Skip to content

21 March, 2023

Subscribe Advertise About Us
  • My Account
  • Register
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
    • Categories

      • View All
      • Board Moves
    • BlackRock Larry Fink

      Larry Fink puts focus on finance and inflation

      Although BlackRock’s CEO does not mention the term ‘ESG’ in his annual letter, he highlights...

    • woke silicon valley bank News round-up: this week in governance

      GOP declares SVB ‘woke’; banks slow to sustainability; fund managers accused of dodging voting risks;...

    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • data decision

      How to boost decision making

      Innovative digital tools can help boards to deliver against strategic objectives, but it is the...

    • remote working

      Navigating the new world of work

      Firms need to focus on building an inclusive environment and a culture of trust to...

    • digital transformation

      Digital transformation: Get the basics right

      Board involvement at the get-go will boost the chances of a successful digital transformation for...

  • Comment
      • View all
    • uncertainty in 2023

      Being a CEO in 2023: how to navigate uncertainty

      Agility, planning in the shorter term and bravery will all stand chief executives in good...

    • A week of business moving to the centre of human rights

      A week of events signals the initiatives underway to have companies play a central role...

    • audit reform IIA Why we need audit reform right now

      There is an "urgent need" for reform to the audit landscape as well as internal...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

    • Board priorities 2023 Board priorities 2023: tact, trust and transparency

      We asked key figures what would help boards this year. The answers ranged from 'smarter...

    • Group of investors/shareholders in glass building Climate issues likely to figure prominently at next year’s AGMs

      A recent webinar heard that say-on-climate voting is expected to rise, while ESG remains a...

  • Careers
      • View all
      • Selection
      • Board Moves
    • female ceo Less than a third of FTSE 100 executives are women

      In Europe as a whole, only 7.7% of top companies’ chief executives are female, gender...

    • board size Performance declines as boards grow in size

      Researchers found that investment dropped by 2-3 percentage points as companies passed from 12 to...

    • Silicon Valley governance Silicon Valley improves its governance

      Big technology companies are stealing a march over other top corporates when it comes to...

  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Corporate & Advisory Services
    • Gender diversity barometer

      Barometer of Gender Diversity in Governing Bodies in Europe

      The 2023 Barometer of Gender Diversity in Governing Bodies in Europe looks at the 16...

    • geopolitical risk airmic

      Navigating geopolitical risk

      Today, the future feels less secure, and optimism is more restrained. Taking decisions in an...

    • Edelman Trust Barometer 2023

      2023 Edelman Trust Barometer

      The report is the result of the Edelman Trust Institute's research, which sampled more than...

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Selection
    • Board Expertise
    • finance
    • Technology

Fraud vigilance should be bolstered with the aid of technology

by Jason Piper on May 17, 2021

It’s time for accountants to place less emphasis on “gut feeling” and let digital tools guide judgments in the fight against fraud.

Electronic circuit in shape of pound symbol

Image: Anueing/Shutterstock

Traditionally, accountants have prided themselves on building client relationships based on mutual trust and an informal assessment of character. They have often satisfied themselves that a new client is reputable partly based on the recommendation of another client or their own “gut feeling” or instinct.

However, it’s not unknown for those clients who seemed decent types and who passed paper-based checks to turn out to be involved in fraud or other criminal activity. White collar criminals are harder to spot than the cartoon ones who wear stripey jumpers and carry bags of swag.

In an age of increasing complexity and with developing capabilities from digital tools, is it now time for accountants to place less emphasis on the firm handshake and steady gaze, and let technology guide character judgments?

My report Know Your Customer: Is it Time to Digitalise the First Line of Defence? surveyed 278 accountants, mainly in the UK, but with input from around the world.

The conclusion indicates that accountants need to keep up their guard when taking on new clients and make sure anti-fraud checks are rigorous enough to combat a potential increase in criminal activity driven by the economic effects of the global pandemic.

Fraud and technology checks

ACCA warns finance professionals against over-confidence in trusting their “gut feel” about clients and strongly recommends they consider if digital technology checks could help counter fraud.

However, accountants who contributed to the survey have reservations about digital tools that aim to verify identities and check the financial records of prospective new clients and believe they are too expensive and not relevant for smaller practices.

Only 49% of respondents ran any form of online checks on new clients—preferring to verify passport and other identity details using traditional paper methods. The report showed that 65% still relied on manual record-keeping of physical documents.

The availability of “off the shelf” tools for smaller businesses has been more of a challenge

The research discovered that sole trader accountancy businesses in particular regarded anti-fraud checks as “box-ticking” exercises. They preferred to go with their instinct on judging new clients’ good character and to rely on recommendations from other clients and contacts.

The largest firms have long since moved on to bespoke computer-driven processes, but the availability of “off the shelf” tools for smaller businesses has been more of a challenge.

For verification of identity, with so much business now operating on the basis of formal regulated frameworks rather than personal recommendation, is there a case to be made for many more accountants likewise to rely more on tools than intuition?

