28 May 2010

Memorial Day: Vigilance Reminder...

What does Memorial Day mean this weekend in the United States? A time to reflect on all those who have served and sacrificed their lives for our freedom and continued way of life. At the same time it is an opportunity to look into the minds of those who will determine the future course for our security strategy. The U.S. National Security Strategy articulates this future vision. How does Secretary of State Clinton see the new strategy?

The strategy calls on the United States to build its economy “and to shape the global system so that it is more conducive to meeting our overriding objectives: security, prosperity, the explanation and spread of our values, and a just and sustainable international order,” Clinton said.

The threats are diverse, the secretary of state continued, and include terrorism, proliferation of weapons of mass destruction and the means to deliver them, climate change, cybersecurity, energy security and many others. Responding to these threats, she said, also produces opportunities, new modes of cooperation, new capacities to improve lives and tangible efforts to bridge great gaps in understanding.

“We are in a race between the forces of integration and the forces of disintegration, and we see that every day,” Clinton said. “And part of our challenge is to define American leadership in relevant terms to the world of today and tomorrow, and not merely looking in the rearview mirror, which makes it very hard to drive forward.”



If you are sitting in a "Mud Hut" in Kandahar right now or standing on the grave of a loved one in "Section 60" at Arlington National you could be asking yourself, what does this all mean to me?

The thoughts and words of world leaders may change about what is the proper way to go about the "Global Housekeeping" this year or decade yet it will never change the threat that continues to be our greatest Operational Risk. The human beings on the planet that get up every morning to fight on the battlefield, find food and water for their family, commute to a chaotic and quiet room in a major city to read, analyze and think about new information or even pray to their god, have the same vulnerability.

A complacent point of view. A lack of vigilance to help defeat the evil behavior of other humans, prepare for the hazards thrown at us by mother nature and the will to utilize civility in our approach to solving all of the problems before us. Complacency is the greatest operational risk before us.

com·pla·cen·cy

–noun, plural -cies.

1.
a feeling of quiet pleasure or security, often while unaware of some potential danger, defect, or the like; self-satisfaction or smug satisfaction with an existing situation, condition, etc.

It is the reason there are so many people still scratching their heads on such topics as:

  • AIG
  • Bernie Madoff
  • SEC
  • Freddie Mac
  • Fannie Mae
  • Conficker
  • Umar Farouk Abdulmutallab
  • Qods Force (IRGC-QF)
  • Zeus
  • Faisal Shahzad
  • ‘Volume Algo’
  • Deep Water Horizon
And the list goes on. Memorial Day each year is a dedication to those who have served our country and still are serving our country. The operational risks are many and they are not slowing down. This Memorial Day 2010 requires that we all make the pledge to purge ourselves of any complacent attitudes. Our vigilance is the last opportunity we all have to make a difference on this planet.

19 May 2010

Hawaladars: Domestic Extremism Risk...

Are a network of "Hawaladars" operating within your organization? Or perhaps your online charity? Maybe it's both. This Operational Risk is real and still not on the radar of many NGO's or charitable non-profits. The clandestine method for moving money without a paper trail is ancient and it is still operating to fuel transnational criminal and terrorist operations in the high tech world of mobile phones, money service businesses and stored-value cards. "Domestic Extremism" is a national security issue. Bryan Bender of the Boston Globe explains:

An informal money-exchange network known as “hawala’’ — a centuries-old system that operates outside conventional banking networks — is at the center of the investigation into three Pakistanis arrested Thursday in Massachusetts and Maine with alleged ties to the suspect in the failed Times Square bomb plot, law enforcement officials said yesterday.

The men, who were detained on immigration charges after several raids across the Northeast, were described by government officials as having funneled money to Pakistani-born Faisal Shahzad, who is in federal custody for trying to set off a car bomb earlier this month. The three men are being investigated for possibly using the hawala system to provide money that Shahzad used to finance the plot, the officials said yesterday.

Detecting the use of a "Hawala"-based system is not going to be easy with high technology tools, systems and software that are in place with financial institutions. Even those legal citizens in country have found ways to move money back to relatives still in their native homeland before they took the citizenship exam and pledged their allegiance to their new country.

Operational Risks in your environment include the behaviors by employees, suppliers and 3rd parties that touch this anonymous and prolific network for moving money for potential use by criminal or terrorist non-state actors. Do you run the operations for a large charitable organization or non-governmental organization (NGO)? How many entities now are operating alone on the Internet acting as 501(c)3 organizations in the United States involved with Haiti Relief, Aide to Congo Refugees or even now environmentalists who claim to be advocates for cleaning up the Gulf of Mexico oil disaster?

The financial safeguards for even the most legitimate organizations who operate in the movement of funds for use in religious, community food banks and other non-profit charities must be continuously monitored. The controls for detecting the possible illegal transfer of money from an individual or business to another individual or transnational entity is a risk management priority. Utilizing capabilities from firms like World-Check in combination with even the most simple system for cross-checking transactions can be an initial step for those legitimate businesses who are still Operational Risk neophytes.

