authbridge newsletter volume viii issue 2

7/30/2019 AuthBridge Newsletter Volume VIII Issue 2

1/10

Ensuring KYC norms are being adhered to and AML

controls are strengthened is gathering momentum

across the globe. While banks in India up their ante to

address the stink being raised by the revealing reports

of Cobrapost, the global landscape is equally scathed

with Federal Reserve [UK] and Administracin Federalde Ingresos Pblicos (AFIP), the Argentinian federal tax

agency raising concerns on the functioning and controls

at Citibank and HSBC respectively.

Serious Fraud Investigation Ofce [SFIO] in the process

of setting up a forensic audit laboratory along with

revamping its Market Research & Analysis Unit to

enable it to function as an intelligence unit. SFIO also

has the powers to recommend prosecution in white

collar crimes.

In this edition we have Mr S. Varadarajan, Executive President Human Resource of Tata Teleservices

Limited sharing his views on the evolution of and impact of Screening on the hiring processes in his organization and

the Industry. He also speaks on the role of regulatory bodies in ensuring they are synchronized with the industry needs

especially in the regularization of education institutions.

Screening the CXOs has been a largely muted subject and most organizations overlook its import. It is indeed a point

we would like you to ponder on and share your views with us. There are enough instances of frauds committed at the

senior-most levels and the impact it can have on the credibility and existence of the organization.

The case of how a law graduate resorted to multiple forgeries to procure a plum law position, which eventually resultedin her facing a trial in the New York court makes for an interesting read and clearly depicts the risks of not verifying

before trusting a probable hire.

We continue with sharing our data analysis on trends we see in the screening we conduct across industry sectors and

best practices we are certain will help you strengthen your hiring processes.

Your feedback on the newsletter will help us continue improving it to make it a worthwhile read.

Monthly NewsletterVolume VIII Issue 2

Editorial

Content

1. News

2. Legal Update3. ClientSpeak

4. A Point to Ponder

5. Screening Trends

6. Best Practices in Screening

7. Case Studies

8. Products and Services


2/10

Stirrings within the Nation

Mumbai Company cons HSBC of Rs 330 crore

The Economic Offence Wing (EOW) of Mumbai police have registered a Rs 330 crore cheating and forgery case

against a city-based company and its representatives for duping HSBC by securing investment with fake promises.

The company claimed to have entered into a contract with BBC to upgrade their entire library from 2-D to 3-D.

Investment was sought to purchase technical equipment and programs for upgradation. The bank representatives

meeting was arranged with an executive who purportedly claimed that he was representing BBC. The bank later

veried with the BBC and found that they had not awarded any contract to the accused. The bank also found that

the BBC representative met with them was a con and all the submitted documents were forged. The bank then led

the case with EOW.

SFIO plans early warning system to detect fraud

SFIO is expected to prepare a comprehensive framework for fraud prediction model by June this year. The aim is

to develop an Early Warning System for detection of and to undertake investigation of serious frauds through the

SFIO, according to an internal Ministry document. The IT infrastructure for the proposed system is expected to be

ready by the end of this year, while the pilot testing is anticipated to begin in September. In addition, SFIO would

be setting up a forensic audit laboratory along with revamping its Market Research & Analysis Unit to enable it to

function as an intelligence unit. SFIO has the powers to recommend prosecution in white collar crimes.

The new Companies Bill, awaiting approval from the Rajya Sabha, would provide statutory powers to the agency

that would help in bolstering its investigation and other capabilities. Forty two cases have been referred to SFIO in

the current nancial year and probe has been completed in 15 of them.

Global Ripples

Citigroup told to improve money laundering controls

The Federal Reserve has ordered Citigroup to strengthen its controls against money-laundering, pointing to

problems in subsidiaries including the US unit of Citis Mexican bank, Banamex. In a consent order released by

the Fed and signed by the bank, Citigroup pledged to take extensive actions to better comply with the US Bank

Secrecy Act on preventing money-laundering. The consent order did not provide any details on what problems

were unearthed by regulators except stating Citigroup lacked effective systems of governance and internal controls

to adequately oversee the activities of the subsidiaries with respect to the BSA and anti-money laundering rules.

