Leading by Example: Fighting Fraud From the Top

“You shouldn’t blindly accept a leader’s advice. You’ve got to question leaders on occasion.”     – Sir Richard Branson, CEO of Virgin Group


Leaders – in business, politics and life – are not chosen at random. They move to the fore through traits of personality and character. Often strong-willed and charismatic, they influence people and gain followers through their deeds and their words.

It is the faith that many of us put in our leaders that makes it all the more difficult to accept that they are fallible. Sometimes, the same instincts and attitudes that pushed a leader to the top can end up being a weakness if they cause the person to tune out doubts, or questions… or criticisms. In the business world, this can lead to disaster.

The Enron fraud more than 10 years ago taught us what can happen when “the smartest people in the room” begin to make flawed decisions. In the end, the massive accounting fraud went straight to the top, leading to criminal and civil charges for top company executives. They had allowed a culture of unethical behavior to run amok, and it led to the company’s undoing.

Fraud and corruption affect organisations worldwide, and no region or industry is immune. Transparency International (TI) provides exhaustive research on this problem in its yearly Corruption Perceptions Index. According to TI, the Index “serves as a reminder that the abuse of power, secret dealings and bribery continue to ravage societies around the world. The Index scores 177 countries and territories on a scale from 0 (highly corrupt) to 100 (very clean). No country has a perfect score, and two-thirds of countries score below 50. This indicates a serious, worldwide corruption problem.”

The findings are backed up by a recent PwC survey that finds economic crime is rising globally. The survey was completed by 5,128 respondents from 95 countries between August and October 2013, and of the respondents, 50 per cent were senior executives, 35 per cent represented publicly listed companies, and 54 per cent were from organizations with more than 1,000 employees.

Some 37 per cent of respondents, a 3 per cent rise since 2011, say they have been victims of economic crime, according to the survey. And, about 25 per cent say they have been victims of cybercrime, as fraudsters increasingly turn to technology as their main crime tool.

In a news release, Steven Skalak, PwC Forensic Services partner and lead editor of the survey, said: “Like a stubborn virus, economic crime persists despite ongoing efforts to combat it. No organisation of any size anywhere in the world is immune to the impact of fraud and other crimes.”

What does this say about leadership? Sadly, it tells us that it is failing, at least when it comes to stemming fraud and corruption. This stark reality makes fraud prevention and proper due diligence an absolute must for any organisation.

Preventing fraud is a proactive endeavor. Unfortunately, discovering it after it already exists is usually too late to save a company from losses. The greatest visionaries will look beyond their “instincts” and “gut feelings,” which have no doubt served them well, but might cloud problems that lurk in the details.

Leaders in business must be open to changing the culture of their organisation and listening to those who might question, or even criticize, business practices that could lead to fraud. The most effective leaders will engage their employees and seek out experts, as needed, to strengthen the company and help protect it from unseen risks What kind of leader are you? What kind of leader do you want to be?

New EY Survey Shows Troubling Fraud, Corruption Trends

New findings published by Big Four accounting firm EY (formerly Ernst & Young) in its 13th Global Fraud Survey show concerning levels of perceived fraud, bribery and corruption across the world. According to EY, the survey included in-depth interviews with more than 2,700 executives across 59 countries, including chief financial officers, chief compliance officers, general counsel and heads of internal audit. Nearly 40% of all respondents believe that bribery and corruption are widespread in their country.

Perhaps even more alarming than that, however, is the apparent disconnect the study shows among the business leaders who were surveyed. Even with the consensus that threats such as cybercrime are increasing, nearly half (48 percent) of them “considered it to represent a very or fairly low risk to their business.”

That's not a huge surprise to those of us working in the anti-fraud field. Fraud is always considered “somebody else's problem” and “it couldn't happen here” for many business leaders around the world. When it does occur, companies often find that the controls they had in place, if any, were exceedingly inadequate or ineffective in stemming the damage caused by fraud.

According to EY's press release, “the survey also found that compliance fatigue within businesses appears to have set in at a time when they can least afford it. In a regulatory environment in which international cooperation is becoming more frequent, our respondents described a largely static internal compliance environment,” as detailed here:

  • One in five businesses still do not have an ABAC policy

  • 45% of organizations have not introduced a whistleblowing hotline

  • Less than 50% of respondents have attended ABAC training

  • Less than a third of businesses are conducting anti-corruption due diligence as part of their mergers and acquisitions process.

The corruption trends are increasingly worrisome. According to the report, the executives themselves are being confronted with corruption issues, even on a personal basis: “Twenty-one percent of CEOs said that they had been approached to pay a bribe in the past, compared with 10% of all C-suite interviewees... Worryingly, given their role in setting an ethical tone from the top, a significant minority (11%) of CEOs considered misstating financial performance to be justifiable in order to help a business survive an economic downturn, compared with 6% of all respondents.”

