It’s getting ever more complex

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2022 promises to be an exciting year with new challenges in many respects. What this all means for the corporate risk landscape is the subject of an interview conducted by Thomas Wegerich with Don Aviv and Ben Kunde.

Business Law Magazine: How are you feeling about the evolving landscape of risks your clients will encounter in 2022?

Ben Kunde: Well, it certainly won’t be boring and there are some considerable differences in current challenges from what we worked on even two years ago. Trends like the #metoo movement and continued focus on social justice in the U.S. will remain part of how our clients evaluate the backgrounds of potential employees and counter-parties. The Covid-19 pandemic has brought new risk factors to the global supply chain that will reverberate throughout the next year, and cyber risks continue to spike.

Don Aviv: There are definitely some novel risks we’re working to mitigate on behalf of our clients and partners that I see carrying well into 2022. But that doesn’t mean the classic risks we’ve been helping clients navigate for years have gone away. I’d say the world is ever more complex.

Business Law Magazine: To Ben’s point, it’s really fascinating the way global supply chains have been upended. Has that increased the risk of fraud?

Ben Kunde: It certainly has. Manufacturers have had to scramble to find new partners since many of their long-standing partners shut down temporarily due to the pandemic or went out of business. That has led to instances of fraud or other abusive business practices as a rush to meet orders has frequently pushed aside the thorough due diligence we advise our clients to engage in as they struggle to fill orders.

Don Aviv: But it’s a classic case of a “penny wise, pound foolish.” They might get lucky and find an honest partner, but they also might wind up losing all their money on an order because their partner – often residing in an opaque jurisdiction sitting beyond the reach of standard legal recourse – takes their money and disappears. Or they could wind up with a partner that doesn’t really adhere to the ESG standards that are demanded by a company’s shareholders, management, and clients.

Ben Kunde: I think we’ll be spending a lot of 2022 leveraging our global network to help manage these risks while also counseling clients to consider moving supply chains closer to home and/or diversifying the number of partners they have.

Business Law Magazine: Makes for the prospect of a busy 2022 for Interfor. Ben mentioned cyber risks as another big one at the moment. Can you expand on that?

Don Aviv: The cyber threat has certainly been exacerbated by Covid-19 and the resulting global instability as more employees work from home and share or manage valuable IP in the cloud. IT departments – always under pressure – are stretched ever thinner, especially with current labor shortages, so we’ll likely see more instances of cyber-fraud and opportunistic attacks. The weaknesses of IT departments and the slowness of corporate America to awaken to this threat increases these risks as companies have gone to remote workforces with unprecedented speed and scale.

Ben Kunde: In the U.S., The Cyber Diplomacy Act of 2021, if it passes in the Senate, might increase the chances that states like Russia act against criminal hacker gangs wreaking havoc with ransomware. But it will likely be a game of whack-a-mole as those hackers move to different locations to pursue their activities. Companies will have to move from crisis management solutions to a focus on detection and protection – governments really can’t protect the corporate sector; they have their hands full safeguarding vital infrastructure.

Don Aviv: Continuing with cyber-risk, bitcoin and other cryptocurrencies get people really excited and offer some interesting possibilities for our world, but they also help fraudsters and bad actors launder money and extort.

Ben Kunde: Definitely. And while enhanced privacy protections of our financial records by governments and corporations might be seen as a positive trend, it also makes asset tracing harder.
Business Law Magazine: Feels like kind of a push and pull with technology doesn’t it? On one hand, certain technological tools aid the investigator. In other instances they make things harder. Would that be a correct assessment?

Don Aviv: Yes, I’d say so. There are upsides and downsides to things like increasingly sophisticated biometrics being gateways to mobile devices. But it is a real problem when investigators and law enforcement need to get inside a device to ascertain essential details related to nefarious activities.

Business Law Magazine: Moving on, I know Interfor is a leader when it comes to asset tracing. How are you feeling that particular subset of the investigative world evolving in 2022?

Ben Kunde: Asset tracing will continue to be one of the more interesting and shifting aspects of our work because of the aforementioned reasons and increasing global cooperation on taxation issues and recognition of tax shelters as every government’s problem. The Pandora Papers are the latest in a string of disclosures about dodgy financial practices of the wealthy that are embarrassing governments and driving outrage and calls for transparency.

Business Law Magazine: Is technology impacting the specific area of asset tracing as well?

Don Aviv: Absolutely. But it’s an example also of how the human element is still essential. For example, social media and geolocation services can be incredible tools to locate a fraudster, but having a truly global network and being able to count on an experienced investigator locally to provide that boots-on-the-ground perspective in addition to available tech tools is still just as essential.

Ben Kunde: A computer won’t serve a fraudster legal papers! And while machine learning to detect financial anomalies has been a boon to our work and has saved us time, a smart human analyst putting pieces of those anomalies together in the context of a broader investigation is still essential.

Don Aviv: Computers can’t come close to understanding the differences in cultures. An investigation in China is much different than one in, say, Venezuela. The cultural and political differences are so stark between different jurisdictions that local expertise and experience is invaluable.

Business Law Magazine: So we won’t be bowing to machine overlords just yet!

Ben Kunde: Not just yet! In fact, I think the ubiquity of social media, and how fast information travels these days, underscores how increasingly important it is for deep background checks to mitigate reputational risks. If you hire a CEO who turns out to have #metoo skeletons in his closet, and you only did a public records background check without investing in a skilled investigator to speak discreetly with sources about his background, you are responsible for the damage to your company that results from the fallout.

Don Aviv: Absolutely. The only thing we can say for sure about 2022 is that it won’t be dull, and it will likely see record numbers of deals, frauds and surprises.

Business Law Magazine: Dear Don and Ben, thank you for this interview and thanks for sharing your insights.

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