Fraud and bribery inevitable in corporate Malaysia
(L-R) KPMG Malaysia Managing Partner, Johan Idris; KPMG M’sia Managing Director Advisory, Hew Lee Lam Seng; KPMG M’sia Executive Director
Fraud is on the rise in corporate Malaysia. In addition, fraud has become more sophisticated and industry aligned over the past three years, a KPMG Malaysia survey revealed.
A startling 90% of respondents who experienced fraud were of the opinion that fraud, bribery and corruption are inevitable costs of doing business in Malaysia, according to the results of the KPMG survey on fraud, bribery and corruption released today.
“(The) mindset that fraud, including bribery and corruption, is part and parcel of doing business is rather dangerous as it could lead to the cultivation of a somewhat lenient and tolerant attitude towards the occurrence of fraud,” KPMG Malaysia managing partner Johan Idris said.
“Organisations (are) merely reacting to fraud instead of taking proactive steps to nip it in the bud,” he feared.
The survey, in its fifth edition, was comprised of close to a hundred respondents representing major Bursa Malaysia-listed companies. Senior management staff made up the bulk of respondents.
Worryingly, a comparison between the results of the latest KPMG survey and that of the same survey five years ago showed an increase in the percentage of respondents reporting fraudulent activity as a problem in their organisation and for Malaysian businesses in general.
The latest survey results revealed 83% of respondents felt fraud to be a major problem for Malaysian businesses in general compared to just 66% in the same survey last conducted in 2008.
More than half, or 52% felt fraud to be a major problem in their own respective organisations, ten percentage points more than the 42% of respondents in the 2008 edition of the survey.
Fraud more sophisticated and industry-aligned
KPMG Malaysia executive director of management and risk consulting Tan Kim Chuan shared the same view as the survey respondents. He told members of the media of organisations becoming more aware of previously uncommon forms of fraudulent crime, such as theft of intellectual property.
Fraudulent crime is also becoming entrenched in certain industries, with the KPMG fraud, bribery and corruption survey reporting 63% of organisations claiming to be victims of fraud to belong to only three industry sectors: trading and services, consumer products and construction.
Of the 26% of respondents who could accurately quantify fraud loss experiences, the total figure added up to RM2.41 million, based on a data set of almost 100 respondents from major Bursa Malaysia listed companies, the survey also revealed.
“Although the actual quantum of fraud reported appears to be small, we believe that it is only a fraction of the actual cost of fraud, as many incidences go undetected or unreported,” said Tan.
MACC to focus efforts on private sector
(L-R) KPMG M’sia Executive Director Management and Risk Consulting, Tan Kim Chuan; KPMG M’sia Managing Partner, Johan Idris; M’sian Anti-Corruption Commission (MACC) Chief Commissioner, Abu Kassim Mohamed and KPMG M’sia Managing Director Advisory, Hew Lee Lam Seng
Malaysian Anti-Corruption Commission (MACC) chief commissioner Abu Kassim Mohamed, who delivered the keynote address today, called for the government to pass into law legal reforms proposed by the Parliamentary Special Committee on Corruption.
Chief among the proposed legal reforms is the introduction of a “corporate liability” clause to the Malaysian Anti-Corruption Commission (MACC) Act 2009 in order to hold companies accountable for their employees involved in graft.
“We have seen many cases where the offences were carried out either for the benefit of a company or as a result of corporate negligence or poor management. Without a corporate liability clause, action can only be taken against the individual while the company remains untouched,” Abu Kassim said.
Referring to the KPMG report, the chief commissioner said MACC would step up enforcement activity on the private sector. He cited a low familiarity with the MACC Act and the common misconception that transactions between private sector companies were outside the jurisdiction of the MACC as areas that require more work.
Regardless, the KPMG survey found bribery and corruption to be endemic in both the country’s public and private sectors.
Just over 80% of respondents in the survey revealed the most common underlying motivator for bribery and corruption was to ‘win or retain business’ and to ‘get routine administrative approvals from government agencies.’