and terrorist financing, the powers

and means of enforcement of the financial regulator and the FIU have

been strengthened as well as the applicable penalties and sanctions.

Cooperation requirements of professionals with the authorities have

been enforced, as have cooperation requirements between competent

and foreign authorities. Indeed, professional secrecy does not apply

LUXEMBOURG • SANDRINE PERIOT • KPMG LUXEMBOURG S.À R.L.



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?


vis-à-vis the FIU and disclosure of information by professionals will

not constitute a breach. The numbers employed by the Luxembourg

authorities have also been enforced. A specific entity, ‘Transparency

International’ was established in 2009. Awareness raising campaigns

have been addressed to both the public and private sectors with an

emphasis on the link between money laundering and corruption.

PERIOT: Prior to the introduction of the law of March 2010, only physical

persons could be prosecuted and held liable for bribery of domestic and

foreign officials, meaning that only directors or any other representatives

of a company would be held liable if a criminal offence was committed.

Since the law of March 2010, natural persons and legal entities – for

example, private or public companies, and profitable or non-profit

entities – can also be held liable in case of violation of bribery rules. It is

noteworthy that foreign companies can be prosecuted for foreign bribery

if the offence has been committed within the territory of Luxembourg.

In the same way, any nationals or Luxembourg residents committing an

offence of corruption abroad could be subject to criminal proceedings in

Luxembourg. Sanctions for individuals prosecuted for corruption related

offences can range from a fine, imprisonment from six months to 15

years, loss of civil rights, and prohibition from practising certain types of

professions. Legal entities can, amongst others, face a fine, be permanently

or temporarily disqualified from public tenders, or be dissolved.

PERIOT: Whistleblowing plays an essential role in the detection of fraud.

Nevertheless, employees should trust that they can report suspicious

activity on an anonymous and confidential basis without fear of reprisal.

In that respect, the law of 13 February 2011, relating to the fight against

corruption, contains a specific provision in relation to the protection of

whistleblowers.



continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

PERIOT: The first mechanism companies should adopt is the

implementation of a zero tolerance culture towards fraud, starting from

the top with the existence of a code of conduct, integrity and ethics

charter, conflict of interests policy, anti-fraud policy, and repeated

training and awareness. Companies should fully assess the vulnerabilities

of their business operations and implement measures to mitigate the

risks identified. This risk mitigation process should then be reviewed

on an ongoing basis to identify weaknesses. Only an anti-fraud regime

applicable to all will be effective.

SANDRINE PERIOT

DirectorKPMG Luxembourg S.à r.l.+352 22 51 51 [email protected]

Sandrine Periot is a director in charge of Forensic and Anti-Money Laundering services at KPMG

Luxembourg. She joined KPMG in 1996 where she initially focused on voluntary liquidations of investment

funds, banks and other financial professionals. Since 1999, she has integrated the Forensic department

and has over 13 years experience in anti-money laundering services, dispute advisory services and fraud

investigations. Her experience also includes compliance function reviews for banks and other financial

professionals.




AUSTRALIAOWAIN STONEKORDAMENTHA FORENSIC




FRAUD, BRIBERY AND


IN AUSTRALIA IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

STONE: It is always difficult to be definitive about trends concerning

the extent of corporate fraud, bribery and corruption, especially as there

is no specific requirement in many Australian jurisdictions to report such

matters, and corporates are often reluctant to report to the authorities

if they don’t have to. However, we have continued to see an increase in

the discovery of corporate fraud, bribery and corruption in recent times.

Companies are much less willing to ignore allegations and we now

see a higher proportion of such issues being more fully investigated

by firms. From the foreign bribery perspective, in October 2012, the

OECD issued their Phase 3 report on Australia’s implementation of the

OCED Anti-bribery Convention (the OECD Report), which was scathing

of Australia’s extremely low level of enforcement activity of foreign

bribery. We expect to see a notable increase in such cases investigated

by the Australian Federal Police (AFP).

STONE: Due to the diversity of industries across Australia, the fraud we

see occurring in the mining and resources sector can be different to that

in the manufacturing sector. However, we continue to see a number of

common types of fraud in the current climate. These include: conflicts

of interest; employees receiving kickbacks from vendors; inventory

misappropriation; theft of plant and equipment; and theft of intellectual

property, particularly confidential commercial information. A tougher

economic climate has also seen corporates pay more attention to costs,

which in turn has led to greater scrutiny of vendors and in certain cases,

identified significant overcharges, sham invoices or kickbacks.



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN AUSTRALIA


COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS IN

AUSTRALIA HAVE SUFFICIENT




THIS AREA?

STONE: In Australia, legislation prohibiting bribery at the Federal

– national – level is contained in the Australian Criminal Code Act

1995 (the Code) as amended by the Crimes Legislation Amendment

(Serious and Organised Crime) (No. 2) Act 2010. In November 2011,

the Criminal Justice Division of the Australian Attorney General’s

Department released a consultation paper in relation to ‘Assessing

the “facilitation payments” defence to the Foreign Bribery offence and

other measures’ under the Code. In particular, public comment was

sought on the treatment of facilitation payments under Australian law;

the factors that influence whether a benefit is ‘legitimately due’ to the

recipient; the current requirement to identify a particular foreign public

official in order to establish an offence; and the role of dishonesty in

domestic corruption offences. The results of this public comment are

yet to be communicated, but we consider it likely that some changes

will be made in this area to bring Australia either into line with, or

closer to, the UK position on facilitation payments.

