Nigel Layton is no stranger to the more colourful aspects of forensic accounting. During an 11-year stint at PwC, he cut his teeth working on the Robert Maxwell insolvency. “I literally spent five years working on one case in the corporate recovery department as the insolvency person who liaised with the forensic people.”
It was an experience that was to pave the way for an illustrious career in forensic investigations. Layton left PwC with two other forensic experts, David Lee and Tim Allen, to set up Quest, the investigations arm of the Lee & Allen accounting practice. There, Layton led the inquiry into irregular payment transfers in the Premier League. The firm was subsequently hired by the Football Association to audit the January 2008 transfer window, after which Layton sold his shares in Quest.
A 10-year stint at KPMG followed, initially as a director in the firm’s corporate intelligence practice before becoming a partner in 2012. “I spent my first two years as a partner in Moscow running KPMG’s forensic business in Russia and the Commonwealth of Independent States (CIS).” On returning to the UK, Layton became a Partner in the forensic team for the risk consulting arm of KPMG. He retired from KPMG two-and-a-half years ago and joined Mazars the next day as Head of Investigations and Compliance.
Today, Layton is Partner – Crisis & Disputes at Mazars. The mainstay of his job focuses on investigations into bribery, corruption and fraud, usually the result of a whistleblower calling out anything untoward happening. Meanwhile, the compliance side of Layton’s work – a growing part of the business thanks to a heightened sense of concern about the implications of bad behaviour coming to light – hinges on helping organisations thrash out policies and procedures and ensure that they have systems in place to keep them on the right side of the law.
“I’m advising major international household-name pharma companies on issues such as introducing third-party due diligence checks on all of their worldwide suppliers. If they’re using a local distributor, they need to know that they have a good reputation and understand their business practices.”
The power of AI
Bearing in mind the complex supply chains involved in drug production across global businesses, use of technology – and more specifically, artificial intelligence – has revolutionised the ability to perform due diligence by performing much of the necessary grunt work and reducing the time and manpower needed to manually trawl through documents.
Mazars licenses Exiger’s DDIQ software for use in-house and to sell to clients. The AI system trawls around 40,000 publicly available sources of information including registries and press coverage in 60 different languages, translates the text into English, and produces a report in seven minutes. “It’s extremely powerful,” Layton says.
Despite the obvious efficiency gains, it took a while for the industry to embrace AI. One client made Layton do around 50 samples before he won the contract. “When new technology comes in, people ask, ‘how do I know I can trust this?’ We’ve passed a lot of due diligence and we’ve taken a lot of care to get it right, which reduces the scariness – but it doesn’t take it all away completely,” Layton admits.
This is not about abdicating complete responsibility to the tech, Layton says. “If there’s a serious red flag, the client might ask us to do a bit more work to make sure that it’s correct. The system gives us an audit trail of every single search it does, so if you ever get a regulatory investigation, you can show exactly what due diligence you did.”
While Layton concedes that bribes are part and parcel of doing business in some jurisdictions, the ramping up of regulatory requirements has propelled supply chain due diligence up the list of corporate priorities. The Bribery Act 2010 in the UK; US federal law, the Foreign Corrupt Practices Act; and French legislation SAPIN II all have global reach and have all helped focus minds, Layton says.
“If you have a footprint in the UK and your local business in, say, India commits a bribe in India, you are liable under the UK Bribery Act for that offence. A lot of the pharma companies have in recent years fallen foul of the Department of Justice (DoJ) and the Serious Fraud Office (SFO) because they have been paying bribes overseas. The regulator will come down hard if allegations of bribery are made.
“The regulation has forced people to understand their risks. There’s also a requirement to train people in anti-bribery and anti-corruption practices, because if you have a regulatory investigation, you may have to demonstrate that. Does bribery and corruption still occur? Of course, it’s part of the territory of dealing with certain countries and governments,” Layton adds.
But this shouldn’t be about using a sledgehammer to crack a nut, he says, and due diligence must be approached proportionately. “You’re not doing a huge amount of work on every supplier, but you might go into detail on the odd one because you’re slightly concerned. Business practices around the world vary enormously. Some countries have always done business in a certain way and you’re likely to experience higher anti-bribery and corruption risks in certain countries of the world – that’s just a fact.”
Anyone can whistle
Layton says the shift in corporate attitudes towards whistleblowing is probably the biggest thing to happen in the industry in the past 10 years. “Every major company has a whistleblower hotline so you’re one phone number away from making a complaint. What whistleblowers have done is highlight areas of potential corruption. Whistleblowers have raised the game enormously because it gives you an opportunity to find out what’s really going on in your business.”
At the same time, the importance of working for ethical businesses makes it far harder for organisations to simply pay lip service to their ethical credentials. “If you look at the values statements of major pharma companies, it’s about being the best but it’s also about integrity and trust. It’s about making sure the organisations are living and breathing those values. In my experience, they are really taking it seriously. They’re auditing it. They’re improving it all the time.”
Sustainability, too, is also creeping under the due diligence remit with the environmental impact of suppliers increasingly under the spotlight. “You cannot be a leading company and not take environmental issues seriously.”
Despite widespread economic gloom, Layton says Mazars’ pharma and life Sciences UK business looks set to grow by about 20% this year, against a backdrop of burgeoning demand for consulting services by organisations in the sector. “I think the BEIS consultation on audit will help us win a bigger-sized slice of the audit pie. The more that we can pick up big audits, the more chances we have to convince companies that Mazars is a name you can trust.”
Layton downplays the challenges of finding the professionals that the firm will need in order to be able to satisfy this demand against a backdrop of frantic recruitment across the professional services sector. “We employ a lot of people who are ex-Big Four, like me, so we have the skills, we have the experience, and we have the people, and we operate in 90 countries around the world. If we can compete on experience, then hopefully we’ll win on price.”
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