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Case studies

Specialising in supplier due diligence

Case Study 1: A fired director operates an accreditation agency

Maurice Dimmock was sacked from his post as director of international operations at Northumbria University. But he was approved to direct an accreditation agency for private colleges, The Accreditation Service for International Colleges (ASIC).

ASIC then approved a college which was a front for an immigration scam that smuggled over 1,000 illegal immigrants into the country. It approved another that sold bogus diplomas, netting £5 million for its owners, who later fled the country.

 It was one of just seven such government approved organizations. It was run from a semi-detached house, and employed 5 staff including Mr Dimmock’s 78 year old father.
“There is a lack of information and transparency about (ASIC’s) management, governance and financial structures,” said the chief executive of Universities UK.

Source: The Times, June 2009

Measures that could have been taken to avoid this calamitous incident immediately emerge:

The government should have made sure that there was transparency about the governance and financial structures of ASIC. Only once they had an idea of how it works could the government be sure that – as it had claimed – ASIC was capable of performing its job properly.

The government should also have investigated why the director had been removed from his previous post. It would have been highly advisable to compile a full report on his credentials and examined any discrepancies in detail. Only then could the government have had full confidence in approving ASIC as an accreditor.

Case Study 2: Insurance claims handler hires contractors from Yell.com

Aspray Limited failed to control its business network by not “maintaining appropriate systems and controls for the recruitment, training and monitoring” of its appointed representatives.

In some cases, it had failed to make financial checks, compliance visits, and review the files of its appointed representatives.

It is a franchise company that manages insurance claims for property repairs. The FSA fined Aspray for failing to control its business network.

Source: FSA, March 2009

This company could have done more to ensure that its appointed representatives were bona fide and performing to the expected level. This posed a risk to their customers and their reputation. And they paid a price in the form of a fine of tens of thousands of pounds.

It would have been far more economical for the company to invest in checking the equipment and capabilities of their contractors. This could be achieved through an on-site audit and an interview enquiring about their policies concerning governance, security, and whether they hold necessary industry affiliations and qualifications.

Case Study 3: Fraudster’s request over £1.5m from financial administrator

Within the timescale of two months, £1.5m was requested from over 20 clients of Capita Financial Administrators (CFA). Fraudsters received £328,241 in actual payments.

The FSA fined CFA, a third party administrator that carries out client instructions to buy and sell investments, £300,000 for failing to have robust anti-fraud controls.

Source: FSA, March 2006

Companies can combat the risk of data loss through a third party supplier with several preventative precautions. They should ensure that suppliers’ IT systems meet standards recommended by governing bodies and the information commissioner. They must check suppliers’ governance policies regarding data security: they should find out that there is a data security manager, that staff are trained to be secure with sensitive data, and that there is a written policy which meets the minimum standards to guarantee that sensitive information for which the company is responsible remains safe. Overall, the company can protect their data by avoiding the bad practice listed to the left. This could be established through a visit to the company, or an interview over the phone, as would be expected when an important business deal is about to be agreed.

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