ARTitle_CorpFraud_MAY18.jpg

ANNUAL REVIEW

Corporate Fraud & Corruption 2018

May 2018  |  FRAUD & CORRUPTION

financierworldwide.com


Click cover to download

(Subscriber-only password access)

 

Not a subscriber?

Click here to join the FREE mailing list and receive password access


From insider trading to money laundering and many other forms of malfeasance in between, corporate fraud and corruption haunts companies across industries and jurisdictions, costing national economies billions. Business leaders realise they must do more to protect their companies. They must be proactive on prevention and set the right ‘tone at the top’, cascading this to employees at all levels. They must commit sufficient resources to relevant departments to identify and contain malfeasance and other inappropriate behaviour. Employee training sessions, codes of conduct and hiring policies should communicate the company’s dedication to fraud detection and prevention.

 

UNITED STATES

Glenn Pomerantz

BDO United States

“Traditionally, fraud and corruption has surfaced in three area: crimes against the company, financial reporting fraud, and corruption. More recently, boards and senior executives have devoted significant time to reducing incidents of a different kind – bad behaviour. Perhaps driven by the ‘Me Too’ movement, instances of senior executives being caught up in harassment and similar investigations appears to be peaking. Boards are demanding education programmes, reporting hotlines, swift remediation and zero tolerance. The link between unethical behaviour and a workplace environment conducive to fraud is anything but tenuous.”

 

CANADA

Stéphan Drolet

KPMG in Canada

“Boards and senior executives are becoming more attuned to the risk of fraud and corruption in their organisations. Consequently, fraud risk assessments and prevention are becoming a topic of discussion at the board table. Internal risks are reviewed and analysed but cyber threats are top of mind. As a result, boards and senior executives are meeting with IT professionals to pursue proactive measures against cyber risks. Senior executives, particularly those with bank access, are trained on phishing schemes and alterations to bank approval rights, and authority levels are made to reduce risks accordingly.”

 

MEXICO

Monica Estrada

BDO Mexico

“Boards and senior executives have been working more diligently and more consistently to prevent fraud and corruption. Increasingly, companies are taking into consideration the best practices for their industry, implementing internal controls, external reviews, corporate governance and other measures. The culture of prevention has been renewed by a growing majority of companies despite a stubborn belief among the minority of companies that prevention is a cost and not an investment. Regulations enhance effective enterprise risk oversight, including the role of boards of directors in connection with the implementation of fraud risk programmes.”

 

PERU

Rafael Huaman Cornelio

EY

“Boards and senior executives have been working more diligently and more consistently to prevent fraud and corruption. Increasingly, companies are taking into consideration the best practices for their industry, implementing internal controls, external reviews, corporate governance and other measures. The culture of prevention has been renewed by a growing majority of companies despite a stubborn belief among the minority of companies that prevention is a cost and not an investment. Regulations enhance effective enterprise risk oversight, including the role of boards of directors in connection with the implementation of fraud risk programmes.”

 

ARGENTINA

Raúl Saccani

Deloitte Argentina

“In a recent survey from the IAE Business School’s Centre for Governance and Transparency, more than 200 Latin-American compliance officers were asked about the most important obstacles they struggle with. The biggest obstacle reported is organisational culture, closely followed by the incentive system and the lack of an adequate ‘tone at the top’. As long as these complex issues are not addressed and the necessary changes are not initiated, the success sought by compliance officers will be limited. Such a background would lead us to believe that boards and senior executives are unlikely to take proactive steps to reduce instances of fraud and corruption.”

 

UNITED KINGDOM

Zafar Anjum

Corporate Research And Investigations Limited

“Business leaders in the UK recognise that being proactive against fraud and corruption is about more than just protecting the business – which is critical – but it is also a key component of growing and connecting to more opportunities. According to the World Bank, business grows an average of 3 percent faster where corruption is low. One way for organisations to demonstrate their commitment to preventing bribery and corruption is to engage in ISO 37001 certification. We expect to see more UK companies seeking certification and we expect this trend to increase as organisations look to set themselves apart from their competitors.”

 

PORTUGAL

Filipa Marques Júnior

Morais Leitão, Galvão Teles, Soares Da Silva & Associados

“Boards and senior executives in Portugal are more aware and see fraud and corruption as a major concern. This leads to cautious preparation, implementation and maintenance of compliance policies and programmes to safeguard their companies. Attention is also paid to risks that exist in the country where business is conducted, to diligence on third-party relationships and on transactions. In this respect, we see boards and senior executives paying more attention to codes of conduct and internal policies regarding, among others, gifts and courtesies, hospitality, facilitation payments and sponsorships, as these are relevant areas of fraud and corruption risk.”

 

SWITZERLAND

Roman Richers

Homburger AG

“The awareness of fraud and bribery as key risks to a company’s business has clearly increased in recent years. This is particularly true regarding corruption-related risks where the media coverage of large international bribery schemes, as well as the related crackdown on bribery, has led to a rethink in the corporate world. Most multinationals have been paying close attention to fraud and bribery risks for many years now, but small and medium-sized enterprises are now focusing on these topics as well. Under Swiss criminal law, the board is responsible for compliance with the anti-bribery laws, and this responsibility cannot simply be delegated to management.”

 

ITALY

Mario Galiano

Grant Thornton Consultants S.r.l.

