Warning Signals: Fraud

There has been a global wind of change concerning compliance and cross-border reporting regulations. Fraud and corruption are costing the global economy an estimated USD 1.5 trillion a year. Especially in China, this topic is coming to the forefront, as the government has launched a number of high-profile anti-corruption cases in recent years. Various anti-fraud surveys estimate that companies may be losing as much as 7% of their turnover as a result of corruption, with only a small percentage detected and recovered every year.


With the Chinese government seriously ramping up its investigations, it is a critical time for foreign companies operating in China to ensure compliance. Fraud can happen at all levels within a company and is not limited to a particular sector or even country. This is why many Fiducia clients hire us to analyse their current procedures to ensure the compliance of their China entities with the relevant laws and regulations.


While there is no fail-proof way to guard your business from corruption, we have come across a number of common reasons in our investigations. Below we share a few areas you can already keep an eye on to assess if you need to investigate further.



An unexpectedly high percentage of fraud occurs at senior management level. In these cases there is often a lack of clear reporting lines and review mechanisms. Sometimes bonus schemes can be too ambitious, being linked directly to financial results, increasing the incentive to engage in corrupt practices. In addition, often there are no proper training systems in place when it comes to professionalism in key accounting principles. We can help you devise a clear management control structure, covering responsibilities, authorities, delegation, and supervision.



Since awareness for anti-corruption is fairly new to China, often times the commitment of staff from all levels is still limited. This is why it is essential that companies have adequate recruitment and screening processes. Low salary levels, coupled with general dissatisfaction can have negative consequences, especially if the employee has access to desirable assets. We recommend revisiting your employment contracts and employee handbook, as well as your employer branding strategy, to ensure a healthy team with clear supervision.



Having clear internal control processes in place is a must-have in this day and age. Too often do we come across poor documentation practices and a lack of segregation of duties and independent checking mechanisms of key transactions. Frequently physical assets are not classified and properly accounted for. Moreover, access to critical IT systems is not monitored, allowing for fraudulent activities. We advise to take stock of your assets and set up transparent and clear reporting and documentation processes.


Fiducia carries out internal audits of your operations and can help you to structure your risk management by providing hand-on solutions.



The Fiducia ERP team can customise a dashboard for your unique needs to help you:

  • monitor your business activities in real time across all departments
  • generate customised and regular reports with one click
  • identify accounting warning signals and respond immediately
  • establish proper financial compliance and reporting procedures
  • align your accounting and controlling practices across borders

Email us at contact@fiducia-china.com for more information.