The Flow of Corruption

The learning theory is based on learnt situations, which triggers to execute a learnt behavior, as this leads with a high possibility to a motivator, which satisfies the need. For example, a sales employee needs to pay its open bills and bribes a procurement person of the client organization. With this he reaches a higher bonus to pay the personal bills. This situation not only applies for objective needs, but also subjective temptations, as the more expensive car or luxury vacations. If the used behavior leads to regular success, the employee will most probably continue with it. Further this extrinsic motivation gets replaced by an intrinsic one. The external motivator is not required anymore to trigger the corrupt behavior. The employee enjoys the flow experience of bypassing internal process and external laws. Thanks to the ignoring of rules, life gets easier for him or her, a certain feeling of liberty or even superiority gets perceived. As the external amplifier is not required, the corrupt behavior gets shown also in situations with a only minimal benefit.

San Francisco, Alcatraz

This explains why repeatedly high level employees get caught in small crimes, where the risk of jeopardizing a long business career does not stand in any relation to the potential benefit of violating internal guidelines. Depending on the individual character and the case where such behavior not got caught & sanctioned in the past, employees may underestimate the risk of getting caught. This is an opportunity for the Compliance system, as suspicious behavior can get caught in the regular random samples to control the approval- and control-processes, as for example in sponsoring and donation or the travel expenses. Mafia gangster Al Capone was imprisoned in 1931, not for murder, money-laundry, kidnapping or similar, but tax evasion. First he spent his time in the Federal Prison of Atlanta, before he got transferred to Alcatraz, the prison island in the Bay of San Francisco. 1939 he could leave based on his good behavior.

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Compliance Tasks related to Self Driving Technology

We are in the process that software is taking over tasks, which today still are done by humans themselves. An example are self-driving cars, which most of the car manufacturers have on their to-do list. This development may be disturbed by a raising individualism of the vehicles. As we have both trends, the question is, will it be necessary that each car would have to get an individual driving license, including a practical test, similar as each human driver has to do? The first fatal accident of Tesla’s autopilot had been explained by the company: “Neither autopilot nor the driver noticed the white side of the tractor-trailer against a brightly lit sky, so the brakes was not applied.” A problem which could be electronically solved with updates on the software or mechanically on the camera. Similar as a person needs to advise for the getting or renewing the drivers license, if he or she needs glasses. In a next development step, the software can include Artificial Intelligence and learn from experience. This would lead to the situation that each autopilot would be different from another. As the car is connected to the Cloud, it has access to other cars’ experiences, but based on its own individualism, differences stay. Further mechanical parts, as for example camera lenses have wear-effects and for this, require regular maintenance and controls.

1970: Ferrari 512 S Modulo

Even if luxury cars as Tesla are an important communication channel for the self-driving technology, a faster growth in the beginning could come from the commercial vehicles, where the “pleasure of driving” is no relevant factor. An intelligent software can replace the human driver and so take aware the risk that because of cost pressure drivers often are fatigue and cause related accidents. Furthermore, the self-driving vehicle will be included in the company’s “just in time production”-process, so that speed and route could be adapted and with this the vehicle will arrive exactly at the time, when it is required to. This, of course, keeping in mind actual weather conditions and traffic situation. It is no surprise that McKinsey & Company forecasts that by 2025 already one third of the trucks will use advanced self-driving technology.

A modern company’s Compliance system works with values and controls, Asimov’s Law provides the basic fixed values for a robot or intelligent software. Similar to a Compliance system we cannot keep the machine alone with this. Artificial Intelligent researcher and author Andrew Rosenblum created the example that the self-driving car faces the situation that a truck is approaching from the front, what surely will destroy the car and kill its passenger. The only possibility to avoid this situation is to swerve and drive the car into a group of 15 pedestrian.  Purely based on Asimov’s Law, the car would have to do the mathematics and decide to sacrifice its own passenger. This may interfere with the car’s obligation to protect its passengers and owner. Due to this, the car manufacturer may feel tempted to include an additional guideline into the software that the car has to protected its owner, as this is the person who pays the company for the intelligent car. What about the 1:1 situation, where the decision is to sacrifice the passenger or one pedestrian? Here the car has to decide always in favor of its passenger? A government cannot burden such a decision on the car manufacturer, programmer or the software. It is required to establish laws and guidelines, which an Intelligent Software has to follow, especially in such grey areas. If such a near future scenario, the Compliance Officer must be able to control the potential “if-then”-strings of the software. As the discussion about the Volkswagen defeat-software and emission controls show, software engineers are under high pressure to reach the high external and internal goals; they are tempted to find solutions to bypass the regarding controls.

