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A passion for fighting corruption

An interview with Alexandra Wrage



Alexandra Wrage, founder and president of TRACE International and a former member of FIFA's Independent Governance Committee, shares her thoughts on last year's FIFA scandals, the recent release of the Panama Papers and the keys to tackling global corruption through anti-bribery and corruption compliance support.

Football, or soccer, is arguably one of the most popular sports in the world. The 2014 FIFA World Cup Brazil reached a global in-home television audience of 3.2 billion people, breaking several TV audience records in key international markets, including the U.S. and Germany. More recently, the Barclays English Premier League took center stage when Leicester City FC beat unfathomable odds — 5,000 to 1 — to clinch the English Premier League trophy.

But behind the glitz of exotic World Cup locales and the excitement of soccer club rivalries lies a seemingly corrupt federation at the helm. On May 27, 2015, Swiss authorities, working together with U.S. officials, conducted an early-morning raid on a luxury hotel in Zurich, Switzerland, to arrest seven top soccer officials. FIFA, football's world governing body, continued to take hits when the U.S. Department of Justice indicted 14 FIFA officials and those connected with the organization after an investigation by the FBI and the IRS Criminal Investigation Division into wire fraud, racketeering and money laundering.

More news broke in September 2015 that the Swiss attorney general's office announced criminal proceedings against former FIFA President Sepp Blatter for "criminal mismanagement ... and misappropriation." Among the charges was an allegation that Blatter gave a "disloyal payment" of $2.1 million to Michel Platini, president of the Union of European Football Associations. FIFA's ethics committee banned Blatter and Platini from football for eight years, which was later reduced to six years. Platini's ban was reduced to four years on May 9, 2016.

And while 2015 may have put the FIFA scandal in the spotlight, 2016 has been equally unkind to FIFA with the release of the Panama Papers — 11.5 million stolen confidential documents detailing information about more than 214,000 offshore companies listed by the Panamanian corporate service provider Mossack Fonseca and the identities of company shareholders, directors and high-profile political figures. (See Shell shocked and ACFE.com/PanamaPapers.)

The papers suggest that Juan Pedro Damiani, a Uruguayan member of FIFA's Independent Ethics Committee, and his firm provided legal assistance for at least seven offshore companies linked to Eugenio Figueredo, former FIFA vice president and one of the seven officials arrested in Switzerland. Damiani has resigned his position on the committee. FIFA's newly elected president, Gianni Infantino, has also been named in the papers.

Alexandra Wrage, an anti-corruption expert and a former member of FIFA's Independent Governance Committee, provides a unique look into the workings of football's governing body and corruption on a global scale during a recent interview with Fraud Magazine.

Wrage is the president and founder of TRACE International, a nonprofit business association that pools resources to provide members with anti-bribery compliance support. (She also manages TRACE Inc., a separate firm that provides due diligence and consulting services for non-members.)

Wrage served on the 2015 B20 Taskforce on Anti-Corruption, which drafted recommendations to G20 leaders for consideration in their global economic policies. And she doesn't shy away from sharing her opinions and expertise when it comes to the rising tides of global corruption.

"FIFA is a very seductive place," says Wrage. "People arrive and are enthralled by the place pretty quickly. … At least with corporations, the shareholders can ultimately organize and declare that they've had enough. In the world of soccer governance, there are no shareholders. The fans, players and even the clubs have no voice.

"As for the scope of the Panama Papers, I don't think compliance professionals were all that surprised," continues Wrage. "No country can address this issue in isolation; it has to be made a priority by the international community or the accounts just become an elaborate shell game, moving from one jurisdiction to another."

Wrage, a keynote speaker at the 2016 ACFE Fraud Conference Canada, Sept. 11-14 in Montreal, Quebec, discusses widespread corruption and compliance issues around the world, including those affecting football's governing body.

