South Africans Have a Responsibility to Fight White-Collar Crime

“To win the fight against fraud and corruption in South Africa, each individual and organisation needs to play their part. With the tools at our disposal, it is our responsibility to ensure the country does not descend to levels experienced elsewhere in Africa,” says Deloitte partner and national anti-corruption leader in Risk Advisory Forensics, Marius Alberts.

CAPE TOWN, 11 December 2012 - Despite the World Bank Enterprise Survey identifying corruption as one of the top 10 constraints in the South African business environment, South Africa still outperforms other sub-Saharan countries in the annual Transparency International Corruption Perceptions Index. Although corruption is a problem, in reality, South Africa is one of the least-corrupt African countries.

“Being the lesser of two evils is not an endorsement in any sense. Fraud and corruption of any kind is a stain on society and we should strive to eradicate this phenomenon altogether. South African legislation that addresses white-collar crime is indeed powerful and successfully contributes to the fight against fraud and corruption but needs to be complemented with a robust combat plan to actively detect and eradicate the root causes of these crimes. We believe that a balanced approach needs to be taken to increasingly combat the problem, as the legislation itself will never be enough,” says Alberts.

Alberts says that we must speak out to condemn corrupt and illegal behaviour. There are a number of channels available to employees and the public to take action if they suspect or know of fraud and corruption taking place, including confidential national, regional and institutional reporting and hotlines that guarantee anonymity. These are proving to be very successful in identifying potential threats to an organisation and are considered the greatest asset in the fight against fraud and corruption as it motivates and encourages people to take decisive action.

“Deloitte proudly promotes the United Nations (UN) Against Corruption Today (ACT) campaign, which calls every society, sector and individual to say no to corruption. We agree that every individual has the opportunity and responsibility to fight this crime. We can all strengthen our democracy, promote justice, support education, bring prosperity, safeguard development and improve public health if we take an active role in fighting fraud and corruption,” he says.

South African legislation to address white-collar crime is powerful. Implementation of this legislation is, however, not as successful as it could be in curbing corruption. To eradicate corruption in South Africa, both macro and micro actions are needed. The Institute for Accountability in Southern Africa, in its Explanatory and Supplementary Notes to the Directorate of National Integrity Bill says that to leverage the anticorruption legislation to be more effective, South Africa has to address the need for:

• Better education about corruption and strategies for fighting it
• Using existing resources more effectively and efficiently
• Coordination of actions within the South African anti-corruption landscape.

It is estimated that white-collar crime costs South Africa billions of rands annually. Since 1994, an estimated R21.4 billion has likely been lost due to public-sector corruption alone. Corruption in South Africa is not characterised by isolated incidents of corruption. It is systemic in nature. This means that it is a complex phenomenon, and identifying its extent is a multi-dimensional challenge.

The civil society organisation Transparency International annually publishes its Corruption Perceptions Index, in which countries are ranked according to their perceived level of public sector corruption. Since 2007, South Africa’s position on this Index has moved down 26 places. Despite this drastic decline, it is still doing much better than most of its African counterparts. In the latest 2012 Index, South Africa ranked 69th out of 176 international countries, a drop of four places from last year.

“Although South Africa should not be classified as the white‑collar capital of Africa, the prevalence of corruption is still a risk factor to companies, which has the potential to bring about very serious negative economic and social consequences,” says Alberts.

Alberts recommends that organisations look at the following issues to deal effectively with their fight against white collar crime:

• Lead by example: Setting the tone at the top is very important – top management should have zero tolerance, must lead by example by adhering to the policies and procedures and be accountable for their actions.

• Positive working environment: Management should create a positive working environment that encourages employees to follow policies, procedures and act in the best interests of business.

• Policy manuals and code of conduct: Organisations should have well documented and easily accessible policy and procedure manuals, an accepted laid down code of conduct, organisational charts and well-established internal controls at all levels.

• Segregation of duties:  Segregation of duties and authorisation controls should be well defined, clearly identifying people and their responsibilities at each step of a transaction.

• Whistle blowing policy:  Organisations should make use of a whistle blower policy. Employees should be able to communicate any concerns anonymously and, it is important to highlight the fact that there will be no negative consequences when “blowing the whistle”.  Management must also demonstrate that it actively follows up all issues raised via the whistleblowing mechanism.

• Monitor employee behaviour: Management should monitor employee behaviour to identify reasons for employees working beyond office hours, for not taking leave, appearing to be living beyond their means, etc.  A change in employee behaviour is an indicator of possible fraud.

• Comprehensive recruitment policy: It is important that past employment details be validated by employers and that they seek explanations for any employment gaps. Part of this process should include the verification of all qualification documents and that reference checks are done.

• Monitoring and supervision: Strong supervision of all activities is vital and, a deterrent. A lack of oversight by line managers or senior managers on deviations from existing process/controls has been identified as one of the major reasons for increased fraud incidents.

• Investigate all incidents: Management should investigate each event to ascertain the facts, to enable them to make informed decisions and reduce losses.

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