In Module 4, we explore our approach to finance, fraud and corruption prevention and counter terrorism measures we need to take. If at any point in time you have a question about these topics and the information outlined below, please reach out to your KTF contact. This module should take you approximately 30 minutes to complete.

1. Fraud & corruption prevention

KTF operates using a Fraud & Corruption Prevention Policy which is applicable to all staff, board members, volunteers and partners. You will be asked to read, understand, sign and adhere to to KTF’s Fraud & Corruption Prevention Policy at the conclusion of these training modules. The information below outlines the key components of KTF’s Fraud & Corruption Prevention Policy.

1.1 Policy

It is strictly prohibited for any KTF representatives (board directors, staff, volunteers, subcontractors, consultants, partners and other representatives) to engage in, participate in, cover up or in any way assist in, fraud, corrupt conduct, maladministration, money laundering or serious and substantial waste of public money.

If any KTF representative engages in, participates in, covers up or in any way assists in such conduct, which will invariably be a breach of KTF’s code of conduct, KTF will take disciplinary action, which may include termination of employment or engagement, and/or criminal prosecution.

If KTF becomes aware of allegations of corruption, fraud, maladministration, money laundering, modern slavery or serious and substantial waste of public money, KTF will investigate the allegations. The level of inquiry will depend on the seriousness of the issue. KTF may also notify the Police (in PNG and/or Australia), the Independent Commission Against Corruption (Australia), the PNG Internal Revenue Commission (IRC) Commissioner, the Australian Department of Foreign Affairs and Trade, and / or other relevant government agencies as required under legislation.

To ensure appropriate expertise and adherence to investigation standards, KTF will appoint individual(s) who are impartial and who possess appropriate skill, as part of the investigation process.

1.2 Definitions

Corrupt Conduct: Has a specific definition as set out in the Independent Commission Against Corruption Act 1988 (NSW). However, a working definition of corrupt conduct is the dishonest exercise of official function by an employee or representative. For example, this could include:

• Improper use of knowledge, power or position for personal gain or the advantage of others;

• Acting dishonestly or unfairly, or breaching public trust;

• Influencing another individual to use their position in a way that is dishonest, biased or breaches public trust;

• Offer, payment, solicitation or receipt of secret commissions / bribes, either in money or other form of value;

• Manipulation of the procurement process by providing misleading information to the tenders / bidders / suppliers;

• Payment or solicitation of donations for an improper political purpose;

Fraud: Fraud is a recognised subset of corruption. The Australian Standard on Fraud and Corruption Control defines fraud as:

“Dishonest activity causing actual or potential financial loss to any person or entity including theft of money or other property by employees or persons external to the entity and whether or not deception is used at the time, immediately before or immediately following the activity. This also includes the deliberate falsification, concealment, destruction or use of falsified documentation used or intended for use for a normal business purpose or the improper use of information or position”.

Example of fraud include but are not limited to:

• theft of moneys or property;

• credit card fraud involving the unauthorised use of a credit card issued to another person;

• deliberate falsification, concealment, destruction or use of falsified documentation;

• false invoicing (i.e., creating a fictitious invoice claiming payment for goods and services not delivered or falsely charging GST while not entitled to)

Maladministration: Is conduct that involves action or inaction of a serious nature that is contrary to the law, unreasonable, unjust, oppressive or improperly discriminatory or based wholly or partly on improper motives.

Bribery: Is the promise or delivery of a benefit in order to influence the receiver’s behaviour. Usually the behaviour expected of the person receiving the bribe is illegal and unethical in nature and would not be something they would usually do. However the return behaviour itself does not have to be illegal or unethical in order for it to fall within the definition of bribery.

Facilitation Payments: Are low-value payments designed to speed up the actions of a service provider or supplier.

Conflict of Interest: Is a situation where an individual or an organisation has multiple interests, one of which may improperly influence the performance of that individual’s or that organisation’s duties and responsibilities. (See KTF’s aligned Conflict of Interest Policy)

Money Laundering: Is the process of concealing the origin, ownership or destination of illegally or dishonestly obtained money and hiding it within legitimate economic activities to make them appear legal. For example, this could include:

• Payments to phantom names;

• Incorrect charging and overpayment for services/goods delivered/provided;

• Payments for contracts where goods and services are not delivered;

• Transfer of funds to jurisdictions with opaque financial systems or to tax havens.

