A rise in corporate fraud cases poses a threat to economic development in the Middle East. This was the view during a roundtable on the prevention of corporate fraud in the Middle East, organised by chartered accountancy body, ICAEW.
Panellists included Shiraz Sethi, Regional Managing Partner and Co-Head of Employment Department at DWF (Middle East) LLP; Zara Merali, Senior Associate at Freshfields Bruckhaus Deringer and Anjam Jalal, Associate Director at DFSA Enforcement. The event was moderated by Mark Millard, Managing Director of FTI Consulting’s Forensic Litigation and Consulting Department.
Discussions focused on the types of fraud being perpetrated, the major challenges faced by regulators in the region and how they are being addressed, as well as how businesses can protect themselves against fraudsters.
The region has seen an increase in bribery and corruption investigations and the speakers agreed that the risks businesses face today should not be underestimated.
The first 48 hours are crucial once fraudulent activity is discovered and having robust IT systems in place is imperative when determining how quickly information can be recovered. To mitigate risks, speakers advised three key steps companies must follow:
• Prepare an investigation strategy to assess the risks at hand, such as loss of assets and reputational damage.
• Once identified, manage all stakeholders involved. This could be employees who could potentially leave the organisation with assets or valuable information and perhaps even clients.
• Assess the company’s disciplinary policies thoroughly and gather enough evidence before taking further action — such as the suspension or termination of employment, and perhaps imposing travel bans against the relevant individuals.
Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said: “With the rise in regional corporate fraud investigations, we applaud the efforts of the Dubai Financial Services Authority in establishing a regulatory environment that fosters the DIFC guiding principles of integrity, transparency and efficiency — however, there is, of course, room for improvement.
“Chartered accountants have a huge role to play in mitigating corporate fraud in the Middle East — because the profession has individuals who possess forensic accounting skills. To build a positive vision of the future, auditors must demonstrate professional scepticism — this means being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.”
Mark Millard, Managing Director at FTI Consulting and specialist in investigations stated: “Corporate fraud is an increasingly important issue for Middle East companies, especially as regulatory bodies demand greater compliance, enforce regulations more strictly and impose fines for breaches. Therefore, there is an increasing need for regional firms to educate and train employees on the risks of regulatory breaches.
“Reform is also needed to combat corruption and encourage whistleblowing in the Middle East. To help mitigate corporate fraud in the region, whistleblowers must be given full immunity and protection when coming forward. This way, the business community will be able to encourage cultural integrity within the workplace.”
According to a report by PwC, in 2019, fraud committed by customers tops the list of all crimes experienced by businesses at 47 per cent, up from 36 per cent in 2018. The report also highlighted that more than half of organisations in the Middle East responded to economic crime by implementing and enhancing controls, and nearly three-quarters of respondents conducted an investigation following an incident.
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