Anti-Money Laundering compliance has been part of the banking systems regulatory framework for decades. According to World-Check:

According to the KPMG Global Anti Money Laundering Survey published in 2007, a staggering US$ 1 trillion per year is being laundered by financial criminals, drugs dealers and arms traffickers worldwide. With this much laundered money in the wrong hands, criminal syndicates are able to expand their operations, resulting in more violence, higher levels of addiction and a range of related socio-economic problems throughout the world.

Laundered money is also known to finance highly coordinated international terrorist activities; a phenomenon that poses a clear and present danger to worldwide political and economic stability.

As such, Anti Money Laundering and the Combating of Terrorist Financing (CTF) can only be treated as pressing objectives of global concern. A sharp worldwide increase in the amount of wealth in private hands, combined with the multinational expansion of leading financial institutions, further necessitated the expansion of supranational legislation and law enforcement structures to combat money laundering and related financial crimes.


Entities such as the Financial Action Task Force (FATF), Wolfsberg Group and Basel Committee are key drivers of the regulatory policy-making process, and are closely involved in the standardization and enforcement of related compliance mandates.

So where do you begin as a consumer or a small and legitimate charitable organization? One place is with the "Top Ten Best Practices of Savvy Donors" at Charity Navigator. As a consumer this will give you a better idea on what to look for when you are providing money to a particular cause or to aid your favorite religious organization. As a charitable organization, it will give you an understanding of what you should be putting in place to become compliant and to attract the kind of donors you are looking for online. Here are "Six Questions to Ask Before Donating":

At Charity Navigator, we advocate that all potential donors take the time to ask charities questions about their programs, mission, and goals before they decide to support them. For those people who don't have the time or resources for this, we provide our services as a guide, so you can give with confidence. In addition, we have developed a list of questions that you as a donor should ask before you begin the act of supporting a charity.

Be alert and be vigilant. If the entity that you are engaging with doesn't pass the sniff test on these 16 questions then observe, document and report what you have experienced with the proper authorities within your organization or by contacting your local law enforcement. Follow the money.

11 May 2010

Information Threat: Battle for Superiority...

What continues to be the greatest economic threat to your organization? Is it "Internal" or "External" to your institution? Could it be both? Insiders rarely work alone and therefore the nexus with some outside influence, whether it be a person, life factors or some other entity are typically in play.

Is an engineer in R & D copying precious intellectual property information from within the enterprise company that could be worth hundreds of thousands or even millions to the highest competitive global bidder? Could your small business have an accounting supervisor that has been diverting funds to a private bank account for the past two years? Would it be possible that a supplier or 3rd party partner is capable of inflating the number of billable hours on a project?

Whether it's IP Theft, Fraud or other white collar corporate malfeasance these Operational Risks are real and growing at a double-digit percentage rate annually. The greatest economic threat to your organization could be complacency or an apathetic staff who works without adequate resources and little communication with the Executive "Powerbase".

The compliance and oversight mechanism's are in full swing from the federal governments around the world as highly regulated critical infrastructure organizations are implicated in a myriad of corruption, scandal, ethics and criminal matters. Litigation is an Operational Risk that many organizations have realized the necessity for more robust internal teams to address the continuous requests for information from the government.

There is one common denominator across all of the insider threats, external forces and other vectors that seem to be attacking our institutions night and day. That common denominator is "Information". And underlying this is the data and meta data that all to often ends up being the key or clue to finding the "Smoking Gun" and the source or person(s) associated with the scheme or attack on the organization.

Managing information in a mobile and interconnected planet is a major issue in any global company. Providing the tools and the right information faster and more accurately than the competition can be the difference in your own survival on the corporate battlefield. So how does the CxO suite even begin to address the risks, opportunities and resilience in our demanding information-centric environment?

They believe in having a strong culture of ethics, training and continuous monitoring of employees, systems and their supply chain. They understand the importance of providing the vital resources to the people on the front line of risk management and to make sure that their early warning systems and methods are not compromised. This breed of CxO's are the new breed of organizational management that are leveraging information to their most significant advantage:

Goldman Sachs isn’t the only firm that made a trading gain every day last quarter.

JPMorgan Chase reported positive trading revenue every day in its first quarter, according to a regulatory filing posted Monday. The firm said that its average daily revenue was $118 million.

The achievement is remarkable for both Goldman and JPMorgan — and yet may serve as another target for legislators eager to restrain the trading activities of banks.

What could account for the phenomenal trading results at both firms? Both would claim strong risk management — especially since both emerged from the financial crisis stronger than their rivals. But the surging markets, especially those in fixed income, surely played a role as well.

Whether you are trading in a marketplace, analyzing assets on a map or manufacturing widgets and selling them to qualified buyers, operational risk management begins and ends with information. Managing that information effectively and more accurately than your competition is the name of the game. What have you done today to insure your survivability in the face of the next crisis?

Goldman Sachs Group Inc. lawyers met this week with representatives of the Securities and Exchange Commission in a first step toward a potential settlement of the agency's fraud lawsuit against the securities firm.

The two sides remain far apart. The preliminary settlement talks, held Tuesday, between Goldman co-general counsel Gregory Palm and other lawyers representing the New York company and SEC officials didn't include any specific settlement terms, such as the amount of a fine or agreements Goldman could make with the agency, people familiar with the situation said.