Modern slavery: Is the severe exploitation of other people for personal or commercial gain. For example, this could include human trafficking, forced labour, child labour, forced and early marriage, and slavery-like practice. At the date of this policy, KTF is not a reporting entity under the definition of the Modern Slavery Act 2018 (Cth)  or Modern Slavery Act 2018 (NSW). The Modern Slavery statement is not required. Nevertheless, KTF adopts robust high level of monitoring and assessment of risks and is committed to ongoing due diligence in procurement and contract management and training of staff and representatives of Modern Slavery Act requirements.

Serious and substantial waste of public money: Involves the uneconomical, inefficient or ineffective use of resources which results in loss / wastage of public funds / resources. In addressing any report of serious and substantial waste regard will be given to the nature and materiality of the waste.

1.3 Examples of potential fraud and corruption

1.4 Obligations and responsibilities

In order to ensure that KTF conducts itself and carries out its duties and activities free from fraud, corrupt conduct, maladministration, money laundering, modern slavery and the serious and substantial waste of public money, all KTF representatives, including staff & partners must ensure compliance with the following obligations and responsibilities.

1.5 Reporting and investigation process

1. All those who participate in the work of KTF as articulated in the Scope of this policy, have a duty to report concerns they have, or information provided to them, about any possible fraudulent or corrupt activity of any staff, Board member, contractor, vendor, implementing partner or any other funding recipients with an association with KTF including across all PNG projects.

2. Staff or other KTF representatives that come forward and report incidents of wrongdoing are helping to promote integrity, accountability and good management within KTF. Staff should report conduct, which involves (or which they reasonably believe may involve) fraud, corrupt conduct, maladministration, bribery, facilitation payments, money laundering, modern slavery or serious and substantial waste of public money;

3. Staff aware of fraudulent or corrupt conduct are required to report the incident to their line manager, or the COO. If the claim is to be made against the CEO, then reports are made to the Chairman. Staff or other KTF representatives are to document the allegation by completing KTF’s Fraud and Financial Incident Notification Tool.

4. Reports of corrupt activity received by CEO or senior management are to be forwarded to the Board of Directors. The Board of Directors will oversee necessary investigations relating to any fraud and corruption reports and a responsible and independent appointed officer will conduct the investigation. The outcome of an investigation will be reported to the Board of Directors and senior management for action (where necessary);

5. In the event that allegations of fraud or corruption are substantiated, the Board may elect to prosecute the person responsible. Senior management will also conduct a review of the area in which the fraud or corruption is alleged to have occurred to determine the cause for any breakdown in controls, and will effect changes to systems and procedures if necessary. It is the responsibility of senior management to implement any recommendations made as a result of the investigation.

The button below will take you to KTF’s policies page which has the Fraud & Financial Incident Notification Tool.

1.6 Reporting Channels

Reports of breaches to this policy can be made by contacting the following people:

 KTF’s CEO can be contacted on: gen.nelson@kokodatrackfoundation.org

KTF’s COO can be contacted on: mike@kokodatrackfoundation.org

KTF’s CFO can be contacted on: alwin@kokodatrackfoundation.org

KTF’s Chair of the Finance, Audit & Risk Management Committee can be contacted on: admin@kokodatrackfoundation.org  or (02) 9252 2992

Anonymous complaints can be made via KTF’s website: https://www.ktf.ngo/feedback-complaints

General KTF Phone: +61 2 9252 2992 OR +61 418 811 748

General Postal Address: PO Box 184 Balmain NSW Australia 2041 OR PO Box 928 Port Moresby NCD Papua New Guinea

1.7 Fraud & Corruption Prevention Plan

KTF operates using a Fraud & Corruption Prevention Plan - a useful tool that operationalises the Fraud & Corruption Prevention Plan.

Always consider you fraud control and anti-corruption operating environment. At KTF, our operating environment looks like the diagram to the right:

The below table identifies specific examples of stakeholders or providers that fall into each of the categories listed above in KTF’s operating environment. It also displays the documents used by KTF to mitigate and manage the risk associated with the identified stakeholders.

