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Factoring Conference Warsaw, October 2003

Factoring Conference Warsaw, October 2003. Tony Murphy Director, Corporate Recovery. Introduction to Smith & Williamson Limited. A private Bank / Investment House & specialist financial service provider , established 1881 Current turnover circa £100M , 9th biggest practice in UK

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Factoring Conference Warsaw, October 2003

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  1. Factoring ConferenceWarsaw, October 2003 Tony MurphyDirector, CorporateRecovery

  2. Introduction to Smith & Williamson Limited • A privateBank / Investment House & specialist financial service provider , established 1881 • Current turnover circa £100M, 9th biggest practice in UK • Market specialism in recovery for the Factoring / Discount Industry

  3. Fraud Detection & Prevention Most frauds are variations on a theme, which are learnt , or copied . The key to detection & prevention is accordingly understanding the likely problems & the related indicators. • It is therefore critically important to implement training FOR ALL STAFF • Training must be detailed and practical on the types & mechanics of common frauds • Share knowledge & experiences within the industry • Learn from previous errors

  4. “Warning Signs “ • Rapidly expanding businesses --- Over Trading • “Old & Tired”; losing market share, disinterested management, decreasing sector, new products taking over, increased competition • Highly geared companies, or those with a high overhead base. Very turnover sensitive • Fundamental technological or sociology [ legal ] changes in the market

  5. Accounting Issues • Delays in submitting accounts • Capitalisation of Profit &Loss costs • Shifts in year ends • Manipulation of group accounts / Inter Company trading • Treatment of Extraordinary / Exceptional items • Non disclosure of contingent liabilities

  6. Management issues • “One Man Rule”. Dictatorial director who controls all aspects of the business • Non - participating executive board • Weak finance function, which can be over ruled • Lack of management depth, and experience, therefore susceptible to loss of key personnel & general inability to react to change

  7. Most Common Types of Fraud • Multiple Financing • Memo Invoicing • Fresh Air invoicing • “Cross-Firing” • Document Falsification • [ VAT Carousel ]

  8. Recovery - UK • There is a clear recognition / understanding of assignment and effective priorities between secured creditors • Mature & experienced secondary support industry for recovery by specialist Accountants, Lawyers & Agents • Prompt & vigorous / effective enforcement through Receivership / Administration and Liquidation procedures • Lenders have Confidence in Recovery

  9. Recovery - Internal Systems • In-house / external staff training • designated “Warning Signs” in internal reporting • nominated Recovery Manager & support team with agreed recovery procedures • nominated advisers; accountants, lawyers and agents

  10. Policy Issues • Central Register of charges / legal interest • Clear legal definition of priorities between completing claims • Recognition of Enforcement Rights ; there needs to be an ability to set “Super Priority” for lenders • The key is to achieve Confidence in Recovery

  11. Summary • Most of UK recoveries have an element of fraud • Most frauds are variations on a theme & are learnt • It is possible to detect problems early • Vital to act promptly & decisively • Important to create a culture & robust legal framework of vigorous recovery

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