Let that sink in for a moment. The business leaders we are trusting to set the tone and enforce an ethical workplace among their employees, contractors and business partners are themselves being tempted to engage in fraud.

The entire report is worth reading, and it's important to reflect on the results. Only by making a concerted effort to keep fraud and corruption at bay – through proactive controls, prevention and detection – will these trends be reversed. It's a global battle, and every business leader needs to be on the right side, partnering with experts who can help them protect their company and their investments.

CRI Group Named Finalists in 'Best Ad Awards' - Cast Your Vote Today

We are proud to announce that CRI Group's "You secure their future... We'll secure their past" advertisement has been named one of the finalists for "Most Effective Message" and "Best Headline" in a prestigious award competition hosted by PreemploymentDirectory.com. Voting commenced June 11th 2014 for the selection of the winners in the Best Ads Awards competition in the Background Screening Industry.

The "Most Effective Message" award is for the advert that "will most likely produce the intended or expected result it was designed to produce and/or will stimulate readers to take a desired action." The "Best Headline" category recognizes "the headline that grabs your attention the most and which you found to be most compelling."  CRI Group's advert notes that:

"Global hiring is on the rise. Are you confident your candidates truly have the skills, credentials, knowledge and experience they claim on their résumé, or during an interview? How can you be certain of the integrity, background and personal history of potential hires? CRI Group can help."

The ad helps communicate what CRI Group offers clients and partners: user-friendly, web-based background screening services with flexible, bespoke employment solutions for a range of various industry sectors with clients utilising this service across the globe. Our latest online portal is the industry’s most highly developed and internationally customized software platform – providing the CRI Group Background Screening Division an enterprise-level solution.

Winners will be announced in July and voters can be entered for the chance to win a gift. To vote, follow the link - http://preemploymentdirectory.com/2013-best-advertisers-of-the-year-awards-voting-process/#axzz34JPcZpX4.

Celebrate! CRI Group Looks Back at 24 Years

In 1990, Mikhail Gorbachev was premier of the Soviet Union. Great Britain was seized by a record heat wave. The Space Shuttle Discovery placed the Hubble Telescope in orbit. And CRI Group was born, destined to become a leading due diligence firm serving clients around the world.

We are celebrating a special milestone at CRI Group as it's our 24th anniversary, and we want to thank our clients and all of our staff for making this occasion a reality. As we enter our 25th year, we hold steadfast to our commitment to integrity and remaining faithful to our customers' trust.

A lot has changed in the past 24 years in the realm of due diligence and risk management. Fraud and corruption, once kept behind closed doors or “swept under the rug” as a part of business, are now in the public eye and under scrutiny. New laws and regulations like the UK Bribery Act are in effect, promising steep penalties for companies that don't conduct proper due diligence and run afoul of the law.

In any business, longevity is a sign of success... and this is a proud milestone for us. Our services have been based upon being innovative in the world of due diligence, risk management and investigation – while always staying focused on the needs of our clients.

Thank you for taking this voyage with us. We look forward to the years ahead, always looking for new technology, best practices and different and effective ways to examine data and events.  

