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A COMPLIANCE CASE STUDY
IN THE GLOBAL BANKNOTE
INDUSTRY
GEOFF BELL
CHIEF RISK & COMPLIANCE OFFICER
The Breakthrough The First Guardian Banknote - 1988
3
INTAGLIO
TRANSPARENT WINDOW
HOLOGRAM
SHADOW IMAGE
OWNERSHIP STRUCTURE
80% 20%
50% 50%
CORPORATE PROFILE
Market Statistics
31 countries have issued banknotes on Guardian® substrate
7 countries have announced full
Guardian® banknote series
5 denominations are converting to
Guardian® each year
Current market share at 5-7% and growing
112
0
20
40
60
80
100
120
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Nu
mb
er o
f D
eno
min
atio
ns
Number of Denominations Issued on Guardian®
Source: Securency analysis
MULTI NATIONAL RISKS
Senior government officials
TAIWAN
COSTA RICA
AUSTRALIA
NEW ZEALAND
CHILE
PARAGUAY
HONDURAS
NICARAGUA
BRAZIL
DOMINICAN REPUBLIC
GUATEMALA
MEXICO
NORTHERN IRELAND ROMANIA
CHINA
PAPUA NEW GUINEA
INDONESIA VANUATU
SRI LANKA
KUWAIT
MALAYSIA
HONG KONG
SINGAPORE
THAILAND VIETNAM
BRUNEI
MOZAMBIQUE
CANADA
Long term high value contracts
Intense competition and barriers to entry
Agent sales and marketing arrangements
THE OFFENCE – CRIMINAL CODE
A person is guilty of an offence if the person provides, or offers, or promises to provide, a benefit to another person where:
The benefit is not legitimately due to the other person; and
The person does so with the intention of influencing a foreign
public official in the exercise of the official’s duties as a foreign
public official in order to:
Obtain or retain business; or
Obtain or retain a business advantage that is not legitimately due
to the recipient, or intended recipient, of the business advantage
WHY COMPANIES NEED TO CARE…
39 countries have enacted bribery and corruption laws under the 1997 OECD Anti-Bribery Convention
There is an increased focus by law enforcement and regulators here and abroad on Bribery and Corruption and related offences
The reach of foreign law is expansive and there is unprecedented cooperation between authorities
The laws overlap and conduct may be caught by the laws of multiple jurisdictions
And then, of course, the cost of the investigation and the remediation…
THE INVESTIGATION
Whistleblower alleges corrupt activity at Securency
Board informs Australian Federal Police – full cooperation
Forensic Review
Change over in executive team – investigation continues
Charged for conspiring to bribe, first under criminal provisions
Nine executives charged
Company matters resolved, committal hearings and mounting media focus
The cost to the business?......to be continued.
THE COMPLIANCE CHALLENGE
Forensic and internal audit
Termination of all agents and executive team
Flat sales and marketing structure
Appointment of Chief Risk & Compliance Officer
“No go” zones and local legal support
Culture, communication, transparency – industry role model
Governance, reporting and KPIs
Third party due diligence
UK bribery act – TI adequate procedures
LESSONS TO DATE Must Do’s for International Companies
Understand legislation and risks in your business
Top level commitment
Policies – strong and well communicated
Due diligence
Books and records – strong financial processes
Contracts need to involve more than Sales personnel
Conduct quality audits of key third parties
Reinforce messages – training
Whistleblower reporting
A sound culture is your best defense
RED FLAGS
Invoices from non-approval service providers/unnecessary third parties performing services
Cash payments, travel expenses, per diems
Payments to intermediate and ‘agents’, especially where appear inflated or lack of documentation
Contracts with vague deliverables
Government customer that recommends or requires the company to use a particular representative or distributor
Sales to governmental agencies with high unit price and low frequency
Requests for commission payments to be made to accounts in other countries or to people/companies who did not perform the services
Excessive payments or commissions for services rendered or insufficient staff to perform the services to be rendered
Loosing bidders hired as subcontractors
Favourable treatment of one supplier over another
Suspect qualifications of a successful bidder