Category Archives: Supervision

Those pesky Romulans!

You may not be old enough or nerdy enough to remember the Romulan cloaking device from the original Star Trek.  But I do/am.

“Fake Signals and Illegal Flags: How North Korea Uses Clandestine Shipping to Fund Regime,” The Wall Street Journal, November 29, 2018 (online). How do shipments still arrive in and leave from North Korea, notwithstanding the various sanctions on the regime there?  Apparently, it’s blue smoke and mirrors.

I raise this here for two reasons.  First, in the North Korean story this is a bunch of information being generated that is deliberately false, and the compliance types struggle to deal with it in order to enforce the applicable rules.  The enforcers use satellites and data analytics; the shippers use deception and semi-legal and illegal stratagems.

Second, what extremes might your employees go to to avoid being detected when they are doing something they know is wrong, and how well prepared are you to deal with it?  Do you have the proper controls and investigative procedures?  What should you look at to confirm that what you’re being told is true?

 

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Filed under Collect, Compliance, Compliance, Compliance (General), Controls, Corporation, Data quality, Directors, Duty, Employees, Governance, Information, Internal controls, Management, Oversight, Policy, Supervision, Third parties, To report, Use

Fraud at the top

“Former Goldman Bankers Charged,” The Wall Street Journal, November 2, 2018 A1. “Two senior … bankers allegedly paid bribes and stole and laundered money … [in] one of the biggest financial frauds in history.”

What does it say when two of your 435 partners and one of your managing directors commits a fraud?  Failures in systems/controls?  Bad culture?  Do you have a “cowboy atmosphere” in Asia?  Poor training?  Are these rogue employees?  What’s the impact on your reputation?  What was the tone at the top?

This is primarily a Governance point.  How will the new CEO handle?

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Filed under Compliance, Compliance (General), Controls, Corporation, Culture, Directors, Duty, Duty of Care, Employees, Governance, Oversight, Policy, Supervision, Who is in charge?

Another one bites the dust

“Barnes & Noble Details CEO Firing,” The Wall Street Journal, October 31, 2018 B1.  CEO allegedly fired for sexual harassment and bullying, and interfering with the sale of B&N.

So, the CEO gets canned.  No severance package.  What message does this send to the rest of the organization (and, indeed, to other CEOs and other companies)?  How does the Board look on this one?  From a Compliance standpoint, and a Governance one, looks pretty good.

Might this be a pretext?  Could he have been fired for some other reason?

 

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Filed under Board, Communications, Compliance, Compliance, Compliance (General), Controls, Corporation, Duty, Employees, Governance, Internal controls, Oversight, Supervision

Consequences

One of the consequences of non-compliance is a higher level of scrutiny from the regulators.

“Wells Fargo Places Two Executives On Leave,” The Wall Street Journal, October 25, 2018 B10.  The Comptroller of the Currency sent letters to two WF executives about their failures of oversight at the bank in connection with WF’s sales practices.  Execs (chief administrative officer and chief auditor) placed on leave and removed from operating committee.

Boy, does that ever not look good on your resume.

Why did the regulator have to do this?  One reason is that WF didn’t do it itself.  Would your compliance system do better?  Do the directors still have their jobs?

 

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Filed under Board, Compliance, Compliance (General), Corporation, Culture, Directors, Duty, Employees, Governance, Government, Oversight, Supervision, To report

Information delayed

“Advertisers Allege Facebook Put Off Disclosing Error,” The Wall Street Journal, October 17, 2018 B1.  Facebook sued two years ago for knowing the statistics on how long users were looking at videos were flawed, overstating the average time videos were viewed but failed to let the advertisers know.  So advertisers paid for posting videos based on inaccurate information from the seller (Facebook).

I guess one could comment on the culture at Facebook that would permit this behavior, or upon the Compliance implications of the apparent failure to punish anybody (employees, directors) for this apparent breach of customer trust. But instead one could focus on how much value Facebook derived from not disclosing information about known defects in its processes.  So, either (a) the definition of Information includes information you don’t disclose or (b) the value of information can include the value of not disclosing it.

The documents turned over in discovery are not favorable to FB.

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Filed under Accuracy, Communications, Compliance, Compliance (General), Controls, Corporation, Culture, Data quality, Definition, Directors, Duty, Duty of Care, Employees, Governance, Information, Internal controls, Oversight, Reliance, Supervision, Technology, To report, Value

Facebook again. Plus or minus 20 million.

“Facebook Details Data Breach,” The Wall Street Journal, October 13, 2018 B1.  Data exposed between July 2017 and September 2018.  But thankfully only affected 30 million users, not the 50 million users originally feared.  It only took 2 days to stop it after it was discovered.  A flaw in the computer code opened a door.

The decrease in the number of affected users was reported in a blog post.

Does this mean that a defective product was released into commerce?  So who pays how much to whom?

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Filed under Compliance (General), Controls, Corporation, Duty, Governance, Information, Internal controls, IT, Oversight, Protect assets, Security, Supervision, Technology

Hiding another ball

“HSBC to Pay $765 Million in U.S. Pact,” The Wall Street Journal, October 10, 2018 B12.  Bank hid the risks of defective mortgages for at least 2 years.  Sold mortgaged-back securities in the meantime.

“Wells Fargo … [paid] $2.09 billion to settle similar claims.”  Four other banks also settled.

Why do we keep our money in banks?  Weren’t they supposed to be safe?  What does it say about the Boards of these companies?  Did the directors screw up?

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Filed under Communications, Compliance, Compliance (General), Controls, Corporation, Culture, Directors, Duty, Duty of Care, Employees, Governance, Information, Internal controls, Investor relations, Oversight, Protect assets, Supervision, To report