STONE: The AFP is tasked with investigating potential violations of the

Code. In response to criticism that allegations of foreign bribery may not

be investigated thoroughly, the AFP is mentioned in the OECD Report

as having created a Foreign Bribery Panel of Experts (the Panel) who will

assist in evaluating all foreign bribery referrals and subsequent decisions

as to whether to open an investigation. The Panel will also monitor

allocation of resources for an investigation. However the relatively

small number of investigations of foreign bribery by the AFP means

that whilst they have some highly experienced and trained individuals,

they are on a steep learning curve to build sufficient strength in depth.

AUSTRALIA • OWAIN STONE • KORDAMENTHA FORENSIC



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

The OECD Report has recommended that the Australian Securities and

Investments Commission (ASIC) use their experience and expertise

in investigating corporate economic crimes to assist the AFP when it

comes to investigating foreign bribery. However, the ASIC does not

have legislated jurisdiction in relation to foreign bribery.

STONE: Earlier this year, it was reported in the media that the AFP had re-

opened two foreign bribery investigations. Given criticism in the OECD

Report for a lack of enforcement and the fact the AFP reopened these

two cases, companies should expect increased enforcement activity

and ignoring legislation like the Code will be at their own peril. Falling

foul of the Code means a company can expect a criminal penalty of the

greater of $11m, three times the benefit obtained by the company, or

if this cannot be determined, 10 percent of the annual turnover of the

company in the 12 months preceding the offence. Individuals can face

a fine of up to $1.1m or 10 years’ imprisonment or both.

STONE: The ACFE’s ‘2012 Report to the Nations on Occupational

Fraud and Abuse’, stated that over 43 percent of uncovered frauds

in an organisation were detected by a tip. Our experience is that

whistleblowers can be a great source of information in the fight against

fraud. Accordingly, it is vital a company implement a safe and secure

route for employees and associated persons to provide such tips

surrounding fraud and misconduct by way of a whistleblower hotline. In

the US and UK the establishment of a whistleblower hotline is regarded

as one necessary element in an overall anti-corruption framework.

However this should be one of a suite of initiatives, rather than putting

all the onus on individuals to report inappropriate behaviour.




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

STONE: Companies should implement an anti-fraud framework

that covers the following three objectives: prevention; detection; and

response. These three objectives are covered in the Standard which

provides a suggested approach to controlling fraud and corruption against

and by Australian entities. We recommend companies develop their

anti-fraud framework based on the Standard, with appropriate tailoring

for their specific circumstances. For compliance with international anti-

corruption legislation, Australian companies should not simply conduct

a box ticking exercise but develop an anti-corruption framework

specific to their business operations and ensure that they go beyond

paper compliance and monitor its ongoing effectiveness. Our view is

that a company should concentrate on ensuring its anti-corruption

framework will allow and encourage employees and associated persons

to follow the spirit of anti-corruption compliance.

OWAIN STONE

PartnerKordaMentha Forensic+61 3 8623 [email protected]

Owain Stone manages the KordaMentha Forensics team and has over 25 years experience in a wide range

of forensic accounting projects. He was previously the Oceania Head of Fraud Investigation and Dispute

Services for Ernst & Young, managing a team of over 50 across Australia, New Zealand and Indonesia. His

recent experience includes expert witness related forensic accounting services (including preparation of

expert reports and giving oral testimony) in the Australian Federal Court, the Supreme Court and County

Court of Victoria, the Supreme Court and High Court of Singapore, the Supreme Court of Vanuatu, and

giving evidence in arbitrations in Australia, Hong Kong and the US.




CHINA

PACKHAM: There has been a rise in corporate fraud, notably the

manipulation of financial statements to inflate the value of various

companies involved in Chinese Reverse Mergers (CRM), whereby

Chinese companies avoided IPO procedures by buying US-listed shell

companies. Increased international trade and investment has also

meant heightened exposure to international regulations such as the

US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. Foreign

firms often do not understand their Chinese operations, and Chinese

firms often do not understand the international regulations to which

they have been exposed. Corruption of government officials is also an

increasingly high profile issue. Chinese leaders have recently stressed

that corruption represents an existential threat to the Communist

Party and have pledged to tackle it.

PACKHAM: The most common frauds of recent years have involved the

manipulation of accounts and financial statements. As noted above,

these have often involved Chinese reverse takeover or CRM companies

that file their accounts in the US. They have also involved foreign

companies whose newly acquired Chinese subsidiaries or joint ventures

have manipulated their financial reports to their head offices or JV

partner while extracting value from the company. The most recent case

to hit the headlines involved the write off of $580m due to alleged

fraud in the recently acquired Chinese subsidiary of a multinational

infrastructure provider. These frauds have arisen from a mixture of weak

corporate governance in Chinese companies and lack of independence

in accounting firms.

HARVEY PACKHAMALVAREZ & MARSAL CONSULTING


TYPES OF FRAUD THAT



CURRENT CLIMATE?




FRAUD, BRIBERY AND


IN CHINA IN RECENT YEARS?



continued...

8

CHINA • HARVEY PACKHAM • ALVAREZ & MARSAL CONSULTING

PACKHAM: In 2011, the 8th Amendment to the Criminal Law made

it an offence to bribe a foreign official, and that law now applies to

all Chinese nationals globally, to anyone physically present in China,

and to all entities organised under Chinese law. The Amendment’s

definitions are vague which will afford it a broad scope. Also in 2011,

new regulations were introduced concerning prepaid shopping cards

for large supermarket chains, which had previously been used to pay

bribes. The new regulations dictate that real identities must be given

when purchasing the cards and any significant purchases must be

made by electronic banking transfer. In 2012, the Supreme People’s

Court issued a new judicial interpretation on offering bribes, in which

it provided guidelines on the categorisation of bribes offered and the

penalties to be applied to bribe givers for each category.

