What is the price of fraud and economic crime?
Fraud and economic crime are threats that can strike any organisation regardless of size or industry. 41% of Malaysian companies report being victim to fraud and economic crime*. And all too often, it is discovered too late. In some cases, its damage is irreversible. That’s because fraud does more than impact the bottom line. The damage to your reputation, shareholder trust and employee morale—not to mention the costs of enforcement and litigation—can be significant and lasting.
Compliance programmes, internal controls and traditional risk management are essential, but they can be circumvented, and can’t always be relied on to prevent fraud. What’s needed is a sophisticated, flexible approach that reflects your culture, needs and issues.
Our Forensic professionals can assist you in overt and covert fraud investigations, combining deep investigative experience with local insight, knowledge of relevant regulations and the latest forensic technology.
Our experience covers a wide range of financial crime, which includes:
- bribery/corruption, undisclosed conflicts of interest and improper business relationships
- corporate irregularities and regulatory violations
- asset misappropriation
- financial reporting fraud
- patent and copyright infringements, including piracy and counterfeiting, product diversion,
- disruption of distribution systems, and 'grey market' activity
* PwC’s Global Economic Crime and Fraud Survey: Malaysia Report, 2018
The complexity of the business and regulatory landscape is growing intensely.
Companies are navigating a proliferation of new regulatory requirements and stakeholder expectations, and are challenged to do so in a way that supports performance objectives, sustains value and safeguards the brand.
We assist our clients in complying with various regulations including their efforts to combat money laundering/terrorism financing (AML/CFT) and support our clients who are subject to foreign regulations such as the Foreign Corrupt Practices Act 1977 (FCPA) and the United Kingdom Bribery Act 2010 (UKBA).
The anti-corruption landscape has also changed in Malaysia itself. The recent change in government is credited in large part on the new government’s anti-corruption stance, and there has even been a recent announcement of 223 recommended changes by the Institutional Reform Committee about governance, integrity and corruption prevention. In fact, the Prime Minister has announced that certain key agencies, government bodies and government-linked companies will be required to obtain ISO 37001 Anti-Bribery Management System certification. However, we believe that Malaysian society’s expectations will not stop at Parliament’s doors, but that the private sector will be impacted by these developments as well.
In 2017 Malaysia itself amended its Malaysian Anti-Corruption Commission Act 2009 (MACCA) to introduce a Section 17A that makes corporations potentially liable for the offence of failing to prevent bribery. This is very similar to the UKBA. Also following the UK’s example, the only defence against that charge is the implementation of Adequate Procedures to combat bribery. The implementation date is set for June 1, 2020. Considering, though, that anti-corruption compliance potentially cuts across every function in a business, smart companies are taking action NOW to address this change.
What should Malaysian companies do to implement Adequate Procedures?
By June 1, 2020, Malaysian companies are required to have implemented “adequate procedures” to prevent bribery. If they fail to do so and a person associated with the company offers or pays a bribe and is caught, the company’s directors or senior managers are liable for fines starting at RM 1 million or up to 20 years in prison, or both.
This sobering prospect may not yet be on your radar or not an immediate priority, but it’s important that directors and senior managers recognise that tackling bribery is no longer a “nice to have,” but a must-have for which they could be personally liable.
But what are these “adequate procedures?” In December 2018 the Malaysian government published guidelines defining these adequate procedures. However, the guidelines are not particularly prescriptive – remember, they are intended to apply to every commercial organisation in Malaysia, and are thus restricted to high-level principles that each organisation has to interpret and implement according to its own size, complexity, and risk profile. In fact, the introduction to the guidelines discusses this principle of “proportionality,” thus: “These guidelines are not intended to be prescriptive and it should not be assumed that 'one-size-fits-all.’ They should be applied practically, in proportion to the scale, nature, industry, risk and complexity of the organisation.”1
The Malaysian government’s guidelines use the acronym TRUST as a mnemonic device to help summarise the guidelines, where:
T: Top level commitment
R: Risk assessment
U: Undertake control measures
S: Systematic review, monitoring and enforcement
T: Training and communication
Each of these headings, however, can be a significant undertaking in its own right. Depending on the risk profile of your organisation, these may require not only long-term commitment, but also long term devotion of time, management effort, and other resources. In our experience, the most economical way to approach the implementation of “adequate procedures” is to perform a corruption risk assessment and a gap analysis of your existing anti-corruption procedures and controls - some organisations with prior exposure to anti-corruption principles along the lines of the US Foreign Corrupt Practices Act, the UK Bribery Act or with World Bank guidelines, will already have done some of the hard work.
