The Green Hyena’s 2023 Watch: Key Fraud Trends and Developments

Today, the 31st of December 2023, marks the final day of the year. We naturally look back at the past year and take our lessons to be learned. This moment of reflection is especially significant for us at The Green Hyena, as 2023 marked the year of our establishment. Just like the hyena, known for its keen senses and clever nature, we started our mission to scrutinize the world of white-collar crime. Our journey, much like that of a hyena’s in the wild, has been about vigilance and adaptability. We’ve strived to bring light to the shadowy corners of corporate misconduct, laying bare the underbelly of fraud, corruption, and non-compliance. With this article, we want to help you look through our eyes at the Green Hyena and discover five fraud trends we spotted in 2023.

Our goal is to expose, educate, and empower, and make information accessible and understandable to our readers. For a deeper understanding of our ethos and mission, please explore our About Page. Here, you’ll find a detailed insight into what drives us, the values we uphold, and the impact we seek to create in our pursuit of a more just corporate landscape. Looking ahead to 2024, The Green Hyena is committed to continuing this vigilant watch. We aim to evolve further, sharpening our focus on these critical issues that impact economies and societies worldwide. Our vision is not just to report and analyse, but to empower and educate, fostering a more transparent and accountable corporate world.

The Green Hyena: Fraud Trends Spotted in the Wild

Well, let’s not get too carried away and move to what you are really here for: the top 5 trends spotted during another year of exposing white-collar predators. What trends did we spot at The Green Hyena, and what steps do you need to take in 2024? Here are they.

1. Integration of ESG factors in compliance

First on the list of fraud trends spotted in 2023 is the integration of Environmental, Social, and Governance (ESG) factors in compliance programs. There is a growing need for companies to align their practices with evolving ESG standards to avoid issues like greenwashing and fraud. The European Union has been a frontrunner in establishing mandatory ESG reporting standards through the Corporate Sustainability Reporting Directive (CSRD), which came into force on January 5, 2023. This Directive modernizes the rules for reporting on social and environmental information, requiring a broader set of large companies, including listed SMEs, to report on sustainability.

The European Sustainability Reporting Standards (ESRS), developed under the CSRD, detail disclosure requirements in areas such as climate change, pollution, water and marine resources, biodiversity, and circular economy. Additionally, they cover social aspects related to the workforce, value chain, affected communities, and consumers, and include governance aspects like business conduct, anti-corruption, and anti-bribery practices (more about this towards the end of our list of fraud trends). Read our article “The Dark Side of ESG and the Energy Transition” to understand potential shadow sides of ESG-compliance.

The CSRD necessitates third-party assurance over the disclosed sustainability information. From 2024, companies will initially need only limited assurance, but by 2028, a higher standard of assurance akin to financial statements will be required. Furthermore, the CSRD outlines responsibilities for the companies’ administrative, management, and supervisory bodies in ensuring compliance with these requirements. The CSRD’s international impact is also not to be overlooked. US companies listed on EU-regulated markets are subject to these standards, starting with large companies having more than 500 employees in 2024. By 2025, this will expand to include all large US companies listed in the EU.

All together, it is uncertain how this development will play out in practice and we will likely spend more articles on this topic in 2024. What we do know is that the introduction of global ESG standards drive transparency, aligning with higher stakeholder expectations for corporate accountability in environmental and social impacts. They level the playing field, ensuring companies can’t gain unfair advantages by ignoring these responsibilities, and empower stakeholders to make informed decisions based on a company’s ESG performance. This shift towards openness and responsibility reflects a broader move towards ethical and sustainable business practices, bringing us to the second fraud trend spotted..

2. Increased expectations of corporate responsibility

The second trend that made it to our list of 2023 fraud trends are the increased expectations of corporate responsibility. In 2023, the corporate landscape is undergoing a transformation in terms of taking responsibility. This shift, as explored in our blog The Green Hyena, particularly in our detailed analysis of the Monaco Memo and its implications for corporate compliance here, reflects a new era where businesses are scrutinized not just for financial integrity but also for their ethical conduct and adherence to compliance norms.

Organsiations are increasingly held accountable for their role in preventing and mitigating white-collar crimes, including fraud and corruption. This responsibility goes beyond traditional financial performance and extends to their impact on broader societal and environmental issues. The growing emphasis on ethical governance, underscored by regulatory developments like the Monaco Memo, demands that businesses not only react to compliance breaches but proactively work to prevent them. This proactive approach is particularly pertinent in light of the failure-to-prevent laws and regulations, that place a greater burden on corporations to institute effective measures against misconduct.

The trend is a call for organisations to integrate robust anti-fraud, anti-corruption, and compliance strategies into their core operations. This evolution in corporate responsibility is reshaping strategies, pushing companies to adopt a more holistic view of their role in society, a role that balances profit with principled conduct. In this dynamic landscape, the importance of transparency, sustainable practices, and ethical decision-making is key, signaling a significant shift in how businesses are expected to operate in the face of evolving regulatory and societal expectations.

These developments collectively highlight a global shift towards greater corporate responsibility. Companies are now expected to take proactive steps to ensure compliance, with a clear emphasis on internal controls, effective communication policies, and ethical corporate behavior. This trend towards increased corporate responsibility seamlessly leads to the next trend of effective compliance, where the focus is not just on establishing compliance frameworks but ensuring they are practically effective and deeply embedded in corporate culture.

