A Procurement Fraud Article and a Few Words on Fraud

This is an interesting article on procurement fraud. http://www.fraud-magazine.com/article.aspx?id=4294973850

Sometimes we tend to ignore "obvious" red flags that something might be wrong in our organizations because we have "people we trust" running the organization. Making a case for internal audit or Fraud Risk assessment is not the easiest of things to engage business/organizational leaders. It is hard to convince a CEO who is focused on building a company why some form of internal regulation is so paramount to his goal, that he should spend a considerable amount of funds to create a credible internal audit/risk unit[1]. Measuring the benefits of efforts spent on marketing, finance and production for companies is easy and quantifiable. But how do you evaluate an internal audit/risk department especially if it is so effective that no major incidences of fraud/misconduct reported due to the fact that employees believe they will be detected.

How can risk professional demonstrate that there is value to be added in an organization by investing in a risk department/internal audit department?

Next I will discuss this in detail and demonstrate how an  internal/risk department can add value to an organization. I will also describe ways of evaluating the effectiveness of an risk/internal audit department.

[1] This is used in a very broad meaning and includes internal auditors, risk specialists, investigators, forensic accountants and compliance professionals

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Anti Bribery and Corruption laws -a few words

In the last few weeks the many articles have been published regarding alleged payment of bribes by the US retail giant Wal-Mart in Mexico. The articles (this I found to be very comprehensive) have been very comprehensive, therefore I do not wish to retell the story in this article. Many readers will agree that ten years ago not many companies expanding into the emerging markets or seeking business in the emerging markets cared much about risks posed by acts of bribery on their side. It was business as usual to bribe government officials in third world countries in order to win lucrative tenders or to do business in those countries. This is despite the fact that the FCPA has been in existence since the late 1970’s. But things have changed. The USA is not the only country that has anticorruption and bribery laws that apply outside of the country. The UK anti bribery Act has come into force and a number of British firms have been found to have violated the Act and fines have been imposed on them in the few years it has been in operation. (Read related article).

There are lessons to be learned in all this, the most important being that bribery and corruption has no place in modern business world. The era of saying that..this is how business is conducted in Africa..is coming to an end. It will not end today or tomorrow of course. But anti fraud professionals in Africa need to be ready, because this will be the next frontier in the fight against fraud. The questions remains are companies that discover possible violations of such acts ready to own up and expose locals who seek the bribes they pay. The ant bribery laws should not only

Punish the bribe payers but also those who seek them. A foreign based company that pays bribe and owns up in its home country should be compelled to disclose the individuals who received the bribes in the country the bribes were paid.