Investigation Of Financial Fraud And Corruption - Essay On Steps And Legal Obligations.

You are a Head of Financial Crime for Large. Well established international firm, operating in a sector of jurisdiction of your choice. You receive notification through the externally managed whistle blowing advise line that one of the junior accounts clerks has identified some discrepancies with regards to payments made to specific sales people within the company, including the sales director for the firm.

Initial investigation indicates that sales director has been falsifying sales using dormant accounts, with some of these sales being processed using the log in details belonging to few of his sales team managers.  

You are aware that the bonus scheme for the second half of the year has been heavily weighted for certain products in order to incentivize staff to improve sales of these products.

1. Indicate what actions you will need to take, in order to carry out investigation in the short, medium and long term.
   
   
2. Produce a memorandum to the Risk Committee that highlights the key issues from the scenario and provide some recommendations that the firm should consider in order to reduce the likelihood of a repeat incident

Select a jurisdiction of your choice.

1. Outline the key legal and regulatory obligation on regulated firms within the jurisdiction of designated, to counter- bribery and corruption.
   
   
2. Evaluate the effectiveness of the legal and regulatory responses (obligations) to a bribery and corruption, linked to the financial Services Sector. Use examples to support your analysis. 

Actions for investigation of short-term

Part A

One of the major risk faced by companies in Oman is related to dormant accounts as these accounts get easily unnoticed because of lack of financial activity and communication. This fraud is done by insider which enhances the risks of non-detection.

Actions for investigation of short-term

Close monitoring of financial transaction: Firstly director suspected will be suspended for the time investigation is completed, and close monitoring of financial transactions will be done by independent auditors. This step will be taken as individual or individuals engaged in fraudulent activities will try to cover up and at that culprit involved can be detected.

Confirmation from external parties: By considering sales transactions external confirmation will be taken from the other parties involved to ensure the reliability of transaction. This transaction can be selected on the basis of stratified random sampling to cover all transaction categories.

Actions for investigation of long-term

Surprise audit: For long-term; surprise audit will be undertaken to assess financial transactions to prevent fraudulent activities. This audit will be conducted by the independent person so they will not be partial towards directors.

Use of accounting software: Transaction will be recorded on software and will be assessed by auditor team on a regular basis to detect fraud issues.

To

Risk Committee

XYZ company

Dear Committee

Your team is requested to consider following identified issues to resolve the same by the implementation of cited recommendations:

Issue identified

• Manipulation of sales accounts
• Unethical practices of directors
• Accessing confidential information by managerial authorities

• Monitoring employees: It is essential for a business to know their employees as fraud committers regularly show behavioural personas which can depict their objective to commit deception. Further; business can recruit their loyal ones in each team that can report and reveal their true intentions.
• Effective internal controls:Internal controls can be defined as strategies and program implemented by business for safeguarding company’s assets, deterring and detecting fraud and assurance of the integrity of developed accounting records. In this aspect; business can take the step of segregation of allocated duties as a component of their internal control strategy as it will make a reduction in the risk of fraud from occurring. The act of classifying duties splits the recordkeeping, its authorization and reviewing functions in the accounting process which will enhance the prospect of detection of risk. Further; documentation of each receipt related to sales and bank deposit should be done and overviewed in a timely manner to maintain proper records. In addition to this; business should also monitor and revised internal control strategies on a timely basis.
• Hire experts:Business should hire one or more of the following experts:
• Certified Fraud Examiners (CFE),
• Certified Public Accountants (CPA) and
• Certified in Financial Forensics (CFF) 

           These professionals will provide various services start from complete internal control audits and forensic analysis to other required consultations.  

• Evaluation of financial statements by the independent auditor: This will deter employees from providing incorrect financial statements.

Head of financial crime

Name            _ _ _ _ _ _ _ _ _

Signature:        _ _ _ _ _ _ _ _ _

Date:             4^th December 2017.

