Fraud 360 by CRI Middle East LLC

Before Doing Business in the Middle East, Conduct an Integrity Check Pg. 6

Expert Shares Insights on Fraud Due Diligence PG. 20

1st quarter 2013

Contract Fraud: Is Your Organization at Risk? PG. 22

Case Studies: Background Checks Reveal Alarming Discrepancies PG. 30

Crigroup.com

Fraud:

A Global Problem

Corruption, bribery and a lack of due diligence harm business interests worldwide. Learn what the experts are doing to combat these and other threats. Pg. 14

Published by

Fraud360 is created for business leaders, directors, investors and professionals who need the latest information and best practices for protecting their assets from fraud. Presenting practical tools, case studies, and articles focused on fraud prevention and detection, Fraud360 provides an insightful look at the issues impacting businesses worldwide. Fraud360 is published by Corporate Research and Investigations, LLC.

WORLDWIDE LOCATIONS Middle East & North Africa CRI Group Headquarters – Dubai, UAE Level 9, #904, Liberty House, DIFC P.O. Box 111794 Dubai, UAE Tel: +971-4-3589884 Fax: +971 4 3589094 Email: crimena@CRIgroup.com Web: www.CRIgroup.com CRI Group ME – Doha, Qatar Level 22, Tornado Tower Al-Funduq Street PO Box 27774 Doha, Qatar Tel: +974 44292434 Email: doha@CRIgroup.com Web: www.CRIgroup.com Europe CRI Group EMEA – London, UK Level 33 25 Canada Square London E14 5LQ United Kingdom Tel: +44 207 038 8366 Email: info@CRIgroup.co.uk Web: www.CRIgroup.co.uk

Asia CRI Group Asia – Pakistan Level 12, #1210, 1211 55-B, Islamabad Stock Exchange (ISE) Towers Jinnah Avenue, Blue Area Islamabad, Pakistan PO Box 2144 Tel: +92 51 111 888 400 Toll Free : 0800 00 CRI (274) Email: admin@CRIgroup.com Web: www.CRIgroup.com CRI Group Asia Pacific – Singapore 1 Raffles Place, #19-07, Tower 2 One Raffles Place, Singapore 048616 Tel: +65 6808 5634 (35-36) Fax: +65 6808 5800 Email: admin@crigroup.asia Web: www.CRIgroup.asia

CRI Group is a global supplier of investigative, forensic accounting, business due diligence and employee background screening services for some of the world’s leading business organizations. A Licensed and Incorporated entity of the Dubai International Financial Centre-DIFC, CRI Group safeguards businesses by establishing the legal compliance, financial viability and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. Implemented and Certified ISO 9001:2008 (Quality Management Systems) ISO27001:2005 (Information Security Management Systems)

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Contents Fraud360 | 1st Quarter 2013

Employee Screening: Conducting Background Investigations in the Middle East

Expert Shares Insight on Fraud Due Diligence

VENDOR B VENDOR A

Fraud: A Global Problem Corruption, bribery and a lack of due diligence harm business interests worldwide. Learn what the experts are doing to combat these and other threats.

Before Doing Business in the Middle East, Conduct an Integrity Check

Buyer beware: The information presented on paper may not represent a true picture of a foreign companyâ&#x20AC;&#x2122;s financial health.

Contract Fraud: Is Your Organization At Risk?

Case Studies: Background Checks Reveal Alarming Discrepancies crigroup.com | 3

Letter from the CEO An Inside Look at Fraud and Due Diligence Welcome to the inaugural issue of Fraud 360. In the following pages, you’ll find articles about combating corruption, bribery, embezzlement and many other fraud threats that can damage any organization beyond repair. In today’s global economy, it is more important than ever to be protected and to perform the due diligence necessary to safeguard business interests and assets. The mission of Fraud 360 is to put the information you need into your hands — presented in a way that is informative and accessible to all business professionals. Our cover story, “Fraud: A Global Problem,” goes straight to the heart of the issues facing any organization doing business across international borders. From the various fraud threats faced by companies today, to the best methods in preventing them, the article provides advice that business leaders can employ immediately to help stem losses and be better protected. Doing business in the Middle East? You won’t want to miss our insightful look at the importance of performing an integrity check, as well as verifying backgrounds of those with whom you may be building connections. “Contract Fraud: Is Your Organization at Risk?” explores the dangers inherent in the procurement process. You’ll be surprised to learn how widespread the problem of fraud is among contract and procurement processes, yet there are solutions: the article provides ways to implement an effective integrity program, and stresses the importance of following through to ensure it is achieving your goals of preventing more fraud. You will also read several case studies that exemplify the dangers posed by those who spin deceit in order to get an unfair advantage in the business world. Their efforts were thwarted — and in reading these cases, you’ll be better prepared to deal with such scenarios should you encounter them. I hope you enjoy this first edition of Fraud 360.

Zafar I. Anjum, CFE, CIS, MICA, Int. Dip. (Fin. Crime), MBCI Chief Executive Officer of CRI Group

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Today’s global markets are constantly changing.

Is your company at risk?

CRI Group can help.

CRI Group provides clients comprehensive tools to mitigate risk in international business transactions, mergers and other growth opportunities. CRI Group offers: » Risk Management Consulting

» Business Intelligence and Investigations

» Investigative Due Diligence

» Forensic Accounting and Investigations

» Fraud Risk Investigations

» Skip Tracing and Debt Collections

» Fraud and White-collar Crime Prevention

» Intellectual Property Investigations

» Insurance Fraud Investigations

» AML Consulting Services

» Corporate Security Consulting and Investigations

» Employment Screening and Background Investigations

+44 207 038 8366 investigations@CRIgroup.co.uk www.CRIgroup.co.uk

UAE | Qatar | United Kingdom | Pakistan | Singapore

crigroup.com | 5

Before Doing Business in the Middle East, Conduct an Integrity Check Buyer beware: The information presented on paper may not represent a true picture of a foreign company’s financial health By Zafar I. Anjum

t is a proven fact that what may seem like gold in the international business arena could quickly turn to rust if the vetting of all the parties involved isn’t properly conducted. Here’s a case in point: An investor in the U.S. was interested in purchasing a major jewelry operation headquartered in Dubai. The jewelry

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business had painted a rosy picture of itself on paper as one of the region’s most profitable companies, and had attracted the eye of the U.S. investor. But an intensive due diligence investigation conducted by a professional background screening company based in Dubai and retained by the U.S. investor told another story.

