1. Fighting Crime in the Workplace
Tom Phillipson – Head of Contingency & Crime, Swiss Re Corporate Solutions
Lois Fuchs – Risk Manager, Honeywell

2. Aims & Agenda
Aims
Understanding the prevalence of crime in the workplace
What can YOU do to mitigate this exposure?
Agenda
Industry Statistics
Common Scenarios
Real Losses
Profile of a Perpetrator
Prevention and Detection – a Risk Manager's Perspective (Lois Fuchs)
Commercial Fidelity Insurance
Questions

3. Crime Exposures
Cost to industry: typical organisation loses 5% of annual revenue to fraud: global estimated USD2.9 trillion per annum
Recession fuelling rise in crime: loss as a proportion of income has risen 20% in the last year
Severity: approximately 25% of all reported losses cost US companies more than USD1million
Difficult to detect: average length of fraud losses prior to detection is 24 months
Time served: largest frauds are committed by longest serving employees

4. Common Scenarios Theft (by employees or third parties): cash / stock
Billing: employee creates a fictional vendor and bills employer for non-existent services
Bribery and corruption: employee processes inflated invoices for supplier and takes a kickback
Premises and transit: robbery/burglary/hold-up
Payroll: employee claims overtime for un-worked hours or adds ghost employees to the payroll
Information: employee or third party steals confidential customer or product information

5. Real Losses
Case Study 1: Milton Morris, senior manager in charge of trucking at SC Johnson conspires with suppliers to overpay them in return for back-handers. Scam goes undetected for 10 years. Company obtains judgement against the perpetrator and trucking companies in excess of USD 200m.
Case Study 2: Chia Teck Leng was sentenced to 42 years in jail, one of the longest jail term meted out for the largest case in commercial fraud in Asia to date. Chia was a finance manager at Asia Pacific Breweries when he forged documents to swindle banks out of S$117 million over four years to feed his gambling addiction.
Case Study 3: Singapore Airlines' employee Teo Cheng Kiat, who embezzled S$35 million from the airline over 13 years. He was convicted in 2000 and jailed for 24 years for the crime.

6. Profile of a Perpetrator
Age/seniority: middle management aged commit more than a third of internal frauds – more authority and more access to company resources. Also responsible for the largest losses
Tenure: longer-term employees commit the largest frauds
Department: accounting department employees commit disproportionate number of crimes (30%). Senior management (18%), operations (16%) and sales (11%) staff also feature strongly
Background: 87% or perpetrators have never been charged or convicted and 82% have never previously been punished or terminated
Motivation: domestic financial difficulties/stress including divorce, gambling, drugs. Pure jealousy combined with rationalisation ("I work just as hard as the CEO why shouldn't I have the benefits which he/she enjoys"?)
Red flags: living beyond means, financial difficulties, divorce/family problems, close association with vendor, refusal to take vacation, complains about lack of pay

7. Prevention and Detection – A Risk Manager's Perspective
Internal/external audit
Anti-fraud training
Dual controls for cheque signing/wire transfers
Employee vetting
Detection
Tip or complaint (including whistleblower hotline)
Surprise audit
Linguistic software
Red flags

8. Commercial Fidelity Insurance Covered
Indemnifies the insured for direct financial loss i.e. first party loss caused by:
Employee dishonesty
Theft by a third party
Counterfeiting or forgery of a negotiable instrument by a third party
Computer crime by a third party
Trigger: losses discovered during the policy period.

9. Commercial Fidelity Insurance Not Covered
Unauthorised trading
Liabilities to third parties
Loss caused by directors or major shareholders
Consequential loss (e.g. computer downtime)
Pure inventory loss
Theft of trade secrets or confidential information

10. Questions?

11. Appendix I – Sources and Recommended Reading
Association of Certified Fraud Examiners Global Report 2010
Kroll Global Fraud Report 2011/12
PWC Global Economic Crime Survey 2011

12. Appendix II - Swiss Re Corporate Solutions Underwriting Appetite
Target clients: all industry segments, except jeweller’s block & casinos
Multi-year capabilities
Capacity & attachment linked to size of insured
Revenue > USD 500m
Capacity: up to USD 25m
Attachment point: minimum USD 5m
Revenue < USD 500m
Capacity: up to USD 10m
Attachment point: minimum USD 25k
Required Underwriting Information:
Number of employees and their locations
- Audits - Training - Dual controls
(5) year loss history

13. Thank you!

14. Legal notice
©2012 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivatives of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re.
Although all the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial and/or consequential loss relating to this presentation.