FROM LEFT: Wissam Mehanna, Country Internal Audit Head at the Arab Bank-Lebanon; Abbas Bou Diab, Executive Manager and Head of Compliance and AML at BLOM Bank Qatar; Zainab Wahab, Deputy Director of Training, Union of Arab Banks; and Dr. Salah Abbas, Trai
About 49 percent of the reported occupational fraud cases in the Middle East and North Africa (Mena) region involved corruption such as bribery or conflicts of interest, a finance expert has said here yesterday at the opening of the Combating Fraud & Forgery In Banking Industry Workshop organized by the Qatar Central Bank in collaboration with the Union of Arab Banks.
By definition, occupational fraud occurs when a person uses one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organisation’s resources or assets. It is a fraud committed against the organization by its own officers, directors, or employees.
Talking to The Peninsula on the sidelines of the event, Wissam Mehanna, Country Internal Audit Head at the Arab Bank-Lebanon, who was also the main speaker at the event, said corruption was the most common form of occupational fraud scheme found in the region. This was followed by cash-on-hand misappropriations (23 percent of cases) wherein employees steal cash from the companies’ premises, and noncash misappropriations (19 percent of cases) wherein employees steal or misuse noncash assets or confidential customer information.
Mehanna, an active member of the World Union of Arab Bankers, was citing the findings of the Report to the Nations 2018 Global Study on Occupational Fraud & Abuse which was conducted by the world’s largest anti-fraud organization, the Association of Certified Fraud Examiners (ACFE), wherein he is a founding member for the Lebanon chapter.
According to Mehanna, the reported fraud schemes in the Mena region resulted to a median loss of $200,000 to the victim organizations. The report also said that in 23 percent of the Mena cases wherein the owner or executive was the perpetrator, the company suffered a median loss of $1,25m, while in 33 percent of the cases where the manager was found to be the perpetrator, the company suffered a median loss of $175,000.
In 41 percent of the cases where the perpetrator is an ordinary employee, the company suffered a median loss of $105,000.
Mehanna said that there was a strong correlation between the fraud perpetrator’s level of authority and the size of the fraud. High-level fraudsters tend to have greater access to an organisation’s assets than low-level personnel. They may also have greater technical ability to commit and conceal fraud, and they might be able to use their authority to override or conceal their crimes in ways that low-level employees cannot, he added.
According to Mehanna, tips (38 percent of cases) were the leading detection methods for fraudulent activities in the region, which was followed by internal audit (20 percent of cases), and management review (16 percent of cases). The leading anti-fraud controls found among organizations here were external audit of financial statements (93 percent of cases), internal audit department (85 percent of cases), and management certification of financial statements (81 percent of cases).
Mehanna also said, “It’s not easy to detect corruption. But in the Mena region, it’s detected mainly by tips such as use of hotlines, secret emails, or whistleblowers. Whistleblowing policy should be available in every organization. However, whistleblowing policy should have certain mandatory conditions. First is the protection of the person who actually sent the tip. Also, I always say risk management fraud governance has to do with the whole organization. The culture of ethical behavior and code of conduct starts with the board of directors of an organization and moves down to senior management, middle level management, and to the employees. Internal auditors also have a role in it. But I believe that fraud prevention is the job of the whole organization”.
Earlier in his presentation, Mehanna also said that globally, the total loss caused by the fraud cases in the ACFE study exceeded $7.1bn, a tiny fraction if compared to the unreported frauds committed against organizations during that time.
The ACFE study analysed over 2,600 cases of occupational fraud that were investigated by the Certified Fraud Examiners in 23 major industries across 125 countries.
Globally, the greatest number of fraud cases occurred in the banking and financial services (338 investigated cases), followed by the manufacturing (201 investigated cases), and government and public administration sectors (184 investigated cases), added Mehanna.
He also said majority of the fraudsters in the study were males (69 percent were males and 31 percent were females). He added that some of the behavioural red flags seen among the perpetrators were living beyond means (41 percent of cases), financial difficulties (29 percent of cases), and unusually close association with vendor/customer (20 percent of cases).