PACKHAM: A lack of resources should not be an issue in China since

the government should be able to mobilise whatever resources it needs,

especially since its leader, Xi Jinping, made anti-corruption measures a

priority in November 2012. However, since corruption appears to be

a problem at all levels of the party – Xi Jinping referred recently to

cracking down on ‘tigers’ and ‘flies’, meaning both senior leaders and

more junior bureaucrats – it will require considerable political will to

root it out. Furthermore, what is perceived in the West as corruption

and weak corporate governance are often accepted cultural norms in

Chinese business practice, so regulatory resources may not necessarily

be focused or applied as they would be in other countries.

Q DO REGULATORS IN

CHINA HAVE SUFFICIENT




THIS AREA?


REGULATORY CHANGES

IMPLEMENTED IN CHINA


COMBAT FRAUD AND

CORRUPTION?



continued...


PACKHAM: The aggressive application of the FCPA over the last few

years, combined with the increasing exposure of both foreign and

Chinese companies to the FCPA through mutual trade and investment,

has certainly increased the risk of investigation and prosecution by

US regulators. It is still too early to say whether the 2011 regulatory

changes and the 2012 interpretation of China’s anti-corruption laws,

as well as the recent prioritisation of anti-corruption measures by Xi

Jinping, will have a sustained impact on companies. Under Chinese

law, companies found guilty will be fined, and will have to return any

inappropriate monetary benefits. Any non-monetary benefits, such

as operating licences, are dealt with in accordance with ‘applicable

regulations’.

PACKHAM: Whistleblowers play a significant role in the fight against

corporate fraud – even more so than in developed countries because

of the weak corporate governance, compliance, and internal control

environment in Chinese companies. We believe that whistleblowers are

responsible for revealing the majority of corporate frauds uncovered

in China. As international standards of corporate governance become

more accepted we expect whistleblowers to report more fraud and

corruption, leading to more investigations, and prompt further, albeit

slow, improvements in corporate governance.

Q WHAT ROLE ARE







GOING FORWARD?



INVESTIGATION AND

PROSECUTION? WHAT





continued...


PACKHAM: The tone at the top, stronger corporate governance, and

formal training are key everywhere, but especially so in China. The tone at

the top is especially important since hierarchical structures and respect

for authority are deeply ingrained. Linked to this is the implementation

of effective corporate governance and internal controls to prevent

dominant senior management and owners overriding procedures

currently in place. Cultural acceptance of fraud and corruption as a

normal business practice – together with respect for authority – means

that the provision of formal training to educate staff as to what is not

acceptable is also crucial. Foreign companies with Chinese subsidiaries

or JV partners should perform risk assessments as soon as possible, and

identify and address deficiencies in the internal controls, policies and

procedures that mitigate those risks.



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

HARVEY PACKHAM

Director Alvarez & Marsal Consulting+86 10 6563 [email protected]

Harvey Packham is a chartered accountant with over 14 years’ experience including forensic accounting

investigations into manipulation of profits, embezzlement, carousel fraud, and US Foreign Corrupt

Practices Act issues, as well as litigation support and quantum of damages calculations for courts

and international arbitration. Mr Packham has advised clients from a range of industries including oil

exploration, metallurgy, telecoms, travel services, banking and financial services, aeronautics, manufacture

of healthcare products, perfumery, and import and export. He has also worked with government agencies

and insurance companies.



SINGAPOREMATTHEW FLEMINGKORDAMENTHA FORENSIC




FRAUD, BRIBERY AND


IN SINGAPORE IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

FLEMING: The KPMG Singapore Fraud Survey 2011 showed the

average number of fraud incidents reported per organisation had

increased from 3.8 in 2008 to 9.0 in 2011. The estimated cost of these

incidents increased from S$5.3m to S$6.5m. However, the majority

of respondents are generally unfamiliar with the implications of

anti-bribery and corruption legislations in Singapore, the US and the

UK. In recent times, whistleblowing has gained renewed attention.

Corporate and government bodies are encouraged to establish effective

whistleblowing channels that protect the whistleblower against

retaliation. This could have contributed to a rise in corporate fraud being

investigated. Singapore has been ranked as one of the world’s least

corrupt countries in Transparency International’s Corruption Perception

Index 2011. The reported cases to Singapore’s anti-corruption agency

– the Corrupt Practices Investigation Bureau (CPIB) – appear to be on

the decline. According to the organisation’s 2011 report, CPIB received

the lowest number of complaints since 2007.

FLEMING: Singapore is among the largest financial centres in the world

and, with Asia leading the global economic recovery, there has been an

increase in the use of nominees, and layering through shell entities and

financial intermediaries, to commit and conceal fraud. Typical offences

we have seen increasing in recent times include criminal breach of

trust, cheating and investment scams, falsification of accounts, money-

laundering, and motor insurance fraud.



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN SINGAPORE


COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS

IN SINGAPORE HAVE





FLEMING: In Singapore, legislation against fraud and corruption is

contained in the Penal Code, the Prevention of Corruption Act, and

the Corruption, Drug Trafficking and other Serious Crimes Act (CDSA).

