This document is a part of The AACI series of anti-corruption resources made available to our CACM members . The contents of this document constitute an integral part of the CACM Review textbook that would be available in countries where the CACM will only be offered by exam.
Those charged with governance should have proper and adequate anti-corruption intelligence to prevent and deter corruption and avoid negligence or gross negligence in performing their duties.
The AACI defines anti-corruption intelligence as:
" the minimum, optimum knowledge a decision maker should have to avoid fraud and corruption intelligently. Such knowledge includes the proper blend of due diligence, internal controls, anti-corruption, governance, decision making, process auditing ( from a management perspective and duties) to avoid anti-corruption and fraud. By avoidance, we emphasize the concept of deterrence and prevention.Corruption prevention is less expensive and better than any cure."
Internal control is a pillar of anti-corruption intelligence. Regardless of her background, a decision maker should master the concept of internal control. This mastery should include, at the minimum, the executive summary of Internal Control - Integrated Framework.
We issued "Introduction to Internal Control" in October of this year and emphasized the importance of the control environment component of internal control.It is the foundation of other internal control components. It is unfortunate that too many decision makers and board members have misconceptions about internal control.
Delusions of internal control include, but not limited to, the following:
Internal control is the policies and procedures of an organization.
Internal control is not directly related to preventing, deterring, and detecting fraud and corruption.
Internal control is not required in small and medium-sized (SMEs) entities.
Internal control is not related to business risks.
Good governance is not related to internal control.
Strategic management is not related to internal control.
Internal control is not related to the board responsibilities.
Accountability, transparency, and responsibility are not related to internal control.
Compliance is not part of internal control.
Expenditure on internal control is a waste of resources and expense.
Internal control is static.
Internal control prevents and detects every fraud and corruption event.
The more widespread these misconceptions among decision makers of an organization, the higher the corruption risks and business failure.
Why do we call these assertions and beliefs "misunderstandings about internal control"?
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What is the
resilience of an entity in preventing, deterring, and detecting fraud and
corruption?
Part 1(C) Fraud and
Corruption Deterrence in a For-Profit
Organization
Corruption is an
illegal and immoral act of serious existential consequences on organizations.
Whatever the cost of fraud and corruption deterrence mechanisms organizations
use, it would be less costly than what they would suffer from the ramifications
of uncovered and publicized case(s) of fraud and corruption. Fraud and
corruption deterrence aims to:
1.Set the proper tone at the top
2.Increase the likelihood of detecting corrupt acts
3.Heighten perpetrator's costs
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March 21, 2016 Wells Fargo Chair and CEO John Stumpf appeared before the Senate Banking Committee to discuss his company’s settlement with federal officials in which Wells Fargo agreed to pay $185 million in fines over alleged fraudulent accounts opened without customers' permission. Senators questioned Mr. Stumpf about the corporate behavior and practices related to over 2 million unauthorized accounts, and which led to the termination of over 5,000 Wells Fargo employees nationwide. Following Mr. Stumpf, regulators, including Consumer Financial Protection Bureau Director Richard Cordray, answered questions about their investigations into Wells Fargo, and what they recommended to not only address wrongdoing within that company, but prevent future abusive practices across the financial services industry. Elizabeth Warren
"This just isn't right. A cashier who steals a handful of $20s is held accountable, but Wall Street executives who almost never hold themselves accountable, not now and not in 2008 when they crushed the worldwide economy. The only way that Wall Street will change, is if executives face jail time when they preside over massive frauds."
Elizabeth Warren
"We need tough, new laws to hold corporate executives personally accountable and we need tough prosecutors who have the courage to go after people at the top. Until then, it will be business as usual. And at giant banks like Wells Fargo, that seems to be cheating as many customers, investors and employees as they possibly can. ' Thank You, Mr. Chair."
The AACI delivers globally a disciplined anti-corruption certification program to organizations seeking to prevent fraud and corruption inside their business processes, operations, and culture.
This certification process is the first of its kind worldwide and forms a basis for institutional change in fighting fraud and corruption. It is available to organizations of all types. The process is “principally” administered and completed online.
As we received too many questions about this new certification program, the technical staff of The AACI addressed the substance of these matters in the following question and answer blog.
Q: What is the Corruption Prevention Management Test (CPMT)?
The AACI: The CPMT is an online test authored by and copyrighted to The AACI. It is the core of the organizations' anti-corruption certification program. Except for the CACM members of The AACI, the CPMT is not available to individuals; it is only available to organizations ( private, public, or nonprofit) seeking to get certified through the organization anti-corruption certification program. As the exam unit of The AACI administers it, we use third party software to deliver the CPMT (software provider).
Q: What are the benefits of getting an organization certified?
The AACI: The certification process enables those charged with governance of the organization to:
1.Evaluate and measure relevant corruption prevention knowledge competencies of the board members, senior management and employees.
2.Identify the strengths and weaknesses of the entity's corruption prevention knowledge that is necessary for preventing fraud and corruption.
3.Select appropriate responses to address identified corruption prevention knowledge weaknesses.
