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The coronavirus (COVID-19) pandemic had a significant impact on corporate fraud and corruption. Remote working and reduced organisational oversight undoubtedly emboldened malicious actors to engage in wrongdoing. As a result, compliance teams have been stretched to their limits in recent years. A renewed focus on combatting fraud and corruption is emerging across many jurisdictions. In the US, for example, the Biden administration, via the Treasury, recently issued a new ruling requiring many businesses to report information about their beneficial owners, to crack down on illicit finance and enhance transparency.

UNITED STATES

Simpson Thacher & Bartlett LLP

“Although the Biden administration has emphasised that combatting corporate fraud, bribery and corruption are enforcement priorities, with a focus on holding individuals accountable, we have not yet seen a significant rise in enforcement actions in these areas. While the Securities and Exchange Commission (SEC) has reported that it filed more enforcement actions in 2022 than in the previous year and recovered a record $6.4bn in penalties and disgorgement, the Department of Justice (DOJ) has reported that individual charges brought in 2022 are down from the prior year.”

CANADA

Deloitte

“We have seen an increase in the number of organisations experiencing financial crime, as well as an increase in the magnitude of losses. We are also seeing increasingly complex cases involving organised networks and sophisticated technology. The coronavirus (COVID-19) pandemic resulted in considerable staff and process changes within many organisations, which contributed to increased occupational fraud.”

BRAZIL

Control Risks

“‘Operation Car Wash’, a Brazilian federal police investigation which began in 2014, was a landmark moment for anti-corruption enforcement in Brazil. In subsequent years, the appetite for enforcement and the volume of internal corruption investigations has increased significantly. However, after the ‘Car Wash’ task force was officially disbanded in 2021, the country has sent mixed signals about its commitment to anti-corruption initiatives. As a result of decreasing pressure from authorities, the anti-corruption measures now being implemented by corporations do not appear to be as robust as those established only a few years ago, and we are seeing limited interest and reduced scopes when companies do conduct investigations.”

ARGENTINA

BDO Argentina

“In recent years, bribery and corruption in Argentina have been more prevalent than corporate fraud. Suspicions of corruption are always in the media headlines, and distrust in regulators has also boosted private sector efforts to uncover the issue. Sadly, Argentina is one of the countries that obtained scores between 32 and 45 out of 100 in the Corruption Perceptions Index (CPI) issued by Transparency International over the last 10 years. It also ranked 94 out of 180 countries in 2022 on the CPI, which means Argentina is a country that is perceived as having high levels of corruption.”

UNITED KINGDOM

Corporate Research and Investigations Limited

“In recent years, there has been a notable rise in the level of corporate fraud, bribery and corruption uncovered in the UK. According to a 2019 report by the National Crime Agency (NCA), the number of corporate fraud, bribery and corruption cases in the UK had risen by a third year on year. The report also noted that the value of losses caused by fraud had increased by 50 percent. Furthermore, the Serious Fraud Office’s (SFO’s) annual report for 2018/19 reported a 13 percent increase in the number of bribery and corruption cases it investigated compared to the previous year.”

GERMANY

Alvarez and Marsal

“We see an increasing number of issues with respect to financial crime in the financial services sector. On the one hand, financial institutions have heavily invested in resources and tools within their anti-financial crime departments, but on the other hand, regulatory authorities, such as the German Financial Intelligence Unit (FIU) and the Federal Financial Supervisory Authority (BaFIN) are showing increased momentum in strengthening oversight and enforcement. Whether the uplift in cases has been caused by an increase of financial crime per se or is rather the result of enhanced monitoring within institutions as well as on the regulators’ side, remains to be seen.”

ITALY

BDO Italy

“Cases of corporate fraud in Italy usually involve an employee using his position to receive a personal benefit, misappropriation of funds, such as cash theft or inflated expense reimbursement, and budget fraud. While there has been an increase in financial crime and attempted corruption involving public subsidies related to the economic crisis, Italy has made strides to combat corruption, as evidenced by its recent rankings on Transparency International’s Corruption Perceptions Index. As of 2022, Italy’s score was 56/100 – 0 means highly corrupt and 100 means very clean.”