The screening company’s investigation uncovered several “red flags” that portrayed the jewelry business as not only a risky investment, but a potentially liable one, at that. In the course of the investigation (which involved international public records searches and local hands-on interviews

countries such as Saudi Arabia, Bahrain and the United Arab Emirates have fast become inviting markets, enticing U.S., U.K. and European-based businesses with strong currencies, reduced barriers to entry, and lucrative opportunities. While these opportunities can prove to be beneficial to companies seeking to broaden global markets, they can also

Most expatriate business professionals in the Middle East advise anyone contemplating expanding their business in this market to remember that it is not what you know that is important, so much as who you know. to look into the financial liabilities of the jewelry operation’s directors and primary shareholders), it was discovered that the jewelry company was, in fact, in the midst of liquidation proceedings, a major factor not previously disclosed to the potential buyer in the U.S. Further research conducted at a local level revealed that the company’s principals were involved in several bankruptcy cases and that the company had been issued warnings by local regulatory agencies concerning a host of collusive business activities. Because these discoveries would have been nearly impossible to uncover using conventional Internet-based search methods, the potential buyer stood to lose his entire investment had it not been for the business background investigation conducted by the offshore screening firm. It has become increasingly easy for both small and large organizations to open up international business channels and source operations worldwide. One region of increasing influence is the Middle East, particularly in the Gulf region. Emerging

open the doors to predatory or other unscrupulous business practices orchestrated by scammers who prey on otherwise legitimate organizations while creating legal headaches and wreaking havoc for those companies down the road. With that threat in mind, it is imperative that business organizations involved in global business dealings establish a comprehensive risk management program that incorporates international background investigations, preferably conducted by a screening company not only experienced in business due diligence, but highly familiar with the specific laws, jurisdictions, business cultures and terrain of the target countries in which the potential business is being conducted.

Doing Business in the Middle East Most expatriate business professionals in the Middle East advise anyone contemplating expanding their business in this market to remember that it is not what you know that is important, so much as who you know. Therefore, a good investment in time and effort to understand the social and business culture across the Gulf

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region is essential to long-term business success. Being well-versed in such areas as business etiquette, meeting protocol and negotiation techniques are crucial to properly establishing business partnerships that transcend stereotypes and improve communications. It is the “who you know” part of the equation that dictates the need for a thorough risk management program, which begins with a scrutinized understanding of the individuals and organizations with whom you’re conducting business. In this environment it is essential that businesses become completely familiar with the operations of international clients, business partners, distributors, agents, consultants and individuals before conducting offshore transactions, establishing formal corporate partnerships or committing to international investments. Part of the risk management arsenal includes a “business partner integrity check” which should be conducted before dealing with businesses or governmental organizations involving: • Pre-merger, acquisition or pre-IPO transactions; • Entering into any newly formed joint venture; • Engaging in new banking or business relationships; • Employing, contracting or retaining a foreign business partner; or • Reviewing regulatory compliance or corporate governance best practices. While extensive in scope, this due diligence process requires a “boots on the ground” team to ensure that no stone is left unturned. Unfortunately, most U.S. based screening and investigations firms lack the wherewithal to properly conduct overseas searches. And when it comes to

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the Middle East — where a vast majority of jurisdictions lack the technology that makes online records searches globally obtainable — proper vetting of individuals, directors, shareholders (especially those connected to ruling families), companies and governing bodies can only be achieved through in-person interviews, access to local records and discussions with sources who are personally knowledgeable with the subject being investigated. Because of the sheer remoteness of various regions in the Middle East, the inherent risk of becoming involved with individuals or organizations that regularly take part in corruption, organized crime, terrorist financing or money laundering is not uncommon. Further, a misunderstanding of local laws can lead to unenforceable contracts that can blindside a foreignbased operation.

Leveling the Playing Field For this reason, major U.S., U.K. and European corporations rely on offshore screening companies that can provide the localized research required to properly vet foreign business partners in the Middle East. Such companies have access to the hard-copy records that aren’t found on the Internet, and have the ability to locate local sources that can aid in the investigation. Armed with a familiarity of the terrain, an understanding of the culture, and an ability to acquire information, these homeland-base screening operations can easily uncover hard-to-obtain facts that can play a vital role in the business decision-making process. While foreign investigative companies know their terrain, they’re also highly educated in the local laws that govern business transactions (which could jeopardize your operation) as well as the anticorruption laws that govern U.S., U.K. and EU-based businesses. This dual knowledge

ensures complete compliance with Foreign Corrupt Practices Act (FCPA) regulations, U.K. Bribery Act laws, anti-money laundering laws and other anti-corruption regulations to which companies must adhere. The true value of retaining a foreign based investigative firm is that they can

uncover information that may not necessarily be on the public record. Such information can include potential involvement with: • Business or government officials who regularly accept or require bribes; • Third-party sources (suppliers, distributors, etc.) who regularly pay bribes to officials; • Unscrupulous individuals who may be part owners of the businesses with whom you associate; • Minority business owners who may also be government officials or have connections with such; • Questionable individuals who may have recommended a third-party partner; • Individuals who require payments in cash for services provided;

• Individuals who may not be experienced in providing the products or services you require; • Individuals who request commissions that exceed normal commission levels; or • Organizations or third-party sources that are not familiar with FCPA and other anticorruption laws. While association with such organizations or individuals may be termed as “business as usual” to many operations, such associations obviously conflict with FCPA regulations, EU laws and U.K. antibribery rules, and erode public confidence in the parties involved. Used as part of a comprehensive risk management program, a thorough and professional offshore screening operation that provides due diligence, “business integrity checks” will provide the measurable insight needed to reduce business, legal and reputation risks when seeking partnerships in unfamiliar international markets. With the required capability to properly assess the background, integrity and character of those individuals and organizations with which global companies seek to affiliate, such offshore investigative companies can help organizations remain compliant with domestic and international regulations while maintaining high standards of business ethics and behavior. ABOUT THE AUTHOR Zafar I. Anjum, CFE, CIS, MICA, Int. Dip. (Fin. Crime), MBCI is Chief Executive Officer of CRI Group (www. crigroup.com), a global supplier of investigative, forensic accounting, business due diligence and employee background screening services for some of the world’s leading business organizations. Licensed and incorporated by Dubai International Financial Centre, CRI safeguards businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI Group maintains offices in UAE, Singapore, Pakistan and the United Kingdom.

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Employee Screening

Conducting Background Investigations in the Middle East By Kanwal Zafar

n the complex world of employee background screening, no two countries are alike. In the United States, investigators have a web of databases at their disposal and a vast network of local resources that provide a wealth of information at the mere click of a mouse. It is a different world in the Middle East. Technology is limited in many parts of the region. Privacy legislation varies from

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country to country and from jurisdiction to jurisdiction. Cultural differences can impact the flow of information. Language barriers can contribute to inaccurate reporting. Instead of database-driven investigations that are generally conducted in the United States, professionals in the Middle East must conduct large parts of their investigations literally on foot, traveling to remote regions to scour records and interview sources.

Simply put, if you’re looking for accurate, reliable information in the Middle East you need to turn to qualified, professional sources that are familiar with the countries, cultures, terrain, languages, resources and — most of all — the laws that govern

Middle East countries have no prohibitive legislation that governs the employment screening process. At the same time there is no cooperative legislation and regulation to support background screening services for employee due diligence. personal privacy. In this part of the world, your contacts and resources are your greatest asset.

