Of all the types of organizational fraud, bribery is one of the most difficult to detect. It often occurs in foreign countries and involves officials with a vested interest in keeping it going. Bribery and corruption schemes represented 43 per cent of the fraud cases reported in the ACFE’s 2020 Report to the Nations on Occupational Fraud and Abuse. And with a median loss of $200K and increasing enforcement actions, it’s an expensive problem to address. Join financial crime compliance advisory and training specialist Michael Schidlow, as he reviews recent bribery-related incidents around the world and maps out a strategy for combatting them.

1. Under the Table:
Combatting Bribery and Corruption Through
Analysis and Prevention
Michael S Schidlow

2. Under the Table
Overview

3. Polling Question
Is it bribery?
A US-based energy company is making a promotional sales pitch to a
foreign government official. The company pays to fly the government
official in business class to view a product demonstration.
A. No, not if the flight cost was a reasonable, bona fide business expense
B. Yes, travel is always considered a bribe, unless for intra-company
business
C. No, business promotion/sales expenses can never be considered
bribery
D. Yes, business class travel is an unjustifiable expense

4. Bribery and Corruption
Distinctions
• IMF: There are USD $2 trillion in bribes per year.
• One in three people report paying bribes, depending on region.
• People pay bribes for medical services, identity documents, permits,
electricity, and water.

5. Bribery and Corruption
Sprung a Leak
• In the past three years:
– Numerous data leaks – Panama Papers, Paradise Papers,
Luanda Leaks
– Two major scandals (Operation Carwash, 1MDB)
– Three global laundromat scandals (Russian, Azeri, Troika)
• $230–430 billion in linked activity

6. Bribery and Corruption
Keep it Simple
• Simple bribery/corruption is the misuse of a position for personal
gain.
– Personal gain is “anything of value.”

7. Bribery and Corruption
Grand Scale
• Grand corruption:
– “Those at the political, decision-
making levels of government use
their office to enrich themselves,
their families, and their associates.”
(FATF)

8. Bribery and Corruption
Who commits grand corruption? Politically exposed
persons (PEP)
“Prominent”
Political
function
Officeholder
Close
family
Close
associates
Related
businesses

9. Bribery and Corruption
Risks
• Institutional bribery—a French bank:
•Over five years, the bank paid
bribes through a Libyan
“broker.”
The Broker
•The broker had a Panamanian-
based front company and sent
funds to a family member.
Front
Company •Bank employees had
knowledge of how the broker
was obtaining business and
concealed the bribes through
payments to the Libyan
intermediary.
Corrupt Intent
•$90 million in bribes, portions
of which the Libyan broker
paid to high-level Libyan
officials to secure the
investments from various
Libyan state institutions for the
bank.
Millions

10. Bribery and Corruption
Globally:
Skewedeconomics
Values and
economy
distorted
Capitalflight
Lack of
infrastructure
EndemicRisk
Self-
perpetuated
Systemicallyenabled
Multiple layers
of complicity

11. Under the Table
Essential Elements

12. Essential Elements
Bribery
• Acting with “corrupt” intent (“trying to influence a person to act
contrary to a standard of conduct, such as a legal obligation”), the
person:
– Offered or solicited
– Anything of value
– In exchange for misfeasance, malfeasance, nonfeasance

13. Essential Elements
Anything of Value
• Bribery: “anything of value”:
– Cash
– Tangible/Intangible Assets
– No-show or low-show job
– Loans, lines of credit, or
waived fees
– Travel or entertainment
expenses
– Goods (luxury or otherwise)

14. Polling Question
Is it bribery?
The governor’s spouse is on the board of a charitable organization – a dog
rescue – and a bank makes a donation to that charity. The donation is
under USD $500.
A. Probably not, because a charitable donation shouldn’t be considered
“something of value”
B. Possibly, if the organization did not properly review and approve the
donation.
C. Probably not, because board members face tremendous scrutiny
D. Possibly, if the donation was made by the bank with corrupt intent

15. Essential Elements
Low Show Job
• Wife of NY State Deputy Secretary
• “Employed” by a Maryland- energy company seeking contracts in
NY
– USD $90,000/year salary
– Taught a +/- 90-minute course, every other month
– Posted on social media
– Passively join occasional conference calls

16. Essential Elements
Extortion
• In general, the person
– Threatens to deprive another person/company
– Of access to otherwise available opportunities and/or resources
– In exchange for something of value

17. Essential Elements
Kickback
• Misappropriation of Funds
• Used to enrich a decision maker
• In order to influence an outcome

18. Essential Elements
Larceny
• Unlawful taking
• Or exceeding use of
• Property of Another
• Without Permission

19. Essential Elements
Embezzlement
• Larceny where
• The person taking the property was entrusted
• Is legally obligated
• To maintain safe custody of the assets

20. Essential Elements
Embezzlement
• Teodorin Obiang Jr.
• The son was given a role in the
cabinet.
• He swindled millions from the country.
• He purchased homes in London, LA,
and Paris.
• $16 million in cash and watches were
seized.
• VC Malte Tourbillon = $775,000

21. Essential Elements
Fair/Honest Services
A scheme to deprive another of the intangible right to honest/fair
services

22. Essential Elements
Fraud
• Misrepresentation
• Or omission
• Of a Material Fact
• Causing Reliance by the Victim
• Harm

23. Essential Elements
Fraud
• Materiality – significant enough to cause reliance
• Reliance – action/inaction resulting the harm
• Harm – usually, financial loss

24. Essential Elements
Self Dealing-Conflict of Interest
• Usually falls under the umbrella of bribery, or extortion
• Misutilizing an official position
• To steer business/opportunities
• To self or other

