fraud and corruption module steven powell

objectives? fraud facts and theory including the profile of the fraudster overview of corruption an explanation of corrupt practices, & procurement risks highlighting the EFT fraud risk prevention and combating of corrupt activities act fraud prevention and internal controls the tools to identify corruption case studies

understanding the fraud risk your most capable, most reliable, most trusted employee - mr fixit! more than 80% of all frauds involve employees, most of whom have more than 5 years of service TRUST REPLACES THE CONTROLS generally: older than 30, higher percentage are male, stable family situation, above average education, first offender - (look around)

the fraud triad - Psychology behind fraudulent conduct the fraud recipe pressure opportunity fraud rationalization

fraud pressures living beyond means insecurity regarding tenure of position trigger events divorce extra marital affairs medical emergency peer pressure gambling alcohol or drug problems

opportunity poor control environment remote location shared passwords limited segregation of duties limited independent review high trust

examples of “rationalizations” “it was just a loan I am going to pay it back” “it was a spotters fee” “it was just a commission” “the company does not pay enough money for us to survive” “the company has retrenched a lot of staff” “i should have been promoted long ago”

detection of fraud Michael J Comer

understand the risk: screen staff & suppliers too many organisations employ individuals with criminal records – you can ask about and check prior criminal history when you appoint to positions of trust too many of our suppliers don’t have the skills to do the work they sell to us declaration of interests coupled to regular screening is vital to identify moonlighting related party transactions (hidden) ghost suppliers

the symptoms of fraudulent behavior the red flags or warning signals in respect of the corrupt employee are always present - make sure that staff report suspicious activity

fraud red flags excessive lifestyle gambling alcohol or drug problems staff who constantly claim underpaid close relationships with suppliers sole suppliers - not shopping around poor credit rating poor communication and reports indulging in affairs not taking leave refusal of promotion excessive & unexplained overtime criminal record

divisional red flags too much trust placed in key employees limited segregation of duty no independent checks on reconciliation and payments no clear lines of authority or responsibility proper authorization procedures not enforced inadequate documentation & records infrequent independent reviews inadequate disclosure of interests & investments management override of the controls operating on a crisis basis inadequate attention to detail ©2004 Deloitte

conclusion be prepared prevention is better than cure people will try to tempt your staff promote a strong ethics culture review your anti-fraud controls annually perform control review regarding eft payments do not rely only on controls - only as effective as the people enforcing train people to recognize the symptoms do not work in a vacuum - use the tools and technology & most importantly – use the right experts ©2009 S Powell

Questions

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