Discovering Hard-to-Find Facts in Hard-to-Reach Locations The biggest challenge to conducting background investigations in the Middle East is collecting reliable information in the most efficient manner. This requires a welltrained and diverse group of professional investigators who are multilingual and multi-cultural, are familiar with those geographic regions and can easily traverse the obstacles that often impede international investigations. Those obstacles include: • Working with local customs offices; • Complying with data protection laws and mandates; • Knowledge level of local investigative researchers; • Lack of centralized information resources and databases; and

• The proliferation of multicultural environments that are particularly influenced by locals who vastly differ in their approaches to investigative screening and public record searches, particularly with information collected via database sources. To address these obstacles, successful background investigators in this part of the world are often required to work deep in the field, traveling to remote destinations to conduct interviews, develop resources and enlist local assistance to verify information. Progressive screening firms will conduct investigations that regularly involve a thorough review of local press records, using online and proprietary databases augmented by manual field research to locate the appropriate public records. This indepth investigative approach is necessary to bring to light any instances of malfeasance or notable, publicly aired criticism. These professionals will also research all public records that are available within the respective government institutions such as a region’s trial courts, police and SEC sources, and global sanctions lists. The goal of providing this level of investigative legwork is to collect timely, well-documented and substantiated information, which will measure up to the high standards often required by our U.S. partners.

Examples of Privacy Laws in the Middle East While reputable screening firms in the United States comply closely with the Fair Credit Reporting Act to conduct domestic background investigations, foreign investigations are much more complex. Middle East countries have no prohibitive legislation that governs the employment screening process. At the same time there is no cooperative legislation and

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regulation to support background screening services for employee due diligence. However we, as industry professionals, must adhere to strict data protection requirements (such as the European Union data protection directive) to process consensually based personal information. In our region local police departments provide “Good Conduct Certificates” for employees for immigration purposes, while

the Dubai International Financial Centre (DIFC) awards a “Police Clearance” certificate for employee due diligence work. In the United Arab Emirates, data protection laws permit investigators to process sensitive personal information such as criminal history data. As a DIFC licensed entity, the CRI Group (as well as other reputable background screening firms) must maintain strict adherence to the region’s Data Protec-

How to Locate and Partner with Reputable Screening Firms in the Middle East So how does one go about securing a reputable background screening source abroad? The following checklist may be helpful. 1. To begin, it is highly recommended that you research the listing of expatriate background screening firms provided by the National Association of Professional Background Screeners (NAPBS) or PreemploymentDirectory.com in the International Section. The list can be found online at NAPBS. com or at PreemploymentDirectory.com. 2. Ask your provider how they comply with local and regional laws governing individual privacy protection and the methods they utilize in protecting information. 3. Make sure your service provider’s physical 12 | fraud360 | 1st quarter 2013

address is in the region they’re conducting investigations. If not, they could be simply outsourcing their cases to a third party. 4. Ask about the manner in which your service provider conducts investigations. Stay away from firms that investigate exclusively through media searches. 5. Inquire about the internal policies and procedures the service provider uses to monitor the protection of data, and if it conducts regular audits to ensure compliance with regional privacy mandates. 6. Don’t settle for firms that say they specialize in providing checks of the International Terrorist Watch List and the OFAC watch list. Those lists are

available online to anyone at no cost. 7. Avoid firms that won’t supply you with the source of the records they obtain. Also, be sure to ask: how old is their collected information? 8. The truly reputable firms will combine in-depth field investigations with routine public records searches. Make sure your provider is doing both. 9. Service delivery is critical in foreign investigations. Ask about average turnaround times and get commitments for delivery in advance of the investigation. 10. Find out what other U.S. companies use the service provider. Ask for references.

tion Law of 2007 in order to fulfill our ongoing DIFC licensed status. As in the United States, the procurement of personal data in this region — and any subsequent transfer of data outside of the DIFC — may only be attained with the written consent of the individual being investigated. Reputable screening firms in the Middle East will also comply with regional privacy laws (such as the E.U. data protection

responsibility is to conduct independent audits of the firm’s various information processing operations which handle customer and employee data. The DPO ensures that personal data is handled in accordance with all relevant data protection provisions covering online and offline data procurement while complying with local and regional regulations pertaining to individual privacy standards.

As the world economy shrinks and the pool of foreign job applicants expands, a partnership with a reputable international background screening service provider to conduct investigations abroad is essential for maintaining a safe hiring program for your clients. To ensure you’re using the best providers available, a little investigating of your own will result in big benefits down the road.

directive) by appointing an internal Data Protection Officer (DPO) whose primary

ABOUT THE AUTHOR Kanwal Zafar is Group Director of Corporate Research and Investigations, LLC. She can be reached by email at kzafar@crigroup.com.

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Fraud:

A Global Problem Corruption, bribery and a lack of due diligence harm business interests worldwide. Learn what the experts are doing to combat these and other threats.

From a global perspective, economic crime is fast becoming a chief concern of business organizations worldwide. The global economic downturn has adversely affected the worldâ&#x20AC;&#x2122;s business climate and as a result, the risk of fraud and white collar crime at the organizational level has significantly increased. Unfortunately, there is no global cookie-cutter method for investigating and detecting fraud that emanates from outside the organization. In the Middle East and Africa information technology is largely limited in many regions and cultural differences can impact the flow of information that is so vital to

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By Zafar I. Anjum the due diligence investigative process. Couple this with the varying degrees of privacy laws and regulations in this region (which can vary from country to country and from jurisdiction to jurisdiction), and the language barriers that can wreak havoc on accurate investigating, and an organization can find itself running in circles trying to implement safeguard measures. Because due diligence investigations in the Middle East and Africa must, in many instances, be carried out literally on foot, with investigators traveling to remote regions to scour records and interview sources, busi-

nesses must rely on qualified, professional sources that are familiar with the countries, cultures, terrain, languages, resources and â&#x20AC;&#x201D; most of all â&#x20AC;&#x201D; the laws that govern personal and business privacy. In this part of the world your contacts and resources are your greatest asset.

Business Fraud: A Growing Battle The key to combating business fraud is first understanding the complexity of these crimes, knowing where the perpetrators of business fraud are found, and weighing the many costs associated with becoming a victim of white collar crime.

Business fraud is defined as any intentional act carried out against an individual or organization to steal assets (money, equipment, property) or improperly misrepresent an organization’s financial position to deceive outside parties (investors, shareholders, etc.). This broad definition is manifested through a number of different criminal activities, including: • Asset misappropriation • Intellectual property infringement • Money laundering • Embezzlement • Check and credit card fraud

• Illegal insider trading • Bribery and corruption • Market fraud (involving cartels colluding to fix prices) • Espionage What’s interesting is that, while fraud detection methods have improved markedly over the last decade, an incredibly high percentage of businesses worldwide have become victims of fraud in one form or another (according to recent studies, incidences of accounting fraud

alone have more than tripled worldwide since 2003.) Because economic crime continues to be a serious issue affecting businesses worldwide, it is important to understand who is committing these crimes and some of the factors that motivate criminal activity.

