Tuesday, October 26

Fraud continues to be serious threat within corporate Malaysia

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KUALA LUMPUR: Fraud continues to be a serious threat within corporate Malaysia, with 49 per cent of Malaysian companies surveyed, experiencing at least one incidence of it.The Head of KPMG Forensic Malaysia, Tan Kim Chuan said the threat of fraud came mostly from within the organisation.

According to Tan, internally perpetrated fraud by management and non-management employees, accounted for 88 per cent of the total reported fraud value of over RM60 million during the survey period.

Based on the survey, he predicted that fraud, especially that which is Information Technology (IT) related, is expected to increase due the high usage of IT products in companies.

A total of 47 per cent of respondents who had experienced fraud within their organisation disclosed that the total losses suffered during the survey period was RM63.95 million.

The remaining 53 per cent were unsure of the amount, Tan told reporters after the launch of the KPMG Fraud Survey Report 2009 at the Securities Commission, here yesterday.

The report was launched by Securities Commission (SC) chairman Tan Sri Zarinah Anwar.

Tan said the survey, conducted from January 2006 to December 2008, was a call for commitment to tackle fraud incidents robustly in an environment underpinned by a culture of compliance and an appreciation of the values of integrity and honesty.

He said according to the survey, a total of 714 separate cases of fraud were reported by 84 per cent of respondents who had experienced it within their organisation, while the remaining 16 per cent were unsure of the number of incidents.

He said greed/lifestyle and personal financial pressure were cited as the two most common motivations for fraud.

He also said that the theft of cash and inventory, fraudulent expense claims followed by kickbacks, were the most common types of fraud perpetrated.

“The theft of physical assets appeared to be a popular category of fraud perpetrated among non-management level employees and external parties. Management level employees were more prone to committing the theft of funds (outgoing),” Tan highlighted.

He added that companies must come up with measures or a system to detect fraud to minimise fraud cost.

“Before hiring, companies must also undertake screening. The most significant method used to detect fraud was internal control procedures,” he noted.

Other methods in this regard were notification by employees, internal audit review, notification by customer or suppliers and anonymous letters, informants or whistleblowers. — Bernama