Confronting the challenges of cross-border fraud examinations Part 2

‘machine learning’
fights fraud P. 16
anonymous shells
rising P. 20
fraudulent
diamonds P. 28
winning back
tipsters P. 44
trust us ... we
wouldn’t lie P. 48
VOL. 33 | NO. 3 | MAY/JUNE 2018
Fraud-Magazine.com
This reporter exposed the
massive 1MDB scandal in
Malaysia. Now she says
democracies need strong,
courageous media to help
protect the public against
the powerful, p. 36.

FRAUD BASICS
Fundamentals for all
Confronting the challenges
of cross-border fraud
examinations
Part 2 of 2
As your organization grows,
its business could expand
into new nations. You
might be conducting fraud examinations
in cultures with unfamiliar social
customs, laws and judicial systems. As
I covered in part one in the January/
February issue, you should have a solid
cross-border investigative plan before
you tackle a case with roots in several
different countries.
In part two, we’ll cover assessing
legal and cultural considerations, specifics
of your plan, reporting findings
and remediation across borders.
Assess legal and cultural
considerations
Before the examination begins, you
must discuss with in-house counsel
if attorney-client privilege laws will
protect it. You also must understand
the laws of the area in which you’re
investigating because they might not
align with international corporate law.
You’ll always have to tweak your investigations
to comply with local laws
and culture.
within:
For example, corruption is dealt
• The U.S. under the Foreign Corrupt
Practices Act (FCPA) and some aspects
of the USA Patriot Act.
• The U.K. under the Anti-Terrorism,
Crime and Security Act 2001, which
includes extraterritorial provisions
relating to corruption.
• Australia under the Commonwealth
Criminal Code Act 1995, which makes
it an offense to bribe a foreign public
offcial, whether in Australia or in
another country.
• Germany via the federal government’s
complete legal framework
from the Prevention of Corruption,
2004, that includes an anti-corruption
code of conduct. The German
penalty code and criminal procedure
law allows the pursuit of employees
as long as the act has taken place on
German soil.
Also, consult regulations of economic
bodies, such as the Organisation
for Economic Co-operation and Development
(OECD).
Many countries don’t have defined
legal and political systems, especially
those who have been or are engaged in
war. (While once working on an investigation
in a country at war, I had to plan
every step to perfection or I might have
had to say adios to the world.) That’s
when an astute understanding of those
countries’ cultures (unwritten rules of
how things are done) comes in handy.
KPMG, in its report, “Cross-border
investigations: Are you prepared for the
challenge?” (KPMG International, 2013,
tinyurl.com/ycn66vej) says that cultural
differences remain one of the top three
challenges in conducting cross-border
investigations — up to 37 percent in
2013 from 26 percent in 2007.
An obvious cultural barrier is body
and spoken language. For example, in
North American countries it’s fine to
look directly into another’s eyes when
speaking — even when lying! However,
in some countries it’s considered rude
to ever look someone straight in the
eye. And watch out for social faux pas:
Tipping wait staff in the U.S. is generally
expected; in Japan it’s an insult.
Miscommunication and lack of
awareness of a local language can be
disastrous for investigators who don’t
fully understand the jurisdiction in
which they’re operating. In Middle
Eastern countries words usually are
as valid as written contracts, so many
make deals verbally. However, you
might receive a response such as
“Inshallah” to a verbal request for a
meeting, which indicates “if Allah wills
it.” But don’t take it as an affrmative
unless you’re setting up an electronic
meeting. Depend on your translator.
You might have to tweak language
to respect diverse cultures and customs.
For example, in the Middle East,
because the word “investigation” might
disturb some, use words like “special
review” and “analysis.” And rather than
saying “whistleblower,” “informant”
12 FRAUD MAGAZINE MAY/JUNE 2018 FRAUD-MAGAZINE.COM