25. Essential Elements
Self Dealing-Conflict of Interest
•Former mayor of Detroit
Accepted numerous forms and
types of bribes
Used influence of office to steer
projects to his best friend’s business
Contracts were often
padded/excessive
BFF paid kickbacks to the mayor

26. Polling Question
Is it bribery, corruption, and extortion?
The town little league wants to expand its primary baseball field from a
one field to a three-field capacity. The acreage would support three fields,
but due to environmental zoning restrictions, would have to modify the
outfield. The parking cannot capacitate more than two games’ worth of
attendees at once and there is no street parking. There are only two bids
for the project.
A. Possibly, if there is no bona fide explanation for the discrepancies
B. Probably not, because the approvals needed senior-level oversight
C. Possibly, if the two bids were connected or otherwise inappropriate
D. Probably not, because baseball is America’s pastime and professional
sports in general are corruption-free

27. Under the Table
Case Studies

28. Varsity Blues
College Admissions
• Payments funneled from high-net worth individuals to college
admissions staff
• Coaches/Athletics Directors bribed to list students at prospects
• Parents set up staged athletics promotions
Source: Mercury
News

29. Varsity Blues
William “Rick” Singer
• Key Worldwide Foundation
• Three officers, two of whom had no hours
• USD $8 million, < USD 1,000 in overhead
• Transfers of ”scholarships” to same address as the business itself
• Passthrough payments

30. Rolex Rob
The County Executive
• Witness testified that he issued a check in the amount of $5,790
to cover the majority of the price of a Rolex Submariner, with the
remainder paid by a county executive
• The transaction was arranged by the witness at a jeweler of his
choice
• The witness and another individual also donated USD $15,000 to
the county executive’s campaign
• They were both chaplain positions with the county police,
including a “free parking” permit; neither person was in the clergy

31. Rolex Rob
The County Executive
• The county executive's watch was forfeited to the FBI
• The county executive then tried to contest the forfeiture before
ultimately giving up
• He tried to claim that USD $1900 was the “full price” for a preowned
Rolex Submariner
• No charges were filed against the executive and he has been seeking
election to the state assembly

32. United Auto Workers Union
Top Down
• The former president was among 15 people charged in a broad
embezzlement and corruption scandal.
• The former president was accused, along with others, of using Union
member dues to pay for a four-month luxury villa rental (USD
$12,200/month), lavish meals, cigars, and golf outings.
• The travel/expenses had nothing to do with Union business.

33. United Auto Workers Union
Top Down
• Another former president has already pleaded
guilty to bribery and racketeering charges.
• The charges expand to executives from car
companies.
• Both the car companies and the Union were
spending money on a lakefront home, given to
the UAW president, to be used as a “training
center.”
• Prosecutors accuse the training center admin
of “conspiring with other union leaders to
receive millions of dollars in bribes and
kickbacks from vendors that made hats, shirts
and other merchandise for the union, internally
known as ‘trinkets and trash.’” (Source: CNBC)
For Sale – $1.299 million
3 Bed, 3.5 bath
1,907 sq ft
1,000 acres
750 feet of visible shoreline
Source: The Detroit News

34. 1MDB
Najib Razak and Jho Low
• Multibillion-dollar international fund for development in Malaysia
• Big political battles on the horizon
• Fund started missing payments
• Local reporters picked up the story
Razak
Transfers arranged
by Jho Low
PM’s personal
accounts
Shell
Companies
Riza Aziz

35. 1MDB
Source: ”Malaysians ScrutinizingWatchesWorn by Mahathir, Najib, Rosmah, and Fellow Politicians,” Mothership (May 2018).
“His and hers” Hublot BB Black Magic
$68,000
Special edition Hublot Big Bang
$45,000
Breuget XX Pilot
$11,000
Panerai Radiomir 152
$71,000
Jaeger LeCoulture Master Grande
Tradition Tourbillon
$88,000
Harry Winston Project Z2
$27,000
Richard Mille RM07-01 “Diamond Cruncher”
$158,000
Royal Oak Offshore
$45,000

36. SEIZED INCOME
1MDB

37. Under the Table
Considerations and Takeaways

38. Considerations and Takeaways
Shells - Internally
• Targeting Shell Companies
• Luxury Purchases
• Passthrough Transactions
• Comingling
Cabestan Luna Nera
USD $225,000

39. Considerations and Takeaways
Shells - Externally
•Single owner/common owner
Only registering agent on file
Set up in a secrecy haven
Not publicly listed
No clear biz purpose
No employees
No products

40. Considerations and Takeaways
Training
•Targeted
Role-Based
Likelihood of
Exposure
Roles and
Responsibilities
Attestation tied
to CoE

41. Negative Media
Ongoing
• Strong Parameters – “fake news”
• Four Eyes Review
• Sampling/QA over decision
Alexei Navalny, opposition
party advocate, called out
Dmitry Peskov for his
wristwear.
Richard Mille RM52-01 =
USD $515,000

42. Bribery Risk
BOLO
• Third-Party Risk
• Padded/Excessive/Tailored/Single-
Bid Contracts
• Referral Source
• Broker/Agent/Intermediary
• Unusual payment terms

43. Governance
Metrics
•Numbers of
PEP
customers/risks
PEP SARs
Accounts/
relationships
declined
Exit
Donations/
Expenses
Promotion/Busi
ness Expense
PEP
Employees/
Referrals

44. Under the Table
Questions

45. Thank-you for participating
Michael S Schidlow
michael@scientergroup.com
@ProfSchidlow
https://www.linkedin.com/in/mschidlow
Contact i-Sight
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