audit to detect fraud and corruption: evaluation of the fight against corruption and money...

AUDIT TO DETECT FRAUD AND CORRUPTION:

EVALUATION OF THE FIGHT AGAINST CORRUPTION AND MONEY

LAUNDERING

Atty. ALEXANDER B. JULIANODirector – Fraud Audit Office

Commission on Audit - Philippines

The 10th ASOSAI Research Project

Assessment of Current Situation of Corruption

and Money Laundering in the Philippines

Respondents

Salient Features of the Anti-Money Laundering Act of the Philippines

•Criminalizes money laundering •Creates a financial intelligence unit•Imposes requirements on customer identification, record keeping and reporting of covered and suspicious transactions •Relaxes strict bank deposits secrecy laws •Provides for bank inquiry and freeze ex parte petition/seizure/forfeiture/recovery of dirty money/property •Provides for international cooperation

Mandate of the Ombudsman

THE OMBUDSMAN AND HIS DEPUTIES, as protectors of the people shall act promptly on complaints filed in any form or manner against officers or employees of the Government, and enforce their administrative, civil and criminal liability in every case where the evidence warrants in order to promote efficient service by the Government to the people (Section 13, R.A. No. 6770; see also Section 12 Article XI of the 1987 Constitution).

The Ombudsman shall give priority to complaints filed against high ranking government officials and/or those occupying supervisory positions, complaints involving grave offenses as well as complaints involving large sums of money and/or properties (Sec. 15, R.A. No. 6770)

SURVEY RESULT

S

Anti-Money Laundering

Council

Field Investigation Office I & II

Preliminary Investigation,

Administrative Adjudication &

Monitoring Office

Public Assistance & Corruption

Prevention Office

Deputy Ombudsman for

Mindanao

· Low /

· Moderate /

·

Moderate and widespread among some public sectors / / /

·

Serious and pervasive in most or all sectors

· Other (Please specify)……………..

CURRENT PREVALENCE OF CORRUPTION IS MODERATE AND WIDESPREAD AMONG SOME PUBLIC SECTORS (60%)

Anti-Money Laundering Council




Monitoring Office


Prevention Office


Mindanao · Much higher than

previously

· Slightly higher than previously

· About the same as previously

· Slightly lower than previously / / / /

· Much lower than previously /

· Other (Please specify)…..

THE CURRENT PREVALENCE OF CORRUPTION IS SLIGHTLY LOWER THAN PREVIOUS YEARS (80%)

RANKING IN TRANSPARENCY INTERNATIONAL’S-CORRUPTION PERCEPTION INDEX DOES NOT FAIRLY REFLECT THE REALITY OF CORRUPTION IN THE COUNTRY (80%)

· Yes /

· No / / / /

· Other (Please specify)……………


Council Field Investigation

Office I & II



Monitoring Office

Public Assistance & Corruption Prevention

OfficeDeputy Ombudsman for

Mindanao

SCORE OF THE GLOBAL INTEGRITY INDEX DOES NOT FAIRLY REFLECT THE REALITY OF CORRUPTION IN THE COUNTRY (60%)

· Yes / /

· No / / /




Office I & II



Monitoring Office



Mindanao

THE COUNTRY’S POPULATION IS MODERATELY INTOLERANT TOWARDS CORRUPTION (60%)



Office I & II



Monitoring Office



Mindanao

· Tolerant towards corruption / /

·

Moderately intolerant towards corruption / / /

·

Strongly intolerant towards corruption

· Other (Please specify)…………..

THE STRENGTH OF STEPS TAKEN BY THE GOVERNMENT AGAINST CORRUPTION IS MODERATE TO STRONG (60:40)



Office I & II



Monitoring Office



Mindanao

· Weak

· Moderate / / /

· Strong / /

· Other (Please specify)…………….

THE PATTERN OF CORRUPTION DEALINGS IS MODERATELY PREDICTABLE (80%)



Office I & II



Monitoring Office


Prevention OfficeDeputy

Ombudsman for Mindanao

· Unpredictable

·

Unpredictable but benefitting few top leaders /

· Moderately predictable / / / /

·

Highly predictable and can be seen from certain pattern

·

Other (Please specify)…………….

