In This Issue

     • The Scandals

     • The Stats

     • What is Fraud & Misconduct?

     • So What Can We Do?

Introduction

Following a number of high profile cases of corporate fraud across the globe, JLT Group Legal and Group Audit have joined forces to raise awareness and make recommendations for the prevention and detection of corporate fraud and misconduct.

As part of our remit we will issue periodic "Fraud Watch" bulletins dealing with the latest developments and matters of interest in the world of corporate fraud.

The Scandals

We’ve all heard of Madoff; the man who made off with billions of $$$$, now serving a prison sentence of 125 years!!!

Did you know?

The former CEO, MD and FD of Independent Insurance were convicted by the Serious Fraud Office and sentenced to prison for up to 7 years having been found guilty of conspiracy to defraud. The particular details of the offence included the withholding of claims data from the company's actuaries and the incomplete disclosure of agreements between the company and its reinsurers; both of which created a more positive picture of the company's financial standing when in fact the company was in financial difficulties.

Did you know?

The Enron scandal resulted in the complete collapse of Arthur Anderson as a direct result of the damage done to its professional reputation by the breaches of its professional obligations and the systematic shredding of documents relevant to an audit.

The Stats

The 2008 - 2009 Integrity Survey conducted by KPMG found that:

• 74% of employees reported that they had observed or had first hand knowledge of wrongdoing within their organisations in the preceding 12 months;
  
  
• 46% of those employees reported also that the wrong doing was significant enough to cause a "loss of public trust if discovered".
  
  
• 59% of employees and managers feel pressure to do "whatever it takes" to meet business targets.
  
  
• An analysis of recent cases by law firm Mischon de Reya and KPMG showed that corporate data theft cases in the UK have doubled between 2006 and 2008.

What is Fraud & Misconduct?

Compromising customer or marketplace trust by:

• engaging in false or deceptive sales practices;
  
  
• submitting false or misleading invoices to clients;
  
  
• engaging in anti-competitive practices (e.g. price fixing);
  
  
• improperly gathering competitors' confidential information;
  
  
• breaching confidentiality or privacy obligations;
  
  
• entering into client contracts without proper terms, or approvals;
  
  
• violating contract terms with clients.

Compromising shareholder trust by:

• falsifying or manipulating financial reporting information;
  
  
• stealing or misappropriating assets;
  
  
• falsifying time and expense reports;
  
  
• mishandling confidential or proprietary information;
  
  
• providing inappropriate information to analysts or investors;
  
  
• trading shares based on "inside" information;
  
  
• engaging in activities that pose a conflict of interest;
  
  
• violating international employment or human rights.

Compromising employee trust by:

• discriminating against employees;
  
  
• engaging in sexual harassment or creating a hostile work environment;
  
  
• violating workplace health and safety rules;
  
  
• violating employee wage, overtime or benefit rules;
  
  
• breaching employee privacy;
  
  
• abusing substances (drugs, alcohol) at work.

Compromising public or community trust by:

• making false or misleading claims to the media;
  
  
• providing regulators with false or misleading information;
  
  
• making improper political contributions;
  
  
• making improper payments or bribes;
  
  
• doing business with third parties prohibited under international sanctions;
  
  
• violating international employment or human rights.

So What Can We Do?

In order to combat fraud it is vital to have in place, within any organisation, appropriate policies and procedures to protect against fraud. The following table sets out some examples of how fraud can be prevented, detected and responded to.

Enquiries:
Email: Dorai_Krishnan@jltasia.com

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