Ensuring KYC norms are being adhered to and AMLcontrols are strengthened is gathering momentumacross the globe. While bank...
Stirrings within the NationMumbai Company cons HSBC of Rs 330 croreThe Economic Offence Wing (EOW) of Mumbai police have r...
2Argentina Accuses Local HSBC Unit of Facilitating Money Laundering, Tax EvasionRicardo Echegaray, director of federal tax...
3S. Varadarajan (Raja)Executive President – Human ResourceTata Teleservices LimitedSpearhead for the Human Resource functi...
4Candidate Identity, Address Verification and Education are of utmost importance.In my view checking on a candidate’s basi...
A Point to PonderCEO CONNECTEDNESS and CORPORATE FRAUD“The SEC named the CEO and/or CFO for some level of involvement in 8...
In continuation of the Discrepancy Trend Analysis, in this edition we share the check-wise discrepancy comparisonfor the f...
The first issue spoke about a comprehensive Background Screening Policy and the best practices as defined by NAPBS.The cur...
Ms Sengupta had her career collapse, undone by the chance discovery of a single lie that led to the discovery of manymore....
AuthBridge Research Services Pvt. Ltd. http://www.authbridge.comPlot No. 123, II Floor, Udyog Vihar, Phase IV – Gurgaon – ...
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AuthBridge Newsletter Issue 2- Subject Your CXO's to Thorough Background Check


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Employee screening is practically the first step towards strengthening organisational governance, stresses the Executive President- HR of Tata Teleservices Ltd, S. Varadarajan.

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AuthBridge Newsletter Issue 2- Subject Your CXO's to Thorough Background Check

  1. 1. Ensuring KYC norms are being adhered to and AMLcontrols are strengthened is gathering momentumacross the globe. While banks in India up their ante toaddress the stink being raised by the revealing reportsof Cobrapost, the global landscape is equally scathedwith Federal Reserve [UK] and Administración Federalde Ingresos Públicos (AFIP), the Argentinian federal taxagency raising concerns on the functioning and controlsat Citibank and HSBC respectively.Serious Fraud Investigation Office [SFIO] in the processof setting up a forensic audit laboratory along withrevamping its Market Research & Analysis Unit toenable it to function as an intelligence unit. SFIO alsohas the powers to recommend prosecution in whitecollar crimes.In this edition we have Mr S. Varadarajan, Executive President – Human Resource of Tata TeleservicesLimited sharing his views on the evolution of and impact of Screening on the hiring processes in his organization andthe Industry. He also speaks on the role of regulatory bodies in ensuring they are synchronized with the industry needsespecially in the regularization of education institutions.Screening the CXOs has been a largely muted subject and most organizations overlook its import. It is indeed a pointwe would like you to ponder on and share your views with us. There are enough instances of frauds committed at thesenior-most levels and the impact it can have on the credibility and existence of the organization.The case of how a law graduate resorted to multiple forgeries to procure a plum law position, which eventually resultedin her facing a trial in the New York court makes for an interesting read and clearly depicts the risks of not verifyingbefore trusting a probable hire.We continue with sharing our data analysis on trends we see in the screening we conduct across industry sectors andbest practices we are certain will help you strengthen your hiring processes.Your feedback on the newsletter will help us continue improving it to make it a worthwhile read.Monthly NewsletterVolume VIII Issue 2EditorialContent1. News2. Legal Update3. ClientSpeak4. A Point to Ponder5. Screening Trends6. Best Practices in Screening7. Case Studies8. Products and Services
  2. 2. Stirrings within the NationMumbai Company cons HSBC of Rs 330 croreThe Economic Offence Wing (EOW) of Mumbai police have registered a Rs 330 crore cheating and forgery caseagainst a city-based company and its representatives for duping HSBC by securing investment with fake promises.The company claimed to have entered into a contract with BBC to upgrade their entire library from 2-D to 3-D.Investment was sought to purchase technical equipment and programs for upgradation. The bank representative’smeeting was arranged with an executive who purportedly claimed that he was representing BBC. The bank laterverified with the BBC and found that they had not awarded any contract to the accused. The bank also found thatthe BBC representative met with them was a con and all the submitted documents were forged. The bank then filedthe case with EOW.SFIO plans early warning system to detect fraudSFIO is expected to prepare a comprehensive framework for fraud prediction model by June this year. The aim isto “develop an Early Warning System for detection of and to undertake investigation of serious frauds through theSFIO,” according to an internal Ministry document. The IT infrastructure for the proposed system is expected to beready by the end