As part of PwC’s purpose, “to build trust in society and solve important problems”, we have been helping organisations perform anti-corruption risk assessments around the world for more than a decade. Our Malaysian-based experts are well-placed to help you understand what good practices in this area are, and what regulators typically expect from a robust compliance programme. After all, the US, UK and others have had similar extraterritorial legislation, and commercial requirements, on the books for years.
More importantly, from our deep understanding of control failures and weaknesses gained from many of the world’s most important anti-corruption investigations, we know how to help Malaysian companies design and implement controls that can withstand real world tests.
For more detailed discussion of these topics, please see the following blog posts we’ve published on this topic:
- Malaysia enacts ‘global standards’ anti-corruption legislation
- Malaysia imposes corporate and personal liability for organizational bribery
Please reach out to Alex Tan or Michael Sprake to have a conversation about your own compliance programme today. Contact details at the bottom of this page.
Please reach out to Alex Tan or Michael Sprake to have a conversation about your own compliance programme today. Contact details are as follows:
Fraud Risk Management
All business entities face a variety of fraud risks - asset misappropriation, bribery, financial misrepresentation - to name a few. Business entities should take steps to ensure that effective policies, procedures and infrastructure are in place to address and reduce their exposure to fraud risk.
Fraud risk assessment helps management to understand the risks that are unique to their businesses, and assist in identifying and evaluating internal controls to alleviate those risks.
Our team of experienced professionals can help your company to:
- undertake a comprehensive fraud risk assessment
- implement or evaluate existing anti-fraud programmes and controls
- design fraud responses and remediation plans
- develop fraud monitoring programmes that are tailored to your needs
- conduct training to increase awareness of fraud risks
- understand what constitutes leading practice in this area
Our services bring a fresh perspective and structure to help companies avoid fraud and emerge stronger, if it does occur.
Forensic accounting is the application of the skills and training of a qualified accountant in investigations, disputes, reviews and other procedures.
The results of the findings and observations could end up in a court of law.
Our professionals have experience in:
- unravelling complex accounting records to ascertain the true nature of the transactions recorded
- detecting any false or creative accounting entries
- performing any type of procedures pursuant to shareholder disputes or other civil matters. We also have the experience of working hand in hand with legal professionals involved in such procedures
- quantifying the value of the loss experienced by an organisation or individual,
acting as an expert witness pursuant to our work
Ultimately, the value of the forensic accountant is in communicating complex financial transactions or information in a succinct manner using pictures, graphs and language readily understandable by non-accountants.
Business disputes and regulatory probes have become increasingly more disruptive, cumbersome and complicated.
Whatever the nature of your dispute, success is often predicated on the depth and credibility of your data, the power of your analytical work, and the ways both can inform a winning legal strategy.
Complex litigation matters require the insight and experience of individuals who understand how to interpret financial records and documents.
When faced with this challenge, companies and their counsel can call on our litigation support team. We can help with the gathering of financial data, quantification of exposure, and reconstruction of financial information.
We can also provide expert witness evidence in legal proceedings and are experienced in presenting facts to withstand cross-examination.
Our professionals have experience in:
- both fact and expert witness testimony
- performing many types of financial procedure
- quantification of damages
- serving as arbitrators, mediators, or special masters
- business analytics (quantitative analysis and optimisation of operating metrics)
Our Partner, Alex Tan has given evidence on behalf of clients at Kuala Lumpur and Shah Alam High Courts into our investigation findings on several occasions. Alex has also given evidence in the Magistrate, District and High Courts in Hong Kong and New Zealand and acted as a Police prosecutor in the Magistrate and District Courts in Hong Kong. Other team members have also testified as fact witness in arbitration, in the local tribunal court, as well as before Shah Alam High Courts.