Under the CDSA, it is mandatory for any person to lodge a Suspicious

Transaction Report (STR) if he or she knows, or has reason to suspect,

that any property may be connected to a criminal activity. Singapore

has continued its efforts to combat fraud and corruption, on both the

global and national fronts, by announcing tighter money laundering

and terrorist financing regulations, ratifying international conventions,

and conducting outreach programmes to share knowledge and enhance

public awareness. Other than complying with the legislation, listed

companies are encouraged to adopt the principles and guidelines of

the Code of Corporate Governance (Singapore Code) and are required

to disclose and give explanations for any deviations from the Code

in their annual reports. The Code was first introduced in March 2001,

and was revised in July 2005 and May 2012. The revised Code includes

stricter guidance on director independence, boards’ responsibilities

regarding risk management, and disclosure on remuneration. The Casino

Regulatory Authority was set up in 2008 to ensure that the management

and operation of the newly opened casinos in Singapore are free from

criminal influence or exploitation. Online gaming is gaining popularity

and is an area where regulations are still in the development phase.

FLEMING: In Singapore, commercial crime is investigated by the

Commercial Affairs Department, while corruption matters are

investigated by CPIB. Listed companies are regulated by Singapore

Exchange (SGX), which, a self-regulatory organisation, also operates

the centralised electronic marketplace for trading, clearing, and settling

securities and derivative products. With the proliferation of technology,

financial crimes are becoming increasingly more complex, involving

SINGAPORE • MATTHEW FLEMING • KORDAMENTHA FORENSIC



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

more transactions, and are cross-border. Regulators recognise that they

have to increase their analytical resources, information technology

infrastructure and field intelligence capabilities, and are taking steps to

strengthen inter-agency and international cooperation frameworks.

FLEMING: The risk of regulatory investigation and prosecution remains

high. For cheating – if property is delivered, penalties include fines and

mandatory imprisonment up to 10 years. If no property is delivered,

punishments can include a fine or imprisonment of up to three

years. For corporate corruption, a fine not exceeding S$100,000, and

imprisonment for a term not exceeding five years can be imposed. For

criminal breach of trust (CBT) there can be fines and imprisonment for

up to seven years. For falsification of accounts, a fine and imprisonment

up to 10 years can be handed down. Money laundering can see a fine

of no more than S$500,000 for an individual, or up to S$1m for non-

individuals, and imprisonment of seven years or less. For corruption

crimes involving public servants, the penalties are harsher: imprisonment

can be up to seven years. For CBT crimes committed by public servants,

bankers, merchants or agents, the imprisonment can be up to 20 years,

or life.

FLEMING: It is vital that companies implement a safe and secure

route for employees and associated persons to provide tip offs by way

of a whistleblower hotline. In the US and UK whistleblower hotlines

are regarded as a necessary element in an overall anti-corruption

framework. However, they should be one of a suite of initiatives. In

Singapore, there is no specific standard on fraud control. However, the

2012 Code recommends that listed companies should implement a

policy for whistleblowing.




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

FLEMING: Companies should implement an anti-fraud framework

that covers the following three objectives; first, prevention; second,

detection; and third, response. These objectives are covered in the

Australian Standard on Fraud and Corruption Control (the Standard)

which suggests an approach to controlling fraud and corruption against,

and by, Australian entities. We recommend companies develop their

anti-fraud framework based on the Standard, with appropriate tailoring

for their specific circumstances. For compliance with international anti-

corruption legislation, Australian companies should not simply conduct

a box ticking exercise but develop an anti-corruption framework

specific to their business operations. Our view is that a company should

concentrate on ensuring their anti-corruption framework will allow and

encourage employees and associated persons to follow the spirit of

anti-corruption compliance. Getting the spirit right, including a strong

‘tone from the top’, will allow both the letter and the spirit of the law to

be followed, whether that be Australian, US, UK or international laws.

MATTHEW FLEMING

PartnerKordaMentha Forensic+65 6593 [email protected]

Matthew Fleming is a partner who leads the Singapore practice of KordaMentha Forensic. Having

previously spent 11 years in the New South Wales Police force, Mr Fleming is now responsible for

conducting protracted complex fraud investigations, foreign bribery investigations, asset tracing

assignments, AML, and factual investigations on behalf of clients throughout the Asia Pacific region. He

has experience conducting investigations in most Asian countries including Vietnam, Thailand, Japan,

Korea, the Philippines, Malaysia, Sri Lanka and India. Mr Fleming has also been engaged in work in Europe

and the Americas.




MALAYSIAJOYCE LIM WAN CHEAKERNST & YOUNG




FRAUD, BRIBERY AND


IN MALAYSIA IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

LIM: Bribery and corruption have remained pervasive, according to the

12th Global Fraud Survey conducted by Ernst & Young in 2012. The

survey, culled from 1758 interviews with senior decision-makers in 43

countries, showed that 39 percent of the respondents felt that bribery

or corrupt practices occur frequently in their countries. In Malaysia,

fraud and corruption seem to be on an uptrend. However, there is

greater public awareness to fight against corruption and this is further

enhanced by the fact that boards today are becoming more cognisant

and concerned about their personal liability from fraud, bribery and

corruption. During challenging economic conditions like the recent

financial crisis or the current eurozone crisis, it is inevitable that there

is closer scrutiny by internal as well as external stakeholders as the

performance of companies does not meet expectations. Often, the

‘skeletons come out of the closet’ during such challenging times, when

transactions or actions which may not have been open to scrutiny in

the past, become more exposed.

LIM: Procurement fraud and corruption seem to be appearing more

frequently in Malaysia. We are still a developing country with lots of

opportunities for economic development. Many companies are falling

victim to procurement fraud and corrupt practices by employees,

between employees and suppliers or contractors, and also collusion

among bidders. According to our 2012 Global Fraud Survey, one of

the most troubling findings is the widespread acceptance of unethical

business practices such as cash payments to win contracts and mis-

statement of financial statements. The challenge is even greater in

rapid-growth markets, where a majority of respondents believe these

practices are common.



