The American Anti-Corruption Institute (AACI) in the MENA Region

This is a short and partial coverage about the AACI participation in an international conference in Palestine, Middle East and Africa, in November 2012. — in Ramallah, Palestine.

Is Corruption Getting Worse?

...."The recent G20 round resulted in a strong set of recommendations to strengthen the fight against corruption. Through the B20 process, business leaders articulated recommendations to G20 governments across a range of areas including the development of collective action and sectoral initiatives, model codes of conduct to SMEs, good practices to incentivize self-reporting and common principles on enforcement of bribery legislation. Together, these recommendations can spur tangible efforts under a framework of support from countries among and beyond the G20, becoming the basis for a model legislative framework."......"The growing number of prosecutions and resulting fines as a result of the US Foreign Corrupt Practices Act and more recent UK Bribery Laws are setting a new bar for enforcement. Greater transparency is no longer an option, but an imperative to create sustainable competitiveness environments that serve the public and foster an ethical and competitive marketplace."

Source: http://www.huffingtonpost.com/robert-greenhill/is-corruption-getting-wor_b_2257016.html

Comment: I think that nations aspiring to have attractive business environments for foreign investment  must fight corruption in all its forms. Failure to fight corruption has disastrous and catastrophic socio-economic   and political negative consequences that will take long time to correct. 

Nations can no longer avoids fighting corruption. The 1980s and 1990s eras are by far different from our current era. 

Fraud in the private and nonprofit sector

Internal control, decision making, and effective management are at the core of fighting fraud in the private and nonprofit sector. It is unfortunate that management and those charged with governance do not give sufficient attention to the importance of the linkages between internal control and decision making.

Internal control is the foundation of the decision making and decision making processes. Effective decision maker should be able to consume effectively and efficiently reliable and proper information. Unless private and nonprofit management have effective decision makers, they will continue to suffer from all kinds of fraud that will cost their stakeholders too much money, pain, and most importantly trust in the justification of their existence.

I wrote this commentary based on the following article that appeared in "THE ATLANTA JOURNAL-CONSTITUTION"  

Fraud in the private and nonprofit sector, December 4, 2012

Bad Grades Are Rising for Auditors

As reported by the New York Times on August 23, 2012 by FLOYD NORRIS, it becomes clear that this is only one facet of the audit industry failure. This is a really disturbing news report supported by a recent report of the PCAOB. It is an alarming report not only for the regulators in the USA, but also to each country's regulators regarding the audit industry in each respective country. 

It is globally accepted that once the public no longer trust the output of an auditor, the auditor or the audit firm loses any justification to continue in business. Should not each country have a regulatory agency that is mandated to do a similar work like that of the PCAOB? I think the answer is yes it should. In my opinion, corruption is one reason, among others, that prevents too many countries from devoting sufficient and  appropriate attention to the audit profession despite the strategical value of this industry. 

Corruption not limited to politicians

Corruption not limited to politicians

Corruption is in every and each entity at all  levels. What differs is the level of corruption, and its depth and breadth.

How Corrupt are we Really?

How Corrupt are we Really?: If you listen to the blokes standing with beer in hand around a braai, you would swear that South Africa was one of the most corrupt countries in the world.

Corruption runs deep in the Middle East, poll finds

Corruption runs deep in the Middle East, poll finds

"Across the Middle East and North Africa (MENA), fighting corruption has been the clarion call of Arab Spring protestors, ensnaring once untouchable officials in places like Egypt and Libya. But if a survey published this week by the accounting firm Ernst & Young and the security consulting firm Perpetuity Research and Consultancy International is correct, the anti-corruption drive has barely scratched the surface.

They asked 139 people from 64 organizations in UAE, Jordan, Kuwait, Egypt, Qatar, Saudi Arabia and Bahrain about the extent of corruption, and the answers they received painted a picture of endemic bribery, graft and fraud. More than a fifth said it was impossible to compete in business in the MENA nations without committing fraud. Half doubted that legislation could prevent it........The Ernst & Young/Perpetuity survey found that 52 percent of the respondents admitted that their companies had no relevant anti-fraud strategy and 35 percent confessed that no policy was in place for reporting corruption. Not surprisingly, even though two thirds of executives polled said fraud and bribery were also a “major problem” in the Middle East, only 14 percent said they believed that corruption was an issue within their companies."

