Financial crime prevention needs a comprehensive approach

13 May 2020 3 min. read
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As incidences of corruption and fraud intensify under Covid-19 conditions, FTI Consulting financial crime expert Mark Pulvirenti addresses the status of detection and prevention mechanisms across Australia.

Pulvirenti is a Senior Managing Director at FTI Consulting with nearly three decades of experience in managing financial crime, which includes bribery, corruption, money laundering, fraud, asset misappropriation and a number of other criminal activity. According to the expert, Australia’s businesses need to ramp up their investments in fraud prevention.

Big Four accounting and advisory firm Deloitte recently reported that the destabilisation of mechanisms across the business environment due to Covid-19 has led to an increase in incidence of financial crime across Australia. Part of this is down to malicious attacks, while other incidents can be put down to security lapses as employees adjust to working from home.

As a result, training is one area where many businesses are investing in. Other businesses establish basic prevention mechanisms. The extent of these measures depends on the size and scope of each business, although Pulvirenti observes that most lack a comprehensive set of preventive measures.

Mark Pulvirenti, Senior Managing Director at FTI Consulting

“Companies typically have certain anti-fraud and corruption procedures in place, for example they have a code of conduct, may engage in training employees and have a whistleblower hotline. However, these procedures are not typically tailored to identified fraud and corruption risks, they lack appropriate leadership and resources and they are often inadequate,” he said in discussion with Financier Worldwide. 

Prevention and detection mechanisms need to be comprehensive, stretching across all operations of an organisation. This includes employee behaviour, communications, as well as third-party interactions. An assessment of risks – something that has become essential under current circumstances – is crucial to developing a comprehensive prevention system, highlighted Pulvirenti.

“Effective fraud and corruption management needs to be risk-based. An organisation needs to understand what its risks are and where those risks lie in order to deploy its limited resources to higher risk areas. Having a code of conduct and staff training alone does not constitute an effective risk management programme,” he said.

That being said, Pulvirenti points out that the response to an incident is equally important. Investigating an incident requires planning and input from a variety of areas, including legal, internal audit, human resources and IT. While identifying the suspected perpetrators, businesses need to evaluate the legal, financial and operational ramifications of an incident.