Cross-border fraudsters getting away with it


In this age of globalisation, crime no longer stops at national borders. Yet companies are often reluctant or ill-prepared to investigate fraud or misconduct if it occurs in a country other than where they are headquartered.

Criminals can digitally flash stolen money and intellectual property across the globe in an instant and, a survey by KPMG International has concluded, increasingly be sure of getting away with it because of corporate lethargy or ignorance.

Its survey of 103 senior business executives in 21 countries found virtually all – 92 per cent – said they expected the number of international investigations to increase or at least remain the same in the coming year.

Yet more than half said they had not implemented comprehensive investigation procedures.

By contrast, nearly two thirds of executives acknowledged that planning an investigation remained key to its success.

"Fraudsters operate undeterred by global boundaries and companies must therefore be increasingly focused on the steps they need to take to prevent, detect and respond to fraud," said Richard Powell, Forensic partner with KPMG in the UK and co-ordinator for forensic investigations in Europe, Middle East and Africa.

"An effective fraud detection and investigative capability must keep up to date with changes in technology and be refined with the benefit of experience," he added.

"In addition to financial loss, ineffective prevention, detection and investigative processes can adversely impact an organisation's reputation, its risk management abilities, and its commitment to good corporate governance," he continued.

Almost eight out of 10 of the executive polled believed that, in the next five years, proficiency in information technology will be even more important than it already is to the success of cross-border investigations.

"Getting better at utilising technology to combat and investigate fraud and misconduct clearly remains high on the agenda of businesses who want to be able to effectively respond to such issues and where appropriate to recover costs and damages," said Powell.

"In many of the cases we have investigated this year, the use of technology has been fundamental in identifying key information relevant to determining what had happened, who was involved, and the best steps to take to secure recovery.

"The modern investigator is greatly assisted by access to and knowledge of how best to use tools designed to assist in effective capture of e-data and e-documents, in analysis of large volumes of data (forensic data analytics), and in the effective review and search of large volumes of e-material," he added.

Multinational organisations often relied too heavily on one-size-fits-all investigative policies and procedures across the many countries in which they operated, but on top of this each nation had its own, ever-changing regulatory and policing procedures that could stymie an investigation, said KPMG.

"Companies should establish broad investigative procedures, knowing that they should be tailored to each respective country, ideally with a well-trained local team that knows the language, culture, and legal and regulatory environments. Dealing with a foreign language and customs can be a particular challenge for many companies," said Alex Plavsic, KPMG's UK head of fraud and financial investigations.

Executives surveyed by KPMG say they are challenged around the globe by a variety of factors when conducting cross-border investigations.

These challenges fall into four main categories including: cultural, language and legal differences, planning the initial response to an incident of alleged fraud or misconduct, not having an investigative team with the right technical skills and experience and the availability and accessibility of electronic data.

In addition, just under half said their investigative staff had received training during the past six months, while more than a quarter had not been trained within the past year.

Companies, KPMG advised, need to do more to assess and benchmark their investigation competence against industry-recognized "better practice" capabilities, particularly the use of forensic technology.

Other advice included assessing their investigation protocols and ensure that the board and audit committee were informed of any gaps.

They could ensure there was a single, global point of accountability for reporting incidents of fraud and misconduct and develop a written incident-response document.

Teams could be better educated on managing fraud and misconduct issues across borders.

The company's IT ability could be evaluated and reviewed to ensure quick retrieval of data.