Digital Forensics & eDiscovery
We have computer forensic laboratories strategically located in over 30 territories (including in Malaysia) to facilitate efficient and rapid response to fraud investigations, disputes, regulatory matters, cyber breaches, litigation, whistleblower allegations, and other crises. We are here to help you plan for uncertainty, garner insight from your data - and make informed decisions under pressure. Our Digital Forensics and eDiscovery professionals employ the most sophisticated tools in the industry to forensically process, store and review electronic evidence.
We have the knowledge, experience and are well certified to handle evidence that meets local and international regulatory requirements.
We can assist you by:
- forensically preserving electronic data from various electronic sources, including desktop computers, laptops, servers and mobile devices
- reviewing and analysing both unstructured and structured data as part of an investigation
- making electronic documents available for your legal counsel or management to review on a secure online platform
- providing expert witness testimony in court in the event that our findings are used in litigation
- providing incident response expertise if you are the target of a cyber attack
You’re using your data to drive business innovation, so there’s no room for error. Data quality begins with solid data governance. It has to be well-organized, relevant, accurate, and understandable. We’ll help create your data framework, build the strategy, optimize your infrastructure, processes and systems and create the culture to become a data-driven organization.
We can also help you with suspicious transactions analysis by interrogating ERP, financial and transactional systems to uncover red flag breaches and unusual patterns of behaviour that may indicate fraud, malpractice, or process weaknesses. Anti-money laundering and economic sanctions is also part of our expertise where we perform suspicious transactions look-back analysis and filters testing in support of compliance and remediation activities.
Companies often need to make strategic partnerships with other organisations in order to get competitive advantages in innovation, growth, pricing, profitability, speed to market, quality and to establish a global reach.
Licensing, franchising, supplier or distributor agreements are often very complex and non-compliance with the provisions of these agreements can have a direct impact on the bottom line. Over the life of any kind of licensing agreement, the ‘revenue leakage’ may result in hundreds of thousands, and in some cases, millions in lost income.
That’s why we help clients with contract compliance – looking at whether their business partners are keeping to their contracts, and finding out whether there are opportunities to recover revenue or cut costs. Often, our clients invoke the audit clauses in their contracts to bring us in to investigate their business partners’ data and records.
Our work helps companies to get the best value from their agreements. For licensing and revenue-sharing agreements, our work can lead to revenue recovery. For other important contracts, such as sales and distribution, supply, outsourcing and joint ventures, it can lead to cost recovery.
We bring together local knowledge, language and culture to help companies optimise their revenues, capitalise on and protect intellectual property, and manage risk.
As business leaders you rely on information and intelligence for almost all your critical decision-making. Whether it's evaluating suppliers, identifying new markets, reshaping strategy, making acquisitions, hiring key personnel, pursuing new business or using forensic intelligence to respond to crises.
And when leaders are informed by relevant, up-to-date, reliable intelligence, they are empowered to make better decisions.
Our Global Intelligence Operations Centre (GIOC) is the 'engine' that helps to integrate vast streams of complex data and information, analyses the results, and produces the finely tuned intelligence upon which companies from all around the world depend to achieve the best possible outcomes. Malaysia's GIOC has helped many global clients vet their third parties, evaluate business deals, identify parties with conflicts of interests, and provided forensics support where required.
PwC's GIOC comprises more than 400 dedicated professionals that speak more than 40 languages across the globe. Our GIOC professionals come from diverse professional backgrounds ranging from finance to engineering, military to law enforcement, as well as governmental organisations, journalism and international relations.
In addition, we constantly invest in cutting edge information collection technology and databases that include consumer sentiment analysis, market intelligence, sanction lists and financial crime related information.
By partnering with us, business leaders benefit from the access to a global network of resources as well as global industry leading intelligence that will help you sharpen your competitive edge.