The apparent problems involved Citigroups key operating subsidiary Citibank, and Banamex USA, the US arm

of leading Mexican bank Banco Nacional de Mexico, also controlled by Citigroup. They also involved other group

subsidiaries in international banking. The consent order lays out a detailed schedule of actions Citigroup and the

subsidiaries must take to tighten its compliance, and reporting requirements on those actions. The order camewithout any prior testimony or legal hearings or ndings, and said it did not constitute an admission or denial by

Citigroup of any allegation that had come before the Fed.

News

1

Continued...


3/102

Argentina Accuses Local HSBC Unit of Facilitating Money Laundering, Tax Evasion

Ricardo Echegaray, director of federal tax agency Ap, said a six-month probe uncovered evidence of tax evasion

for ARS224 million and money laundering for ARS392 million. He said charges were led in early February. Mr.

Echegaray said there was decisive participation of HSBC executives to hide information from Ap. HSBC Bank

Argentina SA ranks as one of Argentinas top 10 banks by deposits and assets. Ap is also investigating otherbanks and a brokerage rm for possibly using phantom accounts and bogus tax receipts for tax evasion and money

laundering, Mr. Echegaray said at a press conference. Argentina isnt the only country where HSBC has come under

scrutiny from regulators in recent months. In December, U.S. authorities announced a $1.9 billion ne against

HSBC Holdings for failed anti-money laundering controls they said allowed drug proceeds and transactions from

sanctioned nations to enter the U.S. nancial system. Neither HSBC nor any of its executives were charged with

criminal conduct in that case.

Employers Must Use Revised Form I-9, Employment Eligibility Verication

USCIS will no longer accept previous versions of Form I-9

U.S. Citizenship and Immigration Services (USCIS) reminds employers that beginning May 7, 2013, they must

use the revised Form I-9, Employment Eligibility Verication (Revision 03/08/13)N for all new hires and re-

verications. All employers are required to complete and retain a Form I-9 for each employee hired to work in the

United States.

The revision date of the new Form I-9 is printed on the lower left corner of the form. Employers should not completea new Form I-9 for existing employees, however, if a properly completed Form I-9 is already on le.

The revised forms are available online at www.uscis.gov/I-9.

Employers should use the implementation of the new form as an opportunity to ensure that company policies

and procedures are current and compliant. Best practices include a written policy regarding Form I-9 rules and

procedures, yearly audits and training, and appointing an I-9 czar for your company. I-9 inspections by the

government are at an all-time high. Neglecting to ll out I-9 forms or lling out I-9 forms incorrectly can result in

nes of up to $1,100 for every incorrect form.

Centralized KYC Registry for customers across different Financial Institutions

RBI issues guidelines to issue Unique Customer Identication Code for NBFC Customers in India (UCIC) to adhere

to the Know Your Customer (KYC) norms; Anti-Money Laundering (AML) standards and Combating of Financing

of Terrorism (CFT). This guideline applies to all Non-Deposit taking NBFCs with assets of Rs 25 cr and above and

to All Deposit taking NBFCs.

The increasing complexity and volume of nancial transactions necessitate that customers do not have multiple

identities within a Financial Institution or across the nancial system. In this regard, a Working Group constituted

by the Government of India has proposed the introduction of unique identiers for customers across different

Financial Institutions for setting up a centralized KYC Registry.

Legal Updates


4/103

S. Varadarajan (Raja)Executive President Human Resource

Tata Teleservices Limited

Spearhead for the Human Resource function and responsible for HR Strategy, Organization Design, L&D, Cross Culturebuilding, Remuneration Practices, Performance Management and Leadership Capability Development at Tata Teleser-vices, Indias fastest growing Telecom Service Provider, Raja has been awarded with the Seasoned HR ProfessionalAward for 2012 from NHRDN and Presidents award in 2010 for his contribution to NHRDN. Raja was also awarded forhis thought leadership and contribution to the eld of HR at the World HR Congress in 2009.

