General Counsel: OPS Risk Priorities...

As General Counsel are you keeping up with the latest technology being deployed in your enterprise? Do any of your employees use Twitter? What about your "Generation Y" and the use of P2P file sharing programs. Does your CxO in charge of Safety, Security, Investigations and Corporate Integrity have the latest report on employee violations of your Information Assurance and Acceptable Use policies?

Unknown to corporate America, the popular peer-to-peer file-sharing networks that allow music and movies to be shared could be sharing something else with the public: company secrets and personal data.

Management-side lawyers are sounding alarms to their corporate clients, warning that peer-to-peer networks are increasingly becoming a gateway for trade secrets, confidential financial information and personal data.

The economy is continually downsizing and employees are now being sent home to work in "Virtual Mode" and Operational Risk loss events are matastasizing. Corporate Counsel and CxO's must provide thorough due diligence, security awareness training and effective annual audits of employees who work from home or may be perpetual "Road Warriors" hopping the globe from hotel to hotel. Why?

In 2007, Citigroup Inc.'s ABN Amro Mortgage Group reported that the personal information, including Social Security numbers, of more than 5,000 customers was leaked when a business analyst signed up to use a P2P file-sharing service on a home computer containing the personal information.

If you are a General Counsel and your organization is authorizing the use of encryption on laptops or other personal social networking sites or systems, it's imperative to pay attention to their application. The use of encryption for data security can be utilized to keep the data secure in the event of a breach or a lost digital asset. It can also be used to cloak fraudulent or criminal activities:

In an expanding probe of investment giant UBS, the Justice Department on Wednesday announced the indictment of the Swiss bank's chairman of global wealth management, accusing him of playing a key role in a tax evasion scheme to shelter secret U.S. account holders from income tax bills and drive up bank revenue.

Raoul Weil, who oversaw the Swiss bank's cross-border private banking business serving 20,000 U.S. clients, helped conceal a combined $20 billion in assets from the Internal Revenue Service, the indictment charged.

"Prosecutors said the executives and managers used nominee entities, encrypted laptops, numbered accounts and other counter-surveillance techniques to conceal their U.S. clients and offshore assets."

"If the company policy is written correctly, employees have no privacy interest in any materials created or accessed on company computers. With such a policy in place, an employer generally can review with impunity an employee's activities on the company's computer system."

Whether information is discoverable is going to be a different matter. A careful review of most social networking sites privacy policies will most likely reveal that posted information is not private, therefore discoverable. Therefore, effective legal and IT security awareness programs and education is essential in any enterprise where employees are working remotely.

The modern day General Counsel must rely on the Chief Privacy Officer working diligently with the Chief Security officer and the Chief Compliance Officer to mitigate Legal Risk. The convergence of these responsibilities lies more on the Chief Operational Risk Officer to see that all parties are synchronous in their strategies and efforts. They may be the best person to insure the entire spectrum of operational risks are being thoroughly addressed.

operational risk

AML: Transnational eCrime Ecosystem...

The Operational Risk threat matrix from "Advance Fee Fraud", "Nigerian Letter (419) Fraud, Foreign Lottery/Sweepstakes Fraud and "Overpayment Fraud" is still growing exponentially. During our current economic crisis, the spike in these consumer Mass Marketing schemes is to be expected. Global Anti-Money Laundering (AML) operations are in high gear at home and abroad.

The "Transnational Economic Crime Ecosystem" is thriving and the major phases of the environment continue to be a major challenge for global financial institutions and law enforcement:

1. Collection
2. Monetization
3. Laundering

Let's take a closer look at "Overpayment Fraud":

Overpayment Fraud - Victims who have advertised some item for sale are contacted by buyers who remit counterfeit instruments, in excess of the purchase price, for payment. The victims are told to cash the payments, deduct any expenses, and return or forward the excess funds to an individual identified by the buyer, only to discover they must reimburse their financial institution for cashing a counterfeit instrument.