FM: How did you come to work for FIFA's Independent Governance Committee?
       AW: Sepp Blatter asked Mark Pieth [professor of criminal law and criminology at the University of Basel] to create and lead an Independent Governance Committee (IGC). I'd known Mark for many years because of our work in the anti-bribery world, so he asked me to join that committee. The goal was to have both governance expertise and stakeholders on the committee and to have some regional diversity across the group. I was full time with TRACE throughout this time, but agreed to work on the IGC on a pro bono basis.

FM: What were your impressions of Sepp Blatter (former FIFA president) during your time on the committee?
       AW: Mr. Blatter gave me the very strong impression that he intended to control the scope of the reform process. He said that he wanted his legacy to be about the development of the sport and not the recent scandals, but he also talked about keeping things in "the football family" and bristled at some of the IGC's questions. Although he made it clear that inviting us in was his idea, he quickly also made it clear that his appetite for reform was limited. Very soon after we began our work, it seemed to me that appearing committed to reform was far more important than any actual reform.

FM: It's been a little over a year since the first FIFA arrests. Do you think FIFA is operating more honestly now? Has anything changed?
       AW: I don't think anything really can change when the leadership is largely the same. It's true that much of the top level of leadership has been banned, arrested or is under investigation, but the next tier down has simply moved up to take their places.

FM: FIFA recently elected a new president, Gianni Infantino. He has said that he would "usher in a ‘new era' for the sport's embattled governing body." However, Infantino was also recently named in the Panama Papers for reportedly signing off on a contract in 2006 with two businessmen who have since been accused of bribery. He's expressed "dismay" in the media over questions of his integrity. Did this revelation surprise you? Do you think Infantino is the right man for this job or do you think these recent allegations show continued faulty leadership?
       AW: I don't believe an insider was ever going to be the right person to lead FIFA out of its current morass. The FIFA rules are designed to favor an insider, so there was no real hope of a fresh start. The organization is rigged to benefit insiders. The best illustration of this? One of the last things Infantino did before the 209 Football Associations (FAs) voted for a new president was to promise every FA in the room a record $5 million each. That's more than a billion dollars that he promised to voters just minutes before they voted. When the FIFA leadership can allocate enormous sums to the FAs and the FAs keep the president in power, where's the incentive to look out for the players, the clubs or the fans?

FM: How do you feel about the world of soccer? How far do you think the arms of corruption extend within the sport?
       AW: Our group focused on (and largely failed at) reform at the corporate level, but the confederations and FAs clearly have their own challenges, as we've seen. And we didn't even turn to the issue of match fixing, which is a whole world of corruption, coercion and organized crime.

FM: Why did your group then — FIFA's Independent Governance Committee — fail? 
       AW: We were largely unsuccessful for two reasons: The first was that many recommended reforms were rejected outright or neutered. But, more importantly, we were working on governance upgrades to an organization that had more fundamental problems. We only learned recently, for example, about the secret, oral agreement between Blatter and Platini that led to their bans. No amount of external governance improvements can take hold when that sort of thing is happening at the highest levels and with the knowledge of Markus Kattner, FIFA's finance director and deputy secretary general. Kattner was fired on other grounds on May 23.

Citizens are losing patience with the petty shakedowns. They're insisting on greater transparency."

FM: What do you think the key is to turning FIFA around?
       AW: Independent oversight. FIFA is a very seductive place. People arrive and are enthralled by the place pretty quickly. The only way to break free of that is to have a powerful, short-term transition team with sweeping powers and a short-term mandate that can compel change. Otherwise, the old guard is simply replaced by the new. The problem has always been that only those in positions of authority can implement this idea and they have no incentive to do it. At least with corporations, the shareholders can ultimately organize and declare that they've had enough. In the world of soccer governance, there are no shareholders. The fans, players and even the clubs have no voice.

FM: Global corruption recently took center stage with the release of the Panama Papers. Were you surprised by the extent of the implications? How do you think global corruption of this magnitude can be fought?
       AW: I'm not a fan of secret companies, but offshore companies aren't necessarily evidence of corruption. There's no question that they're a tool used by the corrupt — and by narcotraffickers, terrorist organizations and other criminals — but the structure itself is typically legal.

