The WHO Health Emergencies Program, the division spearheading the worldwide response to the coronavirus outbreak, is severely underfunded, recent audits reveal. The WHO is still battling to implement vital reforms in the fallout of its widely criticised response to a life-threatening Ebola outbreak 6 years ago. The number of internal corruption allegations across the entire WHO has shot up, with the detection of many schemes aimed at defrauding large amounts of money from the organisation. An external committee has alerted the WHO that it faces dwindling internal control compliance. To make matters worse, experts say the WHO’s initial response to the coronavirus, now called COVID-19, was too slow, and that the WHO should have declared a public health emergency of international concern (PHEIC) sooner. Find out more at https://www.abc.net.au/news/2020-02-17/coronavirus-who-underfunded-internal-corruption-allegations/11970382
South African laws and regulations outlining the standards for sex offences courts were published on 7 Feb 2020 and implemented on 31 Jan 2020, as activists welcomed the government’s move forward after years of leaving vital legislation on hold. These courts can now bring much-needed relief and justice to victims of gender-based violence. The new laws, which President Ramaphosa signed into effect, enable these courts to have facilities and measures in place to provide services that better protect survivors, improve the quality of prosecutions and evidence given in sex offence cases, and reduce secondary trauma for victims. The legal amendments to the Act have been on hold for years. On 7 Feb, both the Amendment Act and the regulations were published, a pivotal day for South Africa.
Although South Africa has one of the highest rates of reported sexual offences worldwide, it also has a criminal justice system that innovatively addresses this. One example is the sexual offences courts. These are specialised courts where survivors get support services, and specialists in the field prosecute cases. These courts have been opened around SA but haven’t had a legal framework until now, so the services they provide are not consistent. Also, the criteria for a court to be a sexual offences court, haven’t been clear until now. President Ramaphosa has signed legislation into law to fix this. Jeanne Bodenstein, from Rape Crisis’ Rape Survivor Justice Campaign, said this “.. is a strong sign of Ramaphosa’s commitment to a stronger criminal justice system; the rollout of sexual offences courts and specialised forensic units promises a ray of hope for survivors of gender-based violence”. Get the full story at https://www.dailymaverick.co.za/article/2020-02-07-key-sex-offences-courts-legislation-finally-emerges-from-limbo/
Does my company need a tool for employees to report fraud, and do these work? Definitely yes. Read this article to find out why.
First, fraud hits over 80% of companies. According to research by ACFE (the Association of Certified Fraud Examiners), companies lose 5% of turnover to fraud (and that’s just the fraud they know about!). So like it or not, your firm is at risk.
Second, ACFE research shows that you’re more likely to pick up fraud via a tip than by any other route. This includes internal audits, management reviews, documentation reviews or external audits. A properly implemented anonymous fraud reporting tool makes your staff part of your fraud prevention and detection program, and can significantly cut the frequency and size of potential frauds. Businesses with anti-fraud controls lose half as much to fraud as companies without these, and the fraud doesn’t last as long. So it makes business sense – and is good corporate governance – to give your people a way to notify you about potential fraud or wrongdoing. It’s also a requirement of the Companies Act that listed companies have a fraud reporting tool.
But we’re a pretty small company. Do we need a fraud reporting tool?
Yes, you do. Firms of all sizes should have fraud reporting tools. These can be particularly useful to smaller businesses, which often have fewer internal controls and anti-fraud resources. And it’s largely because of this, that nearly 50% of small businesses get hit by fraud at some stage in their business lifecycle, according to ACFE data. On top of this, even the smallest firms can get anonymous, independently hosted, fraud reporting tools like FraudCracker at reasonable prices.
Okay, so my company could benefit from a fraud reporting tool. But I know a company that signed up for one, sent an email to staff announcing it but didn’t get any submissions. What about that?
For a fraud reporting tool to be effective, you need careful thinking, planning and implementation. First, think about how you’re going to roll out the tool to your staff. Just sending out an email and putting up posters in the canteen isn’t enough. The email is forgotten, and the poster quickly becomes unseen and forgotten next to the water machine.
To actively engage your people, you need to train them on what fraud looks like in their areas of responsibility and in your industry. Here’s why training is vital and how can it help your company:
- Staff tend to explain away the clues of fraud when they see them in close co-workers. But if they’ve been trained on what red flags for fraud actually look like, they’re more likely to recognise them for what they are.
- Educating your employees makes them your “eyes and ears” against fraud. They’ll more quickly recognise a potential fraud, and they’ll remember the fraud reporting tool they can use to alert you about their concerns. The earlier you know about potential fraud, the quicker you can investigate and the less this fraud can cost you. No fraud gets less over time. So the sooner you can do something about a potential fraud issue, the better.
- Employees will better understand what the fraud reporting tool is meant for, and you’ll get fewer reports about being paid too little or co-workers’ irritating personal habits.
So, we implement a fraud reporting tool and we get a submission. What do we do now?
You need to decide which staff, in which departments, should be involved in various types of investigations. The CFO may not need to investigate an HR report, while the HR Director doesn’t usually need to be involved in an accounting issue. For some reports, you may need to consult with outside legal counsel or forensic investigators. It’s best to think about these issues before a crisis hits. Your fraud reporting service should help you set up an appropriate investigation protocol for your firm. If your fraud reporting service has experienced fraud investigators on board, they could even help you set up the right procedures for internal investigations.
So if you don’t have a fraud reporting system in place, you should. And if you do have one, make sure it’s implemented properly. Because with fraud, it’s not only your company’s money that is at risk. It’s your brand and reputation too.
Reposted with permission from Shauna Woody-Coussens of BKD Forensics. See her original article at https://bkdforensics.com/2016/03/21/fraud-hotlines-necessary-work/
The latest lethal strain of coronavirus arose at a wild animal meat market in Wuhan, China. This is according to the Chinese Center for Disease Control and Prevention. The market, now closed, was home to stalls selling everything from civet cats, snakes, rats, beavers, foxes and wolf cubs, to peacocks and pangolins. Early investigations pointed to a person that ate a snake that ate a bat infected with the virus. Now the latest suspect in the investigations is the pangolin. Just like SARS and Ebola, these outbreaks start in the murky waters between legal and illegal trade, where bushmeat and dodgy packages travel long distances on commercial routes, aided by bribes and legal loopholes. So corruption could well have triggered the coronavirus epidemic.
Hygiene and veterinary controls are meant to stop the transmission of inter-species diseases and to prevent diseases from crossing borders. But the big problem is that these cannot be applied to smuggled wildlife and wildlife goods. They are also not enforced in the places where these goods are traded, often alongside legal wildlife. Corruption plays a big role in this. Offered a bribe, inspectors are quick to turn a blind eye. This could well be why inspectors gave the dodgy market in Wuhan a clean bill of health late in 2019. Get the full story at https://fcpablog.com/2020/01/30/did-corruption-cause-the-deadly-coronavirus-outbreak/
Employee fraud is much more common than you think. It could be happening to you, and you may not even know it. So what can you do to prevent business fraud in your firm? In this article, we’ll find out more about fraud, and unpack the anti-fraud steps that ACFE (the Association of Certified Fraud Examiners) and Arrowhead* recommend.
But first, some background.
Fraud hits 80% of companies. They typically lose 5% of revenue to fraud. That means, for every $100m annual turnover, you’re losing $5m to fraud every year. That’s $5m you may as well be throwing down the toilet.
Insider fraud, otherwise known as occupational fraud, happens in every sector – even education, religion, non-profits and charities. There are usually 3 types: asset misappropriation, bribery/corruption, and financial statement fraud.
Asset misappropriation is the least costly and the most common type of fraud (happening in 91% of fraud cases). Bribery and corruption happens in 30% of fraud schemes. Financial statement fraud is the biggy: it causes 3x the loss as the other 2 combined, but it’s the rarest, happening in only 10% of cases.
Sadly, we all think fraud won’t happen to us. We often hear reasoning like: “We hired good people and they are loyal to us. None of them would screw us. We check the books. Surely that’s enough, right?” Wrong. This ostrich-head-in-the-sand attitude can cost you dearly: companies without anti-fraud controls lose 2x as much to fraud, compared to those with controls in place. Those controls are typically audit, management review, and a fraud reporting tool for staff.
So what steps can you take to reduce the chances of fraud happening in your company? Here are the key steps that ACFE and Arrowhead* advise:
1. Draw up an ethics code that applies equally to management and staff, and have each and every one of them sign it.
2. Identify and close any areas of weakness in your internal controls.
3. Implement more checks and balances, such as surprise audits and mandatory leave.
4. Improve your hiring processes e.g. run criminal, credit and background checks, plus social media audits.
5. A tip is the most common way of uncovering fraud. So put in place an anonymous fraud reporting tool like FraudCracker for staff and customers. You’ll also find out about fraud more quickly with an anti-fraud tool than without.
