Question

Global Economic Crimes are said to be widespread and on the increase. As an aspiring fraud investigator, write an essay on global economic crimes and fraud. In your essay, you should describe the nature and scope of global crime and fraud, distinguish between global crime and global fraud respectively, explain why companies should be concerned about global crimes and fraud, and discuss how companies should address

Answer 1

Global economic crimes consist of a wide range of economic offenses and include different forms of financial crimes that are committed. Examples of global economic crimes are money laundering, tax evasion, improper use of tax havens, embezzlement and bribery etc.

Global economic fraud is a sub set of global economic crime and consists of those actions that are considered as an intentional act of deception for the purpose of making financial gains. A dishonest advantage is gained through acts of global economic fraud. Examples of global economic frauds are identity fraud, banking fraud, investment fraud, and fraud by abuse of position.

Companies should be concerned about global crimes and frauds as these acts of crime and fraud may put companies in a position of disadvantage in the long run. These acts will dilute some of the value creation activities that companies are pursuing and in the long run these acts will prove detrimental to the value creation objectives of companies. Further the acts of crime and fraud increase the risk scenario in which companies operate and hence the chances of losing money increase manifold.

Companies should address the issue of fraud and crime in a tangible manner and approach to tackle them on a heads on basis. To address the issues companies should firstly recognize fraud when they first see and encounter it. For this companies will require robust fraud risk assessment framework in place. The approach should not be reactive and defensive rather the approach should be pro-active and aggressive. The next step is to take a dynamic approach. Chief executives and senior management should be made accountable. Fraud detection should move up to the first line of defense and Internal Auditor should be made responsible for independent assurance. Thirdly companies should make use of harness the power of technology. Lastly and perhaps most importantly companies should invest in people and not just invest in machines. Fraud and crime, as discussed earlier, is a complex mix of conditions and human motivations. Investments in people will help a company be prepared for the human motivations that can lead to a crime or a fraud in the future. When motivations are identified beforehand then better controls will be put in place by companies, thus significantly reducing the chances of fraud and crime.