FRAUD (part I)

Fraud is an everyday occurrence. It is of all times, and a phenomenon that happens in every country. In discussions about fraud (and corruption) in Curaçao you regularly see that people refer to other countries, in particular to the Netherlands, to downplay this phenomenon here somewhat.
The small number of criminal prosecutions and convictions are often mentioned. In this connection it is often said that they are of ‘a political nature’. Sometimes it is even alleged that someone’s integrity can only be discussed when there is a criminal conviction. We can delude ourselves a lot!
In the event of corruption the core is that someone with certain powers (for instance the power to grant a license) grants unlawful favors in exchange for reciprocal favors. It is a form of abuse of power.
In 2013 a report called ‘National Integrity System Assessment: Curaçao 2013 ‘ was published by Transparency International. On page 29 of this report the following was stated:
The Crime Analysis of Curaçao 2008 confirms the lack of information about the extent of corruption. According to those interviewed for this analysis, corruption in Curaçao is not a systemic feature of departments of the administration, but concerns ‘individual missteps’. A public prosecutor when interviewed estimated that there have been some 50 bribery cases involving civil servants over the past 10 years. Two types of corruption are mentioned as the most common in practice: support in drug transactions and document fraud. The political aspect of corruption cases is also underscored in the study, and illustrated by reference to the offering of jobs, permits and contracts to secure political support and finances for political campaigns. According to the Crime Analysis, those practices result in too much dependency of high officials and politicians on financiers and voters, which undermines their critical stance and their ability to act if they need to address irregularities or enforce compliance.
Fraud and corruption occur in the public and private sector. The extent to which these phenomena occur is not known. Obviously those involved have an understandable interest in keeping this as quiet as possible. The public concern with these phenomena has increased in recent years and it is increasingly recognized that there is a social problem. After all, fraud and corruption can have a devastating effect by which honest people as well as society as a whole can become the victim.
She was almost a member of the family
Just an announcement in the newspaper: ‘Top bank employee embezzled NAf 1.2 million ’ (Amigoe, 6 March 2004). The respective woman had been employed by the bank for almost 40 years and was, incidentally, entrusted with monitoring fraud. The President of the bank made it known that she had been employed for such a long time that she was considered almost a family member. But he also said two other interesting things: (i) if you consider the integrity of an employee, you really should also look at their family circumstances and (ii) who actually monitors the monitor?
A very large proportion of fraud in companies is committed by long-service employees. Long service and an advanced age are therefore certainly no guarantees that the respective persons will not commit fraud. This is not an invitation to immediately subject such employees to a cross-examination, but it is meant to indicate that ‘trust’ in a certain person does not provide a guarantee against fraud.
Prevention is better than cure. In this connection it can only be said that a good organizational structure is important, because this can prevent opportunities being created for individuals to act improperly. For instance Nick Leeson at Barings was able to place orders on the stock exchange as well as being responsible for their administrative processing (error account 88888). Due to this double function combined with the absence of internal control, it was possible to commit fraud. So Barings’ management can also be blamed for this.
What is fraud?
Everybody knows some examples of fraud. Bankruptcy fraud, invoicing fraud, credit card fraud, benefit fraud, election fraud, identity fraud, insurance fraud, mortgage fraud, building fraud, subsidy fraud, tax fraud, computer fraud, cyber fraud, food fraud and diploma fraud come to mind.
Fraud is not a legally defined concept. Usually, fraud is considered if the following elements are present: (i) a person performed a certain intentional act creating a misleading misrepresentation, (ii) with the aim of obtaining a dishonest or unjustified advantage from this and (iii) in addition, there is a person or organization which is or could be adversely affected, financially or otherwise.
For instance the person who commits diploma fraud makes it appear as if he successfully completed a certain training course and therefore obtained his diploma, with the aim of becoming eligible for a certain job. If the person is engaged on the basis of a non-existing diploma, the employer will be the party who experiences or can experience harmful consequences. If someone reports something wrongly to the police as stolen in order to claim the loss from his insurer, this constitutes insurance fraud. If someone consciously does not declare certain income or assets to the tax authority in order to pay less tax, he will be guilty of tax fraud. (To be continued.)
Karel Frielink
(Attorney/Lawyer, Partner)
(8 September 2015)
Karel's Legal Blog

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