6. Communicate your anti-fraud stance consistently and often. Show your people that you’re constantly on the lookout for fraud. Remind them about your anti-fraud policies and your anonymous fraud reporting tool. Without giving away the whistle-blower’s name, make staff aware of actual fraud cases that have happened in your firm, and the consequences for fraudsters who were found guilty e.g. termination or prosecution. If you want your people to tell you about fraud happening in your business, it’s vital for them to see that:
a. something will be done about it, and
b. whistle-blowers won’t get victimised,
Otherwise they won’t report it.
7. Hold regular anti-fraud training for execs, managers and staff, teaching them basic ways to prevent employee fraud.
8. Know your people. Watching and listening to staff can help you pick up possible risks early on. An under-valued worker may retaliate via theft or fraud. Be on the lookout for toxic attitudes.
9. Implement internal controls and separate employees’ responsibilities. For example, in a retail environment, if one staff member mans a credit card machine and cash register at each checkout, have a different person collect and add up all the receipts and prepare the bank deposit. A third person should then take the deposit to the bank. Don’t give all these responsibilities to the same person. Add documentation steps, so that management can review daily receipts and deposits more easily .
As much as we like to think fraud won’t happen to us, a healthy dose of realism and the willingness to take these steps is a far better strategy than doing nothing. Here’s to stepping up the fight against fraud!
* Reposted with permission from Arrowhead General Insurance Agency, Inc. See their original articles at https://www.arrowheadgrp.com/blog/how-to-prevent-business-fraud and https://www.arrowheadgrp.com/blog/how-to-prevent-employee-fraud/
When designing FraudCracker, a ground-breaking online fraud reporting solution for companies, our founder Dr Gavin Symanowitz identified not only the main problems with existing solutions, but also the critical success factors that an effective fraud reporting mechanism should cover. In this article, he discusses the first of these factors.
If Bimla Chand could have it over again, she certainly would have made different decisions. In 2002, she was a revenue protection officer at RailCorp in Australia. After becoming aware of serial time-sheet fraud – a so-called ‘job-and-knock’ scam – she felt compelled to come forward with the information.
But instead of getting a pat on the back for doing the right thing, the opposite happened. From that day onwards, she was systematically victimised and bullied by her colleagues, to the point where she was eventually declared mentally insane. She was ultimately dismissed, effectively ruining her career. Bimla later said: “State Rail not only wants to bury me, they want to dance on my grave for daring to speak out.” She cautioned other potential whistle-blowers not to follow her example, because “blowing the whistle has ruined my life”.
The problem is that most employees have heard similar stories to that of Bimla. So they are very reluctant to come forward with information about fraudulent or unethical activity that they’ve witnessed. It’s just too risky. So most employees simply keep quiet, and the important information never gets reported. In fact, in an independent survey, 54% of employees stated that the fear of retribution from co-workers was the main reason for their silence.
When I started designing the optimal fraud reporting mechanism for FraudCracker, the need for anonymity was clearly identified as the most critical factor for success. Quite simply, an employee needs to feel completely safe before he or she will be comfortable coming forward with crucial information about wrongdoing in the company.
The problem is that most existing solutions fail miserably in this regard. While purveyors of anti-fraud telephone hotlines say that the caller’s identity remains hidden, employees believe that this isn’t completely true. They know that their voices are recorded and so if management really wanted to discover the identity of the whistle-blower, then they could. The fact that management is very unlikely to do such a thing is actually irrelevant – it’s perceptions that matter. The unfortunate perception is that the employee’s anonymity is at the discretion of management, and this deters many potential whistle-blowers from using the hotline.
The core of an effective fraud reporting mechanism has to be built around satisfying the need for anonymity as the number one priority. If there is any room for doubt in the mind of an employee, then the result will be losses which the company will never know about. The stakes are too high to get it wrong.
Confidence fraud, also called romance scamming, is on the rise. But the FBI is coming down hard on perpetrators. Get tips from the FBI on how to protect yourself from online romance scams.
Romance scamming is a multi-million-dollar business and growing. Comparing 2015 to 2018, the number of reports to the US Federal Trade Commission (FTC) more than doubled, and reported losses more than quadrupled. In 2018, the FTC was hit with over 21,000 reports of romance scams, with the victims reporting losses of $143m, more than any other type of consumer fraud reported to the FTC. Backtrack to 2015, when the FTC got 8,500 reports of romance scams, and reported losses totalled $33m. The FBI is seeing a similar rise. In 2016, the FBI’s Internet Crime Complaint Center (IC3) received almost 15,000 complaints of romance scams, amounting to losses of over $230m (more than R3,357m). That’s almost 2,500 more complaints than in 2015.
Romance scams can be financially devastating for their targets. In 2018, the typical victim lost roughly $2,600, about 7 times higher than other frauds. Some of the more unlucky victims have lost hundreds of thousands of dollars.
But the FBI is clamping down hard on these and other devastating Internet crimes.
In August 2019, the FBI accused 80 people in what is believed to be one of the biggest cases of online fraud in U.S. history, involving $40m (R606m). Out of the 80 accused, 77 were Nigerian. According to the US authorities, the suspects used a range of different fraud schemes to defraud their targets of millions of dollars, These included romance scams, business email compromise (BEC) fraud (where funds are illegally transferred in real companies), and schemes targeting the elderly. This indictment was a huge step in disrupting the criminal networks that use BEC schemes, romance scams and other frauds to dupe victims. It sends a strong message that the FBI WILL identify fraudsters – no matter where they live – and WILL stop the flow of ill-gotten gains.
What is the typical profile of a romance scam victim targeted by criminal groups, usually from Nigeria? Victims are mainly older women, computer-literate and educated, and often emotionally fragile, widowed or divorced. And scammers know just how to hone in on that vulnerability because potential victims willingly post details about their lives and themselves on dating and social media sites. “The Internet makes this type of crime easy because you can pretend to be anybody you want to be.” says Christine Beining, special FBI agent.
So when you’re online, how do you protect yourself against these romance scams? According to the FBI, be wary about what you post, as con artists can use that info against you. Always use credible websites, but assume that scammers are combing through even the most reputable dating and social media sites.
If you’re building a romantic relationship with someone you met online, the FBI gives the following tips:
1. Google their photo and profile to see if they’ve used the same material somewhere else. Copy and paste text should raise a big red flag.
2. Take it slow and ask lots of questions.
3. Be careful if the person seems too perfect or soon asks you to leave a dating service or social media site to go “offline.”
4. Beware if they try to separate you from friends and family, or ask for inappropriate photos or financial data. These could be used to scam you later.
5. Be warned if they promise to meet in person but then always come up with an excuse as to why they cannot. If you haven’t met the person after a few months, whatever the excuse, be suspicious.
6. Never EVER send money to anyone you don’t know personally. “If you don’t know them, don’t send money,” Beining said. “You will see what their true intentions are after that.”
Most importantly, if your gut says something isn’t right, it probably isn’t. Listen to it and end that online conversation fast. If you want your gut feel to get better at warning you, you need to develop it through practice. And that comes by listening to your instincts. Stay safe!
Prosecutors in Angola are accusing Africa’s richest woman, Isabel dos Santos, of embezzlement and money laundering. Attorney General Helder Pitta Gros said the allegations are linked to her time as chairwoman of state oil company Sonangol in Angola. He urged her to return to Angola, where she faces potential criminal charges. Damning documents being called the “Luanda Leaks” have revealed widespread corruption and how she exploited poverty-stricken Angola to build her riches. However, dos Santos has denied all wrongdoing.
Prosecutors are looking to recover $1bn that dos Santos and her associates allegedly owe the state. “Isabel dos Santos is accused of mismanagement and embezzlement of funds during her tenure at Sonangol,” said Pitta Gros. She was being provisionally charged with “money laundering, influence peddling, harmful management…[and] forgery of documents, among other economic crimes”. The Angolan authorities will carry out a criminal investigation to assess if she should be formally charged. If dos Santos does not return to Angola willingly, a global arrest warrant will be issued for her. Her assets in Angola have been frozen.
The International Consortium of Investigative Journalists obtained the “Luanda Leaks” dossier, a stash of over 700,000 confidential emails, audits and accounts about dos Santos’ business empire. The leaked documents unpack how she was able to exploit deals on land, oil and diamonds during the presidency of her father, José Eduardo dos Santos, in mineral-rich Angola. His 38-year rule became known for nepotism and corruption. The “Luanda leaks” also show how a worldwide network of consultants, lawyers, bankers and accountants helped dos Santos build her wealth and siphon it out of Angola. It’s alleged that some of the world’s leading companies – including the Boston Consulting Group, McKinsey and PwC – helped her profit from Angola, while lending their legitimacy.
Dos Santos, estimated to be worth $2.2bn, claims her wealth is self-made and she never benefited from state funds. She slammed the allegations as false and labelled the investigation as a “political persecution.” The 46-year-old billionaire, who now lives in the UK, told the BBC she was thinking about running for president of Angola.
