Welcome to 2021
Happy New Year, and thank you to the more than 100,000 people that visited Board and Fraud in 2020!
With everything that happened last year, fraud, compliance,
Herbalife’s business relationship in China was committed to illegal activity, which it knew or should have known violated the FCPA. Specifically, beginning in late 2006, Herbalife China provided improper benefits and payments to government officials to obtain direct selling licenses for two cities. Herbalife paid out millions of dollars in bribes. Fraudulent expense reimbursements were used to fund the bribes, which is is a common tactic for these types of bribes.
Specifically, the SEC found that Herbalife China paid bribes through extravagant meals, gifts, and other benefits given to Chinese officials to obtain sales licenses and remove negative media coverage in China. Managers at the subsidiary asked employees to falsify expense report documents, for example, adding names to meal receipts to get below the company’s per head spending limit. It also found that the payments and benefits were inaccurately recorded and that Herbalife failed to maintain a sound system of internal controls.» Read More
The U.S. Commodity Futures Trading Commission (“CFTC”) will be issuing its Guidance similar to the DOJ’s recent writing on Evaluating Corporate Compliance Programs, which sends a clear message
Soon all public and private organizations in the EU with more than fifty (50) employees will soon be required to comply with a new EU Whistleblower Protection law. The new law highlights the importance of responsive, transparent, and timely whistleblowing case management. So just implementing a hotline is not enough. Organizations must consider confidentiality, acknowledgment of the tip or compliant, response times, the competence of persons receiving the reports, communication with the whistleblower, and feedback on how the case is being processed. The new law also includes the right to report concerns externally while remaining legally protected. That’s a risk organizations must avoid. With the December 2021 deadline fast approaching, there is no better time for management and boards to act.
Read more!» Read More
In July 2020, The Institute of Internal Auditors (“IIA”) updated its Three Lines of Defense Model (“Model”) to emphasize more active forms of risk management and governance that appear to go beyond merely defensive maneuvers made by the internal audit function.
Some believed the old model sent a message that we should fear risk. I never saw it that way. I understood the subliminal message was the model was about achieving objectives, which requires both the creation and the protection of value. The new model does a much better job of confirming that risk management contributes “to achieving objectives and creating value, as well as to matters of “defense” and protecting value.”
Learn why the Enterprise Risk Resilient Model might be a better choice.» Read More
In this pandemic era, global companies have been challenged to maintain a reliable and effective internal investigation program. Companies have relied on remote investigation strategies to collect and review documents and conduct interviews. In conducting remote investigations, companies have to ensure that they follow investigation requirements, maintain the confidentiality of the process, and comply with applicable data privacy rules and security requirements.
In this webinar, Jessica Sanderson, Partner at The Volkov Law Group, and Jonathan T. Marks, Partner| Leader of the Global Forensic Investigation, COmpliance & Integrity Practice at Baker Tilly, will discuss best practices for conducting remote internal investigations. They will outline strategies for collecting and reviewing documents, analyzing financial data, and conducting interviews using remote technologies.» Read More
The SEC and DOJ Resource Guide is intended to provide information for businesses and individuals regarding the U.S. Foreign Corrupt Practices Act (FCPA). The guide has been prepared by the staff of the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission.
The key changes to the Second Edition reflect developments and issues that are well-known to experienced practitioners. Nevertheless, the updated Guide emphasizes the importance of effective (and “adequately resourced”) compliance programs, risk-based diligence efforts, and voluntary self-disclosures.» Read More
Last week, the Association of Certified Fraud Examiners (” ACFE”) published the results of a survey taken by more than 1,800 anti-fraud professionals in late April and early May 2020, while we were deep into the Covid-19 crisis. The findings, for the most part, are not surprising, but does reveal some disappointing information. While I have not seen a raw copy of the survey, I was surprised the ACFE didn’t ask if the company’s fraud risk assessment was reviewed and modified accordingly.