• Online (cyber) fraud • Tax and accounting fraud

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Identifying the Fraudsters Most discussions surrounding economic fraud generally focus on external fraud sources: Third-party intermediaries, vendors, agents, customers... even regional and local government officials (particularly in the Middle East and

result of the recent global economic downturn. As organizations cut staff to make operations more lean, departments increase pressure to perform, and shareholders demand stronger bottom lines, internal personnel increasingly turn to white collar crime as a means

company share price, fraud can negatively affect virtually every aspect of the organization. These incidences can affect everything from employees and management (internally) to customers, suppliers, shareholders and prospective business sources (externally), as

These internal fraudsters are driven to their actions by a variety of circumstances, most notably as a result of the recent global economic downturn. North Africa regions, where bribery and corruption is prevalent and control is not as stringent). Yet â&#x20AC;&#x201D; surprisingly â&#x20AC;&#x201D; organizations around the globe report that most incidences of economic crime are committed internally by perpetrators that include junior staff, middle managers and senior executives. These internal fraudsters are driven to their actions by a variety of circumstances, most notably as a

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to justify simple business survival. Unfortunately, these individuals fail to recognize the impact of their actions on their organizationâ&#x20AC;&#x2122;s performance. While the financial costs associated with global fraud and white collar crime are staggering, the collateral damages can be devastating. From negative media exposure and damaged reputation to sinking employee morale and deflated

well as the community surrounding the organization, making the long-term ramifications daunting.

Fraud Risk Assessments It is a proven fact that conducting regular fraud risk assessments throughout the business greatly decreases the incidences of reported fraud in an organization. From an operational standpoint, a fraud risk assessment will help to

identify weaknesses in the systems and controls surrounding the organization’s financial operations. Effective assessments will expose vulnerabilities in the organization’s various departments and functions while mitigating risks associated with all types of internal and external business transactions. Regular application of a fraud risk assessment will also force organizations to continually review risk management policies to ensure “checks and balances” are in place, and up-to-date detection and prevention procedures are constantly measured. From a personnel level, fraud risk assessments will make it easier for staff to identify collusive behavior inside and outside of the organization. Through

To ensure every member of the staff is aware of (and has bought into) the organization’s policies, companies should: • Supply employees with written corporate policies and post the policies on the corporate website. • Make sure employees are fully familiar with “conflict of interest” scenarios that could ultimately lead to improprieties, noting that the organization’s interests should never be subordinated to personal gain or advantage. • Set up a phone “hotline” that enables employees to discretely communicate perceived improprieties to the organization.

party resources will ensure the organization is “playing fair” in the global marketplace. Such due diligence becomes an effective risk management tool in times when the organization: • Performs pre-merger and acquisition research and pre-IPO investigations; • Offers and enters into newly formed international joint ventures; • Engages with new banking or commercial clients; • Employs, contracts with or retains foreign business partners; • Seeks to maintain regulatory compliance and corporate governance best practices; and

• Is required to be in compliance with Foreign Corrupt Practices Act (FCPA) rules and assessments regulations.

As would be expected, those organizations where

From a personnel level, fraud risk will make it easier for staff to identify collusive behavior inside and outside of the organization. documented corporate policies that clearly define the organization’s code of business conduct and ethical behavior, employees should be able to report any concerns dealing with questionable staff behavior on a confidential basis, without fear, and confident that the guilty parties will be adequately reckoned with.

senior management and executives take an active and visible role in maintaining integrity policies within the organization generally report noticeably fewer incidences of fraud and white collar crime. Finally, conducting regular and thorough due diligence on business partners, suppliers and third-

Global business opportunities are proving to be very beneficial for companies hoping to broaden markets and increase sales. But those opportunities can also open the doors to fraud and white collar crime orchestrated by internal and external perpetrators who prey on weaknesses in overworked and understaffed business

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operations and cause costly and potentially long-term damage. To safeguard the organization, it is imperative that business organizations involved in global business dealings establish a comprehensive fraud risk assessment and management program that regularly monitors systems and controls to expose vulnerabilities and potential weaknesses in business operations. ABOUT THE AUTHOR Zafar I. Anjum, CFE, CIS, MICA, Int. Dip. (Fin. Crime), MBCI is Chief Executive Officer of CRI Group (www.crigroup.com), a global supplier of investigative, forensic accounting, business due diligence and employee background screening services for some of the world’s leading business organizations. Licensed and incorporated by Dubai International Financial Centre, CRI safeguards businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI Group maintains offices in UAE, Qatar, Pakistan, Singapore and the United Kingdom. CONTACT INFORMATION Zafar I. Anjum, CFE, CIS, MICA, Int. Dip. (Fin. Crime), MBCI Chief Executive Officer CRI Group Dubai International Financial Centre (DIFC) 904, Liberty House, DIFC PO Box 111794, Dubai, UAE PHONE: +971 4 3589884 FAX: +971 4 3589094 CELL: +971 50 9038184 EMAIL: zanjum@crigroup.com

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Case Study: Due Diligence Exposes Fraudulent Business One of CRI Group’s clients is a multinational company engaged in the provision of equipment and supplies used by the medical industry. The client wished to contract with a company founded in Egypt (and also having operations in Iraq). Before entering into contractual arrangements, the client wanted to ensure that there are no regulatory or reputational problems associated with the business in Egypt, and thus wanted to know their track record, integrity and reputation. During the course of this integrity due diligence, CRI Group local operatives focused on whether the company in question was a legitimate business, and sought to identify the key players running operations both in Egypt and Iraq for the company in question. However, no information was found from local industry resources; specifically, corporate registration authorities, local chamber of commerce, etc. to support that the company was who they claimed to be. Questions arose as the experts worked to find out more about their backgrounds, political connections, and reputation. Research showed no physical locations; the office address was found to be a residential site with no indication of business operations. No commercial relationships in Iraq were evident. Local operatives further investigated the company’s distribution capabilities

in the country, especially to the north and south, as claimed in a questionnaire provided to the client. Yet no information was found from any source to corroborate the company’s claims. Additionally, discreet interviews with local individuals found that no one was aware of the company. Things just weren’t adding up in a positive way in trying to establish that the company was a legitimate business. Skepticism was confirmed when a local agent researched court and police resources, finding that the company’s principal was previously charged with “criminal breach of trust” and there was still a trial proceeding with regional trial courts. Three other civil damages claims against the principal were discovered, with USD $1.2 million claimed in liabilities. When this evidence was presented to the client, CRI Group helped them avoid becoming entangled with a fraudulent business and an alleged criminal – protecting the client from making a bad business deal that could have resulted in severe economic loss and a potentially damaged reputation.

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Expert Shares Insight on Fraud Due Diligence Zafar I. Anjum, CEO for Corporate Research and Investigations LLC, recently participated in a panel discussion with a U.K.-based finance publication about fraud due diligence. The following are excerpts of his discussion points for business leaders and professionals around the world.

Companies are placing a great emphasis on due diligence. After the most recent serious regulatory actions, it has been mandatory for every company, regardless of jurisdiction, to undertake rigorous integrity due diligence on third parties and intermediaries associated with their business operations to ascertain their legal compliance, financial viability, and integrity levels. There is a significantly increased willingness to undertake due diligence as a pre-emptive measure against fraud and corruption across industry sectors, specifically after the financial crisis.

