1. IQPC Public Sector Fraud & Corruption Summit, Canberra
Wednesday 26th October 2016
Dr Darren O’Connell MBA FGIA
The key to raising awareness and comprehension
of your compliance program

2. • What is corruption? The best intentions fail if your
employees don’t know what to look for.
• Implementing clear ethical and integrity standards
throughout all areas of your organisation.
• Using compliance reminders and surveys to continuously
strengthen and measure your organisation’s stance
against corruption.
• The integral need for an integrity champion: Audit and
policies are not enough.
2
0. What is this presentation about?

3. 3
Bribery
• Bribery is the giving, receiving of money, a gift or other advantage as an
inducement to do something that is dishonest, illegal or a breach of trust.
Fraud
• Fraud is the criminal deception intending to result in financial or personal gain.
Corruption
• Corruption is the misuse of public office or power for private gain; or misuse of
private power in relation to business outside the realm of government.
Gifts and Benefits
• Offering something of financial value that is to the advantage of another
person and in doing so is intending that individual to perform a function
improperly or secure business or a business advantage.
Conflicts of Interest
• A conflict of interest is a situation in which an employee has competing
professional or personal interests. Such competing interests can make it
difficult for individuals to fulfil their PNSW duties impartially.
0. Key Terms

4. 4
• Despite some serious concerns being raised by the OECD about
Australia’s failure to tackle and prosecute corrupt behaviour, a number
of anti-bribery and corruption trends are driving greater compliance and
creating increased accountability in Australian organisations when it
comes to corrupt behaviour:
1. Increasing scrutiny – Reinforcing the need for law reform, pressuring
domestic regulators to cooperate with international counterparts;
2. Law reform – Removal of facilitation payments defence in Australia but
due to the growing influence of the UK Bribery Act. Whistleblower
protections will encourage disclosure and investigation of wrongdoing;
3. Domestic & international cooperation – A visible coordination between
law enforcement agencies to fight cross-border corruption;
4. Cross-border enforcement action – Organisations with offshore
operations face greater enforcement of extra-territorial laws;
5. Disclosure obligations – A failure to disclose corruption allegations may
expose organisations to the risk of litigation.
1. Key anti-bribery and corruption trends

5. 5
6. Contractual obligations – increasing cross-boarder enforcement action
resulting in organisations requiring their Australian business partners to
include anti-corruption contractual obligations;
7. Anti-corruption compliance frameworks – Anti-corruption trends are
making compliance programmes a “ticket to play” because they impart a
competitive advantage when operating in higher-risk jurisdictions;
8. Third party verification – Organisations are conducting third party due
diligence to mitigate the risk of non-compliance, and the verifying their
anti-corruption programme for contractual purposes that reward effective
compliance;
9. Socially responsible investments – Ethical and socially responsible
investment is popular and tend to yield higher returns, and attract more
funds when anti-corruption conduct is assessed; and
10.Benchmarking – Raises awareness about the importance of fighting
corruption, reinforcing and aligning compliance to global trends.
1. Key anti-bribery and corruption trends

6. 6
• According to Deloitte (2015) 83% of respondents do not see domestic
corruption as a Top 5 risk!
1. So why are we in this position?
17%
83%
Is domestic corruption a top five risk for your
organisation?
Yes
No

7. 7
2. What to look for?
…into
private
hands.
• Tenderer/
Contractor/
supplier
• Property
developer
• Business
partner
• Family/ friend
• Client
• Public official
• etc
…can be
transferred
from a
government
agency…
Something
of value…
• Tender/
Contract/
Purchase
• Information
• Approval
• Avoid fines,
fees & charges
• Employment
• Services
• Equipment/vehi
cles/ assets
• Etc
Source: Waldersee, R and Shapiro, A, 2016. Strategic Responses to Corruption – Day 3.

8. Money
Ideology
Coercion
Ego
8
2. What to look for?
Tight
Competition
Weak
market
Stakeholder/
Industry
Culture
Situational
perspective
Psychological
perspective
Supply of motivated
offenders
Available
opportunities
Absence
of suitable
guardians Rationalisation/
Integrity maturity
Motivation/
Pressure
Perceived
Opportunities
Arrogance
Greed is good
The owe me
Narcissism
Everybody does it
Entitlement
Criminal mindset
Lifestyle
Gambling
Conflict of interest
Desire
Secondary employment
Fraud and
Corruption
Ability
Blind trust
Poor governance
Corrupted industry
association
Manager/
stakeholder override
Low maturity /
inexperience
Regulatory capture
Role confusion
Weak policy & Systems
Weak non existence
tender processes Approvals
Variations
Licences
Direct negotiations
Exposed assets

9. 9
Transaction-generated Risks
Low barriers to entry A market characterised by numerous buyers and sellers, and low profit margins.
Asset specificity Investments made in specialised goods or services for unique customers. Location of facilities and the degree of
human capital can also be significant factors.
Weak markets A market with many sellers, few buyers and prices in a state of decline. In addition, a weak market is
characterised by poor regulation.
Peripheral product A good or service that is not the primary focus of an organisation but despite being ancillary is still important.
Low reputational capital Organisations that have little market presence, can close down without being missed, and restart with little
scrutiny.
High relationship / contact A contracting relationship between a buyer and a seller characterised by high frequency social interaction.
Networked industry An industry in which each member has linkages to other members.
Uncertain future work Linked to asset specificity, the business contracted for is highly specific and likely to be a one-off or there are
large gaps between repeat business.
Source: Waldersee, R and Shapiro, A, 2016. Strategic Responses to Corruption – Day 3.
2. What to look for?

