Is a Fraud a Cultural Issue?

 In Articles

Jiwasraya’ default case has been trending in social media and news outlets lately. The latest news said that fraud allegedly occurred in Jiwasraya. According to Kompas.com (11/15), the state-owned insurance was suspected of providing a non-transparent financial statement and for allegedly embezzling investment funds.

This case has caused hundreds of customers who have entrusted their money to become victims. To date, Jiwasraya’s customers’ total claims have reached 16.1 trillion rupiahs. Adding to the victims, the reputation of several banks that sold Jiwasraya’s product is at stake. This news suggests that the alleged fraud that occurred within the oldest life insurance corporation in Indonesia can happen in other corporations, regardless of the industries they are in and their sizes. The Ministry of State-Owned Enterprises (BUMN) has reported the alleged fraud to the Attorney General’s Office.

The good news is, that such fraud risks are very likely to be anticipated by corporations if they walk the talk in terms of code of conduct. In principle, a code of conduct encourages ethical cultures in preventing violations within the corporations.

 

Also Read:

5 Theories Explain Why Frauds Occurred Repetitively

Why Your Corporation Should Treat Whistleblowers as Assets

At least 58% of Occupational Fraud Case Not Reported To Law Enforcement

 

In general, fraud cases are often a cultural issue. In the Jiwasraya case, this cultural issue can be judged at least from the allegedly non-transparent financial statements. Although the corporation has a whistleblowing system as a preventive instrument, its function becomes just an ornament due to the lack of support for whistleblowing culture. Where whistleblowing culture includes a transparent culture in which open and honest communication lies.

Quoted from an article entitled Business Fraud: Culture is the Culprit, “fraud is like a shade-loving plant”. Whereas transparency creates an uncomfortable environment for fraudsters because they would feel as if they are being watched by the environment, such that it narrows their space to commit lies and violations.

Kaptein, in his book Ethics Management, explained that in organizations with high levels of transparency, individuals tend to try to modify and correct their own and others’ behaviors. In other words, a working environment with transparent culture encourages the strengthening of internal control. Robust internal control can be manifested by the sense of responsibility an employee has to report his/her concerns over violations.

The earlier the report is received, the greater the opportunity the corporation has to minimize risks and losses. And in a transparent culture, leaders will openly address reported violations and share information to strengthen the company’s commitment to conduct healthy business practices.

Integrity is ready to assist you to conduct a healthy business practice with our compliance services – governance and compliance, business investigation, and brand protection. Should you have any questions regarding compliance services, please do not hesitate to contact us.

 

 

 

Image by rawpixel from Pixabay

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