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Jiwasaraya\u2019s\u00a0mega scandal has continued to be in the media\u2019s\u00a0spotlight since the end of 2019\u00a0as the state-owned\u00a0insurer failed to pay the matured policies of JS Saving Plans\u00a0worth Rp 12.4 trillion. As a result of this scandal, the Attorney General’s Office estimated\u00a0that the country’s potential loss\u00a0has\u00a0reached\u00a0Rp 13.7 trillion. Here are three facts about Jiwasraya’s fraud case.<\/p>\n
According to Shaker A Zahra, et al. in their study titled\u00a0Understanding the Causes and Effects of Top Management Fraud, <\/i><\/em>top fraud management\u00a0<\/i><\/em>consists of\u00a0deliberate actions taken by management at any level to deceive, con, swindle or cheat investors or other key stakeholders. Fraud can take many forms, including embezzlement, internal trading, and corruption. Top management may also involve window dressing.<\/p>\n The Audit Board of the Republic of Indonesia, held a press conference on Thursday 8 January 2020 regarding the results of their investigation on Jiwasaraya. They revealed the fact that Jiwasraya window dressed their financial statements in 2006. And as the company\u2019s financial statements were made by the company’s management, this classifies this case as top management fraud. And window dressing is ultimately a time bomb. According to the study, top fraud management has a far-reaching impact. Not only in regard to harming the stakeholders – customers, employees, the insurance industry, but also society in general.<\/p>\n Similar to the Enron case, the Jiwasraya scandal involves a Ponzi scheme on its investment products, as revealed by Jiwasraya\u2019s\u00a0Director Hexana Tri Sasongko to CNBC Indonesia (12\/29\/2019). He acknowledged that at the beginning, the company had no intentions\u00a0of\u00a0practicing\u00a0the Ponzi scheme. However, amid a twisted financial problem, Jiwasraya guaranteed an interest return of up to 13% for the JS savings plan products\u00a0and 14% for traditional insurance products. The situation encouraged the\u00a0company\u00a0to pay their old customers’ matured policies with new customers’ premiums.<\/p>\n The Attorney General’s Office on Wednesday 15 January named five people as corruption suspects, three of whom were the former Jiwasraya Finance Directors\u00a0for the January 2013-2018 period, the Jiwasraya President Director for the 2008-2018 period and the former Head of the Jiwasraya Investment and Finance Division.<\/p>\n <\/p>\n Also Read: <\/strong><\/p>\n Learning From the Mistakes of Big Companies That Lost Billions of Dollars Due To Fraud<\/a><\/strong><\/p>\n 5 Theories Explain Why Frauds Occurred Repetitively<\/a><\/strong><\/p>\n Is a Fraud a Cultural Issue?<\/a><\/strong><\/p>\n <\/p>\n The Jiwasraya fraud scandal can occur in companies across many different industries, both in large and small scales. The good news is that fraud can be prevented. Generally, fraud cases are often a cultural problem, namely, transparency. In the Jiwasraya case, this transparency problem is reflected in the fact that the company conducted window dressing.<\/p>\n Fraud is a shade-loving plant.\u00a0Therefore,\u00a0the only way to constrain\u00a0this\u00a0undesirable conduct by executives is to increase the visibility of their actions\u00a0as mentioned in an article titled\u00a0Business Fraud: Culture is the Culprit <\/i><\/em>from\u00a0the FTI Journal.<\/i><\/em>\u00a0Transparency creates an environment that\u00a0is\u00a0uncomfortable for fraudsters, as it makes\u00a0actions that hide illegal activity and information difficult.<\/p>\n <\/p>\n The key in combating corruption, misconduct, and other kinds of frauds is detection. Whistleblowing is the most effective way to detect fraud early on. A proper whistleblowing system should at least be\u00a0able to protect the whistleblowers from\u00a0being subject to any kind of retaliation. A whistleblowing system that works such\u00a0a\u00a0way\u00a0will create an environment where each individual supervises each other. Over time, it\u00a0will encourage and nurture a culture of transparency.<\/p>\n Integrity through the Canary\u00ae Whistleblowing System<\/a><\/strong> provides third-party whistleblowing service that enables the safe, secure, and anonymous reporting of activities involving misconduct, fraud, abuse, and other violations of the company’s policies. For more information about our whistleblowing system service, contact us today!<\/a><\/strong><\/p>\n <\/p>\n <\/p>\n <\/p>\n2. Ponzi Scheme<\/strong><\/span><\/h2>\n
3. Corruption<\/span><\/strong><\/h2>\n
So, what can companies do to promote transparency?<\/h3>\n