Forensic Interviewing for Fraud & Liability in the Workplace

1. INTERNAL AUDIT SERVICES, INC. INTERNATIONAL BOARD CERTIFIED FORENSIC FRAUD EXAMINERS

2. DISCLAIMER • The information provided herein should be used only as a guide and not as the only source of reference. • The author and firm will have neither liability nor responsibility to any person or entity with respect to any loss, damage or injury caused or alleged to be caused directly or indirectly by any information contained or omitted from this publication.

3. FORENSIC INTERVIEWING FORFRAUD & LIABILITY IN THE WORKPLACE BY: JOHN A. CAPIZZI, CFE, FACFE, DABFE INTERNAL AUDIT SERVICES, INC., INT’L www.internalauditservices.com

4. What We Do: Internal Audit Services, Inc. (IAS), with offices in Palm Beach, FL and Philadelphia, PA. Is a firm providing International confidential fraud examination and detection of “White Collar Crime” and loss prevention by offering the following services: • Fraud Examinations; • Assistance to Internal Auditors, CPA’s, Insurance Carriers; • Business Management, Corporate Counsel; • Personnel Integrity Reviews; • Training; and • Confidential Advisory Services.

5. Internal Audit Services, Inc. (IAS) Provides you with the best business solutions to these problems by specializing in identifying the wrongdoer through Forensic Interviewing with a high success rate in prosecution or in gaining a signed confession with restitution

6. OBJECTIVE Assist internal auditors, CPA's, attorneys, human resources, insurance carriers, business management and law enforcement in fraud examination and loss prevention through forensic auditing and forensic interviewing techniques

7. GENERAL PROFILE OF AN EMBEZZLER

8. MALE • 25 to 35 years old • Executive or Administrator • Takes money to maintain a certain life style • Sometimes may have an accomplice • Give as causes: • Marital troubles • Drugs • Gambling habits • Greed • Just for the fun of it • Average amount stolen: $10,000 to 25,000 • Accounts for 60% to 65% of embezzlement arrests

9. FEMALE • 19 to 30 years • Bookkeeper ,Teller or Junior Officer • Takes money because: “I’m not paid what I’m worth” • Divorced-husband’s not working to support family • Almost never with an accomplice • Average amount stolen: $1,000 to $2,500 • Accounts for 35% to 40% of embezzlement arrests

10. Statistics from the United States Department of Justice indicate that when embezzlers are prosecuted, about 30% of those convicted spend time in jail. Convicted women embezzlers with children are even less likely than men to receive jail sentences. 92% of those persons convicted of financial institution robbery serve time in jail. However, PERSONS WHO EMBEZZLE FROM FINANCIAL INSTITUTIONS, WHETHER MALE OR FEMALE, ARE LESS LIKELY THAN ANY OTHER TYPE OF EMBEZZLER TO RECEIVE JAIL SENTENCES.

11. CRIME TRIANGLE

12. CRIME TRIANGLE A.VICTIM (Your Company) B.DESIRE (Need) Created by financial problems Be sensitive to employee needs 1. Bad checks 2. Loan turndown 3. Comments about money problems 4. Calls from creditors Created by other problems 1. Drugs 2. Outside business interests Non-shareable problems C.OPPORTUNITY ( Reduce Opportunity) 1. Follow procedures 2. Enforce dual control 3. Control and protect keys 4. Surprise audits

13. RED FLAGS • Financial Pressures on Employees • Employee Personality Changes • Poor Money Management by Employees • Employees Living Beyond Means • Employee Outside Business Interests • Poor Internal Controls • Too Much Control in One Employee

14. Lax Management • Failure to Pre-Screen Employees • Records Altered-Missing or Destroyed • Chronic Shortages • Signatures on Records Appear to be Forgeries • Employee Drug or Alcohol Abuse • Employee Gambling Problems • Employee Gives Inadequate Answers when Questioned about • Missing Supplies or Property-Funds • Customer or Supplier Complaints about Shortages or Discrepancies

15. Psychological Profile

16. PSYCHOLOGICAL PROFILE ESTABLISHED THROUGH PERSONNEL RECORDS: A) APPLICATION B) REVIEWS C) REPRIMANDS ESTABLISH: A) EDUCATION LEVEL B) WORK HISTORY C) REASONS FOR BREAKING PRIOR EMPLOYMENT D) REFERENCES E) GEOGRAPHICAL VALUES (NORTH, WEST, MIDWEST, SOUTH) F) QUESTIONS TO ESTABLISH NORMAL SPEECH PATTERNS EX: DATE OF BIRTH SOCIAL SECURITY NUMBER DATE OF HIRE G) MARITAL STATUS H) FINANCIAL SITUATION

17. INTERVIEW WITH DIRECT FAMILY MEMBER, FRIEND, NEIGHBOR, SUPERVISOR ESTABLISH: • TEMPERAMENT OR SUBJECT • MOODY, STREETWISE, EMOTIONS • RELIGIOUS • FAMILY RELATIONSHIPS • ETC. THIS INFORMATION IS VITAL TO DEVELOPING EFFECTIVE RATIONALIZATION DURING THE COURSE OF THE INTERVIEW PROCESS

