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Final disfunctional anti fraud compliance

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Final disfunctional anti fraud compliance

  1. 1. PROFILE KAMUDONI NYASULU LAW CONSULTANTS Fraud and Corruption Examination * Rule of Law and Security Reforms * Litigation DISFUNCTIONAL ANTI FRAUD COMPLIANCE Plot No. 584/585 Area 10 Tsoka Road P. O. Boc 1848 Lilongwe Phone +265994368423/+265881424891 kamudoni@hotmail.com
  2. 2. Fraud in Our Laws  Any false representation made by words, writing or conduct which the maker knows to be false  Made fraudulently or intended to defraud  To induce public officer to act contrary to his duty  Resulting in loss to the victim; or  The maker achieving an ADVANTAGE (gain)  The maker knows has no right to the Advantage
  3. 3. Advantage  Benefit, service, enjoyment or gratification  Payment, in cash or in kind, rebate, deduction, concession or loan  Condition or circumstance that puts one person or class of persons in a favourable position over another including a “gift”  Public officers receiving property to show favour  Only exception is “entertainment” Gift
  4. 4. Corruption  Offering, giving, receiving, obtaining or soliciting of any advantage to influence the action of any person in the discharge of his or her duty  Influence peddling  Demanding or receiving by a person in office of a fee or other payment for services, work, supplies that should be gratuitous Challenge: Citizens Not willing to Cooperate: Patriot: Citizens cooperating
  5. 5. Types of Fraud  Corruption  Generally bribes offered, given, solicited, and received  Asset Appropriation: An employee or in collusion with an employee a perpetrator steals or misuses an organisation’s resources; e.g.  Use of organisation’s fuel to attend a Heritage Society celebration  Financial statement fraud: involves the intentional misstatement or omission of material information from the organization’s financial statements; “cooking the books”  1. Asset Appropriation Statement Fraud Bribes
  6. 6. Examples of Fraud  Embezzlement  Forgery or alteration of documents  Fraudulent financial reporting  Misappropriation or misuse of Organisation’s resources (e.g., funds, supplies, equipment, facilities, services, inventory or other assets)  Authorization or receipt of payment for goods not received or services not performed  Authorization or receipt of unearned wages or benefits  Conflict of interest, ethics violations
  7. 7. Perpetrators  Major frauds:  Politicians, Senior Management, Syndicates, Organisations, Employees, Clients and Suppliers  Pedestrian frauds:  Employees, Clients and Suppliers
  8. 8.  Generally employees commit fraud because there is  “Opportunity”, “Pressure”, and they “Rationalize” their conduct  We need to break the triangle: First step is to remove or minimize “Opportunity”
  9. 9. Factors that Drive Fraud  Opportunity  No or weak: Supervision and review  Management approval  System or Internal controls  Pressure (or motive)  Personal financial problems; unforeseen expenses  Personal vices/addictions such as gambling, luxury lifestyle  Rationalization Individual develops justification for the fraudulent activity e.g.  “Everybody is doing it: we always do it” – Members of NCIC
  10. 10. Compliance: Remove or Minimise Opportunity REQUIREMENTS:  Citizen, Organisations, Staff Aware of anti-fraud framework (not fraud) RED FLAGS:  Organisations set anti-fraud systems and procedures  Organisations, Staff Able to recognise indicators of fraud  Organisations, Staff compliance with systems and procedures  Regularly Examine the systems and procedures
  11. 11. Detection and Resolution  Sector Wide Joint Programming  Justice Chain Collaborative Planning  Justice Chain Coordinated implementation  Organisations’ structured record keeping practices
  12. 12. DAUNTING CHALLENGE
  13. 13. Levels of Fraud Control PARLIAMENT PUBLIC APPOINTMENTS COMMITTEE PUBLIC ACCOUNTS COMMITTEE LEGAL AFFAIRS COMMITTEE BUDGET AND FINANCE COMMITTEE JUDICIARY MINISTER OF FINANCE CABINET MINISTER OF JUSTICE RESERVE BANK OF MALAWI TREASURY DIRECTOR PROCUREMENT DIRECTOR PUBLIC PROSECUTIONS ANTI-CORRUPTION BUREAU MALAWI POLICE SERVICE FIU, ACCGEN, AUDGEN, MRA PRINCIPAL SECREATARIES PROFESSIONAL BODIES ACB, MPS (Fiscal) MALAWI LAW SOCIETY MALAWI ACCOUNTANTS MINISTRIES, DEPARTMENTS, AGENCIES, STATUTORY BODIES, FINANCIAL INSTITUTIONS, CIVIL SOCIETY ORGANISATIONS *** CITIZENS