CORRUPTION OCCURS EQUALLY IN THE PUBLIC AND PRIVATE SECTORS



Office I & II



Monitoring Office




· Mostly in public entities /

· Mostly in private entities /

·

Equally In public and privateentities / / /


PREVALENCE OF GRAND CORRUPTION RANKS NO. 1, PETTY CORRUPTION NO. 2 AND CORRUPTION AT ENTERPRISE LEVEL NO. 3



Office I & II



Monitoring Office




· Petty corruption 2 1 1 2 2

·

Corruption at enterprise level 3 3 3 3 3

· Grand corruption 1 2 2 1 1

·

Other (Please specify)…………….

ranking was made on collective consideration of enumeration

THE PREVALENCE OF PETTY CORRUPTION IN THE COUNTRY IS MODERATE TO HIGH (60:40)



Office I & II



Monitoring Office



Mindanao

· Non-existent

· Low

· Moderate / / /

· High / /


PEOPLE MOST LIKELY TO BE INVOLVED IN PETTY CORRUPTION ARE RANK AND FILE EMPLOYEES



Office I & II



Monitoring Office




· High-level management

·

Medium Management / Supervisors

/

· Rank and file employees / / / / /

· Public

/


MAIN PATTERNS OF PETTY CORRUPTION IN THE COUNTRY



Preliminary Investigation, Administrative Adjudication

& Monitoring Office



Mindanao

Directly requesting kickbacks/tokens in exchange for performing a job

Petty corruption occurs usually where there is face-to-face interaction between the public employee and the public and/or where documents are to be submitted for processing, signature or approval

Street corruption by enforcement officers

Direct and indirect solicitation of grease money

Front liner service providers are more exposed or prone to small scale corrupt practices

THE PREVALENCE OF GRAND CORRUPTION IN THE COUNTRY IS MODERATE (80%)



Office I & II



Monitoring Office



Mindanao

· Non-existent

· Low /

· Moderate / / / /

· High


PERSONALITIES MOST LIKELY TO BE INVOLVED IN GRAND CORRUPTION ARE 1)ELECTED OFFICIALS AND THEIR FAVORITES 2) POWERFUL GOVERNMENT OFFICIALS 3) SPECIFIC BUSINESS INTEREST AND POLITICAL GROUPS



Office I & II



Monitoring Office




·

Elected officials and their personal favourites / / / /

· Powerful government officials / / /

· Business entrepreneurs

· Specific business interests

and/or political groups /


THE MOST COMMON TYPES OF CORRUPTION IN THE COUNTRY ARE 1)ABUSE OF POSITION/POWER 2) BRIBERY 3) 4) KICKBACK AND 5) EMBEZZLEMENT



Office I & II



Monitoring Office



Mindanao · Abuse of position/power 2 1 1 1 2

· Bribery 1 2 5 3 3

· Criminal breach of trust 7 8 6 9 5 · Extortion 6 3 7 7 6

· Embezzlement 4 4 8 2 1

· Forgery 9 5 9 6 8

· Influence peddling 8 6 2 5 7

· Kickback 3 7 3 4 4

· Nepotism 5 9 4 8 9


The approximate average monetary value where such corruption has an identifiable monetary value

1 = Less than USD50,0002 = Between USD50,000 – USD100,0003 = Between USD100,000 – USD500,0004 = Between USD500,000 – USD1,000,0005 = More than USD1,000,000



Office I & II



Monitoring Office



Mindanao · Type of corruption rank No.1 : 5 1 2 5 1

· Type of corruption rank No.2 : 5 1 1 3 2

· Type of corruption rank No.3 : 5 2 2 2

·

Agriculture 9 4 8 12 11

·

Customs 1 1 2 3 1

·

Education 8 5 11 11 7

·

Energy 10 10 10 9 9

· Environment 13 11 6 8 8

· Health 11 12 9 13 13

· Legislature 12 13 3 4 3

· Judiciary 6 6 7 10 12

· Law Enforcement/police 5 2 5 6 5

· Local government/Municipalities

7 3 4 2 4

· Public service delivery 4 7 12 1 6

· State-owned enterprise 2 9 13 7 10

· Taxation 3 8 1 5 2

· Other (Please specify)..............



Office I & II



Monitoring Office




THE SECTORS MOST VULNERABLE TO CORRUPTION ARE 1)CUSTOMS 2) TAXATION 3) LOCAL GOVERNMENT UNITS 4) LAW ENFORCEMENT/POLICE, AND 5)PUBLIC SERVICE DELIVERY





Monitoring Office


Prevention Office


Mindanao

· Procurement contracts 2 4 3 1 1

· Electoral irregularities 3 3 5 4 4

· Revenue (Taxes) collection 4 1 2 2 2

· Public fund disbursement

procedures 1 2 1 3 3

· Licensing 5 5 4 5 5


CORRUPTION HAS THE GREATEST PROBABILITY OF OCCURRING IN 1)PUBLIC FUND DISBURSEMENT 2) PROCUREMENT CONTRACTS, TAXATION, REVENUE COLLECTION, 3) ELECTORAL SYSTEM AND 4)LICENSING





