Cross border financial frauds on the rise

Kolkata, May 30 | Updated: May 31 2007, 05:30am hrs
India and 20 other nations, including the US, the UK and Japan, are ill-prepared to investigate cross-border financial fraud, leading to both a huge loss in revenue and a severe setback in investor confidence.

The fraud ranges from the over-billing of customers and deceptive sales practices to fraudulent financial reporting and insider trading.

According to a recent study conducted in 21 countries by KPMG, a global network of professional firms providing audit, tax and advisory services, 56% of the investigation professionals interviewed said their companies do not have investigation protocols.

While the companies are battling to reduce financial fraud and 60% of the executives acknowledged that investigations could curb such acts, 56% of the companies have not yet implemented comprehensive investigation procedures.

The amount of loss suffered by the Indian companies is not available with KPMG. According to the Association of Certified Fraud Examiners' 2006 National Fraud Study, the loss owing to financial fraud in US companies was estimated at $652 billion.

Moreover, 48% of survey respondents said their investigative staff had received training during the six months before the survey was released, while 27% had not been trained in 2006.

"Fraudsters operate undeterred by global boundaries," said Deepankar Sanwalka, KPMG's head of forensic services in India. "Therefore, companies must be increasingly vigilant about their ability to prevent, detect and respond to fraud."

According to Sanwalka, multinational organisations often develop uniform investigative policies and procedures across the many countries in which they operate, while the fact is that each nation has its own changing, regulatory and policing procedures.

The survey says the major hurdles in the way of conducting cross-border investigations are cultural, language and legal differences, identifying initial response to an incident of alleged fraud, not having a skilled and experienced investigative team, and the availability and accessibility of electronic data.