The predominantly transnational nature of the mass marketing fraud crime problem presents significant impediments to effective investigation by any single agency or national jurisdiction. Typically, victims will reside in one or more countries, perpetrators will operate from another and the financial/money services infrastructure of numerous additional countries utilized for the rapid movement and laundering of funds. For these reasons, the FBI is uniquely positioned to assist in the investigation of these frauds through its network of Legal Attache offices located in over 60 U.S. embassies around the world. By leveraging its global presence and network of liaison contacts, the FBI has successfully cooperated with other domestic and foreign law enforcement agencies to combat, disrupt, and dismantle international mass marketing fraud groups.

Despite the best inter-agency enforcement efforts to combat mass farketing fraud, the FBI remains cognizant of the fact that the only enduring remedy for this crime problem lies in consumer education and fraud prevention programs. Towards this end, the FBI has not only produced its own mass marketing fraud prevention pamphlet but coordinates on other public information efforts with the DOJ, FTC, and the USPIS. The FBI also supports a consumer fraud prevention website in conjunction with the USPIS which can be located on the web at: http://www.lookstoogoodtobetrue.gov.

While the number of Mass Marketing Fraud cases has declined over the past few years, the number of new money laundering cases has risen to over 500 in FY 2007 alone. This is to some degree as a result of the cooperation being given to law enforcement by the financial instituions themselves. And for good reason. There is a new sheriff in town.

(Reuters) - A U.S. tax investigation into UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz) is concentrating on senior and midlevel executives and bankers, and could result in one or more indictments, the New York Times said, citing people briefed on the matter.

Investigators are sifting through more than 70 names and related account details of American clients provided by UBS over the last few months to the Justice Department, which has passed the details to the Internal Revenue Service for further scrutiny, the paper said.

The Justice Department and the IRS plan to build both civil and criminal tax-evasion cases against some of the clients, the people told the paper.

The U.S. tax investigation risks compounding damage to UBS's reputation at a time it has been forced to make bigger writedowns than any other European bank in the credit crisis.

The U.S. Department of Justice is investigating UBS over offshore services provided to U.S. clients from 2000 to 2007 to find out whether UBS helped wealthy Americans dodge taxes. The Swiss bank was singled out by U.S. President-elect Barack Obama as one of the banks who helped "tax cheats." It decided earlier this year to stop offering offshore Swiss bank accounts to U.S. citizens.

Yet the collection phase of mass marketing fraud is not about "70" or a "100" UBS clients who are trying to cheat on their taxes. It is still about the millions of phishing and spam messages that circle the digital globe in search of their targets or prey. These illusive criminal organizations behind this organized cybercrime wave are continually exploiting the vulnerabilities of our financial institutions and our own human behavior.

"Merchandise Mules" are being recruited by the hundreds if not thousands to reship goods outside North America. These criminals are utilizing stolen identities and credit cards to purchase goods on eCommerce sites and eBay and then requesting to ship the goods overseas. Unfortunately, those who are elderly or even just down on their economic luck fall victim to this tremendous economic crime tsunami:

Much of the modern organized crimes are very similar to the old. The most significant transformation from the streets to cyberspace has enlarged the territory of individuals and organized groups.

Enabled by the Internet, criminals can operate in cyberspace where less governance, a transnational stage, and a multitude of transactions to monitor complicate surveillance and enforcement. From counterfeiting drugs and software to identity theft and credit-card fraud, illegal transactions are increasingly infiltrating legitimate businesses where counterfeited goods and money laundering are buried in the billions of legitimate computer transactions made daily around the globe.

Counterfeited products are rising through global distribution via Internet sites. According to the World Health Organization, 50 percent of the medicines sold online are counterfeit.

The expanse of international criminal activity has been followed with an increase in prosecution through cooperating international law enforcement agencies willing to join the fight against globalized crime.

operational risk