Part A

Legal and regulatory obligation to counter- bribery and corruption4

There are different types of the legislation that have been created by the Omani government against bribery and corruption. All the government officials are subject to law Royal Decree No. 112 of 2011 which prohibits, accepting; giving any kind of bribe that is against the legislation (Alalawico.com, 2017). If anyone is found doing this, then strict actions are taken in which the person is not only terminated or suspended from the work but is also held responsible for serving in prison with heavy penalties (Hough, 2013). Government officials are also prohibited from using the public funds for the personal uses, and if found then strict actions are taken.  Omani Penal Code Royal Decree 7/1974 has also been created to fight against the corruption covering unethical and corrupt practices in the public sector. Other than that the law also has some restrictions towards the embezzlements of the state or the public funds that are being entrusted to the government official. For the private sector employees and the companies also same rules apply and the defaulters are either sent to prison or levied with heavy penalties (Hansen, 2012).

Actions for investigation of long-term

Omani law directly criminalizes abuse of office, passive and also the active bribery. All the officials are subject financial disclosure laws, whenever required by the government auditors. Non-compliance with these laws can result in heavy fines (Export.gov, 2017). However, despite all these laws, there are various loopholes which are very important to be taken care of as it is hurting the economy of the country (Choi & Davis, 2014). It is very important for the government to take the strict actions to make the laws better and effective.

Effectiveness of the legal and regulatory responses to bribery and corruption, linked to the Financial Services Sector

The financial service sector in Oman is not only scattered but is not regulated as it is done in any other countries. Oman is ranked on the 59^th number as a country in terms of the effectiveness of the anti-corruption laws (Karpoff, Lee & Martin, 2012). Various rules have been set for the different financial institutions so that they can be prevented from affecting the laws of the country. In respect of this, regular auditing is done, and proper information is provided to both private as well as to public sector companies so that they can be prevented from committing crimes. The effectiveness of these laws is slowly increasing in this country as the government is getting day by day. All the companies and individuals are very well aware of the consequences if they are caught so it can be said that the effectiveness is increased in the past few years (Wouters, Ryngaert & Cloots, 2013).

The financial sector in the country is regularly updated with new laws and restrictions which prevent the companies from finding out the loopholes in the existing ones. It has really helped the government to stabilize the sector a lot (Oman Law Blog, 2017). The responses of the companies in this sector are also very positive, and they are trying to follow all the rules effectively. However, there is still a lot of scope for improvement because there are lots of corruption among the officials which hinders the policies and laws of the government (Arafa, 2012). It is very important for the country to make strict laws and rules that can be followed by these financial institutions so that the economy of the country can be developed.

References

Alalawico.com. 2017. [Online] Available at: https://www.alalawico.com/pdf/presentations/Anti-Corruption%20&%20Anti-Bribery%20(27%20August%202015).pdf [Accessed 5 Dec. 2017].

Arafa, M. A. 2012. Corruption and Bribery in Islamic Law: Are Islamic Ideals Being Met in Practice?.

Choi, S. J., & Davis, K. E. 2014. Foreign Affairs and Enforcement of the Foreign Corrupt Practices Act. Journal of Empirical Legal Studies, 11(3), 409-445.

Export.gov. 2017. Oman - 9-Corruption | export.gov. [Online] Available at: https://www.export.gov/article?id=Oman-Corruption [Accessed 5 Dec. 2017].

Hansen, H. K. 2012. The power of performance indices in the global politics of anti-corruption. Journal of International Relations and Development, 15(4), 506-531.

Hough, D. 2013. Corruption, anti-corruption and governance. Springer.

Karpoff, J. M., Lee, D. S., & Martin, G. S. 2012. The impact of anti-bribery enforcement actions on targeted firms. Unpublished working paper. University of Washington.

Oman Law Blog. 2017. Anti-Bribery Laws: Restrictions on Providing or Receiving Gifts. [Online] Available at: https://omanlawblog.curtis.com/2013/10/anti-bribery-laws-restrictions-on.html [Accessed 5 Dec. 2017].

Wouters, J., Ryngaert, C., & Cloots, A. S. 2013. The international legal framework against corruption: Achievements and challenges. Melb. J. Int'l L., 14, 205.