Posts Tagged ‘Corruption’
Fraud and Corruption – A Strategic Direction
Nobody likes to be misled, especially by population they trust or have an anticipation will do the right thing, anyone that is. Fraud and corruption can be a blow to the self-image of capable managers and their belief in their quality to deter or detect a fraudulent scheme. More so, they can have a negative impact on an organisation’s brand, image and reputation, organisational morale and where the loss is large – significantly impact the lowest line.
In a new study of fraud in Australian organisations, 84 percent of respondents agreed or strongly agreed with the proposition that fraud control is a governance issue.
Travel Asia
Corporate governance is an whole culture that sets and monitors behavioural expectations intended to deter the fraudster. As part of the preparing of sound corporate governance, it is now clearly approved that an organisation should formulate a fraud and corruption control strategy. straight through the improvement and implementation of the strategy, compliancy with anti-fraud and corruption control practices can be promoted, maintained and instances of fraud and corruption control non-conformance identified and dealt with quickly.
What is a fraud and corruption control strategy?
It is a uncut summary of key elements that the organisation has introduced to prevent, identify, manage, study and deal with fraud and corruption exact to its own circumstances. according to the Australian approved As8001-2003 , although an organisation’s approach to its strategy will be dependent upon its size, diversity, geographical spread and the manufactures in which it operates, the approved recommends that a strategy consist of a whole of elements. some of these elements are discussed below:
- Fraud and corruption awareness – How does the organisation educate their staff and stakeholders about how fraud and corruption occurs and what to do if it is discovered? This is a key element as fraud surveys have clearly demonstrated over time that the majority of frauds are discovered by staff and that whistleblowers are also an important source of information.
- Reporting of fraud and corruption – Is there a formal reporting process? Does senior management and the Audit and Risk management Committee get told of all incidences ? If all instances are not recorded centrally, how does management collate the size and breadth of the problem and effectively manage it ? Also importantly, if the instances if fraud and corruption are not reported to the Audit and Risk management Committee, how do they monitor the carrying out of senior management in managing the risk?
- Fraud and corruption risk assessment – Identifying a consolidate of fraud risks in your firm risk assessment or firm risk management process is far from adequate. An organisation should not rely on management alone to come up with all inherent risks as there may be a knowledge gap, a reluctance to recognize the existing weaknesses, inadequate allocation of time to discuss the issues or lack of a persistent inquisitor to ask the tough questions and ensue up. So, think having person involved who thinks like a fraudster and has experienced a broad range of fraud and corruption issues who can add real value to the process. The insights concerning risks and process weaknesses can be invaluable.
- Whistleblowing – How does your organisation safe whistleblowers? Does it encourage anonymous reporting ? Whistleblower programs allow employees and others to description concerns-including those about corporate fraud-and can allow the management and/or the Board to take early corrective action. Whistleblowing lines are now becoming more important in the private sector.
- Pre-employment screening – Is there a consistent process of screening over the organisation ? How thoroughly are background checks, such as prior employment history, tertiary qualifications and memberships of professional associations, conducted ? Does it cover only full-time employees or consist of contractors ?
- Regular reviews of internal controls – productive internal controls cannot be both prosperous and static. They should be monitored and evaluated for improvements and changes made considerable by changing conditions. The scope and frequency of evaluations of the internal control structure depend on risk assessments and the uncut perceived effectiveness of internal controls. As an example, under the Sarbanes-Oxley requirements, management is charged with performing an assessment at least annually. Anti-money-laundering procedures employed by financial institutions are a good example of a proactive process designed to deter fraudulent transactions from taking place straight through a financial institution.
Commonwealth Agencies have clearly led the private sector in developing fraud and corruption control strategies. This is in general because it is mandated under the Financial management and responsibility Act 1997 that all budget-funded agencies, and relevant Commonwealth Authorities and fellowships Act 1997 funded bodies, put in place practices and procedures for productive fraud control. The Commonwealth Fraud control Guidelines, outlines how each group must have a fraud control plan.
What are the trends and issues that organisations should be aware of?
Patterns of behaviour are clearly emerging as both the cost and complexity of technology decreases and facts is shared straight through the internet in real time. Although more original frauds continue to be perpetrated against organisations, there are also a whole of new or increasingly important challenges. Some of these challenges include:
- Identity fraud and theft – Criminal syndicates ensue the money and as such identity fraud and theft is fast becoming a considerable problem as they target individuals and organisations. The quality of new forgeries of identification documents such as driver’s licences, birth certificates and even passports has highlighted the need for biometric identification solutions such as fingerprints, voice patterns, retinal images, facial or hand geometry to be seriously thought about by organisations.
