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Home arrow Management arrow Corporate Fraud and Corruption: A Holistic Approach to Preventing Financial Crises

Prosecuting Suspects and Punishing the Guilty

Legislative frameworks addressing fraud and corruption are not only consolidated in corporate law or the criminal code but are also to be found in legislation that stands on its own merit such as the UK Bribery Act of 2010. While legislation codifies the community’s moral attitudes into statutes, regulations or guidelines are also promulgated by the legislature to embody social norms in the community. However, the legislature and the government need political will and commitment in order to combat fraud and corruption. How many times have we heard promises from politicians during election campaigns that, if elected, they will address or implement measures or help to amend or introduce legislation to combat these offenses? As Miller, Roberts, and Spence (2005, 130) noted, “some members of the legislature lack this requisite level of commitment because corruption is [so] deeply entrenched that enacting anticorruption legislation may have adverse political consequences for them.”

Lambropoulou (2012, 94) noted that “overregulation, complex legislation as well as ambiguities in legislation and contradiction in content of legislation” offer public administration a high degree of discretionary power. Furthermore, legislation is not always the solution to the problem unless it is enforced, and in some cases, there may be a requirement to use certain mechanisms to ensure that the legislation serves its stated purpose(s). Some countries have legislation on political party funding or on asset disclosure of elected officials. However, having the legislative and regulatory framework is not sufficient to ensure that a corrupt officer or a fraudster would be brought to justice because existing legislation may not be enforced for various reasons. Normally in most countries once an investigation documents that fraud or corruption has been perpetrated, a case will be prosecuted. In many jurisdictions the police and the judiciary are not corrupt, and the legal process will take its course. However, in some countries corrupt law enforcement and judges undermine efforts to deal with corruption effectively. Concerning judicial corruption, Transparency International (2007) in its Corruption in the Judiciary Report stated that it “includes any inappropriate influence on the impartiality of the judicial process by any actor within the court system” (p. xxi). Examples of judicial corruption could include the following: allowing or excluding evidence with the aim to justify the acquittal of a guilty defendant of high political or social status; changing the court dates to favor one party; distorting witness testimony in summarizing court proceedings or delivering a verdict; accepting political interference in the judicial process; accepting a bribe; or even arranging for a file to be misplaced and thus “lost” for period of time. The report suggests several measures to tackle judicial corruption, including (a) appointment and promotion of judges on merit; (b) high salaries, secure working conditions, training, and a fair process for promotion and transfer; (c) a fair and effective process for the discipline and removal of corrupt judges; and (d) a transparent court process allowing media and civil society to monitor court activity and to expose judicial corruption if it occurs. Before going on to discuss preventative actions, it should be noted that when someone convicted of fraud or corruption is incarcerated, it is contributing to prevention because, while offenders are serving prison sentences, they are not free to commit more frauds or corrupt acts. This is known as “community protection,” but generally speaking when an offender is incarcerated, it is for punishment.

The experience internationally has shown that in countries without documented cases of judicial corruption the “prosecute-and-punish” approach is relatively ineffective. Therefore, many argue that prevention is better than a cure, so let us next turn our attention to preventative actions that have been suggested.

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