Winning the war against fraud, export slumps, NPAs and corruption

EY's Forensic Outlook 2018 outlines some of the key trends that could accelerate growth in technologically disruptive times

India’s growth has gone through a sea change in the last few years, becoming a powerhouse in the global economy. However, businesses have also struggled through their lion’s share of challenges such as export slumps, non-performing assets, fraud, bribery and corruption risks as well as money laundering. Collectively, these can become insuperable trenches in the prosperity of both companies and nations.

Reforms to clean up banking channels, focus on corporate governance, and dynamic enforcement action have been indicators of India’s endeavour to establish a positive environment. The future of corporate India can have a favourable outlook with companies’ energy and readiness to mobilise resources, and set up resilient anti-fraud and anti-corruption programmes.

EY’s Forensic Outlook 2018 outlines some of the key trends foreseen for India Inc. that could accelerate growth in technologically disruptive times.

• Overcoming tribulations in emerging markets: Emerging markets have been seen as the epicentre of global growth in recent times. In 2018, compliance and governance teams need to look out for behavioural or cultural changes so business is done “the right way” rather than just being profit-centric. Formulation and adoption of policies such as code of conduct and code of ethics, guidance from corporate headquarters for ethical parity across regions and zero tolerance toward errant behaviour will enhance transparency and fortify the organisation’s building blocks.

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• The digital transformation of compliance: Rapid adoption of advanced analytics, cloud and mobile have changed how businesses operate in India. Going forward, compliance teams will have to be agile in embracing technological enhancements (big data analytics, visual analytics, predictive modelling, machine learning, RPA, IoT, blockchain and cloud) to monitor operations, understand their application by building new and innovative investigative techniques to identify past issues and deter future risks. Data privacy concerns will be in the spotlight, with EU’s upcoming General Data Protection Regulation being effective from May 2018. For Indian companies, instituting Information Governance Programmes will be critical for transparency and compliance.

• Propelling chief compliance officers to the front seat: The role of chief compliance officers (CCOs) has matured considerably and become an intrinsic part of the C-suite. This year, risk and compliance challenges will become even more complex, especially in heavily regulated sectors and cross-border transactions. CCOs will have to put greater emphasis on data-driven programmes, benchmarking, measuring the programme’s success and evaluate tangible returns. Compliance should incite innovation for business growth and technology should be harnessed to enable dealing with new age digital risks related to cybercrime and ransomware.

• Clashing against bribery and corrupt forces: The last one year has seen tremendous regulatory action in the bout against bribery and corruption, with the government and regulators going full throttle through numerous initiatives. The focus to curb bribery and corruption in the public and private sector alike will continue to see an upsurge this year. Anti-bribery mechanisms such as the global ISO 37001 and Institute of Company Secretaries of India’s Corporate Anti-Bribery Code will emerge as attractive compliance tools for companies. Self-reporting may see an uptick, led by the new FCPA Corporate Enforcement Policy for US companies doing business in India.

• Strengthening governance in the financial services sector: Financial institutions have witnessed significant churn of regulatory changes such as the recent ordinance to amend the bankruptcy code, amendments to Prevention of Money Laundering Act, clampdown on shell companies, etc. The common theme seems to be improved governance, proactive monitoring, and punitive measures for non-compliance. 2018 will see increased focus on compliance activities and developing additional skills for anti-money laundering transaction monitoring is likely to rise. Investments such as building robust KYC frameworks during customer onboarding, forensic due diligence on borrowers, fraud early warning mechanisms for corporate lending, continuous transaction monitoring to identify trends and patterns, and use of technology for early detection, will be imperative for minimising risks faced by banks. Areas such as automation and robotics will also gain momentum in the financial crime space to achieve improved capabilities.

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The author is partner and head, India and Emerging Markets, fraud investigation & dispute services, EY