1 00:00:05,920 --> 00:00:08,640 Speaker 1: Welcome to the Fear and Greed Daily Interview. I'm sure, almam. 2 00:00:08,880 --> 00:00:11,280 Speaker 1: There is so much disruption in the global economy at 3 00:00:11,320 --> 00:00:13,560 Speaker 1: the moment thanks to US trade policy, wars in the 4 00:00:13,560 --> 00:00:18,840 Speaker 1: Middle Eastern Europe, and uncertainty around Chinese ambitions, among others, 5 00:00:19,960 --> 00:00:23,479 Speaker 1: that it's easy to lose sight of other business risks. 6 00:00:23,680 --> 00:00:27,320 Speaker 1: One such risk is corruption, or, as our guest today 7 00:00:27,640 --> 00:00:31,200 Speaker 1: puts it, the c in ESG. Morris burg is. He 8 00:00:31,240 --> 00:00:36,159 Speaker 1: Managing Director Investigations, Diligence and Compliance at Kroll Krouble La 9 00:00:36,320 --> 00:00:41,000 Speaker 1: Strategic Consultancy, focusing in part on enterprise risk. He argues 10 00:00:41,000 --> 00:00:44,600 Speaker 1: coruption is becoming a growing problem for global businesses. Maurice, 11 00:00:44,680 --> 00:00:45,600 Speaker 1: Welcome to Fear and Greed. 12 00:00:45,960 --> 00:00:46,280 Speaker 2: Thank you. 13 00:00:46,280 --> 00:00:51,440 Speaker 1: Sean. Generally, broadly, is corruption more of a problem now 14 00:00:52,400 --> 00:00:53,760 Speaker 1: than it has been previously? 15 00:00:54,720 --> 00:00:57,560 Speaker 2: So I think the short answer is no. 16 00:00:58,720 --> 00:01:00,160 Speaker 3: In that I think, you know, I would say it's 17 00:01:00,160 --> 00:01:04,400 Speaker 3: always been a problem, and that in sort of relative terms, 18 00:01:05,040 --> 00:01:07,959 Speaker 3: it's not that corruption per ses growing as a problem 19 00:01:08,120 --> 00:01:09,240 Speaker 3: in the global economy. 20 00:01:09,800 --> 00:01:13,520 Speaker 2: But I think it is interesting when we talk about 21 00:01:14,120 --> 00:01:18,360 Speaker 2: regulative risk and compliance pressures that businesses face as to 22 00:01:18,400 --> 00:01:21,279 Speaker 2: whether it's it's somewhat taking a back seat in terms 23 00:01:21,280 --> 00:01:27,200 Speaker 2: of where businesses are parking their compliance resources. And it's 24 00:01:27,600 --> 00:01:31,080 Speaker 2: also interesting to answer your question by reference to you know, 25 00:01:31,400 --> 00:01:34,120 Speaker 2: is this a problem in Australia. Is it a domestic 26 00:01:34,200 --> 00:01:37,640 Speaker 2: issue for Australian businesses? And I think that the honest 27 00:01:37,680 --> 00:01:40,520 Speaker 2: answer again is no, that's not a growing issue. Corruption 28 00:01:40,600 --> 00:01:43,880 Speaker 2: is an everyday reality and Australia is not corruption free. 29 00:01:44,280 --> 00:01:47,640 Speaker 2: But the real problem kicks in when Australian businesses go 30 00:01:47,720 --> 00:01:51,800 Speaker 2: offshore into jurisdictions where corruption is far more of an 31 00:01:51,840 --> 00:01:56,960 Speaker 2: everyday reality and a threat. And that's when Australian businesses 32 00:01:57,000 --> 00:02:00,160 Speaker 2: tend to trip up where they're in these high risk environments. 33 00:02:00,640 --> 00:02:04,680 Speaker 1: Okay, so let's then get a definition of corruption, and 34 00:02:04,720 --> 00:02:07,040 Speaker 1: then we might look at a few in certainly the 35 00:02:07,040 --> 00:02:10,480 Speaker 1: mining companies at different times. There's stories about what's happening 36 00:02:10,639 --> 00:02:14,160 Speaker 1: when they're in different jurisdictions. But what is what is corruption? 