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).

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."

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.

60 Minutes: Congress legalized insider trading

'60 Minutes' on " Honest Graft". This is not a soft graft. It is corruption based on any definition of corruption. Congress men and women should be brought to justice for any kind of misconduct including corruption. More is mentioned in this video.  

Lobbyist , Congress, Corruption: Stop Corruption in Washington DC

Crooked lobbyist Jack Abramoff explains how he asserted his influence in Congress for years, and how such corruption continues today despite ethics reform.