Monitoring Office


Prevention Office


Mindanao

· Acquiring assets 2 1 1 1 1

· Bank deposits 1 2 2 2 3

· Investing in real estate 3 4 5 3 2

· Leisure, social activities 5 3 3 4 4

· Stock investment 4 5 4 5 5

· Other (Please specify)……………. Gambling/vices

MONIES AND ASSETS GAINED FROM CORRUPTION MOST OFTEN USED FOR 1)ACQUIRING ASSETS 2)BANK DEPOSITS 3) REAL ESTATE INVESTMENT 4) LEISURE/GAMBLING 5) STOCK INVESTMENT





Monitoring Office


Prevention Office


Mindanao

· Absence, weaknesses or failure

in regulatory and legal systems to combat corruption

1 4 6 3 1

· Complicated and cumbersome

administrative procedures 2 3 5 4 2

· Culture, customs and habits of

giving bribes to get things done 3 5 1 1 5

· Low salary levels

4 1 2 5 4

· Lack of financial rules and procedures

7 6 8 6 3

· To become rich as quick as possible

6 7 3 7 7

· Rapid population and economic growth

8 8 4 8 6

· Unclear rules and loopholes for manipulation

5 2 7 2 8

· Other (Please specify)..............

THE ROOT CAUSE OF CORRUPTION IN THE COUNTRY ARE 1)ABSENCE/WEAKNESS/FAILURE OF REGULATORY AND LEGAL SYSTEM TO COMBAT CORRUPTION 2) CULTURE, CUSTOM AND HABITS AND 4) LOW SALARY

THE PATRONAGE-CLIENT SYSTEM IS THE MAIN CAUSE OF GRAND CORRUPTION AND PETTY CORRUPTION (60%)



Office I & II



Monitoring Office




· Strongly disagree / /

· Disagree

· Neither agree nor disagree

· Agree /

· Strongly agree / /

WEAK ACCOUNTING PRACTICES, INCLUDING LACK OF TIMELY FINANCIAL MANAGEMENT ARE CONDITIONS FAVORABLE FOR CORRUPTION (80%)



Office I & II



Monitoring Office




· Strongly disagree /

· Disagree


· Agree /

· Strongly agree / / /

MONITORING THE SITUATION OF CORRUPTION IN THE COUNTRY IS A HIGH PRIORITY (60%)



Office I & II



Monitoring Office




· Not a priority

· Low priority

· Medium priority /

· High Priority / / /

· Essential /

COMPLAINTS OF CORRUPTION OR FRAUD FROM THE PUBLIC IS A HIGH PRIORITY (100%)



Office I & II



Monitoring Office




· Not a priority

· Low priority

· Medium priority

· High Priority / / / / /

· Essential

EMPHASIZING THE ROLE OF WHISTLE BLOWER IN REPORTING CORRUPTION IS VERY IMPORTANT (60%)



Office I & II



Monitoring Office




· Not at all important

· Low importance

· Slightly important

· Neutral

· Moderately important /

· Very important / / /

· Extremely important /

WHISTLE BLOWING IS AN EFFECTIVE AVENUE TO LODGE COMPLAINTS OF CORRUPTION (80%)



Office I & II



Monitoring Office




· Not effective /

· Effective / / /

· Very effective /

· Other (Please specify)...............

THE DAMAGE THAT CORRUPTION CAUSES TO THE GOVERNMENT’S BUDGET IS VERY SERIOUS (60%)



Office I & II



Monitoring Office




· Not at all serious

· Somewhat serious /

· Serious

· Very serious / / /

· Extremely serious /

THE DAMAGE THAT CORRUPTION CAUSES TO THE PRIVATE SECTOR IS SERIOUS



Office I & II



Monitoring Office






· Serious / /

· Very serious /


THE DAMAGE THAT CORRUPTION CAUSES TO CITIZENS IS VERY SERIOUS



Office I & II



Monitoring Office






· Serious /

· Very serious / /


CORRUPTION DURING BUDGET FORMULATION IS PRIMARILY GRAND OR POLITICAL CORRUPTION AND IS INFLUENCED BY THE DISTRIBUTION OF BUDGETARY POWERS BETWEEN THE EXECUTIVE AND THE LEGISLATURE



Office I & II



Monitoring Office





· Disagree

· Neither agree nor disagree / /

· Agree


Unchecked and excessive executive discretion in the budget process tends to create opportunities for political corruption. Politician or senior level bureaucrats are able to provide subsidies or favorable tax treatments to favored citizen groups or allocate budget resources to projects areas based on political connection.



