“Just One Rotten Apple” Leader – Marie- Louise Rossi , FIRM Head of Insurance and Risk Management, New Security Foundation and John Burbidge-King WB MCMI CEO Interchange Solutions. IRM Risk Forum 2008 raising the game. Background.
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“Just One Rotten Apple”
Leader – Marie- Louise Rossi , FIRM
Head of Insurance and Risk Management,
New Security Foundation
John Burbidge-King WB MCMI
CEO Interchange Solutions
Notwithstanding corporate commitment to compliance, how dynamic / holistic / ? enterprise is the risk management function / culture?
Implications for cultural change, training and remuneration structures
Insured Risks, eg:
Directors & Officers
Terrorism / K&R cover
Property and business continuity
Management of Uninsured / “Uninsurable” Risks, eg:
AbcSure and the Interchange Solutions logo are ®registered trade marks in the UK.
“The misuse of entrusted power for personal gain.”
“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.”
“The abuse or threat of power in such ways to secure response
In payment or other items of value”
(L)Anti Terrorism Crime and Security Act 2001(L)Proceeds of Crime Act 2002 (L)Fraud Act 2006(L)Company’s Act 2006(L)3rd EU Money Laundering Directive and UK AML
(P/R) Listing and FSA Rules
National laws in other jurisdictions(including Scotland)
NB UK Law Commission drafting a new anti bribery and corruption bill
23 year old graduate Ben has worked for Sharpes Media plc for 4 months. The regional manager of Dynamedia, a long standing key supplier, phoned Ben to tell him how much he enjoyed the business relationship. Ben is flattered.
A week later, Ben received an unmarked case of wine, delivered to his home. Inside he discovers an envelope marked “With Thanks” containing a cheque for £100.
Ben assumes the gift is from Dynamedia, although there’s nothing on the box to indicate this. A little naive and unsure whether this is normal he considers reporting the gift to his operations manager, a slightly remote lady in her late 50’s. He falters and asks a colleague more his age.
Linda told him “Oh ~ you too? Well, there’s no rule against it; it would be rude not to accept. Besides, keeping the suppliers on-side means we can get better rates for our clients… so it’s a win-win situation all round”.
Ben banks the cheque. He places increasingly more business with Dynamedia, encouraged by their matching generosity and what he perceives as their recognition of his building a good personal relationship.
Ben and his colleagues are being groomed to receive and accept bribes. They have been enticed into placing more business with Dynamedia through the receipt of increasingly disproportionate incentives. These would probably be viewed as bribes by the authorities.
Tone from the top
Strategy & M&A
Financials & performance
Direct/ indirect sales channels
‘At Risk’ Transactions
[D&O weak link]
Gifts & Hospitality
ABC Limited is a small Borders based manufacturer of specialised encrypted circuit boards, only used by a small number of aerospace, defence and military customers. One of the company’s key customers is Grantham plc, a prime supplier of communications equipment to the UK Ministry of Defence.
ABC is investigated by the City of London and MOD Police after a tip off by a disaffected employee about paying bribes to a foreign defence official to win a tender to supply a part government owned military electronics plant.
The Operations Director suffers serious depression after his home is searched at 0500 and is sent on sick leave. The investigation completely disrupts ABC’s production schedule; the legal and other costs quickly escalate. The board discovers that their legal costs insurance is insufficient and due to an oversight, the Director and Officer Liability (D&O) insurance renewal premium was not paid when it had became due two weeks previous to the raid.
A cash crisis follows; ABC is unable to meet its commitments to its bankers who have become unhelpful in present economic circumstances. Critical deliveries fall behind and as a consequence, Grantham plc fails to deliver a crucial order of infantry radios to the MOD as the alternative supplier to ABC, based in Canada, cannot respond to Grantham’s urgent demand.
Within two months of the allegation, ABC is forced into bankruptcy and supplies to Grantham plc, now struggling to meet its commitments to the MOD, have stopped.
Bribery / corruption / extortion
“A blurring of the lines between terrorism, organised crime, bribery and corruption,
money laundering and fraud is already apparent. Organisations will need to
take a more holistic approach to what is becoming a single area of risk.”
Fraud Advisory Panel 10th Annual Review June 2008.
Mountain highway @ £250 million @ 5% commission
5 ambulances @ £50,000 each @ 5% commission
= £12,500 for the agent
= £12,500,000 for the agent
£12,500,000 for the agent
“The more I got away with ~ the more a game
it became, a game I knew I would ultimately lose”
Frank W Abagnale Jnr
O/s A-C Unit
National Contact Point
Dept of Justice
Dept of State
Other State organisations
company professional advisors
Industry Sector Industry Reports
Patterns travel and banking
Press and NGO
SARs & AML PEP connection
Supply chain exposure
US and other intelligence
“It takes twenty years to build a reputation
and five minutes to ruin it. If you think about that,
you will do things differently”Warren Buffet
Paradigm BVfined $1m for $12,500 bribe
“WSP Internationalfaces Indonesia graft inquiry”
“Weir Grouppledges fresh inquiry into £2.5 million 'bribes' to Saddam”
De La Rueconfirms that a police investigation is being conducted at the Company(July 2007)
Birmingham City FC“Corruption raid on Premier League club”
“Compassprofit halved as UN investigation continues”
“Bribery probe forDaimlerChrysler”
“Vetcohit by record fine for bribes”
“AWBchief grilled on ‘bribe’ plan”
“Potato buyer arrested over alleged£3m bribe from Greenvale” [March 2008]
“Siemens“fined €201m by German court in bribery case”
“ABBdiscloses possible bribery”
“FormerWembleychief jailed for bribery attempt”
“The CBRN TeamMD admits bribery and awaits sentence”
“BHP Billitondenies trying to bribe Saddam with wheat”
UN and SFO investigations
commence Sept 05
= 24% decline between Aug 05 and Oct 05
and did not recover value until June 06
Corporate attitudesApproach to anti-corruption
The Best Practice
And Significantly less costly than an investigation / prosecution
Do You REALLY Know Your Customer and Suppliers?
1997 OECD Convention
UN Convention against Corruption
US Foreign Corrupt Practices Act
Other useful websites:
Other useful sources:
World Bank / Transparency International Corruption Perceptions Index
Over a nearly 30 year career, Marie-Louise has specialised in political, (including terrorism), credit and export credit risks, as a broker and as a management consultant. She has also had extensive experience in the fields of regulation and compliance. She was, for 11 ½ years,
Chief Executive of the International Underwriting Association (IUA) (and its predecessor, London International Insurance and Reinsurance Market Association (LIRMA)), representing an over £11bn pa international insurance and reinsurance market to governments, regulators and the international institutions worldwide.
John Burbidge-King WB, MCMI
Founder and CEO of London based Interchange Solutions, specialists in business reputation and risk management.
Operational service in the Royal Marines included Yemen, Oman, Ethiopia, the Far East and Northern Ireland; his international business experience ranges from banking electronics, biometrics to security printing. He was an active participant of the World Economic Forum, especially on preventing the counterfeiting of goods (paper discussed at Davos 2004) and on anti-corruption.
He has interacted with all levels of government and companies around the world; lived in the Far East, Arabian Gulf and California; a member of the UK Fraud Advisory Panel, a consultant on Middle East culture, speaks Arabic and is a Court Assistant to the Company of World Traders. Interchange is a member of the Society of British Aerospace Companies.
T: 0044 (0) 208 528 1011