The Perils of Corporate Fraud in the Philippines

Financial crimes in business organizations are often committed internally, and in many cases by top-level executives whose illicit activities are often overlooked due to the high profile roles they play in the company. The cloak of authority in business organizations are particularly prone to abuse in the Philippines, where corporate hierarchy are hardly questioned by company auditors who either act in collusion with those who commit fraud or turn a blind eye for fear of retaliation.

As a consequence, corporate malpractice in the Philippines often go unnoticed, putting at risk their internal and external stakeholders. Notable corporate frauds in the Philippines in recent years include that of Metrobank, which erupted in 2017 and was one of the country's biggest scandals in the financial sector.

The fraud in Metrobank involved a rogue VP, who was discovered to have funneled loans to bogus accounts listed under a client’s name. When the suspect was finally seized by authorities in a sting operation it was uncovered that she had siphoned almost a billion pesos from the bank.

In 2016, the Rizal Commercial Banking Corporation (RCBC) figured in one of the most elaborate cybercrimes ever perpetrated in Asia. RCBC came under fire after the bank reportedly received millions of dollars stolen from Bangladesh’s central bank. Investigations found that funds from Bangladesh's central bank were transferred to suspicious local accounts in a specific RCBC branch. The manager of the branch immediately became a prime suspect as a vast conspiracy took shape in the public eye.

The incidents in Metrobank and RCBC, however, are but a few of the many unreported fraud cases in the Philippines. As such, companies seeking to partner with local firms in the Philippines need to ensure they have credible strategies in place for combating internal fraud. Investors need to constantly re-examine their strategies when entering an emerging markets like the Philippines, where the rule of law and regulatory institutions are often lacking.

In addition to external auditing firms, investors can hire business risk consultants, who can discreetly investigate and conduct corporate due diligence on local companies and their executives to examine whether they comply with international ethical standards. Such services can likewise come in handy in avoiding conflicts of interest with investors' other business assets and partners.

In the Philippines, however, very few if any, offer credible and efficient local corporate investigations and due diligence. Back in the early 2000s, a number of security risk consultancy firms thrived in the local scene as business activity in the country thrived. The global financial crisis in the late 2000s, though, saw several of these players downsized their operations, with some pulling out their operations from the country altogether. The flight of these firms from the Philippines has left a vacuum in the local corporate investigations industry.

Still, a number of professionals who used to be part of the once thriving corporate investigations in the Philippines remain active in their field, albeit as independent consultants. Such is the story of Risk Profiles Philippines, which was put up two years ago by corporate security professionals who now work on various due diligence, background investigations, and records verification for various international and local individual and corporate clients. To know more how Risk Profiles can help your organization in protecting your business interests in the Philippines, send us an email to [email protected] or contact its founder Benedict Alibasa in his LinkedIn profile or send him an email at [email protected].