Office I & II



Monitoring Office




· Strongly disagree

· Disagree


· Agree / / /

· Strongly agree /

PUBLIC FINANCIAL MANAGEMENT SYSTEM WEAKNESS DURING BUDGET FORMULATION CAN INCREASE THE RISK OF ADMINISTRATIVE CORRUPTION DURING BUDGET EXECUTION.



Office I & II



Monitoring Office





· Disagree


· Agree / / /

· Strongly agree /

MOST SIGNIFICANT INCIDENCES OF CORRUPTION (BOTH PETTY AND GRAND CORRUPTION) IN THE PAST 5 YEARS (2007-2012)



Preliminary Investigation, Administrative Adjudication & Monitoring Office

Public Assistance & Corruption Prevention Office

Deputy Ombudsman for Mindanao

i. ………… smuggling of oil

violation of RA 3019 (Anti-Graft and Corrupt Practices Act)

NBN-ZTE deal ZTE

ii. ……….. use of

government funds for personal use

malversation

Military procurement (conversion of funds)

Gen. Ligot case

iii. ……… bribery in high places inlcuding the Office of the President

bribery

Police procurement PAGCOR

iv. .……… failure to render account

v. .…..…… plunder

THE USUAL STYLES OF FRAUD AND CORRUPTION



Office I & II

Preliminary Investigation, Administrative Adjudication &

Monitoring Office



Mindanao

none 1) Influence peddling to approve PPP projects through unsolicited proposals under BOT scheme 2) Conveyance of public funds through bogus foundations/NGO's

In public works, costs or prices are increased in order not to sacrifice quality and quantity both the excess amounts are divided accordingly. In Tax credit certificates scam, the value of the bus (among others) is doubled in order to increase the tax credit/claim from the government. Accordingly, increasing the percentage of share.

REMARKS ON THE PREVALENCE AND NATURE OF CORRUPTION IN COUNTRY



Office I & II


Monitoring Office



Mindanao

none It is serious though improving.

Corruption among legislature is grandeous and assured for instance if you are a congressman and you received million a year (as pork barel) multiplied by three years (term) equals 20 Million. With an assured kickback ranging from 10% to 20%, the congressman received P21 Million to P42 Million as the case maybe.

Assessment Of Current Situation Of Money

Laundering





Monitoring Office


Prevention Office


Mindanao

· Extremely serious

· Very serious /

· Serious / / / /

· Not serious



MONEY LAUNDERING IN THE COUNTRY IS SERIOUS (80%)





Monitoring Office


Prevention Office


Mindanao

· Strongly agree

· Partially agree / / / /

· Disagree

· Partially disagree



RESPONDENTS PARTIALLY AGREE THAT MONEY LAUNDERING TENDS TO INCREASE IN RECENT YEARS (80%)





Monitoring Office


Prevention Office


Mindanao


· Partially agree / / /

· Disagree

· Partially disagree



OVER THE YEARS, MONEY LAUNDERING TENDS TO BE MORE SOPHISTICATED (60:40)





Monitoring Office


Prevention Office


Mindanao

· Corruptive practices through

money laundering mostly found in public entities

/

· Corruptive practices through

money laundering mostly observed in private sectors

/

· Both in public and private

entities / / /


THE MAIN PATTERN OF MONEY LAUNDERING IS OBSERVED BOTH IN PUBLIC AND PRIVATE ENTITIES (60%)





Monitoring Office


Prevention Office


Mindanao

· Real estate 2 4 2 4

· Finance, banking 1 3 1 1 1

· Trade 3 2 3 2

· Construction 4 1 4 3

· Other (Please specify)……………. drugs

THE FIELDS WHICH HAVE THE HIGHEST RISK OF MONEY LAUNDERING ARE 1)FINANCE/BANKING 2)TRADE 3)REAL ESTATE 4)CONSTRUCTION





Monitoring Office


Prevention Office


Mindanao

· Business 4 2 5 2 5

· Cash transaction 5 1 3 4 1

· Casino 3 6 4 9 3

· Money exchange 8 3 2 7 2

Project 7 4 6 3 4

Real estate 2 5 7 5 7

Stock market 6 7 8 6 6

Through internet 9 9 9 8 8

Through financial institutions 1 8 1 1 9

· Other (Please specify)……………. 4 2 5 2 5

THE MOST COMMON METHOD OF MONEY LAUNDERING ARE 1) CASH TRANSACTION 2) BUSINESS 3) FINANCIAL INSTITUTIONS





Monitoring Office


Prevention Office


Mindanao

· International economic

integrating / /

· Bank and financial institutions do not have suitable supervision/control system to anti money laundering