1.7.1 KTF’s Fraud Control and Anti-corruption Framework

KTF’s Fraud control and anti-corruption framework is outlined below. Critical to the success of the implementation of this framework is effective and ethical leadership with constant monitoring and evaluation.

1. PREVENTION

FRAUD RISK ASSESSMENT

KTF operates a comprehensive fraud risk assessment tool that assists in identifying and mitigating risks. It is the job of all staff to use the fraud risk matrix when planning projects, partnerships and risk management activities. The fraud risk matrix covers fraudulent activities that could occur within KTF as well as fraud committed by people or organisations external to KTF.

The objective of the fraud risk matrix is to minimise risk as much as humanly possible, knowing that operating in Papua New Guinea carries the risk of both security and fraudulent activity breaches. The fraud risk assessment works hand-in-hand with the fraud control and anti-corruption framework to assist stakeholders in identifying tools to use in order to identify, mitigate and ultimately remove any level of risk associated with fraud and corruption.

ANTI FRAUD & CORRUPTION POLICY

KTF implements a strict anti fraud and corruption policy that clearly outlines KTF’s commitment to maintaining an organisation free from fraud, corrupt conduct, maladministration, and serious and substantial waste of public money.

This policy is given to all staff and board members as well as partners, potential partners, suppliers, contractors, and donors (where applicable). KTF’s transparent approach on anti fraud and corruption is critical in all partnerships internal and external.

DUE DILIGENCE RESEARCH

As part of KTF’s project planning, all new partners, project locations and suppliers are subjected to thorough due diligence tests. KTF uses its Partner Capacity Assessment Tool as well as private, corporate and government networks, knowledge and research tools to ensure that all aspects of new partnerships and projects are safe, secure and free from fraud and corruption.

Any potential for fraud and corruption is highlighted via the fraud risk assessment and communicated through appropriate channels to senior management, the FARM committee and the board in the decision making process.

PARTNER CAPACITY ASSESSMENT

All partners of KTF (existing and future) are subject to a partner capacity assessment. The capacity assessment looks at each organisation’s vision and mission, aims and objectives and investigates the organisation’s history and operations. The organisation’s annual reports and audited financial statements are analysed. KTF’s Programs, Monitoring & Evaluation Advisory Group and CEO must approve all new partnerships.

INTERNAL POLICIES

KTF has a number of policies intended to minimise the potential of fraudulent behavior and corruption. Such policies include:

• Financial Controls Policy

• Code of Conduct

• Procurement Policy

• Value for Money Policy

• Conflict of Interest Policy

• Fraud & Corruption Prevention Policy

• Counter Terrorism & Anti-Money Laundering Policy

All of these policies are circulated to all internal staff as well as outside stakeholders including, but not limited to, partners, donors, government bodies and suppliers. Many of KTF’s policies are publicly available on its website.

PROJECT PLANNING

Risk management planning is a critical step in all of KTF’s project planning documents. Whenever a new project is considered, a risk management matrix and a fraud risk assessment are completed. These reports are also generated when projects undergo a re-design and incorporate suggested changes and corrective action to the structure of the particular project to safeguard it from fraudulent activities and corruption.

MEMORANDUM OF AGREEMENT

When KTF enters into any new partnership, a memorandum of agreement (MOA) is drafted and signed by both parties. The MOA summarises all parties involved and clearly outlines each party’s role and responsibility within the partnership. In some situations, where there is a financial arrangement with implementing partners, Funding Agreements take priority over MOAs.

Examples of where MOA’s are needed are listed below, but not limited to:

• Financial implementing partner

• In-kind implementing partner/Co-delivery partner

• Government partner

• Community partner

• Elementary School partner

• Health Centre partner

• Women’s group partner

2. DETECTION

MANAGEMENT REPORTING & DATA ANALYSIS

Financial

KTF’s Finance, Audit & Rick Management committee regularly reviews monitoring reports, management reports, and risk reports to ensure and confirm transparency as well as analyse budget expenditure. KTF has in place a suit of financial controls policies (including financial controls, financial risk management, foreign exchange etc) that dictate a range of reporting requirements that would easily detect financial fraud. All financial transactions require two signatories for approval, prior to payment transfer.

