The Malaysian Bar's International Malaysia Law Conference ("IMLC") 2018 is taking place from 14 to 17 Aug 2018 at The Royale Chulan Kuala Lumpur.
By Louis Liaw, Member of the Bar
In Malaysia, financial fraud has taken centre stage in recent years, since the exposition of 1MDB. It is against this context that this session, titled “Investigating International Financial Fraud”, was discussed. Panellists, namely Helen Briant from Trowers & Hamlins LLP, Birmingham, UK; Colum Bancroft, Managing Director, AlixPartners, Hong Kong; Andrew Chiew, Messrs Lee Hishammuddin Allen & Gledhill;and moderator Nick Edmondes, Trowers & Hamlins LLP, Kuala Lumpur, share their experiences.
The session started with Colum providing a definition of fraud, which he said was when trickery or deceit is used for financial gain or for an unfair advantage. He proceeded to explain that the main components to a fraud are “pressure” (to commit that fraud), “opportunity’ (to commit that fraud), and “rationalisation” (of the said fraud).
Helen then proceeded to state that safeguards and strict policies had to be put in place by corporates and financial institutions to address these components. She stressed that institutions should in particular pay attention to the use of technology, the storage of data, the recruitment of personnel, the policies to protect whistleblowing, as well as the corporate culture itself.
In Malaysia, financial fraud has taken centre stage in recent years, since the exposition of 1MDB. It is against this context that this session, titled “Investigating International Financial Fraud”, was discussed. Panellists, namely Helen Briant from Trowers & Hamlins LLP, Birmingham, UK; Colum Bancroft, Managing Director, AlixPartners, Hong Kong; Andrew Chiew, Messrs Lee Hishammuddin Allen & Gledhill;and moderator Nick Edmondes, Trowers & Hamlins LLP, Kuala Lumpur, share their experiences.
The session started with Colum providing a definition of fraud, which he said was when trickery or deceit is used for financial gain or for an unfair advantage. He proceeded to explain that the main components to a fraud are “pressure” (to commit that fraud), “opportunity’ (to commit that fraud), and “rationalisation” (of the said fraud).
Helen then proceeded to state that safeguards and strict policies had to be put in place by corporates and financial institutions to address these components. She stressed that institutions should in particular pay attention to the use of technology, the storage of data, the recruitment of personnel, the policies to protect whistleblowing, as well as the corporate culture itself.
Andrew agreed that when the components mentioned were targeted and addressed with policies and strict rules, prevention of fraud could be improved, which would be much more effective than seeking to recover lost money after a fraud has occurred. Colum stressed that it is most crucial for corporations and institutions to conduct risk assessments early on so as to identify the potential areas of fraud and the potential scale of such fraud, after which, policies and guidelines had to be formulated to close the gaps. All the panellists agreed that this is important, because when a fraud happens, time is of the essence and action had to be taken swiftly. Therefore there had to be a crisis management plan in place, instead of addressing the fraud with a knee–jerk reaction.
The panellists were of the same mind that injunctions, such as freezing orders, had to be obtained at the soonest to have a greater chance of recovering any money lost due to fraud. The panellists stated that it would be particularly difficult for such recovery once the money was transferred across different banks, across borders, and especially when monies were transferred to countries that are uncooperative in assisting with fraud investigations.
Additionally, the panellists agreed that solely relying on the internal compliance team of an institution or corporation was often insufficient, and instead, external advice should be sought either in policy formulation or litigation.
The panellists finally concluded that other than legislation and corporate internal rulings, culture in the corporate sector as well as in a society were elements needed to drive fraud prevention. Promoting a culture that encourages speaking up when something is not right, is often critical in identifying a fraud, recovering fraud money and capturing the fraudster.
The panellists were of the same mind that injunctions, such as freezing orders, had to be obtained at the soonest to have a greater chance of recovering any money lost due to fraud. The panellists stated that it would be particularly difficult for such recovery once the money was transferred across different banks, across borders, and especially when monies were transferred to countries that are uncooperative in assisting with fraud investigations.
Additionally, the panellists agreed that solely relying on the internal compliance team of an institution or corporation was often insufficient, and instead, external advice should be sought either in policy formulation or litigation.
The panellists finally concluded that other than legislation and corporate internal rulings, culture in the corporate sector as well as in a society were elements needed to drive fraud prevention. Promoting a culture that encourages speaking up when something is not right, is often critical in identifying a fraud, recovering fraud money and capturing the fraudster.
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