4.Set apart the organization as taking the risks of fraud and corruption seriously from those that do not.
5.Support the board members, executive management, and other decision makers to meet their fiduciary and legal duties.
6.Support organizations to show their sincere duty of care efforts to protect the interests of all stakeholders.
7.Help those charged with governance to set a proper tone at the top.
8.Support an effective implementation of and compliance with corporate governance code or principles.
9.Support an effective implementation of comprehensive anti-corruption policy, internal control and processes, and code of ethics (conduct).
10.Support the organizations to comply effectively with the requirements of ISO 37001: anti-bribery management systems.
Q: Are there any other benefits for stakeholders?
The AACI: Yes there are. For example, the certification
1.Supports regulators or chambers mitigate and control bribery, fraud, and corruption in a business sector or segment.
2.Enables local governments or states to bring about real and visible anti-corruption efforts to be part of their local healthy business practices.
3.Supports the investment optimization in human capital.
Q: Is there a passing score for the organization under this certification program?
The AACI: No. There is not a pass or fail score. We report on the results of the certification process and issues a CPMT certificate reflecting the score of the organization as a whole.
Q: What are the primary topics the anti-corruption certification program of organizations tests?
The AACI: Most of the online test questions primarily deal with the following fields:
More than 80% of the questions cover the following:
1.Anti-fraud and corruption
2.Corporate governance
3.Internal control
4.ISO 37001: anti-bribery management systems
However, The rest of it touches on the following:
1.Accounting
2.Auditing
3.Management and ethics
Q: The certification process requires the organization to submit management representation letter stating in it the decision makers of the organization it has so that they sit to the CPMT. What do you mean by decision makers?
The AACI: For the purpose of this certification process, decision makers of an organization are the following:
1.Board members / partners / owner - manager
2.Chief executive officer (CEO)
3.Deputies of the CEO
4.Department heads
5.Deputies of department heads
Q: What would an organization obtain as a result of getting certified?
The AACI: The organization will get the following:
Q: How would this certification program assure an organization of preventing fraud and corruption inside it?
The AACI: The certification program, on its own, will not provide any assurance of preventing fraud and corruption inside any organization. It all depends on those who are charged with governance to bring this confidence. Those who are charged with governance in any organization are responsible for institutionalizing corruption prevention and deterrence inside their organization.
This certification program is an effective tool decision makers can use it to fight corruption inside their organization and in the organization's business dealings with all stakeholders.
Q: How can an organization measure the impact of the certification program?
The AACI: The answer consists of two parts: the first part is the visible one. An organization can compare its aggregate CPMT scores and CPMT reports over years and find out the results of its responses to earlier results.
For example, assume that in year 1, an organization had an aggregate CPMT score of 60% while two board members did not sit for the CPMT test- they had qualified CPMT report. After one year, this organization got certified and obtained aggregate CPMT score of 40% and unqualified CPMT report. Under these circumstances, those who are charged with governance of this organization have a duty to all stakeholders to answer for these results.
The other part of the answer to this questions is straightforward: corruption in any organization is unknown until it is discovered. As we do not know what the corruption level was at an organization, we cannot provide any precise and conclusive evidence about the exact level of corruption level reduction this certificate program affected.
What we are confident of is that when there is a proper tone at the top, and the top management has "real" will to fight fraud and corruption, this certification program is an effective tool to materialize their efforts.
Q: Why is the certification program an annual one?
The AACI: It is an annual certification program to
1.Maintain its credibility and public confidence in it.
2.Reflect changes in decision makers composition and / or their competencies over one year period.
Q: How would an organization benefit from the certification process in dealing with its suppliers?
The AACI: When an organization gets certified, it can ask its suppliers to get certified to continue business dealings with them. Integrity and culture of vendors affect corruption risks of any organization directly.
Q: How would a government utilize the certification program to fight fraud and corruption?
The AACI: A government and its agencies are well positioned to utilize this certification program to combat fraud and corruption effectively and efficiently. Presuming a government has a national strategic corruption prevention strategy, we believe a government can:
1.Set the example and have all its ministries and agencies certified.
2.Respond adequately to the results of the certification and start implementing national changes to improve its ministries and agencies score.
3.Set the certification program as a prerequisite for private sector organizations that want to transact with the government.
4.Start gradually requesting private sector entities to get certified.
5.Issue adequate rules, laws, and regulations to institutionalize corruption prevention.
Q: Will The AACI consider nationalizing the certification program to suit the local language, culture, laws, and regulations?
The AACI: In principle, yes we will. The AACI will also consider partnering with local governments or states to have a national CPMT certification program.
Q: How much does it cost to have an organization certified?
The AACI: The annual cost of certification depends on the number of decision makers who will sit for the test. There is also a fixed administration fee. For more information, you may contact us at Exam@THEAACI.com.
The AACI offers governments planning for nationalizing this certification program significant discount.
The Certified Anti-Corruption Manager (CAMC) is the premier
anti-corruption management credential targeting executive management and those
charged with governance. CACMs do make a difference.