24 Facts About Fraud to Celebrate Our 24th Anniversary

  1. Fraud is costing the UK around £73bn a year. Source: The National Fraud Authority, ‘Annual Fraud Indicator’, (March, 2012) pg. 3.
  2. In a survey of more than 1,000 executives, almost one in five claimed to have lost business due to a competitor paying bribesSource: Ernst & Young, ‘Corruption or Compliance – weighing the costs, 10th Global Fraud Survey’ (2008) pg. 5.
  3. In a survey of more than 2,300 staff in European companies, nearly 1 in 5, regardless of grade, consider it acceptable to pay bribes to win or retain business. Source: Ernst & Young, 'European Fraud Survey 2011: Recovery, Regulation and Integrity’ (2011).
  4. More than half of the 70,000 people interviewed in 69 countries for TI’s 2009 Global Corruption Barometer said they were willing to pay more to buy from corruption-free companies. Source: Transparency International, ‘Global Corruption Barometer’ (2009), pg. 16.
  5. 75% of all those interviewed agree that there is a commercial advantage to ethical behaviorSource: Ernst & Young, ‘European Fraud Survey 2011: Recovery, Regulation and Integrity’ (2011).
  6. The British Virgin Islands got more foreign direct investment in 2013 than the major emerging economies of India and Brazil combined. Source: The United Nations, Global Investment Trends Monitor UNCTAD report, 2014.
  7. Private-sector corruption in developing countries is a tax on growth, costing at least $500 billion a year — more than three times all foreign assistance in 2012. Source: The Center for Strategic and International Studies,The Costs of Corruption, 2014.
  8. Nearly half of workers across Europe, the Middle East, Africa and India think bribery and corruption are acceptable ways to survive an economic downturn. Source: Ernst and Young, Navigating today’s complex business risks Europe, Middle East, India and Africa Fraud Survey 2013', pg.12.
  9. More than 40 percent of employees at board and senior manager level said that sales or cost numbers had been manipulated by their company. This included reporting revenue early to meet short-term financial targets, under-reporting costs to meet budget targets, and requiring customers to buy unnecessary stock to meet sales targets. Source: Ernst and Young, 'Navigating today’s complex business risks Europe, Middle East, India and Africa Fraud Survey 2013', pg. 8. 
  10. Fewer than half of respondents knew that their company’s policy contains guidance on gifts or hospitality, and less than a quarter knew of policies on political contributions. More than half of respondents do not know whether their company has specific procedures to guide dealings with government officials. Source: Ernst and Young, 'Navigating today’s complex business risks Europe, Middle East, India and Africa Fraud Survey 2013', pg. 17.
  11. Illicit Financial Flows, including corruption, bribery, theft and tax evasion, cost developing countries $1.26 trillion per year, which is equivalent to the economies of Switzerland, South Africa and Belgium combined. This amount of money could lift the 1.4 billion people living on less than $1.25 a day above this threshold for at least six years. Sources: Global Financial Integrity, ‘Illicit Financial Flows from Developing Countries over the Decade Ending 2009’ (2011) pg. i; World Bank, ‘World Bank Indicators Database’ (2011); Oxfam, Discussion papers, ‘A safe and just space for humanity' (2012), pg. 5.
  12. Over 12 months, one in four people paid a bribe when they came into contact with one of nine institutions and services, from health to education to tax authorities. Source: Transparency International, Global Corruption Barometer  (2010), surveying 91,500 people across 86 countries.
  13. Nearly three quarters of the 178 countries in the Corruption Perceptions Index score below five, on a scale from 10 (highly clean) to 0 (highly corrupt), suggesting a perception of widespread corruption among public officials. Source: Transparency International, Corruption Perceptions Index (2010).
  14. According to the EU Commissioner for Home Affairs, an estimated €120 billion is lost to corruption each year throughout the 27 EU member states. Source: EUobserver, '€120 billion lost to corruption in EU each year', 06/03/13. 
  15. In Teodorín Obiang’s previous role as the minister for agriculture and forestry in Equatorial Guinea, he was earning a salary of around £2,700 a month. Nevertheless, between 2004 and 2011, his total expenditure was US $314m, over 4,000 times his official salary. Sources: Guardian, 'France impounds African autocrats' 'ill-gotten gains', (06/02/2012) and Independent, 'Teodoro Nguema Obiang: Coming To America (to launder his millions?)', (16/06/12).
  16. The wealth accumulated by Libya, Egypt and Tunisia’s leaders stands at an estimated $190 billionSource: TI paper based on news reports (2011).
  17. General Sani Abacha of Nigeria is suspected to have looted between $3 billion to $5 billion of public money. Source: Basel Institute of Governance/ICAR, “Managing Proceeds of Asset Recovery: The Case of Nigeria, Peru, The Philippines and Kazakhstan” (2009), pg. 7.
  18. Ferdinand Marcos of the Philippines siphoned off between $5 to $10 billion during his reign in the Philippines from 1965 to 1986. Source: Basel Institute of Governance/ICAR, “Managing Proceeds of Asset Recovery: The Case of Nigeria, Peru, The Philippines and Kazakhstan” (2009), pg. 12.
  19. The level of assets stolen by corrupt leaders and moved to offshore accounts is estimated at $180 billionOnly $5 billion has ever been returnedSource: CCFD, Comité Catholique contre la Faim et pour le Développement (2007), pg. 1.
  20. 98% of crimes reportedly go unpunished in Mexico, where drug-related violence cost the lives of an estimated 40,000 people from 2006-2011. Source: Monterrey Institute of Technology, Mexico (2010).
  21. In Argentina and Mexico only 15% of the people believe that institutions will act effectively in cases of corruptionSource: The World Justice Project, 'Rule of Law Index' (2011) pgs. 41, 79.
  22. An earthquake in Turkey killed 11,000 people in 1999: over half of all structures failed to comply with building regulations. Source: Transparency International, Global Corruption Report:Climate Change (2011), pg. xxxi.
  23. Four former Shanghai city officials have been jailed for corruption in connection with a fire in a high-rise block of flats that killed 58 people. Source: BBC News, 'Shanghai officials jailed over deadly high-rise fire', (02/08/11).
  24. A fire at a nursery killed 47 children in Mexico in 2009. The state-funded nursery was privately run by the wives of two top local officials and an influential businessman. It had passed federal safety tests only 10 days previously — despite allegedly not meeting necessary criteria. Source: Transparency International webiste, True Stories, 'Who is to blame?' 