37 00:02:15,560 --> 00:02:20,400 Speaker 2: So look, essentially, it's providing some kind of benefit to 38 00:02:21,080 --> 00:02:24,519 Speaker 2: a government official or accounter party. Yeah, on a sort 39 00:02:24,520 --> 00:02:27,919 Speaker 2: of confidential basis, to gain some sort of advantage, right, 40 00:02:27,960 --> 00:02:30,520 Speaker 2: I mean that's the kind of water down version of 41 00:02:30,639 --> 00:02:35,280 Speaker 2: most regulatory definitions of corruption. So it's it's paying a 42 00:02:35,320 --> 00:02:39,200 Speaker 2: government official to issue a license to you. It's paying 43 00:02:39,200 --> 00:02:42,519 Speaker 2: a significant amount of money to a company that's put 44 00:02:42,560 --> 00:02:45,880 Speaker 2: out a tender for a construction project. It's paying a 45 00:02:45,880 --> 00:02:48,480 Speaker 2: small amount of money to a customs official to allow 46 00:02:48,520 --> 00:02:52,399 Speaker 2: your goods to come through. Now the sort of traditional examples, 47 00:02:52,400 --> 00:02:55,120 Speaker 2: if you like, but corruption gets much more in citios. 48 00:02:55,160 --> 00:02:57,639 Speaker 2: And then maybe this is you know where risk grows, 49 00:02:57,680 --> 00:03:01,040 Speaker 2: particularly for Australian companies operating offshore. You know, we see 50 00:03:01,040 --> 00:03:05,120 Speaker 2: corruption happening in circumstances where garments clothes are being made 51 00:03:05,240 --> 00:03:08,920 Speaker 2: in factories in South Asia and bribes are being paid 52 00:03:09,080 --> 00:03:14,040 Speaker 2: to factory inspectors to turn a blind eye to human 53 00:03:14,040 --> 00:03:18,040 Speaker 2: slavery issues, you know, underage workers and terrible working conditions. 54 00:03:18,320 --> 00:03:21,079 Speaker 2: That's the hidden sea in an ESG issue. So that's 55 00:03:21,120 --> 00:03:24,640 Speaker 2: corruption that's threatening human lives but feeding through to the 56 00:03:24,639 --> 00:03:27,600 Speaker 2: consumption of a product like garments in Australia. They did 57 00:03:27,639 --> 00:03:33,160 Speaker 2: an investigation in South Asia where a factory manufacturing electronics 58 00:03:33,160 --> 00:03:35,800 Speaker 2: goods couldn't understand why there was such a high risk 59 00:03:35,880 --> 00:03:40,280 Speaker 2: of serious fatalities and injuries in the workplace, and they 60 00:03:40,320 --> 00:03:42,680 Speaker 2: again and again checked their equipment to discover that it 61 00:03:42,720 --> 00:03:45,160 Speaker 2: was all in perfectly good order until they realized that 62 00:03:45,200 --> 00:03:49,920 Speaker 2: the Human Resources Department were taking bribes to hire people 63 00:03:50,000 --> 00:03:55,920 Speaker 2: who were illiterate despite the requirement for a certain degree 64 00:03:55,920 --> 00:03:58,040 Speaker 2: of literacy, and so these people couldn't read any of 65 00:03:58,080 --> 00:04:03,520 Speaker 2: the safety warnings on equipment corruption, endangering lives and causing problems. 