In addition, the survey highlights trends in the overall level of fraud. Survey respondents provided information about their current observations and expected changes regarding ten (10) specific types of fraud.» Read More
Without any fanfare, the U.S. Department of Justice Criminal Division has once again revised its Evaluation of Corporate Compliance Programs (“ECCP”). The ECCP remains organized around three overarching questions that prosecutors ask when evaluating compliance programs, with some revisions, which are in bold text below:
Is the corporation’s compliance program well designed?
Is the program being applied earnestly and in good faith? In other words, is the program being implemented adequately resourced and empowered to function effectively?
Does the corporation’s compliance program work in practice?
While most of the document is identical to the 2019 Guidance, there are subtle and noticeable revisions. The revisions appear to be designed to help provide additional clarity when answering the above three questions.» Read More
Leaders must find ways to engage with their people to motivate them, and this becomes increasingly important during uncertain or trying times. If done correctly, talking can be incredibly powerful. It can help relieve anxiety and help people find the strength they didn’t know was in them. Studies have shown that talking shuts down the brain’s fear center.
As Dr. Judson A. Brewer stated in a recent New York Times article, “Anxiety is a strange beast. As a psychiatrist, I have learned that anxiety and its close cousin, panic, are both born from fear.”
Fear and anxiety can be debilitating. Without proper communication in a crisis, it’s easy for people to spin and spread stories of fear, creating social contagion. To balance this tendency, in a crisis, leaders need to take their “tone from the top” to the next level.» Read More
Whistleblowers: Tipsters not trusting the system? Here’s how to win them back.
Anonymous hotlines and tip-reporting structures are useless, of course, if informants don’t trust them. Employees won’t blow the whistle if they fear reprisals. So, their concerns often don’t enter case-management systems and frauds continue. Here’s how to earn back their trust, take them seriously and transform raw tips into valuable fraud examinations.» Read More
As the use of whistleblower programs continues to grow, many organizations find themselves struggling to manage burgeoning caseloads. As a result, serious fraud investigations can be delayed (with mounting losses) while less consequential complaints are being investigated. The lack of a timely, systematic and repeatable process for evaluating and prioritizing whistleblower tips that contain allegations of ethical breaches can also expose an organization to increased regulatory risk.
While there is no single, “right” method for following up on whistleblower complaints, the most effective approaches often resemble the medical triage programs that hospitals and first responders use to allocate limited resources during emergencies, or a crisis situation.
Here are some useful guidelines for designing and implementing a fraud triage system.» Read More
The risk of fraud is a serious concern for all types of enterprises, but fraud can be particularly damaging to a nonprofit or not-for-profit organization, for which a damaged reputation can have devastating consequences.» Read More
Under the U.S. Federal Sentencing Guidelines, in order to receive credit for having an effective compliance program, and thereby reduce the fines imposed on the organization, a Board of Directors must be “knowledgeable about the content and operation of the compliance and ethics program,” and must “exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program.” In addition, in criminal actions against a business organization, including the FCPA, the DOJ’s Justice Manual instructs prosecutors to ask and answer several questions, including: 1) Do the Directors exercise independent review of the company’s compliance program? and 2) Are Directors provided timely and accurate information sufficient to enable the exercise of independent judgment?» Read More
As a crisis unfolds, like Coronavirus, and markets decline globally, fraudsters will be adapting and new risks will emerge and some risks will increase.
Remember, white collar criminals adapt by profiling us, so they can exploit our weaknesses. That being said, companies need to develop a strategy that enables the deployment of appropriate tactics to manage these new or increasing risks.
This writing explores some fraud, compliance, and integrity risks and is intended to provoke discussion.» Read More
Crisis Management: Some of the biggest mistakes made when handling a crisis are not dealing with the problem head-on, thoughtless or insincere comments, lack of communication with stakeholders, unprepared spokespeople, getting defensive after receiving backlash, or, sitting back and letting the problem grow. Domino’s, Sony, Samsung, BP, United Airlines, Equifax, KFC, are all good examples of companies who stumbled with crisis management. Companies should study these crises and learn from the mistakes!
