The recent forum in Muscat on fraud risk management leads the way to the revamp of anti-corruption strategy aimed at companies and individuals who have been taking advantage of loopholes in the financial system.
The forum hosted by Association of Certified Fraud Examiners (ACFE) Oman at the College of Banking and Financial Studies (CBFS) has been endorsed by the Central Bank of Oman and widely embraced by investors and business partners.
Last year, Oman took an important step to tackle money laundering and the Central Bank took a leading role. But how successful it will be implemented depends on how committed the agencies responsible for its crack down. It will also depend how wide the fraud revamp would cover. In strict terms, fraud include financial embezzlement, corruption and bribery. The forum also talk about encouraging whistle blowers to allow them expose offenders. But whistle blowers often are intimidated and the forum asked for their protection. It is common knowledge that there is excessive executive fraud in our corporate world and the net catches just a few.
We also know that the private companies, whether listed in the Muscat Securities Market (MSM) or not, are the biggest offenders when it comes to financial frauds. Embezzlement is high on the agenda, according to court cases. But the darkest side of fraud is bribery of contract awarding. This problem is never reported because either the companies are too big or the senior management use intimidation tools preventing from being exposed.
A toxic combination of malpractice in the corporate world is when the CEO teams up with the board of directors to change important decisions in their favour. For example, when a member of board of directors wants his company to be awarded a contract. However, there are times when the CEO crosses the line and start dictating terms on their favour.
But it is not only the CEOs and the board of directors of the private companies. It is also very evident senior managers are wielding so much power that they overlook the interests of shareholders and sometimes even escape the scrutiny of the capital market laws. This is an inherent problem in the country that the system has created over the years when managers believe that they are above the law. It is also time for shareholders, for example on the MSM listed companies, to have a greater say on who is appointed in top positions. Shareholders also must be allowed to get justification on the actions of the board of directors.
Thankfully now the laws are revamped to make it easy for offenders to be fully accountable. But it must be clear how the new laws will be designed, measured or audited and to what standard. It will also must be clear for auditors in the country to agree on a standard on how to measure profits, especially on bonuses and executive compensations. Also, investigators of fraud must be skilled enough to reveal financial embezzlements, without the feeling of intimidation.
Oman has already secured some foreign investments in many projects, not only in the capital Muscat, but in industrial areas like Sohar, Salalah and now Duqm. However, that is not enough. The new call to end financial fraud will accelerate investments from abroad. International companies need to safeguard their investments. They want to see a robust strategy that would end fraud in every sphere of the Omani business. They also want transparency in the legal system and a clear objective in investment laws. Now Oman is ready to embark on a structure that will be free from financial malpractices, I am sure foreign investors would take notice.
The Central Bank is also working on the current audit system to make it fully impregnable by closing down all loopholes. Hopefully, the new financial climate would nail down the offenders and eradicate fraud once for all.
SALEH AL SHAIBANY