1. Fighting Crime in the Workplace

2. Catch Me If You Can https://www.youtube.com/watch?v=hFj3OXVL _wQ https://www.youtube.com/watch?v=hFj3OXVL _wQ

3. Aims & Agenda Aims  Understanding the prevalence of crime in the workplace  What can YOU do to mitigate this exposure? Agenda  Industry Statistics  Common Scenarios  Real Losses  Profile of a Perpetrator  Prevention and Detection – a Risk Manager's Perspective (Lois Fuchs)  Commercial Insurance  Questions

6. Crime Exposures Cost to industry: typical organisation loses 5% of annual revenue to fraud: global estimated USD2.9 trillion per annum Recession fuelling rise in crime: loss as a proportion of income has risen 20% in the last year Severity: approximately 25% of all reported losses cost US companies more than USD1million Difficult to detect: average length of fraud losses prior to detection is 24 months Time served: largest frauds are committed by longest serving employees

7. Common Scenarios Theft (by employees or third parties): cash / stock Billing: employee creates a fictional vendor and bills employer for non-existent services Bribery and corruption: employee processes inflated invoices for supplier and takes a kickback Premises and transit: robbery/burglary/hold-up Payroll: employee claims overtime for un-worked hours or adds ghost employees to the payroll Information: employee or third party steals confidential customer or product information

8. Real Losses Case Study 1: Milton Morris, senior manager in charge of trucking at SC Johnson conspires with suppliers to overpay them in return for back- handers. Scam goes undetected for 10 years. Company obtains judgement against the perpetrator and trucking companies in excess of USD 200m. Case Study 2: Chia Teck Leng was sentenced to 42 years in jail, one of the longest jail term meted out for the largest case in commercial fraud in Asia to date. Chia was a finance manager at Asia Pacific Breweries when he forged documents to swindle banks out of S$117 million over four years to feed his gambling addiction. Case Study 3: Singapore Airlines' employee Teo Cheng Kiat, who embezzled S$35 million from the airline over 13 years. He was convicted in 2000 and jailed for 24 years for the crime.

9. Profile of a Perpetrator Age/seniority: middle management aged 41-50 commit more than a third of internal frauds – more authority and more access to company resources. Also responsible for the largest losses Tenure: longer-term employees commit the largest frauds Department: accounting department employees commit disproportionate number of crimes (30%). Senior management (18%), operations (16%) and sales (11%) staff also feature strongly Background: 87% or perpetrators have never been charged or convicted and 82% have never previously been punished or terminated Motivation: domestic financial difficulties/stress including divorce, gambling, drugs. Pure jealousy combined with rationalisation ("I work just as hard as the CEO why shouldn't I have the benefits which he/she enjoys"?) Red flags: living beyond means, financial difficulties, divorce/family problems, close association with vendor, refusal to take vacation, complains about lack of pay

10. Prevention and Detection – A Risk Manager's Perspective Prevention Internal/external audit Anti-fraud training Dual controls for cheque signing/wire transfers Employee vetting Detection Tip or complaint (including whistleblower hotline) Surprise audit Linguistic software Red flags

11. Commercial Insurance Covered Indemnifies the insured for direct financial loss i.e. first party loss caused by: Employee dishonesty Theft by a third party Counterfeiting or forgery of a negotiable instrument by a third party Computer crime by a third party Trigger: losses discovered during the policy period.

12. Commercial Insurance Not Covered Unauthorised trading Liabilities to third parties Loss caused by directors or major shareholders Consequential loss (e.g. computer downtime) Pure inventory loss Theft of trade secrets or confidential information

13. Morage Fraud video to prep for training lab Fraud video: https://www.bing.com/videos/search?q=fraud &&view=detail&mid=E75B5B7D4398397C153 2E75B5B7D4398397C1532&FORM=VRDGAR

14. Questions?