As for the scope of the Panama Papers, I don't think compliance professionals were all that surprised. As long as these vehicles are readily available, they'll be used to protect privacy, for lawful tax avoidance and, yes, by criminals. No country can address this issue in isolation; it has to be made a priority by the international community or the accounts just become an elaborate shell game, moving from one jurisdiction to another.

FM: Like you just mentioned, shell companies can be used for legitimate reasons, such as "holding" non-physical assets, including copyrights, trademarks, patents and other intellectual property. Businesses also use them as accounting mechanisms to organize assets. However, criminals also use shell companies to launder money, evade taxes and perpetuate fraud, as evident with the release of the Panama Papers. How do you think we can more effectively prohibit criminals from using them for nefarious purposes?
       AW: The firms that establish these accounts claim to be doing exactly what the law requires of them, so it's clearly time to require greater due diligence prior to establishing these entities. New standards would then have to be policed by the host country.
 
FM: What realistic steps can be taken to crack down on money laundering? Will it have to come from law enforcement and international governing bodies, or will this have to be changes in the way businesses operate?
       AW: Efforts to reduce bribery and increase commercial transparency really took hold once there was a greater likelihood of enforcement actions on one side and a better understanding of the cost of bribery on the other. Well-run companies generally understand that bribery isn't good for business — negotiating bribe-tainted agreements is slow, expensive and uncertain. A company has no recourse when a corrupt transaction falls apart; the injured party can't exactly complain that the bribe recipient didn't hold up his end of the deal. But even with the business, corporate social responsibility and ethical implications, anti-bribery efforts didn't gain real momentum until enforcement picked up and companies could more easily justify compliance budgets. Anti-money laundering will probably follow the same path — some companies will do it because it's the right thing to do, but most will calculate the risk of non-compliance.
 
FM: You founded TRACE International in 2001 with support from a group of in-house anti-bribery compliance experts "to achieve economies of scale and set a widely benchmarked common standard for two shared elements of anti-bribery compliance programs: due diligence reviews of commercial intermediaries and anti-bribery training for the global marketing and supply chain." Can you tell me a little more about this? How does the day-to-day business operate? What are your goals? 
       AW: I was in-house at Northrop Grumman when I established TRACE, with Northrop's approval; I had planned to do it in my free time on a pro bono basis because there was clearly a need for a forum where companies could meet, benchmark and, when feasible, share resources. The organization was essentially designed to provide everything I heard in-house colleagues were asking for. So, for example, we have more than 300 member companies. If each of those companies had to buy or build online anti-bribery training, it would cost well over $10 million. Instead, TRACE invests heavily in effective, multilingual online training and then makes it available to these member companies at no cost. This does two things. First, it encourages them to use the training widely — for employees and for their supply chain — because there's no cost associated with it. But it also enables them to reallocate resources formerly used for online training to more targeted compliance tasks including, for example, periodic in-person training or on-the-ground interviews of third parties.

We have a similar model for due diligence. While due diligence can never be entirely standardized, the first 60 to 70 percent of these reviews are often identical: collect basic corporate information on ownership and structure, business registrations, financials, CVs, etc. and then screen everyone against watch lists and international media, provide anti-bribery training for the key people and identify any red flags. That's what TRACE-certified due diligence does, and we do it on a shared cost basis so that companies have a solid starting point before doing their own deal-specific due diligence.

FM: Did one incident motivate you to begin TRACE, or was it just a "slow boil" over time?
       AW: There was definitely one incident: I learned that a government official in a north African country was telling each company bidding for a contract that every other bidder had promised him a payment under the table. He was suggesting that "everyone else" was on board to pay bribes, but when it came down to it, none had agreed. He was making the whole thing up to try to start a bidding war! It's important for serious, well-run companies to have a forum in which they can discuss compliance challenges — like this, but also more mundane challenges — and to work together to develop solutions. Most companies know where the challenges are and want to start moving toward solutions.  