Program

As per KTF’s effectiveness framework, KTF works towards achieving its outputs, outcomes and impact. Ongoing monitoring and evaluation of all projects occur at multiple times throughout the project lifecycle and can include:

• Field reporting and progress reports

• Project specific data collection

• Quarterly reporting

• Quantitative analyses

• Qualitative analyses

• Mixed method research

All of these reports are reviewed by management, the CEO and various board committees and advisory groups which assist staff and board members to detect any signs of fraud and corruption. Should fraud be detected, individuals are required to use the reporting channels as outlined below.

INTERNAL & EXTERNAL REPORTING CHANNELS

All staff and board members are obligated to immediately report any suspected fraud activities and corruption, using the internal reporting channels below. All cases of fraud and corruption allegations are treated confidentially, quickly and in a professional manner.

All contractors, service providers and donors are encouraged to report any alleged fraud and corruption cases to their direct contact at KTF, line manager at KTF or the CEO. As stated previously, all cases of alleged fraud and corruption reported from external sources are treated with the same level of confidentiality, efficiency and professionally.

The final stage in the reporting channels is the Australian Federal Police. If and when required, the Chairman of KTF will report fraudulent activities and corruption to the AFP and will be informed by the board directors with possible input from external investigators.

PROJECT SITE VISITS

KTF staff regularly visit project locations to ensure the effectiveness of project delivery, to monitor and evaluate projects and to detect and report any fraud cases or corruption and report the case via appropriate channels. KTF has operational MOAs or Funding Agreements in place with project partners to ensure accountability and minimize risks relating to the project including fraud and corruption risk.

AUDITING

KTF is subject to an annual external audit as required by the Department of Foreign Affairs & Trade, the Australian Council for International Development and the Australian Charities and Not-for-Profits Commission. At the conclusion of every audit, KTF releases a compliance letter from the external auditors on its website as well as in its financial statements and annual report.

3. INVESTIGATION & RESPONSE

INVESTIGATION PROCEDURE:

1. Identification

   • Identify inappropriate and unethical behaviour

   • Determine the operating environment in which the fraud or corruption cases is allegedly taking place

2. Reporting

   • Report the case via the internal or external reporting channels

   • CEO to undertake an internal investigation of the case to determine further action. If further action is not required, the case will be dealt with by the CEO and Senior Management and closed. Should the case require additional investigation, consideration and action, then the CEO will take the case to the FARM Committee.

3. Investigation

   • The FARM Committee will investigate the case and determine whether the case can be dealt with internally through corrective action strategies, whether the AFP need to be notified, whether an external investigation needs to take place and then submits a full report to the board.

   • The board then has the authority to commission an external investigation and the chairman will notify the AFP if required.

Outcomes

Outcomes of various investigations could include but are not limited to:

• Recovery of losses

• Application of appropriate penalities

• evaluate systematic and procedural issues and implement corrective action

• Prosecution

2. Counter terrorism Financing & Anti-Money laundering

2.1 Introduction

Kokoda Track Foundation (KTF)’s Counter Terrorism Financing and Anti-Money Laundering Policy outlines the organisation’s commitment to taking all reasonable efforts towards ensuring that it does not provide finance or support to organisations that are listed by the Australian Government as terrorist organisations or engage any personnel with links to terrorism or money laundering. KTF acknowledges its obligations under both Australian laws and the laws of Papua New Guinea (PNG) in which we operate and is committed to ensuring that all KTF personnel (including staff, directors and sub contractors) and partner organisations’ personnel and sub-contractors adhere to this policy and related procedures to minimse the risk of support for individuals and organisations associated with terrorism and money laundering.