Today chip-tuning is already used to change the management of the engine and find additional horse-power. This is in most cases legal, but liberates the car manufacturer from its guarantee. When self-driving cars are a relevant market, it is a question of time, when programmers will offer software to ensure a higher safety for their owners, programmed preference for the passenger against the pedestrians. As different countries have different legal-systems and underlying values, for example Roman or Anglo-Saxon Law. Most properly an auto-pilot requires different processes for such decision making.  In one country choosing the option with the less numbers of victims maybe be adequate, but in another country actively driving the car against this one person may be interpreted as an active act of killing and murder. Governments and car manufacturers are required to find solutions how to avoid this, via law, but also technical protections against non-approved software. Similar to today’s computer viruses, it will be a continuous competition between new viruses and the anti-virus industry.

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Comparison between Yesterday’s Mafia and a Today’s Compliance Department

Sicily at end of the 18th Century was characterized by a long history of foreign rule. As consequence, large landowners divided the island. Nevertheless being far away from bigger cities, these families wanted to enjoy a similar lifestyle to there. For this they moved from the central island to Palermo or Napoli. Because of their absence, they installed a private protection force for their property. Often these groups had been let by a tenant (“Gabelloti”), who leased the land from the landowners and rent it to the small local farmers. As Sicily’s legal infrastructure was not efficient, after some time, it was for the original landowners not possible to control the tenants and until the end of the 19th century, they officially became the owners of the land. Sometimes they bought it from the former owners and sometimes they took it by force.

Later these Gabelloti and their armed forces became what we know today as the Sicilian Mafia, which took on additional roles, including middleman, consultant, judge and protector. The Mafia achieved this status on the one hand based on pure violence, but on the other hand also based on traditional values as family, integrity and religion. Two sides of the same medal, which normally are not compatible.

In my second article for LEC (Legal, Ethics, Compliance) Mexico I analyzed the similarities between today’s Compliance and yesterday’s Mafia, what includes values, efficiency, simplicity and group pressure.

The article can be found in Spanish at the LEC Mexico-wesite. Based on my book “Compliance is a Race Car.”

 

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What ethics for IoT and artificial intelligence?

A guest article by  the technology, privacy and gaming lawyer Giulio Coraggio, earlier this month also published on his blog GamingTechLaw.

The development of Internet of Things (IoT) and artificial intelligence (AI) technologies raises the issue on whether they should also act ethically.

On 26 October 2016, I attended the IoT Solutions World Congress, one of the largest events in the world on the Internet of Things, and I had the pleasure of being part of a panel on “Ethical Uses of Data”, together with Edy Liongosari from Accenture, Prith Banerjee from Schneider Electric, Derek O’Halloran from the World Economic Forum, Sven Schrecker from Intel and David Blaszkowsky from the Financial Semantics Collaborative.

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The discussion was very interesting on a topic that is quite uncommon at such type of events and below are my top 3 takeaways from the debate:

1. Individuals will care about their privacy

In a few years, we will now own almost anything. Our car, our house and whatever we use during the course of the day will become “as a service“. In this context, the sole asset that will belong to individuals is their “digital identity“.

As a consequence, it is reasonable to expect that people will exponentially care about their privacy rights. In order to avoid that privacy compliance becomes an unbearable cost for businesses though, companies themselves shall “educate” their customers. This is to ensure that compliance becomes a competitive advantage, rather than disadvantage. And it is interesting that this is happening just after the approval of the EU Privacy Regulation that will lead to a major change in the approach to privacy compliance, also because of the applicable sanctions.

2.  Compliance will no longer be enough for IoT and AI

In a previous blog post, I had called for a standardization of security measures to be implemented in IoT and AI technologies, as well as in any other technology, in order to create a higher level of certainty which is necessary to foster investments.

I am still a strong supporter of security standards for new technologies such as those of the Internet of Things. However, as raised during the debate of the DLA Piper European Tech Summit, the growth of IoT technologies requires the establishment of relationship of trust between the supplier and its customers.

No software can be 100% secure, but the ability of proving the company’s diligence in having performed whatever was necessary to comply with applicable obligations, together with the ability to promptly react to a potential data breach, are absolutely crucial to acquire customers and avoid to quickly lose them in case of potential issues.

The certification of compliance will become a “must-have” especially once the new fines provided by the EU General Data Protection Regulation will come into force. But, this is just a solution aimed at avoiding potential regulatory sanctions, while it will not be sufficient to ensure that customers really trust a company.

3. Machines need to act ethically, not just reasonably

During the debate, there was a long discussion concerning artificial intelligence systems such as those of self-driving cars and whether they should be educated to have also an ethical behavior. The most commonly used example is the one of a self-driving car that is hitting a bus with many kids and does not just gets off the road since it reaches the conclusion that statistically the best conduct to take was to remain on the street.

