Muddy Money: The Dirty Truth About Political Corruption

Muddy Money: The Dirty Truth About Political Corruption

Corrupt politicians are a common trope in society, but what's more uncommon is how to spot the red flags of shady dealings. Breakout speaker Michael Schidlow, CFE, CAMS-Audit, head of financial crime risk training and emerging risk advisory at HSBC Bank, took attendees at the 29th Annual ACFE Global Fraud Conference in Las Vegas last month on a ride through the world of political corruption combining pop culture references with infamous real-world examples involving names like Gaddafi and Putin. 

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How Hollywood Got Tied Up in an International Corruption Scandal

How Hollywood Got Tied Up in an International Corruption Scandal

On Wednesday March 7, Red Granite Pictures, a Los Angeles-based movie production, agreed to pay $60 million to settle a lawsuit brought by the U.S. Department of Justice (DOJ). The suit alleged that the production studio took money associated with the 1MDB scandal — a multibillion dollar corruption and money laundering case that centers around Malaysia.

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


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.

The Netherlands: Tackling Corruption at Home, Challenged Abroad



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.