66 00:04:03,680 --> 00:04:06,960 Speaker 2: And again, when you talk about insidious coruption, if you're 67 00:04:07,000 --> 00:04:12,560 Speaker 2: paying government regulatory bodies in the construction space to ignore 68 00:04:12,640 --> 00:04:16,680 Speaker 2: the quality of construction, you're putting economies in jeopardy. You're 69 00:04:16,680 --> 00:04:19,520 Speaker 2: putting people in jeopardy, you know, and a lot of 70 00:04:19,520 --> 00:04:22,680 Speaker 2: money is lost when buildings are built badly. 71 00:04:23,120 --> 00:04:26,640 Speaker 1: Okay, So I mean the cost of this then is 72 00:04:26,680 --> 00:04:28,560 Speaker 1: as bad as human life, literally. 73 00:04:28,800 --> 00:04:32,159 Speaker 2: It can be, you know. And this is this is 74 00:04:32,200 --> 00:04:36,080 Speaker 2: why we, you know, engage in very closely with clients 75 00:04:36,080 --> 00:04:40,080 Speaker 2: who it's it's it's simplistic to say have been distracted 76 00:04:40,160 --> 00:04:43,520 Speaker 2: by the E and the S in ees G. Because 77 00:04:43,520 --> 00:04:46,039 Speaker 2: these are these are important things, you know, saving the 78 00:04:46,040 --> 00:04:50,039 Speaker 2: planet and protecting people our critical objectives as well. But 79 00:04:50,560 --> 00:04:52,680 Speaker 2: there's a lot of businesses who have said, right, well, 80 00:04:52,720 --> 00:04:56,440 Speaker 2: let's focus on our environmental footprint and ensuring that we're 81 00:04:56,680 --> 00:04:59,039 Speaker 2: you know, we're not damaging the environment in the places 82 00:04:59,040 --> 00:05:01,480 Speaker 2: where we operate. Le's look at modern slavery. Let's make 83 00:05:01,480 --> 00:05:04,520 Speaker 2: sure that all our workers are looked after and businesses 84 00:05:04,600 --> 00:05:08,320 Speaker 2: have finite compliance, real resources, you know, and that often 85 00:05:08,640 --> 00:05:12,680 Speaker 2: we see that businesses are distracting their compliance people away 86 00:05:12,720 --> 00:05:16,799 Speaker 2: from you know, a traditional pursuit of corruption and looking 87 00:05:16,839 --> 00:05:19,640 Speaker 2: at fraud and are now worried about these issues. And 88 00:05:19,720 --> 00:05:22,800 Speaker 2: that's that's causing you know, something of a vacuum if 89 00:05:22,800 --> 00:05:25,040 Speaker 2: you like, where corruption issues are on the rise. 90 00:05:25,520 --> 00:05:27,440 Speaker 1: Stay with you, Marris. We'll be back in a moment. 91 00:05:34,160 --> 00:05:37,520 Speaker 1: I'm speaking to Marris Burke from Kroll. Before the break. 92 00:05:37,560 --> 00:05:40,240 Speaker 1: You said that corruptions on the rise in some areas, 93 00:05:40,279 --> 00:05:44,080 Speaker 1: it will presume you're talking about in some is it geographies, 94 00:05:44,240 --> 00:05:47,360 Speaker 1: is it sectors? Where is it that we've really got 95 00:05:47,360 --> 00:05:48,080 Speaker 1: to keep an eye out for. 96 00:05:49,120 --> 00:05:54,640 Speaker 2: So as global business gets more complex, opportunities for corruption grow. 97 00:05:55,520 --> 00:05:59,400 Speaker 2: You know, I've been looking at, for example, Southeast Asian 98 00:05:59,600 --> 00:06:03,360 Speaker 2: corruption issues in countries like Indonesia and Vietnam, who are 99 00:06:03,360 --> 00:06:06,239 Speaker 2: both fighting corruption. But you know, there was a time 100 00:06:06,279 --> 00:06:09,160 Speaker 2: when senior local officials would say, look, in the old days, 101 00:06:09,160 --> 00:06:11,640 Speaker 2: coruption was pretty simple. You just paid a bribe to 102 00:06:11,680 --> 00:06:15,200 