The Malta Independent 15 August 2022, Monday

EY’s 2014 Global Fraud Survey – Overcoming compliance fatigue: reinforcing the commitment to ethical growth

Malta Independent Saturday, 12 July 2014, 07:54 Last update: about 9 years ago

More than six years after the beginning of the financial crisis, high-profile regulatory enforcement actions continue to dominate the headlines. Additionally, the prosecutions, fines and disgorgements have not been limited to banks and insurers.

With billions of dollars in fines being levied and executives being indicted, are companies doing enough to mitigate the risks of fraud? Surely the world’s regulators expect their actions to have had a significant deterrent effect and would have compelled companies to truly redouble their efforts to drive ethical growth?

EY’s long-running series of global fraud studies presents some concerning trends. The easy gains and quick wins for the compliance function have been secured. Further progress from here is likely to be difficult for many companies. Indeed, for some companies compliance fatigue may have already set in.

EY’s 2014 Global Fraud Survey offers powerful findings and interesting insights and provides concrete recommendations regarding “what good looks like” in fraud, bribery and corruption risk management and investigation. The results from interviews with more than 2,700 executives across 59 countries portray a disturbing picture and raise serious questions:

Could Boards be more engaged with management regarding these risks? Why are executives so reticent to be involved in anti-bribery training and why isn’t more being done to encourage greater participation in such training in emerging markets? Why isn’t anti-corruption due diligence a routine aspect of getting deals done? Are opportunities being missed to mine big data with forensic data analytics to drive better compliance and investigation outcomes? How robust is the risk assessment process in reality? Has a “tick the box” mentality set in? Are compliance teams and internal audit functions appropriately resourced?

To meet the significant compliance risks, businesses need to recognise that policies and training are really only a starting point. The clear guidance from regulators is that this is not enough. Boards should be demanding that their organisations go beyond the basic building blocks.

Over the past 10 years, EY’s survey results point toward a level of unethical conduct that businesses are unable to eradicate. They must instead seek to minimise its impact. They need to detect, investigate and remediate the actions of individuals within their organisation who are prepared to act unethically.

Board engagement – Boards need to appropriately challenge management and request regular updates regarding fraud, bribery and corruption risk Big data – mining big data using forensic data analytics tools can improve compliance and investigation outcomes and can help management provide useful summary information to the Board Anti-corruption due diligence – such specialised due diligence should be the norm, not the exception Escalation procedures – companies should have clearly defined escalation procedures, whether to respond to a whistleblower or a cyber-incident, to minimise the damage being done Training – companies should have tailored Anti-Bribery/Anti-Corruption (ABAC) training programmes; business unit leaders should be evaluated on participation levels, and C-suite executives need to lead from the front Budget support for internal audit and compliance functions – they play essential roles in both improving standards of business conduct and in keeping the company out of trouble

Companies, their Boards and other stakeholders would be well served to deliver on these important priorities. With more focus on driving revenues from less mature markets, the challenges for companies are getting more complex at the very time that regulators are working together across borders like never before to hold companies and their executives to account. The time is now to reinforce the commitment to ethical growth.

Full results of EY’s 2014 Global Fraud Survey can be accessed through the following link:$FILE/EY-13th-Global-Fraud-Survey.pdf. For further information on this or on any of our services, do not hesitate to contact our Financial Crime team on [email protected]

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