- Cyber-crime – The role of ‘phishing’ and the use of ‘trojans’ to illegally perforate computers to accumulate confidential information, including banking details, shows no signs of abating. As an example, over 11,000 unique phishing assault websites were reported to the Anti-Phishing Working Group in May 2006.
- Cheque fraud – this continues to be one of Australia’s most prevalent frauds affecting businesses. It involves the alteration of an existing cheque to a new payee and sometimes an altered amount.
- Gambling – There is an inextricable link between gambling addiction and fraud. As the chance to partake in various forms of gambling grows, the incidence of fraud will also continue to grow. Refer to the escape box for some new Australian examples.
What can your organisation do ?
Senior management tasked with governance responsibilities should undertake a narrate of their approach to fraud and corruption control. It is recommended that they at least benchmark your organisation against best institution recommended by the Australian approved As8001-2003 – ‘Fraud and Corruption Control’ in order to settle gaps that need addressing. This will be the blue print for going forward.
Key areas of the fraud and corruption control strategy that should be emphasised and undertaken should include:
- championing a pro-active and approved approach to fraud risk management over the organisation;
- reviewing the organisation’s whistleblowing procedure and procedures and where one does not exist, seriously think the inclusion of an anonymous reporting line to augment the reporting structure; and
- educating staff about fraud, how it is detected and importantly the organisation’s reporting procedures.
Conclusion
Emerging technological trends, the globalisation of manufactures as well as the growing impact of the prevalence of gambling should be of concern to Board members and senior management in all organisations, both large and small. They all generate risks that need to be permanently managed.
Those who commit fraud and corruption, either internal or external to the organisation, are often attuned to principles and control weaknesses and therefore target least points of resistance.
To deal with these fraud and corruption risks, organisations must look to how they are allocating their resources and seriously think the need for a uncut strategy.
Case Study – Whistleblowing
Fraud awareness training was provided to all staff in a division. Subsequent to this training, the Financial Controller was sent an e-mail with the sender’s details disguised although indicating that they had attended one of the fraud awareness sessions. The e-mail contained detailed allegations concerning anomalies with a senior manager’s use of a firm credit card.
A initial narrate was undertaken of the credit card statements that revealed personal purchases of clothes, meals, accommodation, dating services and books over an eighteen-month period that were all fraudulently misrepresented on the card statements as firm associated expenses. Although the card statements were countersigned by other manager, the manager later admitted trusting the senior manager’s explanations for the purchases.
The senior manager was in a key governance position within the organisation and was subsequently dismissed.
Case Study – False invoicing
A Finance Director with responsibility for the Asia-Pacific region travelled regularly. An anomaly with his expenses led to a supplementary investigation of his activities. A link was identified between the name of an Australian based firm of which he was a Director and a firm based in Malaysia that had received consulting fees authorised by the Finance Director.
Further investigation revealed four fellowships in dissimilar Asian countries that had received consulting fees based on bogus projects. As a ensue of the investigation, it was proven that more than 50 invoices were prepared and subsequently signed off by the Finance Director at an Australian Dollar equivalent just below his delegation limit.
International firm searches revealed he was a Director and Shareholder in each company. Over Aud2 million was recovered.
It was also revealed that the each year allocation for such consulting expenses was 0,000 when the Finance Director joined. In the first year, he increased the allocation to .8 million. He therefore budgeted for his own fraud.
Examples – Gambling motivated fraud
.1 million – Accountant defrauded clients’ trust funds. Spent 937 days out of 7 years gambling at the Crown Casino.
.3 million – Claims officer reopened claims files and made out 1,003 cheques to fictitious 3rd parties over a period of 10 years. Most of the money was lost straight through gambling.
.3 million – Merchant Banker in an investment bank wrote out 76 cheques in erasable ink over four years, altering payee to own benefit used to gamble.
million – Bank manager by unauthorised Eft’s. Racehorses.
.57 million – Financial Adviser.
million – general manager of a transport company. Unauthorised Eft’s. Racehorses.
.5 million – Two Managers of a credit Union. Poker machines.
4,000 – Financial Controller of a Hotel. Roulette.
,000 – Carer of population with a disability. Poker machines.
Fraud and Corruption – A Strategic Direction
valleykayaks.bestshoppingnp.com baseballbatcase.bestshoppingnp.com swampcoolersforsale.bestshoppingnp.com