Is fraud winning the race against compliance in India?

Man jumps into sand duneGordon Gekko is probably etched in the memory of most people who have seen the cult movie ‘Wall Street’. Even after a decade and a half, many still try and follow the quotable mantra of the iconic stockbroker. But will it work in this time and age? Maybe or maybe not, but it doesn’t stop many fraudsters from giving it a try. The result we see today is in the form of fraud and corruption, which is steadily on the rise globally. Corporates across sectors are no stranger to its perils, with each incident becoming increasingly complex, challenging and pervasive.

Our recently released Global Fraud Survey 2014 Overcoming compliance fatigue: reinforcing the commitment to ethical growth brings out a similar sentiment prevalent in the today’s business environment. According to the survey, fraud, bribery and corruption are some of the key challenges that Indian organizations are grappling with. With a ‘survival-of-the-fittest’ mindset to withstand the downturn and other economic uncertainties, many organizations seem to have a justification if engaging in unethical behaviour. For instance, a majority of Indian respondents agreed that offering entertainment, personal gifts, cash payments to win or retain business or misstating a company’s financial performance is ‘acceptable’. Bribery and corruption risks appear widespread in India (68%) as compared to the global average (39%).

Globally, more than 1 in 10 executives surveyed reported their company as having experienced a significant fraud in the past two years. Today, most senior management feels weighted down as they have to shoulder the responsibility to deliver exceptional results. With this mounting pressure to meet and sometimes even overachieve these financial targets, it’s no surprise that 80% of the survey respondents have agreed to having more flexible policies, changing assumptions to determine valuations or even backdating contracts.

So the question remains – where is corporate India going wrong? A comparison of results of 13th and 12th Global Fraud Survey reveals that the compliance efforts among Indian companies seem fatigued. While last year was more optimistic, with the 88% of the top management professing their commitment to propagate anti-bribery & anti-corruption policies; the sentiment this year saw a decline (71%). Indian companies ranked in the bottom 10, with only 50% saying that there are clear penalties for breaking anti-bribery and anti-corruption policies.

The 2014 survey also put the spotlight on lower than expected levels of anti-bribery & anti-corruption trainings which are provided by organizations. Only 29% of respondents have asserted to attending such trainings and 27% have been asked by their companies to participate in an anti-bribery & anti-corruption risk assessment. Less than half of the total Indian respondents said that their companies have a whistleblowing hotline.

Going by these statistics, the present may seem a little dull but the future looks promising. The Indian regulatory landscape is evolving, making concerted efforts to keep pace with global standards. A case in point is the Companies Act 2013 and its impact on reshaping the fraud landscape. It will also be instrumental in paving the way for many anti-graft provisions and polices, which will make ABAC trainings, assessments, response plans and due diligence a key priority. These combined will be crucial in driving Indian organizations toward higher standards of ethics, compliance and sound governance.


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