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The UK Bribery Act 2010 advanced the material scope of due diligence, making it an indispensable tool in establishing issues such as legal compliance, financial sustainability, and the integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. Successful risk management begins with scrutinizing the individuals and organizations with whom you will be conducting business. It also requires compliance with international laws, which can be complex

and subject to change. Investigative due diligence before any transaction is a proactive countermeasure against fraud, and an economical approach to reducing vulnerabilities in the deal process. It safeguards the interests of the buyer and investors. Many organizations still don’t have proactive fraud risk-management measures implemented, thus compromising workplace security and increasing the organization’s vulnerability towards employee fraud and malfeasance. Verifying employee’s past histories will reduce exposure to fraud and theft, identity fraud, drug abuse and workplace violence. The background check process can start at the candidate’s interview to where the CV and other credentials can be checked, specifically previous employment history and litigation record checks. This process should be consent-based and the applicant should know that a rigorous background check will be in place during his or her application. Similar activities can be put in place for outside vendors, suppliers and outside partners and affiliates. Fraud in business organizations can be undertaken by three main groups of people, those charged with management, employees and third-parties. Current regulatory compliance legislations require organizations to make it mandatory to undertake ‘integrity due diligence’ to ascertain the legal compliance and fraud risk assessments of third-parties, suppliers and customers. Businesses are required to ensure they understanding how their intermediary partners do business, in order to ascertain risks associated with third-parties and identify proactive measures. Many jurisdictions still lack modern investigative research and due diligence techniques. There are no centralized

database systems in most countries across the Middle East and Asian regions — however, the use of modern techniques to ascertain the facts is a top level decision within the organization. If management is committed to anti-fraud and anti-corrupt business transactions, this is an economical solution. First, the local legal compliance challenges of each jurisdiction should be taken into consideration. Legislation and local anti-fraud regulatory requirements, privacy and data protection laws, and the operational and reputational risks associated with the business in question are important considerations that can impact the implementation of anti-fraud programs. Due diligence is especially critical when dealing with businesses or governmental organizations in developing markets. In this environment it is essential that businesses become completely familiar with the operations of international clients, business partners, distributors, agents, consultants and individuals, before conducting offshore transactions, establishing formal corporate partnerships or committing to international investments. ABOUT ZAFAR I. ANJUM Zafar I. Anjum, CFE, CIS, MICA, Int. Dip. (Fin. Crime), MBCI is Chief Executive Officer of CRI Group (www. crigroup.com), a global supplier of investigative, forensic accounting, business due diligence and employee background screening services for some of the world’s leading business organizations. Licensed and incorporated by Dubai International Financial Centre, CRI safeguards businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI Group maintains offices in UAE, Qatar, Pakistan, Singapore and the United Kingdom.

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VENDOR B VENDOR A

Contract Fraud: Is Your Organization At Risk? By Zafar I. Anjum

seemingly endless stream of business fraud allegations flows continuously over our news tickers. The growing preponderance of corruption, collusion, coercion and fraud in the procurement of business contracts has thrust companies into the international limelight and forced organizations to become more accountable.

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DATELINE: KABUL, AFGHANISTAN (DECEMBER, 2012) â&#x20AC;&#x201D; Two former contractors of the U.S. Agency for International Development (USAID) are facing a possible three-year imprisonment and financial penalties for conspiring to steal nearly $10,000 from the development agency in 2011. The employees worked for a USAID implementing partner for the Afghanistan Farm Service Alliance project in the country, were charged with fraud for allegedly falsifying documents.

Be it major grant work awarded by government or other funding agencies, securing lucrative contracts around the globe, or using third-party intermediaries to aid in new business development, business organizations worldwide are becoming increasingly susceptible to corporate fraud and increasingly scrutinized by law enforcement agencies — and the public — in the manner by which they conduct business. And the risk of collusion increases markedly in the context of the economy and greater levels of subcontracting. In the past year, law enforcement agencies have taken a more proactive stance to identify, apprehend and prosecute perpetrators of corporate fraud, leveling record fines against companies and harsh sentences against executives as a way to demonstrate intolerance towards fraud and judgment on those found guilty. Business organizations worldwide – under the auspices of the Foreign Corrupt Practices Act (U.S.), the UK Bribery Act, and a myriad of other laws laid down by governments worldwide – have been cajoled into re-examining their fraud compliance programs and incorporating tighter internal and external controls to identify irregularities, pinpoint infractions and mitigate the risk of damages. How does your organization rate in its ability to deter fraud? Let’s take a look at the current state of affairs and focus in on what progressive companies are doing to crack down on wrongdoers and reduce risk.

FCPA: The Letter of the Law for Businesses in the U.S. and Abroad The Foreign Corrupt Practices Act (FCPA) has largely been effective in its intended goal of bringing a halt to the bribery of foreign officials in order to restore public confidence in the integrity of the American business system.

The act makes it unlawful for a U.S. citizen, and certain foreign issuers of securities, “to make a payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. The law also applies to foreign firms and persons DATELINE: VIETNAM (NOVEMBER, 2012) — A British businessman has been accused of bribing a Vietnamese central bank governor by offering to arrange and pay for his son’s university education in Britain. The businessman is alleged to have made the offer in return for a lucrative contract to print the Vietnamese currency in 2003. The allegations were made after investigating the company for corrupt practices in securing international banknote contracts. who take any act in furtherance of such a corrupt payment while in the United States,” as stated by the U.S. Securities and Exchange Commission. Further, the FCPA prohibits corrupt payments through intermediaries. It is unlawful to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official (it should be noted here that the FCPA does not require that a corrupt act succeed in its purpose. The mere offer or promise of a corrupt payment can constitute a violation of the statute).

Homing In on Procurement Fraud Procurement fraud is a generic term describing fraud relating to the purchase of goods and/or the commissioning of services. Procurement fraud usually involves collusion between one or more members of an organization’s staff and one or more outside suppliers. Such transaction are identified as being “at risk” due to the known or suspected involvement of government officials or

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politically exposed persons, irregularities in procurement processes and contract awards, and other red flags. General examples of procurement fraud include the following: • Persuading government officials to receive kickbacks during the procurement process; • Using outside contractors that have bid on substantial jobs with no previous experience; • Working with contracting companies which are owned by politicians; or • Forming working relationships with private sector partners, individuals or politicians who have been previously prosecuted in kickback schemes. Frequent areas where misrepresentations often occur include unauthorized use of outside consultant resumes without the consultant’s authorization, bait and switch offers on products or services, misrepresentation of past performance, provision of falsified bank guarantees, and misrepresentation of financial position.

The Overall Cost of Fraud to the Company Above and beyond the usual and customary criminal and civil penalties that a person or company can incur if found guilty of violating the FCPA, the statute also emphasizes further action, which could include: • Being ruled ineligible to receive export licenses; • Suspension or barring of individuals from the securities business; and • The possible suspension or debarment from agency programs.

