Clare Rewcastle Brown to Discuss Money-Laundering Controls Learned from 1MDB Scandal

GUEST BLOGGER

Sarah Hofmann
ACFE Public Information Officer

“I think this whole offshore financial structure that’s been allowed to grow like a canker … the whole thing’s got out of control,” said investigative journalist Clare Rewcastle Brown in an interview with the Association of Certified Fraud Examiners (ACFE). 

Rewcastle Brown founded The Sarawak Report and Radio Free Sarawak in 2010 to disseminate news that concerned the Sarawak region of Malaysia and eventually, news surrounding the emerging 1MDB (1Malaysia Development Bhd) scandal. In August 2015, a warrant for her arrest was issued by a Malaysian court for "activities detrimental to parliamentary democracy" and the "dissemination of false reports."

“I think we’re seeing a swing of the pendulum and I think 1MDB’s just kind of cropped up perhaps at the right place at the right time … governments across the world have started to realize that they’ve lost control and populations have lost patience,” she said.

Rewcastle Brown will address anti-fraud professionals from across Europe at the 2017 ACFE Fraud Conference Europe in London, March 19-21. Despite having an arrest warrant issued for her by a Malaysian court, Brown remains optimistic that corruption on a global scale can be defeated. She said, “I do think we’re seeing a lashback and 1MDB is going to be just one example of enforcement agencies hitting back.”

Despite not being able to attend the 2016 ACFE Fraud Conference Asia-Pacific last November in Singapore due to safety concerns, she is committed to speaking in-person at the conference in London. She plans to lay out the intricate timeline of the 1MDB scandal that allegedly began in 2009 and runs through present day.

1MDB is currently being investigated by Swiss, Singh and U.S. authorities. In a question-and-answer session after her prepared remarks in Singapore, Rewcastle Brown addressed what controls she thought could help prevent this type of large-scale money laundering. “I think this case is really an opportunity to hold banks and players in these actions seriously to account. And to make the actors who have broken the rules pay the penalty, seriously. [They should be] absolutely exposed, shamed and embarrassed because we need to put off future, potential situations like this arising again,” she said. “I think that’s the best we can hope to come out of this. By showing at last, that the financial regulators have teeth and that they’re catching up to the global criminal element who have been using our offshore system and far-too compliant financial organizations. If we can get ahead of them, maybe that’s the best way to deal with this particular problem.”

Find out more about the upcoming 2017 ACFE Fraud Conference Europe, and register by February 17 for early registration discounts, at FraudConference.com/Europe.

Bringing Down FIFA: 'The dogged obsession of a single reporter'

FROM THE PRESIDENT

James D. Ratley, CFE
ACFE President

Sports are an obsession for many fans around the globe. Team owners, promoters and gear manufacturers know their customers are loyal (sometimes rabid), unpaid publicists. So we're talking about boatloads of cash coursing through sport systems — and sometimes surreptitiously into fraudsters' pockets.

Andrew Jennings, an independent investigative journalist, has spent more than 15 years laboriously examining the economic intricacies of FIFA (Fédération Internationale de Football Association). His reporting of entrenched FIFA corruption — bribes, kickbacks, vote rigging and ticket scandals — eventually caught the attention of the FBI. In 2015, the U.S. Department of Justice indicted scores of FIFA-related officials under the U.S. Racketeer Influenced and Corrupt Organizations (RICO) Act and the U.S. Travel Act. As of publication, the U.S. had convicted 21 on various racketeering and corruption charges with 42 defendants publicly charged.

Simon Jenkins of the Guardian newspaper wrote that credit for the routing of FIFA "should go to the dogged obsession of a single reporter, Andrew Jennings."

Jennings has been chasing bad guys around the globe for decades. He's investigated corruption in Scotland Yard, the Sicilian Mafia and the International Olympic Committee, among many others.

The inscription on the ACFE's Guardian Award reads: "For Vigilance in Fraud Reporting." That phrase defines Jennings's work. And that is why we're presenting him with the award at the 28th Annual ACFE Global Fraud Conference, June 18-23 in Nashville.

Jennings says that from his teen years, he wanted to become an investigative reporter. He attended university for a couple of years, but he was chomping at the bit to get to his investigations. He worked for some of the U.K. national newspapers, but he was bored. He went to the BBC where he worked on a TV documentary about corruption in Scotland Yard, but the BBC pulled it at the last moment. He quit and went home to write a book about it. And then a public-affairs TV show — "World in Action" — called him and he re-made the film.

From there he made several documentaries and wrote a couple of award-winning books on Olympic corruption, which prepared him for rooting out "the rot," as he calls it, in FIFA.

Even today, at 73, he's still sniffing for bad smells in large institutions. Read more about Jennings in the latest issue of Fraud Magazine.

And, sign up for the 28th Annual ACFE Global Fraud Conference to hear this fascinating man and many other fraud fighters.

Naughty or Nice: Who Made the List in 2016?

GUEST BLOGGER

Emily Primeaux, CFE
Assistant Editor, Fraud Magazine

He sees you when you're sleeping. He knows when you're awake. He knows when you've been bad or good...

