Deloitte Poll: Nearly One-Quarter of Execs Polled Say Their Investment Management...

Deloitte Poll: Nearly One-Quarter of Execs Polled Say Their Investment
Management Firms Have no Monitoring Systems for 'Suspicious Transactions'

NEW YORK, July 23 /PRNewswire/ -- As anti-fraud enforcement levels have surged
to an all-time high in the investment management industry, a recent online
poll, conducted by Deloitte, found that nearly one-quarter (23.8 percent) of
respondents' companies do not have a "suspicious transaction" monitoring
system and an additional 32.4 percent of respondents were not aware of whether
their firms did.

"Because hedge funds, private equity firms and other investment managers are
often incorporated offshore and serve a client base of high net worth
individuals from around the world, these organizations can be potential
targets for suspicious transactions that may be part of money laundering,
Foreign Corrupt Practices Act violations and other fraud schemes," said
Michael Shepard, a principal in the Anti-Money Laundering practice of Deloitte
Financial Advisory Services LLP (Deloitte FAS).

"Even though these organizations are only a fraction of the overall financial
services industry, fraud can be a potential sleeping giant of financial woes
for individual and institutional investors, not to mention legal trouble for
the firms through which schemes are perpetrated," added Adam Weisman, a
partner in Deloitte FAS' Forensic & Dispute Services practice.

While 39.2 percent of respondents' surveyed said that their companies maintain
formal anti-money laundering policies and procedures, one in 10 (10.1 percent)
respondents' surveyed said that their companies have not addressed money
laundering at all. An additional 31.7 percent of respondents surveyed do not
know whether their firm has established formal anti-money laundering policies
and procedures.

Investment management firms must also be wary of potential FCPA violations.
The FCPA states that it is a federal criminal offense for any company or
individual doing business in the U.S. to offer, pay or authorize a bribe to a
foreign government official to gain business advantage. While the FCPA was
passed in 1977, enforcement has increased dramatically in recent years. Yet,
despite the increase in the number of enforcement actions, 13.6 percent of
respondents surveyed indicated that their companies have not addressed FCPA
risk at all; 12.1 percent said that their organizations had addressed FCPA
risk, but have not established a program to address the risk; and 10.9 percent
said that their organizations have an established FCPA program, but that it
needs improvement.

"A severe lack of viable checks and balances designed to prevent and detect
wrongdoing, combined with high pressure to deliver strong investment returns,
may make firms within the financial services industry vulnerable to fraudulent
behavior," said Simon A. Charlton, a principal in Deloitte FAS' Forensic &
Dispute Services practice. "Just because compliance programs aren't federally
mandated for these companies, shouldn't necessarily make them optional. Fines
for money laundering, FCPA and other fraud violations have, in many cases,
been in the millions of dollars per case with jail time included for certain
individuals."

According to Deloitte, some of the key steps that can help mitigate fraud,
money laundering and FCPA violations include:

-- Establish a consistent organizational culture that does not condone
fraudulent activity.
-- Understand that the complex transactions inherent in hedge funds and
private equity are often unique to each organization. Fraud prevention and
detection programs should be tailored to the organizations they serve.
-- Do not expect banks to catch all anomaly transactions. Consider
implementing detection software designed to help uncover troublesome events
more quickly; some programs currently available can track investing patterns
and report back on less routine activity.
-- Institute an anti-money laundering compliance program. Such a program
should be designed to address several areas including: assessing risk,
establishing proper governance and reporting structures, designating an
anti-money laundering compliance officer and conducting an enterprise-wide
training program.
-- Help mitigate FCPA risks by conducting FCPA due diligence. Learn about
which geographic regions and industries are at higher risk for bribery and
corruption, then institute controls designed to identify violators before they
become investors.

More than 500 executives from the banking and security, financial services and
investment management industries responded to the polling questions during the
webcast, which was titled "Investment Management Anti-Fraud Programs: Are You
Ready if the Government Launches an Investigation?"

About Deloitte
As used in this document, "Deloitte" means Deloitte LLP and its subsidiaries.
Please see www.deloitte.com/us/about for a detailed description of the legal
structure of Deloitte LLP and its subsidiaries.

SOURCE Deloitte

Lauren Mistretta, Public Relations, Deloitte, +1-312-486-4259,
lmistretta@deloitte.com; or Shelley Pfaendler, Vice President, KCSA Strategic
Communications, +1-212-896-1248, spfaendler@kcsa.com