Examples of organizations employing fraudulent practices due to ethical lapses are in the media almost every week. Sometimes they let the bottom line become more important than adhering to their stated ethical values. Other times, they never cared about having an ethical framework in the first place. Regardless of why ethics were ignored, the outcome is almost always the same: fraud. “I see fraud as a symptom of an unethical culture,” said Dr. Attracta Lagan, co-principal of Managing Values, in her keynote session at the virtual 2020 ACFE Global Fraud Conference Asia-Pacific. Dr. Lagan stressed to attendees how important it is for anti-fraud professionals to look at behavioral science when it comes to instilling and maintaining an ethical culture in their organization.
During her keynote session at this year’s virtual ACFE Fraud Conference Asia-Pacific, forensics and nonverbal communication expert Kiki Wong explained how we can deepen our understanding of body language and use that knowledge to conduct more thorough and effective investigations and interviews. As head of forensics at The Forensics Company and director at The Silent Company, Wong has spent years researching micro facial expressions, handwriting analysis and lie detection. Her presentation focused on various in-depth examinations of both nonverbal and verbal deceptive measures to be attuned to when investigating fraud.
Carson Block, the founder and Chief Investment Officer of Muddy Waters Capital LLC, made headlines at the beginning of 2020 when he posted a report to Twitter accusing Chinese coffee company Luckin Coffee Inc. of fraudulently inflating sales. In April, the company admitted that more than $300 million of its sales from 2019 were fabricated. Block told the ACFE that when he’s looking at companies to short, he starts with the basics. “It usually starts with companies or stories that seem ‘too good to be true,’” he said. “Then we read transcripts of senior managers speaking to see how promotional the management seems to be.”
Imagine that a large multinational company in China is suspected of engaging in collusive activity between salespeople and distributors, and the allegations involve potentially thousands of entities and millions of transactions. The company needs a way to rapidly identify potential trouble spots where they can launch a detailed investigation. According to Allanna Rigby, director of Control Risks Group, conflicts of interest, like the case described above, are quite hard to detect. At the 2019 ACFE Fraud Conference Asia-Pacific, she told attendees that cultural nuances make conflict-of-interest investigations even more difficult.
Investigations are pivotal to fraud examination. Though fraud examiners prepare as much as they can before launching an investigation, CFEs understand that things are unlikely to go exactly as planned — new evidence arises and interviews yield surprising discoveries. CFEs also often must navigate difficult personalities, change their expectations for the scope of work, deal with organization restructuring and more that they cannot readily anticipate.
Best-selling author Tom Wright’s address at the 2019 ACFE Fraud Conference Asia-Pacific began and ended with one central figure in the 1MDB corruption scandal: Paris Hilton. I kid. But, Hilton’s name did come up several times while Wright recounted the events that led to the ousting of Malaysian Prime Minister Najib Razak and the exposure of a billion-dollar corruption scheme known as 1MDB.
Although the 1MDB scandal first came to light in 2015, the effects are still being felt in the Asia-Pacific region today. “It’s become clear that banks and other financial firms in Singapore and Hong Kong are facilitators of fraud,” said best-selling author Tom Wright. “Singapore took action to jail some bankers, but Hong Kong has yet to act. Both places will have to take further action to ensure bad actors don’t continue to operate on their soil, but this is unlikely.” Wright, the former Asia Economics Editor for the Wall Street Journal, will address hundreds of anti-fraud professionals in Singapore at the 2019 ACFE Fraud Conference Asia-Pacific. He believes that accounting practices in the region contribute to fraud. “One of the major problems in Asia is the poor quality of auditing. Often local affiliates of the Big Four are barely supervised by head office, and local standards of auditing are lax to say the least,” he said. “Fraud is pervasive in this region, and any deal needs to be viewed with skepticism, even if it has the backing of governments.”
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