of this year, while the pilot testing is anticipated to begin in September. In addition, SFIO wouldbe setting up a forensic audit laboratory along with revamping its Market Research & Analysis Unit to enable it tofunction as an intelligence unit. SFIO has the powers to recommend prosecution in white collar crimes.The new Companies Bill, awaiting approval from the Rajya Sabha, would provide statutory powers to the agencythat would help in bolstering its investigation and other capabilities. Forty two cases have been referred to SFIO inthe current financial year and probe has been completed in 15 of them.Global RipplesCitigroup told to improve money laundering controlsThe Federal Reserve has ordered Citigroup to strengthen its controls against money-laundering, pointing toproblems in subsidiaries including the US unit of Citi’s Mexican bank, Banamex. In a consent order released bythe Fed and signed by the bank, Citigroup pledged to take extensive actions to better comply with the US BankSecrecy Act on preventing money-laundering. The consent order did not provide any details on what problemswere unearthed by regulators except stating Citigroup “lacked effective systems of governance and internal controlsto adequately oversee the activities” of the subsidiaries with respect to the BSA and anti-money laundering rules.The apparent problems involved Citigroup’s key operating subsidiary Citibank, and Banamex USA, the US armof leading Mexican bank Banco Nacional de Mexico, also controlled by Citigroup. They also involved other groupsubsidiaries in international banking. The consent order lays out a detailed schedule of actions Citigroup and thesubsidiaries must take to tighten its compliance, and reporting requirements on those actions. The order camewithout any prior testimony or legal hearings or findings, and said it did not constitute an admission or denial byCitigroup of any allegation that had come before the Fed.News1Continued...
  3. 3. 2Argentina Accuses Local HSBC Unit of Facilitating Money Laundering, Tax EvasionRicardo Echegaray, director of federal tax agency Afip, said a six-month probe uncovered evidence of tax evasionfor ARS224 million and money laundering for ARS392 million. He said charges were filed in early February. Mr.Echegaray said “there was decisive participation” of HSBC executives to hide information from Afip. HSBC BankArgentina SA ranks as one of Argentina’s top 10 banks by deposits and assets. Afip is also investigating otherbanks and a brokerage firm for possibly using phantom accounts and bogus tax receipts for tax evasion and moneylaundering, Mr. Echegaray said at a press conference. Argentina isn’t the only country where HSBC has come underscrutiny from regulators in recent months. In December, U.S. authorities announced a $1.9 billion fine againstHSBC Holdings for failed anti-money laundering controls they said allowed drug proceeds and transactions fromsanctioned nations to enter the U.S. financial system. Neither HSBC nor any of its executives were charged withcriminal conduct in that case.Employers Must Use Revised Form I-9, Employment Eligibility VerificationUSCIS will no longer accept previous versions of Form I-9U.S. Citizenship and Immigration Services (USCIS) reminds employers that beginning May 7, 2013, they mustuse the revised Form I-9, Employment Eligibility Verification (Revision 03/08/13)N for all new hires and re-verifications. All employers are required to complete and retain a Form I-9 for each employee hired to work in theUnited States.The revision date of the new Form I-9 is printed on the lower left corner of the form. Employers should not completea new Form I-9 for existing employees, however, if a properly completed Form I-9 is already on file.The revised forms are available online at www.uscis.gov/I-9.Employers should use the implementation of the new form as an opportunity to ensure that company policiesand procedures are current and compliant. Best practices include a written policy regarding Form I-9 rules andprocedures, yearly audits and training, and appointing an I-9 czar for your company. I-9 inspections by thegovernment are at an all-time high. Neglecting to fill out I-9 forms or filling out I-9 forms incorrectly can result infines of up to $1,100 for every incorrect form.Centralized KYC Registry for customers across different Financial InstitutionsRBI issues guidelines to issue Unique Customer Identification Code for NBFC Customers in India (UCIC) to adhereto the Know Your Customer (KYC) norms; Anti-Money Laundering (AML) standards and Combating of Financingof Terrorism (CFT). This guideline applies to all Non-Deposit taking NBFCs with assets of Rs 25 cr and above andto All Deposit taking NBFCs.The increasing complexity and volume of financial transactions necessitate that customers do not have multipleidentities within a Financial Institution or across the financial system. In this regard, a Working Group constitutedby the Government of India has proposed the introduction of unique identifiers for customers across differentFinancial Institutions for setting up a centralized KYC Registry.Legal Updates
