The Commercial Law Development Services continued in its mission to acquaint managers, business owners and decision makers with the skills required to manage legal issues impacting their business decisions, by organising a Seminar on ‘Fraud Examination and Forensic Accounting’ on Tuesday, July 19, 2016 at the International Centre for Arbitration and ADR (ICAA), Lekki, Lagos.

Fraud being a costly problem in our society and the world at large, it is the duty of the fraud examiner to investigate and gather evidence to prosecute the offenders. The need to detect, prevent and fight financial fraud in organizations, attracted a high profiled audience from government institutions/ organizations, financial institutions and law firms such as the Nigerian Stock Exchange (NSE), National Insurance Commission, Nigeria Deposit Insurance Corporation (NDIC), National Pension Commission (PENCOM), NPF Microfinance Bank and other reputable organisations.

This one-day capacity building Seminar afforded the participants the opportunity to broaden their knowledge of fraud which may be inherent in certain businesses, share ideas as well as hone their forensic accounting skills whilst networking with colleagues from other organisations and government institutions.

The event featured two speakers from KPMG Advisory Services, Mr Olutomilayo Ogunwole, Manager, Forensic Risk Consulting, and Mr Thierry Mbimi, Partner / Head of Financial Risk Management, and one speaker from OGE Professional Services, Mr Godwin Emmanuel Oyedokun who is the Chief Technical Consultant / Managing Partner. The Seminar was comprised of the following sessions which were extensively dealt with:

i. Recent Fraud Trends and Patternsii Fraud Detection and Prevention iii Understanding Forensic Investigation Processes; and iv Financial Crisis and Risk Management

Mr. Olutomilayo Ogunwole facilitated the sessions on “Recent Fraud Trends and Patterns” and “Fraud Detection and Prevention”. He defined Fraud as “an intentional, false representation or concealment of a material fact, for the purpose of inducing another to act upon it, to his or her detriment, and to the direct or indirect benefit of the perpetrator”. He further explained that typical organizations lose 5% of revenues each year to fraud, hence, companies need to design anti-fraud mechanisms that look both ways, inside and outside, as a lone inside fraudster may be working with people outside of the company.

Mr. Ogunwole stressed on the fact that fraud is almost twice as likely to be perpetrated in groups  because collusion makes it easier for perpetrators to commit fraud. He stirred a debate when he said that Women are less likely to collude. He stated that statistically speaking 45% of females colluded as opposed to 66% of males and collusion is highest in Latin America and the Caribbean (76%) and Africa and the Middle East.
While answering a question on why fraud is committed, Mr. Ogunwole stated that “Pressure or motive is the circumstance which gives an individual or group of individuals a reason, desire, or need to perpetrate fraud or misconduct. He expressed a concern for companies to reinforce internal controls as fraud is less likely to occur in companies where there are robust internal controls and monitoring.

According to him, “One of the most effective methods of detection is awareness that detective controls are in place to identify fraudulent activities. Detection techniques are designed to identify fraud and misconduct when the controls in place are not strong enough to prevent it.”

Mr Godwin Emmanuel Oyedokun, who presented a paper on “Understanding Forensic Investigation Process (UFIP)”, started by stating for a fact that forensic accounting/audit has taken an important role in both private and public companies since the birth of the 21st century. He buttressed this point by referring to  avoidable failures of some formerly prominent public companies like Enron and Tyco in the late 1990s, so also the terrorist attacks of September 11, 2001, which contributed immensely to the high demand for forensic accounting expert that can bring about a new, important and lucrative specialty.

Mr. Oyedokun emphasized the need for organisations to employ forensic accounting techniques which are useful in prevention, detection, and deterrence in the area of fraud, money laundering, investigations, crime and terrorist financing. These techniques includes, investigative skills, audit skills, legal skill etc. However, he explained that a good investigator is not necessarily a good interrogator. To be a good interrogator “you need to be a good actor and must have an insight of human psychology”.

Whilst concluding, Mr. Oyedokun recommended that all would be forensic accountants/investigators, fraud/forensic auditors, statutory auditors, and investigative accountants, should be well equipped with forensic accounting techniques in obtaining admissible evidence suitable for litigation purposes. These forensic accountants need accounting, finance, law, investigative and research skills to identify, interpret, communicate and prevent fraud. As more and more companies look for forensic accountants and professional organizations offer certifications in the area, it is becoming evident that the forensic accountant has a skill set that is very different from an auditor or a financial accountant.

Mr Thierry Mbimi, who led an expository session on “Financial Crisis and Risk Management”, gave an overview of the Global financial Crisis of 2007, 2008, 2011 and 2016 which he said was triggered by several factors which include but not limited to complex interplay of policies that encouraged home ownership, compensation structures that prioritize short-term deal flow over long-term value creation etc.

Mr. Mbimi further emphasized the need for “Increased board and executive engagement oversight to strengthen the resources, stature, and authority of risk management” in order to improve the procedures for setting and monitoring risk appetite. On the issue of curbing financial mismanagement, Mr. Mbimi clearly stated that Board independence reduces the chance of financial wrongdoing. Unfortunately, several members of a company’s board conduct business with the company, thereby creating conflict of interest which in turn dilutes the board’s independence. He further advised that firms should have comprehensive risk assessment methods and meaningful reporting mechanisms.

Mr. Mbimi also addressed the financial crisis Nigerian Banks faced in 2008/2009 and  2016 which emanated from the ripple effect of the 2007/2008 global financial crisis and The 2016 financial crisis was due to overexposure (concentration of assets) in the oil and gas sector, poor controls in the credit processes of banks, and enormous exposures to insider related events. He said that the global financial crisis spilled over to the real economy, causing a deflationary situation that threatened the total collapse of large financial institutions; and there was a drop in the value of stock markets worldwide. He further added that the crisis led to the collapse in the prices of commodities, especially crude oil which is the mainstay of Nigeria’s economy; and this resulted to a contraction of revenue to the federal government.

In conclusion, Mr. Mbimi commended the close supervision by the CBN, of banking operations and, lending activities by Nigerian commercial banks as the banks need to enhance risk management tools and processes. “Robust risk appetite and stress testing framework should be developed and fully implemented by banks to make strategic decisions”, he further added.

The seminar ended with the presentation of the certificate of participation by Mr. Oyedokun on behalf of the Commercial Law Development Services, to all participants.