ANNUAL REVIEW

Fraud & Regulatory Enforcement 2013

April 2013  |  FRAUD & CORRUPTION

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Financier Worldwide canvasses the opinions of leading professionals around the world on the latest trends in fraud & regulatory enforcement.

 

UNITED STATES

Randall Wilson

RGL Forensics

We have seen a noticeable rise in the discovery and resulting prosecution of fraud, bribery and corruption cases. Interestingly, with the increase in awareness of the potential, magnitude and pervasiveness of these crimes, it is surprising that these crimes continue to be discovered at alarming rates. One of the primary factors in my view is the continuing effect of the economic recession in the US that began in the late 2000s.”

 

CANADA

W. Michael G. Osborne

Affleck Greene McMurtry LLP

Increased anti-corruption and anti-fraud enforcement by Canadian federal and provincial governments has had a dramatic impact. In recent times, Griffiths Energy International has been fined $10.35m and Nikko Resources, $9.5m, for bribing foreign officials. Engineering giant SNC-Lavallin was raided twice in connection with investigations into alleged bribery of foreign officials, and its former CEO has been charged with domestic corruption.”

 

CAYMAN ISLANDS

Martin Livingston

Maples and Calder

We have seen an increase in detected corporate fraud, bribery and corruption in past years, but this may not necessarily equate to an increase in the incidence of fraud, etc. Although there have been some notable allegations of fraud involving investment funds, virtually all of the alleged fraudulent conduct is committed, usually by the fund manager, outside of the Cayman Islands.”

 

BRAZIL

Eduardo Sampaio

FTI Consulting Brasil

Corruption remains a hot topic in Brazil. Certainly a lot of recent activity has marred the Brazilian landscape, but it is difficult to establish a clear path. On the one hand, Brazilians have enjoyed some unquestionable gains in the country’s fight against corruption and the move towards greater transparency. Some of these victories include the Mensalão judgement at the Supreme Court; the final hearings of this very high profile case made daily headlines, as well as prime time TV for most of the second half of 2012.”

 

ARGENTINA

Andrea Rey

Ernst & Young Argentina

During the global financial crisis, Argentina demonstrated a high degree of flexibility. The country has shifted from facing a crisis to encountering and creating great business opportunities for both local and international operators. However, within this context, the level of acceptance of occurrences of bribery and corruption has increased significantly in our market, standing at 68 percent in Argentina, compared with 39 percent globally and 14 percent in the US.”

 

COLOMBIA

Laude Fernández

FTI Consulting Colombia

Over the last five years there has been a noticeable rise in the number of cases relating to bribery and corruption in both the public and private sector. This trend is influenced by two notable factors: an increased interest in the subject on the part of investigative journalists and a growing presence of entities specialised in conducting complex investigations. Journalists have been able to document and divulge major corruption cases, thereby supporting government activities related to this as well as fuelling the public opinion pressure necessary to make corruption a priority.”

 

UNITED KINGDOM

Lilia Santos

CRI Group

Recent months have seen numerous headlines about cases of corporate corruption – both within the UK and globally involving UK-based companies. This alone does not mean that corruption is on the rise, only that stronger measures are being implemented. The UK Bribery Act has now been implemented and is delivering daily results. At present we can see a real increase in the detection of acts of corruption, resulting in severe penalties for the companies involved.”

 

GERMANY

Benno Schwarz

Gibson, Dunn & Crutcher LLP

The published figures analysing the development of corporate fraud, bribery, and corruption for Germany suggest a slight decline in this category of crime. However, surveys show that the overall amount of damages caused by these crimes has risen significantly. The reason for this is that, in addition to the immediate damage caused by the fraud itself, there are higher collateral damages.”

 

FRANCE

Philippe Goossens

Altana

It is difficult to know exactly how much financial crime has increased in recent years due to the confidentiality of investigations. However, if we refer to the statistics of the Ministry of Justice, less than 5 percent of penal matters are related to this type of offence. Moreover, the number of crimes reported to investigating judges has decreased, when compared to the number of preliminary investigations.”

 

THE NETHERLANDS

Martijn Hin

BDO Consultants B.V.

Due to the financial crisis, companies’ profit margins are under pressure. Therefore, firms are reviewing their financial results in more depth. This results in more identified cases of financial statement fraud and the misappropriation of assets.”

 

SWITZERLAND

Marcel Meinhardt

Lenz & Staehelin

Since 2008 we have noted a significant increase in white-collar cases. This rise was caused on the one hand by an amended, more rigid regulatory regime on bribery, corruption and white-collar crimes in general. On the other hand, enforcement activities have increased and specialised divisions for white-collar crimes within the public prosecutors’ offices have been created. Today, Swiss public prosecutors also investigate cases with an international dimension.”