October 2019 saw Ukraine’s Parliament introduce the “Whistle-blowers Law”. This gives far-reaching protection to people who blow the lid on corruption in the Ukraine. But the new law has also sparked heated debate. The big question is: Will Ukraine’s new whistle-blower law punish innocent organisations?
Why are companies concerned? There are a number of reasons.
The Whistle-blowers Law allows the NAPC (National Agency for Prevention of Corruption), a national anti-corruption agency of the Ukrainian government, to file lawsuits on behalf of whistle-blowers, and to represent them in court.
Also, the new law guarantees whistle-blowers major labour-law protection from the instant that they report corruption, whether this be real or fake. Employees who report corruption cannot be fired, even if their report turns out to be untrue. It will be up to employers to prove that a corruption complaint is deliberately false. In reality, it will be very hard to show that a whistle-blower filed a fake or malicious whistle-blowing report on purpose, especially if the NAPC represents them in court.
These are just a few of the reasons that Ukrainian companies are apprehensive about the new Whistle-blowers Law.
On the other hand, however, who needs protection more: the whistle-blower, or the business they are reporting on?
By reporting misconduct, whistle-blowers often risk their lives and careers, and the lives of their families. Worldwide, we see countless cases of people being harassed, fired, arrested, sued, attacked, and even murdered for coming forward. So they need a strong legal safety net, plus anonymous tools like FraudCracker.com, to protect them against intimidation, and to allow them to report wrongdoing safely and anonymously. To make matters worse, if they are fired for whistle-blowing, they cannot afford legal aid.
So I’d argue that whistle-blowers need protective laws (plus the legal aid of government organisations like the NAPC), much more than the businesses they whistle-blow on.
The Whistle-blowers Law is a powerful, much-needed move in the right direction for whistle-blower protection in the Ukraine. And it sets a positive example for other countries to follow. Hopefully, just enforcement of the Ukrainian Whistle-blowers Law will give whistle-blowers the legal protection they so desperately need.
Corruption hurts all of us. And we can all benefit from standing United Against Corruption. Most of us think that corruption is “just a way of life” and cannot be prevented. But every one of us can do something about it. Here’s how:
A. For some great examples of how you can fight corruption, read the UN’s Call to Action Matrix at http://www.anticorruptionday.org/documents/actagainstcorruption/print/materials2016/corr16_call2action_A4_EN.pdf.
B. Social Media: Join the UN’s fight against corruption by:
1. Using the United Against Corruption logo in your articles, posts and messages, and at your events. Download it from http://www.anticorruptionday.org/actagainstcorruption/en/print/index.htm; and
2. Using these hashtags in your social media messages: #UnitedAgainstCorruption | #IACD2019 | #IACD2020 | #YouthForJustice
Join us in the fight against corruption. It all starts today.
Today 9-December is International Anti-Corruption Day. Corruption hurts all of us. At an individual level, it increases the amount of tax paid by us as taxpayers, raises the prices that we pay for goods and services without increasing what we get for this, and lowers the quality of goods and services we receive. It hurts the economy because it pushes up inequality, poverty, job losses and unemployment, which in turn increases crime; it raises the number of freeloaders; it increases inflation, lowers foreign direct and domestic investments, distorts and misuses public investments; and devastatingly, it eats into public revenues and budgets for education, healthcare, medicine, crime-fighting and other critical services. These are just some of the negative effects of corruption.
As much as we’d like to, we cannot ever stop corruption completely, because there is a lot happening that we don’t even know about. But we can do something about it. We can reduce it in 2 ways:
- We can report it whenever we see it. In fact, this is why we started FraudCracker, to give you a voice in the fight against fraud and corruption, without anyone knowing your name.
- And we can say no to corruption and unethical behaviour when these happen in our daily lives. That means saying no to bribes that are offered to us, and not offering these ourselves. Even if it means paying the full price for a traffic fine. Or not getting that business tender. It means speaking up even when you benefit from keeping quiet. Even if it means owning up for your mistakes that no-one has yet noticed. Or telling the cashier when they undercharge you at the checkout, or give you too much change.
It all starts and stops with us, with you and me. Because our children see our behaviour today, and will behave the same way tomorrow. If they see us as parents offering or accepting bribes, or behaving unethically, then that’s what they’ll do tomorrow. Even it is something small like being undercharged. Corruption and unethical behaviour start out small, and grow bigger as you get away with more and more, and become greedier and more daring.
So starting today, International Anti-Corruption Day, let’s do things differently. Let’s stop corruption while it’s still small and manageable. This is my challenge to myself and to you. Let’s say no to corruption and wrongdoing today, and stop the rot for our children tomorrow!
Great to see South Africa’s electricity supplier Eskom picking up the fight against corruption in the organisation. After lifestyle-auditing almost 400 execs and senior managers in the past year, Eskom will roll out these anti-corruption measures to 2,300 more staff in key divisions. In these lifestyle audits, Eskom contracts investigators to sift through personal details such as bank accounts and assets of its staff’s families. These will start in the next few weeks in key departments such as procurement and group capital, which manages new capital investments. “The executive committee has mandated that we continue with lifestyle audits in other risk areas of the business,” said Ishan Bhowani, acting head of assurance and forensics. Departments that will initially be affected, employ about 2,300 people, according to Bhowani. During Phase 1 of lifestyle audits, which kicked off in 2018, Eskom investigated 365 of its most senior staff in the E-band (exec and senior managers) level and higher, their spouses and children, said Bhowani. “We asked for bank accounts for the past 3 years, plus declarations of assets and liabilities, and matched those against the salaries to determine what the lifestyle should be.” Hopefully these audits will root out corruption, and Eskom’s new CEO will punish the perpetrators in order to send a strong anti-corruption message… Find out more at https://www.dailymaverick.co.za/article/2019-11-28-eskom-to-subject-2000-more-staff-to-lifestyle-audits-as-fight-against-corruption-intensifies/
It’s great to see heads finally starting to roll in the fight against injustice and corruption in South Africa. The EFF have been hit with a double blow on the legal front, this after the State charged both their commander-in-chief, Julius Malema, and his deputy, Floyd Shivambu. Malema appeared in court on 27 November for discharging a firearm at the EFF’s fifth-anniversary celebrations in 2018 in the Eastern Cape. The National Prosecuting Authority (NPA) said Malema faces 5 counts‚ including unlawful possession of a firearm‚ unlawful possession of ammunition‚ discharging a firearm in a built-up area or public place, plus reckless endangerment to people or property. Although it’s not an arrest for corruption, it’s a move in the right direction for the NPA. And hopefully we’ll see more punishment for corruption being meted out to the dirty perpetrators of State Capture soon…. Get the full story at https://www.dailymaverick.co.za/article/2019-11-27-the-state-charges-eff-leaders-julius-malema-and-floyd-shivambu/
They called her the cryptoqueen. Bulgarian-born fraudster Dr Ruja Ignatova was a jet-setting, Oxford-educated entrepreneur with her own unique cryptocurrency brand called OneCoin. It seemed like the “perfect scam”: a glamorous founder, a multi-billion-dollar con, a fake currency, a cult–like recruitment drive and a lucrative pyramid scheme, all rolled into one. Ignatova attracted huge audiences to her OneCoin lectures, convincing people to invest their life savings. By March 2017, OneCoin had attracted over $4,5bn from 175 countries. But within a few months, the mysterious Bulgarian disappeared without a trace. Ignatova is on the run from the FBI, accused of pulling off one of the biggest individual frauds in financial history. Her victims number over a million, many facing financial ruin. Will they ever find this fascinating fraudster and recover the billions she stole? Find out more at https://www.dailymail.co.uk/news/article-7668405/Inside-hunt-cryptocurrency-fraudster-vanished-without-trace.html and https://www.theguardian.com/tv-and-radio/2019/nov/04/the-missing-cryptoqueen-the-hunt-for-a-multi-billion-dollar-scam-artist
It’s taken a long time, but corrupt politicians involved in South Africa’s state capture are finally getting punished. The Hawks’ Serious Corruption Investigation team arrested ANC MP Bongani Bongo, a strong Zuma supporter. He appeared in court today on corruption charges, after he tried to bribe an advocate on the parliamentary commission of inquiry into Eskom’s state capture. While Bongo was state security minister in 2017, he allegedly offered a blank cheque to advocate Ntuthuzelo Vanara, the evidence leader of the Eskom inquiry. Bongo wanted Vanara to take sick leave on the first day of the inquiry, stonewalling the investigation into Eskom. However, Vanara alerted his seniors about the bribe, triggering the Hawks investigation.
Bongo was released on R5,000 bail (which seems low, considering how serious the charges are against him). The case against him was postponed to 31 January 2020, where it will be tried in the Western Cape High Court. The Hawks also arrested 10 other suspects for fraud, corruption and money-laundering.
In the huge toxic sludge that is state capture, Bongo may be a relatively small, big fish. But his arrest shows that corruption is finally starting to be punished in SA. We still need to see the take-down of much bigger fish involved in state capture, such as former Ministers of Public Enterprise Lynne Brown and Malusi Gigaba. But Bongo’s arrest is a much-needed move in the right direction.
