ANNUAL REVIEW

Corporate Fraud & Corruption 2017

May 2017  |  FRAUD & CORRUPTION

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Irrespective of company size or industry, fraud and corruption remains a persistent and corrosive influence. Though many countries and international organisations have redoubled efforts to investigate, punish and prevent fraud, there is still much work to be done. While technological developments have revolutionised so many different industries, they have also helped to facilitate fraud, corruption and bribery. According to a 2016 study commissioned by the European Parliament, corruption costs the European Union around £800m a year.

 

UNITED STATES

Ellen Zimiles

Navigant

“Corporate related fraud and white-collar crime trends have continued, as in previous years, with augmentation through technology. The increased use of phishing and malware programmes has led to large scale identity theft schemes in both the public and private sectors. Hackers are illegally transacting through consumer bank and brokerage accounts and are stealing funds. Denial of service schemes have shut down company websites, preventing companies from conducting business, while simultaneously threatening their reputations. Digital currencies, such as bitcoin, provide criminals new ways to mask their identities.”

 

CANADA

Stéphan Drolet

KPMG Canada

“Generally speaking, corporate fraud scandals have been subject to increased media coverage in recent years, suggesting a greater interest and awareness of the issue among the public. On a domestic level, fraud committed by corporations in the context of public procurement has been receiving increased attention from law enforcement than it has previously. In addition, we have seen chief legal officers spend more time training employees on risks attached to non-compliance than they did just a few years ago. When it comes to corruption committed overseas, while there was some momentum in the enforcement of the Corruption of Foreign Public Officials Act (CFPOA) in 2013 and 2014, it appears to have slowed down in 2015 and 2016.”

 

PERU

Rafael Huaman Cornelio

EY

“Over the last two years, the Latin American region has been impacted by the results of the Lava Jato investigation. Top executives of Brazilian construction companies were discovered to have paid significant sums of money to government authorities in many countries of the region, including Peru. This information, together with investigations being carried out by the Peruvian authorities, has led to the preliminary arrest of former Peruvian public officials, who would have received bribes, and has resulted in the arrest of a former Peruvian president.”

 

CHILE

Claudio Feller

Grasty Quintana Majlis

“Recently, there has been an increase in corruption cases. There has been a marked increased in the number of individuals using corrupt means to achieve political influence, via contributions of money to the financing of political campaigns and candidates. This practice has occurred for some time, but lately there have been various criminal investigations related to the practice, some of which have concluded with criminal charges against politicians and private individuals. With respect to corporate fraud, there have been several cases, many in the financial sector, which have been conducted through investment companies that have offered very attractive interest rates, but were, in fact, just simple pyramid schemes which resulted in losses being incurred by a significant number of people.”

 

UNITED KINGDOM

Nick Matthews

Duff & Phelps

“It is difficult to quantify, but what we have observed is an increasing use of technology by criminals manipulating high volume, low value transactions and taking advantage of loopholes and vulnerabilities. This can continue for some time before the corporate victim can act or link the different, smaller incidents together. We have seen activity, such as coordinated fraud via online retail channels, where the retailer or the card issuer is the victim. Technology allows the fraudsters to channel the volume of transactions. It also provides anonymity, including via the use of crypto currencies, and facilitates coordination among disparate groups or individual criminals where necessary.”

 

PORTUGAL

Filipa Marques Júnior

Morais Leitão, Galvão Teles, Soares Da Silva & Associados

“There has been a rise in the number of known investigations by the authorities regarding fraud, corruption and bribery involving companies. However, this trend seems to be more related to the available means of investigation and enhanced cooperation between authorities and enforcement agencies at both the national and international levels, than to an increase in corporate crimes. The public exposure of these cases and rising awareness of compliance issues have increased companies’ concerns with the adoption of mechanisms aimed at reducing these crimes.”

 

NETHERLANDS

André Mikkers

PwC

“From a Dutch perspective, the Dutch Prosecutor has increased its activity with regard to the prosecution of both companies and individuals on bribery and corruption. However, where companies are concerned, the Dutch Prosecutor has preferred to settle with companies. The penalties have increased considerably, but the individuals responsible for corruption have not been prosecuted. The Dutch Prosecutor has issued verbal statements stating that individual managers will also be prosecuted in the near future.”

 

SWITZERLAND

Roman Richers

Homburger AG

“Switzerland continues to be a country with low levels of criminality, including white-collar crime, and it would be difficult to argue that acts of fraud, bribery and corruption have noticeably increased. However, the picture is slightly different when it comes to the number of cases uncovered and prosecuted, which seems to have increased in recent years. This increase has occurred for a number of reasons, including an increasing level of international cooperation between prosecuting authorities, the fact that more companies are discovering irregularities through their own internal investigations, increasing reporting obligations in regulated industries, and the increased attention that has been given to bribery and corruption in recent years.”

