Sima No Notes~220609[1]

Catch me if you can?

Interchange Solutions Limited
88 Wood Street
London EC2V 7RS
T: 0208 528 1011
John Burbidge-King
E: jbk@interchange-solutions.co.uk 23rd June 2009
W: www.interchange-solutions.co.uk

All content © Interchange Solutions Limited 2004-2009. AbcSure and the Interchange Solutions logo are registered trade marks in the UK.
© Interchange Solutions Limited 2007

“Changing business risk into business value”

 Consultancy and training
Delivering tailored anti-corruption mitigation
processes, both internal and external

 Anti-corruption audit
AbcSure® integrity audit tool to determine the level
of corruption risk mitigation in a company’s
compliance policies and business processes

 Risk assessment and specific research
for markets and projects

 Reputational due diligence for third parties
in context of applicable law, market and the
corruption environment
www.interchange-solutions.co.uk

Agenda

 Impact
 Legal and regulatory
 Criminal and terrorist risk
 Organisation risk (read public & private)
 People risk
 Discovery
 Adequate procedures
 Q&A


Bending the Rules!

 Would you pay a police traffic officer to avoid a speeding
fine?

 Someone who made an unofficial payment to a
government official (UK or abroad) to fast track a service?

 Do you know anyone who paid a ticket tout for a
football/concert ticket?

 Have you or family ever used a pirated DVD or music
download?

The last 6 months
£2.25m Oct 08

$1.16bn1 Dec 08

£5.25m Jan 09

$350m Jan 09

$17.8m Mar 09

$37m likely Mar 09

Arrested and charged
Mar 09

UK Solicitor charged, awaiting
Extradition Mar 09
1 Costs estimated €2.25bn


Some Definitions 1

Corruption:
“The misuse of entrusted power for personal gain.”

Bribery:
“An offer or receipt of any gift, loan, fee, reward or other
advantage to or from any person as an inducement to do
something which is dishonest, illegal or a breach of trust in the
conduct of the enterprise's business.”

Extortion
“The abuse or threat of power in such ways to secure response
In payment or other items of value”

1. Transparency International


Bribery and corruption impact
Taxpayers’
Niger Delta
pain levels

Environment Civil Society

Infrastructure &
Equipment Economic
Failure

Buildings specs Political World Bank $1.5 Trillion
China earthquake

Karzai, Afghanistan

Law, regulation, convention

 United Kingdom
(L) Prevention of Corruption Acts 1906 and 1916
(L) Anti Terrorism Crime and Security Act 2001
(L) Proceeds of Crime Act 2002
(L) Fraud Act 2006
(L) Company’s Act 2006
(R) Money Laundering Regulations 2003/2007
(L) Criminal Justice (Scotland) Act 2003 Part 9
(L?) Bribery Bill

 National laws in other jurisdictions

 Foreign Corrupt Practices Act (USA)
UK Extradition Act 2003

 Conventions
OECD Convention
UN Convention Against Corruption
UN Global Compact

Proposed Bribery Bill 2009
(England, NI, Wales)

 Criminal offence to promise or offer bribe in UK or abroad
 Criminal offence to agree to receive or accept bribe in UK
or abroad
 Bribing overseas public official (as well as UK public
official)
 Overseas jurisdiction ~ UK citizens, UK companies,
Resident in UK
 Corporate offence of negligence in preventing
 10 years imprisonment, unlimited fines (company and
individual)
 MPs and Peers
 Attorney General consent not required


“But we have compliance policies!”

Chairman …
I am sorry to disturb you.

The Police and four men from the SFO are outside – they
have asked that you step outside immediately, or they will
enter the board meeting.


Bribery & Corruption

Fraud Cybercrime
Asymmetric
Risk

Money Laundering Anti-Competition

Criminal and terrorist risk
Links to the criminal network

Money
Fraud
laundering

Bribery
& Extortion Terrorism

Organised
crime


Corruption radar screen


Grounds for weak compliance

Historic M&A growth > multiple subsidiaries
Silo effect
Structure
Staff churn
Revenue targets ~ high value contracts

Leadership and Accountability
Dispersal and weak collaboration
Communications
“Need to know” culture
Patchy concept of zero tolerance

Weaknesses in business processes
Not a priority for BUs
Process
Disconnected compliance solutions
Unequal focus on different jurisdictions


Organisational disconnect

XYZ plc

Procurement Strategy & M&A

Financials & performance
Board
Management Board
Supply Chain

Management
Regulation
Operations

Remuneration

Direct/    
indirect
sales
channels   „At Risk‟ Transactions
[D&O weak link]


