What You Need to Know About the Paradise Papers

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Mason Wilder, CFE
ACFE Research Specialist

Massive data leak leads to newspaper reports uncovering shady offshore financial dealings. Sound familiar? It should.

Once again, the International Consortium of Investigative Journalists (ICIJ) managed to get its hands on a treasure trove of financial and legal documents that outline the mechanisms used to help some individuals and corporations move money to reduce their tax burdens and obscure asset ownership. This time, the leak and accompanying stories have been coined the “Paradise Papers,” in a follow-up to 2016’s “Panama Papers.”

The two leaks share many similarities, but how are they different?
First off, and perhaps most importantly, this year’s Paradise Papers feature a main player (Appleby – a Bermuda-based legal services firm) that was seemingly more selective about its client list than the star of last year’s Panama Papers. Mossack Fonseca, a Panama-based law firm, showed no qualms dealing with individuals and entities potentially tied to illegal activities, including several heads of state and/or their families and associates. The leaks led to the Mossack Fonseca’s dissolution, the arrests of the founders, the resignation of Iceland’s PM, the removal of Pakistan’s Prime Minister, and investigations targeting more than 6,000 individuals and corporations throughout the world.

The Paradise Papers have not yet linked the subjects of the data leak to criminal culpability – and aren’t necessarily expected to – but they do feature a much more eye-catching list of names associated with almost 25,000 shell companies in more than 30 offshore jurisdictions. British royals Queen Victoria and Prince Charles, rock star Bono, Formula 1 superstar Lewis Hamilton, U.S. Secretary of Commerce Wilbur Ross, Twitter, Facebook, Apple, American pop stars Madonna and Justin Timberlake, and Russian oligarchs. These are only some of the high-profile figures and companies connected to offshore financial dealings through the Paradise Papers. It’s worth mentioning again that none of these people have faced allegations of criminal wrongdoing thus far, just questions about whether their financial dealings are “bad optics.”

Secondly, while the Paradise Papers certainly qualify as a bombshell data leak, the Panama Papers have them beat in terms of size, setting the record for largest known data leak at 2.6 terabytes (TB). There’s a good chance that much of the data from the Panama Papers still hasn’t even been seen by human eyes yet. The Paradise Papers, on the other hand, reportedly feature only 1.4 TB of data, or 13.4 million documents ranging from 1950-2016. Additionally, the Panama Papers’ documents came in formats much easier to process compared to the Paradise Papers. It may be a while before all the implications of the Paradise Papers can get sorted out and relayed to the public.

What can fraud examiners learn from this latest leak in the meantime?
It isn’t exactly a revelation that potential targets of fraud examinations or investigations can go to great and convoluted lengths to obscure asset ownership and complete pictures of their finances. By studying the stories borne out of the Paradise Papers, fraud examiners can gain a better understanding of how the thin line between tax avoidance and tax evasion, or the line between unethical and illegal, can be blurred or skirted. Fraud examiners can also learn red flags to look for and places to look for them in due diligence or compliance investigations, asset searches and more. They can also gain insight into tactics for moving and hiding assets internationally. Most importantly, much of the data from the Paradise Papers has been added to the searchable database of the ICIJ, almost all of which is publicly available on their website for use in any number of investigative or research tasks. Happy hunting!

To learn more about what fraud examiners should know about the Panama Papers leak, read "Shell Shocked" from Fraud Magazine.

4 Challenges to Creating an Effective Whistleblowing Policy and How to Overcome Them

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Mustafa Yusuf-Adebola, CFE, ACCA
Risk Consultant

In reviewing organizations’ whistleblowing platforms, I have noticed two features that consistently affect a program’s success. One, reporters have no trust in the system due to fear of victimization or intimidation when/if the veil of anonymity is removed. And, two, reporters are not encouraged to speak out because there are no (appearances of) far-reaching actions after investigations are conducted. Consequently, there is less motivation to report wrongdoing.

Trust is the bedrock of any whistleblowing platform; as such, potential reporters are comforted by the assurance that cases will be treated with the utmost confidentiality. For instance, an employee of an organization once revealed to me that he would blow the whistle only after he had submitted his resignation letter because the subjects involved in the alleged fraud were top executives. According to him, this was his own way of "rocking the ship" before leaving.