Speaker 2: the central government. Now it's more complicated. We have different ministries, 103 00:06:15,240 --> 00:06:18,120 Speaker 2: we have different regulators. You know, exactly who should get 104 00:06:18,160 --> 00:06:21,520 Speaker 2: paid is not always immediately be parent. So that side 105 00:06:21,520 --> 00:06:25,679 Speaker 2: has got more complicated. But economies grow, you know, looking 106 00:06:25,720 --> 00:06:30,359 Speaker 2: at Indonesia or Vietnam, these are fantastically prosperous economies. The 107 00:06:30,440 --> 00:06:33,680 Speaker 2: bigger and economy grows, the more opportunity there is for 108 00:06:33,720 --> 00:06:34,440 Speaker 2: fraud and corruption. 109 00:06:34,960 --> 00:06:38,599 Speaker 1: Does Australian governments and regulators do enough around this area? 110 00:06:40,080 --> 00:06:44,960 Speaker 2: So certainly domestically, you know, we are lucky. Australia's standing 111 00:06:45,000 --> 00:06:48,880 Speaker 2: has and there are various sort of scores that you 112 00:06:48,920 --> 00:06:51,400 Speaker 2: can reference. Often you have to be a little bit 113 00:06:51,760 --> 00:06:55,599 Speaker 2: cautious about about how they're ranking countries in terms of 114 00:06:55,600 --> 00:06:59,520 Speaker 2: corruption risk. But Australia has as essentially always stayed within 115 00:06:59,560 --> 00:07:03,680 Speaker 2: the top ten globally of sort of low risk environments 116 00:07:03,720 --> 00:07:06,880 Speaker 2: for corruption purposes. And you have to you have to 117 00:07:06,920 --> 00:07:10,880 Speaker 2: credit a good corporate culture, you have to credit law enforcement, 118 00:07:10,920 --> 00:07:15,280 Speaker 2: You have to look at the efforts on shore that 119 00:07:15,320 --> 00:07:18,360 Speaker 2: have kept Australia in that environment. But you go straight 120 00:07:18,400 --> 00:07:23,480 Speaker 2: to know that's Trans's an organization called Transparency International who 121 00:07:23,640 --> 00:07:26,920 Speaker 2: create a corruption Perception index and this is the best 122 00:07:27,040 --> 00:07:32,320 Speaker 2: metric out there to judge objective corruption. And you go 123 00:07:32,440 --> 00:07:34,840 Speaker 2: from number ten, which is roughly where Australia is, to 124 00:07:35,560 --> 00:07:38,880 Speaker 2: I think number fifty or something when it comes to India, 125 00:07:38,920 --> 00:07:41,480 Speaker 2: and then eighty eight is Vietnam and ninety nine out 126 00:07:41,480 --> 00:07:45,760 Speaker 2: of one hundred and eighty countries, Indonesia is considered pretty 127 00:07:45,800 --> 00:07:49,960 Speaker 2: much it's just almost outside the top one hundred. So 128 00:07:50,000 --> 00:07:53,160 Speaker 2: these are these are high risk environments. So is Australia 129 00:07:53,200 --> 00:07:58,480 Speaker 2: doing enough to protect Australian businesses operating in these markets? 130 00:07:58,760 --> 00:08:01,360 Speaker 2: It's certainly created a regular true framework which is designed 131 00:08:01,400 --> 00:08:03,960 Speaker 2: to do that. But you can it's it's I don't 132 00:08:03,960 --> 00:08:07,720 Speaker 2: need to describe the obvious challenges of police in corruption 133 00:08:08,200 --> 00:08:11,200 Speaker 2: in Southeast Asian nations from an Australian perspective. It would 134 00:08:11,200 --> 00:08:14,480 Speaker 2: just be an extraordinary strain on resources even if it 135 00:08:14,560 --> 00:08:16,000 Speaker 2: was even if it was possible. 