Scottish IOR Conference John J Armstrong Leslie A Bryce Cartwheel Conspiracy Case Study 26 th October 2012 Fortinbras Risk Consultancy Ltd

Insert Slide Title Why it is important Fortinbras Risk Consultancy Ltd ©2 “ Our vision is that...there is a very clear lead from the top of financial organisations – that fraud is a significant threat that needs managing strategically and effectively. In considering fraud issues we will look, for example, at whether a firm has a strong anti-fraud culture, with the lead being given from the top.” Philip Robinson former FSA director of financial crime

Insert Slide Title Initial Allegation – how do you react Is your organisation equipped to handle it? Management Response Communication Company Policy Key Decision Points Investigation Disciplinary Actions Civil and Criminal Proceedings Reputational Impact Anything else? Discussion Points Fortinbras Risk Consultancy Ltd ©3

Insert Slide Title  A whistle-blower has made contact to allege:  Long-serving member of staff has stolen large amounts from the company in the form of fraudulent claims payments.  In particular, payments have been made to an ex-boyfriend and other friends.  One cheque for around £28,000 recently sent to a D Pritchard.  Works in Southend but originally from Liverpool. The Allegation Fortinbras Risk Consultancy Ltd ©4

Insert Slide Title  Suspected fraudster has 16 years service, mainly in the claims function  Expert knowledge of certain claims systems  Trains new staff  Claims payment authorisation of up £50,000  Family members work for the company  Liked by staff, generous and heavily involved with local charities  Initial investigation has found a cheque payment for £28,275 to D Pritchard with no apparent connection to the associated claim What do we know? Fortinbras Risk Consultancy Ltd ©5

Insert Slide Title  False allegation  Mishandling of the case resulting in failure to recover any losses  Reputational risk to the company from bad publicity  Potentially unidentified control failures in the claims handling and  claims payment systems Risks? Fortinbras Risk Consultancy Ltd ©6

Insert Slide Title  Supportive of the investigation?  Complying with legislation?  Creating the right culture?  Willingness to address control failures? Management Response Fortinbras Risk Consultancy Ltd ©7

Insert Slide Title  Who investigates?  Who is told about the investigation and when?  Who makes the decision on civil and/or criminal proceedings?  Who handles the legal aspects?  Who handles external communication? Key decision points Fortinbras Risk Consultancy Ltd ©8

Insert Slide Title  On the Company?  On clients?  On staff?  On shareholders?  On the regulators? Reputational Impact Fortinbras Risk Consultancy Ltd ©9

Insert Slide Title The Suspect Fortinbras Risk Consultancy Ltd ©10

Insert Slide Title Involved Fortinbras Risk Consultancy Ltd ©11

Insert Slide Title  Do not voice your suspicions to anyone who does not need to know. This could be deemed to be ‘tipping off’ and is a criminal offence  Do not challenge the individual  Contact the appropriate investigation function as soon as possible  Secure or photocopy relevant documents in your possession. However, if fingerprints are a factor, avoid touching the documents  Document any relevant conversations  Do act quickly to minimise risk  Act normally Remember! Employees who suspect fraud and do not report through the appropriate channels can be prosecuted personally under the Proceeds of Crime Act What to do if fraud is suspected Fortinbras Risk Consultancy Ltd ©12

Insert Slide Title Fortinbras Risk Consultancy Ltd Fortinbras Risk Consultancy Ltd ©13