Find out more at https://www.dailymaverick.co.za/article/2019-11-21-bongani-bongo-arrest-first-shots-in-the-fight-against-corrupt-public-officials/ and https://www.dailymaverick.co.za/article/2019-11-21-anc-mp-bongani-bongo-gets-bail-after-court-appearance-on-bribery-charges/
Walls are shrinking for the corrupt Gupta clan. SARS head of legal, Refiloe Mokoena, has been fired. Mokoena allegedly granted the Gupta family a reported R420m VAT refund. She was one of 5 execs suspended pending the outcome of their disciplinary processes. South African Revenue Service SARS fired Mokoena after a disciplinary hearing chaired by senior counsel from the Johannesburg Bar, where she was found guilty of serious misconduct. “SARS has accepted the chairperson’s recommendation of immediate dismissal and her services have been terminated with effect from 15 Nov 2019,” SARS said. Get the full story at https://www.timeslive.co.za/news/south-africa/2019-11-15-sars-legal-head-fired-with-immediate-effect-over-r420m-gupta-vat-refund/
The Guptas wouldn’t have been able to capture South Africa without the help of a global network of consultants, lawyers, accountants and banks. At the Zondo Commission, British MP Lord Peter Hain named a host of global “enablers” that provided facilities to the Guptas and their companies, even after many red flags had shot up around them. Hain said Standard Chartered Bank, HSBC, Bank of Baroda, KPMG, Bain, SAP, McKinsey and law firm Hogan Lovells were among those who aided the Guptas, either purposefully or not. State Capture could not have happened without the financial network that helped them to create complex systems to disguise ownership of those stolen funds, he said. Some of them provided the international pipeline through which the Guptas could move their unlawful gains out of South Africa, so Hain said they must own up to the role they played. Read more at https://www.dailymaverick.co.za/article/2019-11-18-lord-peter-hain-puts-foreign-governments-global-companies-in-state-capture-spotlight/
Facebook Inc took down 3.2bn fake accounts in Q3 and Q4/2019, plus millions of posts showing child abuse and suicide. This is according to its most recent content moderation report released yesterday. That’s over double the number of fake accounts removed during the same timeframe in 2018 (1.55bn). So either Facebook is getting better at detecting these, or the number of fake accounts being created is rising, or both.
More and more, disinformation researchers are seeing Instagram as a hot bed for fake news. Proactive detection of violating content was lower on Instagram than on Facebook. The company proactively detected content linked with terrorist organizations 98.5% of the time on Facebook and 92.2% of the time on Instagram. During Q3/2019 it removed over 11.6m posts of child nudity and sexual exploitation of children on Facebook, but only 754,000 posts on Instagram.
On the one hand, it’s great to see Facebook deleting these unethical accounts and posts. But on the other hand, it still raises a number of questions: if Facebook knew the accounts were fake and the posts were inappropriate, did it remove them immediately, or did it wait? If it waited, was this because it made money out of them? And once it knew about them, what did Facebook do about them (other than deleting them)? Find out more at https://www.reuters.com/article/us-facebook-enforcement/facebook-removes-32-billion-fake-accounts-millions-of-child-abuse-posts-idUSKBN1XN2B2
Facebook and Youtube are taking a stand. They’re blocking users from sharing the identity of a CIA officer who allegedly filed the damning whistleblower complaint that sparked impeachment hearings against President Trump. Facebook is blocking references to the whistleblower’s name and photos under its policy against “coordinating harm.” YouTube is doing the same. But Twitter is allowing posts that allegedly share his name and images. U.S. officials have kept his name confidential, in line with federal law aimed at protecting whistleblowers from victimisation. Trump, however, is calling for the whistleblower’s name to be revealed, which could well be putting their life in danger. Get the full story at https://www.washingtonpost.com/technology/2019/11/08/facebook-youtube-move-block-spread-supposed-whistleblowers-name-twitter-permits-both-name-photos/
The Springboks’ decisive win in the Rugby World Cup has boosted every South African’s spirits (thank you Bokke, we needed this!). However, it’s a short-term boost, and our country’s long-term path will be determined by raising confidence in the long-term. To do this, we need to see 2 things:
- strong leadership, and
- punishment of corruption perpetrators.
In a recent survey, RMB Morgan Stanley asked households what changes were needed to boost their confidence in the economy. Almost 80% spoke of the need to investigate and prosecute officials suspected of corruption. In a recent speech, President Ramaphosa estimated that corruption has cost SA R500bn to R1trillion over the last 10 years.
We need action against corruption to improve confidence in SA, boost investment and grow jobs and the economy. We’re tired of waiting for perpetrators to be punished. Prosecuting the wrongdoers will boost confidence in the short term. Halting corruption and improving the management of state-owned enterprises will raise SA’s productivity and competitiveness, and boost confidence in the long term. Good governance is a vital part of boosting SA’s growth – in the short term and the long term. President Ramaphosa is confident that those guilty of corruption will be punished. In his speech he said: “People are asking when are you going to arrest people? When are you going to put people into jail?” He explained his role was to “strengthen the institutions that must do their work” and then step back. The NPA has been given budget to hire 4 senior advocates for prosecutions, so there does seem to be progress in this space.
The impact of corruption stretches well beyond the state, into private firms like EOH and Sasol. While EOH is the poster child for a corruption-fighting firm, it was encouraging to see another SA company willing to tackle mismanagement head-on. Sasol announced that their co-CEOs would be leaving as part of “consequence management”. Our state companies have seen similar moves – with execs replaced at many key entities.
Both EOH and Sasol have found strong CEOs to lead them through the short-term. Besides prosecuting those responsible for corruption at state entities, what we need now is leadership. A great first step would be an Eskom CEO with a deep understanding of the institution and a track record for dealing decisively with the issues it is facing. The question now is who is the right person, and are they willing to accept the job? Read more at https://www.dailymaverick.co.za/opinionista/2019-10-29-prosecution-of-corruption-wrong-doers-and-great-leadership-the-short-and-long-term-steps-to-improving-confidence/
Cloud computing, automation, Artificial Intelligence, the Internet of Things and blockchain. More and more, integration of financial data, intelligent software and vetting systems are leaving humans out of the picture — including the shady ones cooking the books. If bean counters are no longer needed to check and balance the books, are they still needed? And if so, what is their new role? Read more at https://www.dailymaverick.co.za/article/2019-10-29-accountancy-faces-up-to-digital-disruption/
Mattel’s chief financial officer is leaving the US toy firm after a board investigation triggered by a whistleblower report exposed mistakes in its accounting and breaking of auditor independence rules. Find out more at https://www.ft.com/content/1e43ed96-fa93-11e9-98fd-4d6c20050229
The number of us who’ve seen wrongdoing is rising, studies have found – but many of us are too scared to report it. In 2018 in South Africa, research by the GIBS Ethics Barometer with our company FeedbackRocket, revealed these scary stats: on average, 51% of employees (half) have seen unethical behaviour; but only 26% of these have reported it. That means 74% (3 out of every 4), turn a blind eye and don’t speak up about it.
A survey by The Ethics Institute had a similar finding: a third of employees in corporate South Africa have seen misconduct, yet only half of those report it.
Why is this happening? Over and over again, studies show that the two biggest reasons for not reporting are:
- Fear of being victimised and
- The belief that nothing will be done about it.
With FraudCracker‘s anonymous interactive chat software, we can solve the victimisation problem, we can prevent whistle-blowers being targeted. But only the organisation’s management can address the second problem: they need to punish wrongdoers, and they need to let people know that they’re doing this. People need to see that wrongdoing has negative consequences.
With these two fixes in place, hopefully we won’t be afraid to speak up about wrongdoing any more. And we can start rebuilding our incredible country in the post-Zuma era.
- 2018 GIBS Ethics Barometer and FeedbackRocket.com
The Financial Action Task Force (FATF), the inter-governmental regulating body, are in South Africa to evaluate the country’s compliance with global money-laundering standards. The results could be damaging, as there are billions at stake. Financial crime is on the rise in SA despite the amendment of laws designed to curb it. In the past year, financial crime has hit almost half the companies, according to a survey by the Financial Intelligence Centre.
Representatives from FATF, the IMF and the Eastern & Southern Africa Anti-Money Laundering Group will carry out the FATF evaluation. Their report, known as a mutual evaluation in industry lingo, will give an in-depth breakdown of SA’s system for combating criminal abuse of the financial system. The team will assess SA’s technical compliance with the FATF 40+9 recommendations, plus its effectiveness in implementing these.