/ /

· Use of cash and illegal money

transfer is dominant / / /

· Legal system for anti money

laundering is not enough / / / /


THE LEGAL SYSTEM FOR MONEY LAUNDERING IS NOT ENOUGH AND USE OF CASH AND ILLEGAL MONEY TRANSFER IS DOMINANT





Monitoring Office


Prevention Office


Mindanao

· Embezzlement / / /

· Corruption / / ·

Production, buying and selling of illegal goods / /

· Terrorism / /

· Drugs / / / /


DRUGS AND EMBEZZLEMENT ARE OFFENCES CLOSELY ASSOCIATED WITH MONEY LAUNDERING

THE TOP THREE OFFENCES:





Monitoring Office


Prevention Office


Mindanao

1. Drugs Drugs Corruption Embezzlement Drugs

2. Corruption Corruption Embezzlement Corruption Terrorism

3. Embezzlement Embezzlement Drugs Terrorism Corruption

How would you rate the approximate average amount of monetary involved for the top three offences. (Please choose from the answers below)

1 = Less than USD10M

2 = Between USD10M - USD50M

3 = Between USD50M - USD100M

4 = More than USD100M



Office I & II



Monitoring Office



Ombudsman for Mindanao ·

Offence rank No.1 : 1 2 1 2 1

· Offence rank No.2 : 2 1 1 2 2

· Offence rank No.3 : 3 1 1 2 3





Monitoring Office


Prevention Office


Mindanao

· Avoiding prosecution / / /

· Becoming legitimate / / /

· Evading taxes / /

· Hiding illegally accumulated wealth / / /

· Increase profit / /


THE MAIN REASON CRIMINALS LAUNDER MONEY INCLUDE THOSE ENUMERATED BELOW





Monitoring Office


Prevention Office


Mindanao

· Increased crime and corruption / /

· Weakened financial institutions / /

· Compromised economy and private sector / / /

·

Negative impact on foreign investment / /

·Reduced government tax revenue and weakened government control over the economy

/ / /

· Damaged privatization efforts / /

· Other (Please specify)……………. all of the above

THE CONSEQUENCES OF MONEY LAUNDERING ARE THOSE ENUMERATED BELOW





Monitoring Office


Prevention Office


Mindanao

· No consequences

· Not too serious /

· Serious /

· Very serious / /


THE ECONOMIC AND SOCIAL CONSEQUENCES THAT MONEY LAUNDERING HAS CAUSED IS VERY SERIOUS





Monitoring Office


Prevention Office


Mindanao

· No impact

· Not too serious /

· Serious / /

· Very serious / /

· Extremely serious

MONEY LAUNDERING HAS VERY SERIOUS NEGATIVE IMPACT ON NATIONAL SECURITY, INTERNATIONAL REPUTATION AND WEAKENS THE ECONOMY AS WELL AS ECONOMIC REFORM

THE MOST SIGNIFICANT INCIDENCES OF CORRUPTION THAT TOOK PLACE FROM 2007 TO 2012




Monitoring Office

Public Assistance & Corruption Prevention Office

Deputy Ombudsman for Mindanao

i. ………… smuggling

AFP/PNP coruption cases (eg. Garcia Case)

NBN-ZTE deal ZTE

ii. ………..

use of gov't funds for personal use

NBN_ZTE Deal (against former Pres. Arroyo)

Military Procurement

Gen. Ligot case

iii. ……… bribery in high places

PCSO Plunder Case (against former Pres. Arroyo)

Police Procurement

PAGCOR

THE USUAL STYLES OF MONEY LAUNDERING IN THE COUNTRY


Council



Monitoring Office



Mindanao

Money laundering also involves using, processing, concealing or disguising money or property to make it look that it came from legitimate sources

Buying the winning jackpot lotto ticket

Others asked relatives to look for OFW who sends money to their relative in the country. The relative received the dollar (etc) and text the name and amount/address and the launderer will deliver the money to the addressee in person or deposit in the account

A GENERAL ASSESSMENT OF MONEY LAUNDERING IN THE COUNTRY


Council



Monitoring Office



Mindanao

Criminals are increasingly becoming more savvy in concealing the proceeds of illegal activities. Various Media are now being used including technology

maybe crime Weak enforcement of the Law; very limited predicate offences

Money laundering is more common among drug lords/gambling lords/terrorists/smugglers and legislators/politicians

audit to detect fraud and corruption: evaluation of the fight against corruption and money...

Documents

reality of corruption

petty corruption

preliminary investigation

mindanao slide

pattern of corruption

antimoney laundering

philippines slide

public entities