Corporate Compliance and Ethics Week: Interview with Roy Snell

By Lara Jezeph, CRI Group


Roy Snell is the CEO of the Health Care Compliance Association (HCCA) and the Society of Corporate Compliance and Ethics (SCCE). Roy was a co-founder and the organization’s first president. I had the pleasure of speaking with him at a compliance conference in New York City.

What’s integrity mean to you?

Telling the truth. Every time.

To what extent are boards and senior executives in your region taking proactive steps to reduce incidences of fraud and corruption from surfacing within their company?

In the U.S. there is a very strong movement to move beyond “talking about doing the right thing” to auditing, investigating and taking disciplinary action when necessary. Companies are implementing compliance and ethics programs. The enforcement community previously concentrated on holding a company responsible for regulatory infractions and fining that company. The enforcement community has not seen the reaction they were looking for and believe companies are too willing to pay a fine and consider it a cost of doing business. Now they are now holding individuals and boards accountable.  As a result, senior executives and boards are taking this more seriously and implementing compliance programs to prevent find and fix ethical and regulatory problems.  The US is moving beyond just telling people to do the right thing – they are enforcing it.

Have there been any significant legal and regulatory developments relevant to corporate fraud and corruption in your region over the past 12-18 months?

The most visible regulatory developments have been in the area of anti-bribery. There have been many large settlements. There are more settlements to come. Some involve companies based outside the U.S. that do business in the U.S. These settlements are so large that it has become “profitable” for the government to invest in more enforcement. There is a positive return on investment. We will see a continued enforcement and regulatory effort involving all regulations. More importantly, many believe that to become an effective player in the global economy your country needs to have a trusted economic environment to conduct business in. The only way for a country to become trusted is to have the rule of law and enforce it. Countries that achieve that trust are going to prosper in the global economy. Most countries that have no enforcement are suffering economically. Those in the middle or those that make a half-hearted effort will be less effective and less prosperous in the global economy.

When suspicions of fraud or corruption arise within a firm, what steps should be taken to evaluate and resolve the potential problem?

People need to stay calm and have a process in place. They need to rely on that process. That process should be free of conflict of interest so that an independent investigation can take place. I would start with finding an outside expert who has handled many cases just like the case you are investigating. Not just any expert but rather a very experienced specialist. That expert will help you with all of the other many details that must be considered such as record retention, conflicts of interest, information gathering, interviews, the potential need for disclosure, etc.

How has the renewed focus on encouraging and protecting whistleblowers changed the way companies manage and respond to reports of potential wrongdoing?

The “protect the whistleblower” movement is staggering. The pendulum has swung from cases of retaliation to an all-out war on the accused. There are two ways this can go badly, not listening or retaliating against the whistleblower to stunning damage to the life and career of the falsely accused. There are countries in Europe that are leading the way in taking a balanced approach. The rest of the world has yet to appreciate that we must protect the whistleblower and the accused. Reputations of innocent people are often dragged down the street and ruined only to find out later that they are innocent. This can have a harmful effect on the organizations culture and the ability to attract and retain great employees. 

Could you outline the main fraud and corruption risks that can emerge from third-party and counterparty relationships? In your opinion, do firms pay sufficient attention to due diligence at the outset of a new business relationship?

There are too many laws and ethical expectations to mention. However, the appreciation for the compliance and ethics efforts of business partners and the consideration of compliance and ethics in acquisition and mergers is changing before our very eyes. A few years ago third-party compliance was not considered much at all. Many wise organizations have developed policies and procedures. They have compliance and ethics expectation not only for their own company but expectations of their partners.  Many organizations now consider compliance and ethics an important aspect of mergers and acquisitions. In the past a company may have looked the other way when a partner got into trouble. Now they are more likely to sever ties with that organization. Many organizations have come to the realization that the smallest of acquisitions can result in tremendous pain if shortly after the acquisition the acquired entity runs into trouble. The ultimate regret occurs when a small acquisition results in an investigation that then spreads to the entire organisation.

What is the most important skill of a compliance officer?


What advice can you offer to companies on implementing and maintaining a robust fraud and corruption risk assessment process, with appropriate internal controls?

The most important thing to understand in implementing a compliance risk program is the difference between risk to the company (insurance, investments, etc.) vs. risk the company causes others such as not following the rule of law. Most all risk assessments in the past were assessments of risks to the company. A compliance and ethics risk assessment is very different. It is often watered down with a focus on risks to the company. If you have the people in charge of risk assessments that have traditionally focused on risks to the company you are likely to come up way short on your compliance and ethics risk assessment. This is easily solved if you separate the compliance and ethics risk assessment out and have it conducted by an experience compliance and ethics professional.

Name a person with integrity?

No one is perfect. All we can do is get in the ballpark. My father.