By Robin Singh, CFE, LPEC
or “witness,” use “employee” or
“colleague.”
Find subject matter experts in the
regions in which you’ll be investigating
and frequently run your plans by them.
Also, depend heavily on your
organization’s administration staff in
the areas in which you’re investigating.
Plan them in your budget. You simply
can’t conduct cross-border examinations
without reliable people who know
the intricacies and peculiarities of their
jurisdictions. In hostile environments,
plan for armored vehicles, local escorts
and trained, savvy drivers.
Ask management for a hefty
miscellaneous budget for intercity
traveling, security, vehicles, translators,
witnesses living in safe houses and
emergencies.
If management is balking on supplying
enough cash for miscellaneous
spending, tell them that the organization’s
reputation could suffer if you
don’t have suffcient funding for your
investigation.
Specifics of your crossborder
investigation
Acquisition, seizure
and collection of data
Most of your relevant data will be like
the unseen 90 percent of an iceberg:
submerged and diffcult to access.
Collecting relevant information is a
crucial step of any examination, but differing
data privacy laws and procedures
often make this process challenging.
This is another area where it’s important
to understand the local laws and
procedures.
Remember these principles when
you’re collecting data:
• You must obtain explicit permission
from those who own data — physical
or in electronic form — that you’re
processing, and they must always be
able to access it at any time.
• Of course, you must process all data
accurately.
• You should only process data — in
fair and lawful ways — for purposes
of the examination.
• If you’re in the European Union (EU),
you should only share data with those
located in countries that can afford
adequate protection to data in the
eyes of the European Commission
(EC).
Application of datacollection
principles
Applying these principles in practice,
particularly in the context of a crossborder
Foreign Corrupt Practices Act
investigation, isn’t necessarily straightforward.
Say, for example, providing
notice to wrongdoers that you’re
Many countries don’t
have defined legal and
political systems, especially
those who have
been or are engaged
in war.
collecting their data obviously will tip
them off that you’ve begun an examination.
Or when you’re looking for
evidence, exculpatory or otherwise, it
might be technologically impossible to
examine limited data. And non-EU legal
requirements or requests from non-
EU authorities don’t overrule EU data
protection laws and consequently might
not be lawful.
The EC has numerous exceptions
for transferring data outside the EU.
While transferring data outside the EU
is sometimes tedious, you can adopt
— at a minimum — risk mitigation
strategies, such as determining the
exact location of the data, transferring
de-identified data, filtering data prior
to transfer, etc. (De-identified data, of
course, doesn’t disclose identities.)
Interviewing
Be culturally sensitive when you’re
interviewing. Always remember that
the person sitting in front of you is only
a potential alleged fraudster no matter
how much evidence you might have.
During a cross-border examination,
you must realize that many countries
allow employees to refuse to cooperate
or allow them to have limited access to
files that identify them as relevant. And
your organization’s jurisdictional documents
might not be valid in a country
like Afghanistan. Again, understanding
the culture can help with this process.
Sometimes the only weapon you might
have is the skill of persuasion.
During an interview, always have
your trustworthy translator in the room.
(Never use family members or friends of
the interviewee.) Even if the interviewee
speaks in your language, the local
experienced translator can help with
dialects, slang and local jargon.
Make sure your body language
radar is up and running constantly to
make sure movements, expressions and
words all coincide.
Analysis
Midnight brainstorming sessions with
your team (and your daily investigation
diary) will help you fill in the blanks on
your linked analysis. Don’t hesitate consulting
with your SMEs, your in-country
consultants and onsite organization staff.
Reporting findings
After you’ve completed your examination,
your team needs to report its
findings to the authorities. You must
understand the chain of reporting in the
country in which you’ve conducted the
FRAUD-MAGAZINE.COM MAY/JUNE 2018 FRAUD MAGAZINE 13

FRAUD BASICS
Fundamentals for all
examination. Their privacy laws might
not allow some of the information to be
seen outside of the jurisdiction, such as
individuals’ names, financial information
or personal data. Therefore, establish
the proper data export channels
before providing a report (even a draft
of a report) to management or directors
outside of the country. Do likewise
for reports and materials prepared by
experts and consultants.
Remediation across borders
Remediation is the final step of the
process before formal charges are
brought against an individual or organizations.
It’s critical that organizations
punish employees proportionately to
the magnitude of involvement in the
unethical conduct and in line with
local regulations. For example, certain
countries require employers to notify an
employee if they’re going to be terminated
for cause or without permissible
cause. Even if the evidence appears to
implicate a person, the labor laws in
certain countries contain higher standards
that must be fulfilled to justify a
termination for cause.
Another key area of remediation
is to address the inadequate, insufficient
or non-operating/ineffective
controls or procedures that allowed the
unethical act to occur. Implementing
these changes to the existing controls
(such as a fraud response plan or
anti-corruption/compliance program)
might reduce the severity of the charges
against a company.
Cross-border fraud
examinations are unique
As fraud examiners, we deal with this
paradox: Organizations are continually
expanding globally, but border
restrictions are tightening. So, we must
always be prepared with a preemptive
cross-border fraud examination plan
that includes understanding of changing
countries’ laws and cultures. Your
success depends on it. n FM
Robin Singh, CFE, LPEC, is the
compliance and fraud control department
lead offcer at Abu Dhabi Health
Services Company – SEHA (Government
of Abu Dhabi). Reach him at:
robinsingh002@yahoo.com.
The opinions expressed in this column
are those of the author and don’t reflect the
opinions of SEHA or its business entities or
its affliates.
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14 FRAUD MAGAZINE MAY/JUNE 2018 FRAUD-MAGAZINE.COM