Fraud Corruption Awareness Training January 2015 Overview Fraud

Fraud & Corruption Awareness Training January 2015

Overview - Fraud is dishonest activity causing actual or potential financial loss whether or not deception is used. Fraud includes the deliberate falsification, concealment, destruction or use of falsified documentation or the improper use of information or position. Examples include: • Stealing cash or assets. • In many cases, perpetrators try to conceal theft by adjusting records. Asset Misappropriation BEGA CHEESE LIMITED| PAGE 1 • Making false claims for compensation such as overtime for hours not worked or adding a ghost employee to the payroll and receiving wages. Payroll Fraud • Causing the Group to issue a payment for fictitious goods or services, inflated invoices or personal purchases including an employee submitting a fraudulent or a personal expense claim. Disbursement Fraud • Misrepresenting the financial statements or other key reports in order to seek to enhance the performance of the Group. • Staff may benefit from selling shares, receiving performance bonuses or using the false reports to conceal other frauds. Financial Statement Fraud

Examples of Fraud $1. 2 million in false expenses. David Smith, a former Quest Diagnostics manager, managed to get reimbursed for over $1. 2 million in false expenses through a complex web of deception. He set up fake companies, created fake invoices and turned in fake expense reports for payments he’d supposedly made to companies on Quest’s behalf. A suspiciously long case of jury duty. Joseph Winstead, a Washington, D. C. , postal worker, managed to milk the USPS out of close to $40, 000 in unearned wages over a total of 144 days by claiming he was serving jury duty on an extended federal trial. (The USPS worker fabricated court paperwork to support his reimbursement because he was excused before the deliberations began. ) He would’ve gotten away with it if he didn’t try his luck again — three years later. After a supervisor caught on, Winstead plead guilty to fraud — in the same federal courthouse where he claimed to have spent over 100 days fulfilling his civic duties. Who counts coins anyway? A former Calgary Transit employee, David Hamilton, pilfered almost $375, 000 from his company the old-fashioned way. Over the course of seven years, the former fare counter took coins home with him by hiding them in his bag. That’s an average of $200 per day in small change ! BEGA CHEESE LIMITED| PAGE 2

Overview - Corruption is dishonest activity in which a director, executive, manager, employee or contractor of an entity acts contrary to the interests of the entity and abuses his/her position of trust in order to achieve some personal gain or advantage for him or herself or for another person/entity. Examples include: • The offering, giving, receiving or soliciting something of value for the purpose of influencing an outcome. • A bribe can consist of immediate cash or of personal favours, or anything else that the recipient views as valuable. • Accepting something of value or demanding anything of value as a condition to awarding business or favouring a third party. • The person may facilitate a third person (spouse/child) deriving a benefit Bribery Kickback BEGA CHEESE LIMITED| PAGE 3 • Unauthorised use, illegal use or theft of confidential information to wrongly benefit someone. • An undisclosed personal economic interest in a transaction that adversely affects the organisation or shareholder interests. Confidential Information Conflict of Interest

Examples of Corruption West Africa, Nutrition Project Local project and international donor officials in a US$25 million nutrition project approved multiple source training contracts to local consulting firms in exchange for kickbacks of 12. 5% of the contract values. The consultant’s fees were grossly inflated, as were the number of contracts awarded. Much of the training, which was intended to improve the health of young children, was never delivered, with the reports of the non-existent training sessions copied verbatim from previous reports. Among other failings, the firm presented its programs and materials in French and English, neither of which were understood by the trainees, rather than in Portuguese as required. China: Glaxo Smith Kline (GSK) (UK’s biggest drug maker) Several GSK employees confessed to bribing doctors with gifts, travel, lecture fees and cash bonuses to persuade them to prescribe more of the company’s drugs with some doctors being compensated for conferences or lectures that never took place…. . the employees had aggressive sales growth targets linked to their remuneration. BEGA CHEESE LIMITED| PAGE 4

Policy The Bega Group will not tolerate any acts or attempted acts of fraud or corruption in any form whether direct or indirect. The Bega Group promotes an ethical and professional environment where all employees play a role in minimising the likelihood and occurrence of fraud. Managers are expected to put in place strategies to mitigate risks, control costs, develop and review systems and introduce effective controls. The Bega Group considers that fraud or corruption incidents are very serious and may result in criminal proceedings, other penalties and disciplinary action including termination of employment. BEGA CHEESE LIMITED| PAGE 5

Red Flags “Red Flags” that warrant further investigation when selecting or working with an agent, consultant or other third party include: §Transactions involving a country (particularly emerging economies or countries with high risk) or sectors known for corrupt payments. §Background checks that raise questions about a third party’s reputation, qualifications or trustworthiness. §Family or other relationships that could improperly influence the decision of a customer or an official. §Compensation arrangements which are disproportionate, non-transparent or otherwise unusual. §Payments without adequate documentation. §Lack of cooperation. If you experience ‘red flags’, seek advice from your manager prior to engaging further. BEGA CHEESE LIMITED| PAGE 6

Behavioural red flags of fraud perpetrators Source: ACFE (Association of Certified Fraud Examiners) 2012 Global Fraud Study BEGA CHEESE LIMITED| PAGE 7

IT Security BGA have in the past been targeted by fraudsters who have set up domain names such as ‘Begacheese-au. com’ and ‘Begachhese-au. com’. The fraudsters then intercept emails sent from Bega email accounts to customers and try to redirect customer payments to fraudulent bank accounts by sending emails that look like they come from Bega Cheese but do not (ie: Joe. Blow@begacheese-au. com rather than Joe. Blow@begacheese. com. au) Increase your vigilance when using Group Information Technology. Here are some tips: • Do not access links in unsolicited emails • Be suspicious and vigilant / Malware • Where are you travelling? Consider country risk / IT security of WIFI networks / What are you sending? • When travelling regularly connect to BGA network to obtain latest Virus detection definitions • Use your BGA computer for BGA work only • Ensure you follow correct BGA procedures and policies when sending invoices / sensitive information via email. For example, all invoicing for export customers must be completed via BSM • Phone suppliers where they advise of a change in bank accounts based on a phone number on an older invoice to confirm the change BEGA CHEESE LIMITED| PAGE 8

Reporting Suspected Fraud and Corruption Fraud, corruption, illegal or unethical behaviour will not be tolerated and employees must report any suspected or known cases to the Whistle Blower Hotline. BEGA CHEESE LIMITED| PAGE 9