APRIL 8 — Early last month, the Indonesian authorities arrested a former Indonesian tax office employee, Dhana Widyatmika, for fraud.
The initial suspicion arose after a report by the Financial Transaction Report and Analysis Centre (PPATK) regarding Dhana’s suspicious “fat bank accounts,” which were believed to indicate possible fraudulent conduct. Dhana’s wealth was said to be worth at least 60 billion rupiah (RM20 million), which is considered to be too much for a government official of his rank.
An important red flag that alerts the authorities to many fraud cases in Indonesia is a so-called excessive lifestyle that many believe is a manifestation of greed. Association of Certified Fraud Examiners’ (ACFE) global fraud survey, for example, has put living beyond one’s means as the most noticeable behavioral symptom of fraud offenders. Other study revealed that greed is behind most if not all fraud cases. Mixed together with opportunity and rationalisation, greed is a recipe for organizational disaster.
As suggested by KPMG’s global fraud survey, most fraud offenders are working in areas that give them access to corporate assets. Additionally, another study conducted by ACFE concluded that the higher a fraud offender’s position, the higher the losses from their acts will be due to the opportunity afforded by such positions.
In the case of tax fraud in Indonesia, many believe that Gayus Tambunan and Dhana Widyatmika were just “small players” and that there were others with higher positions involved in the scheme that might have caused even greater losses to the country.
Often defined as excessive acquisitiveness, greed has been seen by many experts as the dark side of self-interest that comes in various forms such as the pursuit of money, sex and power. Nonetheless, many others also believe that it is a necessity in achieving wealth and prosperity, as it motivates people to work harder to achieve their goals. However, when the ambition to achieve wealth and prosperity becomes too great, evidence suggests that some people will then resort to fraud.
In ACFE’s global fraud survey, for example, the “wheeler-dealer” attitude is one of the most common behavioural traits of fraud offenders. Many see fraud offenders as driven by the same desires as everybody else: The pursuit of happiness.
Studies in psychology suggest that an increase in personal wealth of those who are already wealthy will not increase their happiness. Unfortunately, many wealthy people seem to think otherwise and focus most of their time and energy on financial matters even at the cost of ethics and morals.
An interesting fact about greed and fraud is that although the former is generally known to cause the later, evidence also suggests that many fraud cases are uncovered due to the perpetrators’ greed. Fraud generally consists of three elements: action, concealment and conversion.
Conversion is when fraud offenders are enjoying the proceeds of their crime through, for example, a lavish lifestyle such as the purchase of luxurious items (e.g. cars, jewellery and apartments). In other words, this stage is where fraud offenders satisfy their greed.
Unfortunately for them, this stage is also where authorities will usually look for any signs or traces of fraudulent conduct, such as in the case of PPATK’s “fat bank account” list. The effectiveness of this fraud detection approach of course depends on the availability and access to information on wealth and possessions.
Other than focusing on excessive lifestyles, as suggested by studies on fraud offenders, authorities should also look for other behavioural red flags such as an unwillingness to share duties, an unusually close relationship with customers and vendors and prior employment problems. Other non-behavioural signs that are worth consideration include weak internal controls, tips and complaints from within the organisation and transaction and bookkeeping anomalies.
Overall, it takes more than just punishing current fraud offenders to eliminate fraud in Indonesia. A more comprehensive approach is needed particularly to cut off the supply of offenders by strengthening the moral and ethical values of future generations through family and formal education. — thejakartapost.com
* This is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.