3. Culture as the foundation of an effective compliance program

As a third trend to be included on our 2023 wrap-up of fraud trends, we spotted culture as a cornerstone of an effective compliance program. Fitting in the overarching development of effective compliance. This year, developments like the EU’s adoption of ESG criteria, intensified enforcement of corporate crime laws in the US, and the UK’s introduction of legislation targeting ‘failure to prevent fraud and bribery offenses’ have underscored the critical need for effective compliance programs. However, these programs are no longer evaluated merely for their existence; the expectations have elevated.

Today’s environment demands more than just compliance on paper. Organisations are now expected to integrate these programs deeply into their corporate culture. This means moving beyond basic policies, training, and screening tools to critically evaluating the effectiveness of compliance systems. This new vision expands the responsibility of organisations to include their suppliers’ practices, holding them accountable for misconduct.

Assessing the effectiveness of a compliance program, especially in a global economy with varied laws and regulations, presents a challenge. Yet, methods exist to objectively evaluate and enhance program effectiveness. A robust compliance program is increasingly seen as a key tool in reducing corporate crime and misconduct.

Acknowledging the significance of this shift, January 2024 has been designated by us as the ‘Month of Compliance’, encouraging a thorough assessment of compliance programs. To help you with this, we developed a blueprint for building an effective compliance program. In total, the framework has 10 elements with 5 principles per element. In every blog, we will share an element, its principles and how you can measure the objective in your own organisation. The framework is practical and with sufficient openness to adapt it to your organisation. Using this framework is an opportunity to strengthen your framework, align with best practices, and ensure that your program is not just in place, but effectively guiding your organisation. Curious? Have a look at our first article explain how culture impacts effective compliance and how you can use it for your benefit.

4. Strengthening of whistleblower safeguards

The third trend in our 2023 fraud trends list concerns the further strengthening of whistleblower safeguards. The year saw significant progress in protecting and encouraging whistleblowers, notably through the implementation of the EU Whistleblowing Directive. By end-2023, the Directive’s scope broadened, particularly affecting private sector companies with 50 to 249 employees, now required to comply with the Directive’s stipulations. These include safe, accessible reporting channels, confidentiality for whistleblowers, specific timelines for acknowledging and responding to reports, and protection against workplace retaliation.

This broadening of whistleblower protection has influenced global best practices, encouraging employers to proactively prepare for compliance. Essential steps include monitoring the Directive’s implementation status in each EU country, establishing clear whistleblowing arrangements, and considering the consolidation of multiple hotlines into a central system. However, implementation challenges have been prevalent. Some member states have been criticised for either delays in implementing the Directive or specific aspects of their national laws. For instance, Spain’s law, introduced in February 2023, was praised for allowing anonymous reporting and promoting transparency, but criticised for its short complaint resolution timeframe and potential privacy concerns. Similarly, Ireland’s laws, aligning with the Directive, were commended for their clarity and stronger safeguards but also criticised for potentially discouraging whistleblowers due to the criminalisation of false reports.

In terms of financial impact and effectiveness, the US Securities and Exchange Commission (SEC) paid out substantial sums to whistleblowers in 2023, highlighting the value of whistleblower information in detecting and preventing fraud. The SEC filed 784 enforcement actions, obtained orders for nearly USD 5 billion in financial remedies, and distributed nearly USD 1 billion to harmed investors. The SEC’s actions reflect a global trend towards recognising and rewarding the critical role of whistleblowers in uncovering fraudulent activities.

These developments illustrate a growing global commitment to fostering a culture where speaking up is encouraged and protected, reinforcing the role of whistleblowers as a key tool in detecting and preventing fraud. As stronger safeguards for whistleblowers emerge, attention is increasingly turning towards addressing bribery and corruption. This trend reflects a growing recognition that encouraging transparency and accountability in reporting can directly impact efforts to combat corrupt practices. Enhanced whistleblower protections are not only empowering individuals to speak up but are also driving organizations to more rigorously examine and improve their anti-bribery and corruption measures.

5. Reinforced focus on bribery and corruption

The fifth and final trend on our 2023 fraud trends list concerns the reinforced focus on bribery and corruption. Besides noteworthy enforcement actions such as the Swiss enforcement action against Trafigura, 2023 was a year in which many anti-corruption efforts were seen. This trend aligns with the 2022 Report to the Nations, which identified corruption as the most impactful type of fraud. In response, several significant legal developments occurred globally in 2023 to combat corruption and bribery.

To name a few. In the UK, the Economic Crime and Corporate Transparency Act (ECCTA) became law on 26 October 2023. This Act includes the ‘failure to prevent fraud’ offence, targeting large organisations without adequate fraud prevention procedures in place, particularly when fraud benefits the organisation. In the US, the Foreign Extortion Prevention Act (FEPA) was enacted as part of the 2024 National Defense Authorization Act. The FEPA addresses the ‘demand side’ of foreign bribery, making it a criminal offense for foreign officials to solicit or accept bribes from US entities or individuals.

On the European front, the European Commission proposed stronger rules to fight corruption in May 2023. Amongst others, the Commission proposed a new Directive on Combating Corruption. This directive aims to update the EU’s legal framework on corruption, ensuring comprehensive criminalisation of corruption in all member states. It emphasises the criminal liability of both natural and legal persons and mandates effective, proportionate, and dissuasive criminal penalties for various corruption-related activities, including bribery in the public and private sectors.

Despite perceptions by some that corruption is no longer a pressing issue, the fraud trends and legal developments of 2023 suggest otherwise. These developments are a clear indication that, contrary to the belief that corruption might be waning in relevance, 2024 is shaping up to be an important year in the fight against corruption. Organisations and individuals should prepare for a more rigorous enforcement landscape, reflecting the global commitment to uphold integrity, transparency, and legality in business and governance practices. The message is clear: corruption remains a significant issue, and the global response is becoming increasingly robust and coordinated​

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