Internal ~ where?
Suppliers
Bills of Over-
quantity invoicing

Procurement
Kickbacks Brown
envelopes

Employees Gain Contracts Management

Favours

Sales & Gifts & Hospitality
Commission Agents
ledger

Joint Ventures
Customers & Offset


External ~ supply chain

Refinery

Customer


Share volatility ~ BHP Billiton

23rd October 2008

http://www.telegraph.co.uk/


People bribe ~ not companies


JBK’s 80/20 Rule

10% 80% 10%

CBRN Team

 UK SME

 Provider of emergency equipment

 Government customers

 Agent arrested Heathrow April 2008

 CEO arrested July 2008

 Liquidated 2008

 Principal and agent convicted August


Wembley plc
Attention to detail ~ watching the deal

 UK based company
 HQ Colorado , major revenue potential Rhode Island
 Senior partner US law firm elected Speaker Rhode
Island House Representatives
 Suggestion of bonus
 Fraud uncovered in Colorado
 Litigation followed
 Allegation of bribery
 Potter convicted conspiring to bribe…. imprisoned


Follow the money
 Unusual number of money transfers from Lichtenstein
bank account
 Transfers between account controlled by Siemens
executives in Greece and Munich
 Post 911 scrutiny and AML procedures key
 Internal auditors role
 Largest corporate bribery case ~recent history

LGT Group Lichtenstein

Employee red flags
A. Opportunity…
Right place at right time

• Access
• Undue influence
• Right place at the right time”;

B. Motive...
That drives their actions

• Financial pressures
• Personal reasons
• Pressure to succeed

C. Rationale...
Their personal justification

• “Others would do the same”
• “Not likely to be found out”
• “I can justify or excuse my actions if caught?”


At what risk to company?

 Reputation

 Catalyst for other crime

 Share volatility, adverse ratings, loans, covenants

 Diversion of resources, unbudgeted costs

 Impact on customers, suppliers and partners

 Investigation, prosecution, criminal record


Global village

Business

“Trust”

Crime &
Terrorism

“Advantage”

Law enforcement

“Evidence based”


Enforcement radar screen

Company profile
Case Fit
Industry Sector
Industry Reports

Countries~Operation/Export
Associations
Patterns travel and banking
Press and NGO

Allegation
SARs & AML
Whistle blowing
PEP connection
Reportschain exposure
Supply
Enforcement intelligence


Routes to evidence

 Diaries , visitors books, records
 Electronic devices, office and home
 Policy and processes
 Expense claims, hospitality registers
 Travel patterns, meetings
 Credit cards, corporate and personal
 Bank statements, corporate and personal
 Agency Agreements and payment ledgers
 Due diligence, KYC records
 Personal wealth, PEPs
 Employees, temporary staff
Whistle blowing
 Charity/political payments (home/abroad)Reports


Adequate Procedures

Policy: Process:
 Ethics  Accountability and audit
 Compliance  Independent due diligence third parties
 Code of conduct  M&A, IPO, JVs, Offset
 Gifts and hospitality  Embedded in strategy & business process
 Oversight  Benchmarked
 Disclosure mechanisms  Risk register and monitoring

People: Communications:

 Tone from the top  Single clear message
 Zero tolerance of corruption  Cross culture, across organisation
 Board responsibilities  Disclosure in reports
 Sanctions and performance  Openness in business
 Train, educate and train again  Suppliers and customers
 KYC ~ Supply and sales side  Known for high standard of integrity


Changing business risk into business
value
 Enhanced reputation ~ organisation with integrity
 Increased investor attractiveness ~ sustainability
 Enter new markets confidently
 Better supplier and outsourcing choices
 Avoids blacklists and sanctions (World Bank, EBRD etc)
 Embedded in culture
 Reflected in bottom line
 Keeps directors, executives, employees on right side of the
law

And
Significantly less costly than a crime / investigation /
prosecution


“Changing business risk into business value”

Q&A
 Consultancy and training
Delivering tailored anti-corruption mitigation
processes, both internal and external

 Anti-corruption audit
AbcSure® integrity audit tool to determine the level
of corruption risk mitigation in a company’s
compliance policies and business processes

 Risk assessment and specific research
for markets and projects

 Reputational due diligence for third parties
in context of applicable law, market and the
corruption environment
www.interchange-solutions.co.uk

Sima No Notes~220609[1]

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