India’s business landscape remains buoyant, highlighted by improved ranking (100) in World Bank’s recently released Ease of Doing Business Report 2018. The market has seen a gradual through significant transformation on multiple fronts including new domestic and global reforms and the ongoing war against unethical practices. While, fraud, bribery and corruption remain endemic in emerging markets including India, organizations have steadily realized that countering these risks is important to sustain successful businesses by augmenting anti-fraud measures and promoting ethics.
Global initiatives such as International Fraud Awareness Week (or Fraud Week) provide a much-needed thrust to increase awareness on fraud risks and their repercussions. In 2017, this movement is from 12 to 18 November.
Our recent newsletter, Fraud and beyond (Vol II) highlights key news and trends around fraud, non-compliance and other emerging threats, and the ways to mitigate them.
Chasing shell companies to diminish money laundering
Following demonetization to eradicate black money, counterfeit currency and terrorist financing, the Government has come down heavily on shell companies operating in India. The common modus operandi of such companies to engage in illicit activities is becoming “fronts” for layering transactions during funds transfer or making foreign remittances of black money through fake trade transactions. Banks and financial institutions will need to ramp up their anti-money laundering frameworks, including customer and vendor due diligence, risk profiling, KYC compliance and governance, and upgrade of transaction monitoring systems. The role of Robotic Process Automation (RPA) will also be instrumental in KYC compliance and enhanced due diligence procedures.
Caught in the cyber crosshairs
Global organizations across countries including India have emerged as vulnerable targets for cybercriminals, with attacks such as WannaCry, spear phishing and advanced persistent threats coming to light. Ransomware has dominated headlines worldwide, locking down hundreds of computer systems and hampering business continuity. Emerging markets have seen a massive transformation in terms of digital adoption, but cybersecurity frameworks are inadequate and incident response is still low. Corporate India needs to increase awareness, self-report cases and invest in building cyber capabilities to tide over the cyber wave.
Corporate governance issues taking centre stage
The recommendations laid down in the report by the SEBI-appointed Uday Kotak Committee on corporate governance are expected to boost transparency and ethics in listed organizations. The suggestions include the participation of independent directors in the company’s business operations, disclosure around related party transactions, augmenting guidance and efficacy of the board and safeguarding shareholder interests. With rising unethical conduct, the role of boards and independent directors has become crucial. Resilient organizations will have to keep pace with the disruptive times, enhance anti-fraud and anti-corruption controls and motivate employees to “do the right thing.”
Preparing for GDPR compliance
The EU’s upcoming General Data Protection Regulation (GDPR), effective from 25 May 2018, is expected to bring about several changes in how global businesses deal with the personal data of EU citizens by offering increased protection, and giving them the right to manage and control their personal information. GDPR non-compliance or a data breach can call for severe warnings and penalties. The future of data protection and privacy can be strengthened through regulations such as GDPR and organizations’ ability to achieve compliance with it. Information governance programs can be crucial to charting the compliance path by building an operational program to bring in efficacy and structure with GDPR.
ISO 37001: A game changer to curb fraud and bribery
ISO 37001, the first international standard on anti-bribery management systems, has become an attractive compliance tool seeing traction among the private and public sector alike. The rise in demand is mirrored by the fact that the Governments in many nations including Peru and Singapore have already adopted it, setting an example for emerging markets to follow. As fraud, bribery and corruption continue to be major compliance risks in emerging markets, ISO 37001 can help entities evaluate and ramp up existing compliance frameworks.
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