Choosing wisely and timely: annual CPEs

Outside the US and the UK, this requirement is fairly unknown – certainly among all those who do not hold a qualification which requires Continuing Professional Education (CPE). As a Certified Fraud Examiner (CFE), earning and reporting CPE credit on an annual basis is mandatory. It’s not a nice to have, it’s a must.

Some of the misconceptions I have encountered are rooted in cultural differences. For instance, in Germany, CPE tends to be confused with concepts such as Lifelong Learning. Of course, the language barrier may play a role, too. CPE is most adequately translated to Kontinuierliche Berufliche Weiterbildung or Fortbildung. Howevermost German professional qualifications do not require any CPE, so the concept per se remains foreign to many.

I would like to help readers across Europe and beyond to understand what it means and why it is beneficial to the professional individual and the professional community but also to the wider industry, the employees, and even the public.  So I decided to clarify this here on my website:

The ACFE’s CPE requirements for CFEs – What are they, how do they work?
As Certified Fraud Examiners we have to fulfill a number of academic, professional and character-related criteria (see here) prior to our certification, these constitute the eligibility criteria. Subsequent to studying the 2,000 pages manual (or alternative ways to prepare) and passing the exam, certification can be applied for.

Once, we have achieved certification, an annual CPE requirement applies, as the ACFE specifies:

To maintain your CFE Credential, you are required to earn at least 20 hours of Continuing Professional Education (CPE) every 12-month period.
At least 10 of these hours must relate directly to the detection and deterrence of fraud and 2 hours must relate directly to ethics.

What’s the purpose and how is this meaningful?
CPE is not just meaningful but a vital means by which we CFEs maintain our professional knowledge and specific skill set. Continuing education in our profession is particularly valuable and vital, as the area continues to undergo frequent change and evolves on a global scale.

The competence maintained in this way benefits the individual in so far as we can continue to develop our full potential. It also aids the overall standard of the profession and keeps it on a high and up-to-date level. Ultimately though, this also helps the wider civic society.

CPE options, formats, and financial aspects:
The ACFE currently counts more than 60,000 certified members in over 120 countries. To some, their nearest chapter is the provider of workshops, seminars, and conferences where CPEs can be earned.

Others, in more remote locations, less mobile, with limited funding or a very tight schedule may prefer earning their CPEs with webinars, webcasts, self-study books, and university materials or authoring of materials. The ACFE provides a wide range of CPE credit options, they differ in the format of delivery, duration and in terms of subject area. They also differ widely in financial aspects, some are entirely free of charge – for an overview see here.

CPE reporting, failure, and disciplinary consequences:
CPE credits need to be reported to the ACFE on an annual basis, reminders are issued from around 90 days prior to the expiration of annual reporting period – which equals an individual member’s annual membership period.

CPE reporting is subject to audits. The ACFE also maintains a database of suspended members. Those who fail to earn their CPE credits or committed fraudulent acts in earning them become subject to disciplinary measures in line with the ACFE bylaws, rules and regulations.

Here is how I chose to fulfill my CPE requirement:
a) I opted for a 20 CPE self-study course, focusing on public sector fraud with a specific focus on the FCPA and the UK Bribery Act. This course contains the 2 mandatory CPE hours of ethics training and requires passing an exam. This could be sufficient to fully earn my annual CPE credits.

(b) However, I have also completed a number of webinars with the ACFE, each of them at 1CPE. This has provided me with fresh insights into areas the self-study course did touch upon but in a different way. For instance, I attended a webinar which focused on data analytics and how it can be used in compliance testing – which overall acted also as an eye-opener in terms of creative thinking when it comes to fraud prevention and detection.

(c) Further, I chose a few of the American Institute of Certified Public Accountants’ (AICPA) CPE webcasts (see all CPE courses). AICPA has been maintaining a very close collaboration with the ACFE for years. The webcasts differ slightly from the ACFE’s webinars insofar as they are often panel discussions, they contain test questions which pop up during the cast and an overall exam.

Especially the AICPA Behavioral Ethics webcasts, amounting to 1.5-2 CPE credits, are very interesting and useful (to fulfill ACFE ethics CPE requirement). They may cross-reference the ACFE material, for instance, the Annual Report to the Nations, or else.

Overall, I find the mix of sources, predominantly provided by ACFE and AICPA courses, very valuable and thought-provoking. The combination I strongly recommend also includes CPE credit from a wider variety of organizations, for instance, Protiviti and Thomson Reuters offer respectively 1 CPE for the attendance of a live webinar on Anti-Money Laundering Model Validation and a live webcast on hidden risks surrounding sanctioned entities.

Earning CPE credit and enhancing one’s skill set can be and should be as interesting, stimulating and positively challenging as possible. Hence, to me, earning CPEs are not just an annual duty – they are a vital part of my professional development and as such, I actively seek opportunities to enhance the mandatory requirement. You’ll never know where inspiration comes from…..