“There is a growing focus on the opportunity to develop a framework through which private and public organisations can prevent fraud and corruption. Many companies are expanding their internal processes focused on fraud risk, and this is confirmed by the increasing demand for cyber security services. Many companies are providing training courses which involve employees belonging to each level of hierarchy and, more broadly, senior managers are applying pressure to their organisations in order to achieve a concrete implementation of the enterprise risk management framework, which would allow companies to reduce the frequency and the impact of fraud and corruption.”

 

RUSSIAN FEDERATION

Denis A. Korolev

EY, Russia and CIS

“Recent regulatory developments and anti-corruption enforcement actions introduced by the state have driven business leaders to be more proactive in confronting fraud and corruption. This also reflects the understanding of risks associated with seeking a growth opportunity in a challenging market such as Russia, as well as the recognition of strong corporate governance as a crucial instrument in addressing fraud and corruption issues.”

 

INDIA

Mansi Mehta

BDO India

“A large proportion of Indian companies continue to be reactive in their approach to fraud and corruption. Only a few companies have started acting proactively against these issues. These primarily include some of the largest home-grown corporations and Indian subsidiaries of global multinationals. The boards and senior executives of most of these companies have set up a whistleblowing mechanism to enable effective reporting of such incidents, have conducted fraud risk assessments for various processes within their organisations to improve controls, and have increased awareness among their employees and vendors to encourage them to report these issues.”

 

PAKISTAN

Fatima Farrukh Nawaz

Corporate Research and Investigations Pvt Ltd

“Rising fraud risks have driven companies to establish the right steps to prevent fraud and corruption from surfacing. Following through with a focused trajectory ultimately also ensures failsafe protections are put in place, which will guard against scandals or negative publicity, while minimising risk exposure. There is quite a notable empirical rise in the frequency of companies conducting background screenings to nip corruption in the bud. Though checks can vary in nature, enforcing internal controls by implementing ISO strategies can bring pivotal change to a company’s strategy.”

 

HONG KONG & CHINA

Keith Williamson

Alvarez & Marsal Disputes and Investigations Limited

“In the past few years there has been a noticeable increase in the prevalence of compliance and internal audit functions in multinational companies’ China operations. Whereas previously such functions were provided from global or regional hubs outside China, more international companies now recognise the importance of hiring local resources that are familiar with local language, culture and business practices to be able to more readily identify and mitigate risks of fraud and corruption. Further, especially in industries that have been the subject of high-profile Asian fraud or corruption scandals, some companies are now conducting periodic monitoring and auditing for potential issues, and are responding quickly as risks are identified”

 

MALAYSIA

Sanjay Sidhu

BDO Malaysia

“The extent of proactive action is very varied across the region, driven by a combination of factors such as country, size of business, type of ownership and nature of business. A large part of the region does tend to be compliance-driven, so it is no surprise to see these steps being spearheaded by entities that are either listed or regulated, such as financial institutions, followed by entities that are driven or influenced by ownership or management from more mature environments. These entities are driving initiatives in respect of codes of ethics and conduct, maturity and automation of business processes and controls, and sound mechanisms for whistleblowers, and are increasingly driving these initiatives to their business partners as well.”

 

AUSTRALIA

Roger Darvall-Stevens

RSM Australia

“The steps taken by boards and senior executives to reduce fraud and corruption depend on their awareness, the industry in which they operate and the types of risk they are exposed to. There is a spectrum from boards that are unaware or ill-prepared for risks, to boards that are very aware and ever-vigilant. A key question to ask continues to be whether management has established, implemented and tested a process of oversight of fraud, bribery and corruption risks by the board of directors or others charged with governance, such as the audit and risk committee.”

 

UNITED ARAB EMIRATES

Zafar Anjum

Corporate Research And Investigations Limited

“High-profile corruption scandals have driven home the seriousness of fraud and corruption, and the turmoil that can engulf a company because of it. Organisations in the United Arab Emirates (UAE), and in the Middle East region as a whole, understand that being proactive against risk can be a matter of survival, especially in a competitive environment, but it is more than that. Today, being forward-thinking and proactive when it comes to fraud and corruption can actually foster organisation growth. Business grows an average of 3 percent faster where corruption is low, according to the World Bank.”

 

SOUTH AFRICA

Roy Waligora

KPMG South Africa

“South Africa has one of the highest reported rates of economic crime in the world. This demonstrates that South Africans have a heightened level of awareness of corruption and fraud and its impact on the economy and the country’s social fabric. Boards, senior executives and the public sector, as well as political parties, have witnessed the impact of reported bad behaviour – in 2017 we learnt that bad news travels fast and corporate, individual or political reputation is not shielded by any law, jurisdiction or due process.”


CONTRIBUTORS

Alvarez & Marsal Disputes and Investigations Limited

BDO India

BDO Malaysia

BDO Mexico

BDO United States

Corporate Research And Investigations Limited

Corporate Research and Investigations Pvt Ltd

Deloitte Argentina

EY

EY, Russia and CIS

Grant Thornton Consultants S.r.l.

Homburger AG

KPMG in Canada

KPMG South Africa

Morais Leitão, Galvão Teles, Soares Da Silva & Associados

RSM Australia


©2001-2018 Financier Worldwide Ltd. All rights reserved.