Transcript DWF Corporate PPT Template

Financial Crime
A Guide for Health Insurers
Carole Chantler
Kate Archer
October 2014
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
Go further
What is Financial Crime?
• Definitions
• A variety of offences
– Under statute & common law
–
–
–
–
Money laundering,
Corruption
Terrorism financing
Fraud or dishonesty offences
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
2
How Financial Institutions/Insurers are Involved
• Victim
• Perpetrator
• Agent
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
3
Impact of Fraud
• Very challenging to measure
• Significant under-reporting to the police
• Perpetrators reliance on various factors
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
4
Financial Impact of Fraud
• Estimated loss £5.4bn annually
• Includes £2.1bn known insurance fraud
• Organised Crime Groups
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
5
Money Laundering & Proceeds of Crime
• Wide definition
• Increasingly complex transactions
• Increasingly involving non-bank FIs – EG insurers
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
6
Money Laundering & Proceeds of Crime
• Primary offences – POCA – ss327-9
• Secondary offences – ss330-2
• Five key obligations on the regulated sector
• Penalties imposed on individuals & institutions involved
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
7
The Role of the FCA
• Regulates institutions providing financial services to consumers
• Statutory objectives
• Eight regulatory principles
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
8
The Role of the FCA
• Enforcement Guide
• Open & co-operative relationship
• Limited resources
• Civil & criminal enforcement powers (Financial Services & Markets Act 2000)
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
9
Civil & Criminal Fraud Offences
• Civil Fraud
– False representation has been made knowingly, or without belief in its truth, or
recklessly, without caring whether it is true or false – Deek v Perry (1889)
– Not a cause of action per se
– Examples: fraudulent misrepresentation, tort of deceit, conspiracy, breach of
fiduciary duty, breach of trust, dishonest assistance
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
10
Civil & Criminal Fraud Offences
• Criminal Fraud
– The Fraud Act 2006
– Applies when a person dishonestly:– Makes a false representation – s2
– Fails to disclose information when under a legal duty to do so – s3
– Abuses a position of trust – s4
– … with an intention to make a gain or cause a loss or risk of loss to another
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
11
Criminal Fraud
• Other offences under the Fraud Act 2006
– Obtaining services dishonestly – s11
– Possession of articles for use in fraud – s6
– Making, adapting, supplying articles knowing it is designed or adapted for use in
fraud – s7
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
12
Civil v Criminal
Civil Fraud
Criminal Fraud
Burden on the Claimant
Burden on the Prosecution
Lower standard of proof
Higher standard of proof
Control rests with the victim
Victim has less control (but confiscation &
compensation orders possible)
Focus on redress rather than public policy
In public interest
Powerful remedies available
No costs recovery
Claim determined by an experienced judge
Trail determined by lay jury
Settlement is possible
Likely that claim attracts less public attention
Claim is in public domain – more publicity
Gathering & Preserving Evidence
• Identify all parties involved
• Establish any relationship between fraudster & victim (essential if an insider fraud is
suspected)
• Retain all documentation & preserve any equipment used by suspected fraudster
(computer, laptop, Blackberry etc)
• Attendance notes of all telephone conversations & meetings to be maintained & filed
by encryption
• Instruct lawyers to establish legal privilege
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
14
Why Commit Fraud? The Fraud Triangle
Opportunity
Rationalisation
Pressure
Creating an Anti-Fraud Culture
• Key elements
– Creating & maintaining a culture of honesty & integrity;
– Evaluating the risk of fraud & implementing processes, procedures & controls to
mitigate the risks
– Developing an appropriate oversight process
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
16
Creating an Anti-Fraud Culture
• Strong, ethical & anti-fraud culture is essential to identify & deter internal fraud;
• Communicate the organisation’s anti-fraud policy
• Put in place & implement whistleblowing policy
• Ensure recruitment checks & disciplinary procedures are suitable to detect & address
potential problem employees
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
17
Creating an Anti-Fraud Culture
• Operate & implement controls & procedures effectively & act when breaches occur;
• Review controls & procedures routinely to ensure they are fit for purpose;
• Ensure good communication within organisation to create a positive working
environment to remove threat of “rationalisation”
• Ensure employees feel comfortable in approaching managers with concerns &
problems
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
18
Fraud Indicators
• Behavioural
• Financial
• Procedural
• Organisational
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
19
Detecting Fraud Internally
• Use the fraud indicators, consider how they apply to your organisation & use them
with broader risk management strategies;
• Take account of new business activities &/or control procedures which may open up
potential new fraud risks
• Involve staff in identifying & discussing fraud risks & how to prevent fraud occurring
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
20
Detecting Fraud Internally
• Implement systems & processes to detect the early warning signs of fraud
• Have a fraud response plan which clearly defines roles & responsibilities
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
21
Are You….
• Developing strategies for information sharing?
• Scrutinising policy wording with underwriters to protect at front end?
• Educating policyholders as to processes when making a claim?
• Educating staff for awareness of trends?
• Raising fraud awareness with providers, members & staff?
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
22
Do You….
• Have a process of sharing information with other insurers to map trends?
• Have a process for dealing with fraud?
• Invest in training of staff to:
– Spot abuse of policy?
– Initiate process when fraud suspected
– Ensure appropriate gate keeping of claims across all domains?
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
23
Do You…
• Mount vigorous recovery actions
– Civil?
– Criminal?
– Both?
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
24
Consider the Impact
• Cost of investigation – internal wasted costs & spend on external advisors
• Effect on staff morale (particularly if internal fraud)
• Involvement of the regulator/authorities
• Publicity
• Effect on Board, shareholders, share price
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
25
Values
Our firm is driven by its core Values which focus on:
Our Clients
Private & Confidential. Not for distribution.
©DWF LLP 2014 www.dwf.co.uk
Our People
Our Community
Our Environment
26
Go further°
DWF is the business law firm with industry insight.
Our legal experts combine real commercial understanding
and deep sector knowledge to help clients anticipate issues,
create opportunities and get the outcomes they need.
We’ll deliver the results that help you go in the right direction –
wherever you are.
©DWF LLP 2014
DWF LLP is a limited partnership registered in England and Wales with registered number OC328794. The content of the Regulatory and Licensing
Insert does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.
www.dwf.co.uk