Financial Crime: What does it mean to Investec? MLROs.com February 2007
Financial Crime: What should we consider? • What is financial crime? • What crimes or types of behaviour are covered? • What should we do? • What are our responsibilities?
Financial Crime: What is it? • Definition? • Common types of fraud • False Accounting • Money Laundering • Corruption • Asset misappropriation • Investment Schemes • Computer Fraud • Intellectual property fraud • Insurance fraud • What is covered? • Internal fraud and theft • External attacks • Money laundering • Insider Trading • Market abuse
Financial Crime: What are the risks? • Reputational risk • Financial risk • Regulatory risk • Legal risk
False Accounting How would this effect Investec. • To obtain for funding from the bank • To raise share price or value • To get performance related bonuses • To cover original theft • To hide losses
Asset misappropriation How would this effect Investec. • Identity theft/ account take over • False expense claim • Theft of company assets • Theft of intellectual property • Payroll fraud • Advanced fee fraud • Long firm fraud • Cheque fraud • Investment scheme fraud
Computer fraud How would this effect Investec. • Internet fraud • Spam and virus • Phishing • Denial access • Hacking
Corruption How would this effect Investec. • Political Exposed Person (PEPs)/ High net worth individuals • Employees • Clients
Warning signs What to watch out for. (People) • Management dominated by one person • High turn over of accounting/financial staff • Remuneration very heavily based on financial performance • Low morale • Employee life style • Excessive hours worked • Unprofessional or to closer relationship with customer/ supplier • Grievances
Warning signs How would this effect Investec. (Internal processes) • Lack of pre employment screening • Weaknesses identified but not corrected • Poor authorisation processes • Ability to override internal controls • Poor cultural attitude to fraud issues
Warning Signs How would this effect Investec. (External signs) • Structure that are overly complicated • Excessive use of jurisdictions • Overly complex transactions • Failure to identify ultimate beneficial owners • Lack of understand regards clients business • Clients profile changes for no apparent reason • Share prices that are either to high or to low for market conditions
Controls How can we protect Investec. • Pre employment screening • Appropriate sign off levels • Segregation of duties • Internal reporting systems and staff protection • Staff training and awareness • Annual fraud risk review • Fraud considered in new product or process design • Holiday policy • Senior management responsibility
Financial Crime policy What should be covered. • That the policy applies to all levels • Whether to company has a zero tolerance • Define what financial crime is • Conflicts of interest • Gift and entertainment • Internal reporting systems/ whistle blowing policy • What employees should deals with incidents of financial crime • Liaise with law enforcement • Contingency plan for dealing with incidents.
Financial Crime Policy What to do if a financial crime is discovered. • Preserve all relevant documents. (Carefully place them in plastic folders) • Preserve the scene where appropriate. (e.g. if employee suspected preserve desk contents, notebooks etc) • Preserve any other office equipment believed to be suspected or used to facilitate fraud (e.g. fax machines etc) • Ensure that the incident is reported to the appropriate senior member of staff • Inform their relevant business unit manager • If the method by which monies have been defrauded is identified, take immediate steps to safeguards further losses. • Immediately attempt to recover funds. Consider blocking accounts. If the funds have left the bank make immediate contact with the recipient bank and seek assistance. • Keep detailed notes of immediate action taken. In particular note telephone and fax numbers called with parties outside the bank. • Remember immediate actions taken at the time the fraud is discovered prove to be the most effective at securing evidence and recovering funds.
Simon Wilkin Fraud and Money Laundering Reporting Officer Email: email@example.com Tel: 0207 597 4645 Fax: 0207 597 4398