It is evident that corruption and fraud in the Middle East and Africa are real problems that need a lot of efforts to minimize them. Further, I think that we need a disciplined and committed researches in these areas so that nations of these regions have sufficient and appropriate information to establish their nations' anti corruption strategies. I think that fighting corruption and fraud is not an option especially in the Middle East and Africa.

To prevent fraud, offer a hotline, train employees on fraud prevention, report says

To prevent fraud, offer a hotline, train employees on fraud prevention, report says


"For all geographic regions, corruption and billing schemes comprised more than 50% of the frauds reported to the ACFE, making those types of schemes a worldwide risk.

The ACFE survey also found that:

• Small businesses are particularly vulnerable to fraud because they often have fewer resources and less effective fraud controls than larger organizations.
• In 49% of cases, the victim organization had recovered no losses from fraud at the time of the survey. Just 16% reported recovery of 100% of losses.
• As in 2010, accounting was the most common area of employment for perpetrators, representing 22% of cases. Operations ranked second at 17%.
• Behavioral red flags most commonly associated with perpetrators were: living beyond their means (36%) and financial difficulties (27%)."

As the report was issued buy the ACFE on May 10, 2012, I will read it and provide my insights at a later time this month. I would like to assert the fact that is clear enough for us as experts in fighting fraud and corruption: The most effective fraud prevention and detection is Whistle Blowing ( Tips and Hotline).

What is the Financial Statements Audit ? Part 1

U.S. Leads Anti-Corruption Efforts

“We have an interest in reducing poverty and sparking economic growth around the world."

President Barack Obama poses for a group photo with leaders attending the Open Government Partnership in New York, Tuesday, Sept. 20, 2011. (AP Photo/Pablo Martinez Monsivais)

The United States has made fighting corruption around the globe a high priority.  “We have an interest in reducing poverty and sparking economic growth around the world,” said U.S. Secretary of State Hillary Clinton, “in creating greater security, prosperity, and even peace. And we know that corruption and the lack of transparency eats away like a cancer at the trust people should have in their government. Corruption stifles entrepreneurship and siphons funding away from critical services.” 

American businesses are also less likely to invest in countries where corrupt public officials take advantage of their positions for self-enrichment.  And when some multinational companies take advantage of this dynamic to obtain business, it tilts the playing field against U.S. companies and others that act according to a high ethical standard.

In an effort to mobilize a global consensus in support of greater transparency, the U.S. and Brazil launched the Open Government Partnership.  It is a network of support for government leaders and citizens working to bring more transparency and accountability to governments.  In total, 53 countries and dozens of civil society organizations are taking part and will convene next on April 17-18 at the initiative’s first High Level Summit. 

International cooperation to combat corruption takes many forms.  Our work to promote implementation of the UN Convention against Corruption, the most comprehensive and globally applicable set of international anticorruption commitments, involves over 150 countries and includes sharing good practices and participating in peer reviews. At the Organization for Economic Cooperation and Development, Colombia and Russia are on the path to becoming full parties to the Anti-bribery Convention.

The United States is encouraging China, India, Indonesia, and Saudi Arabia to join the convention as well. Another mechanism for fighting corruption is the Deauville Partnership, which works with Arab states on anticorruption, open government, and asset recovery efforts.  

Modern technology has already provided simple and effective means of cutting down on some forms of corruption.  In Afghanistan, for examples, members of the national police force are now being paid by mobile phone instead of in cash, which has cut down markedly on opportunities to exact bribes. 

Corruption is part of human nature, but we are now in a position to make even greater progress in the fight to stop it.  International cooperation, strong partnerships with civil society around the world, and the skillful use of modern technologies can all play key roles in this effort.

Source: http://www.voanews.com/policy/editorials/US-Leads-Anti-Corruption-Efforts--146744495.html

My Comments: 

I think that the US can make more than what it does to push forward the international efforts to fight fraud and corruption globally. Fighting fraud and corruption is a strategic security goal for each country all over the globe. In my opinion, countries that do not show real, proper, adequate, and enough efforts towards joining the international community efforts in fighting fraud and corruption should be punished by the international community. 

