Published Editorial

Educating corporate India on fraud downfall crucial

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BW Buisnessworld

By

Mukul Shrivastava, Partner, Fraud Investigation & Dispute Services, EY India

In a recent EY India study, 58 percent of Indian respondents believe bribery and corruption happens widely in the country. To control fraud and corruption within an organisation, stakeholders have started taking external help. In an interview with BW Buisnessworld, Mukul Shrivastava, Partner, Fraud Investigation & Dispute Services, EY India spoke about the expertise provided by a specialist, trend in malpractices, governments approach and more.

Edited excerpts

How important is it for companies to deploy an agency like EY to minimize the risk of fraud and corruption?

Fraud and corruption present a miasma of challenges for corporates, who are inevitably at risk if they do not devise a holistic framework to combat such issues. Having begun to understand the gravity of this threat, with the emergence of cyber threats having grown more prolific over the last few years; businesses now look toward gaining concrete advice to proactively deter these practices.

An external party, such as EY Fraud Investigation & Dispute Services (FIDS), brings in vast industry experience, a multi-skilled team and a hands-on insight on how to manage these fraud, bribery and corruption related risks effectively. We also look to provide companies with a well-rounded approach to (proactively and reactively) detect and mitigate risks.

Can you briefly highlight your role when a company suspects something and asks you to find the source?

A typical investigation routine would encompass assessment of the data provided, conducting probes into the matter, sifting through electronic data to establish a trail of evidence, and then providing the company with a document setting out the facts on the case. An area which is deemed extremely critical these days is the handling and storing of the data in a forensically and legally acceptable format which can then be used for judicial purpose as evidence. This is achieved with the assistance of eDiscovery services. The criticality of conducting these procedures in an efficient manner is top priority for both the company and us, to avoid hurdles with the legal proceedings at a later point of time.

Post the investigation report, the company/management/board needs to take a decision basis their policy/code on how to deal with the incident. In some cases we may also be called upon to recommend a course of action, or be called in as an "expert witness" in a litigation process.

Over the past few years there have been many fraud cases, e.g. Ponzi scams, Sahara, Kingfisher and many. Where do you feel India is lagging behind to control such scams?

The past few years has seen a sea change in terms of soaring public awareness because of global and national initiatives to combat fraud and corruption issues. For the corporate sphere, the enhanced stipulations brought about in the area of anti-fraud through laws such as the Companies Act 2013, created the much needed impetus for proactivity and a conscious approach toward combatting fraud. Additionally, companies now have in-house professionals which oversee aspects of risk, compliance, legalities, vigilance, ethics etc. In fact, one of the world's largest anti-fraud association has recently launched a unique platform, Forensic Trailblazer Award to recognize this growing base of anti-fraud professionals.

Perpetrators of countries like US when caught in corporate frauds are punished but in India the case is very different. Why is that so?

Judicial proceedings vary from country to country and we are gradually moving toward more uniformity in the approach toward dealing with fraud and corruption. With cross border collaboration of enforcement agencies increasing today, this differentiated outcome should cease to exist in the near future.

How high is corruption, fraud and bribery in the Indian business ecosystem?

As per EY's 14th Global Fraud Survey 2016 - "Corporate misconduct - individual consequences", 58 per cent of Indian respondents believe bribery and corruption happens widely in the country. Bribery, corruption and fraud therefore could be categorised as a few of the biggest risk factors affecting India today. Interestingly, majority of the companies today are more concerned about cybercrime penetrating through their very own employees or contract employees. Hence, educating corporate India on the downfall of fraud has become crucial.

As the occurrence of fraud and corruption is sector agnostic, most major sectors i.e. retail, automotive, e-commerce and media and entertainment, have equal susceptibility of being victimised by fraud.

What has been the trend in the past 2-3 year and has the government taken big steps to improve the prevailing image?

Recent steps taken (i.e. New Companies Act 2013) to improve governance standards in the country are encouraging and are garnering support of various sections of society, e.g., investors, corporate organizations and the general public. The Prevention of Corruption (Amendment) Bill (PoCA), 2013, introduced by Parliament (expected to be enacted in 2016) is expected to substantially alter the way corruption is dealt with, having drawn inspiration from key global anti-bribery and anti-corruption laws. Dealing with corruption has subsequently become more effective with increased enforcement.

Latest statistics reveal that law enforcement officials at the state and local level have aligned themselves with the country's anti-corruption laws. There has been a notable increase in inquiries and investigations driven by enforcement agencies i.e. Enforcement Directorate (ED), Anti-Corruption Bureau (ACB), Central Vigilance Commission (CVC), Central Bureau of Investigation (CBI), Lokpal and Lokayuktas and many state-level anti-corruption agencies. This is demonstrative of a nation ramping up its drive against graft and this changed approach will inevitably drive a more positive outlook for India's future.