Fraud - Finding the Truth

In New York, crooked Ponzi operator Bernie Madoff has busted all the estimates for the global cost of fraud. Closer to home, there are daily reports of “utterly trustworthy employees” turning to fraud of all kinds. In 2007 over £1 billion in fraud cases went to court in the UK. While investigators and prosecuting lawyers acknowledge that 2008 was indeed a bumper year for fraud, there are no signs that the worst is over: the contrary is true.  With the downturn in the global economy, individuals in positions of trust are also under personal financial strain.  Vigilance and asset protection were never more necessary.  For the victims of fraud, the legal process can be frustrating and inconclusive.

Roy Ramm, Chairman, CSi said, “Ending up in the courts prosecuting fraud is painful for the victims as it is for the defendants. Fraud is often complex, difficult for juries to understand and shaded - it’s rarely black and white. There is no miracle golden DNA bullet in fraud investigation. I have seen so many important and worthwhile ‘watertight’ cases sink without trace, it is phenomenally time consuming, often when time is the most valuable commodity in the business, and very dispiriting for the losers who feel they have lost twice over.

For every pound a company saves on fraud prevention it risks at least ten thousand in losses through dishonesty. In tough times, it’s easy to say cut anything that doesn’t add to the bottom line but it’s a bit like a struggling farmer saying I won’t bother with fences or a fisherman not maintaining the nets. It doesn’t make sense.

Fraud prevention medicine and rapid triage intervention does not have to cost the earth but doing nothing can be fatal for a business.

Reducing Exposure and Loss From Fraud:

Trust Your Instincts:

• Your sales have remained constant or even grown, your costs are unchanged but you are making less profit. Why?
• There are other suppliers in the market place who appear to be offering materials at less than you are paying. Why?
• Office supplies are inconsistent with the size of your staff. Why?
• A procurement executive is ‘loyal’ to a supplier though goods are late, expensive or of inferior quality. Why?
• Competitors seem to be able to second guess your business plans. Why?
• Your customers are paying less than the market rate for your goods. Why?
• Staff in positions of trust are being entertained by suppliers without your consent. Why?
• You hear rumours of lifestyle inconsistent with remuneration. Why?
• A person in a position of trust does not want to take a holiday and does not want to train a deputy or assistant. Why?
• Records and accounts you want to see are ‘missing’. Why?

Gathering Intelligence:

Gathering intelligence can appear inappropriate, more suited to government and security organisations, and perhaps misplaced in the corporate environment but nothing could be further from the truth. Knowing about your organisation, who works for you and the people you are doing business with is not only sound business advice but in some instances – for example in the prevention and detection of money laundering – may be a legal requirement. Intelligence is the basis for risk assessment

CSi Managing Director, John Lewis, “Intelligence based risk assessment should underpin the way smart organisations operate. Whether it is straight forward pre-employment screening or deeper due diligence on people you are doing business with the principle remains the same. You would not let a stranger into your home and give them access to your valuables but some companies are remarkably relaxed about giving people they know little about the keys to the office and a password for the IT system. Why?

Knowing about your employees, your customers and your suppliers offers a degree of confidence that provides a genuine business edge. If you don’t think you know the stakeholders in your organisation, how can you be a confident manager? Whether you are investing in people through employment or in business development based on supplier and customer integrity the business case for having good information about those relationships is unarguable.”

Conclusion:

CSi offers a range of business services from online pre-employment screening to deep investigative probing. Please contact us on tel: 020 7553 7960.

The Impact of Terrorism on Your Business

• Death, injury – physical and psychological – to members of staff, including key employees
• Physical damage to buildings, vehicles, and other assets
• Loss of data and damage to information systems
• Reputation damage through poor preparation
• Loss of market position

What you can do

• You should make sure you are receiving good assessed information relevant to your business
• As an organisation, you should consider your physical vulnerability to the impact of a terrorist attack or major incident
• You should consider seeking professional advice on other areas of vulnerability
• You should consider your business profile, trading partners, connections and public profile and seek help in assessing and reducing vulnerability
• You should try to assess whether your neighbours raise your vulnerability
• You should consider with your HR department whether your pre-employment screening processes are effective
• You should ask yourself the difficult “what if” questions and be satisfied with your own answers
• You should NOT assume it won’t happen to your business
• You MUST have a crisis management plan
• You MUST have a positive security culture

All businesses have a “duty of care” to staff and to customers. The legal implications to the management team if someone is injured or killed as a result of a failure on the part of the management in the event of a critical incident can be enormous.

Changing the Security Culture

Engendering a security culture without creating a tense atmosphere of fear is a finely balanced objective. 

It has to begin at the top, but still for too many senior executives security is perceived as an unwelcome cost to be born grudgingly.   Good security does mean cost, but it is the thing we care about most and people who don’t have confidence in their security will not perform well. 

