Fraud and Corruption – A Strategic Direction

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Cheating has become a daily part in most of today’s organizations and it seems like signs of fraud and corruption can be found anywhere.

Fraud is an action that is contrary to truth and honesty. Fraud is committed against another person or an organization (such as the State or a company ). Speaking of fraud, it seems Russian billionaire-turned-art-collector Dmitry Rybolovlev has filled $380 million lawsuits against Swiss art dealer Yves Bouvier in what is considered to be the “largest art fraud in history.”  Fraud, therefore, is punishable by law.

The fact is that there are multiple types of fraud. Thus, among these are the salary payments to personnel who do not work, the cancellation of invoices that have been collected, the double billing, the liabilities registered without supporting documentation, the sales, and undeclared services in taxes or salaries — paid to people who do not exist.

Corruption is the act and impact of corrupting (depraving, spoiling, bribing someone, perverting, damaging).

In another sense, corruption is the practice that consists of abusing power, functions or means to obtain an economic or other advantage. Political corruption is the misuse of public authority to gain an illegitimate advantage: What’s essential to understand is that behind every type of fraudulent act that is committed is a plan. To understand this better, let’s go over some examples of planned frauds:

Six main categories of fraud and corruption

As a contribution to the understanding of this phenomenon, we will refer in detail to the different ways of materializing the deceptions that plague the companies in our country and the rest of the world. Fraud knows no borders, but it does identify vulnerabilities in organizations. Knowledge of the phenomenon can help fight it more effectively.

There are six main categories of fraud and corruption, about which this document deals.

1. Misappropriation of resources, including intellectual property and information

  • Simple theft, theft of use and falsification of reports.
  • Theft or diversion of privileged information.
  • Embezzlement and a different allocation of resources.
  • Abuse of paid work time.

2. Corruption

  corruption

Defined as the payment or receipt of unauthorized benefits, made by or to an employee for doing or refraining from doing something concerning his work. Examples are:

  • Acceptance by an employee of a personal interest as a way to influence an administrative decision.
  • Any payment that is given to an employee by a provider in exchange for favorable treatment to the latter.
  • Acceptance of gifts of any nature, from third parties with whom business relationships are held.

3.Conflicts of interest

Refers to cases in which employees or officials have private interests, unknown by the organization, that may interfere with their labor obligations or custody of assets. Some examples are:

  • Accept consultancies or part-time jobs, without express authorization.
  • Use of inside information of the company for a personal or third-party benefit.
  • Abuse of alcohol or other psychotropic substances.

4. False reports, tending to distort the reality of own performance or third parties.

It includes the suppression of information, material and other cases such as:

  • Provision of false information to cover poor performance or to access bonuses.
  • Use false reports to deceive investors, financial entities or third parties in general.

5. Manipulation of financial statements.

Breach of legal obligations and submission of false reports. For example:

  • Presentation of untrue statements of compliance with environmental, labor or legal regulations in general.
  • Deliberate concealment of violations of foreign exchange, tax, industrial safety, and occupational health standards.

6. Hiding accounting errors.

Hiding accounting errors

 Technological abuse, including unauthorized access to computer systems, violation of software licenses, implantation of viruses or other harmful code, or any sabotage, such as:

  • Unauthorized access to electronic files.
  • Misuse of the Network.
  • Computer fraud, in all its manifestations.

Fraud and corruption can involve dishonest acts of customers, suppliers, representatives, competitors, employees, former employees, and managers.

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