In other words, are we making a dent in the fight against financial crime?Yes, regulations may have been strengthened, but SA still loses between $10bn and $25bn every year in illicit financial flows. The evaluation result is key to SA’s status as an investment destination. Being flagged means that certain countries and organisations can’t do business with you. Find out more at https://www.dailymaverick.co.za/article/2019-10-27-sas-anti-money-laundering-measures-under-global-spotlight/
JSE-listed tech group EOH is cracking down on corruption in a big way. EOH has blacklisted 50 enterprise development partners, and reported suspected criminal behaviour to authorities for investigation and potential prosecution. CEO Stephen van Coller contracted law firm ENSafrica to carry out a broad investigation to determine the scale of the problem. This focused mainly on the group’s government contracts. “EOH is committed to ensuring that all perpetrators of wrongdoing are held accountable for their action,” said the ENSafrica legal team. Read more at https://techcentral.co.za/eoh-blacklists-50-business-partners-in-corruption-crackdown/93270/
It looks like the White House’s system protects whistleblowers better than companies’ hotlines do. Harvard Business School professor Eugene Soltes tested the hotlines that companies should have in place, for employees to report wrongdoing. In many cases, these do not work or do not protect whistleblowers’ anonymity.
Also, according to the Sarbanes-Oxley Act, firms must have an anonymous reporting system to protect whistleblowers from being victimised after reporting. Despite this, regulators and auditors often DON’T check if hotlines actually keep whistleblowers anonymous. Find out more at https://promarket.org/companies-are-more-effective-than-the-white-house-in-stopping-whistleblowers/
On the surface, it looks like women are making progress toward equality in the post #MeToo era. In politics, women are making headway. We see strong women emerging in leadership roles. A record number of women were elected to Congress in 2018, and a record number are running for President in 2020. In business, there are now 33 female CEO’s of Fortune 500 companies, up from 24 the previous year. All this seems positive on the surface. But beneath it, not much has significantly changed in the workplace to shift the needle toward gender equality. Since the resurgence of #MeToo in 2017, there has been a lot of media attention given to the issue of sexual harassment and abuse in the workplace. For the most part, we see coverage of celebrities calling out their abusers on a national and global stage. But has this triggered real change for women in the workplace? How has the culture changed? And what can women do to be successful in the post #MeToo era? Find out more at https://www.forbes.com/sites/bonniemarcus/2019/06/13/what-women-can-do-to-successfully-navigate-the-workplace-post-metoo/#7c37b5804e95
South Africa’s CMS (Council for Medical Schemes) recently announced the suspension of 5 senior officials, following allegations of corruption and unethical conduct reported by whistle-blowers. 2 executives and three senior managers had been placed on precautionary suspension with full pay, after allegations of wrongdoing were reported on the regulator’s anonymous tip-off line. The allegations include: collusion in appointment of service providers; irregular placement of schemes under curatorship; irregular spending on service providers; “having personal lifestyles not matched by salaries”; and “close and corrupt relationships” with entities that the council regulates. “The CMS views these allegations in a serious light,” said the council’s Registrar and Chief Exec, Dr Sipho Kabane. “Therefore, these suspensions and investigations are in line with our zero-tolerance to unethical conduct.” He said “appropriate steps” would be taken following probes into the corruption claims. More info at https://www.fin24.com/Economy/medical-regulator-suspends-5-execs-following-corruption-claims-20190918
Under-fire tech services company EOH will lay criminal charges against employees involved in corruption. In a statement issued on 10-Oct-2019, the JSE-listed firm said it had finished its forensic investigation that unearthed shady transactions worth R1.2bn. “Following ENSafrica’s release of the interim update on the forensic investigation in July, the board has now substantially completed the investigation into the R1.2bn of suspicious transactions that were identified during the investigation,” says EOH. The ENSafrica investigation uncovered proof of a number of wrongdoings at EOH, including unsubstantiated payments, tender irregularities and other unethical practices. These are mainly limited to the public sector business in EOH Mthombo and to a small number of EOH employees. Read more at https://www.itweb.co.za/content/G98YdMLxBgnMX2PD
It’s been a great week for the fight against corruption. The Gupta network of shady deals has been dealt a big blow, with the U.S. government hitting the family with financial sanctions that freeze all their U.S. assets. Those blacklisted are the Gupta brothers Atul, Ajay and Rajesh Gupta, and associate Salim Essa. “The Gupta family leveraged its political connections to engage in widespread corruption and bribery, capture government contracts, and misappropriate state assets,” said Sigal Mandelker, U.S. Treasury Under Secretary for Terrorism and Financial Intelligence. “The Gupta family leveraged its political connections to engage in widespread corruption and bribery, capture government contracts and misappropriate state assets. We support the anti-corruption efforts of South Africa’s independent judiciary, law enforcement agencies, and the ongoing judicial commissions of inquiry. Moreover, we commend the extraordinary work by South Africa’s civil society activists, investigative journalists and whistle-blowers who have exposed the Gupta family’s corruption. The U.S. financial system (will) continue to exclude those who profit from corruption.”
The Guptas and Salim Essa fall foul of the Global Magnitsky Human Rights Accountability Act. This honours Russian lawyer Sergei Magnitsky, who died in suspicious circumstances in a Russian prison while fighting corruption. Essa and the Guptas are now part of a global cast of nasty characters targeted by the same law. This includes 17 Saudi officials implicated in the murder and dismemberment of journalist Jamal Kashoggi in Istanbul’s Saudi consulate in 2018. At least 6 other Western countries have adopted their own versions of the Global Magnitsky Act, imposing travel bans and financial sanctions on foreign human rights violators. Other countries are considering doing the same. For more info, go to https://www.dailymaverick.co.za/article/2019-10-11-guptas-join-a-cast-of-international-villains-ensnared-by-us-sanction-law/
So 2 big questions remain: When will the U.S. sanction Jacob Zuma and his family? And when will South Africa prosecute the Zumas and the Guptas, and put them in jail?
These latest sanctions from the U.S. are a big step in the right direction, because they’ll hit the Guptas where it hurts. But, until the Zuma- and Gupta clique are behind bars, there is a lot of work still to be done. Read more at https://www.2oceansvibe.com/2019/10/11/us-sanctions-law-nails-the-guptas/
A former Drexel University professor allegedly spent almost $200,000 of federal research money on strip clubs and other personal expenses, prosecutors said 7 Oct 2019. Chika Nwankpa misappropriated grant money from the Navy, the Department of Energy and the National Science Foundation from 2007 to 2017. “This is flagrant and audacious fraud, and a shameful misuse of public funds,” said U.S. Attorney William McSwain. “The agencies providing these grant funds expect them to be used towards advancements in energy and naval technology for public benefit, not for personal entertainment.” Drexel University discovered the alleged fraud in 2017 during an internal audit and alerted the government. McSwain lauded Drexel for reporting the matter but expressed disappointment that Nwankpa’s conduct “went unnoticed for so long.” Get the full story at https://6abc.com/prosecutor-drexel-professor-spent-federal-grants-at-strip-clubs/5601328/
You can’t control every aspect of your team’s work experience. If someone wants to leave badly enough, then they will. That said, there are 8 things leaders often do that make people leave. One big mistake is not creating a psychologically safe culture. Sound familiar? Understanding the 8, and how they impact your team, will help you identify those who are at flight risk, and make changes that could make them stay. Find out about all 8 at https://hbr.org/2019/09/8-things-leaders-do-that-make-employees-quit
Going public with serious holes in controls is more common than you think. In MarketWatch’s analysis of 100 companies who filed Big 4-audited IPOs in 2019, 20 voluntarily disclosed serious problems with internal controls over accounting, financial reporting and the systems. Find out more at https://www.marketwatch.com/story/20-of-big-4-audited-ipos-report-weaknesses-in-financial-reporting-controls-2019-09-04
If you want your past to be forgotten on the Net, moving to Europe might be your best bet. Google won’t have to apply Europe’s “right to be forgotten” law globally, Europe’s top court ruled on 25-Sept in a landmark case pitting personal privacy rights against freedom of speech. What does this mean for Google? While it must remove links to sensitive personal data from its search results in Europe when needed, it doesn’t have to scrap them from searches elsewhere worldwide. Get the full story at https://www.reuters.com/article/us-eu-alphabet-privacy/you-have-the-right-to-be-forgotten-by-google-but-only-in-europe-idUSKBN1W90R5
The British government continues to approve the export of hi-tech surveillance equipment and software of the type that is being used by states abusing human rights to monitor and repress dissent. This is according to new government data. The government’s exports of ‘telecommunications interception equipment’ to repressive states are likely unlawful. Get the full story at https://www.dailymaverick.co.za/article/2019-09-20-british-government-continues-to-aid-repression-in-human-rights-abusing-countries-new-data-shows/
Speaking at the #ACFESA Africa conference this week on protecting whistle-blowers in the digital age. Lots of interesting other talks. Great to see the move to digital happening more and more in all fraud-related areas – we need to be using smarter tools to fight smarter fraudsters.
