SOUTH AFRICAN INSURANCE CRIME BUREAU (SAICB) SAUMA CONFERENCE – 12 OCTOBER 2010 HUGO VAN ZYL CHIEF OPERATING OFFICER

FRAUD AND SUSTAINABILITY CURRENT SITUATION:  ECONOMIC DOWNTURN  OPENS BUSINESS TO RISK WHEN TOUGH ECONOMIC TIMES IMPACT THE COMPANY FINANCIALLY – THIS USUALLY INCREASES THE OPPORTUNITY TO COMMIT FRAUD.  FRAUD IS SOUTH AFRICA’S NO. 1 ECONOMIC CRIME AND FRAUD ACCOUNTS FOR APPROX. 7% OF A COMPANY’S REVENUE LOST WORLDWIDE. SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY CIRCUMSTANCES UNDER WHICH FRAUD IS COMMITTED  incentive or pressure to commit fraud,  the opportunity to commit fraud, and  rationalisation. SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY IMPACT OF ECONOMIC DOWNTURN: MANY COMPANIES NEED TO REDUCE COSTS AND INSTITUTE MEASURES LIKE:  Retrenching  reduced training,  reduce any pay increases or bonuses and also delay promotions  abandoning checks and balances which may be in place, and/or  cutting back on internal audits, ETC. In such conditions, an organisation is susceptible to fraudulent behaviour internally from its employees, as well as from its service providers and associates. SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY RATIONALISATION  employees feeling resentful and being able to justify to themselves that the fruits of the fraud that they are committing are owed to them.  they may convince themselves that it is acceptable as they are doing it to address a desperate situation or that it is the only option available.  Some even believe that they are just “borrowing” or that everyone else is doing it and thus they are also entitled to do it. SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY RATIONALISATION  Organisations resort to desperate measures to survive. This may result in the payment of bribes, misrepresentations being made to clients, the favouring of tenders, insurance claims being falsified and/or taking short-cuts.  Employees on the other hand may find themselves falsifying qualifications and references, stealing cash and stock, creating ghost workers, falsifying medical and other insurance claims, resorting to insider trading and/or falsifying suppliers’ details. SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY More than 80% of the frauds committed by individuals is in one of six departments: accounting, operations, sales, executive/upper management, customer service or purchasing. SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY Insurance fraud costs the industry billions of rands each year. It is internationally estimated that 30% of all insurance claims contain an element of fraud. In South Africa, if only 10% of claims is fraudulent, this translates into nearly R2 billion annually (Short-term industry only). Insurance fraud specialists, as well as the South African Police Service and other crime related agencies agree that a significant percentage of crime, including insurance fraud and other insurance related crimes, is highly organised and perpetrated by syndicates The UK IFB found that 40% of the insurance fraud its members previously believed to be opportunistic, was also organised SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY HOW DO WE ADDRESS AS AN INDUSTRY?  ZERO TOLERANCE  INTERNAL CONTROLS AND AUDIT PROCESSES  FRAUD PREVENTION POLICIES AND PROCESSES  risk-management strategy  well-drafted economic-crime prevention policies  adequate staff training  a confidential whistle-blowing process SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY ZERO TOLERANCE  WHOLE INDUSTRY TO SPEAK WITH ONE VOICE  SAICB TO DRAFT INITIAL POLICY – SAIA  ZERO TOLERANCE POLICY TO COVER:  CLIENTS  SERVICE PROVIDERS  ASSOCIATES  STAFF SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY WHERE DOES THE SAICB FIT INTO THIS ?  HISTORY  KEY OBJECTIVES  DECTECTION  PREVENTION  INVESTIGATION  PROACTIVE INITIATIVES  STAFF DISHONESTY  FRAUDLINE SOUTH AFRICAN INSURANCE CRIME BUREAU

FRAUD AND SUSTAINABILITY PROACTIVE INITIATIVES  LISTS – SAPS 13, DRäGER, TRACKER  ASSISTING SAPS WITH PROBLEM AREAS PLAGUED BY CORRUPTION AND FRAUD  SAPS POUNDS CLEANUP  BORDERS  ADDRESSING INDUSTRY VEHICLES IN SADC COUNTRY  INDUSTRY STATS  TRAINING SOUTH AFRICAN INSURANCE CRIME BUREAU

SAICB – VISION  INFORMATION SHARING PLATFORM  WHOLE FINANCIAL INDUSTRY  FUSION CENTER  REDUCING RISK FOR INDUSTRY  RECOVERY OF MONEY  AFFECTING CRIME AND FRAUD SITUATION IN COUNTRY

SOUTH AFRICAN INSURANCE CRIME BUREAU THANK YOU