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So, from the sheer bottom-line standpoint, it behooves a business to execute a highly regimented corporate program which acts as a watchdog for improper business conduct. As a well-executed and managed corporate anti-corruption enforcement program will not only deter collusive activity and allay the subsequent criminal and civil penalties which result, it will also position the organization in a more favorable light DATELINE: AFGHANISTAN (MAY, 2012) — An ex-USAID contractor that worked as a procurement officer for the Afghanistan Small and Medium Enterprise Development project was sentenced to three years in prison and fined $10,000 for bribery. with clients and customers, the trade, suppliers and shareholders by: • Boosting stakeholder assurance that the company is acting in everyone’s best interest; • Promoting the use of qualified outside oversight to maintain objectivity and integrity; • Greatly reducing the incidence of poorquality, off-spec or non-compliant work (or goods), or project irregularities, and the potential liabilities that result from such transactions; • Preserving the organization’s reputation in the public’s eye; • Strengthening the company’s ability to conduct business transactions with governments; and • Averting bad press and public distrust.

Better Enforcement, Tighter Controls In the past several years, a major focus has been placed on upholding anti-corruption laws worldwide, resulting in an influx of highly-publicized cases, record fines and notable prison sentences. Key developing

trends in enforcing FCPA laws, in particular, show a dramatically stepped-up level of prosecutions of companies and individuals, and a vastly increased level of fines. As reported by Bloomberg Law Reports (“Another Landmark Year: 2010 FCPA Year-InReview and Enforcement Trends For 2011” by T. Markus Funk, Perkins Coie): • Investigative approaches and techniques are growing increasingly proactive and aggressive and will result in more indictments and more trials. • Whistleblower bounty provisions have been fine-tuned to attract more tipsters. • The prosecution of individual defendants is now a top enforcement priority. • Law enforcement agent specialization will permit effective industry-specific enforcement. • A widening of the demand side of the enforcement net to ensnare bribe recipients and those middlemen who assist them. • A congressional push to mandate debarment of governmental contractors found to be FCPA violators. • Policies aimed at encouraging compliance by offering meaningful consideration to companies with robust compliance and ethics programs. • The expansion of multi-jurisdictional cooperation worldwide.

Corporate good governance begins with a strong and well-executed compliance program. Therefore, corporations should institute and promote a “zero-tolerance” anti-corruption policy which includes a controls-based, detailed approach to fraud and corruption that is fortified by internal training programs and broad-based integrity awareness campaigns. Such programs, then would include: • An effective overall compliance plan which has been developed with the assistance of outside counsel and is easily monitored and updated to conform to changing technology and new legislation; • A formalized code of ethics that is presented and adhered to by the entire company; • The creation of an “anti-corruption culture” within the entire company; • The establishment of direct internal corporate reporting systems and the personnel to effectively oversee and administer them; • Ongoing and regular checks and audits of the company-wide system; Evaluating and modifying the compliance plan and internal controls to make sure they are defendable on both a global and local level. • Appropriate and consistent disciplinary processes to deter irregularities;

These positive trends bode well for both shareholders safeguarding their investments and companies intent on maintaining a high degree of integrity in the ongoing quest for international market penetration and new business development.

• Early detection of potential violations;

Instituting an Effective Integrity Program

Here are suggested initiatives which are designed to strengthen the company’s key internal and external control mechanisms, procurement and financial management

In the world of anti-corruption, the best defense is, of course, a strong offense.

• Voluntary self-referral and whistleblower reporting systems; and • Remedial actions to address past cases of corruption.

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practices, while increasing the transparency and effectiveness of the organization’s operations.

Reporting, Bookkeeping and Contracting Proper accounting and reporting provisions, as dictated by the FCPA, require corporations covered by the provisions to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Key measures here include: • Establishment and implementation of robust financial controls, making sure that relevant staff are made aware of the controls and measures in place; • Ensuring basic records of all financial and contracting records are maintained, and supporting documents are archived;

should a facilitating payment become necessary, a written approval from corporate counsel should first be obtained). All standard bidding documents should contain language that clearly alerts bidders that documents submitted in support of bid proposals may be subject to independent verification by the company or its representatives, and that failure to authenDATELINE: RESTON, VIRGINIA (JUNE, 2012) — A company based in Reston, Virginia that provides design, installation, maintenance and other services at nuclear and fossil fuel power plants, has agreed to pay an $8.82 million criminal penalty to resolve violations of the Foreign Corrupt Practices Act (FCPA). The company allegedly paid bribes to officials employed by a stateowned nuclear power plant in Lithuania, to secure contracts to perform services for the plant. To disguise the scheme, the bribes were funneled through several subcontractors located in the U.S. and abroad. The subcontractors, in turn, made repeated payments to highlevel officials via check or wire transfer.

• Documenting clear procedures for reporting fraud to the proper authorities within the company.

ticate a claim will result in the bidder’s disqualification from the bidding process and debarment from future business.

The subsequent recording of all instances of suspected and confirmed instances of fraud will help the company spot emerging patterns, identify areas of risk, measure losses and build an evidence base if fraud has occurred. The company must properly account for all payments made to government officials, which includes any “facilitating payment” to expedite routine government actions such as to issue a license or permit, to process a visa, to provide services like mail delivery, security services, or utilities services, provided the payment is not prohibited by local law (as the UK Bribery Act and most local county laws prohibit all facilitating payments, the company should generally refrain from such payments. However,

Outside Agents: The Area Most Prone to Abuse

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To avoid being held liable for corrupt third party payments, the company should exercise due diligence and take all necessary precautions to ensure that business relationships have been formed with reputable and qualified partners and representatives. Due diligence is an integral component of integrity violations, backed by technical support and outside advice from counsel. Such due diligence may include investigating potential foreign representatives and joint venture partners to determine if they are in fact qualified for the desired position, whether they have personal or professional ties to the government, the

reputation of their clientele, and their reputation with local bankers, clients and other business associates. Businesses should train outside agents regarding all corruption and anti-bribery

Education and Communications Initiatives Best-practice corporate anti-corruption programs integrate an effective communications program that informs, educates

VENDOR B VENDOR A

Take preventive measures to lessen the overall role of agents or conduits, thereby reducing opportunities for kickbacks.

laws and consider adding requirements for compliance with these laws in all contracts with outside agents. Further measures: • Tight controls should include the exclusion of providers where there are reasonable grounds for deciding they cannot be entrusted with public money. The organization should also interview questionable providers rather than relying solely on paperwork and certificates. • Take preventive measures to lessen the overall role of agents or conduits, thereby reducing opportunities for kickbacks. • Maintain a database of debarred and questionable third-party individuals, organizations and other entities to simplify the due diligence process before contracts are awarded and to prevent contracts from inadvertently being awarded to such entities. • Review and revise contracts used to engage translators and interpreters to include language on adherence to the highest ethical standards of the company’s anti-corruption policy.

and offers a variety of outlets and resources that employees can utilize to instill a universal code of business conduct and ethics, acquire information and expose irregularities. These programs emphasize the importance of working together and call upon every staff member of the organization to collaborate and become vigilant in preventing fraud and corruption in every aspect of their job. Aside from informing and educating, effective communications programs adequately define the role and obligation of each staff member in preventing fraud and corruption in their specific areas of responsibility. Here, in no particular order, are some examples of best-practice solutions that can be integrated into a corporate goodgovernance program: • Conduct regular presentations, seminars or workshops pertaining to the organization’s anti-corruption policy for business delegates, board of directors and key outside representatives. Such presentations raise awareness on such issues as spotting red flags for bribes, how to prevent fraud and corruption in consultancy