When Jolande Smith and 240 other farmworkers became shareholders in the Langwyde Werknemers Trust 10 years ago, they were led to believe their lives would improve. Instead, many still live in dilapidated homes and are struggling to survive because they haven’t received any dividends from the company. The workers believe farm owners are exploiting them to benefit from BEE and get extra state funding. Get the full story at https://www.dailymaverick.co.za/article/2019-09-16-call-for-forensic-investigation-into-farm-worker-equity-schemes/
Garmin South Africa’s shop[dot]garmin[dot]co[dot]za website was hacked. This was according to an email sent out on 12-Sep-2019 by Garmin SA MD Jennifer van Niekerk. The hackers made off with credit card numbers, expiry dates for credit cards, CVV numbers for credit cards, first names, surnames, physical addresses, phone numbers and emails. For more info, see Jennifer’s email at https://info.garmin.com/u/gm.php?UID=05iZKqmKRf&ID=120148819_2646721_6374. Garmin’s support email address which has been hidden in her email message, seems to be email@example.com – this is according to https://www.htxt.co.za/2019/09/13/heres-the-email-address-you-need-to-contact-garmin-about-its-hack/.
Online poker was the undoing of Ashwani Jhunjhunwala, Goldman Sachs’ VP in India. Police have arrested him for stealing Rs 38 crore ($5.4m) from Goldman Sachs. In just 10 minutes, Jhunjhunwala fraudulently transferred the money to an account at a Chinese bank using the computers of junior employees, police said. He was planning to use this to pay off his online poker debt. Find out more at https://economictimes.indiatimes.com/news/politics-and-nation/goldman-sachs-vp-swindles-firm-of-rs-38-crore-to-pay-off-poker-debt/articleshow/71064305.cms
The lifestyle and political aspirations of EFF president Julius Malema were also funded from the R16m robbed from VBS Mutual Bank. Scorpio’s investigation into the bank statements of VBS-beneficiary and slush fund Mahuna Investments show how the life savings of the poor and vulnerable VBS-depositors, as well as municipalities around the country, were transformed into school-related expenses for Malema’s son, and were used to pay for Gucci, Louis Vuitton and tailored suits from designer Linda Makhanya, a Polokwane party venue and the EFF. Scorpio can now reveal details of how at least R5.3m in VBS loot was siphoned off to Mahuna Investments, and how the bank card linked to this account followed Malema around the country, maintaining his personal lifestyle. Get the full story at https://www.dailymaverick.co.za/article/2019-09-08-vbs-theft-money-laundering-lifes-little-luxuries-julius-malemas-time-of-spending-dangerously/
“Unethical” is the way that entrepreneur, Thandile Jwambi, described Nedbank’s behaviour in the IP theft case he and his partner, Nicolas Kutumane, are waging with the bank. In August, they issued a High Court summons against Nedbank for allegedly stealing their ground-breaking invention that allows a user to block financial transaction cards and cheques. So in this real-life version of David vs Goliath, do the underdog entrepreneurs have a case? Find out more at https://www.itweb.co.za/content/LPp6VMr4V8JvDKQz
Regiments Capital has agreed to an astounding R500m settlement with the Transnet Second Defined Benefit Fund (TSDBF). Regiments, a financial services company, scored hundreds of millions of rands in business from Transnet with a leg-up from the Guptas and their associates. The settlement follows the revelation of a previously unknown scheme Regiments allegedly used to suck R349m from the pension fund in only 4 days during late 2015 and early 2016. Get the full story at https://www.fin24.com/Companies/Financial-Services/r349m-stolen-from-pensioners-in-four-days-20190902-2
Managers worry about employees breaking the rules. And they’re right to be concerned. Research shows that working on the same task can lead to more rule-breaking and taking shortcuts. This can be a problem if your people are doing the same work over and over again. There’s a simple solution: get them to switch between a few tasks, and to change their order. These small changes can lead to less rule-breaking. Find out more at https://hbr.org/2017/03/does-doing-the-same-work-over-and-over-again-make-you-less-ethical
Telecom fraud is rapidly becoming one of the biggest sources of revenue loss for telco providers everywhere. A low-risk alternative to traditional financial crime, telecom fraud costs the industry over $32.7bn every year. Fraud poses new challenges for law enforcement and telco providers everywhere and many companies in the space realize that a new approach is needed to tackle the issue effectively. Enter Malaysian telco conglomerate, Axiata Group, which leverages data analytics to address and neutralise the threat of telco fraud. Read the full story at https://techwireasia.com/2019/08/how-axiata-uses-data-analytics-to-thwart-telecoms-fraud/
Uber carried out an eye-opening experiment in behavioural science to subtly entice its independent workforce of drivers to maximise its growth. Some of its psychological tricks were pretty shady. If the drivers knew how Uber was manipulating their behaviour to grow Uber’s revenue, would they have taken part? Find out more at https://www.nytimes.com/interactive/2017/04/02/technology/uber-drivers-psychological-tricks.html
To have better meetings means leading with mutual respectful, inclusivity, and creating a space safe enough for your people to speak their minds. You can increase the freedom, candour, and quality of conversation in your meetings by focusing on 2 key areas: giving permission and creating safety. Through this journey, your team will become more cohesive and able to work together more powerfully. Find out more at https://hbr.org/2019/04/make-your-meetings-a-safe-space-for-honest-conversation
For years, auditors have focused on internal controls to assess if the control environment works effectively to reduce the risk of fraud. As standards have evolved to focus more on fraud, so has tech. Innovations such as artificial intelligence (AI), robotic process automation (RPA) and blockchain are tools that may help to detect fraud; but what if they also allow fraudsters to commit harder-to-detect crimes? Read the full story at https://www.cpajournal.com/2019/07/01/fraud-in-a-world-of-advanced-technologies/
More whistles blown are a sign of health, not sickness. Firms whose hotlines get used more, tend to be more profitable and have less legal exposure. The more employees use whistle-blowing hotlines, the less lawsuits companies face, and the less money firms pay out in settlements. Companies that more actively use their own reporting tools can detect and address problems internally before litigation becomes likely. This lowers legal costs, damage to brand reputation and stock price. Higher use of internal reporting tools doesn’t mean more external reports to regulatory authorities, or that problems at the firm are more frequent or serious. Often, high usage shows open communication between staff and management (and a belief that issues raised will be resolved), rather than real trouble. However, when employees report externally, it signals management’s failure to address problems internally. Managers should see hotlines as a key part of the audit process. Read more at https://hbr.org/2018/11/research-whistleblowers-are-a-sign-of-healthy-companies
Social media has made democracies more democratic by giving everyone a voice. But it also makes cyberbullies with large followings dangerous enough to make the lives of journalists so unbearable, that they quit. The internet and powerful social media platforms like Twitter, Facebook, WhatsApp and Google now host brutal cyber-attacks against journalists. Twitter has even earned the nickname “Toxic Twitter” because of this. Unesco, the United Nations agency that deals with free media, and other global free media advocates, see this as a rising threat to media freedom. In a worrying trend called cyber-misogyny, women reporters are often the targets of scathing, sexually humiliating, online abuse. The more followers the cyberbullies have, the more damage they can do. How do we protect these courageous reporters who risk their lives in the pursuit of truth for us? How do we stop this extreme intolerance of freedom of speech? Read the full story at https://www.dailymaverick.co.za/article/2019-08-06-twitter-and-the-rest-of-social-media-are-a-rising-threat-to-media-freedom-and-i-am-part-of-their-roadkill/
Fraud researcher and documentary filmmaker Kelly Richmond Pope shares lessons from some of the most high-profile whistle-blowers of the past, explaining how they’ve shared information that has shaped society — and why they need our trust and protection. Here’s her TED talk at https://www.ted.com/talks/kelly_richmond_pope_how_whistle_blowers_shape_history
Yesterday 30-July was #WhistleblowerAppreciationDay in the US, while 23-June was World Whistleblower Day. It’s our way of saying a big thank you to the people with the courage to speak out against corruption, fraud and wrongdoing. Let’s celebrate them and protect them! They make the world a better place for us and our kids.