 

AUSTRIA

Claudine Vartian

DLA Piper Weiss-Tessbach

We have noticed a considerable increase in our daily practice as a law firm as well as in media coverage. There is a new sensibility in Austria regarding corporate fraud, bribery and corruption. Numerous cases, more than in the past, are pending at the courts. Former politicians, directors, board members, and officers have all been affected as well as executive staff of private companies. More and more frequently, companies themselves, as legal entities, are drawing the focus of the authorities and are facing painful criminal proceedings.”

 

LUXEMBOURG

Sandrine Periot

KPMG Luxembourg S.à r.l.

With a score of 80, Luxembourg has been ranked the 12th least corrupt country by the 2012 Corruption Perception Index among the 176 countries and territories assessed. However, there are no official statistics to really quantify and determine the exact level of economic and financial crime perpetrated. It must be noted that in the tough economic climate, where maintaining earnings and survival are the key priorities for organisations, fraud continues to affect all business.”

 

AUSTRALIA

Owain Stone

KordaMentha Forensic

It is always difficult to be definitive about trends concerning the extent of corporate fraud, bribery and corruption, especially as there is no specific requirement in many Australian jurisdictions to report such matters, and corporates are often reluctant to report to the authorities if they don’t have to. However, we have continued to see an increase in the discovery of corporate fraud, bribery and corruption in recent times.”

 

CHINA

Harvey Packham

Alvarez & Marsal Consulting

There has been a rise in corporate fraud, notably the manipulation of financial statements to inflate the value of various companies involved in Chinese Reverse Mergers (CRM), whereby Chinese companies avoided IPO procedures by buying US-listed shell companies. Increased international trade and investment has also meant heightened exposure to international regulations such as the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act.”

 

SINGAPORE

Matthew Fleming

KordaMentha Forensic

The KPMG Singapore Fraud Survey 2011 showed the average number of fraud incidents reported per organisation had increased from 3.8 in 2008 to 9.0 in 2011. The estimated cost of these incidents increased from S$5.3m to S$6.5m. However, the majority of respondents are generally unfamiliar with the implications of anti-bribery and corruption legislations in Singapore, the US and the UK. In recent times, whistleblowing has gained renewed attention.”

 

MALAYSIA

Joyce Lim Wan Cheak

Ernst & Young

Bribery and corruption have remained pervasive, according to the 12th Global Fraud Survey conducted by Ernst & Young in 2012. The survey, culled from 1758 interviews with senior decision-makers in 43 countries, showed that 39 percent of the respondents felt that bribery or corrupt practices occur frequently in their countries. In Malaysia, fraud and corruption seem to be on an uptrend.”

 

PAKISTAN

Muhammad Sohaib

CRI Group

It is a widely held view that corporate fraud, bribery and corruption in Pakistan is widespread, systematic, and that it is entrenched at all levels. A World Bank report containing an assessment of Pakistan’s Infrastructure Capacity (PICA) states that 15 percent of Pakistan’s Development budget for 2010-2011 was lost in the procurement process alone, due to corruption. This does not include subsequent costs of corruption in the implementation and maintenance stages of projects.”

 

UNITED ARAB EMIRATES

Zafar I. Anjum

CRI Group

Laws and precautionary measures to tackle corporate corruption appear less frequently in the Middle East than globally, although there is a view that white-collar crime is an increasing problem. In the Middle East, almost half of companies report that white-collar crime costs between AED3.5m to AED1.9m. Despite being aware of the huge risks, companies still fail to take adequate measures to prevent bribery and corruption.”

 

SOUTH AFRICA

Pierre Kilian

BDO Risk Advisory Services (Pty) Ltd

According to the 2012 Transparency International Corruption Perception Index (TI CPI), corruption in South Africa has been on a gradual downwards trajectory over the past few years, dropping from 55th out of 174 countries globally in 2009, to 69th in 2010.”

 

KENYA

Peter Kahi

Ernst & Young Kenya

There has been a general increase in the level of corporate fraud in Kenya. This is attributable to the rising cost of living, emerging modes of committing fraud and an increased focus on Kenya as an investment hub, particularly from China and other Asian countries. Reporting of these cases within the last five years has gone down.”


CONTRIBUTORS 

Affleck Greene McMurtry LLP

Altana

Alvarez & Marsal Consulting

BDO Consultants B.V.

BDO Risk Advisory Services (Pty) Ltd

CRI Group

DLA Piper Weiss-Tessbach

Ernst & Young

Ernst & Young Argentina

Ernst & Young Kenya

FTI Consulting Brasil

FTI Consulting Colombia

Gibson, Dunn & Crutcher LLP

KordaMentha Forensic

KPMG Luxembourg S.à r.l.

Lenz & Staehelin

Maples and Calder

RGL Forensics


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