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Fraud Awareness Protecting Organizations and Their People

Fraud Awareness Protecting Organizations and Their People. Presenter’s Name Presenter’s Title Presenter’s Contact Info. Overview. The Facts Fraud Defined Why’d They Do It? Who Did It? Policy Red Flag Hotline Rule of Thumb. Why Me? / Why Now?. Consequential Damages

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Fraud Awareness Protecting Organizations and Their People

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  1. Fraud AwarenessProtecting Organizations and Their People Presenter’s Name Presenter’s Title Presenter’s Contact Info
  2. Overview The Facts Fraud Defined Why’d They Do It? Who Did It? Policy Red Flag Hotline Rule of Thumb
  3. Why Me? / Why Now? Consequential Damages Protect your job Protect your co-workers Protect your employer Not a witch-hunt; this is a good thing!
  4. The Facts Association of Certified Fraud Examiners’ 2012Report to the Nation – Estimates 5% of revenue lost to Fraud.This equates to $3.5 trillion internationally per year. Same report - typical fraud exists for 18 months before being detected. Same report - median loss per fraud occurrence investigated by its members was $140,000 (over1/5th exceeded $1,000,000). Hotline: Average loss was $100,000; No Hotline: Average loss was $180,000.
  5. The Muskegon Chronicle Former manager of Muskegon's Topline Hy-Lift plant charged with stealing from company MUSKEGON COUNTY — The former general manager of Muskegon auto-parts manufacturer Topline Hy-Lift faces a federal wire-fraud charge for allegedly stealing and selling more than $1 million of the company’s parts and equipment.
  6. The Economic Times Executive Indicted in $31 Million Fraud WASHINGTON: A former executive of Koss Corp, accused of using her position to fraudulently obtain more than $31 million from the stereo headphone manufacturer, has been indicted on six counts of wire fraud.
  7. Fraud Defined Defined by the U.S. Supreme Court as : a. A misrepresentation of a material fact, that b. The perpetrator knew was false, and was c. Made with the intention that the misrepresentation would be relied on, and that d. The victim did rely on the misrepresentation and as a result, incurred a loss.
  8. Fraud Triangle Opportunity Fraud Triangle Pressure Rationalization All three factors are usually necessary for fraud to occur.
  9. Why’d They Do It? EXAMPLES OF PRESSURES: PERSONAL HABITS: Alcohol, drug, or gambling addiction Expensive extramarital affair Family & peer-group expectations Sheer greed WORK-RELATED: Not appreciated Under paid Lack of respect Treated poorly FINANCIAL: New Debt Medical bills Overuse of credit cards Divorce Investment losses
  10. Opportunity Crime is a combination of motive and opportunity. Proper checks and balances are key. Employee reaches a position of trust/weak controls.
  11. Personal Integrity & Rationalization Perhaps the most important factor. Common rationalizations: Only borrowing the money. Nobody will be hurt. I am treated unfairly - this is owed to me. Good purpose. Only temporary.
  12. Example of Rationalization Two colleagues are dining out and one of them is thinking of using the company credit card to pay the bill. A supplier does not wish to reveal confidential information but will lose the client and blow a big sale if she doesn't. Which Way to an Ethical Decision?
  13. Example of Rationalization Which Way to an Ethical Decision? Option A * "It's all right, I'm going to pay them back anyway." * "It's not breaking any laws, so it's OK." * "No one's going to get hurt." * "No one will ever know." * "It's not that I'm trying to take advantage of my position." * "What's the fuss? It's only the first time!"
  14. Avoiding Rationalization Option B * "Am I breaking any laws or regulations?" * "What does the Code of Conduct say?" * "Maybe I should talk to a trustworthy colleague." * "Hmm, perhaps I should take a look at my options." * "How do I feel about what I am doing?"
  15. Avoiding Rationalization In handling ethical dilemmas, employees either talk themselves into making bad decisions, saying the things in option A or follow the structured guide in option B to come up with an ethical decision.
  16. Employee Fraud Conditions that lead to opportunity: Inadequate segregation of duties Company rules / consequences of violating them not communicated Rapid employee turnover Frequently operating under crisis conditions Lack of mandatory vacations Poor channels of communication.
  17. Employee Fraud (cont.) Source: 2012 ACFE Report to the Nation
  18. Who Did It? 53% with the company for more than 5 years Hold a management or executive position (55%) 75% are in accounting, operations, sales, upper management, customer service and purchasing Usually male (65%) Between 36-60 years old (68%) No prior convictions (87%; so 13% should have been screened!) College educated (74%) Common Red Flags: living beyond means, financial difficulty, close relationship with vendor/customer, unwilling to share duties, family problems, “wheeler-dealer” attitude, addictions, not taking vacation, unhappy with pay, etc., etc.
  19. Take Aways Fraud is prevalent in corporate America. Fraud puts my company at risk. Fraud puts my job at risk. Fraud increases my expenses. Fraud can happen at any level. Pressure and opportunity, along with integrity flaws, can lead to fraud. I must take action.
  20. “I” Must Take Action The Parable of Responsibility: Everybody, Somebody, Anybody and Nobody were members of a group. There was an important job to do and Everybody was asked to do it. Everybody was sure that Somebody would do it. Anybody would have done it, but Nobody did it. Somebody got angry because it was Everybody’s job. Everybody thought Anybody would do it, but Nobody realized that Anybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have done.
  21. Taking Action 100% anonymous unless you choose otherwise Toll free number Live 24/7 coverage Immediate reporting Key benefits: #1 way to detect fraud - communications #1 way to prevent fraud – strong tone at the top Reduces damages from fraud by 60%.
  22. Taking Action
  23. Taking Action
  24. Taking Action
  25. Taking Action
  26. Final Thought “[I’d] rather fail with honor than succeed by fraud.” -Sophocles
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