  4. 4. 3S. Varadarajan (Raja)Executive President – Human ResourceTata Teleservices LimitedSpearhead for the Human Resource function and responsible for HR Strategy, Organization Design, L&D, Cross Culturebuilding, Remuneration Practices, Performance Management and Leadership Capability Development at Tata Teleser-vices, India’s fastest growing Telecom Service Provider, Raja has been awarded with the Seasoned HR ProfessionalAward for 2012 from NHRDN and President’s award in 2010 for his contribution to NHRDN. Raja was also awarded forhis thought leadership and contribution to the field of HR at the World HR Congress in 2009.We are happy to share his views on the importance and impact of Background Screening for the hiring process in generaland for Tata Teleservices in particular:Candidate screening is practically “the first step towards strengthening organizational governance”.In a company like Tatas we focus a lot on ensuring the maintenance of the ethical fabric of the organization. In thepresent day context, with more focus on sharpening the Governance system of the organization, “candidate screening”practically becomes the first step towards strengthening organizational governance. The process of ensuring and drivinglegal and ethical behavior, accountability for management’s actions, transparency of operations, fiscal accountabilityetc start with having responsible and ethical people at all levels of the organization and thus not having rigor in thescreening of candidates who are to become employees has immense ramifications. This is especially so in the context ofglobalization liabilities arising thereof such that any failure in this process can potentially be linked to the organizationhaving to shut down its operations.Screening Industry has evolved.The industry has certainly evolved both in terms of size as well with respect to quality of delivery. The evolution has beenfor the better. With more and more service oriented companies increasing their presence in India this has led to a risein having this process outsourced based on the advantage of leveraging such core competency and also the economiesof scale. With database getting built and process improvements made over time, the quality of this service in terms ofimproved TAT, accuracy of information etc also improved.Screening has reduced risk and increased productivity.This process has definitely strengthened our hiring process in line with the requirements of ISO27001. The screeningof candidates ensures that we are at a lesser risk w.r.t possible issues that may arise if one were to hire employees withdubious background. More importantly it has created awareness both within and outside the organization that we takethis process seriously and are well aligned with the ethos and code of conduct of the organization in spirit and practice.This in turn has resulted in increased productivity as we are likely to be having lesser cases unethical practices.ClientSpeakContinued...
  5. 5. 4Candidate Identity, Address Verification and Education are of utmost importance.In my view checking on a candidate’s basic verification with respect to identity and address is of utmost importancegiven the current circumstances. Secondly, while education check may not be criteria for many while selecting a candi-date, it does give valuable insights on the character of a person. If one was to forge or falsify on something as basic as thisthen it is likely he/she may embrace unethical practices more easily. Lastly it is important a police or court verificationbe done as it further helps you to ring fence the overall screening process. This is especially so where organizations arerequired to be compliant with stringent global requirements.Regulatory Bodies and Industry Patronage of Education Institutions should complement not compete.The regulatory body derives its authority from the law of the land. In my view we need to respect the law at all times.While industry patronage augments the institutions but it would be equally important to them for being recognized bythe applicable regulators. The debate should focus around challenges or the way forward on getting such institutionsrecognized or having the regulator revisit the recognition norms rather than choose one over other. They should be com-plimenting and not competing with one another.Centralised Records Database is the future of screening.I do foresee that screening records may get centralized very much like the CRISIL database, and be accessible at a cost.However there could be many nuances that may need to be ironed out first. I also think that such screening process willbecome necessary not only for full time roles but also for temporary or part time roles. An extension is that this data basecan also be used for reference checks as well as analyzing attrition trends in the organization/industry.Long-Term Cost Benefit and Quality should decide outsourcing of screening process.I think that if this process fits into the core competencies of the organization then it’s absolutely fine to have an in-housescreening process, else they would do better to evaluate a long term cost benefit analysis as well as a quality check vis-à-vis involving a specialized third party who are well versed and qualified to carry out these checks.
