1. fraud and corruption module
steven powell

2. 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

3. 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)

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

5. 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

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

7. 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”

8. detection of fraud
Michael J Comer

9. 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

10. 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

11. 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

12. 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

13. 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

14. Questions

15. w w w .ens. c o . z a thank you tel +2721 410 2553 cell 082 820 1036
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