Click cover to download

(Subscriber-only password access)

Not a subscriber?

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

Cases of corporate fraud and corruption have risen in recent years. While malicious actors have become more technologically advanced and bolder in their actions, the events of the last two years have greatly increased their opportunities. The coronavirus (COVID-19) pandemic has created new vulnerabilities for organisations of all sizes and industries. The rapid, chaotic scramble to open up remote, digital channels, coupled with reduced managerial oversight and governance, have exposed companies to fresh threats.

UNITED STATES

Guidehouse

“Corporate fraud and corruption are issues that have affected financial sectors tremendously, increasing in prominence in recent years. Financial institutions (FIs) tend to be particularly concerned with fraud, as it has a direct negative impact on revenue and can erode the confidence of customers. FIs work to have robust anti-fraud and anti-corruption programmes that utilise enterprisewide fraud risk assessments of existing products, businesses and channels, as well as new product offerings. While there are a variety of controls, most are focused on prevention and detection of fraud perpetrated by employees, customers and outside actors posing as customers.”

MEXICO

BDO Mexico

“Boards of directors and senior executives are increasingly focused on the importance of developing more controls to reduce incidents of fraud and corruption. They know the value of investing in compliance programmes to mitigate criminal incidents and promote an ethical culture. They are developing a framework for timely detection, reporting, investigation and more relating to fraud corruption. They ensure no one person has control over all parts of a financial transaction and can comprehensively check into various angles of possible fraud. Smaller and newer companies are also taking a more conscious approach to preventing and detecting business fraud.”

BRAZIL

BDO Brazil

“Boards and senior executives are increasing their adoption of governance practices and requiring the design and implementation of anti-fraud and anti-bribery programmes. These programmes include not only the identification of fraud risk but also response programmes and continuous fraud prevention education for employees at all levels of the organisation. When dealing with third parties, boards and C-level executives are increasingly concerned with carrying out preliminary due diligence as a way of preventing fraud and corruption.”

UNITED KINGDOM

StoneTurn

“Over the past 15 years, key legislation, such as the Fraud Act 2006, Bribery Act 2010 and Criminal Finances Act 2017, have increased the focus of boards and senior executives on taking proactive steps to reduce incidents of fraud and corruption. The scale and pace of change due to the coronavirus (COVID-19) pandemic has injected new fraud and corruption vulnerabilities into business operations due to the rapid shift to digital channels, reduced management proximity and governance. Untested processes have been introduced and internal controls have had to be relaxed to accommodate the ‘new hybrid normal’.”

IRELAND

Grant Thornton

“The proactive steps being taken range significantly based on a number of factors, such as the experience of the board and senior executives, the structure of the company and operating industry. Unfortunately, it is often the case that any proactive steps taken are a result of previously falling victim to fraud and corruption. In fact, Ireland’s Central Statistics Office has identified fraud offences having increased by 72 percent this year, from 7863 reported cases in 2020 to 13,509 reported cases in 2021. As such, the importance of proactive action cannot be stressed enough and it is the responsibility of the board and senior executives to establish, encourage and maintain good fraud risk governance.”

FRANCE

FTI Consulting, Inc.

“In recent years, regulatory developments in France and Europe have led many boards and senior executives to adopt a proactive approach to fraud and corruption risk within their companies. Since the adoption of the French anti-corruption Sapin II Act in 2016, companies falling within the scope of the act are required to perform a detailed and regular corruption risk assessment. As the law requires companies to assess corruption risk, they often integrate fraud risk into their risk-mapping exercises to address these in a global, comprehensive, proactive manner. Boards and senior executives are usually involved in conducting these exercises.”

GERMANY

StoneTurn

“Continuing economic uncertainty and pressure at both a personal and corporate level remains intense due to the coronavirus (COVID-19) pandemic, and the circumstances have lent themselves to a surge in fraud and corruption. During the pandemic, the German government spent billions of euros on providing complimentary lateral flow tests. Dozens of criminal proceedings against operators of COVID-19 test centres are in progress. Another high-profile corruption scandal involves members of the German federal parliament and the procurement of face masks during the pandemic.”

ROMANIA

Budusan & Asociatii

“According to corporate intelligence data, in 2021, more than 75 percent of Romanian companies fell victim to internal fraud. According to Transparency International, in early 2022, Romania remained one of the most corrupt countries in the European Union (EU), with a Corruption Perceptions Index score of 45 out of 100. According to the Eurobarometer published by the European Commission, in early 2022, Romania has made significant progress on anti-corruption policies over the past two decades, but corruption is still perceived as a major problem, well above the Organisation for Economic Co-operation and Development (OECD) average.”

INDIA

BDO India

“Senior management teams of companies in India have been addressing fraud more proactively, working toward strengthening internal controls, including codes of conduct, compliance policies, due diligence requirements, and so on. There is also an inclination to leverage data analytics and technology to prevent and detect fraud, in addition to conventional methods. While top-level executives may believe they are sufficiently covered on this issue, particularly with their increased involvement, there are often gaps in implementation and expectations when it comes to broader adherence to such policies and controls across an organisation.”

CHINA

BDO China Advisory Services

“Most multinational companies (MNCs) and state-owned enterprises (SOEs) have an internal anti-corruption ‘firewall’, which forms part of their first line of defence against corrupt behaviour. At the same time, local anti-corruption laws under which boards and senior executives may be personally liable are being updated and expanded. China’s government also requires enterprises to pay attention to internal compliance issues, such as strengthening the effectiveness of corporate anti-corruption actions. Enterprises formulate rules and regulations, such as employee handbooks and codes of conduct, according to their own characteristics.”

UNITED ARAB EMIRATES

BDO UAE

“Organisations across the United Arab Emirates (UAE) have generally seen an increasing trend of enhanced efforts by leadership to prevent, detect and respond to fraud and misconduct, including corruption. More specifically, there is a concerted effort to detect and investigate corruption for various reasons, including a focus by law enforcement on corruption being a predicate offence for money laundering. This was further intensified by the recent news of large organisations in the UAE that came under the scrutiny of UAE law enforcement authorities for potential wrongdoing.”

SOUTH AFRICA

KPMG Services (Pty) Limited, South Africa

“A holistic approach to managing fraud risk is required to effectively mitigate its effects. This includes implementing a robust fraud risk management framework incorporating prevention, detection and response strategies. In line with the South African Companies Act and King IV Code on Corporate Governance, the board is responsible for risk management, including fraud risk management. Organisations are expected to adopt an anti-fraud policy at board level. The accountability and oversight of fraud risk management is extended to board subcommittees, such as the audit and risk committee and the social and ethics committee.”

GHANA

KPMG Ghana

“In our experience, those charged with the governance of multinational companies operating in Ghana do well to create mechanisms that deal with the risks of fraud and corruption, such as robust controls and whistleblowing channels. Establishing the right tone at the top, that corruption is not tolerated, has a hugely positive influence on the culture of such organisations. Indigenous private Ghanaian companies are often governed by persons with a personal connection to the owners, such as relatives or friends. At times, board members and executives of public entities are appointed based on their political connections.”

CONTRIBUTORS

BDO Brazil

BDO China Advisory Services

BDO India

BDO Mexico

BDO UAE

Budusan & Asociatii

FTI Consulting, Inc.

Grant Thornton

Guidehouse

KPMG Ghana

KPMG Services (Pty) Limited, South Africa

StoneTurn