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contracts and project implementation, and improving governance in various industry sectors. • Clearly define what tools your organization has to fight fraud and corruption, and identify mitigating measures that could be incorporated in operational and procedural processes to prevent integrity violations. Provide regular and mandatory anti-corruption orientation seminars

Regularly provide case studies from past company experiences and publicized cases involving corrupt practices. to educate, create awareness and demonstrate the tools available to conduct due diligence to minimize the risk of integrity violations. • Regularly provide case studies from past company experiences and publicized cases involving corrupt practices. • Align Human Resource policies and procedures with fraud and financial crime issues. These anti-corruption procedures should be integrated into company-produced policies, principles and guidelines manuals. • Set out clearly defined roles and assignments of due diligence responsibilities for staff, including segregation of duties and delegation of financial responsibilities with appropriate report-back procedures. • Initiate open forums to discuss best practices, shared knowledge, methodology; websites and intranets are tools that work best to facilitate such info sharing. • Set up an integrity email reporting system for reporting allegations of fraud and corruption. Effective reporting systems allow for anonymity via a separate webbased email account for communications.

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• A similar “reporting hotline” can be made available for employees to report concerns about questionable or improper accounting of financial matters and unethical, illegal or unsafe business practices. Such systems allow anonymous reporting via a toll-free phone call and are available worldwide 24/7. This enables employees to report concerns without fear of retribution or retaliation. • Produce web-based e-learning modules to educate new and existing staff. E-learning modules provide an excellent feedback system that adequately monitors the level of understanding among corporate staff. • Compile a “Frequently Asked Questions” section on the company intranet as a rapid resource and quick reference for employees to access when integrity issues arise. Through the proper establishment, administration and communication of a company-wide anti-corruption program the business will not only mitigate the monetary and legal damages associated with fraudulent, collusive or coercive practices, it will be capable of properly defending itself in the court of law (and the court of public opinion) when such allegations arise. ABOUT THE AUTHOR Zafar I. Anjum, CFE, CIS, MICA, Int. Dip. (Fin. Crime), MBCI is Chief Executive Officer of CRI Group (www. crigroup.com), a global supplier of investigative, forensic accounting, business due diligence and employee background screening services for some of the world’s leading business organizations. Licensed and incorporated by Dubai International Financial Centre, CRI safeguards businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI Group maintains offices in UAE, Qatar, Pakistan, Singapore and the United Kingdom.

C I F A S The UK’s Fraud Prevention Service

Fighting Fraud Nationally:

Emerging Fraud Threats CIFAS Conference & Exhibition London, Tuesday 4 June 2013

With speakers from a variety of disciplines and backgrounds, this year’s CIFAS Fraud Conference and Exhibition will focus on the latest information about emerging threats across the fraud prevention industry. The day will also be a great networking opportunity, giving you a chance to speak to CIFAS Members and staff, to meet representatives from numerous fraud prevention product providers and to catch up with your peers and colleagues from across the public and private sectors. Highlights include: •

Statistical Update on Emerging Trends: CIFAS Deputy Head of Financial Crime and Strategic Intelligence, Sandra Peaston, will provide delegates with an up-to-date insight into the trends emerging through analysis of the data held on the National Fraud Database.

•

When the Economy Recovers — What Happens Next? Rob McCusker, Director of the Centre for Fraud and Financial Crime at Teesside University, will present the economist’s view of the emerging threats associated with a recovering economy.

•

The Media: Special guest, financial journalist and BBC Radio 4’s Money Box presenter, Paul Lewis, will give the media’s view of the pressing issues related to fraud prevention.

•

The Emergence of Staff Fraud: Managing Director of Digilog UK Limited, Lior Koskas, will focus on the importance of tackling the emerging threat of insider fraud.

•

Identity Crime | The Digital Threat: Associate Fellow, Cybersecurity at RUSI (The Royal United Services Institute for Defence and Security Studies), David Smart, will address the growing identity fraud threats seen across the ever-evolving digital world.

•

And much more . . .

Visit www.cifas.org.uk/events or contact events@cifas.org.uk for a full programme and booking details. Prices start from just £210 per delegate. CIFAS - A company Limited by Guarantee. Registered in England and Wales No. 2584687 at 6th Floor, Lynton House, 7-12 Tavistock Square, London, WC1H 9LT

Case Studies: Background Checks Reveal Alarming Discrepancies By Sobia Syed

roperly screening prospective and current employees is a safeguard every organization should include as a part of their fraud prevention strategy. In these cases, CRI Group was called upon to conduct background checks on promising candidates and existing employees. In each case, the results were startling.

Case 1: Forgeries and Fakes The applicant claimed to be a holder of a university degree. When CRI Group conducted its local education verification process, the university named by the candidate report-

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ed that the applicant’s degree was ‘fake and forged.’ The applicant also provided a reference letter, apparently signed by the university’s Deputy Controller of Examination (Dy COE) — confirming his education record and asking to re-check his record with the university. However, further investigations showed that the reference letter was also fake, and the signatory was not, nor had ever been, the Dy COE of the university. Another fake and forged degree is revealed when CRI Group investigates the applicant’s BBA — as there was no conferment of said degree.

Case 2: False Employment Record A multinational company requested

that CRI Group conduct post-employment verification on one of their current employees. While conducting her employment checks, CRI Group revealed that one of her previous employment records was fake — she had, in fact, never been employed by said company. For the rest of her employments, there were conflicts in her claimed job titles, duties and salaries.

Case 3: Fraud Alleged by Former Employer In another pre-employment verification of an applicant, CRI Group uncovers disturbing details. When the applicant’s previous employers were contacted, one of them reported that the applicant was hired without any prior experience, was trained for a couple of months, and then terminated as due cash embezzlement, harassment and workplace violence. A second employment verification revealed his termination, as he caused a financial loss to the company.

Case 4: Another Fake Letter CRI Group conducted a pre-employment verification of an applicant. The organization that she had listed as her previous employer was contacted and shown a reference letter (provided by the applicant). This organization revealed to CRI Group that she had never been employed by them, and the letter she had provided was a fake. ABOUT THE AUTHOR Sobia Syed is Senior Manager for CRI Background Screening Services, Corporate Research and Investigations, LLC. She can be contacted at sobia.syed@crigroup.com.

The Company That Didn’t Exist

CRI Group was contacted for a due diligence/corporate investigation by a leading international company to conduct some inquiries relating to a company dealing in water treatment plant services in Pakistan. Through corporate and tax records, investigators identified the company’s CEO and a director. During the course of investigation, it is discovered that there is no actual company that exists at the address provided. Similarly, while checking the residence of the director and CEO, the addresses listed were for a boys hostel and a hospital, as well as a fake address didn’t physically exist. When investigators checked with people living in the area, they confirmed that they don’t know either of the subjects or the company in question. Further investigation revealed that there was no such company in the industry. However, one person confirmed that he knew the individual who was listed as CEO of the company, and that he is employee of a shop that deals in home filter plants at the domestic level. The investigation reveals he is not the CEO he claimed to be, and the water treatment plant services company was a fake.