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN MALAYSIA


COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS IN

MALAYSIA HAVE SUFFICIENT




THIS AREA?

LIM: In mid December 2010, the Malaysian government implemented

the Whistleblower Protection Act 2010, which is a key measure to

curb corruption. The level of awareness of bribery and corruption has

also increased with the establishment of PEMANDU, a unit under the

Prime Minister’s Department with the responsibility for end-to-end

delivery of National Key Results Areas (NKRA), one of which is ‘fighting

corruption’, and the Malaysian Anti-Corruption Commission.

LIM: The fight against corruption is one of the areas of focus of our

regulators and authorities and they are committed to increasing their

workforce with the aim of increasing the awareness of fraud and

eradicating corruption. This is in tandem with the 2012 Global Fraud

Survey where 84 percent of the Malaysian companies surveyed think

that the authorities and regulators are willing to prosecute bribery and

corruption cases.

MALAYSIA • JOYCE LIM WAN CHEAK • ERNST & YOUNG



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

LIM: The 2012 Global Fraud Survey showed that in Malaysia, there is an

overwhelming majority (88 percent) who support increased supervision

by regulators, a view broadly in line with the region (82 percent) and

more strongly held than in the rest of the world (69 percent). According

to the Malaysian Anti Corruption Commission Act 2009, if an individual

is found guilty of any offences, the individual shall, on conviction, be

liable to imprisonment for a term not exceeding 20 years; and a fine

not less than five times the sum or value of the gratification which is

the subject matter of the offence, where such gratification is capable of

being valued or is of a pecuniary nature, or 10,000 ringgit, whichever is

higher. The offences include giving or accepting gratification; corruptly

procuring the withdrawal of a tender; and bribery of public officials.

LIM: The role of whistleblowers in the fight against corporate fraud is

becoming more apparent and key to curbing corruption. The Malaysian

government’s implementation of the Whistleblower Protection Act 2010

will enable whistleblowers to be protected and hence, it is expected

that more will come forward to raise issues relating to corruption,

misconduct, breach of trust and irregular activities.




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

LIM: Within an organisation, various means can be used in the fight

against corrupt practices, including instituting whistleblowing hotlines,

introducing anti-fraud programs such as conducting corruption risk

assessment, training on anti-bribery and anti-corruption policies,

and most importantly, setting a strong tone at the top, at senior

management level.

JOYCE LIM WAN CHEAK

Director, Fraud Investigation & Dispute Services, Malaysia Ernst & Young+603 7495 8847

Joyce Lim is a Director, heading the Ernst & Young Fraud Investigation & Dispute Services (FIDS) practice in

Malaysia. In her more than 15 years of service with Ernst & Young, she has led and managed various large-

scale projects involving fraud and forensic accounting investigations, the Foreign Corrupt Practices Act

(FCPA) and the Anti-Bribery and Corruption Compliance Review. She has also carried out internal audits

and corporate governance reviews for government-linked companies (GLCs), multinational companies

and public-listed companies in Malaysia and Singapore, as well as non-profit organisations.




PAKISTANMUHAMMAD SOHAIBCRI GROUP




FRAUD, BRIBERY AND


IN PAKISTAN IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

SOHAIB: It is a widely held view that corporate fraud, bribery and

corruption in Pakistan is widespread, systematic, and that it is entrenched

at all levels. A World Bank report containing an assessment of Pakistan’s

Infrastructure Capacity (PICA) states that 15 percent of Pakistan’s

Development budget for 2010-2011 was lost in the procurement process

alone, due to corruption. This does not include subsequent costs of

corruption in the implementation and maintenance stages of projects.

Important business publications, such as World Economic Forum’s

Global Competitiveness Report (2011-2012), say that corruption is the

third-greatest problem for companies for doing business in Pakistan. The

Organization for Economic Cooperation and Development (OECD) says that

the World Bank and the Auditor General of Pakistan have complained about

governance problems in recruitment, site selection, absenteeism and bribery.

SOHAIB: In Pakistan, fraud is most visible in a number of forms. For

instance, government officials or ministers, or their business partners, may

receive money in exchange for awarding contracts, jobs, promotions or

approving invoices for payment. This crime involves bribery, abuse of power

and collusion. A policeman may receive money to drop charges against

suspects, or receive bribes to arrest others – an example that involves

bribery and abuse of power and may involve collusion and extortion.

Medical doctors using supplies received for use in a public hospital, may

use them in their private practice, and, in doing so, abuse their power

and commit the offences of fraud and embezzlement. A Treasury official

who receives money to pass contractor invoices, knowing that inspection

certificates lack all required approvals, is guilty of bribery, abuse of power,

fraud, deception, collusion and extortion. A senior manager in a public

or private organisation giving a job to a friend or relative, bypassing the

proper selection process, is an example of abuse of power and trading-in-

influence. The list goes on.


A P R I L 2 0 1 3 • F I N A N C I E R W O R L D W I D E • 7 3 8


REGULATORY CHANGES

IMPLEMENTED IN PAKISTAN


COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS IN

PAKISTAN HAVE SUFFICIENT




THIS AREA?

SOHAIB: In Pakistan there has been regulatory change on a routine basis.

However, implementation is found to be lacking. This may be a failure of

mutual consensus, or may be due to a lack of willingness to implement

regulatory changes to combat fraud and corruption.

