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As the incidence of corruption and fraud increases in the wake of Covid-19, FTI Consulting financial crime expert Mark Pulvirenti looks at the state of detection and prevention mechanisms across Australia.
Pulvirenti is Senior Managing Director at FTI Consulting with nearly three decades of experience in managing financial crime, which includes bribery, corruption, money laundering, fraud, misappropriation of assets and a variety of other criminal activities. Australian businesses need to increase their investment in fraud prevention, an expert says.
Big four accounting and consulting firm Deloitte recently reported that the destabilization of mechanisms across the business environment due to Covid-19 has led to an increase in the incidence of financial crime across Australia. Some of this is due to malicious attacks, while other incidents may be due to security lapses as employees adjust to working from home.
As a result, training is one area in which many businesses invest. Other businesses implement basic prevention mechanisms. The extent of these measures depends on the size and scale of each business, although Pulvirenti notes that most lack a comprehensive set of precautions.
“Companies usually have some anti-fraud and corruption procedures in place, for example they have a code of conduct, they can engage in employee training and they have a whistleblower hotline. However, these procedures are typically not tailored to the identified risks of fraud and corruption, lack appropriate leadership and resources, and are often inadequate,” he said in a discussion with Financier Worldwide.
Prevention and detection mechanisms must be comprehensive and must cover all operations of the organization. This includes employee conduct, communications as well as interactions with third parties. Risk assessment – something that has become essential under current circumstances – is essential for the development of a comprehensive prevention system, Pulvirenti emphasized.
“Effective management of fraud and corruption must be risk-based. An organization needs to understand what its risks are and where those risks lie in order to deploy its limited resources in higher risk areas. A code of conduct and employee training alone do not constitute an effective risk management program,” he said.
That being said, Pulvirenti stresses that incident response is just as important. Investigating an incident requires planning and input from multiple areas, including legal, internal audit, human resources, and IT. When identifying suspected perpetrators, businesses must evaluate the legal, financial and operational implications of the incident.
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