To encourage reporting through an effective whistleblowing policy, a few challenges I have noted are:

  1. Low awareness: Organizations need to appreciate the importance of publicizing their whistleblowing policies and the reporting channels to everyone (including third parties).
  2. Poor infrastructure: Create and enable appropriate channels (emails, phone lines, suggestion boxes or internet links) to cater for the preference of the reporter. For example, some organizations have dead web portal links and nonfunctioning phone lines used for whistleblowing. One company published a reporting phone number in its annual report that was entirely different from the website’s listing. These are easy ways to show potential reporters that you want to hear from them.                                                            
  3. No follow-up messages: A program should include assignments of case numbers for each report to give the reporter assurances of activities taken after they have made a claim. In certain instances, a case could be investigated for a long period of time and the reporter should be routinely informed of updates.
  4. Ignoring data analytics: Data analytics is a very useful tool in proactively responding to fraud. Collating and recording all relevant data for established and unestablished cases on the whistleblowing platform can help anti-fraud professionals proactively address fraud indicators, assist in updating in-house training courses, and help in increasing employees' fraud awareness and reviewing of company policies.

Ultimately, the support and actions of top management will go a long way to provide a good framework for preventing and detecting fraud through whistleblowing programs.

The Behavioral Type Interview: Don’t Be Nervous, Be Prepared

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Glenn Bass, Director of Recruiting, SI Placement
Bethesda, Maryland

Behavioral type interviews are alive and kicking. If you are in the job market and interviewing for a new fraud-related role, there’s a good chance you will be faced with behavioral type interview questions. The trick is not to be caught like a reindeer in headlights. Don’t be nervous, be prepared. First, let’s get an understanding of the “what” and “why” of behavioral interviews.

Behavioral type interviews will consist of questions that aim to learn about your past behaviors in specific work situations to see if you have the skills and competencies needed for the job. These questions often start with, “tell me about a time,” “describe a time” or “provide me with an example.” The logic behind behavioral interviews is that past behavior is a reliable predictor of future behavior. What you’ve done in the past, will predict what you do in the future. The interviewer will want examples of what happened, what you did and how you achieved a positive outcome.

The logic behind behavioral interviews is that past behavior is a reliable predictor of future behavior.

Below are some skills and competencies followed by behavioral type interview questions a CFE might hear during an interview:

  • Problem-solving capability (most CFE roles require creativity and critical thinking)
    Describe a time when you faced a significant obstacle to succeeding with an important work project, activity or investigation.
  • Acting with integrity (key characteristic for any CFE)
    Describe a time that you demonstrated integrity by maintaining necessary confidentiality. What did you do? What was the result?
  • Demonstrating Emotional Intelligence (CFEs often work in a sensitive work environment)
    Tell us about some demanding and stressful circumstances where others were intense, but you were able to maintain your composure. How did that affect the result?
  • Establishing relationships (A CFE often needs to be able to build both internal and external relationships)
    Describe a situation in which you had to arrive at a compromise or help others to compromise. What was your role? What steps did you take? What was the end result?
  • Inspiring and motivating others (An important skillset for any type of supervisory/management role)
    What is the toughest group or individual you have had to get cooperation from? How did you get them to perform at their best?

When answering behavioral type questions you will want to tell a story that includes a brief overview of the situation, the task you needed to complete, the specific actions you took to complete the task and the result of your efforts.  

There are also some “don’ts” when answering behavioral type questions.

  • Don’t be ambiguous with your responses. The interviewer is looking for you to provide specific situations.
  • Don’t use phrases such as, "Most of the time..." or" Sometimes..."
  • Don’t give your beliefs or opinions. The interviewer wants a factual example of what you did in a certain situation.
  • Don’t use phrases such as, "I believe..." or "In my opinion..."
  • Don’t give examples of what you would have done rather than what you did do.
  • Don’t use phrases such as, "I would have..." or "I might."
  • Don’t include examples that were team related. The interviewer wants to hear about specific actions you took or were accountable for, not those that were team efforts.
  • Don’t use phrases such as, “We did…” or “The team did…” Or “The group did…”

Behavioral interviews can be tricky, but the key to success is preparation. Don’t be nervous, be prepared.

More tips and advice available at our online Career Center.