  6. 6. A Point to PonderCEO CONNECTEDNESS and CORPORATE FRAUD“The SEC named the CEO and/or CFO for some level of involvement in 89% of the fraud cases, up from 83% of casesin 1987-1997.“ - COSO Fraud Study 2010“CEOs with a taste for luxury goods…aren’t more likely to commit fraud, researchers found. But fraud is more likely tohappen in the companies that they run…”“Big-spender CEOs also tend to run companies that take bigger risks, but have poorer performance and are more likelyto go bankrupt.” - National Bureau of Economic ResearchIf you want to understand fraud, you need to cast beyond rules and regulations and look to the corner office.”- Prof. Magnan, of the John Molson School of Business at Concordia University in Montreal,A study conducted on CEO CONNECTEDNESS AND CORPORATE FRAUDS concluded empirically that “CEOconnectedness decreases the likelihood of fraud detection, lengthens the time from fraud incidence to its detection, re-duces the likelihood of forced CEO turnover upon discovery of fraud, and lowers the coordination costs needed to carryout illegal activities.”The authors of the study found through a study of 282 cases of corporate fraud during the period 1996 through 2006,“Corporate wrongdoing often requires coordination between or acquiescence by top executives who report to CEOs on adaily basis”. They say, “CEOs have both explicit legal authority and substantial “soft” influence within the firm to directcorporate behaviour of which wrongdoing is but one potential outcome.”Would you agree? Would you put your CXOs under the scanner?Some recent instances of CEOs found fraudulent across the world. Absence of Indian instances probably reflects whatthe study concluded about the lengthening the time from incidence to detection.• Claudio Osorio, the former globe-trotting executive who headed a Fortune 500 company, faces up to 30 years inprison after pleading guilty to stealing millions of dollars from investors in his ill-fated venture to build low-costhousing in Haiti and other developing countries.Source: www.miamiherald.com• The former chief executive officer of Peoples Bank of the South, a south Mississippi bank, Larry Barnette Hill, hasbeen charged with fraud and money laundering.Source: www.sfgate.com• Highly confidential documents emanating from the office of the Microfinance And Small Loans Centre (MASLOC)and intercepted by Modern Ghana point to a grand executive fraud involving the Chief Executive Officer MadamBertha Sogah alleged to be involved in a GH ₵ 500,000 deal.Source: www.modernghana.com• Darrell McAllister, former president and CEO of Bank of Choice, has been charged with securities fraud allegedlyhaving violated the registration and anti-fraud provisions of the Colorado Securities Act.Source: www.ncbr.com5
  7. 7. In continuation of the Discrepancy Trend Analysis, in this edition we share the check-wise discrepancy comparisonfor the four industries we are tracking over FY 2010-11, 2011-12 and 2012-13. Apart from the Pharma/Biotech/ClinicalResearch; the other three industry sectors have displayed a decrease in check-wise discrepancy.Telecom displays the maximum decrease in discrepancy percentage.Reasons for the increase in the discrepancy in the Pharma sector or the reason for decrease in the other three sectorscould be attributed to different reasons which we will be discussing in forthcoming editions.This analysis has been done using the number of individual checks conducted per individual who was verified.Screening Trends6
  8. 8. The first issue spoke about a comprehensive Background Screening Policy and the best practices as defined by NAPBS.The current edition shares the risks you should be mitigating by screening your workforce and others associated withyour organisation in any capacity.Risks to be mitigated• Identity: Be certain of the identity of the person you are dealing with in any capacity. Government issued identityproof is a definite check to ensure your prospective hire, vendor, customer, client or even a visitor is a genuine bonafide identity and not an imposter.• Accessibility: Ensure your employees current address in your records is genuine and the individual actually lives atthe address so as to be able to reach the employee in case of any emergency or requirement.• Current Address should be an address where the individual is currently staying and has been staying there fora minimum 6 months. If stay at the current address is less than 6 months, then the address or addresses priorto the current address should also be verified to ensure the address is genuine and that the individual actuallystayed there.• Criminality: A basic check to ensure the individual does not feature in any of the negative lists available in the publicdomain, both Indian and global negates interaction with a person with a criminal record. Additionally, criminalitycan be checked with the authorities specifically the police department for any record of any activity criminal innature at a verified address.• Police Verification conducted without first confirming the authenticity of a stated address and the confirmationof the individual residing at the confirmed address can in all probability give a result which is inaccurate.• Fitment: Verify education, professional and technical qualifications of your workforce to be certain that the personis qualified for the job. Verify past employments with HR and the supervisor to understand capability, attitude andachievements.Gaps between two employments, two educations or between the last employment and the firstemployment are an important area for verification. Stated gaps should be verified to ensure no criminalrecord exists during that period. Unstated gaps [gaps uncovered during the process of verification]should also be verified similarly and should be red alerts for the individual’s integrity.Best Practices in Screening7
