Corporate fraudulent schemes in Malta : an analysis

Abstract

Purpose: This study seeks to identify specific past local corporate fraudulent schemes and analyse the causes behind them. It then seeks to analyse the current corporate prevention, detection and response to fraud occurrences. Design: This study was initiated through an analysis of the local media and past court judgements. Semi-structured interviews with selected Maltese PLCs, regulators and experts in the field were conducted to analyse the local corporate fraud risk management process. Findings: This study established that the most commonly perpetrated scheme locally is Asset Misappropriation, followed by Corruption and Financial Statement Fraud. Local fraud schemes were generally perpetrated by employees; however, in some instances senior management was involved. The reason behind their occurrence was generally lack of, or weakness in, controls. Results also indicated other factors such as the tone at the top, lack of segregation of duties and lack of management oversight. This study has also established that most of the local organisations are aware of the prevention techniques to combat fraud; however, some of the organisations are not effective in implementing them. Fraud reporting channels should be enhanced to encourage divulging by employees. However, organisations must ultimately ensure that an effective response to fraud is made whenever a suspicion is brought to light. This includes conducting preliminary investigations and taking corrective action against the perpetrator. Conclusion: This study concludes that although some fraud risk management techniques are in place, they need to be catered to the particular organisation with specific attention given to the risk areas of the firm. Prevention is never too much and everything should be done by organisations to prevent fraud occurrences. Value: The topic of fraud has been of interest to society as a whole. Locally, this is the first study to identify a history of local corporate fraudulent schemes and identify the causes behind their occurrence. Such study will help entrepreneurs and those in charge with governance within a firm, to deal with a fraud situation.