PROFILE

KAMUDONI NYASULU

LAW CONSULTANTS Fraud and Corruption Examination * Rule of Law and Security Reforms * Litigation

DISFUNCTIONAL ANTI FRAUD

COMPLIANCE

Plot No. 584/585 Area 10 Tsoka Road P. O. Boc 1848 Lilongwe Phone +265994368423/+265881424891 kamudoni@hotmail.com

Fraud in Our Laws

Any false representation made by words, writing

or conduct which the maker knows to be false

Made fraudulently or intended to defraud

To induce public officer to act contrary to his duty

Resulting in loss to the victim; or

The maker achieving an ADVANTAGE (gain)

The maker knows has no right to the Advantage

Advantage

Benefit, service, enjoyment or gratification

Payment, in cash or in kind, rebate, deduction, concession or loan

Condition or circumstance that puts one person

or class of persons in a favourable position over another including a “gift”

Public officers receiving property to show favour

Only exception is “entertainment”

Gift

Corruption

Offering, giving, receiving, obtaining or soliciting of

any advantage to influence the action of any person

in the discharge of his or her duty

Influence peddling

Demanding or receiving by a person in office of a

fee or other payment for services, work, supplies

that should be gratuitous

Challenge: Citizens

Not willing to

Cooperate:

Patriot: Citizens

cooperating

Types of Fraud

Corruption

Generally bribes offered, given, solicited, and received

Asset Appropriation: An employee or in collusion with an employee a perpetrator steals or misuses an organisation’s resources; e.g.

Use of organisation’s fuel to attend a Heritage Society celebration

Financial statement fraud: involves the intentional misstatement or omission of material information from the organization’s financial statements; “cooking the books”

1.

Asset

Appropriation

Statement Fraud

Bribes

Examples of Fraud

Embezzlement

Forgery or alteration of documents

Fraudulent financial reporting

Misappropriation or misuse of Organisation’s resources

(e.g., funds, supplies, equipment, facilities, services,

inventory or other assets)

Authorization or receipt of payment for goods not

received or services not performed

Authorization or receipt of unearned wages or benefits

Conflict of interest, ethics violations

Perpetrators

Major frauds:

Politicians, Senior Management, Syndicates, Organisations, Employees, Clients and Suppliers

Pedestrian frauds:

Employees, Clients and Suppliers

Generally employees commit fraud because there is

“Opportunity”, “Pressure”, and they “Rationalize” their conduct

We need to break the triangle: First step is to

remove or minimize “Opportunity”

Factors that Drive Fraud

Opportunity

No or weak: Supervision and review

Management approval

System or Internal controls

Pressure (or motive)

Personal financial problems; unforeseen expenses

Personal vices/addictions such as gambling, luxury lifestyle

Rationalization Individual develops justification for the

fraudulent activity e.g.

“Everybody is doing it: we always do it” – Members of NCIC

Compliance: Remove or Minimise

Opportunity

REQUIREMENTS:

Citizen, Organisations, Staff Aware of anti-fraud

framework (not fraud)

RED FLAGS:

Organisations set anti-fraud systems and procedures

Organisations, Staff Able to recognise indicators of

fraud

Organisations, Staff compliance with systems and

procedures

Regularly Examine the systems and procedures

Detection and Resolution

Sector Wide Joint Programming

Justice Chain Collaborative Planning

Justice Chain Coordinated implementation

Organisations’ structured record keeping practices

DAUNTING CHALLENGE

Levels of Fraud Control

PARLIAMENT

PUBLIC APPOINTMENTS

COMMITTEE

PUBLIC ACCOUNTS

COMMITTEE

LEGAL AFFAIRS

COMMITTEE

BUDGET AND FINANCE

COMMITTEE

JUDICIARY

MINISTER OF FINANCE CABINET MINISTER OF JUSTICE

RESERVE BANK OF MALAWI

TREASURY

DIRECTOR PROCUREMENT

DIRECTOR PUBLIC

PROSECUTIONS

ANTI-CORRUPTION BUREAU

MALAWI POLICE SERVICE

FIU, ACCGEN, AUDGEN, MRA

PRINCIPAL SECREATARIES

PROFESSIONAL BODIES

ACB, MPS (Fiscal) MALAWI LAW

SOCIETY

MALAWI ACCOUNTANTS

MINISTRIES, DEPARTMENTS, AGENCIES, STATUTORY BODIES, FINANCIAL

INSTITUTIONS, CIVIL SOCIETY ORGANISATIONS *** CITIZENS

Crime

Legislation Competent

Authority

Supervisory

Authority

Subject

Activity

Legal Education and Legal Practitioners

Council of Legal Education

Legal Education

Chief Justice Minister Admission to practice law

High Court

Chief Justice

Attorney General

Malawi Law Society

Discipline

Practice and Conduct

Courts and Judicature Judicial Service Commission Chief Justice Administration

Practice

Discipline

Penal Laws

(+CP&EC)