We are happy to share his views on the importance and impact of Background Screening for the hiring process in generaland for Tata Teleservices in particular:

Candidate screening is practically the rst step towards strengthening organizational governance.

In a company like Tatas we focus a lot on ensuring the maintenance of the ethical fabric of the organization. In thepresent day context, with more focus on sharpening the Governance system of the organization, candidate screeningpractically becomes the rst step towards strengthening organizational governance. The process of ensuring and drivinglegal and ethical behavior, accountability for managements actions, transparency of operations, scal accountabilityetc start with having responsible and ethical people at all levels of the organization and thus not having rigor in thescreening of candidates who are to become employees has immense ramications. This is especially so in the context ofglobalization liabilities arising thereof such that any failure in this process can potentially be linked to the organizationhaving to shut down its operations.

Screening Industry has evolved.

The industry has certainly evolved both in terms of size as well with respect to quality of delivery. The evolution has been

for the better. With more and more service oriented companies increasing their presence in India this has led to a risein having this process outsourced based on the advantage of leveraging such core competency and also the economiesof scale. With database getting built and process improvements made over time, the quality of this service in terms ofimproved TAT, accuracy of information etc also improved.

Screening has reduced risk and increased productivity.

This process has denitely strengthened our hiring process in line with the requirements of ISO27001. The screeningof candidates ensures that we are at a lesser risk w.r.t possible issues that may arise if one were to hire employees withdubious background. More importantly it has created awareness both within and outside the organization that we takethis process seriously and are well aligned with the ethos and code of conduct of the organization in spirit and practice.This in turn has resulted in increased productivity as we are likely to be having lesser cases unethical practices.

ClientSpeak

Continued...


5/104

Candidate Identity, Address Verication and Education are of utmost importance.

In my view checking on a candidates basic verication with respect to identity and address is of utmost importancegiven the current circumstances. Secondly, while education check may not be criteria for many while selecting a candi-date, it does give valuable insights on the character of a person. If one was to forge or falsify on something as basic as this

then it is likely he/she may embrace unethical practices more easily. Lastly it is important a police or court vericationbe done as it further helps you to ring fence the overall screening process. This is especially so where organizations arerequired to be compliant with stringent global requirements.

Regulatory Bodies and Industry Patronage of Education Institutions should complement not compete.

The regulatory body derives its authority from the law of the land. In my view we need to respect the law at all times.While industry patronage augments the institutions but it would be equally important to them for being recognized bythe applicable regulators. The debate should focus around challenges or the way forward on getting such institutionsrecognized or having the regulator revisit the recognition norms rather than choose one over other. They should be com-plimenting and not competing with one another.

Centralised Records Database is the future of screening.

I do foresee that screening records may get centralized very much like the CRISIL database, and be accessible at a cost.However there could be many nuances that may need to be ironed out rst. I also think that such screening process willbecome necessary not only for full time roles but also for temporary or part time roles. An extension is that this data basecan also be used for reference checks as well as analyzing attrition trends in the organization/industry.

Long-Term Cost Benet and Quality should decide outsourcing of screening process.

I think that if this process ts into the core competencies of the organization then its absolutely ne to have an in-housescreening process, else they would do better to evaluate a long term cost benet analysis as well as a quality check vis--vis involving a specialized third party who are well versed and qualied to carry out these checks.


6/10

A Point to Ponder

CEO CONNECTEDNESS and CORPORATE FRAUD

The SEC named the CEO and/or CFO for some level of involvement in 89% of the fraud cases, up from 83% of casesin 1987-1997.

- COSO Fraud Study 2010

CEOs with a taste for luxury goodsarent more likely to commit fraud, researchers found. But fraud is more likely tohappen in the companies that they run

Big-spender CEOs also tend to run companies that take bigger risks, but have poorer performance and are more likelyto go bankrupt.