18. HOW TO INTERPRET VERBAL CLUES ESTABLISH SUBJECT’S NORMAL SPEECH PATTERNS. REFERENCE PSYCHOLOGICAL PROFILE - ASK: NAME; ADDRESS; D.O.B.; S.S. #; D.O.H., ETC. TRUTHFUL SUBJECT: • A) ANSWERS WILL BE DIRECT, TIMELY, UNDERSTANDABLE • B) RESPONSES TO THE INVESTIGATION WILL BE DIRECT • C) SUBJECT WILL TALK EASILY OF EMPLOYMENT, JAIL, POLICE, EMBARRASSMENT, STEALING, EMBEZZLING, FRAUD • D) COOPERATIVE • E) NO ATTEMPT AT FRIENDSHIP WITH INTERVIEWER • F) WILL USUALLY HAVE DIFFICULTY IN REMEMBERING EXACT DATES

19. UNTRUTHFUL SUBJECTS (RED FLAGS): A) ANSWERS WILL BE VAGUE, STAMMERING B) RESPONSES WILL BE TOO QUICK, TOO SHORT, TOO LONG, PAUSING C) SUBJECT WILL TALK ABOUT “BORROWING MONEY”, “OWED SOMETHING”, “REASSIGNED ACQUISITIONS” D) WILL HAVE ALIBI AND EXACT DATES MEMORIZED E) MAY BE OVERLY FRIENDLY - EVEN THANKING YOU FOR INTERVIEWING HIM F) ANYTHING YOU DO IS ALRIGHT AS LONG AS YOU BELIEVE HE/SHE IS NOT GUILTY G) BEFORE ASKED, THE SUBJECT WILL GIVE YOU REASONS WHY THEY COULD NOT BE INVOLVED

20. UNTRUTHFUL SUBJECTS (RED FLAGS) CONTINUED: H) WILL TELL YOU THEIR MEDICAL PROBLEMS (I.E. HEART CONDITION, BLOOD PRESSURE) I) PROVIDE UNCHECKABLE SOURCES TO BACK UP THEIR ALIBIS J) WILL TRY TO POSTPONE THE INTERVIEW SESSION K) WILL REPEAT YOUR QUESTIONS OR ASK YOU A QUESTION L) SUBJECT WILL BE NON-RESPONSIVE - SILENT

21. TWO BASIC TYPES OF BEHAVIOR I. PHYSICAL BEHAVIOR A) BODY POSITION IN RELATION TO INTERVIEWER B) BODY MOVEMENTS DURING THE INTERVIEW II. INVOLUNTARY RESPONSES A) RESPONSES TO QUESTIONS BEING ASKED

22. SUBJECTS UNDER CONSISTENT INTERVIEW/INTERROGATION, TRUTHFUL SUBJECTS WILL BECOME STRONGER IN THEIR DENIALS AND WILL INTERRUPT THE SESSION MORE FREQUENTLY AS TIME PASSES. UNTRUTHFUL/GUILTY SUBJECTS WILL BECOME WEAKER AS THE QUESTIONING CONTINUES. THE LONGER THEY ARE IN THE SESSION, THE MORE DOCILE THEY BECOME.

23. COMMON FACTOR BETWEENTRUTHFUL/UNTRUTHFUL IS COMPLAINING A) CIVIL RIGHTS VIOLATED OR IGNORED B) HUMAN RIGHTS VIOLATED OR IGNORED C) ROOM IS TOO HOT OR TOO COLD D) INTERVIEW SCHEDULE IS INCONVENIENT TRUTHFUL SUBJECT: WILL USUALLY WAIT FOR YOU TO COMPLETE THE INTERVIEW BEFORE COMPLAINING UNTRUTHFUL SUBJECT: WILL LET YOU KNOW AT THE BEGINNING OF THE INTERVIEW SESSION THAT THEY ARE UNHAPPY, RIGHTS HAVE BEEN VIOLATED, AND THE PROCESS IS TAKING TOO LONG

24. ROOM SETTING A) NEUTRAL LOCATION B) IDEAL DIMENSIONS ARE 10' X10' C) PRIVACY - LACK OF DISTRACTIONS (I.E., PHONE CALLS, INTERRUPTIONS) D) GOOD LIGHTING E) GOOD VENTILATION F) TWO FIXED CHAIRS (PREFERABLY WITHOUT ARMS) G) DESK CLEAR OF DISTRACTIONS (PENS, PENCILS, PAPERCLIPS, KLEENEX, ASHTRAYS, ETC.) H) PROPS (I.E., CASE FILE) I) ROOM CLEAR OF REMINDERS OF PUNISHMENT J) ONE ON ONE

25. CONCLUSION The process of identifying and understanding who we are investigating/examining will help minimize the risk of litigation and increase the probability of a successful fraud/liability examination for your company/organization. A. DO: Homework One on one if possible State purpose clearly - ask to repeat if not understood Thank interviewee for his/her time B. DON’T: Ever go in “cold” Get discouraged Begin too abruptly Debate Let session drag out

26. INTERNAL AUDIT SERVICES, INC. INT’L 6231 P.G.A. Boulevard Suite 104 #136 Palm Beach Gardens, FL 33418 USA (561) 626-7746; (800) 434-7746 8001 Castor Avenue #386 Philadelphia, PA 19152 USA (215) 745-1529; (800) 434-7746 E-Mail: jcapizzi@internalauditservices.comWebsite: www.internalauditservices.com