SOHAIB: Regulators have resources to enforce the law but enforcement

is not the only solution to implement law strictly. First, the authorities

need to raise awareness against corruption, fraud and bribery, and run

advocacy campaigns. This is most important before implementing any

law. Second, regulators need to involve private investigation companies

in the legislation process as they can help the regulator to implement the

law at the right time and in the right direction.

SOHAIB: Companies need to ensure that they operate their businesses in

an ethical manner. Fraud awareness training programs should take place

on a regular basis within the organisation. Companies need to be made

conscious about background screening and also the implementation of

strong FCPA compliance. Background checks should be made from the

bottom to the top until all loopholes are clear.

PAKISTAN • MUHAMMAD SOHAIB • CRI GROUP



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

MUHAMMAD SOHAIB Research AnalystCorporate Research and Investigations (Private) [email protected]

continued...



UNITED ARAB EMIRATESZAFAR I. ANJUMCRI GROUP




FRAUD, BRIBERY AND


IN THE UAE IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

ANJUM: Laws and precautionary measures to tackle corporate

corruption appear less frequently in the Middle East than globally,

although there is a view that white-collar crime is an increasing

problem. In the Middle East, almost half of companies report that

white-collar crime costs between AED3.5m to AED1.9m. Despite being

aware of the huge risks, companies still fail to take adequate measures

to prevent bribery and corruption. The main reason reported is that

attitudes against fraud are often weakened by a lack of extensive

training, and the lack of enforcement of financial and non-financial

penalties. This also impacts on the ability of companies to identify and

recognise fraud, both in terms of corporate corruption or white-collar

crime.

ANJUM: The most common corporate crimes seen or reported in

the Middle East include cases of bribery and corruption, cyber-crime

and accounting fraud. Other predominant cases reported include

intellectual property fraud, money laundering and corporate

surveillance. These crimes result in huge damage to businesses.

Incidents of cyber-crime are increasing. In 2002, there was a 300 percent

rise in computer hacking within six months. According to experts,

the UAE is among the top 10 countries most vulnerable to attack by

hackers. White-collar crime includes embezzlement of funds, fraud and

bribery. The UAE has taken several steps in opposing organised crime,

and in January 2002, a law was passed to tackle money laundering.



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN THE

UAE THAT ARE DESIGNED

TO COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS IN THE

UAE HAVE SUFFICIENT




THIS AREA?

ANJUM: Since the late 1980s the UAE has enacted anti-bribery

legislation in the form of the UAE Federal Penal Code; however, we can

see that the UAE business community is not particularly aware of the

existence of the Code and how its provisions could affect their business

operations locally. However, following the global economic crisis and

the slowdown of the UAE economy, there has been a noticeable rise

in the prosecution of individuals suspected of fraudulent practices,

as authorities seek to enforce the law and mitigate such practices. It

is particularly important for businesses to have an awareness of the

provisions of the Code and its implication for businesses in the UAE.

ANJUM: A number of Federal Laws on commercial protection have

been imposed in the UAE. These include: Federal Law No. (4) of 1979

for the Suppression of Fraud and Deceit in Commercial Transactions;

Federal Law No. (37) of 1992 on Trade Marks; Federal Law No. (18) of

1981, as amended by Law No. 14 of 1968 on Regulating Commercial

Agencies; and Federal Law No. 24/2006 on Consumer Protection.

Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum also recently

issued a new draft law to create a committee to combat commercial

fraud. He said the UAE will continue to develop legislation and laws to

protect the community and markets from various types of crimes and

fraud, in accordance with practices and international standards.

UNITED ARAB EMIRATES • ZAFAR I. ANJUM • CRI GROUP



continued...

ANJUM: There has been an increase in the fraud committed by people

with higher level management or sensitive roles. According to a KPMG

survey, nearly 90 percent of white-collar crimes are committed by a

company’s own staff – of which 60 percent are senior management and

board members. The penalties vary for different frauds, from financial

penalties to custodial sentences. Such sentences can reach up to 20

years in jail for those involved in fraudulently laundering private and

public money.

ANJUM: Many people do not consider blowing the whistle, not only

because of fear of revenge, but also because of fear of losing the job,

demotion or harassment. Harassment of whistleblowers has become

a serious issue across the globe. Although whistleblowers are often

protected under law from employer retaliation, there have been

many cases where punishment – such as termination, suspension,

demotion, or harsh mistreatment – has occurred. A protection clause

for whistleblowers has been introduced in the draft code of Corporate

Governance for Developers by the Dubai Land Department. As per the

draft, the Audit Committee, which will be an integral part of the risk

management process, will ensure a framework is in place by way of

policies and procedures which protect whistleblowers from discharge

or discrimination.




INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?



continued...


ANJUM: Management should implement both financial and non-

financial systems and controls to detect and prevent fraud. There

are several prevention and detection strategies such as job rotation,

mandatory vacations, and surprise audits. The organisation should

consider non-financial controls as well, such as pre-screening potential

employees and even post-screening outgoing employees. Management

should talk often with current employees, so they can pick up when they

are feeling stressed. Staff should be made aware of the consequences

of committing fraud, and firms should provide anti-fraud training for

managers and employees.



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

ZAFAR I. ANJUM

Group Chief Executive OfficerCorporate Research and Investigations LLC+971 4 [email protected]

As a corporate investigator with more than 21 years’ experience, Zafar I. Anjum is an expert in the

investigation of multifaceted business crimes and the management of fraud prevention and detection

across the Middle East, as Certified Fraud Examiner. Mr Anjum is proficient in the development of

investigation strategies and the provision of solutions to the most challenging assignments including

fraud, theft of intellectual property and serious organisational misconduct, forensic accounting and

integrity due diligence. He is Pakistan’s foremost member of the Association of Certified Fraud Examiners

(ACFE).



