Fraud Behavior in Brazilian Organizations
According to a study conducted between 2002 and 2004 by KPMG in several organizations regarding fraud cases, it was concluded that such incidents are linked to the loss of social and moral values due to deficiencies in internal controls. This highlights the importance of having effective management that applies monitoring and control mechanisms to all organizational activities and processes.
1. WHAT IS FRAUD?
Fraud can be any means used to gain unfair advantage over another person or organization. According to our Anti-Corruption Policy, fraud is any deceptive, misleading, or dishonest act intended to harm or deceive others, or to avoid fulfilling a duty, thereby obtaining undue advantages or benefits (monetary or otherwise) for oneself or others. This advantage may result from action or omission, through intentional conduct or bad faith. Fraud includes both acts of commission and omission, and may be committed negligently or intentionally.
2. WHAT IS NEGLIGENCE?
Negligence is defined as a failure to fulfill a duty, either by action or omission, arising from carelessness or ignorance. It may or may not be malicious, voluntary, or involuntary. In contrast, intent (or willful misconduct) involves any form of deliberate action, deception, or manipulation to induce someone to commit an unlawful act for personal gain or to benefit another.
3. FRAUD VICTIMS
Victims of fraud include organizations, internal users, and external stakeholders.
4. TYPES OF FRAUD
There are various types of fraud. Some examples include:
Against internal users:
- Financial misappropriation
- Revenue omission
- Expense inflation
- Inventory item diversion
- Document forgery
- Misappropriation of assets
- Concealment of financial and accounting information
Against the Organization:
Internal fraud (by employees):
- Misappropriation / asset diversion: theft of cash, inventory, equipment
- Expense / reimbursement fraud: submission of false or inflated receipts
- Corruption and bribery: receiving or offering undue advantages to suppliers or clients
- Financial statement manipulation: inflating revenue or hiding expenses to meet targets
External fraud:
- Payment fraud / invoice fraud: fake suppliers (fraudsters create invoices and receive payment)
- Credit card / payment fraud: unauthorized use of customer or organizational data
- Third-party fraud: suppliers charging for services not rendered
There is a technical distinction between fraud and error. Fraud is a deliberate, intentional act, while error is a negligent act without intent. Fraudsters typically attempt to conceal their actions.
When investigating fraud, it is essential to consider the characteristics of both the perpetrator and the victim, the control mechanisms in place, the consequences of the fraud, and the relevant legislation for controlling and preventing fraud.
5. PRINCIPLES
- Zero tolerance for fraud: The Organization will not tolerate any fraudulent practice, regardless of the position or tenure of the individual involved.
- Commitment to ethics and integrity
- Shared responsibility in fraud prevention and detection
6. RESPONSIBILITIES
6.1 Directors and Managers
- Promote a culture of integrity and ethics
- Establish effective internal controls
- Monitor risks and signs of fraud within their areas
6.2 Employees
- Act with honesty and transparency
- Immediately report any suspected fraud
- Fully comply with this Policy
6.3 Compliance or Internal Audit Department
- Investigate fraud reports
- Conduct integrity tests and periodic audits
- Support the creation and monitoring of preventive controls
7. Anti-Fraud Actions
7.1 Preventive Actions
- Regular training on ethics, integrity, and fraud prevention
- Due diligence in hiring (employees and suppliers)
- Segregation of duties and system access reviews
- Adoption of a clear and accessible Code of Conduct
- Policy on gifts, hospitality, and entertainment
7.2 Detection Actions
- Regular internal and external audits
- Monitoring tools and data analysis
- Secure and anonymous complaints channels
- Risk indicators and alerts for atypical behavior
7.3 Corrective Actions
- Immediate investigation of suspected fraud
- Disciplinary measures in accordance with the Code of Conduct
- Reporting to competent authorities when necessary
- Strengthening controls after fraud incidents
8. Complaints Channel
The Organization provides a secure, confidential, and, if desired, anonymous channel for anyone to report suspicious behavior or violations of this policy:
Channel: https://connecta.to-brasil.com/sistemas/ouvidoria/Pages/Form.aspx
Availability: 24/7
9. Sanctions
Failure to comply with this policy may result in disciplinary measures, including warnings, suspension, or termination, as well as civil and criminal liability, depending on the severity of the misconduct.