- National Bureau of Economic ResearchIf you want to understand fraud, you need to cast beyond rules and regulations and look to the corner ofce.

- Prof. Magnan, of the John Molson School of Business at Concordia University in Montreal,

A study conducted on CEO CONNECTEDNESS AND CORPORATE FRAUDS concluded empirically that CEOconnectedness decreases the likelihood of fraud detection, lengthens the time from fraud incidence to its detection, re-duces the likelihood of forced CEO turnover upon discovery of fraud, and lowers the coordination costs needed to carryout illegal activities.

The authors of the study found through a study of 282 cases of corporate fraud during the period 1996 through 2006,Corporate wrongdoing often requires coordination between or acquiescence by top executives who report to CEOs on a

daily basis. They say, CEOs have both explicit legal authority and substantial soft inuence within the rm to directcorporate behaviour of which wrongdoing is but one potential outcome.

Would you agree? Would you put your CXOs under the scanner?

Some recent instances of CEOs found fraudulent across the world. Absence of Indian instances probably reects whatthe study concluded about the lengthening the time from incidence to detection.

Claudio Osorio, the former globe-trotting executive who headed a Fortune 500 company, faces up to 30 years inprison after pleading guilty to stealing millions of dollars from investors in his ill-fated venture to build low-costhousing in Haiti and other developing countries.

Source: www.miamiherald.com

The former chief executive ofcer of Peoples Bank of the South, a south Mississippi bank, Larry Barnette Hill, hasbeen charged with fraud and money laundering.

Source: www.sfgate.com

Highly condential documents emanating from the ofce of the Micronance And Small Loans Centre (MASLOC)and intercepted by Modern Ghana point to a grand executive fraud involving the Chief Executive Ofcer MadamBertha Sogah alleged to be involved in a GH 500,000 deal.

Source: www.modernghana.com

Darrell McAllister, former president and CEO of Bank of Choice, has been charged with securities fraud allegedlyhaving violated the registration and anti-fraud provisions of the Colorado Securities Act.

Source: www.ncbr.com

5


7/10

In continuation of the Discrepancy Trend Analysis, in this edition we share the check-wise discrepancy comparison

for the four industries we are tracking over FY 2010-11, 2011-12 and 2012-13. Apart from the Pharma/Biotech/Clinical

Research; the other three industry sectors have displayed a decrease in check-wise discrepancy.

Telecom displays the maximum decrease in discrepancy percentage.

Reasons for the increase in the discrepancy in the Pharma sector or the reason for decrease in the other three sectors

could be attributed to different reasons which we will be discussing in forthcoming editions.

This analysis has been done using the number of individual checks conducted per individual who was veried.

Screening Trends

6


8/10

The rst issue spoke about a comprehensive Background Screening Policy and the best practices as dened by NAPBS.The current edition shares the risks you should be mitigating by screening your workforce and others associated with

your organisation in any capacity.

Risks to be mitigated

Identity: Be certain of the identity of the person you are dealing with in any capacity. Government issued identity

proof is a denite check to ensure your prospective hire, vendor, customer, client or even a visitor is a genuine bona

de identity and not an imposter.

Accessibility: Ensure your employees current address in your records is genuine and the individual actually lives at

the address so as to be able to reach the employee in case of any emergency or requirement. Current Address should be an address where the individual is currently staying and has been staying there for

a minimum 6 months. If stay at the current address is less than 6 months, then the address or addresses prior

to the current address should also be veried to ensure the address is genuine and that the individual actually

stayed there.

Criminality: A basic check to ensure the individual does not feature in any of the negative lists available in the public

domain, both Indian and global negates interaction with a person with a criminal record. Additionally, criminality

can be checked with the authorities specically the police department for any record of any activity criminal in

nature at a veried address.

