01 Jul 2016 20:43 IST

Fighting corporate crime through forensics of another kind

Forensic services industry, with 2,000-2,500 professionals, can grow by 35-40 per cent in 4-5 years

Although the general business sentiment in the country remains positive amidst global gloom, India Inc continues to face an increasing onslaught of economic crime. Take a look at the PwC Global Economic Crime Survey 2016 findings.

~ More than one in four organisations have been hit by economic crime.

~ Fifty-six per cent of respondents see an increased risk of cybercrime.

~ Sixty-one per cent of economic crimes in India are committed by employees within an organisation.

~ Almost 27 per cent of organisations in India were asked to pay a bribe in the last two years.

~ Asset misappropriation is the most ‘advanced’ type of economic crime perpetrated , followed by procurement fraud and bribery and corruption.

Beside common economic crimes such as asset misappropriation and embezzlement, businesses today are struggling to deal with other complex issues, such as:

~ Loss of opportunity

~ Intellectual Property (IP) infringement

~ Financial statement fraud

~ Conflict of interests/related party transactions

~ Cybercrime

There’s a lot that has happened in the last five years. . The complexity of fraud has increased significantly, and the modus operandi have changed. Today, we see more and more instances involving complex financial transactions. Consequently, the losses incurred have increased from lakhs to crores.

Even as the perpetrators of fraud have become much bolder, ready to take increased risks, the prosecuting agencies too are continuously working at unearthing these unethical activities.

With the deep penetration of technology in every facet of business, technology-related scams have increased in proportion and magnitude, with fraudsters deploying sophisticated methods backed by strong technology skills.

Be proactive to counter fraud

Having a passive approach to detecting and preventing economic crime is a recipe for disaster. The burden of preventing, protecting and responding to economic crime rests firmly with organisations. This is why there is a greater need for boards and top managements to address and reduce the opportunities for committing fraud.

While the tolerance level for unethical activities continues to decrease, companies need to consider the value of investing more resources into ethics and compliance programmes.

As regulatory changes, such as the recent Black Money, (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015, the Benami Transaction (Prohibition) Amendment Bill, 2015, and the Companies (Amendment) Act, 2015 continue to emerge, businesses need to invest in their compliance programmes more seriously to address the evolving risk landscape.

Apart from the right mindset, it’s the relevant experience that makes a forensic professional. Currently, the size of the industry in India is 2,000-2,500 professionals across specialties. It is expected to grow by 35-40 per cent in the next five years.

What forensic experts do?

In a nutshell, such experts help businesses prevent, detect and respond to fraud.

The work of forensic professionals involves conducting fraud risk assessments, and assisting companies in the end-to-end rollout of anti-fraud programmes and controls, from policy to implementation and training. They also help them set up, operate and respond to whistleblower allegations and assist in periodically evaluating the efficacy of anti-fraud programmes and controls.

In addition, they conduct internal investigations, data analytics and reviews to identify fraud indicators; they then report back on the health of the anti-fraud programmes and controls. Helping protect the company’s assets, and responding to regulators and/or work with enforcement agencies too are activities undertaken by them.

Specialised skill-sets

The 350-strong forensic services team at PwC, working across seven locations, includes former police officers, who have specific experience in intelligence gathering, and advise on how to collect and analyse information in a credible manner, in accordance with the laws of the land.

For example: conducting background checks on people, developing intelligence on the modus operandi of counterfeiting products, leakages in supply chains, assets created from diverted funds, outside business interests, conflict of interest, beneficial ownership in assets and a myriad other areas.

We also have data analytics professionals, who use raw data from various sources to analyse a range of business functions, including procure-to-pay, credit, default, inventory leakages and employee-related functions such as recruitment, to present a holistic view of potential fraud risks.

Additionally, such professionals have decades of experience across technology/tooling platforms, and leverage this to reduce incidental costs related to fraud. Such a depth of experience in cyber-security helps organisations build the capabilities required to deal with constantly evolving threats.

The team also includes experienced forensic accountants who help us understand the magnitude of economic crime. They help companies navigate the complex world of accounting, provide expert testimony on matters related to quantification of fraud, and claims and counter claims.

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