Financial Crime World

Malaysia’s Persistent Battle Against Financial Crimes: PwC Survey Reveals Concerns and Calls for Action

According to the results of PwC’s Global Economic Crime and Fraud Survey 2020, Malaysian organizations continue to battle high levels of fraud. With 43% of respondents reporting incidents, the figure remains unchanged since 2018 while Southeast Asian nations as a whole saw a decrease with only 39% of companies reporting fraud.

Disruptive Economic Crimes in Malaysia

The survey, which polled over 4,000 respondents including Malaysia, revealed disconcerting trends within the local business landscape. Here’s a breakdown of the most common categories of economic crimes reported in Malaysia:

  1. Customer fraud: Affecting 20% of Malaysian organizations
  2. Bribery and corruption: Affecting 18% of Malaysian organizations
  3. Cybercrime: Affecting 16% of Malaysian organizations
  4. Asset misappropriation: Affecting 16% of Malaysian organizations

These four categories account for a staggering 70% of all reported economic crimes in the country.

Strengthening Internal Controls and Ethical Behavior

Sridharan (Sri) Nair, Managing Partner at PwC Malaysia, commented on the serious risks posed by fraud and corruption to businesses and the trust they maintain. Despite the higher number of fraud cases being detected, the survey results showed a decline in the role of whistleblowing hotlines and tip-offs, with only 14% of crimes discovered in this manner.

Nair urged organizations to prioritize the cultivation of a strong organizational culture focused on ethical behavior:

  1. Establish a speak-up culture: When an issue is raised, leaders should establish open communication with the whistleblower and investigate matters fairly and impartially.
  2. Foster trust and security: Ensure employees feel confident in reporting fraud and corruption, and that their reports will be treated seriously.

Bribery and Corruption

Despite progress, bribery and corruption remain prevalent, with 35% of organizations encountering such incidents. However, a larger percentage of companies had been approached to pay bribes, rising from 11% in 2018 to 25% in 2020.

Alex Tan, Partner and Forensic Services & Risk Consulting Leader at PwC Consulting Associates (M) Sdn Bhd, shared insights on the issue:

  1. Prepare for enforcement: The impending enforcement of Section 17A of the MACC Act 2009 on June 1, 2020, introduces personal liability for Board members and management in cases of corporate corruption, spurring action among affected organizations.

Technology-driven Economic Crimes

Technology-driven economic crimes, including cybercrime, have seen a concerning increase. Malaysian companies have responded with dedicated programs to counter cybercrime, while 59% either lack knowledge about or have no plans to employ Artificial Intelligence (AI) as part of their anti-fraud strategies.

Tan added:

  1. Adapt to new threats: As the landscape for economic crimes evolves, organizations must invest in the right technologies and upskill their workforce to be proactive and maintain a strong corporate culture that espouses zero tolerance for corrupt and unethical behavior.

Conclusion

The survey findings reiterate the importance of robust internal controls, strong organizational culture, and an increased focus on technology to combat financial crimes in Malaysia. Stay informed about the latest trends and regulatory developments to protect your business from the negative consequences of economic crimes.