Police Verication conducted without rst conrming the authenticity of a stated address and the conrmation

of the individual residing at the conrmed address can in all probability give a result which is inaccurate.

Fitment: Verify education, professional and technical qualications of your workforce to be certain that the person

is qualied for the job. Verify past employments with HR and the supervisor to understand capability, attitude and

achievements.

Gaps between two employments, two educations or between the last employment and the rst

employment are an important area for verication. Stated gaps should be veried to ensure no criminal

record exists during that period. Unstated gaps [gaps uncovered during the process of verication]

should also be veried similarly and should be red alerts for the individuals integrity.

Best Practices in Screening

7


9/10

Ms Sengupta had her career collapse, undone by the chance discovery of a single lie that led to the discovery of manymore. A clerk stumbled upon her application le, and noticed her listed date of birth that put her age at 29. Ms. Sengupta,

in her late 40s at the time, declined to answer the many questions which were asked. Eventually, it became clear thatshe had not only shaved nearly two decades off her age but that nearly everything about her work and education historywas not as she had claimed.

Soma Sengupta, an India-born daughter of an engineer, who grew up mostly in Jersey City has a very well-scriptedcareer. A clear indication of what a pre-hiring background check could have prevented.

The Facts:

Graduated from Georgetown Law School in 1998 Became a licensed lawyer in 2000 after passed the New York State bar exam. Began volunteer work two day a week in 2004 for the Legal Aid Societys Prisoners Rights Project

The Falsications

Claimed had left law school before graduating and applied for a paralegal position with the Manhattan districtattorneys ofce, as the ofce did not allow lawyers to work as paralegals.

Claimed 1969 as year of birth, eight years earlier than the correct year of birth Was red from the ofce in 2003, after it became known that she was, in fact, a lawyer. Got her supervisor to write reference letters to help her apply for several staff lawyer positions, including with the

American Civil Liberties Union in New Jersey and the Neighborhood Defender Service of Harlem. Claimed to be an assistant district attorney and to prosecute gang and white-collar fraud cases, Claimed to have defended all felonies including murder and sexual offences, by virtue of being staff lawyer at the

Legal Aid Society Six years of advocacy experience in a common law system

Graduated in the top 1% of her class at Georgetown Law

The Forgery

Reference letter from Robert F. Drinan, a former United States representative from Masachusetts and a GeorgetownLaw professor; it was dated a year after his death.

Forged reference letters stating Ms. Sengupta was an accomplished trial lawyer. Fake Indian birth certicate. Created a fake website for a ctional law rm in the name of ctional former prosecutor Forged reference letter from him Forged a reference letter from the ofce of Eliot Spitzer, the then attorney general.

A comprehensive fraud, this had the Bar Standards Board of England and Wales modify the application process to nowhave the college transcripts come directly from the schools in a sealed envelope, without passing through an applicantshands.

On trial in State Supreme Court in Manhattan, Ms. Sengupta, 52, faces forgery and other charges, the most severe ofwhich carries a maximum prison sentence of seven years.

Case Study

8


10/10

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This niche product from the AuthBridge bouquet of offerings involves checks which scans the past employment historyof the individual with diverse and candid feedback from all those who would have interacted with the individual in anycapacity . Various past and current antecedents are carefully scrutinized and ags are raised on suspicious aspects.AuthLead reports empower the decision maker with intense research-based ndings.

KYC

Industries need to adhere to stringent KYC (Know Your Customer) norms which have been laid down to curb the menaceof money laundering and terrorist funding.

AuthBridge is working with companies to process KYC requirements quickly and efciently. This solution is helpingorganizations across geographies in attaining genuine customers who have provided sufcient, latest and accurateinformation.

AuthBridges KYC solution equips its clients with one of the most advanced technology platforms. The on-line moduleallows clients to keep a tab on the progress as well as download the nal reports. The solution has been designed in waythat keeps condentiality intact throughout AuthBridges internal process, an aspect of high essence for clients.

Product and Services

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