Food Fraud Mitigating the Risks - PowerPoint Presentation

Food FraudMitigating the Risks Kevin Swoffer NSF International

NSF Helps People Live SaferWe carry out this human health and safety mission by :Writing standards to promote the safety of food, drinking water, indoor air, dietary supplements, consumer products and the environment Certifying products to these standards Conducting safety audits for the food, water and consumer goods industries Developing sustainability solutions Certifying to ISO standards Developing training and education programs The NSF Global Food Division provides expertise and accredited services across all supply chain sectors, from agriculture, produce, processing, distribution and dairy, to seafood, fish meal, retail and restaurants.

Definition of Food Fraud ‘ the deliberate placing on the market, for financial gain, foods which are falsely described or otherwise intended to deceive the consumer’ ‘Food Fraud becomes crime when it no longer involves a few random acts by ‘rogues’ within the food industry but becomes an organised activity perpetrated by groups who knowingly set out to deceive and or injure those purchasing a food product.’ Source – Elliott Review, Sept 2014

Types of Food Fraud Mis -labelling Substitution Adulteration Counterfeiting

The Cost of Food FraudThe average cost of fraud to organisation based on fraud figures is £11.2 b per year ≡ 223 b Rand Source- ‘Minimising Fraud and Maximising Value in the UK Food & Drinks Sector’ PKF Littlejohn and the Centre for Counter Fraud Studies 2014

The Horse Meat Scandal

‘Horsegate’ - Not The First And Not The Last Operation Opson III (2014) 33 countries1200 tonnes of fake/substandard foods 430,000 litres of counterfeit drinks Operation Opson IV (2015) 47 countries 2500 tonnes of counterfeit or illicit foods 275,000 litres of counterfeit drinks including 35 tonnes of seafood with ‘freshening agent ‘, 35 tonnes of fake butter and in UK 20,000 empty bottles of vodka with empty containers of antifreeze Source- Europol

Supply Chain Vulnerability Long fragmented supply chains Short term supplier relationshipsPoor use of information technology systems e.g. FDIN ‘Margin squeeze’ High volumes of raw materials with wide dispersion Lack of knowledge of supply chain Inaccurate production forecasting Poor non auditable ordering/invoicing systems Multiple sourcing of single ingredients Import/export duty costs Shelf life demands Product availability (various reasons) Ease of counterfeiting of packaging Culture of supply chain players

The Fraud Triangle Motivation is typically based on either greed or need. Opportunity fraud is more likely where there is a weak internal control system, little fear of exposure and likelihood of detection . Rationalise fraudulent actions as: necessary – harmless – justified

Industry Response‘The GFSI Position on Mitigating the Public Health Risk to Food Fraud’ in July 2014 set two requirements for recognised scheme owners‘Food fraud vulnerability assessment’ requirements – The standard shall require that the organisation have a documented food fraud vulnerability assessment in place to identity potential vulnerability and prioritise food fraud vulnerability control measures. and ‘Food fraud vulnerability control plan’ requirements- the standard shall require that the organisation have a documented plan in place that specifies the control measures the organisation has implemented to minimise the public health risks from the identified food fraud vulnerabilities.

Industry Response Source - GFSI

Scheme Owners ResponseBRC Food Safety Standard V7 New requirements in relation to Food FraudSystems shall be in place to minimise the risk of purchasing fraudulent or adulterated food raw materials and ensure that all claims are legal, accurate and verified Threat assessment Vulnerability assessments Appropriate testing/assurance

Counter Fraud MeasuresGood Corporate Governance Internal Financial ControlsInternal Audit SystemsReporting requirements and supervisionVulnerability assessments Supplier due diligence systems and monitoring Staff Training Whistle blowing systems

NSF Food Fraud Awareness, Detection & Prevention Framework Issues Food Fraud

NSF Food Fraud Awareness, Detection & Prevention Solution is a complex commercial & supply chain issue and is not something that can be solved by “Technical teams” in isolation. STEP 4 Assess Culture across commercial & technical functions STEP 2 Use ‘model’ to identify risk areas and likely form of fraud STEP 7 Ongoing Programme of Supply Chain Assurance & Auditing STEP 3 Identify likely forms of fraud for high risk product groups STEP 5 Deliver training & effective ‘joined up’ approach & internal processes around product dev’t & supply STEP 6 Work with supplier base to develop long term sustainable trusted relationships STEP 1 Horizon Scanning, intelligence & data gathering

The NSF Food Fraud Model

Product Assessment Based Upon Defined Criteria Table 1 (y axis)- Profitability CriteriaCost of ProductCost of Adulterant Profit Margin Sales Volume Availability of the Product Table 2 (x axis)- Ease of Detection Previous Reports/Incidents Analytical Method of Detection Testing Frequency Supply Chain Complexity Cost of Test Table 3 (circle size)- Ease of Fraud Physical State Availability of adulterants/ substitutes Ease of adulteration/substitution Labelling /Tamper proofing

NSF Vulnerability Assessment- Food Fraud ModelsProduct Vulnerability Assessment

Supplier Assessment Based Upon Defined Criteria Table 1 (y axis)- Business Impact % of Company Turnover Related to Product % of Supplier Turnover Related to the Company Number of Finished Product where the product is used Number of Production Units Supplied Table 2 (x axis )- Supplier Confidence Supply Chain AssuranceCountry of Origin (Production ) Contract / Partnership Commercial relationship Quality Evaluation (KPI ) Collaboration Duration Change management of supplier

NSF Vulnerability Assessment- Food Fraud ModelsSupplier Vulnerability High Financial Impact High Confidence Low Confidence Low Financial Impact Vulnerability zone

NSF Vulnerability Assessment- Food Fraud Models Product Supplier Low confidence High confidence High financial risk Low financial risk High profit Low detection Risk zone Risk zone If Both Are In Risk Zone ACTION PLAN

Current NSF Food Fraud Awareness Courses Developed in conjunction with University of Portsmouth Centre for Counter Fraud Studies, with experts from City of London Police and BDO. Covering fraud awareness, counter fraud measures, what to do when you detect fraud and thinking like a criminal.

NSF Vulnerability Assessments Workshops A dedicated workshop programme with a number of attributes, which are;The vulnerability assessment sections of the workshop should incorporate product and supplier assessments and how these interrelate. The workshops should address control measures in accordance with GFSI requirements The workshops content need to be managed by the expert trainer, and in the case of company dedicated and company dictated workshop, are customised to the specific needs of the client The outcome of the workshop should be that a company will have in place a programme of vulnerability assessments and the effective implementation of a monitoring/control plan A company should be capable of implementing a monitoring/control plan and understand when they should undertake vulnerability assessments and how this effects the monitoring/control plan The expert trainer, or an NSF representative should provide additional support to the company.

NSF Vulnerability Assessment Workshops Workshop Audience Number of Delegates No of Days Content 1 Manufacturers Technical and Procurement Team . One company Max 40 1.5 – 2 days Food Fraud Awareness ’Act like a Criminal’ Team Exercise Product Risk Assessment Supplier Risk Assessment Control & Monitoring programme 2 Retailers and Foodservice Technical and Procurement Team One company Max 40 1.5 – 2 days Food Fraud Awareness ’Act like a Criminal’ Team Exercise Product Risk Assessment Supplier Risk Assessment Control & Monitoring programme 3 Manufacturers , Retailers and Foodservice Staff One company Unlimited 0.5 day Food Fraud Awareness Detailed explanation of company food fraud prevention programme