2.2 Counter-terrorism policy

The Counter Terrorism Financing and Anti-Money Laundering Policy’s purpose is:

• To articulate KTF’s commitment to avoid involvement in terrorist activities, avoid supporting terrorism, and avoid working with organisations that support terrorism;

• To articulate KTF’s commitment to avoid involvement in and avoid working with organisations that support money laundering;

• To ensure strict pro-active measures are undertaken to identify, mitigate, monitor, review and report risks or terrorism or money laundering; and

• To promote and implement best practice principles to safeguard against misuse of funds for terrorist and money laundering purposes and build a culture of accountability, transparency and due diligence that minimises the risk that funds or resources managed by KTF are misused to support the actions of individuals and organisations associated with terrorism or money laundering.

To screen for terrorism-related and money-laundering activities:

• KTF will use the Lexis-Nexis World Compliance Risk Management Solutions Service to undertake the necessary screening checks against the defined lists outlined above and a comprehensive list of additional screening checks. This system is a research, investigative and report tool which combines public records, licensed consumer data, senior prominent public figures, sanctions (including the four lists outlined above), watchlist & structures adverse media data and UK and international business data. 

To report suspected terrorism-related activity, KTF will:

• Report any suspected terrorism-related activity to the Australian Federal Police or the National Security Hotline (on 1800 123 400 or +61 1300 123 401) or through their liaison officers in Papua New Guinea;

• Notify DFAT immediately (via counter-terrorism.resourcing@dfat.gov.au) if any link between DFAT funds or a DFAT-assisted organisation and a terrorist organisation is discovered;

• Notify Australian Not-for-profits Commission (ACNC).

• Report any suspected terrorism-related activities of money laundering to KTF’s CEO and board of directors for further investigation and on-reporting as outlined above to authorities.

To demonstrate reasonable efforts to ensure funds are not being directed to terrorist or money-laundering activities, KTF will:

• Screen all suppliers and vendors, partners, partners’ suppliers & vendors, employees, volunteers, directors and associates for terrorism or money-laundering against the prescribed lists annually;

• Ensure appropriate counter-terrorism due diligence is undertaken in the recruitment and selection of all personnel (board members, employees, interns, volunteers, contractors and consultants);

• Develop and maintain records of program budgets, income and expenditure that account for all program expenses;

• Include terrorism financing and money laundering risk in its due diligence assessment of potential new partner organisations, suppliers and its projects;

• Ensure due diligence assessments of partner organisations consider the credentials, financial controls and procedures and ability of the organisation to mitigate the risk of terrorism financing and money laundering;

• Continuously assess terrorism financing risk through close collaboration and dialogue with communities and beneficiaries to ensure that assistance provided will not be misdirected for the purpose of terrorism financing;

• Ensure staff are adequately trained on counter terrorism and such training is provided annually or more frequently if deemed necessary;

• Undertake the necessary due diligence processes (including annual screening checks) prior to entering into any new corporate partnerships or accepting new funding opportunities from significant major donors;

• Produce quarterly and annual financial statements that provide detailed breakdowns of incomes and expenditures; Monitor quarterly financial statements by the Finance, Audit and Risk Management Committee and the Board; and Have an annual audit of financial statements undertaken by an external auditor;

• Immediately suspend the delegation of authority held by a staff, volunteer, director or representative if suspected of breaching this policy. If the breach is proven to be intentional, the staff, volunteer, director, representative’s engagement will be terminated immediately and the matter referred to the police. If the suspicion is proven to be invalid, the delegation of authority will be reinstated;

• Immediately cease any further financial dealings, including transfers or accepting transfers of funds, if a supplier, partner organisation, subcontractor, or a subcontractor of a partner organisation is suspected or found to have been listed on the prescribed terrorist organisation list, or, engaged in activities supporting a terrorist organisation listed on such list.

2.3 Procedures

Policy Training and Risk Assessment

• This policy will be included in KTF’s Policies Manual and will be tabled as part of all new staff, directors, volunteers, partners, and representatives’ induction;

• Ensure adequate terrorism financing and money laundering risk assessments are undertaken as part of the partner due diligence and capacity assessments; Undertake the necessary counter-terrorism financing screening and checks prior to deciding whether or not to work with the relevant partner organisation, supplier or individual;

• Ensure adequate terrorism and money laundering risk assessments are undertaken for each project and that adequate capacity and processes are in place to mitigate such risks;

• Ensure all project activities are monitored to ensure they are not in breach of this policy. Monitoring will be proportionate to the amount of funding and the risk of breach and will be recorded in the project file. Monitoring to include at least one country visit annually;

• Ensure all staff, volunteers and partners undertake annual counter-terrorism and anti-money laundering training and orientation to this policy and procedures;

• Ensure partner organisations undertake annual counter terrorism and anti-money laundering training for their staff and provide support and guidance where necessary.