The Burned House

CRI Group was contacted to investigate an insurance claim verification of a house that had burned down. When our investigator visited the reported address, he discovered that there was no such house number. »» continued on page 35

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Background Checks: The First Step for Business Integrity and Success By Muhammad Sohaib

or an employer, a background check on a potential candidate can only be beneficial. If the potential candidate comes out clean, that is great. If the background check comes up with incriminating information, the employer will have saved himself/herself a lot of trouble. Either way, a background check works out to be a win/win situation for the employer. Employers ranging from senior homes to large corporate organizations are being increasingly cautious about the people they hire. Hiring the wrong candidates could prove to be costly for

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employers that have not been thorough in background checks. Potential employers are making criminal and identity verifications requirements to rule out security concerns related to terrorism. This is particularly true of financial institutions that need to know as much about their employees as they do about their customers. Industries with high turnover rates tend not to do many background checks. Most industries, however, conduct indepth background checks on potential employees because they will be liable for

damages for things they might do during their employment. Employers conducting background checks will go through publicly available records, most of them generated by the government. They will also scan social media and other digital spaces where people generally let their guard down and air their views. Documents and sources accessed during a background check include Social

job market. Employers are keen to get the right fit on board. It is important you see yourself as a brand that the employer wants to invest in and avail the services of, so there is bound to be some checking around before they settle on you. There are many different ways in which a pre-employment background check is done. There is also one other factor to consider. There is no law enforcement agency

Employers conducting background checks will go through publicly available records, most of them generated by the government. They will also scan social media and other digital spaces where people generally let their guard down and air their views. Security numbers, driving licenses, vehicle registration, driving records, credit records, criminal records, education history, workers’ compensation records, bankruptcy records, character references, medical records, property ownership, military records, state licensing records, drug test records, past employers and personal references. The depth of the background check will depend on the nature of the position for which the candidate has applied. It is critical, for instance, that someone who has a history of fraud not be given the job of a cashier, or a possible terrorist a job in a defense facility. The prospective employer can conduct background checks in-house by hiring a private investigator or through agencies. Some of these agencies work in specific areas only. Corporations with large numbers of employees may contract third parties for background checks with reports. After all, it is better to be prepared than to be ambushed and left red-faced. Background checks are a reality in today’s

in the world that can offer you this, so beware of a company that tells you different. If you own a business or a large industry it would be a wise decision to have this done for all your employees and it also gives you information if you ever have any unemployment issues or a workers’ compensation issue. You are already armed with information that will help you out with any problems that could arise. Pre-employment background checks are a very useful tool in the business world today, and CRI Group would suggest to anyone considering this option that you need to get a process implemented into your company’s human resource department to have this done on all employees. Take this into consideration: it could save your organization a huge legal expense in the future, and it could be your first step towards business integrity and success. ABOUT THE AUTHOR Muhammad Sohaib is a Research Analyst for Corporate Research Investigations, LLC. He can be reached at msohaib@crigroup.com.

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CFEs: The Global Experts By Zafar I. Anjum

ertified Fraud Examiners (CFEs) around the world are recognized for their expertise in the prevention and detection of fraud. These professional fraud fighters are leaders in helping organizations protect their assets from white collar criminals. They are also the foremost experts on investigation in cases where fraud is suspected. To become a CFE, an individual must take an exam, administered by the Association of Certified Fraud Examiners (ACFE), in which they demonstrate their mastery of the four major areas of fraud: • Fraud Investigation • Fraudulent Financial Transactions • Legal Elements of Fraud • Fraud Prevention and Deterrence

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Additionally, a CFE candidate must: • Meet specific education and professional requirements • Be approved by the ACFE certification committee • Exemplify the highest moral and ethical standards and agree to abide by the bylaws of the ACFE and the CFE Code of Professional Ethics • Maintain annual CPE requirements and remain an ACFE member in good standing CFEs are trained to recognize red flags that indicate not just actual fraud, but fraud risk — potentially saving organizations thousands of dollars in losses through prevention and detection before it is too late. CFEs have the ability to:

• Identify an organization’s vulnerability to fraud • Examine data and records to detect and trace fraudulent transactions • Interview personnel to obtain information • Write fraud examination reports, advise clients about findings and testify at trial • Advise on improving fraud prevention and deterrence measures Many different types of professionals can benefit from earning the CFE credential. They include accountants, auditors, lawyers, security professionals, compliance officers, government agents, law enforcement personnel and many others. Earning the credential can open new doors in business and help grow a professional’s career in fraud prevention and detection.

Increased Demand for the CFE The globally preferred CFE credential is recognized as a symbol of knowledge and expertise in the anti-fraud profession, and is in demand in today’s business climate for important reasons: Businesses and government agencies are requiring or encouraging select employees to complete ACFE training so they can apply best practices to fighting fraud. Due to new legislation and regulations, more accountants and auditors are benefiting from CFE training because it helps them to be prepared to prevent, detect and deter fraud. Recent high-profile fraud cases around the world have raised the importance of fraud prevention and detection worldwide Businesses know that protecting their investments is as crucial as ever in today’s financial climate. Through their service at large, international corporations and government bodies to small businesses and non-profit organizations, CFEs are working intensely to detect and prevent fraud. Every

corporation — especially those doing business across international borders — should have CFEs on staff. At the same time, every professional fraud fighter should consider earning the credential — to enhance their skills, knowledge and career. ABOUT THE AUTHOR Zafar I. Anjum, CFE, CIS, MICA, Int. Dip. (Fin. Crime), MBCI is Chief Executive Officer of CRI Group (www. crigroup.com), a global supplier of investigative, forensic accounting, business due diligence and employee background screening services for some of the world’s leading business organizations. Licensed and incorporated by Dubai International Financial Centre, CRI safeguards businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI Group maintains offices in UAE, Qatar, Pakistan, Singapore and the United Kingdom. »» continued from page 31

Further investigation revealed that the house that had burned was actually at another location. During the course of investigation, agents learned that the so-called “victim” himself is residing in the house next to the one for which he had made the claim. Furthermore, there was no police record supporting the subject’s claim.

Fake Hospital Bills

A CRI Group investigation to verify hospital bills revealed that the hospital in question was closed almost two years prior due to a dispute amongst doctors — and now existed at a different address, which was 10 km away from the address provided by the claimant. Further inquiries confirmed that there was no record for the invoice and patient in the given dates (or any other dates). In the course of the investigation, it is also determined that the stamp on the bills is a fake, and the names on the bills are phony.

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You secure their future.

We’ll secure their past.

Global hiring is on the rise. Are you be 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. Address checks and physical verifications

Education and credential verifications

International criminal record checks

Reference verifications

Integrity due diligence checking Compliance and regulatory checks Verify identity documentation

Litigation record checks

Local-language media/public domain searches

Immigration status verifications

Employment verifications

Verify credit and financial histories

Bankruptcy research

+44 207 038 8366 investigations@CRIgroup.co.uk www.CRIgroup.co.uk

UAE | Qatar | United Kingdom | Pakistan | Singapore