SOUTH AFRICAPIERRE KILIANBDO RISK ADVISORY SERVICES (PTY) LTD




FRAUD, BRIBERY AND


IN SOUTH AFRICA IN RECENT

YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?

KILIAN: According to the 2012 Transparency International Corruption

Perception Index (TI CPI), corruption in South Africa has been on a

gradual downwards trajectory over the past few years, dropping from

55th out of 174 countries globally in 2009, to 69th in 2010. The index

rated countries according to perceptions surrounding corruption, with

scores from the ‘highly corrupt’ at zero, to the ‘very clean’ at 100. In

January 2012 a new not-for-profit organisation, Corruption Watch,

was launched providing a platform for the general public to report

corruption. In its first 11 months, 1227 reports alleging corruption

were made, equating to three reports a day. Eighty-three percent of

these reports had been previously reported to the public authorities.

Although the general perception is that South Africa is becoming more

corrupt, the statistics suggest that there is a healthy whistleblowing

culture in the country.

KILIAN: Although fraud, corruption and bribery are widespread in both

the public and private sectors and the modus operandi is often similar,

the affect of the illegal acts are much different. In the public sector

the departments affected can often be easily identified as those where

service delivery is poor. When it comes to the private sector, the bottom

line of the company is adversely affected with margins decreasing and

operational effectiveness breaking down. The number of major service

delivery protests reached an all-time high with 173 recorded in 2012,

up from two in 2006, according to Municipal IQ’s municipal hotspots

monitor. This suggests an increase in the abuse of public funds. 2012

also saw a number of high profile politicians implicated in various

scandals relating to government contracts, abuse of public funds and

conflicts of interest.



continued...

8


REGULATORY CHANGES

IMPLEMENTED IN SOUTH

AFRICA THAT ARE DESIGNED

TO COMBAT FRAUD AND

CORRUPTION?

Q DO REGULATORS IN

SOUTH AFRICA HAVE





KILIAN: Due to the significant amount of foreign investment in South

Africa, the recent introduction of the UK Bribery Act, the renewed

emphasis on prosecuting companies under the Foreign Corrupt Practices

Act and the introduction of the King III report on corporate governance,

companies have stepped up their efforts to combat fraud and

corruption through self regulation and employee awareness programs.

The government has also stepped up its anti-corruption efforts in

recent years by introducing a national anti-corruption programme,

promoting ethical practices and establishing the Special Investigating

Unit (SIU), an independent statutory body with the aim of investigating

fraud, corruption and maladministration, and instigating civil litigation

to recover losses suffered by the state. However, the body has been

without a permanent head since December 2011.

KILIAN: The OECD working group’s 2012 report on bribery stated that

sufficient resources had been allocated in South Africa to the public

prosecution of corruption program, and that increased training for

the detection and investigation of foreign bribery had been provided

to investigators and prosecutors. However, according the National

Prosecuting Authority (NPA) there has been a 31 percent decline in the

number of convictions of complex commercial crime offences between

the periods 2008-2009 and 2011-2012, dropping from 1182 to 824.

What is concerning is that this decrease in convictions coincided with

an increase in the budget allocated to the public prosecutions office,

which funds and oversees the Specialised Commercial Crime Unit

(SCCU). This may be indicative of inefficiencies and a decline in service

levels, suggesting that South Africa is losing the battle against fraud and

corruption.

SOUTH AFRICA • PIERRE KILIAN • BDO RISK ADVISORY SERVICES (PTY) LTD



continued...


KILIAN: South Africa has neither prosecuted nor adjudicated any

case of bribery of a foreign public official, although the country has

some of the toughest penalties in the world. If convicted of money

laundering under the Prevention of Organised Crime Act (POCA), an

individual is liable to a fine up to R100m or imprisonment of up to

30 years. To put this in perspective, the life sentence associated with

premeditated murder is up to 25 years imprisonment. Penalties that

companies and associated individuals could face under the Prevention

and Combating of Corrupt Practices Act (PRECCA) range from five to

25 years imprisonment, and a fine up to five times the value of the

gratification involved in the offence.

KILIAN: The Association of Certified Fraud Examiners (ACFE) 2012

report to the Nations on Occupational Fraud and Abuse, found that

occupational fraud was more likely to be detected by tips from

employees in the company than any other method. It is therefore

important that employees know what to look for in detecting fraud

and equally important that whistleblowers are appropriately looked

after. In the future, fraud awareness and employee training should be

the cornerstone of every company’s fraud risk management program.

While companies may have a multitude of policies and procedures in

place to manage their business risks, when it comes to combating fraud

and corruption, no policy or procedure can take the place of a work

force operating within a strong ethical culture.

Q WHAT ROLE ARE







GOING FORWARD?



INVESTIGATION AND

PROSECUTION? WHAT





continued...

PIERRE KILIAN

Manager, Forensic AccountingBDO Risk Advisory Services (Pty) Ltd+27 (0) 10 060 [email protected] / [email protected]

Pierre Kilian joined BDO South Africa in July 2010. He is responsible for leading the forensic service

line and managing day-to-day activities and business development. Mr Kilian was recently seconded to

the London office where he is a manager in the forensic accounting unit. He has extensive experience

leading teams across a variety of industry sectors, with successful engagements being concluded in the

Democratic Republic of Congo, Ghana, Mozambique, Rwanda, Seychelles, South Africa, the UK and Zambia.