Are you paying salaries to people who don’t work for you, or who don’t exist? Ghost worker fraud on a company’s payroll is one of the hardest types of payroll fraud to detect, especially in bigger companies without proper controls. It can lead to substantial financial losses, and can make a serious dent in your firm’s profitability, killing your company over time. So how can you stop it happening? Find out more at https://www.itweb.co.za/content/raYAyqoV9dxMJ38N
The Federal Trade Commission (FTC) has slapped tech giant Facebook with a record $5bn fine over privacy breaches. A US government agency, the FTC’s main goal is to protect consumers, and remove and prevent anti-competitive business behaviour. The FTC says Facebook must pay the fine, submit to new restrictions and a revised corporate structure, and set up strong new mechanisms from board-level down that will hold the firm and its execs accountable for their decisions about users’ privacy. The $5bn penalty is the largest imposed on any company globally for violating consumers’ privacy – almost 20x more than the next biggest fine to date. “Despite repeated promises to its billions of users worldwide that they’d control how users’ personal information is shared, Facebook undermined consumers’ choices,” says FTC chair Joe Simons. The mammoth fine and sweeping conduct relief aim not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture, so that violations are less likely to happen again. Get the full story at https://www.itweb.co.za/content/LPp6V7r4VQ4qDKQz
We need to be the change we want to see, we can’t expect others to do the right thing when we continue to do wrong. When balancing the different needs of the 4 stakeholders in any business (the shareholders, the employees, the customers and the communities), a guiding mantra of ethical leadership is this: we serve the customers, not the shareholders; we reward the shareholders; we support our staff to serve the customers, and we improve our communities. Instead of maximising profits to benefit shareholders, we should focus on making money to reinvest so as to create more opportunities. For the full article, go to https://www.dailymaverick.co.za/opinionista/2019-07-18-ethical-leadership-means-first-do-no-harm-in-business-and-in-life/
Eight people. That’s all. Eight people out of EOH’s staff of 11,500 put the entire company in jeopardy through a systematic process of fraud, corruption and bribery that saw R1.2bn of suspicious payments flow out of the company between 2014 and 2017. EOH believes it has stemmed the rot. But have they? For the full story, go to https://www.dailymaverick.co.za/article/2019-07-17-a-r1-2bn-pot-of-toxic-soup-at-eoh/
According to an update today, law firm ENSafrica found evidence of and is investigating R1.2bn in suspicious transactions at ICT group EOH. ENSafrica’s recent forensic probe into EOH uncovered a number of unethical practices, including unsubstantiated payments and tender irregularities. These may be legitimate transactions, theft or bribery and corruption payments. EOH’s problems started after Microsoft ended its contract with EOH earlier in 2019 after an anonymous whistle-blower reportedly filed a complaint with the US SEC about alleged wrongdoing in a R120m contract with the SA Department of Defence. Just yesterday, EOH announced the resignations of 3 top execs. To find out more, read https://www.itweb.co.za/content/VgZeyvJARRGqdjX9
Creating a culture of trust is good for business. Employees in high-trust organisations are more productive and engaged, have more energy at work and less burnout, collaborate better with their colleagues, are less chronically stressed, take fewer sick days, and stay with their employers longer than people working at low-trust companies. Interestingly, high-trust companies also pay more. These factors fuel stronger performance. Leaders understand the stakes. In its 2016 global CEO survey, PwC found that 55% of CEOs think that a lack of trust threatens their company’s growth. But in order to build trust, where do you start? For a science-based framework that’ll help you manage for trust in your firm, read https://hbr.org/2017/01/the-neuroscience-of-trust
Many recent corporate scandals such as Volkswagen or Wells Fargo have been cases of wide-scale dishonesty. But how could lying and deceit have become the norm at these companies? Some researchers believe that leaders justify unethical choices because of group think or psychological traps. Certainly those factors play a role, but they largely explain why individuals – not entire organisations – behave dishonestly. Are there organisation-wide factors that predict whether or not people inside a company will be honest? The answer is yes. The author’s research uncovered 4 such organisational factors: lack of strategic clarity, unjust accountability systems, poor organisational governance, and weak cross-functional collaboration. The good news is that these factors are completely within a company’s control. Improving them can make your company more honest, and help prevent the reputation and financial disasters that dishonesty can lead to. Read the full story at https://hbr.org/2019/02/4-ways-lying-becomes-the-norm-at-a-company
Fraud against medical aid schemes is a big problem worldwide. But in South Africa, there is another aspect to the issue. And that is race. An organisation for medical professionals has made the explosive allegation that SA’s top medical aids are guilty of racial profiling in their efforts to combat medical aid fraud. Get the full story at https://www.dailymaverick.co.za/article/2019-07-04-medical-aid-schemes-caught-in-a-vice-between-fraud-and-claims-of-racial-profiling/
People are more likely to trust leaders who understand and embody the 3 elements that underlie trust. These are:
- Positive relationships (the extent to which a leader creates positive relationships with others),
- Good judgment/expertise (when making decisions and responding to problems), and
- Consistency (the extent to which leaders walk their talk and do what they say they will do).
For people to trust a leader, all 3 of these elements need to be above average in that leader’s behaviour. To find out more, go to https://hbr.org/2019/02/the-3-elements-of-trust
Strengthening the internal control system and the control environment will help reduce the likelihood of fraud happening as well as the impact of fraud, if it occurs. 49% of respondents in the 2018 PwC Global Economic Crime and Fraud Survey said their companies had experienced fraud, compared to 36% in 2016. For more details, go to http://www.ft.lk/columns/Are-you-ready-to-combat-fraud-/4-679414
In 2016, out of desperation while on a pilgrimage in France, former South African Airways (SAA) treasurer Cynthia Stimpel sent a WhatsApp message to officials at National Treasury, warning them of a dirty deal in the making at SAA. It was ignored. They had stalled and blocked her at every turn, but Stimpel was relentless in her efforts to stop a R15b cash-raising deal from being pulled off outside of due process – and with the help of BnP Capital as transaction adviser for R225m – while South African banks could do it for +/-R85m. Stimpel was fired for standing up to corruption; SAA’s version: she was suspended for misconduct and sharing confidential documents. Find out more at https://www.dailymaverick.co.za/article/2019-06-14-this-is-a-whatsapp-whistleblowing-message-i-dont-know-how-else-to-do-it/
After new allegations at KPMG of cheating on internal training tests, audit committees now have questions about their external auditors’ own adherence to standards – are controls in place, are they well-designed, and are they operating effectively? In what is supposedly the SEC’s largest-ever monetary penalty against an audit firm, KPMG agreed to a $50m settlement and admitted to facts in the SEC’s order describing extensive activity at all seniority levels on 2 separate fronts to circumvent regulatory scrutiny. The firm not only admitted to facts surrounding the 2018 revelation of internal use of information stolen from the Public Company Accounting Oversight Board, but also to newly revealed details of extensive cheating on professional training exams. On top of this, some of the testing circumvented by KPMG auditors relates to extra training required by the SEC as part of an enforcement order that KPMG settled in 2017 over audit failures for a client. Find out more at https://www.complianceweek.com/accounting-and-auditing/kpmg-fallout-cheating-allegations-raise-new-questions/27281.article
If something was seriously wrong at your company, would your staff tell you? The article prompts managers to ask themselves some hard questions about the whistle-blowing climate at their companies. By installing processes to answer these questions, senior leaders show greater commitment to internal whistle-blowing, which nudges middle managers to pay more attention to reports of unethical behaviour from lower-level employees. Also, managers often dismiss most whistle-blowing complaints as frivolous, which only deters employees from reporting. Employees may only notice pieces of a growing problem, not the whole ethical breach. Ignoring these reports at the “tip of the iceberg” creates a culture of silence, because employees think they must report more-complete cases of wrongdoing, which means fewer tip-offs. Management should reassure employees that, when they do report problems, someone higher up will take them seriously and investigate. Ultimately, the responsibility to build a pro-whistle-blowing culture lies with the board. Find out more at https://hbr.org/2017/02/managers-arent-doing-enough-to-encourage-whistleblowing
A record 18% of CEOs were replaced in 2018, with more top execs forced out for ethical lapses than were fired for poor performance or disagreements with their boards, according to a PwC study released on 15-May-2019. About 39% of the top execs dismissed had been accused of ethical lapses, according to the PwC study of turnover among the top 2,500 global public companies – the first time ethical lapses led the causes of CEO turnover in the study’s 19-year history. To find out more, go to
Data breaches, identity theft, online scams – every year, a destructive flood of fraud sweeps the world, leaving countless victims in its wake. New and improved tech only gives fraudsters an edge, making it easier for them to nab financial data from unsuspecting consumers. Swindlers and hackers stole $16bn from 15.4m U.S. consumers in 2016, according to Javelin Strategy & Research’s 2015 Identity Fraud Study. To make matters worse, the Identity Theft Resource Center reports 1,339 recorded data breaches in 2017 – a new record high. For tips to help you steer clear of the most common financial scams, read https://www.investopedia.com/articles/personal-finance/041515/10-tips-avoid-common-financial-scams.asp
It’s vital for employees to voice their concerns when they see something worrying or unethical. But how do you make everyone understand that their voice is valued? For more insights, read this intriguing article at https://www.strategy-business.com/article/Create-a-workplace-where-everyone-feels-comfortable-speaking-up
Whistle-blowing is the most effective way of exposing wrongdoing. In 2 scientific studies (ACFE and PWC), whistle-blowers uncovered over 40% of all fraud cases, while law enforcement only detected 3%. Many of the cases of corruption, fraud and sexual abuse that we know about, have been exposed by workers who reported these issues to their employers, regulators or the media. It’s believed that more cases of fraud and corruption are exposed by whistle-blowers than any other roleplayer – including the police or the media. So whistle-blowers, and tools to protect them like FraudCracker and EthicsDefender, are vital for an anti-fraud program to succeed. Read more at https://lib.ohchr.org/HRBodies/UPR/Documents/session9/US/NWC_NationalWhistleblowersCenter_Annex2.pdf
Occupational fraud and abuse are causing financial losses in almost half of all firms, a survey from Mazars finds. The average loss per company surveyed, exceeded €10,000 (US$11,167 or ZAR160,362). And 12% of companies surveyed, suffered losses above €500,000 (US$558,345 or ZAR8,018,105) over the past 2 years. Theft of cash and goods was the main cause of losses, although cybercrime was seen as an growing threat. Read the full story at https://www.irishtimes.com/business/work/survey-finds-fraud-causing-financial-loss-in-almost-half-of-businesses-1.3897526
Bullying and sexual harassment are rampant in the legal profession. This is according to a new study on nearly 7,000 legal professionals in 135 countries, the largest-ever global survey of its kind. Today the International Bar Association (IBA) launched the ‘Us Too? – Bullying and Sexual Harassment in the Legal Profession’ report. Its findings are scary: bullying in legal workplaces affected 1 in 2 women and 1 in 3 men surveyed; sexual harassment impacted 1 in 3 female respondents and 1 in 14 male respondents. Read more at https://www.ibanet.org/bullying-and-sexual-harassment.aspx
Ask citizens why their countries aren’t developing, ask investors why they choose not to invest in some regions, and corruption is almost always the top reason. Hundreds of millions of dollars are spent annually trying to eradicate fraud and corruption worldwide, yet it’s stubbornly pervasive. Corruption doesn’t result from a lack of ethics or knowledge; it’s a workaround chosen by people with few better options. So what can decrease its lure? For new ways to make progress, read this fascinating article at https://ideas.ted.com/can-corruption-ever-be-eliminated-in-the-world-boss-tweed-and-napster-show-a-counterintuitive-path-forward/.
