Fraud 'blindness' is rampant in businesses and organisations

Many organisations and companies are mostly blind to fraud and an industry of fraud specialists is emerging to profit from the situation.

Fraud investigator and University of Leicester doctoral student Veronica Morino says there is an increasing gap between the reality of fraud and how people and organisations are trying to counteract it.

"Organisations have always been affected by fraud and have, through the years, established a series of protective measures. However, the general consensus is that, in spite of the increased volume of governance, fraud is not decreasing nor have companies proved able to deal with it more effectively," said Morino.

"There is an important distinction to be made between protective measures as generally practiced today, and real resistance [which] requires an organisational and sociological dimension in a holistic response to fraud management."

Morino says true resistance requires fraud and corruption to be recognised and regarded as both pervasive and occurring all the time - but also as deviant and undesirable behaviour. However it has become so widespread that it seems like people have difficulties in recognising it. Meanwhile, a disconnect between academia and anti-fraud practitioners is exacerbating the problem.

Academic studies are not seen as useful because the authors often lack first-hand experience on how fraud and corruption happens in practice, says Morino. On the other hand, the work done by practitioners is not given proper attention in academia because practitioners are not able to translate their empirical experience and practices into a broader and more conceptual contribution which could lead to the development of more interesting and significant theories.

A third complication, which is no fault of the academics, is the wealth of quasi-academic studies which are put out by practitioners who wish to feather their own nests.

Morino says the key is to understand what needs to be done in order to reach a consensus on what is fraudulent and what is not. It is only once this is in place, that people in the organisations will be capable of formulating their own response.

"The more I explore things the more it seems that all these overly complicated rules, procedures, policies, internal controls, risk assessments and monitoring activities are actually taking us in the opposite direction."

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