 

ITALY

Giovanni Foti

Accuracy

“Despite some improvements in Italy, as seen in the Corruption Perceptions Index issued by Transparency International, the number of Italian cases concerning violations of anti-bribery and anti-corruption legislation is increasing, due to a higher incidence of corporate fraud in Italy. Most of the cases are related to falsified Statutory Financial Statements, as well as statements related to market abuse and internal corruption. Few cases concern compliance models. The key to such results can be found in increasing awareness of fraud and corruption among company management and boards of directors, as well as the implementation of stronger compliance models aimed at preventing fraud, bribery and corruption cases, and stricter national regulations.”

 

TURKEY

Gul Saracoglu

Deloitte Turkey

“Having received fewer points each year since 2013, Turkey is now 75th out of 176 countries measured in the 2016 Transparency International Corruption Perceptions Index. Turkey’s perceived level of corruption draws a declining graph which reveals the reality of a notable rise in the level of corporate fraud, bribery and corruption in the past several years. According to the 2016 National Integrity System Assessment report for Turkey, which aims to assess the country’s ability to fight corruption, no Turkish institution was classified as “strong”.”

 

INDIA

Mohit Bahl

KPMG India

“Instances of corporate fraud have been steadily increasing in recent years, both in terms of the number of frauds recorded and in terms of quantum of losses. KPMG International released its ‘global profiles of the fraudster’ report in May 2016 and as per KPMG in India’s analysis we saw technology-related frauds, collusion frauds, related party transactions and misappropriation of assets are the most common types of fraud in India. Greater awareness of fraud risks, a developing culture of corporate ethics and code of conduct and acceptance of whistleblowing mechanisms are some of the key reasons why corporate frauds are being uncovered.”

 

AUSTRALIA

Gary Gill

KPMG Australia

“Our Fraud Barometer for April 2016 to September 2016 shows that in Australia, the number of fraud cases increased by almost a quarter compared to the six months prior, and that the total value of all fraud cases increased by 16 percent to AU$442m. Many corruption and fraud cases still fail to make it to court, but we have noticed an increase in cyber-related investigations, with organised criminals and insiders the most frequent perpetrators, often working in collusion. Technology is advancing at a rapid pace and the perpetrators of corruption and fraud are becoming more sophisticated with their use of technology.”

 

UNITED ARAB EMIRATES

Zafar Anjum

Corporate Research and Investigations Limited

“Some recent, high profile cases have affected companies and countries in the Middle East. Embraer’s bribery scandal, involving sales of its aircraft, included officials in Saudi Arabia, among others. Further, there have been suspicions of corruption surrounding the awarding of the 2022 FIFA World Cup to Qatar, suspicions which have been worsened by allegations of human rights abuses involving migrant workers. In general, however, it is still issues like data theft, ecommerce fraud, information security and other high tech threats that pose serious risks to organisations in the Middle East.”

 

KENYA

William Oelofse

Deloitte

“There has been an upsurge in the number of uncovered cases of fraud and corruption, both in the public and private sectors. Increased regulatory scrutiny has had positive impact in uncovering fraud that would have otherwise gone unnoticed. The auditor general offices in the various governments within the East Africa region have now fully dedicated forensic and value for money audit functions that have been instrumental in uncovering and reporting fraud and corruption. In recent years, we have witnessed the uncovering of high profile fraud and corruption through whistleblowers. We have also seen an increase in the use of social media in uncovering fraud and corruption.”

 

SOUTH AFRICA

Nosisa Fubu

KPMG

“Reports of fraud, bribery and corruption have increased significantly over the last couple of years, probably by virtue of increased transparency, which we believe is driven by two factors. First, an increasingly proactive media, activism in civil organisations, whistleblowing and conscientious disclosures, and political pressure. Second, we believe that the advent of social media has created a powerful social conscience tool which is steadily gaining powerful momentum as a medium of disclosure. Not all of these disclosures are, however, underpinned by exact science and remain to be validated by careful and detailed investigations.”


CONTRIBUTORS

Accuracy

Corporate Research and Investigations Limited

Deloitte

Deloitte Turkey

Duff & Phelps

EY

Grasty Quintana Majlis

Homburger AG

KPMG

KPMG Australia

KPMG Canada

KPMG India

Morais Leitão, Galvão Teles, Soares Da Silva & Associados

Navigant

PwC

 


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