INTERNAL AUDIT AND CRIMINAL PREVENTION

Transcription

1 INTERNAL AUDIT AND CRIMINAL PREVENTION dr. FELICE ISNARDI Deputy General Attorney at the Court of Milan (ret.)

2 Introduction + Supervisory Body with full independence The rules of corporate governance are not always effective

3 Definitions Fraud, Embezzlement, Money laundering Bribery Crimes against companies Crimes to the benefit of companies Individuals in the company: White collar crimes Others Individuals in the company: Corporate crimes

4 Crimes against companies: Fraud Computer crimes, included fishing, cloning, ransomware, malware, social engineering Frauds in financial activity Frauds in the supply of goods or services Frauds in payment systems Frauds in insurance

5 Prevention of frauds The most effective way of prevention is the use of specific tools set up by potential victims

6 Effectiveness of cross-checks 1987 Prevention by the law Insurance Companies have been using systems of crosschecks for over 20 years, as shown by this newspaper article

7 White collar crimes against companies 1988 Embezzlement Money laundering Bankruptcy

8 Recent cases The directors of a listed company appropriated a credit of 8 million euros A AP A AP Q A Q A Q AP

9 Cases concerning banks The most lucrative cases of undue appropriation concerned banks

10 Money laundering. The Pizza Connection case The Pizza Connection case was the most spectacular case of money laundering in the 70 s

11 Money laundering: recent cases Recent cases show that modern forms of money laundering are more sophisticated

12 the Governor of Bank of Italy said that absolute domain position in the management of the banks increases the risk of abuses and favoritism and this can lead to disaster situations Role of Internal Audit

13 Crimes to the benefit of companies: Fraud Interest rates or fees deliberately miscalculated Dangerous financial operations proposed with no warning of risk Purchase of goods Fraud in the detriment of State or EU

14 Bribery to the benefit of companies Corruption can be detected thanks to Confession Phone tapping Conversation monitoring Whistleblowing Unjustified transfer of money or benefits

15 New tecniques of bribery New ways to justify money transactions overbilling advisory contract fake preliminary contract

16 More ways to detect bribery Confession Whistleblowing Tipping-monitoring Money-benefits Insolvence of a company Chance occurrence

17 Effectiveness of Internal Audit to prevent corruption Internal Audit can t always prevent crimes committed to the benefit of companies

18 The case Monte Paschi di Siena and EXPO MPS False balance sheets Market manipulation Obstacle to Supervisory Bodies This case is still under indictment

19 Internal Audit and MPS Internal Audit Service worked only when a new board was appointed Bank of Italy Prosecutor

20 The case EXPO Auction disturbance Bribery Abuse of power External audit Agency charged of the event Prosecutor

21 Lack of independence of internal audit the main reason why Internal Audit is not always effective is the lack of independence toward the board of directors ( Felice Isnardi )

22 Italian Legislative Decree n. 231/2001 Fraud to the detriment of State Misappropriation of public funds Cybercrime Extortion Bribery Currency/credit cards/stamp duties/marks counterfeiting Further control within the system of corporate governance rules False entries Corporate offences Market manipulation Bodily harm in violation of workplace safety rules Environmental offences

23 Independence of Supervisory Body The Court imposes a criminal sentence on an individual in a company Also establishes the administrative liabiity of the company Unless the Company demonstrates to have set an adeguate compliance model The Supervisory Body must be fully independent

24 Italian Law n. 190/2012 This law adapts the previous rules to the public Bodies National Anticorruption Authority Anticorruption Plan Job rotation Anticorruption officer Levels of incompatibility Economic situation of the politicians

25 Conclusions The corporate governance framework is not always able to prevent white collar crimes or corporate crimes The internal audit can play an effective role only when fully independent Setting up independent bodies in the corporate governance system is an effective tool to prevent crimes

26 Questions and Answers Thank You