Screening

• Counter terrorism and anti-money laundering due diligence and checks to be undertaken alongside KTF’s Human Resources Policies and Volunteer Management Policies, and all personnel (employees, directors, volunteers, contractors and others) to undergo annual screening checks via Lexis Nexis screening software. In line with KTF’s Kokoda Track Foundation: Counter Terrorism Financing & Anti-Money Laundering Policy Human Resources and Child Protection Policies, all staff, directors and volunteers (and any other personnel) will be required to undertake annual counter-terrorism and anti-money laundering screening as well as police / working with children checks;

• Counter-terrorism and anti-money laundering policy will be included in KTF’s Memorandums of Understanding with partner organisations. All partner organisations (and their associates) will be screened for terrorism and money-laundering related links and activities during KTF’s Partner Capacity Assessment stage via the Lexis Nexis screening software. Ongoing screening for current partners will be completed annually;

• Prior to engaging suppliers and vendors domestically or internationally, counter terrorism and anti-money laundering screening checks must be conducted to ensure the suppliers/vendors, their board of directors, and key shareholders are not listed on the lists maintained by the Australian Government, World Bank and ADB (as outlined above). Screening to be undertaken prior to payments being approved to suppliers/vendors via the Lexis Nexis screening software;

• Ensure partner organisations undertake annual counter terrorism and anti-money laundering screening checks; support them to undertake these screening checks where required. The partner organisation can undertake these checks if it is assessed the partner has the capacity to do so.

• All screening records and results are to be documented (within the Lexis Nexis screening software) and any consideration given to eliminate a potential match must be justified and documented;

• Any suspicion of a connection of terrorism or money laundering must be escalated to the leadership team, CEO or Board.

Reporting

• All those who participate in the work of KTF as articulated in the Scope of this policy, have a duty to report concerns they have, or information provided to them, about any possible or suspected instances of terrorism financing or money laundering activity;

• Any individual or organisation who has a reasonable basis for suspecting terrorism financing or money laundering activities might have occurred must report it immediately to a member of the leadership team who must report it to the CEO. This includes any positive matches that are identified via the Lexis Nexis screening checks;

• The CEO will review and investigate any instance that is brought to their attention, whether through counterterrorism screening activities or otherwise. The CEO may direct to suspend all dealings with the individual/organisation concerned whilst this investigation is underway. In the event of a confirmed match, the CEO will notify the Department of Foreign Affairs and Trade (DFAT), the Australian Federal Police, the National Security Hotline and other relevant stakeholders. Reporting must occur immediately (understood as within 48 hours) to DFAT if in connection to a DFAT funding agreement, there is a suspected or actual association with or provision of resources to a prescribed person or organization and any other person or organization associated with terrorism;

• If at any time, an individual believes that the action taken by the CEO is inappropriate or insufficient; or the matter involves these individuals, the individual has the ability to report the matter (anonymously or otherwise) through the Whistleblowing Policy mechanism;

• The CEO will report any suspected or detected instances of terrorism financing or money laundering activity to the Board at the earliest opportunity.

2.1 Counter Terrorism & Anti-Money laundering procedures

This sections applies to KTF Staff only, KTF Partners please dismiss this section.

Understanding and Acknowledgment of KTF’s Fraud & Corruption Prevention Policy, Counter Terrorism Policy, and processes and reporting mechanisms

To ensure you understand and acknowledge KTF’s Finance, Fraud Prevention and Counter Terrorism Financing & Anti-Money Laundering Policies and processes and to record your completion of this training module, please complete the survey form below. Upon completion of the form, KTF will be notified and you will have successfully completed module 4.

Please don’t hesitate to contact your KTF representative or any KTF staff member if you have questions or concerns about KTF’s Finance procedures.

Congratulations on completing Module 4. Click on the button below to proceed to the final module, Module 5 now.