Has the message got through?
PricewaterhouseCoopers reports that corporate fraud investigations across the UAE have doubled in the past year. Are we finally ready to confront corruption?
December 16, 2010 4:13 by Samuel Potter
PricewaterhouseCoopers, the leading accountancy firm, says its fraud investigations across the UAE have doubled over the past 12 months. The accountants put the jump down to companies in the country attempting to uncover the misdeeds of the boom years. “The downturn prompted more focus on fraud within all sectors,” says Tareq Haddad, a partner of risk services at the firm. He told the National that contractors trying to bribe developers to win building projects and bankers giving bad investment advice were common examples alleged fraud. Now businesses are coming to PWC to uncover what executives may have been up to.
For anyone in business in the UAE, aside from those few corrupt individuals, this is surely good news. The fact that firms are voluntarily having themselves audited suggests they have woken up to the risks of a lack of transparency and accountability; they not only run the risk of financial scandal, but also of being victims themselves. They may have also recognized that transparency is good for the wider economy. It promotes confidence, and confidence in turn promotes investment, both from within and without.
The news from PricewaterhouseCoopers came on the same day that the Court of Appeal in Dubai reduced the jail sentence awarded to a former member of the board of directors of real estate company Deyaar. The Emirati man, in his forties, was convicted of bribery and given three years in jail and a AED115.8 million fine. The appeal court reduced the sentence to one year in prison and AED11.75 million in fines. This decision may somewhat undermine efforts to appear tough on corruption, given the huge reduction in the punishment, but at least the conviction was upheld – a stark warning to those involved in corporate fraud.
And according to reports earlier in the month, two thirds of Interpol warrants issued by the UAE stem from fraud cases. The National reports that 150 of the country’s 211 red notices (which are requests to Interpol members to arrest suspects) are related to fraudulent activity. The details of the cases are unclear (ie we don’t know if these are large scale or small scale frauds), but the country is the highest issuer of Interpol warrants in the Gulf. There seems to have been a concerted effort by the government to strengthen laws and punish those involved in fraudulent activity.
Could it be that the UAE is at last confronting corporate corruption? Well, part of all this is a consequence of the downturn, of course. Companies and shareholders are more concerned with where their money is spent, and budgets and transactions are under far greater scrutiny, hence we see private sector organizations turning to auditors. But, whatever the companies’ motivation, taken with the government efforts, the upturn in PWC investigations is indeed good news. “In general, there are more cases coming up and there is more political will to investigate,” Omnia Hussein, a member of Transparency International’s secretariat in the MENA region, told the National.
Though Hussein does add, “At the same time, there is a sense that not enough is happening.” The unfortunate truth is that the companies undergoing voluntary audits with the PWC are possibly just the tip of the ice berg. We have a long way to go to rid the Gulf, and the UAE, of corruption and fraud, and to punish those who have profited from such practices in the past. But at least we’ve made a start, and both government and the private sector are apparently ready to see it through.