In addition, fraud, compliance, and integrity risks may change. A crisis situation can and often does increase the pressure on senior management and of course salespeople to meet their sales targets! Deviant behavior is easily justified.» Read More
This one-day fraud symposium, sponsored by Baker Tilly’s Global Forensic, Compliance and Integrity Services, and Solutions Practice Group and hosted by the Institute of Internal Auditors, Philadelphia Chapter, will include topics such as:
•Current trends in white-collar crime
•Tone is the middle
•Case study on a local fraud
Discover who will be speaking and register for the event!» Read More
The United States government’s fiscal year ended on September 30, 2019. Just as in the business world, where many companies try and clear out any unexecuted deals or open contracts, the Securities and Exchange Commission (SEC) cleared out three outstanding Foreign Corrupt Practices Act (FCPA) enforcement actions. The three enforcement actions involved Quad/Graphics Inc., a Wisconsin-based digital and print marketing provider, and its Peruvian subsidiary, Quad/Graphics Peru S.A.; Barclays PLC; and a Canadian clean fuel company Westport Fuels Systems, Inc. and its former Chief Executive Officer (CEO), Nancy Gougarty of Leesville, South Carolina. The terms of each settlement agreement provide a different lesson for compliance practitioners.» Read More
Welcome to my site. I have spoken and been the keynote speaker for many conferences, including the ABA, ACC, ACFE, IIA, and IMA to name a few. I have designed customized training for the board, senior leadership, legal, compliance, internal audit, and others for some of the world’s largest organizations.» Read More
On November 5th, the Department of Justice announced the formation of the new Procurement Collusion Strike Force (PCSF) “focusing on deterring, detecting, investigating and prosecuting antitrust crimes, such as bid-rigging conspiracies and related fraudulent schemes, which undermine competition in government procurement, grant and program funding”.
The Strike Force is an inter-agency partnership comprised of prosecutors from the Antitrust Division, and prosecutors from thirteen (13) U.S. Attorneys’ Offices. Aiding in the prosecutors’ efforts are investigation partners such as the Offices of Inspector Generals from the Department of Justice, Department of Defense, U.S. Postal Service, and General Services Administration Office. The Department of Justice’s announcement proclaimed that investigating and prosecuting those who “cheat, collude and seek to undermine the integrity of government procurement” will have more to concern themselves with when executing their crimes. Prosecutors and investigators alike expressed enthusiasm to be working as a part of this new team.» Read More
How can we protect our brand? What are we doing to protect our brand? Questions all board members should be constantly asking. Reputational risks can damage the most well-crafted business strategies and is a growing challenge that companies around the world are still learning how to manage.
By definition, reputational risk refers to the potential for negative publicity, public perception, or uncontrollable events to adversely impact a company’s reputation, thereby affecting its revenue.
Board directors covet their company’s reputation because it’s their most valuable asset. A study by Deloitte and Forbes affirmed this conviction, but should not surprise anyone. Senior-level executives also agreed that their company’s reputation presented the greatest risk to the company’s ability to achieve business strategies.» Read More
Background The Securities and Exchange Commission (“SEC”) announced that Westport Fuels Systems, Inc. (Westport”), a Canadian clean fuel technology company headquartered in Vancouver, Canada, and its former chief executive officer,
“Trust but verify” could be a downright dangerous approach when applied to audit procedures in particular. A much better slogan for fraud deterrence would be, “Trust is a professional hazard.”
The implication is that because financial management plays a leading role in detecting financial fraud, it is incumbent on executives – not just auditors – to exercise appropriate levels of professional skepticism. Board members and particularly audit committee members also must take care to exercise a skeptical approach to financial reports and supporting information.» Read More