10. 10
• During the 2000s, the NSW ICAC investigated Railcorp.
• It involved employees and managers at many levels of the organisation.
• ICAC investigated allegations of:
• Fraud and bribery;
• Improper allocation of contracts;
• Unauthorised secondary employment;
• Failure to declare conflicts of interest;
• Falsification of time sheets; and
• The cover-up of a safety breach.
• In financial terms RailCorp employees were found to have improperly
allocated contracts totalling almost $19 million to companies owned by
themselves, their friends or their families, in return for corrupt payments
totalling over $2.5 million.
• ICAC reported findings of corrupt conduct on the part of 31 individuals
including 14 RailCorp employees and staff of 16 private firms.
2. Operation Monto: key points

11. 11
• Success of a compliance program hinges on employee engagement;
• Organisational culture is a key risk factor in compromised compliance
and corporate integrity;
• Changing organisational culture is a long-term process and outlasts a
typical tenure of a CEO;
• What makes employees comply with organisational rules, standards,
legislation and regulation?
• Personal value systems aligned to organisational values
• All parties seeking to minimise reputational damage
• What characterizes a ‘positive’ organisational compliance culture?
• Personal and corporate accountability
• Incentives, motivations and rewards
• And, importantly, what can corporate leaders do to encourage
compliance behaviour through culture?
• Lead by examples
• Collective responsibility / lessons learned
2. Ethics & Integrity: enhancing compliance

12. 12
• Starting in 2012, Australia’s TI CPI ranking of least corrupt public sectors
has fallen from 7th to 13th in 2015.
• Public and private organisations face a wake-up call!
• Whilst the deterioration is of significant concern, Australia:
• Has the knowledge to demonstrate the benefits of ethical, transparent and
corrupt-free practices, where integrity systems operate as antidotes to
corruption;
• Observes international anti-corruption conventions;
• Has public, community, NGO and private institutions that work towards
good governance and transparency, and key elements of strong integrity
systems (although a lack of funds make them vulnerable);
• Is involved in supporting programmes available for anti-corruption and
transparency work in the Pacific and wider region.
2. Ethics & Integrity: what are the benefits?

13. 13
• Yet, as Deloitte (2015) points out, there are seven potential benefits to
organisations given Australia’s international reputation for robust
integrity systems:
1. Reputation and brand are powerful galvanisers, drawing global interest in
products and services, increasing activity, revenue and the size of the tax
base;
2. Absence of corruption means a lower cost of doing business every day of
the year;
3. It can result in a lower cost of capital;
4. It supports easier market access;
5. Responsible entities achiever a higher rate of return on investment;
6. The best staff naturally gravitate to the most ethical organisations;
7. Ethical organisations achieve greater stakeholder value.
2. Ethics & Integrity: what are the benefits?

14. 14
Key principle Description
1. Proportionate procedures Procedures to prevent fraud and bribery that are
proportionate to the risk that PNSW faces
2. Top level commitment Commitment by the PNSW Executive to foster a culture
where fraud and corruption are never acceptable
3. Risk assessment The periodic assessment of the nature and extent of
PNSW’s exposure to the potential external and internal
risks of fraud and corruption
4. Due diligence Taking a risk based approach, the application of due
diligence processes and procedures in respect to
customers and third parties who do business and PNSW
5. Communication and training Embedding and understanding fraud and corruption
control through periodic and regular communication and
training
6. Monitoring and review Periodic and regular reviews of procedures designed to
prevent fraud and corruption, and makes improvements
where necessary
3. Principles of an anti-corruption framework

15. 15
3. Principles of an anti-corruption framework
PNSW’s approach to fraud and corruption control is
based on the NSW Audit Office’s Fraud Control
Improvement Kit (2015).
The PNSW Fraud & Corruption Control Framework
supports DFSI’s Code of Ethics and Conduct and its
governing principals set by the Executive.
The scope of the Framework outlines:
• PNSW’s requirements that relate to bribery, fraud
and corruption;
• The agency's position on bribery, fraud and
corruption matters, as well as the governance of the
framework and key roles and responsibilities;
• The DFSI’s Fraud & Corruption Control, Gifts and
Benefits and Conflicts of Interest policies, as well as
the Code of Ethics and Conduct, detail the specific
requirements that must be met by all employees;
• The fraud reporting mechanisms sets out the
requirements and processes that must be
undertaken if an instance of corruption arises.
FraudReporting
Systems
ConflictsofInterest
AntiFraud
AntiCorruption
GiftsandBenefits
Key risks relating to Bribery, Fraud and
Corruption
Business processes
(e.g. Operations, HR, Finance, Strategy, Leasing
Procurement)
The Fraud and Corruption Control Environment
PNSW

