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Jakarta Post

Tech, culture and fraud

Every now and then we are reminded of the one problem that would always be part of our life; fraud

Hendi Yogi Prabowo (The Jakarta Post)
Yogyakarta
Sat, January 26, 2019

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Tech, culture and fraud

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very now and then we are reminded of the one problem that would always be part of our life; fraud. With more access to news and information about various fraud schemes, more people should be able to protect themselves from becoming fraud victims because of their increased awareness of the threats.

Instead, technology has enabled crimes such as website hacking, cyberterrorism, identity theft and spam emails. The McAfee Labs Threats report of December 2018 stated that the effectiveness of today’s cybercrimes is enhanced by support from underground cybercriminal forums. The report also highlighted the pervasiveness of targeted attacks motivated by cyberespionage.

Decades ago many argued that technology and humans were two separate, although coexisting, things. Now many experts are considering technology today as inseparable from human interactions. Our daily communication is made easier by technological means such as text messages, emails, WhatsApp and Skype. The emergence of such tools was driven by our need for expanding our social interactions across boundaries more conveniently.

With various technological products used daily it is easy to forget the implicit cultural values behind them that may determine how they are used, as well as their benefits or drawbacks. For example, technology-enabled whistleblowing systems that work well in Western countries may not work as well in Eastern cultures.

Referring to Geert Hofstede’s cultural dimensions, in collectivistic cultures such as those of many Asian countries “harmony” is valued above all other values, so it needs to be maintained no matter what the cost. Thus, reporting to whistleblowing systems would be considered inappropriate as it would disrupt harmony.

Another cultural dimension, “power distance”, may explain how people react differently to news and information. Power distance is the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. People from a high power distance culture who emphasize hierarchy and authority prefer to seek opinions from others, in particular those of authority figures. Therefore, in such cultures people tend to rely more on opinions in making decisions.

In contrast, people from low power distance cultures prefer to seek facts and data from as many sources as possible before deciding on matters of importance. Thus, a major challenge in a high power distance culture is that personal opinions are often considered more valuable than facts and data, which may lead to problems such as susceptibility to fake news and hoaxes circulated through, for example, social media platforms.

Evidence suggests one of the root causes of social problems such as fraud and economic crime is that cultural dimensions shape our behavior and attitude toward technology.

According to a report by the Basel Committee on Banking Supervision entitled “Cyber Resilience: Range of Practices” released last December, the extensive use of technology in financial sectors, which has provided financial service providers with greater levels of automation and integration with third-party service providers and customers, has increased the risk of cyberattacks from anywhere around the world. This, according to the committee, requires service providers to ensure their systems are “secure-by-design” and resilient to current threats.

On the other hand, according to another study by PricewaterhouseCoopers, “Global Economic Crime and Survey 2018: Southeast Asia Report”, a strong hierarchical culture within many organizations has resulted in resistance to change which eventually hinders the development and implementation of new anti-fraud technologies.

Furthermore, the report also highlighted several defensive reactions such as “I’ve done this longer than you” and “Why now?” as a barrier to companies in improving their capability for fighting fraud. Such reactions may have been caused by management’s excessive familiarity with old anti-fraud routines, as well as fear of diminishing power caused by changes within their organizations.

According to studies by Hofstede Insights, Indonesia is among the countries characterized by high power distance and high collectivism, which can be associated with various fraud problems. Developing anti-fraud tools, no matter how advanced, without considering cultural values would only become a waste of resources with little or no results.

Finally, the development and implementation of anti-fraud technology in a country like Indonesia must be accompanied by strong leaders who can tear down cultural barriers for changes within organizations.
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The writer is director of the Center for Forensic Accounting Studies at the Islamic University of Indonesia (UII) in Yogyakarta. He obtained his Master’s degree and PhD in forensic accounting from the University of Wollongong, Australia.

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