 

 

 

Complex Risk: due diligence, conflict of interest, ultimate beneficial ownership

Recent headlines covered Brexit and Britain’s subsequent repeal of laws, Germany’s private bank Hauck & Aufhäuser, dissolved Welling & Partners in the British Virgin Islands (IcelandReviewruv.is), and Fashion brand founder Karen Millen’s bankruptcy. Unrelated, at first glance, they also entailed various fraud-related issues and bring a pressing need for effective due diligence back into the focus of public attention.

National and international aspects:
The headlines and underlying cases are indicative of the complexity of cross-border transactions in a globalized world where legislation, regulation, and enforcement still remain largely a national matter.  Further significance has been added by the recent conflict of interest breach at the Bank of England, resulting in the Deputy Governor’s resignation.  The ongoing prolific debate around conflicts of interest in the current US White House (visualized web ) has additionally furthered public appetite for scrutiny and clarity byeond national confines and territories.

Spanning Britain, Germany, Iceland, the European Union (EU) and EEA (European Economic Area), as well as off-shore tax havens in the British overseas territories, taking a birdseye view helps to understand and illustrate the challenges resulting from a broad network of anti-money laundering regulatory provisions and policies.

Risk perspectives:

“EU legislation requires that institutions adequately manage and mitigate operational risk, which is defined as the risk of losses stemming from inadequate or failed internal processes, people and systems or from external events.

Operational risk includes legal risks but excludes reputational risk and is embedded in all banking products and activities. It has always existed in banking, and non-banking organizations but it has acquired a greater relevance given the increased complexity and globalization of the financial system and the recent materialization of unprecedented extremely large losses.”

Source: European Banking Authority (EBA)

Conducting required checks and ongoing monitoring and registry maintenance sufficiently, requires both, the buyer’s and seller’s concerted efforts in order to mitigate and manage risk emanating from improper or inadequate due diligence.

 

The complex landscape of regulations and guidelines:

  • Britain‘s exit from the EU will leave its leading role in anti-money laundering (AML), anti-corruption (and anti-bribery and sanctions compliance) mostly intact thanks to the UK Bribery Act which is independent of EU regulations.  Of greater concern is the stricter control of offshore territories, mainly in former colonies, as well as compliance regulation, applicable to financial firms, which is predominantly derived from EU legislation (OECD concern).
  • Iceland, as a member of the European Economic Area (EEA), has to comply with the EU regulations and its interpretations of the Financial Action Task Force (FATF) standards (Iceland in FATF). This scenario could also apply to Britain, depending on the outcome of future negotiations, for now, Britain remains a member of the FATF.
  • The European Union’s 4th Anti-Money Laundering Directive (4AMLD – summary) was adopted in May-2015, became effective in Jun-2015, and its national transposition is required by 26-Jun-2017.This will entail central registers of beneficial ownership as already set up in Ireland but currently not yet in place in Germany (see the Beneficial Ownership Transparency – Country report, 2015 – for in-depth analysis).

 

Knowing which rule, regulation, and watchlist apply:

Conducting checks is time-consuming, resource-intense and it may be costly.  However, failing to thoroughly substantiate the identity of a customer or UBO (buyer, seller, business or other transaction-partner alike) may be significantly more costly and damaging to the reputation and funds.

“Risk, I had learned, was a commodity itself. It could be canned and sold like tomatoes.  Different investors place different prices on risk. ”

(Michael Lewis, Liar’s Poker, 1989)

Outsourcing the checks may be one option but ultimate responsibility may remain with the outsourcing party – as the case of Karen Millen’s tax evasion scheme around-the-world (see EU Parliament Library note on corporate tax avoidance) demonstrated.  A list of significant failures of duty of care in this regard is available on the UK’s Financial Conduct Authority site (FCA).

Knowing when to conduct checks:
Certain types of risk cannot be insulated, transferred, or legally sold.  Due Diligence (and Enhanced DD: EDD), Know Your Customer (KYC), Conflict of Interest (COI), and Ultimate Beneficial Ownership (UBO) regulations and rules are neither effective nor meaningful past the event, which does not render them obsolete but makes their use all the more valuable as a set of preventive instruments throughout the interaction. Compliance programs and efforts have become increasingly sophisticated, however, human factors such as misplaced bias, trust, unquestioned routines, and practices may enhance the operational risk.

“Let me put it this way: I’m standing in front of a burning house, and I’m offering you fire insurance on it.”

(Jared Vennett explains Credit Default Swaps (CDS) in M. Lewis’ The Big Short: Inside the Doomsday Machine, 2010/2015)

Latent reputation risk and litigation risk may arise instantly, at a very early stage during negotiations.  This may apply irrespective of the nature of a transaction, whether an acquisition, a merger or a sale of a specific stake.

It requires due consideration and pro-active mitigation at a time when there is neither smoke nor fire, a long-term approach that may be deemed a challenge in environments where accounting for long-terms risk conflicts with short-term objectives. Adhering to ethics codes voluntarily may be one way to address the issue, voluntarily applying EDD can be yet another.

Overall, it can be argued that transparency of data, consolidation of watchlists, regulations, and enforcement efforts are increasing and increasingly streamlined, consolidated, and subject to public awareness and debate.