  9. 9. Ms Sengupta had her career collapse, undone by the chance discovery of a single lie that led to the discovery of manymore. A clerk stumbled upon her application file, and noticed her listed date of birth that put her age at 29. Ms. Sengupta,in her late 40s at the time, declined to answer the many questions which were asked. Eventually, it became clear thatshe had not only shaved nearly two decades off her age but that nearly everything about her work and education historywas not as she had claimed.Soma Sengupta, an India-born daughter of an engineer, who grew up mostly in Jersey City has a very well-scriptedcareer. A clear indication of what a pre-hiring background check could have prevented.The Facts:• Graduated from Georgetown Law School in 1998• Became a licensed lawyer in 2000 after passed the New York State bar exam.• Began volunteer work two day a week in 2004 for the Legal Aid Society’s Prisoners’ Rights ProjectThe Falsifications• Claimed had left law school before graduating and applied for a paralegal position with the Manhattan districtattorney’s office, as the office did not allow lawyers to work as paralegals.• Claimed 1969 as year of birth, eight years earlier than the correct year of birth• Was fired from the office in 2003, after it became known that she was, in fact, a lawyer.• Got her supervisor to write reference letters to help her apply for several staff lawyer positions, including with theAmerican Civil Liberties Union in New Jersey and the Neighborhood Defender Service of Harlem.• Claimed to be an assistant district attorney and to prosecute “gang and white-collar fraud cases,”• Claimed to have defended “all felonies including murder and sexual offences,’ by virtue of being staff lawyer at theLegal Aid Society• Six years of advocacy experience in a common law system• Graduated in the top 1% of her class at Georgetown LawThe Forgery• Reference letter from Robert F. Drinan, a former United States representative from Masachusetts and a GeorgetownLaw professor; it was dated a year after his death.• Forged reference letters stating Ms. Sengupta was an accomplished trial lawyer.• Fake Indian birth certificate.• Created a fake website for a fictional law firm in the name of fictional former prosecutor• Forged reference letter from him• Forged a reference letter from the office of Eliot Spitzer, the then attorney general.A comprehensive fraud, this had the Bar Standards Board of England and Wales modify the application process to nowhave the” college transcripts come directly from the schools in a sealed envelope, without passing through an applicant’shands”.On trial in State Supreme Court in Manhattan, Ms. Sengupta, 52, faces forgery and other charges, “the most severe ofwhich carries a maximum prison sentence of seven years”.Case Study8
  10. 10. AuthBridge Research Services Pvt. Ltd. http://www.authbridge.comPlot No. 123, II Floor, Udyog Vihar, Phase IV – Gurgaon – 122 016 , Haryana, IndiaSales Enquiries: E-mail: sales@authbridge.com Tel: +91 – 8826988001DesignbyHuesTechnoloiesAuthLeadTMCXOs are at vantage points, with access to highly sensitive and critical information and processes. AuthLead screensthese top honchos so that companies hire the right ones. AuthLead is in-depth verification for each individual completelycustomised to the needs of the organisation, sensitivity of the role and the individual being screened.This niche product from the AuthBridge bouquet of offerings involves checks which scans the past employment historyof the individual with diverse and candid feedback from all those who would have interacted with the individual in anycapacity . Various past and current antecedents are carefully scrutinized and flags are raised on suspicious aspects.AuthLead reports empower the decision maker with intense research-based findings.KYCIndustries need to adhere to stringent KYC (Know Your Customer) norms which have been laid down to curb the menaceof money laundering and terrorist funding.AuthBridge is working with companies to process KYC requirements quickly and efficiently. This solution is helpingorganizations across geographies in attaining genuine customers who have provided sufficient, latest and accurateinformation.AuthBridge’s KYC solution equips its clients with one of the most advanced technology platforms. The on-line moduleallows clients to keep a tab on the progress as well as download the final reports. The solution has been designed in waythat keeps confidentiality intact throughout AuthBridge’s internal process, an aspect of high essence for clients.Product and Services