FM: Have you always had a need to encourage integrity in business or did the desire grow over time?
       AW: After high school in Canada, but before attending university in England, I traveled and did volunteer work in Asia and the Middle East for a couple of years. The damage done by corruption was obvious even then, but it wasn't until after my law degree that I saw the positive role that business could play. It's so easy to blame companies for widespread corruption, but most companies would prefer to do business in a clean and transparent manner and in markets where the best product and a good price wins the contract.

I don't believe an insider was ever going to be the right person to lead FIFA out of its current morass."

FM: Since Dr. Joseph T. Wells, CFE, CPA, founded the ACFE in 1988, he's concentrated not just on fighting fraud but providing strategies for preventing it. What are some ways TRACE International works to help others deter bribery situations before they discover costly crimes?
       AW: I love this question. TRACE has always been focused primarily on the prevention of bribery. We invest heavily in training — excellent, multilingual online training modules, which are free to our members, as well as in-person training events. The in-person events are held at commercial hubs like Dubai and Singapore but also in very challenging markets, like Lagos, Jakarta and Malabo. People need an opportunity to talk not only about the challenge of corruption but some practical responses. We spend a lot of time helping people develop a vocabulary they can use to respond to bribe demands. It's not enough to just tell them they can't pay when they're in markets where they'll face almost daily demands.

We also have an online resource center with materials from partner law firms in 140 countries that make it clear what local anti-bribery laws require of them: Are there limits on hospitality that can be provided to government officials? Who exactly is a government official under local law? Is the use of a third-party agent permitted in country?

And, finally, we've invested most heavily in shared cost due diligence. We have TRACE-certified due diligence reports, of which I described more earlier.

FM: Do you have stories of how some TRACE members were able to nip corruption in the bud or halted grievous cases? Any cases that excite you and make you realize you did the right thing in creating TRACE?
       AW: We do a lot of training in challenging countries for our members. Our sessions are very practical with a lot of examples and case studies that prompt discussion — sometimes very lively discussion! The conversations around these training sessions have identified some weaknesses that enable members to bolster their programs. We have a book series called, "How to Pay a Bribe: Thinking Like a Criminal to Thwart Bribery Schemes." When you're meeting with staff on the front lines and asking them what their compliance weaknesses are, you generally get a blank stare. But if you ask them to think like a local criminal and tell you how they would generate money for and pay a bribe, they often have some frighteningly good ideas. You can then work backwards from those and plug the gaps.

The world will never be free of corruption, just as it will never be free of other forms of crime. But it never gets old to hear people in really tough countries talking about how committed they are to reducing bribery. They know the damage it's doing to their countries. They know that it's a problem that can only be tackled collaboratively. Hearing people say that their association with TRACE makes them realize that there's a community of people working on exactly the same issues is incredibly satisfying.

At an event in Ghana earlier this year where we'd helped dozens of small local companies work for months to become TRACE certified, one man stood up. He looked to us at the front and thanked us for supporting the local business community. But then he looked around at his fellow Ghanaian businessmen and women and thanked them for reminding him that he isn't alone. It was incredibly encouraging.

FM: What encouragement can you give fraud examiners — who toil in the trenches every day?
       AW: The work you're doing is important, and it's having an impact even if it's not always visible to you. I've participated in projects in more than 120 countries. In almost every case, the situation is trending in the right direction. Citizens are losing patience with the petty shakedowns. They're insisting on greater transparency. Anti-bribery laws have been passed and, slowly, we're beginning to see these enforced. Companies are making compliance a priority. It's all too slow, but it's headed in the right direction. 
 
FM: Can you give our readers some idea of what you might be speaking about at the 2016 ACFE Fraud Conference Canada
       AW: I'll draw on my experience with corporations transitioning to more cost-effective, robust and sustainable compliance programs, as well as the failed effort at FIFA — I'll endeavor to provide some "lessons learned" in each case.

Emily Primeaux, CFE, is assistant editor of Fraud Magazine. Her email address is: eprimeaux@ACFE.com.





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