"He," or "she," of course, is the ever present fraud fighter. And in 2016, fraud fighters saw a slew of unsavory characters who clearly ignored the elf on the shelf and instead stole, bribed or colluded to illegally line their own pockets. But for every bad apple, there are unsung heroes — the whistleblowers, journalists, investigators ... the list goes on and on. These heroes go to battle in the trenches every day to root out the crooks and thieves.

In honor of the holiday season, let's ruminate on the past year and the characters that made it onto either the naughty or the nice list.

Naughty

1. Wells Fargo: On Sept. 9, 2016, Wells Fargo negotiated a deal to settle a lawsuit filed by the U.S. Consumer Financial Protection Bureau, the Office of Comptroller of Currency, and the City and County of Los Angeles. Though Wells Fargo didn't admit to any wrongdoing, it did confirm that employees had opened more than two million checking, savings and credit card accounts without customer approval. And in a stunning turn of events, former employees then came forward to say they had called the ethics hotline to report dubious sales practices. However, according to these accounts, some whistleblowers claimed that the bank's strategy for dealing with whistleblowers was to find ways to fire them in retaliation. Though the case is ongoing, John Stumpf has stepped down as the bank's chief executive.
    
2. Andrew Caspersen: On Nov. 4, 2016, this disgraced scion of a wealthy Wall Street family was sentenced to four years in prison for robbing his friends, family and a large hedge-fund foundation in a Ponzi-like scheme. The judge who sentenced him? None other than the ACFE's 2016 Cressey Award winner, Senior U.S. District Judge Jed S. Rakoff. Looks like Caspersen most likely received coal in his stocking this year.
    
3. The Panama Papers: A giant leak of more than 11.5 million financial and legal records from the world's fourth biggest offshore law firm, Mossack Fonseca, detailing financial and attorney-client information for more than 214,488 offshore entities ... otherwise known as the Panama Papers. According to the papers, the leak "exposes a system that enables crime, corruption and wrongdoing, hidden by secretive offshore companies." The leaked documents outed scores of politicians, business leaders and celebrities for fraudulent business practices, including Iceland's Prime Minister, Sigmundur David Gunnlaugsson. He stepped down after documents revealed that he and his wealthy wife had sheltered money offshore.

Nice

1. The Panama Papers: The papers themselves were a great feat of international cooperation when the International Consortium of Investigative Journalists, the German newspaper Süddeutsche Zeitung and more than 100 news organizations released the Panama Papers. These are the good guys.
    
2. Tyler Schultz: When he discovered that Theranos, a health technology and blood-testing company, was using proprietary Edison machines that frequently failed quality-control checks and produced widely varying results, Schultz (an employee of the company at the time) decided to speak up. He drafted an email to founder Elizabeth Holmes to complain that Theranos had doctored research and ignored failed quality-control checks. What makes this move even more incredible is that Schultz is the grandson of George Schultz, a Theranos board member. Since then, a major investor has sued Theranos for fraud and the company has had to stop blood tests, shut down labs and cut jobs. 
    
3. Clare Rewcastle Brown: In 2010, Rewcastle Brown founded The Sarawak Report and Radio Free Sarawak to disseminate news that concerned the Sarawak region of Malaysia and eventually, news surrounding the emerging 1MDB (1Malaysia Development Bhd) scandal. 1MDB is currently being investigated by Swiss, Singh and U.S. authorities. And she's not backing down, despite a Malaysian court issuing a warrant for her arrest for "activities detrimental to parliamentary democracy" and the "dissemination of false reports." She'll be speaking about the scandal at the 2017 ACFE Fraud Conference Europe in London, March 19-21.

The naughty list may never be empty, but at least we have those on the nice list to turn to. And while 2016 saw some pretty egregious schemes, we can enter 2017 knowing that there are those willing to investigate and speak up. Here's to the new year!

1MDB Journalist to Keynote ACFE Asia-Pacific Fraud Conference

FRAUD CONFERENCE NEWS

Sarah Hofmann
ACFE Public Relations Specialist

One of the keynote speakers for the 2016 ACFE Fraud Conference Asia-Pacific, Clare Rewcastle Brown, is all too familiar with the reach of global corruption. Rewcastle Brown is an investigative journalist who has begun a heated international dialogue by publishing accounts alleging corruption occurring in Malaysia. Brown founded the Sarawak Report and Radio Free Sarawak in 2010 to first highlight local deforestation occurring in the Sarawak region of Malaysia. That led her to uncover a system of kickbacks between the logging companies and local officials.

In 2013, her investigations turned from deforestation to exposing potential bribery and theft involved in a Malaysian public development fund, 1Malaysia Development Bhd (1MDB). She obtained leaked materials from an employee of PetroSaudi, an investor in the 1MDB fund, which showed USD 700 million that should have been invested in 1MDB ended up in the personal account of the Prime Minister of Malaysia, Najib Razak.

While 1MDB was created and marketed as a fund set up for furthering Malaysian growth and infrastructure, Rewcastle Brown began uncovering how the fund was drained and moved into various shell companies that benefited a few investors. Multiple banks have been tied to the scandal, including Goldman Sachs, which led a number of outside countries, including the U.S., Singapore and Switzerland, to launch their own investigations into the fund.