Director of Public Prosecutions (DPP) Legal Affairs Committee

Attorney General

Chief Justice

Practice

Malawi Police Service (MPS)

DPP

Courts

Practice

Police Service Commission Administration

Conduct

Fraud

Fraud

Director of Public Prosecutions

Financial Intelligence Unit (FIU)

Attorney General

Practice

Reserve Bank of Malawi (RBM)

FIU

Minister of Finance

Administration

Practice

Anti-Corruption Bureau

DPP, FIU

Legal Affairs Committee

Practice

Minister, President Administration

Malawi Police Service

(Fiscal and Fraud)

DPP

Courts

FIU

Practice

Auditor General

Secretary to Treasury

Minister of Finance

Public Accounts Committee

Practice

Malawi Revenue Authority (MRA)

DPP, ACB, MPS

FIU

Practice

Secretary to Treasury

Minister of Finance

Practice

Conduct

Administration

Financial Services

Financial Services and

Financial Institutions

Reserve Bank of

Malawi

Minister of Finance

Board of Directors

FIU, DPP, MRA, ACB

MPS Fiscal, Bankers Association

Insurance Institute

Other professional societies

Administration

Conduct

Practice

Conduct

Director of Public

Procurement (DoPP)

Internal Procurement Committees Administration

Practice

Cabinet

Minister of Finance

Public Private Partnership Commission Administration

Conduct

Practice

REGISTRARS Administrator General Practice

Registrar General Practice

Land Registrar Practice

Commissioner for Mines and Minerals

Commissioner for Petroleum Exploration and Production

Administration

Practice

Conduct Director of Forestry

Malawi Legal Council Malawi Law Society

Practice

Conduct

Malawi Accountants

Board

Society of Accountants in Malawi (SOCAM)

Professional Societies

National Construction

Industry Council

Master Builders’ Association

Malawian Building Contractors and Allied Trades Association, Board of Architects

and Quantity Surveyors

Board of Engineers; Association of Consulting Engineers; Board of Land Economy

Surveyors, Valuers, Estate Agents and Auctioneers; Chamber of Commerce and

Industry

SUGGESTIONS

Sectors of Recent

Fraud

Procurement and Finance

Financial Services

Land, Forestry and Local

Government

Land, Mining (Petroleum) and Local

Government

Public Private Partnerships

(Privatization)

Penal and Financial Laws

Money Laundering

Corrupt Practices

Financial Services

Public Procurement

Taxation

Consumer Protection

Mining and Petroleum

Bureau of Standards

Possible Steps for Government

Competent and Supervisory Authorities to:

Review their obligations on compliance

Jointly review current performance plans

Plan coordinated implementation

Possible Steps for Others

Professional Bodies, Boards, Councils to:

Review outstanding obligations on compliance

Financial Institutions review compliance regime

Recruit, where required, compliance officers

Create systems and procedures for compliance

Train staff to understand anti-fraud requirements

Train staff on how to recognize indicators of fraud

A Sample of Requirements for

Compliance

Ascertain purpose of transaction large amounts; ascertain origin and ultimate destination

Maintain records of all transactions and correspondence for minimum seven years

Records must be kept in a manner and form that would

make them usable by the Director of Public Prosecutions (DPP) or the FIU

Appoint Compliance Officer

Train staff on the compliance requirements

Train staff on the procedures and systems

Train staff to recognize suspicious transactions (red flags)

A Sample of Indicators (Red Flags)

Out of common 42 indicators the following were present in “Capital Hill

Cashgate”

Business cannot be found on the internet

Client wants to take short cuts

Back to back property transactions

Client uses multiple bank accounts

Parties connected without an apparent business

reason

Requests for payments to third parties

Attention

THIS IS THE LAW

YOU OR YOUR COMPANY

COULD END UP IN COURT !!!