Businesses must prioritise preventing fraud and corruption in their own organisations


Zaakir Mohamed: Companies must make sure their own operations aren’t complicit in enabling corruption.

By Zaakir Mohamed, Director and Head of Corporate Investigations and Forensics at CMS South Africa.

Developing economies are losing US$1.26 trillion per annum to corruption, bribery, theft and tax evasion. This equates to the total value of the economies of South Africa, Switzerland and Belgium combined. Stopping it in its tracks could make a mammoth difference to the development of these states.

While there is a perception that corruption occurs largely in state entities, in fact, the Zondo Commission of Inquiry into State Capture, has made it patently clear that fraud and corruption occurring within government departments often happen together with role players in the private sector.

Former UK politician Lord Peter Hain, testifying at the Zondo Commission last year, said that companies must take responsibility for their failure to monitor transactions. In addition, the United Nations Global Compact calls on participants to develop policies and concrete programmes to address corruption internally and in their supply chains, and to prevent extortion and bribery from finding fertile ground within organisations.

Allowing such activities to take place within a business entity opens the business up to significant financial loss, and the reputational consequences can be dire too. When the fraud and corruption is eventually discovered and made public, the business is likely to lose numerous clients and will ultimately contract in size and have to retrench staff. All in all, the risks to the sustainability of a business are huge.

And so companies in the private sector must make sure their own operations aren’t complicit in enabling corruption. No representative of a business should be able to engage in any type of action that would give undue advantage to any individual or business in order to acquire new business or retain an existing contract.

In addition, any employee or executive must refuse offers of bribes or resist attempts at extortion. To ensure that this can be done, enterprises should develop a robust anti-bribery and corruption compliance programme, and this will go a long way towards eradicating public and private sector corruption

A company’s board and senior management have an important role to play in designing detection strategies. These should detect fraud from within, which will allow businesses to mitigate the severe financial and reputational consequences of being victim to commercial crime.

As regards those in the finance field within a business, here are some practical points of guidance:

Red flags to look out for include:

  • Short-term changes to vendor accounts;
  • Transactions processed after hours;
  • Payments made that are just under authorisation levels;
  • Payments of round number amounts;
  • Invoices that reflect charges in round number amounts;
  • Duplicate payments;
  • Payments made to unknown vendors or suppliers;
  • Lack of supporting documents for payments made; and
  • Invoices with very brief descriptions of goods or services in which insufficient detail is provided.

The finance team, together with the executive of the business, should put in place preventative measures so that fraud and corruption are less likely to occur. These include:

  • Clear segregation or delegation of duties within the finance function;
  • Having appropriate checks and balances when it comes to payment processing;
  • Ensuring that there are supporting documents attached to payments, and not allowing payments to be processed without such documentation;
  • Ensuring that there is adherence to authorisation levels;
  • Ensuring that suppliers and service providers are vetted;
  • A regular review and clean-up of the supplier database;
  • The organisation should have documented clear processes and procedures; and
  • The organisation should have a number of policies in place and which are communicated to staff, such as a procurement policy, anti-bribery and anti-fraud policy, whistle-blowing policy and procedures, detailed finance policies and procedures that set out how payments will be processed, and a fraud response plan in place so that, if a fraud is detected, all relevant parties know how to respond.

    It is very important that all employees are aware of the existence of policies and receive training on the policies.

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