16. 16
• A good compliance regime should have the ability to remind staff of their
obligations under the Code of Conduct.
• Reminders include:
• Annual “read and acknowledgement” of the organisation’s Code of
Conduct;
• Mandatory governance training (e.g. annual fraud & corruption);
• Periodic declarations of breaches of compliance obligations
(personal/department level), conflicts of interest and gifts & benefits;
• Acknowledging that departments/teams are complying with their
legislative compliance obligations;
• Refreshing staff knowledge of whistleblower provisions and the
importance of speaking up;
• Requesting feedback on ethical and cultural health of the organisation
through the use of surveys.
4. Health checking your ethical culture

17. 17
• The use of cultural health check surveys can be a useful management
tool to determine employee engagement.
• Care should be taken in the way the survey is designed and whether it
should be mandatory:
• Non-mandatory surveys tend to garner a low level or participation and
those that participate tend to bias the results;
• Biased responses are usually given by staff with an axe to grind;
• Low response rates to do provide a complete overview of an
organisation’s compliance culture; and
• Mandatory surveys tend to improve participation rates (from a third to two-
thirds typically – but will never get 100%).
• Survey information can combined with other feedback channels to
inform management of the highlights, lowlights and areas for
improvement in organisational culture.
4. Health checking your ethical culture

18. 18
• In 2015 the Sydney Harbour Foreshore Authority (PNSW) conducted a non-
mandatory corruption survey;
• Ten questions were asked about the Authority corruption prevention
framework;
• The key highlights were:
• 49% of respondents had not attended anti-corruption training ;
• 80% of respondents had read the Code of Conduct ;
• 57% of respondents were not aware of the Public Interest Disclosure Policy ;
• 97% of respondents considered the corruption prevention framework was complete
;
• All respondents recognised examples of corrupt behaviour in scenario testing ;
• Over 70% of respondents knew how to report corrupt behavior ;
• Over 80% of respondents believed the Authority to report corruption to ICAC and
has appropriate disciplinary processes in place ; and
• 70% of respondents believed the Authority would protect whistleblowers .
4. Health checking your ethical culture

19. 19
• The survey results were reviewed by the Authority's Fraud Control
Working Group, and agreed that a more concerted effort is needed to
motivate staff to attend face-to-face training when it is offered, and the
refresher eLearning training and survey be made compulsory each
year.
• Greater effort to increase the awareness of the Code of Conduct,
Conflicts of Interest, Public Interest Disclosure, Gifts & Benefits and
Whistleblower protection.
4. Health checking your ethical culture

20. 20
5. The need for integrity champions

21. 21
5. The need for integrity champions
Source: Integration Training. Real Organization Chart. www.integrationtraining.co.uk

22. 22
• Organisational structure is a key element of
control
• Impacts on information flow, decision
location and accountability
• Opportunities arise from weaknesses in
structural arrangements and a failure to
understand the impact of the organisational
design
5. The need for integrity champions

23. 23
5. The need for integrity champions
Hierarchical Organisational StructureChief Executive Officer
Divisional Levels
Hierarchical Organisational StructureTeam Leader
Functional Teams
Managers Managers
Staff Staff

24. 24
Key controls to combat corruption within an organisation are policies
which set the standard to be complied with and internal audit that ensures
the standards were met.
Both controls are discrete inasmuch as they exist at set time points.
The best compliance system in the world will fail without inspired
leadership to drive employee engagement.
An integrity champion is not a person but a skill set that leads by example,
that “walks the talk”, whose decision making is guided by visible ethical
and cultural behaviour
5. The need for integrity champions
t=0
t=1
Anti-corruption policies
Internal Audit

25. • Five key champion characteristics or leadership skills:
• Respect - Taking correction as a compliment. Giving 100 percent, 100
percent of the time. Listening with your ears and eyes.
Spanish Proverb: “We have two ears and one mouth, therefore we listen
twice as much as we speak!”.
• Responsibility - Focusing attention and effort. Recovering quickly from
mistakes. Staying positive no matter what.
• Integrity – As a leader your “yes” means yes and your “no” means no,
consistency and predictability.
• Servant leadership – Promoting the interests of your team at every
opportunity.
• Team camaraderie – Esprit d’corps. Reacting correctly even when others
in the team do not. Support those that need it and those that want it.
5. The need for integrity champions

26. 26
1. Recognising corruption is essential in the detection and managing of
organisational risk:
• Situational perspective
• Psychological perspective
• Absence of suitable guardians
• Available opportunities
2. Culture is essential in developing ethical standards and staff integrity:
• Cultural change is long-term
• How to leverage culture to promote ethical standards and personal
integrity
3. The “gold-standard” anti-corruption compliance framework has a better
chance of engaging employees when it is championed by visible and
respected leaders across the organsiation:
• Walk the talk
• Know the standards and incorporate them into daily decision making
• Encourage staff to incorporate ethical decision making in daily life
6. Top Three Takeaways