Thursday 28 Mar 2024
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This article first appeared in Forum, The Edge Malaysia Weekly on November 26, 2018 - December 2, 2018

It is a sobering thought. You have a colleague you enjoy working with. She or he is hardworking, friendly, a great team player and shies away from office gossip. In fact, you just had teh tarik together yesterday morning. The next thing you know, your colleague is being taken away by the Malaysian Anti-Corruption Commission for allegedly stealing money from your employers and colluding with suppliers.

The signs were not there. Then again, they rarely are without proper controls in place. Think about it, when was the last time your company did a temperature check on employee ethics anyway?

According to PwC’s recently launched Global Economic Crime and Fraud Survey 2018 (Malaysia report), 69% of fraud cases in Malaysia over the last two years were committed by internal staff. What was worse, nearly a third of these internal fraudsters were from senior management. Such statistics are alarming, but are Malaysian organisations aware of the full repercussions of fraud? Consequences of internal fraud are far-reaching, from causing financial loss and damaging a company’s reputation to losing the trust of your stakeholders.

Looking closer, just imagine not being able to trust the people you work with, or the people you work for. Not only would this create a work environment steeped in low morale but it would also be difficult to accomplish even the simplest of tasks. (How can you, when your instincts tell you to keep the information to yourself?)

The saying, trust is hard to build and easy to lose, is true. So, anything that erodes it must be confronted.

 

How you can win in the tough battle against fraudsters

Few things harm trust in business more than fraud and corruption. Abandoned buildings and shoddily constructed schoolhouses or highways may sometimes hold dark secrets — collusion, funding of criminal activities and asset misappropriation are just some possibilities.

It is alarming that 35% of economic crime in Malaysia in the last two years involved bribery and corruption, an increase from 30% in 2016, and 19% in 2014. The golden question is, what are we going to do to reverse this upward trend?

Our survey was done before Malaysia’s 14th general election, so we await with some interest to see the results of our next survey in 2020. In the meantime, though, there is much to be done. While the new government has been on the road to rooting out corruption since coming into power, the responsibility does not rest solely on its shoulders.

The business community must play its part and act too. In our survey, 75% of respondents confirmed they have a formal business ethics and compliance programme in place. An encouraging finding, for sure. But the numbers could be better, especially in a world where fraudsters mask their true intent with a friendly face. To protect your business from risk, the idea that “it could never happen to me” must be shelved.

Recent regulatory developments show promise in making life difficult for would-be fraudsters. One particular example is the amendment to the Malaysian Anti-Corruption Commission Act, which introduced corporate liability for bribery and corruption, a legislation similar to the UK’s Bribery Act.

Through this amendment, company leaders will be held accountable for their employees’ corrupt practices, if they are found to have taken insufficient steps to prevent them. This would surely increase the pressure on corporate leadership to intensify their fight against corruption. We can expect more organisations to review and tighten their policies and procedures before this amendment comes into effect.

It is crucial to empower your employees to make the right decisions through a corporate culture focused on a commitment to integrity. To foster this authentically, leaders need to do more than just talk about organisational values. They need to lead by example, demonstrating the behaviours they want to see. Leaders must go beyond setting the tone at the top; they must demonstrate behaviours from the top. This ultimately builds trust, which is crucial for employees to feel safe about reporting fraud and corruption.

In this digital age, technology has become the weapon of choice for fraudsters and economic criminals, both internal and external to your organisation. Forty-eight per cent of respondents reported being targeted by cyberattacks in the last two years. So, why shouldn’t we rely on technology to fight back?

You may be surprised to hear that technology take-up is not as high as it should be. As many as 85% of Malaysian respondents have no plan or do not know of any plan to use artificial intelligence (AI) or advanced analytics to combat fraud. This is troubling because these technologies could actually put them at an advantage.

Anomaly detection, for example, would enable companies to identify outliers or pick up suspicious financial activities. Machine learning, meanwhile, can be deployed to spot unusual patterns in email or instant messaging conversations within a business. Here is a real opportunity for businesses to take the bull by the horns and help make a difference in the fight against fraud and corruption.

 

Nurturing the seeds of trust

Statistics from our report may show that a number of organisations have fraudsters in their midst. But this does not have to be the case forever, and we certainly should not be accepting of this fact.

While the realist in me knows that fraud — or the intent to commit it — will always be around because of its link to human behaviour, I do believe that if every organisation in Malaysia commits to being more proactive in addressing fraud and economic crime, we can and will gradually reduce its occurrence.

To nurture the seeds of trust in business, it is therefore crucial for companies to:

•    perform regular fraud risk assessments to identify weaknesses in their controls, which can then be fortified;

•    set the right behaviours from the top, in order to build a strong corporate culture that has zero tolerance for unethical behaviour; and

•    invest in disruptive technologies such as AI, anomaly detection and communications monitoring, to name but a few, in order to prevent and detect fraud more effectively.

If you are already doing these, great. Continue to do so consistently. If you are not, it is never too late to start.


Alex Tan is partner and forensic services and risk consulting leader at PwC Consulting Associates (M) Sdn Bhd

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