Compliance Professional Resources    David DeMartino    212.257.6500 ext.1    ddemartino@compliancepros.net
February 2009
	Latest News
	Compliance Professional Resources, LLC. Launches as a Unique Full-Service Regulatory Compliance Company NEW YORK, Sept. 17 /PRNewswire/ - Dave DeMartino, formerly of Prime Associates, Inc., and Len Adams, CEO/Founder of Adams Consulting Group, LLC. (ACG) and co-owner of The ARD Group, announced today the creation of a joint venture called Compliance Professional Resources, LLC. (CPR). CPR will use the combined skills and resources of ACG and ARD. The company will be focused in the Regulatory Compliance market, providing strategic compliance consulting services, as well as Compliance-focused Executive Search, Recruitment and Temporary staffing services. Dave DeMartino has 10 years of experience in the regulatory compliance space, as a co-founder of Prime Associates, Inc. Prime has been a pioneer in Patriot Act technology. Len Adams has 30 years experience in the recruiting and consultancy arena, specifically directed toward the international banking and Financial Services sectors. Adams is also a co-owner of The ARD Group, which offers recruiting services to the insurance sector. As noted by DeMartino, "I expect that the combined skills and resources of ACG and ARD will make CPR a juggernaut in the compliance arena. Our recruiting expertise, consulting services and strategic relationships in the marketplace will make CPR a force in the regulatory compliance community."		As Adams indicates, "CPR's concept of recruiting and consulting services in one organization will set us apart from the rest of the community." About Dave DeMartino Co-founder in the firm Prime Associates, Inc. Ran all of sales and marketing. Helped pioneer the regulatory Compliance technology space by designing and deploying AML, EDD, and OFAC technology in 1999. DeMartino was the former committee chair of the IFSA Technology Committee and the current chair of the IFSA Compliance and Risk Committee. About Len Adams Mr. Adams is CEO and founder of Adams Consulting Group/ACG Resources. He has a 30-year record of achievement in servicing the staffing needs of many prestigious corporations, software companies, banks, and financial services institutions -- nationally and internationally. He currently chairs the Human Resources Committee - International Financial Services Association (IFSA). He was a past Member of Board of Directors of APCNY (Association Personnel Consultants of New York) and a past Chairman of the Ethics Committee, APCNY. He is also a co-founder of International Business Group.
	This issue's articles:
	Issues of Compliance and Risk For Securities Broker-Dealers When Hiring Individuals Without Pristine Records Trade Finance in Today's Regulatory Environment		Using Recruiters to Find Personnel Preventing Fraud in Your Organization
	Issues of Compliance and Risk For Securities Broker-Dealers When Hiring Individuals Without Pristine Records
	by Kevin Scott Koplin, Partner Barton Barton & Plotkin, LLP kkoplin@bartonesq.com | www.bartonesq.com Even with the tailspin in the economy and employers having their pick of the employee litter, it is not always easy to find the perfect candidate to fill a position. And the definition of "perfect" can have a vastly different meaning depending on one’s role at a company that is in a regulated industry, such as the securities industry: management wants an employee who will attain rainmaker-level status while the compliance and risk departments want an employee who, simply put, will not increase their workload. Background checks, within the limits permitted by law, will verify representations made by the candidate on their resume and, more importantly, shed light on whether the candidate is "statutorily disqualified" or requires "heightened supervision". Sections 3(a)(39) and 15(b)(4)(A) of the Securities Exchange Act identify some of the events that would render an individual "statutorily disqualified" for employment at a broker-dealer: Certain misdemeanor and all felony criminal convictions for a period of ten years from the date of conviction; Temporary and permanent injunctions issued by a court of competent jurisdiction involving a broad range of unlawful investment activities; Expulsions and current suspensions from membership or participation in a self-regulatory organization; Bars and current suspensions ordered by the SEC or self-regulatory organizations; Denials or revocations of registration by the SEC or CFTC; and Findings that a member or person has made certain false statements in applications or reports made to, or in proceedings before, self-regulatory organizations.		Individuals who have a history of industry/regulatory-related incidents, but who fall short of being statutorily disqualified – the regulatory approach to the sayings of "where’s there’s smoke there’s fire" – require heightened supervision. Some of these triggering incidents are: Three or more customer complaints alleging sales practice abuse with the past two years; A complaint filed by a regulator; An injunction in connection with an investment-related activity; A termination for cause or permitted to resign from a former employer where the termination appears to involve a significant sales practice or regulatory violation; or Employment with three or more broker-dealers in the past five years. What should be readily apparent about some of the statutory disqualifying and heightened supervisory events is that they are very easy to overlook, such as an enumerated misdemeanor or an employment history of three or more jobs in the past five years. Is the reviewer of the candidate’s background knowledgeable about what constitutes a statutory disqualification? Do these same individuals actually count the number of broker-dealer positions over the past five years for each applicant? If employment is offered to an individual who is statutorily disqualified or who requires, but is not given heightened supervision, it could present tremendous regulatory risks for the employer and its customers. Customer complaints and enforcement matters involving such individuals may be indefensible, unmitigatible, and incredibly costly in terms of time, money, and reputation. Therefore, it is imperative that companies conduct rather detailed background checks on prospective candidates. For broker-dealers this should include obtaining a copy of the candidate’s past Forms U5 and the current Form U4 and thoroughly reviewing all of them to determine is there is an event that warrants the attention of the compliance and risk departments. Finally, best practice would entail using a checklist to determine that the candidates are not statutorily disqualified or require heightened supervision. This checklist would be made part of the candidates personnel file as a record of the steps taken in this incredibly important but often underappreciated area of compliance and risk management.
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	Using Recruiters to Find Personnel
	by Len Adams, CPC, CEO Adams Consulting Group, LLC Whether your business is small (and seeking start-up staff) or large (and seeking to replace key executives), there are many methods of identifying and attracting qualified staff, including running newspaper ads, getting recommendations from existing staff, "networking," or just depending on walk-in candidates. All of these are fine, but recruiting firms, when used properly, can be one of the most effective methods of getting quality personnel. How do you find and use recruiting firms as an effective staffing option? Here are some details on why, when, and how to use them. Varied situations. Whether the position becomes available because of termination, resignation, retirement, or addition to staff, the key reasons for retaining a recruiting firm are: Confidentiality. Particularly when expanding your staff or when replacing an employee, you may not want your competitors or other employees to know your plans. So a newspaper ad may be out of the question (a blind ad-with a box number-is possible, but many candidates won't answer it for fear of applying to their own employer). But you can conduct your search in confidence through a recruiter: Since the recruiting firm's most valuable asset is information, it won't reveal its clients. All preliminary interviews are completed without identifying the client organizations. Only when there's sufficient interest in setting up an interview is the client revealed. Cost effectiveness. When searching for qualified candidates, there are cost factors that need to be considered. For example, the cost of advertising in a major newspaper or business publication can range from several hundred to several thousand dollars. If an ad generates only a few responses, the money may be wasted. Even with a large response, the time and cost involved in processing responses and interviewing applicants can be overwhelming and may not reap a qualified candidate. A recruiting firm, on the other hand, saves both time and money simply because it handles the preliminary screening and interviewing. Thus, the client interviews only those candidates who fit its criteria. And, if the recruiter is hired on a contingency basis, there's no financial obligation until the position is filled. Ability to tap the market. Some of the best candidates do not read newspaper ads: A recruiting firm can reach those candidates who are not actively seeking new jobs. Further, a recruiting firm may be able to attract candidates from within your industry without compromising your firm's reputation. Ability to attract talent. A recruiting firm that's active in a particular industry generally has developed relationships with "up and coming" candidates. Such a firm may be able to reach high caliber individuals who may not be approachable otherwise. COMMITMENT. Don't consider using a recruiting firm until you've completed an unsuccessful internal search, are convinced that using a recruiter would be your most cost-efficient option, and are ready to cooperate fully with the firm. Tools of the Search After you've selected a particular recruiting firm, it's important to provide it as much information as possible about your company and the open position, Adams says. To educate the recruiter about the company, you should furnish the details of your main business line, operating units, asset/capitalization size, and benefits. An annual report and orga-nizational chart, if available, are also helpful. Supplying information about the available position is imperative. This should include: the exact functional/operational title; education, experience, and expertise requirements; salary range; why the position is open, how long it's been open, and whether in-house candidates have been considered; background of employee currently holding position; personality factors, including traits needed for job success and the personality of the position's supervisor (a meeting with the recruiter is advisable); competitors or other companies where a candidate is likely to be found (and companies that shouldn't be tapped); and your interviewing and hiring procedures. A written position description is generally helpful. Types of recruiters. Employment agencies find jobs for people, while contingency search firms and retained search firms work for the employer. Method of billing is another way of distinguishing the types of firms. With all three types of recruiter, fees are paid by the employer and are based on a percentage of the candidate's estimated first year's compensation - generally 1% per $1,000 of salary to a maximum of 30% (for example, at a salary of $30,000, the fee would amount to $9,000). Employment agencies and contingency search firms get their fees when the candidate begins work with the client; fees paid to a retained search firm are delivered on a set schedule (usually one-third when retained, another third after 30 days, and the final payment when the candidate begins work). Retained search firms also bill additionally for expenses. Guarantee periods vary from 30 days to 90 days, with full or partial credits or refunds. Recruiting firms could also be characterized by specialization. Discipline specialists handle certain fields (e.g., data processing, engineering, human resources) and cross industry lines. They usually deal with positions that are technical or at middle and upper management levels. Industry specialists will handle all types of jobs at all levels within a given industry (e.g., banking, medicine). And generalist firms have no specialty. Services provided. When a recruiting firm, whether contingency or retainer, accepts an assignment, it doesn't just "empty its files" (send numerous candidates or resumes to a client, hoping one will be a match). Rather, the firm begins a comprehensive process, which consists of researching, file searching, networking, recruiting, prescreening, preliminary interviewing, in-depth interviewing, reference checking, negotiating, and closing the placement. Note that part of the firm's role in this process is to participate in salary and benefits negotiations and to assist the client in determining the candidate's motivation for making a move. Recruiting firms can be a valuable source of in-formation, too. Most will provide—as a service— up-to-date surveys and information regarding salaries, benefits, and availability of candidates in any particular location or category. And recruiting firms can also help employers troubleshoot turnover problems or difficulties attracting staff. Finding a recruiter. Recruiting firms range from small, independent operations to large public companies and subsidiaries of international firms. How do you choose? Ask around. Check references on prospective recruiting firms just as you would a prospective candidate. Rely on the recommendations of colleagues and business acquaintances. Recruiter industry associations also tend to be excellent sources of recommendations. Specialist firms often are members of professional or industry associations, which can also be helpful in finding a recruiter.		Information on Recruiters A variety of national trade associations represent the recruiting industry. In addition, just about every state has a group or association representing recruiters. Here are some of the national groups that culd help you find a recruiter to fit your needs: National Association of Personnel Consultants Roundhouse Square 1432 Duke Street Alexandria, VA 22314 (703)684-0180 National Association of Executive Recruiters P.O. Box 2156 222 S. Westmonte Dr., Ste. 110 Altamonte Springs, FL 32715-2156 (407) 774-7880 Association of Executive Search Consultants 17 Sherwood Place Greenwich, CT 06830 You might also be interested in A Directory of Executive Recruiters, published by:           Consultants News           Templeton Road            Fitzwilliam, NH 03447 Because recruiting firms strive hard to build their reputations, it's not too difficult to identify the reputable firms in any given location or specialization. Be sure, however, not to confuse reputation with visibility or public relations image. Evaluate firms on their track records and methods of operation. To establish a recruiting firm's ability, require it to provide lists of its current clients and recently completed assignments. Also require it to provide other information to prove its experience in handling the type of position you need filled. What are the firm's procedures? Who in the firm will handle recruiting, interviewing, and dealing with you? Is the firm able to attract candidates from other areas of the country? How much time will it need to fill the position? Also find out about fees, expenses, and payment schedules. After you get this information, consider that the recruiting firm you choose will be representing your company to prospective employees. And you should feel comfortable with the firm. If the chemistry isn't right, it will be very difficult to work well together. Other considerations: Large or small firm? A small firm may be able to offer more personalized service and have a smaller "hands-off list" (employers with whom the firm does business and therefore can't use as recruiting sources). However, a large firm has greater resources available but may have a larger hands-off list, thus limiting the companies from which it may recruit. More important to your choice should be the firm's reputation, professionalism, and ability to produce viable candidates. Contingency or retainer? Both types operate using substantially the same methods. The basic difference is that the retainer firm is compensated for a portion of the fee at the beginning of the search. Thus, retainer firms have more of a report-ing responsibility to the client. Specialist or generalist? For a position requiring special knowledge or technical expertise, a specialist firm is the preferred type. For positions of a general nature, a generalist firm will suffice. Bear in mind, however, that if a recruiting firm is worth its salt, it can recruit for any job, given adequate information. Firms will generally turn down assignments they can't handle. Using recruiters effectively. Work with the recruiting firm in a spirit of trust and cooperation. Treat the firm as an equal extension of your efforts to recruit and screen candidates. Establishing ground rules for working together might also be a good idea. Meet First Arrange for meetings at your office and at the recruiting firm. This way, the recruiting firm can observe the environment a prospective candidate would be working in and you can see exactly how the recruiter's operation functions. The meeting also lets you establish a rapport with the recruiter. Provide the recruiter as complete information as possible about your business and the position or positions to be filled. This information serves as a road map for the recruiter. Also be sure to provide the recruiter with feedback—both positive and negative. If the firm is on the right track, let it know. If the firm is moving in the wrong direction or if some aspect of the posi-tion changes, alert it. And listen to the firm's advice and evaluate it on its merits. Negotiating Fees If the recruiter's fee seems steep, remember that it isn't payment for finding just one individual, but payment for the range of professional services rendered in recruiting that individual. A recruiter's overhead and expenses are comparable to those of any other business. It's a good idea to establish a relationship with one or several recruiting firms, so they will be ready to assist you at the appropriate time (don't wait until an emergency staffing situation arises). However, don't engage 15 recruiting firms to fill one position. Such action will sabotage your search. For example, if a potential candidate is approached by 15 recruit-ers about one position, that person will probably think there is something wrong with the position or your firm. On the other hand, granting an "exclusive" to one recruiting firm could facilitate results: Nothing motivates a recruiting firm more than knowing that a client has faith in its ability. Be Realistic Your criteria for the job candidate, the salary for the position, and the deadline for filling the opening should be obtainable. For example, asking a recruiter to find a candidate at a salary that's 30% less than the position and experience level warrant is a tremendous waste of time and effort. For more information, contact David DeMartino at ddemartino@compliancepros.net.
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	Trade Finance in Today's Regulatory Environment
	by John Baranello, Director Trade Finance, Global Transaction Banking, Deutsche Bank   and David DeMartino, Managing Partner Compliance Professional Resources, LLC Three decades ago, trade practitioners only had to focus on the current issue of the International Chamber of Commerce (ICC) rules which govern the business of documentary credits. Now it’s not only the recently revised documentary credit rules, the ICC publication No. 600, it’s the International Standard Banking Practice for the Examination of documents (ICC Publication No. 681E) - which is a checklist of procedures for document examiners to follow when examining documents under letters of credit and a whole host of US and international regulatory concerns, some of which have always been mandated but in today’s environment are looked at more vigorously. The August 2007 modifications to the FFIEC manual specific to trade finance will certainly test the resolve and skills of trade practioners and compliance organizations. Organizations need to conduct a full trade finance vulnerability assessment, deal with under/over pricing of goods and services, as well as insert new policies and procedures. Clearly, these changes are meant to ensure that enough focus and scrutiny are being applied to trade transactions. However, the degree of difficulty associated with adhering to these new requirements could be staggering. We know now that regulators are focused on these issues and are adding to their exams the below red flags that identify unusual and suspicious transactions that must be reported: Items shipped are inconsistent with the nature of the customer’s business. Essentially, you MUST know who the customer is, what their business is and where they are going as a company. Thus, a steel company that starts dealing with paper goods may be viewed as an inconsistency. Customers conducting business through high-risk jurisdictions, including transit through non-cooperative countries. Your process must be robust enough to detect the origination and transit points to determine if you are carrying any risk with the transaction. Obvious under- or over-pricing of goods. You need to recognize that the cost of a tractor would not equal $100 dollars, and conversely, the cost of pencils would not be $10,000 dollars. This is certainly challenging to monitor. However, assistance may be around the corner. There is one organization that may enter the goods pricing space and they purport to offer an innovative solution. Obvious misrepresentation of the quantity or type of goods imported or exported. Again, this requires reviewing the transactions with a fine-tooth comb and then making a decision based on experience and knowledge.		Customer directs payments to an unrelated third party. This is rather obvious, but third-party information – who they are and what they do – needs to be known, thus presenting another challenge. Additional red flags that must be investigated include overly complex transactions, significantly amended letters of credit, shipment locations or description of goods not consistent with the terms of the letter of credit and, misrepresentation of quantity or type of goods imported or exported. We must recognize that trade finance activities require the active involvement of multiple parties on both sides of the transaction, making the process of due diligence more difficult. Additionally, the trade finance business is more document-based than other areas of banking, and can be susceptible to documentary fraud, which can be linked to money laundering, terrorist financing, or the circumvention of OFAC sanctions or other prohibitions. Due to these risk factors, banks must monitor their clients for exposure to reputational and anti-money laundering risk through a robust transaction monitoring process. In recent years, the sophisticated products of investment banks and corporate finance departments lured clients from more traditional trade finance players. Lately, customers are flocking back to the simplicity and transparency of trade finance. Trade finance continues to be the easiest, cost effective and most collateralized form of credit. It is in these difficult times, trade finance shows itself to be a tried and tested method of financing. What does all this mean to trade finance organizations? Simply, a new level of surveillance must be applied to each transaction. These new requirements raise the bar for the monitoring of money laundering and terrorist financing activities. Without the correct advice, direction and technology, these tasks could be overwhelming. In order to meet these requirements, we recommend a review of banks’ trade clients, to ascertain their associated risks, the scope of regulatory training for trade practitioners and the inclusion of technology –where possible, to detect any abnormalities. Our customers depend on us to take a greater role as trusted adviser and facilitator of technological efficiency and trade finance risk mitigation. We continue to strive to support their business and protect them as well as fulfill our commitment to safeguard our country. For more information, contact David DeMartino at ddemartino@compliancepros.net.
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	Preventing Fraud in Your Organization
	by Fred M. La Marca, CPA, CFP® The Bernard Madoff scandal has proven that even sophisticated investors and financial professionals can be the victims of fraud. According to the Association of Certified Fraud Examiners, the typical U.S. company loses 7% of its annual revenue to fraud and that 40% of private companies have reported some type of fraud in their organization. The Fraud Triangle In order to commit fraud, three factors sometimes referred to as the "Fraud Triangle" must exist. These factors include: An incentive or pressure to commit fraud. An opportunity to commit fraud. The person's attitude or rationalization about committing fraud. Incentives/Pressures to Commit Fraud Incentives or pressures that may motivate a person to commit fraud may be financial or personal in nature. Financial pressures include maintaining an extravagent lifestyle, overuse of credit cards, high personal debt levels, divorce or investment losses. Personal habits such as alcohol, drug or gambling addictions may also result in financial pressures to commit fraud to pay for such habits. Opportunities to Commit Fraud Opportunities to commit fraud can arise when an employee or manager is trusted too much or when internal controls are weak or nonexistent. Examples of conditions that can provide opportunity for employee fraud in an organization include the following: Inadequate seperation of duties. Failure to inform employees about company rules and the consequences of violating them or committing fraud. Rapid turnover of employees. Constant operation under crisis conditions. Absence of mandatory vacations.		Integrity and Attitude Rationalization Personal integrity may be the most important factor in preventing fraud. There are many cases where individuals have severe financial or personal pressures and the opportunity to misapprpriate assets exist but do not commit fraud because of strong personal moral codes. Persons who commit fraud will often rationalize their behavior, believing that they have been unfairly treated by the company they work for or that they are only borrowing the funds temporarily and will eventually pay them back. Breaking the Fraud Triangle To reduce the risk of fraud, companies need to implement policies and procedures that create an ethical environment and reduce employee opportunity to commit fraud. Management has a responsibility for establishing an ethical culture within their organization. That culture, through words and actions, should indicate that fraud is not tolerated and that any incidences will be dealt with swiftly and decisively and that whistleblowers will not suffer retaliation or retribution. In addition, management needs to develop a control system which exhibits the following characteristics: Segregating duties Systems authorization Independent checks and balances Physical safeguards Documentation and records Organizations should also consider using various policies and procedures to improve the quality of their employees and reduce the risk of fraud. Among these policies and procedures are integrity testing, investigating new hires and employees, performing drug testing, implementing an ethics policy, bonding employees, exit interviews and prosecuting fraud perpetrators. Be Diligent While preventing fraud completely in your organization may not be possible, being diligent and aware of the signs that fraud may exist will reduce the risk that you will become a victim. Fred M. La Marca, CPA, CPF® is a partner in the accounting firm of Potter & La Marca LLP.
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	About CPR
	CPR is a unique regulatory compliance services firm. A unique blend of compliance recruiting services (executive, permanent, and temporary), and compliance consulting services. Add in managing partners that have essentially pioneered the industry, this makes CPR clearly a leader in the Regulatory Compliance service space. Our commitment to excellence in all phases of our business is unparalleled. As it relates to recruiting, we will provide you with the best most skilled candidates, we work tirelessly to get the right person, after we completely understand your needs. Our Compliance consultant services are surgically focused on getting the job done as expeditiously as possible, and without crippling your budget. We only provide seasoned and experienced consultants, always with the correct skill sets. Our goal is to get it right the first time.
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