Moving down through an organisation, specific security responsibilities need to be assigned.  People need to know who to speak to about concerns.  They also need to know what is expected of them.  Post an incident, an often heard lament is ‘No one told me I had to challenge strangers!’  People need to be encouraged to be as concerned about their workplace as they are about their homes.

So companies need to invest in visible measures that give staff confidence.  They must not be window dressing, a uniformed guard supplied by an agency patrolling reception when the threat level increases, is not an alternative to an integrated and assessed security response.  It may also be a waste of money!  But a monitored electronically controlled access system may be an effective answer.

Crisis Management Planning

Implementing a Crisis Management Plan and gaining the trust and co-operation from your senior management and personnel is a big task; however, by communicating the right message, to the right people, at the right time is critical to managing a major incident.  Crisis Management is a disciplined, logical and consistent approach that aims to protect an organisation’s personnel and assets by reducing the potential loss before it occurs and mitigating injury, loss and damage if an incident happens.

Whether as victims of direct attacks or as result of collateral damage to widespread and indiscriminate terrorist campaigns, your organisation must consider the vulnerability to the following criminal and politically motivated acts:

• acts of terrorism
• commercial sabotage
• product contamination
• criminal damage
• kidnap, hostage, extortion and ransom
• major systems attacks and reputation assaults

To be wholly effective, an organisation’s Crisis Management Plan should anticipate the impact of:

• loss of life
• material damage
• lethal contamination
• business interruption
• low shareholder confidence
• loss of industry reputation
• clean up costs

By failing to take advantage of the first “golden hour”, those responsible for maintaining continuity can turn a serious situation into a major crisis.  As a situation develops, failure to have planned an established Crisis Management mechanism will exacerbate risk, damage reputation and harm the ability of an organisation to work effectively with local Government officials and law enforcement.  It is essential that comprehensive Crisis Management strategies are established, understood, rehearsed and effectively implemented.

There is an abundance of evidence that whilst a badly handled incident can cause complete organisational failure, organisations that are perceived to have handled a crisis well, will earn public respect, retain customer loyalty and become stronger in the long term.

Conclusions

Every business is different, run in different ways and located in different areas. These differences, combined with the real threat of terrorism, should determine whether your organisation is at immediate risk.  By investing time and resources and by being prepared and responding quickly with confidence, will demonstrate your organisation’s ability to confront and deal with a major business crisis. This will allow you to mitigate adverse effects on your employees, surrounding communities and the environment, as well as helping to avoid costly losses.

Roy Ramm, CSi Chairman

On-Line Counterfeit Goods Market Doubles to £800m:

Figures compiled by DLA Piper and our on-line intellectual property specialists show the estimated value of counterfeit goods passing through on-line shopping sites in the UK to have doubled in just 3 years and is now over £800 million and is estimated by CSi to exceed £1 billion in the next year.  The products most at risk of infringement and typically removed from on-line sites include high fashion and cosmetic items, consumer electronics, vehicle spares and sports goods. But nothing is safe from the counterfeiters. As well as the counterfeiting of brands and trade mark infringements, research also shows that on-line auction sites are fast becoming the market place of choice for the grey marketers.  And the internet is not just the electronic version of a car boot sale. Many fraudulent sellers are earning in excess of £20,000 per month trading in bootlegged and counterfeit goods with some top sellers earning in excess of £1 million per annum.

Simon Levine, joint global head of DLA Piper’s technology, media and commercial group commented, ″Counterfeit goods dilute the value of brands, undermine the integrity of auction sites and ultimately cost the UK economy millions of pounds in lost income. But this is not just about protecting brand owners – it’s for the consumer’s benefit also. If you invest your trust and money in a brand you want to know you’re getting the real thing, whether that’s make up and cosmetics or domestic appliances and children’s toys.  Buyers most certainly need to beware – you may think you are getting a bargain, but you could be funding organised crime or buying faulty or dangerous goods in the process.  “Equally, this is not just a problem for the auction sites to address alone. Consumers need to report illegal or counterfeit trading and copyright owners need to work together with their legal representatives to take more active steps to police their brands on-line.”

James Ramm, Director, CSi said,"We call it E-fencing. Selling stolen, counterfeit or grey market goods. In hard times it's attractive for the buyers, but it's just as dangerous for them as buying something from a stranger in a pub. The quality is often terrible, sometimes dangerously so and there's no comeback. For the manufacturers and owners of the real product it is a serious issue. Their brand value is being eroded by cheap knock-offs. We use some very smart software to track the infringement of brands on-line, scanning both the image and textual descriptions. This is hard edged detective work in cyber space. And when we find illegally offered product, we are in a unique position not to just take the offending advertisements down - we have taken down £35 million worth in just last year - but also to do more conventional detective work, wear out some shoe leather and put together cases for prosecution in the real world." 

CSi offer the most effective and comprehensive brand protection services available. Fully automated or integrated with existing systems, CSi's investigative software provides a comprehensive and highly cost effective solution to brand protection problems. 

For further information call the investigative team at CSi on 020 7553 7960.