136 00:08:17,000 --> 00:08:19,160 Speaker 1: You haven't mentioned cyber yet, now I know. The twenty 137 00:08:19,200 --> 00:08:22,720 Speaker 1: twenty five Global Business Sentiment survey from Kroll talks to 138 00:08:22,720 --> 00:08:25,280 Speaker 1: twelve hundred senior business leaders across a bunch of countries. 139 00:08:25,480 --> 00:08:29,520 Speaker 1: Cyber comes up as a key fear. Is that about 140 00:08:29,520 --> 00:08:30,880 Speaker 1: corruption or is that something different? 141 00:08:31,880 --> 00:08:35,800 Speaker 2: No, that's about theft, that's just about it's just about fraud, 142 00:08:36,520 --> 00:08:40,839 Speaker 2: the complexity. It's rather our other favorite topic at the moment. 143 00:08:40,920 --> 00:08:43,319 Speaker 2: You know, is the world about to fold in on 144 00:08:43,360 --> 00:08:45,720 Speaker 2: itself as a result of cyber risk and fraud? And 145 00:08:45,760 --> 00:08:49,920 Speaker 2: the answer is really no. But cyber just creates the 146 00:08:49,960 --> 00:08:56,840 Speaker 2: opportunity for bad actors to create fraudulent activities faster, bigger 147 00:08:56,960 --> 00:08:59,920 Speaker 2: and better and are able to sort of, you know, 148 00:09:00,640 --> 00:09:04,400 Speaker 2: find ways to get around protections that companies have historically created. 149 00:09:04,800 --> 00:09:06,760 Speaker 2: Is cyber the end of the planet as we understand it? 150 00:09:06,880 --> 00:09:08,880 Speaker 2: We don't think so. You know, there was a lot 151 00:09:08,880 --> 00:09:11,400 Speaker 2: of rumbles if you start to look back a couple 152 00:09:11,440 --> 00:09:14,080 Speaker 2: of decades when online banking became a reality, and it 153 00:09:14,120 --> 00:09:18,320 Speaker 2: was a long time before law enforcement and compliance systems 154 00:09:18,360 --> 00:09:21,960 Speaker 2: caught up with the risk that online banking created. You know, 155 00:09:22,000 --> 00:09:23,560 Speaker 2: we all thought the world was going to fold in 156 00:09:23,559 --> 00:09:26,720 Speaker 2: on itself at wait two k. So, yeah, none of 157 00:09:26,720 --> 00:09:31,680 Speaker 2: these risks actually knew. It's just the traditional chase between 158 00:09:31,720 --> 00:09:36,400 Speaker 2: the bad guys finding faster, better, quicker tools to try 159 00:09:36,400 --> 00:09:40,280 Speaker 2: and steal in law enforcement and corporate compliance plane catch up. 160 00:09:40,440 --> 00:09:42,840 Speaker 2: And I think that's what we're seeing in the cyberspace. 161 00:09:42,559 --> 00:09:44,480 Speaker 1: And we are out of time, But I can't let 162 00:09:44,559 --> 00:09:47,760 Speaker 1: you go without at least mentioning AI, artificial intelligence and 163 00:09:47,760 --> 00:09:52,560 Speaker 1: how that fits in to this process. The scary stories 164 00:09:52,559 --> 00:09:55,480 Speaker 1: are about AI doing all sorts of things that are 165 00:09:55,480 --> 00:09:57,440 Speaker 1: corrupt and we don't want to know about. But I mean, 166 00:09:57,520 --> 00:09:58,320 Speaker 1: is that the reality? 