What are the major trends in fraud and corruption, and how is the
downturn affecting it?
Andrew Durant, managing director, disputes & investigations,
Navigant Consulting Ltd
There really are two types of fraud. There is the underlying level of fraud
which I think will continue – but as we move into the downturn there will be
additional pressures on individuals, employees and management either through
loss of bonus or the pressure to perform generally.
They may decide to commit fraud, these are the people who are generally
honest but the pressure may make them dishonest. So I think that we will see an
increase in fraud and that is likely to come out over the next six months.
I think every industry is at risk, some will be at more risk than others,
especially those where there are highly incentivised staffs where people may be
on bonuses or share options.
It could be the financial sector or any other sector, where the same issues
arise: where maybe the underlying salaries were small compared to total
And as we move into the downturn that bonus element starts to get smaller, or
dissipated, and people may feel under more pressure to maintain their lifestyle
because they have committed themselves to a certain expenditure and they need to
There is a natural cycle to this. Every time there is a big fraud a big
scandal, there are new controls put in place, new legislation put in place. What
you tend to find is that companies will incorporate new controls and they will
put a lot of training around it in the first year and really push the message
out and then something else comes along and that sort of rises up the agenda and
then maybe the internal controls fall down on the agenda.
In year two there is probably less importance put on these controls, year
three even less. By the time you get to year four and year five a lot of people
may have forgotten about why these controls were even put in place.
What can companies do to counter the risks?
Gavin Cunningham , fraud services manager, BDO Stoy Hayward
What is actually important for a business is that it has an effective and
clearly stated anti-bribery and corruption policy. Looking at the pending or not
so much pending recession now, there is certainly a heightened risk of
corruption occurring because there is less business to go around and therefore
people in companies are going to be more tempted to win that business at any
The business has to look at the fact that risk exists throughout a business.
What is important is that the message is set at the highest level of a business,
at senior executive level and it cascades down through a business that they have
a policy, they have training on a policy, that people are aware of it and know
what they have to follow.
In terms of how you do that, you have to review your business and analyse
where the risks are. When you are looking at corruption risks specifically you
are looking perhaps at the geographical areas that business operates in.
If it is overseas, where are the highest risks jurisdictions? Then who does
it deal with, does it deal with agents, intermediaries, third parties in order
to win business? That’s perhaps the highest risk area in business when
considering corruption risks.
Then look at who it deals with individually within countries so does it deal
with politically exposed persons, people related to a ruling oligarchy?
It starts at the top. You have to have the executive board at group level
involved, if it’s a large company, they then have to agree the policy, you then
have a working committee and a steering committee which enforces a policy and it
cascades down an organisation.
There has also been a working group running for about 18 months working with
representatives from the six largest global firms to develop a framework for
reporting an independent assurance of corporate anti-bribery programmes.
They have been working on that for some time and the tension with that is to
enable, as part of the audit process, companies to show that they are compliant,
have a compliant anti-bribery corruption policy.
I think then the point is that they will be able to give that degree of
assurance and announce it within their own reports and on their own website. So
it goes to the very heart of corporate social responsibility in the wider
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