Three psychological dynamics lead to crossing ethical lines: omnipotence, cultural numbness and justified neglect. These come into play when much bigger lines are crossed in corporates: corruption at Nissan, sexual harassment charges in the media, privacy breaches at Facebook, money laundering in the finance sector, and pharmaceuticals’ role in the opioid crisis. For most leaders, moral leadership is not just about acting in good or bad faith. It’s about navigating the big space in between. So how do you know when you, or your team, is on the road to an ethical lapse, and how do you prevent it? Find out more in the Harvard Business Review article at https://hbr.org/2019/04/the-psychology-behind-unethical-behavior
If you’re working at a Gupta-tainted company like KPMG, and they’re going through a public scandal, here’s the big question: should you stick it out, or should you leave? Find out more at https://hbr.org/2018/12/if-your-company-is-going-through-a-public-scandal-should-you-leave
Many people were involved in the spectacular downfall of once-buzzy Silicon Valley blood testing wunderkind, Theranos. But perhaps one of the people most integral to it all was Theranos and Elizabeth Holmes whistleblower Erika Cheung. The former medical researcher joined Theranos in 2013 and only stayed 7 months before exiting, but not before playing an integral part in uncovering many issues in the company’s blood-testing process. Find out more at https://www.refinery29.com/en-us/2019/03/227172/elizabeth-cheung-theranos-employee-interview-the-inventor
While the #MeToo Movement shone a global spotlight on the entertainment industry, it’s painfully clear that the problem is just as widespread in other industries. Sterling Jewelers Inc. is just one example of a company run on discrimination and abuse. For 1000s of women, America’s largest jewellery retailer, and its Zales, Kay and Jared stores, were hotbeds of sexual harassment, assault, unequal pay and discrimination. Back in 2005, two female workers took their concerns to employment lawyers, who set up a confidential toll-free number. 1000s of men and women countrywide phoned in, and it all came out. They spoke about groping, sexual coercion, rape and sexual degradation. The lawyers amassed over 200 sworn statements from staff who mostly didn’t know one another. What emerged was a list of individual horrors and degradations perpetrated against Sterling’s female staff. A system that allowed the abuse to grow and kept it from ever becoming known to other female staff or to the public. A system where men were consistently paid more than women and promoted more quickly. By 2015, the number of claimants stood at an astounding 69,000 women. Their lawyers pursued class action, thinking that a suit with such a large number of women stood a better chance of permanently changing the company-wide culture and policies of unequal pay and harassment, than individual lawsuits.
That lawsuit started almost 14 years ago. Fourteen years is a long time for a lawsuit to drag on with almost zero progress towards a resolution. And it’s a long time to wonder just how an enormous, publicly traded company could keep the details of its sickening working conditions from its shareholders and from the public, and why those dirty secrets might have been the company’s most valuable assets after all. This eye-opening exposé at https://www.nytimes.com/2019/04/23/magazine/kay-jewelry-sexual-harassment.html is a must-read.
Procter & Gamble Co., one of the most important advertisers for Google and Facebook, ramped up criticism of internet platforms, saying the problems plaguing the industry aren’t getting fixed fast enough. In a speech at a recent industry conference, P&G Chief Brand Officer Marc Pritchard blasted the digital media industry for lack of transparency, fraud, privacy breaches and violent and harmful content placed next to ads. He said his company, which spends billions of dollars on marketing products every year, would move its money to services that are completely free of offensive content. “We’ve been tolerant for too long,” Pritchard said. “It’s not acceptable to have brands showing up where opioids are being offered, where illegal drugs are promoted, where abhorrent behaviour is present or where violence is seen. The apologies are heartfelt and appreciated, but that’s not good enough.” Find out more at https://www.dailymaverick.co.za/article/2019-04-12-pg-puts-ad-platforms-like-facebook-google-on-notice-2
The world is buzzing about Elizabeth Holmes. Her $9bn+ biotech company Theranos promised low-cost tech able to detect health ailments with just a few drops of blood from a fingertip. In reality, it endangered lives with its flawed and overhyped blood-testing tech. In the wake of massive fraud charges in 2018, Theranos went from Silicon Valley darling to a spectacular failure virtually overnight, shutting down in Sept-2018. And yet, in 2019, Theranos was granted 5 new patents! Clearly, there’s a disconnect between the legal world of IP, and the real world of science and business. Patents should definitely encourage innovation and outside-the-box creative thinking. But if unethical companies like Theranos are granted lots of patents, are patents really worth the cost and effort involved in getting them? Find out more in this intriguing article at https://www.cbinsights.com/research/theranos-patents-2019/
Thanks to research from GIBS (the Gordon Institute of Business Science, South Africa), companies can use the insights of convicted white-collar criminals to help protect themselves against the growing risk of white-collar crime. Find out more in this interesting article at
Our new EthicsDefender video is live. Take a look and let us know what you think!
P.S. Big shout-out to our voice-over and video team for a great job! Thanks guys.
Today 16th April is World Voice Day. Your voice matters! This is your day to make your voice heard, to not keep quiet about fraud and wrongdoing that you’ve seen, so that perpetrators can be stopped and we can make the world we live in a better place for our kids. This is exactly why we created FraudCracker.com
Looking at the recent protests in South Africa around the launch of Pieter-Louis Myburgh’s book Gangster State, one thing is clear: telling the truth and writing about corruption (and whistle-blowing about it) are dangerous but vital worldwide. In SA and worldwide, authors of controversial books are finding their launches disrupted by groups vehemently opposed to their views. Instead of debating the issues, they use intimidation, vandalism and threats of violence. PEN International found that such attacks on authors reveal a growing intolerance of different viewpoints and greater use of violence to silence these views. A repressive atmosphere leads authors and whistle-blowers to keep quiet, avoiding controversial topics. And that’s exactly why it’s vital to protect them from being silenced. We need to be vigilant about protecting them and their freedom to speak out, so that differing viewpoints and unpopular investigations can be aired in public, and wrongs can be made right.
Find out more in this fascinating article at https://m.news24.com/Columnists/GuestColumn/telling-the-truth-is-a-dangerous-occupation-20190411
WikiLeaks founder Julian Assange was expelled from his hideout in Ecuador’s embassy in London today and quickly arrested by London police amid concerns that he faces extradition to the U.S. WikiLeaks and Assange became famous in 2010 after the organization published government secrets leaked by U.S. Army soldier Chelsea Manning. More recently, the website was front and centre of the 2016 American presidential race after publishing hacked emails from Hillary Clinton’s campaign. Find out more at https://www.dailymaverick.co.za/article/2019-04-11-assange-arrested-after-ecuador-withdraws-asylum-protection/
In 2017, the New York Times broke the now widely-known scandal of media mogul Harvey Weinstein’s apparent decades-long pattern of sexual abuse and harassment. The story came as a shock to the public. However, as details emerged it became clear that Weinstein’s transgressions were not unknown to Hollywood insiders. They were, in fact, an “open secret.”
The big question is this: Why do issues remain open secrets in companies where many employees know about a problem, but no one publicly brings it up?
In studies published in the Academy of Management Journal, authors Insiya Hussain and Subra Tangirala found that, as issues become more common knowledge among frontline staff, the willingness of any individual employee to inform top-management dropped. Instead of speaking up, participants showed the bystander effect, a psychological phenomenon describing how people stay on the sidelines as passive bystanders, waiting for others to act, rather than doing something themselves.
But is the explanation as simple as this?
Find out more in this fascinating Harvard Business Review article at https://hbr.org/2019/01/why-open-secrets-exist-in-organizations