SOCIETAL corruption refers to any wrongdoing involving monetary implications, which has become an acceptable practice affecting society or the community.
It has the tendency to spread like cancer tempting others.
Unfortunately, public awareness hinges on what is reported in the public domain.
What about those that are not reported?
In the corporate world, some 70 per cent of fraud cases are not reported and this is because companies do not want to have a negative impact on their brand name, including lost productivity, reputational damage, attending court cases and the related loss of business.
Due diligence must be conducted to avoid employing criminals.
The issue of integrity is not peculiar to Malaysia, but rather a global phenomenon.
A few years ago, in a survey by Forbes.com, 38 per cent of teenagers polled felt that they needed to cheat in order to get ahead.
THE WORLD IS SUFFERING FROM AN INTEGRITY CRISIS
According to Transparency International (TI), the integrity crisis in the Asia Pacific indicated that 66 per cent of youths would accept bribes if given the opportunity.
A similar scenario is observed among Malaysian university students.
In a study conducted by Universiti Kebangsaan Malaysia, 30.5 per cent of students said they were open to accepting bribes if they have power and opportunity.
This is supported by data from the Malaysian Anti-Corruption Commission.
Today, they are in the system working in the public and private sectors or as politicians.
Based on statistics from 2014 until June this year, 4,860 individuals had been arrested for corruption; 2,594 or 53.4 per cent were below 40.
This data showed that over 50 per cent of those involved were young people.
This issue must be viewed seriously as they will be our future leaders.
A holistic measure must be taken to find the root cause and prevent such immoral acts, especially among the younger generation.
LOSSES FROM CORRUPTION
The 2018 Association of Certified Fraud Examiners Report to the Nations (2018 ACFE) revealed that five per cent of an organisation’s revenue was lost to fraud, while each country lost about four per cent of its gross domestic product to fraud.
The Global Economic Crime and Fraud Survey 2018 Malaysia report indicated that 41 per cent of the Malaysian sample companies had experienced an increase in economic crime in the last two years.
MECHANISM OF FRAUD
Fraud theory puts forward four causes of fraud, which are opportunity, pressure, rationalisation and capability.
People holding high positions in an organisation would have the authority and managerial skills, as they are normally highly educated.
The higher the perpetrator’s level of authority, the greater fraud losses tend to be.
For example, the chief executive officer may influence decision-making on behalf of the company.
He would have the opportunity to choose any parties to deal with.
Opportunity, coupled with financial stress, pressure from spouse and political pressure on the part of the chief executive officer, could lead to fraud.
Being intelligent, the CEO would be able to provide justification for his actions.
Applying the fraud diamond theory in order to address the gaps in societal corruption, the elements of opportunity, pressure and capability may help us understand the wrongdoers’ mind as they commit fraud.
The theory is also supported by the findings of a survey conducted by the 2018 ACFE as follows:
AGE
The highest percentage of perpetrators is from the 36-45 years old age group.
But the highest loss comes from perpetrators aged more than 60 years old.Most losses are caused by individuals aged between 56 and 60.
One possible explanation is that top management positions have unlimited power with easier access to the organisation’s assets.The pressure is felt by the younger generation, but a bigger opportunity is available to the more experienced older people.
WORK TENURE
The opportunity can also be influenced by the tenure of the employees holding key positions in the organisations.
In this regard, the same report by the Association of Certified Fraud Examiners in 2018 highlighted that losses increase with the tenure of the organisation’s key personnel.
Fraud has been committed by employees working in an organisation for between one and five years. The most significant fraud losses are caused by those who have more than 10 years’ experience.
The longer the fraud lasts, the greater the financial damage it will cause.
HOTLINES AND REPORTING MECHANISMS
The most common detection method in our study was tips from employees, accounting for 54 per cent.
Seventeen per cent was from anonymous sources but organisations that had reporting hotlines were much more likely to detect fraud through tips.
Whistleblowers are most likely to report to supervisors at 28 per cent, executives 21 per cent, co-workers 13 per cent, and board or audit committee 13 per cent.
The current fraud cases suggest there are weaknesses in attitude and mindset, monitoring and control, and enforcement and prosecution.
To address these, there must be continuous enhancement in organisations and societies.
The writer holds the professorial chair at Institute of Crime and Criminology, HELP University and the President of Malaysia Certified Fraud Examiners.