167 00:09:58,720 --> 00:10:01,679 Speaker 2: So a I'll give you a short answer to an 168 00:10:02,200 --> 00:10:05,160 Speaker 2: extremely complicated question. But often clients come and say, how 169 00:10:05,200 --> 00:10:07,360 Speaker 2: are we going to fight AI? You know, how are 170 00:10:07,360 --> 00:10:09,719 Speaker 2: we're possibly going to cope with this? And a lot 171 00:10:09,720 --> 00:10:13,360 Speaker 2: of the time the answer is a I. You know, 172 00:10:13,760 --> 00:10:16,439 Speaker 2: it's not just a tool that the bad codes can deploy. 173 00:10:16,640 --> 00:10:19,680 Speaker 2: You know, the best compliance systems we see now, which 174 00:10:19,720 --> 00:10:24,160 Speaker 2: are you know, tracking aberrant patterns of behavior or a 175 00:10:24,240 --> 00:10:28,360 Speaker 2: normalist kind of financial movements AI driven. So yeah, the 176 00:10:28,400 --> 00:10:32,240 Speaker 2: trick is to get in and embrace AIS as an 177 00:10:32,240 --> 00:10:34,360 Speaker 2: effective compliance tool and do all of the bits of 178 00:10:34,360 --> 00:10:38,119 Speaker 2: pieces associated with that, which is good training, good integration, 179 00:10:38,800 --> 00:10:41,920 Speaker 2: you know, constantly monitoring the I AI to make sure 180 00:10:41,920 --> 00:10:44,040 Speaker 2: that it's doing what it's supposed to be doing. But 181 00:10:44,120 --> 00:10:46,679 Speaker 2: you know, it's it's a better compliance tool that it 182 00:10:46,720 --> 00:10:50,400 Speaker 2: is a weapon for fraudsters. So you know, the short 183 00:10:50,400 --> 00:10:53,480 Speaker 2: answer is, if you're worried about AI and get a 184 00:10:53,480 --> 00:10:55,280 Speaker 2: good AI consultant, al. 185 00:10:55,280 --> 00:10:57,480 Speaker 1: Ris, thanks for talking. If you're ingreed, thank you. 186 00:10:57,520 --> 00:10:59,200 Speaker 2: I was going to add, by the way, just to summarize, 187 00:10:59,240 --> 00:11:02,400 Speaker 2: I love the name of the podcast, but I was 188 00:11:02,679 --> 00:11:04,839 Speaker 2: I was having a giggle because it seems that when 189 00:11:04,840 --> 00:11:07,920 Speaker 2: you're talking about corruption, the problem with corruption is there's 190 00:11:08,000 --> 00:11:09,520 Speaker 2: too much greed and not enough fear. 191 00:11:09,679 --> 00:11:13,840 Speaker 1: A very appropriate Well, it's called fear and greed because markets, 192 00:11:13,840 --> 00:11:15,920 Speaker 1: of course are driven by fear and greed. Benjamin Graham 193 00:11:15,960 --> 00:11:19,319 Speaker 1: said that decades and decades ago, and maybe corruption is 194 00:11:19,360 --> 00:11:20,439 Speaker 1: driven by fear and greed too. 195 00:11:20,480 --> 00:11:23,960 Speaker 2: Then well it's driven there. I definitely agreed. Sometimes the 196 00:11:24,000 --> 00:11:26,400 Speaker 2: best the best. I lived in Singapore for twenty three years. 197 00:11:26,440 --> 00:11:30,480 Speaker 2: The anti corruption fight there is driven by fear after 198 00:11:30,760 --> 00:11:34,040 Speaker 2: getting caught, so it's a slightly different enemy. But thank you, 199 00:11:34,120 --> 00:11:34,680 Speaker 2: thank you, Sere. 200 00:11:35,000 --> 00:11:38,599 Speaker 1: That was Mauris Berg, Managing director Investigations, Diligence and Compliance 201 00:11:38,640 --> 00:11:41,640 Speaker 1: at Kroll. This is the Fear and Greed Business Interview. 202 00:11:41,880 --> 00:11:43,880 Speaker 1: Join us every morning for the full episode of Fear 203 00:11:43,920 --> 00:11:47,200 Speaker 1: and Greed at Business News. You can use I'm Chanel Mark. 204 00:11:47,480 --> 00:11:48,040 Speaker 1: Enjoy today