by Geert Vermeulen
Once upon a time there was a city, not far away from here, where the people were happy and prosperous. Large walls have been built around the city to protect its prosperity. A canal runs right next to the walls. There are four entrance gates in the city wall, where you can enter the city, and at each gate there is a drawbridge. These bridges are raised at night and then the gates are closed. During the day there is a different gate company at each access gate, namely A, I, R and V. The gate companies must ensure that as many rich outsiders as possible go to live and work within the walls of the city. This increases the total prosperity in the city. In addition, it is the duty of the gate companies to keep the poor people without income and assets and the criminals outside of the city.
The gate companies have their best employees stationed at the gate. They must not only get the richest and most entrepreneurial people within the walls of the city, they must also ensure that a proper access control takes place at the gate. The gate companies get a higher fee as they let more people in or as they let larger, heavily loaded wagons in. This also applies to the individual gatekeepers themselves. As a result, the interests of the individual gatekeepers run parallel to the interests of the gate company.
The city is governed by the king and queen. They live in the middle of the city in a castle with a high tower. Most of the time they rule the city from this tower, that offers a great view of the city and the surrounding area. The tower is guarded by the Royal Guard. They take care of the personal protection of the royal couple and also supervise the work of the gate companies.
A few years ago, after a scandal, the gate companies A and V almost went bankrupt. They had to be the saved by the royal couple. After all, you can’t leave the gates unguarded and I and R were not in a position to take over A and V, nor their positions at the gate. In order to not distort the competition between the gate companies, A and V continue to function as private companies, which must earn money. Preferably a lot of money, because the debt to the royal couple must be repaid and it is the intention of the royal family to sell the companies again in due course.
A number of well-known criminals may not be admitted to the town. Their pictures are fastened next to the gates by the Royal Guard. That seems clear enough. Some criminals, however, wear disguises. And more and more people who behave suspiciously are trying to enter the city. They are attracted by the prosperity and good living conditions in the city and arrive with large, heavily loaded wagons. Nobody knows how they have obtained their possessions. But well, when they enter the town, it does increase the prosperity of the city, so there are not too many questions asked.
So, the gatekeepers are busy recruiting as many rich and entrepreneurial people as possible. They occasionally ask a question and sometimes briefly compare the faces of the people to the pictures of the criminals. If they make a mistake, they can be fired. However, the likelihood that a mistake is discovered is very small. It often takes around 10 years for a mistake to be discovered and by that time you may be dead, retired or have another job. Moreover, usually only the company is fined and the maximum fines are rather small. And even if the company would go broke, it would be saved by the royal family anyway. That is another reason why the gate companies encourage the gatekeepers to attract as many rich people as possible, without further investments in the access controls or otherwise emphasizing the importance of these controls, because that only costs money and revenue.
In the course of time this starts to create problems. Crime in the city is rising. The old residents of the city wonder where the new residents obtained their wealth and are jealous. They want that too and some are apprenticed to the new residents. The rulers of the other cities are becoming a bit jealous of the rising prosperity of the city. They wonder about the access control by the gate companies and start asking the royal couple questions about this. The royal couple realizes that some unwanted characters have entered the city, undermining the atmosphere in and the reputation of the city, so they try to come up with a solution.
To start with, they tighten the legislation. The possible fines for the port companies go up to 10% of the turnover of the company and disgorgement of profits. In addition, the Royal Guard will be expanded with two people who are especially trained to trace criminals and who are released from other duties.
In addition, the royal couple establishes that from now on a 100% percent check must take place against the pictures of the criminals hanging at the city gates. In addition, the gatekeepers must check and record how the new entrants obtained their possessions.
The gate companies hire a number of compliance officers who try to figure out how the gatekeepers can implement the new rules. They also receive voluntary guidelines from the Royal Guard. The gate companies are not obliged to follow these guidelines, but if they don’t, they must explain why. That’s why most companies decide to just follow the guidelines. The compliance officers conduct a risk assessment, propose and implement new procedures and train the gatekeepers how to follow the procedures. The management considers it unnecessary to know more about these developments; their main interest is that they don’t cost too much money.