Finally, I believe that the US aids to countries should be based on these countries efforts towards fighting fraud and corruption. The Us should not foster its ties with corrupted countries or regimes. This applies not only for the Us, but also to each country that donates its taxpayers money to developing countries. 

What Should We Know About Corruption in the Public Sector?

Corruption is a form of fraud. It is a misuse of public office for private gains. The process of corruption usually has three parties involved: the public official who is entrusted by the public to carry our specific duties, the public who entrusted the public official, and citizen or a firm. Each of us knows for a fact that corruption has significant negative impacts on growth: all kinds of growth. Empirical studies have shown that corruption reduces incentives to invest, worsens the public infrastructures and services, decreases tax revenues and distorts the composition of government spending.

Corruption usually leads to bribery or extortion. Bribery is a situation when a person or entity gets something illegally that (s)he / it is not entitled to. Extortion is a situation when a person or entity pays to get what  (s)he / it  is entitled to. This distinction is very important especially for government officials who are responsible to set up strategies to fight corruption. 

What a government should do to fight corruption? What public should do to fight corruption? 

Among what a government can do are the following:

1. Establish and maintain effective anti fraud commission (AFC). The legal system should enable the AFC maintains its independence. Otherwise, the effectiveness of the AFC would be impaired.

2. Establish and maintain internal control systems that are designed specifically to deter, prevent, and detect corruption.

3. Establish a whistle blow system in each governmental entity. This is one of the most effective tools to discover corruption.

4. Promote fraud and corruption educational programs at the national level.

5. Engage universities and academia in fighting corruption.

6. Provide a healthy environment to enable the civil society play its normal monitoring role regarding the performance of the public sector.

7. Enhance the legal system to provide a strong framework for all stakeholders.

8. Establish code of ethics in each governmental entity that promotes anti corruption practices.

9. Instill accountability for each post in the government. Transparency is a prerequisite to have accountability functions as intended.

10. Promote good governance

11. Obtain a financial position of the public official at the time (s)he starts business in the government and when  (s)he  leaves  (s)he  post.

12. Fight the conflicts of interest that  prevails in too many corrupted governments worldwide

Fighting corruption is not a program that will start at a point and ends at another. It is a national strategy that should start soon and does not stop at any time in the future. Corruption will never be eliminated. It will stay as there are societies alive. A government should not manage corruption, it should minimize it.

Corrupted people are not corrupted by nature. They were not born corrupted. There were motives and opportunities that helped them to pursue their corrupt acts. However, what motivates a fraudster in Mexico may not motivate a fraudster in Cameron. Therefore, Corruption should first be diagnosed professionally and properly, then policies should be established based on strategies to minimize this phenomenon.

The answer to the question I raised regarding what you should know about corruption in the public sector is it depends on where you stand in the process: public official, public, citizen or a firm. It is evident that if there is no citizen or a firm in the process, there will never be corruption. That is why the public (the government) should ensure that they listen to its citizens and its firms.

If you are a government official, do not say it is complex and cannot be solved; you should say why we have corruption and how we should fight it. Unless you face it seriously, you may end with a situation like Egypt or at the best like Greece.

Mohammed J. Masoud, CPA, CFE, CICA, MBA

Managing Director

Birzeit Consulting ME

Tempe, Arizona

USA

Email: mmasoudcpa@bzconsult.com

Published on June 9, 2011 in the Financial Gazette newspaper-Harare as a part of the 3rd Forensic Conference for Africa “Fighting Fraud/Corruption and Money Laundering in Africa Using Investigative Skills". The title of the paper we presented was “Preventing and Detecting Fraud/Corruption in the Public Sector."

Insider Trading Ban for Lawmakers Clears Congress

Insider Trading Ban for Lawmakers Clears Congress

In my opinion, it is an excellent move in the right direction. I think that the spirit of this legislation should be adopted by legislators of each country to combat corruption. Though, I know there is more to be done in this regard. 

"Senator Susan Collins, Republican of Maine, who helped write the bill, explained the surge in support. “At a time when public confidence in Congress is at an all-time low,” Ms. Collins said, “we must remove any doubt that the law and rules against insider trading apply to members of Congress.”"