Mr Kilian holds a master’s degree in forensic accountancy and is registered as a chartered accountant and

certified fraud examiner.


KILIAN: Companies need to understand that the current socioeconomic

climate is one in which fraud, theft and corruption can be widespread.

As a guide, the ACFE report estimates that a typical organisation loses

5 percent of annual turnover to fraud globally each year, but with these

losses impacting the bottom line directly, replacing this lost value can

cost an organisation significantly more. In short, fraud is the bedfellow

of organisational inefficiency. Fraud risk should be regarded as one of

the key risks in the company and be addressed accordingly through

a dedicated fraud risk management team, and continuous employee

awareness and training programs.



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?



KENYA

KAHI: There has been a general increase in the level of corporate fraud

in Kenya. This is attributable to the rising cost of living, emerging modes

of committing fraud and an increased focus on Kenya as an investment

hub, particularly from China and other Asian countries. Reporting of

these cases within the last five years has gone down. When a new

regime took power in 2003, there was increased optimism that the

new government would tackle corruption and citizens were willing

to report corruption cases and assist in fighting corruption. However,

with time, the prosecutorial and investigative arms of government

have performed poorly, eroding public confidence. In the private sector,

people are reluctant to report fraud for fear of victimisation and brand

protection.

KAHI: Some of the more common types of fraud are procurement fraud,

collusion, bribery and/or corruption, embezzlement of funds, kickbacks

and theft. ATM card skimming and other internet related frauds are also

on the rise due to improvements in technology, a growing number of

techno-savvy employees and increased access to internet facilities.

PETER KAHIERNST & YOUNG KENYA




FRAUD, BRIBERY AND


IN KENYA IN RECENT YEARS?


TYPES OF FRAUD THAT



CURRENT CLIMATE?



continued...

8

Q DO REGULATORS IN

KENYA HAVE SUFFICIENT




THIS AREA?


REGULATORY CHANGES

IMPLEMENTED IN KENYA


COMBAT FRAUD AND

CORRUPTION?

KAHI: Yes. These include the recent enactment of the Proceeds of

Crime and Anti Money Laundering Act, which requires the setting up

of a functional financial reporting centre to enhance and enforce AML

compliance by banks and other financial services institutions. The

recent establishment of the Insurance Regulatory Authority is aimed at

fighting fraud in the insurance industry. In the public sector, the Kenya

Anti Corruption Commission was disbanded and has been replaced with

the Ethics and Anti Corruption Commission (EACC). EACC carries out

ethics and integrity assessments of all persons aspiring to join public

service. Furthermore, it investigates all cases of fraud and corruption

touching on public officers and government employees.

KAHI: While regulators are making a concerted effort in the fight

against fraud, they face a number of challenges, including insufficient

funds, lack of the requisite technology, tools and expertise, duplication

of roles, lack of capacity in terms of staffing, bureaucratic processes for

outsourcing fraud experts, undue influence from industry players and

too much control by the government.

KENYA • PETER KAHI • ERNST & YOUNG KENYA



continued...



INVESTIGATION AND

PROSECUTION? WHAT



Q WHAT ROLE ARE







GOING FORWARD?

KAHI: Yes. The trend now is to qualify the limitation of liability of

directors and make them personally liable for certain acts. For instance,

under the Environmental Management and Coordination Act, 1999,

directors may be held personally liable and face imprisonment where

their companies fail to comply with environmental standards. Non-

compliant listed companies risk delisting or suspension from the

Nairobi stock exchange, hefty fines, blacklisting from procurement by

government and international agencies, surcharging and imprisonment

of directors.

KAHI: Whistleblowers have increased publicity on fraud. They have

also created an atmosphere that discourages fraudulent behaviour.

Whistleblowing is likely to lead to a decline in fraud committed through

connivance as the fraudster will not know who to trust in committing

fraud. People are also likely to gain confidence in the use of hotlines to

report fraud.




continued...



PROACTIVELY PREVENT

CORRUPTION AND

FRAUD WITHIN THEIR

ORGANISATION?

KAHI: There are a number of steps that companies can take in order

to prevent corruption and fraud. Firstly they can conduct training on

ethics and fraud awareness, focusing on emerging trends in fraud and

how to detect that fraud. They must also formulate and enforce fraud

prevention policies and procedures. Establishing the right culture via

the ‘tone at the top’ is also important, as is the development of a

fraud response plan. Companies must also conduct periodic fraud risk

assessments as well as regular and accurate background checks on both

suppliers and customers. Equally, companies must continue to embrace

the use of IT security in fighting fraud. Firms must also employ data

analytics to regularly monitor transactions and identify red flags. It is

also vital that companies continue to motivate employees through

sustainable salary reviews; while also improving efficiency in the public

sector and the provision of whistleblowing channels.

PETER KAHI

Partner, Fraud Investigation & Dispute Services Ernst & Young Kenya+254 20 2715300

[email protected]

Peter Kahi’s areas of focus include fraud and investigation, litigation support, anti-money laundering,

fraud risk management and corporate restructuring (asset tracing). He has over 25 years’ experience

in conducting forensic and consultancy assignments. Mr Kahi has led teams in a number of forensic

investigation assignments, in countries such as Kenya, Uganda, Tanzania, Rwanda, Sudan and Somalia. He

is a frequent speaker at workshops and seminars on fraud. Mr Kahi has a Bachelor of Commerce degree

from the University of Nairobi. He is also a certified public accountant of Kenya, an Associate Member of

National Board of Accountants and Auditors (Tanzania) and an Associate Member of the Association of

Certified Fraud Examiners (ACFE).


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