INTERNATIONAL SEMINAR

FRAUD IN ACCOUNTING
AND BUSINESS

Financial Crime: Present status and

01.
Background
• This is an interesting real-life story though it is over a decade old.
Ordinarily, selling illicit drugs would invite severe punishment but
here a pharma company and a medical doctor were pushing
drugs under the guise of medical treatment.

02.
Recent Case
• A recent case is that of Roger Ng, a top executive with Goldman Sachs
for Malaysia. The US Jury convicted him in April this year for his role in
helping embezzle hundreds of millions of dollars from Malaysia's 1MDB
development fund.
• It seems he helped his former boss, Tim Leissner, to embezzle money
from the fund, launder the proceeds and bribe officials to win business
for Goldman.

03.
Recent Case
• In a 2018 case against Australia’s largest and most profitable bank, it
was found that drug syndicates and gun dealers used the
Commonwealth Bank's intelligent ATMs to launder millions of dollars for
years. The bank admitted that its failures prevented the police from
disrupting money laundering by the crime syndicates. It had to pay
A$700 million civil penalty to settle its anti-money laundering and
counter-terrorism financing (AML/CTF) case with AUSTRAC which is the
financial intelligence agency in Australia

04.
Recent Case
• Indonesia is not behind in financial crime either. The Asia Pacific Group 2018
report found that Indonesia has a high risk of terrorist financing (TF). The report
found that corruption, narcotics and taxation as the three main proceeds/ML-
generating predicate offences. The Survei fraud in Indonesia rocked the world
some years back.
• These cases are pointers to the fact that money laundering and fraud are the
two major categories of financial crimes. Sometimes, fraud and financial crime
are considered as synonymous. Though the difference between financial crime
and fraud is blurring, the two can be differentiated.

05.
McKinsey (2019, para 3) notes:
“Financial crime has generally meant money laundering and a few other
criminal transgressions, including bribery and tax evasion, involving the
use of financial services in support of criminal enterprises. It is most often
addressed as a compliance issue, as when financial institutions avert fines
with anti–money laundering activities. Fraud, on the other hand, generally
designates a host of crimes, such as forgery, credit scams, and insider
threats, involving deception of financial personnel or services to commit
theft”.

06.
Refinitive
“a London Stock Exchange Group company – considers that
financial crime is a broader term and includes frauds, money
laundering, theft, bribery and corruption, cyber-crime, and
slavery/human trafficking (Refinitiv 2019)”

07.
ML/TF RISK
The five domains that are assumed to be impacting ML/TF risk are
selected and indicators are developed in total to compute a country’s risk
score. The five domains include:
1. Quality of AML /CFT Framework
2. Bribery and Corruption
3. Financial Transparency and Standards
4. Public Transparency and Accountability
5. Legal and Political Risks

08.
ML/TF RISK
Given the magnitude of the problem and slow progress in
complying with FATF standards it appears that the battle against
MLTF risk would continue to be waged for a long time to come. It is
important to know that as agencies are getting more savvy to
address MLTF risk the counter party that is the criminal gangs are
becoming sophisticated too. Newer and innovative ways for
committing the financial crime are being devised.

09.
ML/TF RISK
• The way ahead would involve giving a bigger role to the private sector in the
fight against MLTF risk. It is the first point of contact at the placement stage
before layering and eventual integration can take place. Consequently, the
capacity of the private sector in detecting the MLTF risk as well as funding for
Proliferation of weapons of mass destruction (WMD); needs to be
considerably improved.
• COVID 19 has shown us that a virus can bring the entire world to a standstill.
It is reported that it was accidently let off from a laboratory in Wuhan, China
but we have seen the consequences. It is also possible that such biological
weapons can be used deliberately to achieve military aims.

10.
ML/TF RISK
Another important point is the need to devise strategies to not only
prevent the occurrence of MLTF and WMD related risks and but also to
eradicate the occurrence there of. Simultaneously, it is critically important
that asset recovery is done speedily.

11.
FRAUD
Several categories of fraud are identified in the literature.
These include five main types: corruption, conflict of
interest, theft of assets, false reporting or falsifying
performance and technological abuse.

12.
FRAUD
• In the Indonesian context, the Association of Certified Fraud Examiners
found in its 2019 report that corruption is the most common fraud in
Indonesia. Nearly, 70 percent of the cases surveyed by it involved
corruption and the total loss was more than 373 billion rupiah. It was
mainly the government that suffered losses.
• The loss suffered by private companies was between 500 million to one
billion rupiah while that suffered by the government was more than 10
billion rupiah.

13.
FRAUD
A report published by the Association of Certified Fraud Examiners in
2022 found that occupational frauds occur in five major industries:
real estate, wholesale trade, transportation and warehousing,
construction and utilities. Globally, organisations lose five percent
of the revenue due to fraud and the losses caused by fraud have been
estimated to be of the order of 3.6 billion US dollars.

14.
FRAUD
Frauds are typically motivated by greed and a belief that it
would not be caught. The Association of Certified Fraud
Examiners found that 42 percent of the frauds were detected
because of the tips received. Furthermore, it was found that
nearly half of the fraud cases took place due to lack of internal
controls or due to overriding of the controls.

15.
FRAUD
To reduce the risk of fraud, organisations take several
measures. These include: Formulating a risk committee which
is generally a sub-committee of the Board, formulating a risk
policy, periodic appraisal, instituting preventive controls such
as physical security, policy and process control, due diligence
and technical controls.

16.
FRAUD
To reduce the risk of fraud, organisations take several measures.
These include:
• Formulating a risk committee which is generally a sub-committee
of the Board
• Formulating a risk policy
• Periodic appraisal
• Instituting preventive controls such as physical security, policy
and process control
• Due diligence and technical controls

17.
 “In a lighter vein, I suggest that to prevent
financial crime, you should watch more
Netflix films!”

18.
Terima Kasih!

Thank you for your

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