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The Insider's Guide to Preventing Organised Crime use of Corruption

Have you been impacted by corruption, are you aware that organised crime groups in many cases have diversified their illicit activities into legal business and would you know how to identify this risk and protect your organisation?

Be the change you wish to see in the world


How does your organisation protect itself from organised crime risk? The last 18 months has shown us how, with restricted movement because of closed borders, both nationally and internationally that criminal groups have diversified online to target various aspects of procurement and supply chains.


SUPPLY CHAIN IMPACT

As we have sees in the global response to the Coronavirus, all sectors have been impacted and many organisations have quickly diversified or enhanced their eCommerce capabilities, leveraged digital giants and shortened supply chains to enhance business outputs. Government and healthcare response to the current crisis has been challenging, and with the limited availability of medical supplies has meant an international scramble to obtain the finite amounts of PPE and related medical products.


As countries focus their attention on gaining access to these resources the urgent need for the manufacture and supply of materials from international markets and new vendors gives the opportunity for criminal enterprise to maximise their profits when normal guardianship is ignored or omitted. Organised crime groups quickly diversified into online sales and eCommerce using digital giants to sell inferior or counterfeit products, gaining credibility from the site and minimising risk because of sites inability or limitations in detecting criminal enterprises.


When procurement becomes an urgent requirement it is not uncommon for organisations to change their procurement approach, dropping or relaxing control measures to expedite delivery and distribution of goods or materials, normal tendering processes are changed to single source and direct award and an organisations ability to confirm receipt and distribution of materials is limited due to reduction in resources and the need for urgent delivery.


When we initially saw food shortages and empty shelves in supermarkets, we only need to look back a few years at the horse meat scandal and the infiltration of supply chains by organised criminals and the adulteration of meat products. Although not specifically highlighted in the current crisis it is easy to see how supply chains could easily be compromised.


Initial information from Action Fraud, confirmed 16,352 people fell victim to online shopping and auction fraud, confirming that they received reports of online shopping fraud totalling £16.6 million.

WILL LESSONS BE LEARNED

Looking at historical disaster events, organisations such as The Carnegie Endowment for International Peace reported that during the Ebola crisis in West Africa, the Red Cross estimated that over $6 million of its assistance was lost to fake customs bills, overbilled supplies, and payments to non-existent workers. Other international aid and domestic budgets were likely subject to similar leakage. Did waste and abuse again threaten citizens’ lives in the global response to the coronavirus pandemic?


In addition to the medical support, in its response to business impact governments are providing financial support to business. When we consider natural disasters like Hurricane Katrina in the USA, it produced one of the most extraordinary displays of scams, schemes and stupefying bureaucratic bungles in modern history, costing taxpayers up to $2 billion.


Criminal enterprises and organised crime groups already have an established supply chain and distribution networks because in the majority of cases is the same one used by legitimate companies, making it very easy to introduce inferior and counterfeit products into legitimate supply chains where organisations are urgently looking for new stock and proper due diligence isn't conducted.


It is also recognised by some of the many online retail and auction sites that identifying and removing fraudulent or counterfeit products from their sales site is challenging. The global threat from counterfeit pharmaceuticals and medical products is significant, in the current global drive to obtain medical equipment greater opportunity and profits are available to the criminal.


Interpol said 121 arrests were made related to the seizure of counterfeit medical supplies and medication amid the COVID-19 pandemic. 2,000 online advertisements related to the coronavirus were found, selling a range of illicit medical devices, such as substandard hand sanitizers, unauthorized antiviral medication and counterfeit face masks. About 326,000 packages were inspected and 34,000 unlicensed and fake products were seized, with an estimated value of more than US$14 million, according to Interpol.

TYPES OF CRIMINALITY

Looking at the current and historical types of criminality or illicit behaviour in such global events, there are many common types of behaviour in this type of event.

  • Charitable solicitations

  • Contractor or supply chain fraud

  • Product substitution & Counterfeit products

  • Corruption

  • False invoicing

  • Fake timesheets & ghost workers

  • Price gouging

  • Insurance fraud

  • Forgery

  • Theft


RISK PROFILING & MATURITY ASSESSMENT

Understanding the risk that your organisation faces can be challenging in the current climate particularly where such a global event hasn’t been planned for that includes the limitation and the lack of information and resources, however recognising and planning for this type of event including types of fraud and criminal activity in the short term is the first step in introducing risk mitigation.


Questions that should be asked include how mature is your organisation when it comes to business resilience and business continuity, do you understand and are you able to measure your operational controls approach and governance including information security and cyber risk. Risk profiling and a maturity assessment will reduce future impact that includes illicit activity by criminal groups.


CONCLUSION

To limit future financial loss organisations must take the position that this type of event will happen again and should introduce a strategy to mitigate risk to individuals, business and supply chains to ensure organisation and procurement integrity and also that these risks aren't passed on to clients or customers.