  14. 14. Crime Legislation Competent Authority Supervisory Authority Subject Activity Legal Education and Legal Practitioners Council of Legal Education Legal Education Chief Justice Minister Admission to practice law High Court Chief Justice Attorney General Malawi Law Society Discipline Practice and Conduct Courts and Judicature Judicial Service Commission Chief Justice Administration Practice Discipline Penal Laws (+CP&EC) Director of Public Prosecutions (DPP) Legal Affairs Committee Attorney General Chief Justice Practice Malawi Police Service (MPS) DPP Courts Practice Police Service Commission Administration Conduct
  15. 15. Fraud Fraud Director of Public Prosecutions Financial Intelligence Unit (FIU) Attorney General Practice Reserve Bank of Malawi (RBM) FIU Minister of Finance Administration Practice Anti-Corruption Bureau DPP, FIU Legal Affairs Committee Practice Minister, President Administration Malawi Police Service (Fiscal and Fraud) DPP Courts FIU Practice Auditor General Secretary to Treasury Minister of Finance Public Accounts Committee Practice Malawi Revenue Authority (MRA) DPP, ACB, MPS FIU Practice Secretary to Treasury Minister of Finance Practice Conduct Administration
  16. 16. Financial Services Financial Services and Financial Institutions Reserve Bank of Malawi Minister of Finance Board of Directors FIU, DPP, MRA, ACB MPS Fiscal, Bankers Association Insurance Institute Other professional societies Administration Conduct Practice Conduct Director of Public Procurement (DoPP) Internal Procurement Committees Administration Practice Cabinet Minister of Finance Public Private Partnership Commission Administration Conduct Practice REGISTRARS Administrator General Practice Registrar General Practice Land Registrar Practice Commissioner for Mines and Minerals Commissioner for Petroleum Exploration and Production Administration Practice Conduct Director of Forestry Malawi Legal Council Malawi Law Society Practice Conduct Malawi Accountants Board Society of Accountants in Malawi (SOCAM) Professional Societies National Construction Industry Council Master Builders’ Association Malawian Building Contractors and Allied Trades Association, Board of Architects and Quantity Surveyors Board of Engineers; Association of Consulting Engineers; Board of Land Economy Surveyors, Valuers, Estate Agents and Auctioneers; Chamber of Commerce and Industry
  17. 17. SUGGESTIONS
  18. 18. Sectors of Recent Fraud  Procurement and Finance  Financial Services  Land, Forestry and Local Government  Land, Mining (Petroleum) and Local Government  Public Private Partnerships (Privatization)
  19. 19. Penal and Financial Laws  Money Laundering  Corrupt Practices  Financial Services  Public Procurement  Taxation  Consumer Protection  Mining and Petroleum  Bureau of Standards
  20. 20. Possible Steps for Government Competent and Supervisory Authorities to:  Review their obligations on compliance  Jointly review current performance plans  Plan coordinated implementation
  21. 21. Possible Steps for Others Professional Bodies, Boards, Councils to:  Review outstanding obligations on compliance  Financial Institutions review compliance regime  Recruit, where required, compliance officers  Create systems and procedures for compliance  Train staff to understand anti-fraud requirements  Train staff on how to recognize indicators of fraud
  22. 22. A Sample of Requirements for Compliance  Ascertain purpose of transaction large amounts; ascertain origin and ultimate destination  Maintain records of all transactions and correspondence for minimum seven years  Records must be kept in a manner and form that would make them usable by the Director of Public Prosecutions (DPP) or the FIU  Appoint Compliance Officer  Train staff on the compliance requirements  Train staff on the procedures and systems  Train staff to recognize suspicious transactions (red flags)
  23. 23. A Sample of Indicators (Red Flags) Out of common 42 indicators the following were present in “Capital Hill Cashgate”  Business cannot be found on the internet  Client wants to take short cuts  Back to back property transactions  Client uses multiple bank accounts  Parties connected without an apparent business reason  Requests for payments to third parties
  24. 24. Attention THIS IS THE LAW YOU OR YOUR COMPANY COULD END UP IN COURT !!!

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