Rise of Procurement Fraud in Southeast Asia And How to Prevent It

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Procurement Certification in Combatting Risk and Fraud

In recent years, procurement fraud, also known as contract fraud, is becoming more commonplace across Southeast Asia. With the region’s predicted GDP to be US$4 trillion by 2022, it is going to become the fifth-largest economy worldwide. This puts the ASEAN market in the international spotlight, further highlighting the importance of organisations in the region to put in place preventive measures for economic crimes.

Based on a survey conducted by PwC in 2018, 43% of frauds were proactively detected through corporate controls and 32% of frauds were reactively detected through corporate culture. This highlights the importance of having proper measures in place to spot and detect when such fraud schemes are happening.

Diving deeper into the problem, Southeast Asia (SEA) follows the global trend of internal actors being the main perpetrators of fraud and economic crime. For SEA specifically, it is more likely that the culprit is an employee of the victim company.  The high level of internal actor-driven frauds could also be a reason why asset misappropriation, business conduct/misconduct, bribery/corruption and procurement fraud are high. These types of crimes often require the involvement of internal actors.

One of the ways to prevent procurement fraud include placing control measures for diversion of funds. Measures include:

• A centralised supplier maintenance team that is responsible for creating, validating and reviewing new supplier set-up.
• Purchasing permission levels to raise purchase orders.
• Realistic and manageable financial authority limits.
• Strict controls over authority to set up new suppliers.
• Internal Audit review creditor payments annually with periodic/scheduled validity checks of existing and new suppliers.
• A whistleblowing procedure is in place.

Also read: Billing Fraud and How to Spot them

Procurement Certification in Combatting Risk and Fraud is a 3-day training course held from 24-26 September 2019 (Kuala Lumpur). This course is certified by The International Association for Contract & Commercial Management (IACCM), where delegates will be able to achieve world-class standards in their trading relationships. Delegates attending this workshop will understand how to reduce the risk and cost of fraud to their organisation and how to secure better value from better procurement and better contracting outcomes.