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Martin Kenney: Overcome fear of fraud with on-the-mark due diligence

It’s a worrying time for executives. According to Kroll’s 2015 Global Fraud Report, some 40 percent of respondents felt vulnerable to corruption and bribery.

I haven’t met any executives who aren’t in favour of this new era of bribery and corruption enforcement and compliance. But there’s also fear of becoming inadvertently embroiled in an intermediary’s bad acts. This concern impacts how companies conduct business and whether they expand into new markets.

Seventy-two percent of companies polled were dissuaded” from conducting business in a region or country due to the perceived “heightened exposure” to fraud. Latin America and Africa account for nearly half of the planned expansions to be rejected.

The cost of compliance is high. But the cost of this fear of a failure in compliance is likely exponentially greater when measured by decisions not to expand or invest in higher-risk territories.

The fact that 75% of companies claim to have been victims of fraud in the last year (an increase of 14% in just three years) is also disconcerting.

As a lawyer who specializes in the investigation of international fraud, money laundering, and asset recovery, I know that fraud perpetrated across national boundaries is growing. That’s why I preach about the need for businesses to enhance their levels of due diligence, to satisfy themselves (as best they can in some of these markets) that they are dealing with bona fide counterparties and reputable, dependable prospective partners.

One of my firm’s fraud investigators was a detective in a UK police anti-fraud group. He has long campaigned for companies to conduct meaningful vetting of both existing and prospective employees, agents, and partners. One of the simplest scams involves the theft of information, such as customer databases, evidencing the need for improved IT security. Disgruntled employees who have been fired, or anyone who hasn’t been paid or rewarded in keeping with their expectations, are frequent corporate saboteurs.

Executives are right to fear fraud. But it’s also their responsibility to enhance their due diligence to prevent and protect against fraud. Due diligence isn’t always a priority. How many businesses go beyond perceived minimal legislative requirements? How many address the actual welfare and wellbeing of their own enterprise by looking for the root causes of fraud? Not enough, of that I am certain.

Robust compliance built around enhanced due diligence is good for business and for peace of mind. As a central part of the culture of an enterprise, compliance allows companies to overcome fear and confidently confront corruption risks and embrace opportunities in new markets. That translates into a singular competitive advantage.


Martin Kenney is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice focused on multi-jurisdictional fraud cases |@MKSolicitors.

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