For the vast majority of every accountant’s client base the global economic downturn consequent upon the Covid-19 pandemic will have increased the risk of non-compliance one way or another. As businesses struggle to survive and cash flow is squeezed, the temptation to cut corners or take advantage of some ‘too good to be true’ opportunity will increase.

Clients who two years ago might never have considered any unlawful activity may now present a significant risk of involvement in money laundering, whether wittingly or otherwise. This increased likelihood of struggling clients taking desperate action highlights the need for annual reappraisals of whether existing processes remain proportionate and risk-based.

Over-confidence in personal perceptions

Finance professionals are always close to the flow of money and a single bad client can destroy the reputation of their practice.

ACCA’s work chimes with a recent study by the Central Council of Accounting Bodies (CCAB), which found that the majority of accountants did not believe the required economic checks were proportionate to the risk of fraud.

Smaller practices relied heavily on their perceptions and personal recommendations

Anecdotal evidence in my report indicated that the profession believes that the risk of them becoming entangled with criminal activity is low and they understand the checks are important, but do not rate them a high priority for their businesses. And while it’s heartening that the importance of these objective checks is widely recognised by accountants, does that necessarily translate into effective execution?

The study explained that smaller practices relied heavily on their perceptions and personal recommendations, so perhaps the most significant risk comes from the over-confident accountant who assumes themselves to be capable of assessments which are not realistically within their ability.

The survey concludes that some accountants could derive real benefits from online anti-fraud tools and that software producers and regulators must work together to ensure the technology is affordable and globally available.

Jason Piper is head of taxation at the Association of Chartered Certified Accountants (ACCA).

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • Paul Manduca takes the wheel as chair of Eurowag
    September 16, 2021
    Paul Manduca, Eurowag

    The former chair of Prudential and Aon UK has joined the board of the commercial road transport services provider.

  • Cutting quarterly reporting may undermine the value of companies
    November 2, 2021
    Quarterly results in cityscape

    Research suggests a decrease in quarterly reporting is linked to decreased company value—and impacts smaller firms more than larger firms.

  • Companies must put equality at the heart of the race to zero
    November 10, 2021
    Trees reflected in buildings

    Singular pursuit of net-zero by 2050 could exacerbate inequality and derail our chances of a climate-resilient future.

  • Ian Dyson named as new chair of the board at Asos
    October 15, 2021
    ASOS package

    Nick Beighton will be stepping down as CEO of the online fashion retailer, while Jørgen Lindemann joins as non-executive director.

For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda

ACCA, accountancy, fraud, Jason Piper, money laundering, Technology

Search


Sign up to our Newsletter

Receive independent news, thoughtful journalism & expert insights about leadership, corporate governance & key boardroom issues straight to your inbox every week.

SIGN UP

Follow Us

 

 

 

 

Most Popular

  • ESG resilience requires leaders to manage without certainty
  • News round-up: this week in governance
  • Being a CEO in 2023: how to navigate uncertainty
  • Reform of NHS levy ‘harms UK competitiveness’
  • How to boost decision making

Featured Partner Profile

Diligent

Diligent

Diligent Corporation, which was founded in 2001, is headquartered in New York, NY with a European HQ in London. Diligent’s modern governance platform empowers leaders and teams at every level of the organisation to digitally transform and create ...

Featured Partner Resources

2022 AGM Season Forecast: An Eye on The Horizon

To help prepare for AGMs in 2022, Equiniti (EQ) hi...

Stakeholder Engagement: A Roadmap for UK Plc Boards

This guide aims to provide directors and their col...

Digital Boards: How Technology Adoption is Driving Culture Change and Resiliency

Digital tools proved their worth to boards during ...
Leadership in AI report

Leadership in AI

This report from Board Agenda and Mazars, in assoc...
Creativity in a Crisis: a Boardroom Map for Innovation

Creativity in a Crisis: a Boardroom Map for Innovation

In the uncertain times at the height of any crisis...
Board Directors Guide to D&O Liability Insurance - November 2020 - AIG & Board Agenda

Board Directors' Guide to D&O Liability Insurance

Directors face liability over a range of new threa...
Leadership-in-Risk-Management-Board-Report

Leadership in Risk Management: Board Report

Board Agenda, in association with Mazars and INSEA...
Director's Guide to Internal Investigations

A Director's Guide to Conducting Internal Investigations

An internal investigation must be handled meticulo...

 


 

ADVERTISE – FREE CORPORATE LISTING

FREE - Add your company profile to our Corporate & Advisory Directory.
ADD

ADVERTISE – PROMOTE YOUR REPORTS & WHITEPAPERS

FREE - Add your company profile to our Corporate & Advisory Directory.
Add Resource

Register Free

Register to receive free article views, selected resource downloads, and all the latest news alerts straight to your inbox. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Corporate & Advisory Services
  • Media Marketing Solutions
  • Contact Us
  • Careers
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
  • Sitemap
|