In the scenario above, the driver of the vehicle might potentially even bring a claim against the manufacturer of the car. This is especially if the latter is not able to adequately prove why that specific behaviour had been considered the most appropriate. And, as previously discussed, artificial intelligence systems might be so complex to prevent a fully tracking of the reasoning followed by the machine.

This would put manufactures of AI systems in a quite weak position as they might end up with no defense in a potential litigation.

The alternative would be to

  1. design AI systems so that they are able to track and justify their conduct. And this is very important in systems processing personal data, especially after the coming into force of the EU Privacy Regulation;
  2. previously disclose to customers that the IoT or AI system have be set up to also ensure ethical behaviors. This would require to define what is ethical not only in the Ts&Cs, but also in the customers’ settings, without ending up in too complicated definitions; and
  3. evangelize” customers on the need to ensure ethical conducts, also establishing an internal ethical committee.

There is no doubt that we will still hear about this topic. Ethics and its different interpretations might lead to endless litigations. Also, my expectation is that companies will establish an internal Ethical Committee quite soon to address the issue.

If you found this article interesting, please share it on your favorite social media!

@GiulioCoraggio

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Compliance is a Race Car.

A Compliance program has been implemented, but what to do next? In many companies and organizations today, Ethics & Compliance is an established function. A good time to conduct a benchmark to understand the next required steps to bring on the system to the next level. Such a comparison can be done with similar functions, but the most interesting results come from comparisons to complete different processes. Combining unusual organizations and ideas is the source of inspiration and “out-of-the-box”-thinking.

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Business is often compared to competition, and really, analyzing a Compliance program in relation to a race car shows amazing similarities and brings out fresh ideas. Changing the setting, “Compliance is like Mafia” is not a comment by employees, who are suffering from a change of corporate culture, it is a true statement about two efficient organizations. Compliance is not only a science, but furthermore an art. Due to this, an impressionist painter as Vincent van Gogh offers precious lessons. The last chapter of book offers a vision of the future and presents the potential tasks in the year 2025, where the Ethics & Compliance Officer is not only responsible for the human individuals, but also Artificial Intelligence and the Cloud.

Ethics and Compliance should be what it is today or can and should be something more? A question to be answered by the reader.

Book

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McQueen, Le Mans & Ferrari

Steve McQueen not only had been a famous actor, known for his roles in The Cincinnati Kid, The Thomas Crown Affair, Bullit and Papillon. Furthermore,  he was a real racing enthusiast. In 1970 he won together with Peter Revson the three-liter category of the 12 Hours of Sebring, just 23 seconds after the winning Ferrari 512S, driven by Mario Andretti, Ignazio Gunti and Nino Vaccarella. This performance was even more out-standing, as he started with a cast around his left food.

The Porsche 908 from the race should be used in the same year for the Le Mans-movie. McQueen had the vision to shoot the perfect race movie, presenting the spectator the real adrenaline and emotions, which normally only the drivers can perceive. While McQueen’s character drove a Porsche 917 to victory, his main opponent started with a Ferrari 512. Knowing the script and the written Porsche victory, Enzo Ferrari declined to provide his factory cars. For this, the movie crew borrowed two cars from the Belgian Ecurie Francorchamps-team. Even if movie became not the hoped success with its first release, later it became cult, judged as the best racing movie up to today.

In racing and film, McQueen was related to Porsche, but in private life he drove Ferrari. Earlier in 1963 he received a 250 GT Lusso as gift from his first wife Neile Adams. As it was one of Pininfarina’s most elegant creations and together with the rare brown metallic it had been a real unique creation, the car became famous over the time. For the 70th Ferrari anniversary, the company created 70 different special editions (used on five different actual models), each to be produced only once. Some of the models have been inspired by successful race cars, others by drivers and some by their famous owners, as Ingrid Bergman or Steve McQueen. The last features, of course, the famous brown metallic color and inside a beige leather.

ferraribrown

Steve McQueen as driver and person lived Enzo Ferrari’s philosophy, stated in one famous quote from the actor: “Racing is life. Anything before or after is just waiting.” A good reason to give the full color luxury edition of my book “Business Philosophy according to Enzo Ferrari” also this elegant brown design.

 

 

 

 

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Bizzarrini

To describe a person as Enzo Ferrari, it is necessary to tell also the tales of his companions. One of them had been Giotto Bizzarrini. Before their ways separated, the talented engineer, developed most of the 250 GTO and later created the Bizzarrini 5300 GT.

It was a  honor and pleasure to discuss Bizzarrini, both person and car manufacturer, with the expert and author Jack Koobs de Hartog.

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