SRI LANKA

BDO Sri Lanka

“Over the past few years, fraud and corruption in Sri Lanka have increased significantly across both the public and corporate sectors, which has contributed to economic collapse and an uptick in poverty. Online fraud has also increased, including cryptocurrency-related schemes, that were well publicised in the media. Sri Lanka also ranks 101st out of 180 countries in the 2022 Transparency International Corruption Perceptions Index (CPI), which puts the country at a disadvantage as it pursues foreign direct investment (FDI). In 2022, it scored 36 out of 100 on the CPI, one point down from 2021 and its lowest score since 2016.”

MALAYSIA

BDO Malaysia

“There has been a noticeable increase in local press reports of corporate fraud committed by those in positions of responsibility. As such, it is hard to tell whether fraud has truly increased or whether companies and boards are simply more willing to report malfeasance and seek investigations and recompense. It is also unclear whether the increase in reported cases is a new development resulting from the coronavirus (COVID-19) pandemic and impending economic slowdown or whether those pressures have increased collective willingness to call out longstanding fraud.”

AUSTRALIA

KordaMentha

“Instances of corporate fraud, bribery and corruption are a constant. However, we are seeing more cases come to light now as business leaders ‘dig into the weeds’. Companies are being more frugal with spending. They are also looking back over the coronavirus (COVID-19) period when not as much oversight or hands-on due diligence took place and are tightening controls as a result. Fraud issues are generally picked up only when past financial performance undergoes forensic reviews, and the immense disruption caused by the pandemic presented far greater opportunities for fraud and bribery.”

JAPAN

PwC Advisory LLC

“According to one of our 2022 surveys, the percentage of companies that have experienced fraud, corruption and economic crime has remained largely unchanged since 2018. The most common type of fraud experienced by Japanese companies is misappropriation of company funds or assets, and the amount of damage associated with these crimes is on the rise. In addition, cyber crime has also been on the rise in recent years, especially crimes by external actors, such as hackers and organised crime groups. In addition, bribery and bid-rigging incidents involving a major international sporting event were uncovered last year.”

KINGDOM OF SAUDI ARABIA

Corporate Research and Investigations Limited

“Economic and financial fraud has been prevalent in the Kingdom of Saudi Arabia (KSA) for quite some time, mainly due to an increase in international trade within the country. Despite the number of provisions introduced by regulators and government authorities to combat fraud, the parties engaged in fraudulent activities seem to constantly evolve their methods of committing financial crimes. Subsequently, companies based in the KSA are confronted with various economic, financial, operational and governing impediments.”

UNITED ARAB EMIRATES

Corporate Research and Investigations Limited

“Over the past few years, the economy has become increasingly progressive, as too have attempts to perpetrate fraud in the region. Though the government is taking steps to combat corruption, fraud and bribery, non-compliance has increased. Many organisations based in the Middle East appear to have adopted inadequate approaches to implementing anti-corruption frameworks and some companies consider negotiated bribery, particularly in the form of kickbacks and commission, as a traditional element of steering business in the region.”

KENYA

BDO Kenya

“Unfortunately, Kenya has made little progress fighting corruption since gaining independence in 1963. The country ranks low – 123rd out of 180 countries – on Transparency International’s 2022 Corruption Perceptions Index, which rates countries based on perceptions of public sector corruption. Compared to other countries in East Africa where we have a forensic footprint, only Uganda, at number 142 on the list, is perceived as more corrupt than Kenya. Ethiopia at 98, Tanzania at 94 and Rwanda at 54 have all made larger strides in addressing corruption since the Index’s inception in 1995, while Kenya has consistently languished at the lower end of the list.”

CONTRIBUTORS

Alvarez and Marsal

BDO Argentina

BDO Italy

BDO Kenya

BDO Malaysia

BDO Sri Lanka

Control Risks

Corporate Research and Investigations Limited

Deloitte

KordaMentha

PwC Advisory LLC

Simpson Thacher & Bartlett LLP