Beating corporate fraud

Forensic accountant Steve Giles’ declaration that fraud in the United Kingdom cost in excess of 17 times more than that of burglary, and that on an average 65 to 70 percent of fraud committed in a company involved directors and senior managers, calls for a measure of domestic soul searching. It would be foolhardy to dismiss Giles’ disturbing revelation, particularly where he has referred to the volume of 2003 corporate fraud in the UK, as being strictly a United Kingdom phenomenon, one needing to be addressed by the UK authorities and of no immediate concern to nationals of this country. Unfortunately, because of millions of dollars worth of cross border investments in the United Kingdom and the United States made by Trinidad and Tobago investors the level of company fraud in the UK should be viewed as affecting them as well, and is a cause for concern. We should not delude ourselves that Trinidad and Tobago is insulated against corporate fraud  and instead ask ourselves to what extent it is being practised in this country.  

As a public service the Central Bank of Trinidad and Tobago should advise as to the action being taken to minimise the risk.  Admittedly, corporate fraud is all too often difficult to detect, to pin down. There have been reports that when it is discovered in some houses in the financial services sector, the persons involved while they may be dismissed are too often not prosecuted, perhaps through fear of triggering a diminishing of confidence in the financial institution concerned. It is perhaps reasonable to assume that what obtains in the United Kingdom, that of fraud costing 17 times more than that of burglary applies to Trinidad and Tobago if even to a lesser degree.  Why then is the burglar more likely to be exposed and condemned than the director or senior manager, who may have fleeced his company of millions? All should be punished and severely. Meanwhile, there is the perception that money laundering is now part of the financial landscape. In turn, the growth of the illegal drug import and transshipment trade has added to the perception that this has been a major contributory factor to the incidence of money laundering.

But if as Giles has stated with respect to corporate fraud, a large percentage of company fraud is committed by directors and senior managers — in the United Kingdom alone it was in excess of  some TT$140 billion last year — it is inconceivable that should corporate fraud be a troubling problem in this country that the dirty money being gained is not being laundered. The question is that with an anti-money laundering Act in place how is the investment of the ill-gotten gains being achieved without this being somehow detected by not only the Police Service but by the Inland Revenue Department as well? For a crackdown on money laundering and/or corporate fraud, however, to be effective there is the clear need for a strengthening of the Inland Revenue Department.  Specially trained Inland Revenue officers could then call in persons conspicuously living somewhat beyond incomes suggested by their tax returns and require that they explain the marked difference between filed incomes and lifestyles.