"the bill requires lawmakers to disclose the purchase or sale of stocks, bonds, commodities futures and other securities within 45 days of transactions, rather than once a year as they now do. The information will be posted on the Web."

"Senator Joseph I. Lieberman, independent of Connecticut and the chief sponsor of the measure, said it was “the most significant Congressional ethics legislation we’ve adopted in at least five years.” "

Insider Trading Ban for Lawmakers Clears Congress

Report: South Carolina government is ripe for corruption - KansasCity.com

Report: South Carolina government is ripe for corruption - KansasCity.com

This news tells a lot about what makes corruption in any state or public sector entity. If this happens in the US, I think that it may be worse in other parts of the world especially in developing countries.

Good leadership key to containing corruption, says DPM Teo - Channel NewsAsia

Good leadership key to containing corruption, says DPM Teo - Channel NewsAsia

"SINGAPORE: Public sector employees account for an average of 7.5 per cent of the total number of people prosecuted by the Corrupt Practices Investigation Bureau (CPIB) over the past three years.

Deputy Prime Minister Teo Chee Hean, who revealed this in Parliament on Thursday, said this figure has remained stable.

He outlined various outreach efforts by CPIB in curbing corruption, including talks to government agencies, business community and even schools.

Mr Teo, who is also Minister-in-Charge of the Civil Service, said while the Civil Service is governed by a Code of Conduct, what's important is good leadership at the top.

Mr Teo said: "Our zero tolerance approach to corruption in the public and private sectors can only work if Singaporeans continue to be imbued with the right values, and recognise that whilst corruption may be a fact of life, it is not our way of life in Singapore.

"There are a number of factors which contribute to this. Good, competitive salaries in the public sector are a key pillar. And I think we need to maintain that. But that is not enough.

"As Professor (Eugene Tan) Tan has said, strong enforcement is necessary as well. We also require good leadership by example at the top, as well as a population which rejects corruption and does not accept any form of corruption at all.""

My Comments:

Tone will always be at the top. This is the basic and most important parameter that forms the foundation for an effective fighting fraud and corruption in both public and private sectors. I would like to reassert what has been stated above regarding the effective fighting fraud and corruption so that one can benchmark other countries with those of Singapore:

1. While the Civil Service is governed by a Code of Conduct, what's important is good leadership at the top.
2. Our zero tolerance approach to corruption in the public and private sectors can only work if Singaporeans continue to be imbued with the right values, and recognise that whilst corruption may be a fact of life, it is not our way of life in Singapore.
3. Good, competitive salaries in the public sector are a key pillar. And I think we need to maintain that. But that is not enough. 
4. Strong enforcement is necessary as well
5. Good leadership by example at the top
6. Population which rejects corruption and does not accept any form of corruption at all

Fraud Examination: What it Takes

ACFE President Offers Career Advice

" Top Skills Needed

FIELD: What do you see as the most critical skills for the people getting into the field now?

RATLEY: I gave some thought to that because I've been asked that many times in the past. The fraud-examination field is comprised of a wealth of talent, but a wealth of specialized skills. We have attorneys that are involved in it. We have accountants that are involved in it. We have investigators, IT professionals. But the backbone of the fraud-examination profession is the investigative skills. And the more of these segments that you can put in your arsenal - the forensic IT specialists - there's a big demand for those now, someone that can come in and conduct an examination on a computer and retrieve deleted information. That's a very hot area right now. But if you take the forensic IT specialist and you provide them with investigative skills, they're even more sought after. The same thing with an auditor or a CPA - if you take an auditor or CPA and train them as an investigator, they're much, much more effective as a fraud examiner, and as a result they're in much greater demand."

This is part of a recent interview with Mr. Ratley, the ACFE president, ( see source below). 

I think that as fraud and corruption became a global phenomenon, fraud examiners need to have  collective skills that will make their activities more effective and efficient. In addition to what Ratley stated in the interview, I think a fraud examiner needs to have, among other personal skills, the following know how and skills:

1. Internal control
2. International business ( culture, values, and ethics)
3. Due diligence
4. Statistics

I would like to reiterate what Rately asserted and emphasized that  the Investigative skills are at the core of the fraud examiner arsenal.

Source: http://www.bankinfosecurity.com/articles.php?art_id=4432&pg=1