Wednesday, January 15, 2014

Survey puts fraud at 'quite dangerous' level in M'sia

1:00PM Jan 13, 2014
Fraud, bribery and corruption are prevalent in Malaysia and an inevitable part of doing business in the country, according to a survey of listed companies.

The survey by KPMG, a top accounting firm, shows that 90 percent of respondents who had suffered fraud said it was part of business costs.

About 80 percent believe that bribery and corruption have increased over the last three years, while 64 percent say that business cannot proceed unless bribes are paid.

KPMG described this trend as "rather dangerous" and called for more pro-active measures.

"It could result in the cultivation of a somewhat lenient and tolerant attitude ...with organisations merely reacting to fraud instead of taking proactive steps to nip it in the bud," managing partner Johan Idris said at the launch of the report in Damansara today.

The survey conducted between March and August last year received about 100 responses from some 1,000 public-listed companies. Over a quarter of the respondents were either chief executive officers (CEOs) or Chief Financial Officers (CFOs).

A copy of the report was presented to the Malaysia Anti-Corruption Commission (MACC), whose head Abu Kassim Mohamed (left) was at the event.

The survey reveals that not a single respondent could claim to be "very familiar" with the MACC Act. About a third said they were "not familiar."

While acknowledging that more education is perhaps the answer, Abu Kassim downplayed the findings of the survey.

"Less talk on corruption may have a better impact. When there is so much news about it ... that is the perception, but the reality is different,"" he said.

Elaborating, Abu Kassim said that KPMG survey must be seen with other findings such as Transparency International's Global Corruption Barometer 2013 which indicated that "only five percent of Malaysians encounter bribery" and ease of doing business surveys which often ranked Malaysia highly.

Bribes for approvals

The KPMG survey meanwhile revealed that 81 percent agreed that they paid bribes to secure routine administrative approvals from government agencies.

Cash payments were the most common form of bribery with winning or retaining business in Malaysia, it said.

The survey said the top three reasons why bribery and corruption happen was because of the inherent nature of some industries, where it was considered acceptable behaviour, and the lack of awareness among employees.

When asked if top executives may have accepted bribery in the KPMG survey on the perception that no big cases have been caught, Abu Kassim said that was not true.

"Let us be fair. A corruption case is not only about investigation but also about prosecution and how the judiciary views it.

"I am not going to go deeper and explain but we are only 30 percent of the whole process. Another 30 percent is prosecution and another 30 percent is decision making, how they look at the case, the evidence in court and how they want to look at justice from their perspective."

He was also commenting on the Port Klang Free Zone (PKFZ) trial which today saw former transport minister and ex-MCA deputy president Chan Kong Choy (left) freed of three charges of cheating.

This is the second blow to the case - Chan's predecessor and former MCA chief Dr Ling Liong Sik was earlier acquitted of cheating the cabinet over the billion ringgit scandal.

"Rather than pointing fingers, let us look at why we lost and we improve. If there is a loophole in legislation, improve that," Abu Kassim said.

He noted that MACC hopes the government will soon pass a "corporate liability" clause to the MACC Act. This would hold companies accountable for their employees involved in graft.

He also said that public may not be aware that the MACC has an independent oversight committee which reviews its cases to safeguard against biased investigations. They were looking at 37 such cases now, he said.

Complex environment

Later, jumping to MACC's defence, another KPMG official also cited other factors which may account for rise in fraud cases.

"The people's perception that fraud is on the increase is because we are dealing with a much more complicated environment...the nature of fraud is getting more complex and sophisticated.

"We have issues of intellectual property, identity fraud and technology-related fraud. Things like this may not have happened back in 2000," said KPMG executive Tan Kim Chuan.

The survey also found a 50 percent spike in fraud cases committed by non-management employees compared to 34 percent in 2009.

It said the typical fraudster profile was of a male aged 26-40 years old, with an annual income of RM60,000 and below, and who has
worked with the organisation for five years or less.

This is the fifth KPMG survey on fraud practice in Malaysia since 2001 and for the first time, it has included questions on bribery and corruption as well.
~ Malaysiakini

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