The guidelines come down to the fact that, going forwards, every gatekeeper must confirm in writing that every new entrant does not look like the people on the photos. To prevent them from misjudging this, it must be checked by a second gatekeeper. However, the access control checks remain challenging; it remains difficult to to compare the pictures, that were sometimes made years ago, with the faces of the new entrants, who sometimes arrive in disguise.
In addition, the entrants must now be able to evidence how they obtained their possessions if they have a large, heavily loaded wagon. What is their profession, who were their parents, what was their parents’ profession, can they show their birth certificate, is it plausible that they have obtained all the goods that are carried along fairly?
Here too, the compliance department of the gate companies has developed procedures and standard documents for the gatekeepers and they train them how to use these. The gatekeepers think it’s boring. They do not earn any money with it, in fact, carrying out the stricter access controls makes it more difficult to reach the revenue targets, while the likelihood of a personal fine is still small.
The business model of the gate companies and the remuneration structure of the individual gatekeepers, however, does not change
The compliance departments monitor the performance of the gatekeepers. In addition, a third, random check is carried out by the internal audit department of the gate company. The business model of the gate companies and the remuneration structure of the individual gatekeepers, however, does not change. As a result, they hold the view that doing business is more important than being compliant. The procedures are not always followed and the gatekeepers are told that they can only do a maximum of three investigations of the wealth of the new entrants per day, otherwise this would cost too much money.
Both the compliance and the audit department report to the management that the access controls should be improved. The Royal Guard noticed this as well and requests improvements. The management ignores these signals. As long as we can show that we are working on it, we will get away with it, they reckon. And so far there have never been any major consequences. The focus remains on attracting new residents.
The two new members of the Royal Guard start to investigate gate company I and find that in the past they have been lax with the access controls. Company I therefore receives a hefty fine of 4% of its turnover, to set an example for the rest. The fine is further increased with 15% because the company has invested too little in the access controls and has therefore obtained an unfair advantage. However, it is also stated that the situation at the other gate companies is not much better.
The fine damages company I’s reputation, it also hurts, but the company does not go bankrupt as a result of it. That would not have made sense, as the royal couple would then have to save the company. The management of I keeps their position. According to the law, they cannot be held personally liable. They could not help it that the gatekeepers did not pay attention. It cannot be evidenced that there was an evil intent from a certain individual. And in any case, it was not clear who should be blamed here, the gatekeepers, compliance, audit or the management. As a few journalists keep on raising the matter, as well as the queen, the person on the board, who was responsible for the gate access controls, resigns “voluntarily”. He would soon be retiring anyway and receives a couple hundred thousand euros as a farewell present.
The gate companies are now serious about the access controls. Large money amounts are invested and many extra gatekeepers are hired. They must record all kinds of information about the people who enter the gate. In order to control the costs, young, inexperienced and relatively cheap gatekeepers are hired, usually holding a temporary contract. They just finished school and receive two hours of training. The costs of the extra checks are passed on to the total population in the form of a higher fee each time someone passes the gate. There are also huge delays in front of the gates, queues and a lot of irritation among passers-by who have to fill out all kinds of forms and pass on information that they would prefer to keep to themselves.
Criminals hire unknown people
However, this does not deter the criminals. If they are refused at one gate, they give it a try at another gate. And otherwise they hire unknown people who bring less heavily loaded wagons or wheelbarrows into the city for them and then leave the city again, as there are no exit controls when leaving the city. Many times, they use different gates into the city, so that they are not noticed by the individual gatekeepers. They also create some extra openings in the city wall, sometimes with the help of people from within the city, who are compensated generously for this. These passages are barely visible, certainly not by the gatekeepers, who only guard their own gate. At night, mercenaries sail over the canal in self-built rafts and stuff goods through the openings in the wall. Some also climb over the wall carrying a full backpack with the help of a rope ladder.
Does this story sound familiar? And did the royal couple come up with the best solution for the problem? Can you imagine a couple other options? Let me know!
The author, Geert Vermeulen, is CEO of Ethics & Compliance Management & Consulting, based in Rotterdam in the Netherlands.