Despite having an arrest warrant put out for her in Malaysia and dealing with potential stalking in her home base of London, Rewscatle Brown remains optimistic about what her investigations in 1MDB mean for corruption on a greater scale.

"I think we're seeing a swing of the pendulum. I think that 1MDB has cropped up at perhaps the right place, the right time," she said. "This whole off-shore financial structure that's been allowed to grow ... the whole thing's got out of control and I think governments all over the world are starting to realize they've lost control."

Be sure to register to hear her speak in Singapore, November 20-22 during the 2016 ACFE Fraud Conference Asia-Pacific and find out more about Rewcastle Brown in October in an exclusive interview on FraudConferenceNews.com.

The Netherlands: Tackling Corruption at Home, Challenged Abroad

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Cathalijne van der Plas
Associate partner at Höcker Advocaten and colleague of ICC FraudNet

Last year, Transparency International released its Corruption Perceptions Index (CPI) 2015, which evaluates the level of endemic corruption in countries across the globe. The Netherlands secured a spot on the CPI as the fifth least corrupt country in the world, moving up from the eighth ranking in 2014 to follow only Denmark, Finland, Sweden and New Zealand in the organization’s annual report.

While the Netherlands’ move toward less corruption signals the country is doing something right when it comes to keeping corruption at a minimum, the CPI’s analysis only covers the public-sector corruption that takes place within a country’s national borders. Its figures do not include corruption by residents of the Netherlands abroad.

The Effect of Out-of-Court Settlements on Perception
It is likely that out-of-court settlements keep a lot of information about alleged corruption out of the public domain. These settlements rarely lead to prosecution of the natural persons responsible for the corrupt actions.

Well-known cases of Dutch companies involved in bribery abroad are SBM Offshore and Ballast Nedam, which both were finalized with out-of-court settlements. Furthermore, in February of 2016, the Dutch Public Prosecution Service entered into another out-of-court settlement with Russian telecom company VimpelCom, headquartered in the Netherlands. It was part of a joint settlement with the U.S. Department of Justice (DOJ), in which VimpelCom and its subsidiary paid $397.6 million to the DOJ and the U.S. Securities and Exchange Commission in fines for bribes paid to a government official of Uzbekistan to win bids for Uzbek telecom providers. More recently, there has been an investigation into the involvement of Shell in corruption in Nigeria.

Improving Enforcement
This highlights what Transparency International in 2015 discovered — that the level of enforcement by the Netherlands abroad can be seen as “limited enforcement.”

In the December 2012 release of its “Phase 3 Report on Implementing the OECD Anti-Bribery Convention in the Netherlands,” the Organisation for Economic Co-operation and Development (OECD) expressed its concerns about the efforts of the Netherlands regarding the active investigation and prosecution of corruption by Dutchmen or Dutch companies abroad.

In its “Follow-up to the Phase 3 Report & Recommendations,” released in May 2015, the OECD noted that the Netherlands has demonstrated significant progress with regard to enforcement, fully implementing 11 out of 22 recommendations and partially implementing six others. Only five of its recommendations were not implemented.

Between the period of December 2012 and May 2015, the Netherlands opened seven new foreign bribery investigations, bringing the total number to 16. Ten of these are ongoing investigations and four have been closed. The remaining two investigations, the cases of the Dutch companies SBM Offshore and Ballast Nedam referenced above, were finalized with sanctions imposed on the defendants through out-of-court settlements. SBM Offshore agreed to a $40 million fine and a $200 million disgorgement for payments in Equatorial Guinea, Angola and Brazil. Ballast Nedam agreed to pay €17.5 million and, in the context of the same case, KPMG Accountants NV agreed to pay a €3.5 million fine and €3.5 million in confiscation for bribery related accounting misconduct.

Nevertheless, the OECD is also aware of 24 other foreign bribery allegations that do not appear to have been investigated.

Changes to the Criminal Code
On January 1, 2015, relevant amendments to the Dutch Criminal Code entered into force. The amendments simplify and harmonize the offences for foreign bribery, including removing the distinction between bribery to induce a violation of official duty and bribery to receive a benefit within the official’s duty. The amendments also increase the maximum sanctions for foreign bribery. Furthermore, the Netherlands has improved the regime of criminal liability of legal persons. However, the Netherlands has not amended its legislation since Phase 3 to increase protections for foreign bribery-related whistleblowing in the public and private sectors.

Enforcement Leads to Improvement
Although the Netherlands is perceived as one of the least corrupt countries in the world, there is room for improvement in its efforts of enforcement against corruption abroad. Stimulating active enforcement will deter from corrupt actions, although the tendency to settle out of court might reduce this effect.

Cathalijne van der Plas is an associate partner at Höcker Advocaten and colleague of ICC FraudNet, an international network of independent lawyers who are leading civil asset-recovery specialists in their respective jurisdictions. Recognized by Chambers Global as the world’s leading asset recovery legal network, FraudNet’s membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden.