Interview with Eoghan Daly, Crowe Clark Whitehill LLP | Fighting Food Fraud in 2017

In the latest instalment in New Food‘s Fighting Food Fraud series, Digital Editor Roy Manuell speaks to Eoghan Daly, Manager of Forensic and Counter Fraud Services at Crowe Clark Whitehill LLP. 

1. Just how big an issue is food fraud at present in our industry?

Fraud can affect the food and drink industry in many forms. It can take the form of an adulterant substance being added to a product, for example, or may relate to fictitious companies receiving goods on credit and disappearing without paying invoices, food products being underprovided in terms of quality or quantity, or overcharging.  

It is not, in my opinion, helpful to focus on specific threats or commodity types.  Fraud constantly evolves as fraudsters react to controls and take advantage of new opportunities. Fraud is well defined in UK criminal and civil law, and I like the definition of food fraud provided by John Spink at Michigan State University as it makes reference to a broad range of fraud types  Having controls in place for only known frauds risks being a step behind, being well covered for existing issues but vulnerable to (as yet) unidentified issues. 

Despite all of the attention fraud receives, the industry does not share information about the nature and extent of food fraud affecting it.  

The absence of information means that it is impossible to determine whether food fraud is increasing or decreasing, and also impossible to determine whether the approaches employed by the industry are effective.  

While examples of specific threats / incidents provide useful illustrations of the types of food fraud that exist they do not provide information about how big an issue food fraud is at present.  For such information to be available, food and drink businesses would have to undertake fraud loss measurement exercises and share the results. Some businesses are considering undertaking fraud loss measurement exercises, but I doubt they will be interested in sharing the results. 

In the meantime there is plenty of other information about fraud resilience that could be usefully shared by the industry.  Fraud resilience is a holistic term used by counter fraud practitioners to describe:

• How well an organisation understands the nature and cost of fraud affecting it.
• Whether an organisation has an effective strategy to address the problem.
• Whether an organisation has a counter fraud structure to implement its strategy.
• Whether an organisation takes a range of pre-emptive and reactive actions to counter fraud.
• The extent to which fraud is addressed and managed like any other business issue.

The term encompasses everything an organisation needs to do (strategic, preemptive, reactive and governance-related) to protect itself against fraud.   Organisations with high resilience levels are likely to be better protected from food fraud threats compared to organisations with lower resilience. Reporting fraud resilience levels would provide a means for the industry to prove it is working to address vulnerabilities. Highlighting that the industry takes fraud resilience seriously, has robust prevention and detection strategies in place, and will pursue all available sanctions, would help to deter potential fraudsters. Regular reporting on fraud resilience would also enable tracking of progress and identification of areas requiring further work.

2. What sort of solutions might we need to consider?

Most work undertaken to address fraud in the food and drink industry focuses on composition and origin, relying on a mix of supply chain mapping, horizon scanning, analytical testing, and audit. Each of these is helpful to address fraud but, even combined, are not sufficient. Fraud is constantly evolving as fraudsters react to controls and take advantage of new opportunities. Attempting to identify the next specific fraud is almost impossible and food safety / quality technical teams cannot do everything necessary to increase a business’s fraud resilience.  An organisation-wide approach is necessary to ensure that the full range of food fraud issues can be addressed.  

Food and drink businesses should consider managing the development of fraud resilience like other areas of work. It should be measured, monitored using specific metrics, and deliver specific and measurable outcomes. It is impossible to prove the effectiveness of work to address fraud without focusing on outcomes. Focusing on outcomes enable organisations to determine whether activities, such as testing and / or supply chain mapping and checking, are effective. At the outset it is important to establish the amount and type of fraud affecting an organisation.

Without this comprehensive diagnosis it is difficult to make a well-informed decisions prioritising system processes and weaknesses.  Setting a baseline is also helpful as it provides a comparator against which success can be measured over time.  This is important when attempting to demonstrate the benefits of spending and investment.

Businesses should strike a balance between ‘looking out’ for the next food fraud issue, and ‘looking in’ at their organisation’s specific fraud vulnerabilities.  Addressing organisational vulnerabilities will help organisations to be prepared for as yet unidentified frauds.  It is worth remembering that most fraud is high volume / low value rather than low volume / high value.  High volume / low value fraud is difficult to detect, and even when detected, is often difficult to justify addressing due to (misplaced) assumptions about the cost. Each requires a slightly different approach.

3. Why is the relationship between science and food so key to driving forward progress?

Science is more than chemistry and microbiology. It involves any subject or topic with testable hypotheses reliant on robust evidence.  The systematic study of structure and behaviour through observation and experiment is fundamental to improving how food and drink businesses address food fraud. 

Without a scientific approach, food and drink businesses risk responses to food fraud that are incomplete, based on assumptions, and do not make best use of the available evidence. Science is how the industry moves forward and addresses emerging challenges. 

4. Could you give us an insight into the sort of measures Crowe Clark Whitehill are undertaking to address food fraud at present?

The food and drink industry is in a particularly interesting place at the moment as the rationale for improving fraud resilience is clear and there is a considerable amount of work underway to address fraud.  While the industry is unique in some respects, it shares a lot of characteristics with other sectors and would, in my opinion, benefit by adopting elements of counter fraud good practice.  The Forensic and Counter Fraud Services team at Crowe Clark Whitehill work with a variety of sectors on issues related to counter fraud and have a good understanding about what works well and why.  We are keen to contribute towards strengthening the industry’s fraud resilience.  

In 2016 we led the development of a guide to Counter Fraud Good Practice for Food and Drink Businesses in collaboration with the National Food Crime Unit, Scottish Food Crime and Incidents Unit, Intellectual Property Office, Centre for Counter Fraud Studies and Chartered Institute of Environmental Health.  The guide, available for free download, describes how counter fraud good practice, well established in a variety of sectors, would help food and drink businesses improve their fraud resilience.  It is a holistic approach that applies to all types of fraud an organisation may be subject to, and emphasises the importance of establishing the nature and extent of the problem, and focusing efforts on all areas of counter fraud –  deterrence, prevention, detection, reaction and recovery. 

This year we are engaging with food and drink businesses, via on online survey and a programme of interviews, to establish which areas of fraud resilience are strong and which could be improved. The plan is to publish our findings in October, initial results suggest there is significant work underway in some areas, like detection, but less work underway in others, for example, deterrence, detailed background checks on key suppliers, and evaluating organisations anti-fraud culture.  We look forward to sharing and discussing the results with the industry.  

5. Imagine we are having this conversation in a year’s time in the run up to Food Fraud 2018… What do you predict will have changed?

In my opinion, change is usually incremental until unexpected and significant issues force bigger shifts. It is impossible to predict the big unexpected issues, and I expect the incremental change may result in the issue of food fraud becoming increasingly normalised and managed like other business risks. As people realise that a safety / quality-type technical response is insufficient on its own, I expect to see food fraud and fraud in general become more widely ‘owned’ across food and drink businesses.  All parts of a business have a role to play to maintain and enhance fraud resilience and I expect this will become more widely acknowledged and adopted.

6. Why are events such as Food Fraud 2017 so important?

Interacting with people that think and work in a similar way on similar topics can lead to groupthink and intellectual isolation. Conversations with people working in different sectors on different issues have, in my experience, been vital to generate new ideas and identify opportunities to apply experience from one sector into another. Innovation is a process rather than an end point, and events such as Food Fraud 2017 are part of that process. They enable professionals working in different areas to come together and discuss experiences and perspectives.  They are also a chance to get out of the office, take a break, and catch-up with people.

We thank Eoghan once again for his insight and look forward to his speech at Food Fraud 2017.

Food Fraud 2017

As we look ahead to Food Fraud 2017 to be held at Manchester’s Renaissance Manchester City Centre Hotel on May 3, New Food Magazine brings you an exclusive interview series with some of the industry leaders speaking exclusively at the event. 

For more information on Food Fraud 2017, click here.

Gavan Wafer, National Food Crime Unit

Peter Overbosch, METRO AG

John Points