3 Tips for Conducting Interviews

GUEST BLOGGER

Courtney Babin
ACFE Communications Coordinator

In the most recent Fraud Talk podcast, Jonathan Turner, CFE, CII, ACFE Regent Emeritus, speaks about his top interviewing tips. As Turner says, “Everything that you do that adds another tool to the toolbox makes you more successful.”

Here are three of Turner’s tips for fraud examiners to remember while conducting interviews:

1. Have an Open Mind
In interviewing it is important to not let your own biases get in the way of the investigation. Biases can cloud your judgement, reality and, most importantly, your investigation. A flaw with many investigations is when you ask a question with an answer in mind, warns Turner. “If you walk in with a predetermination of what they’re going to say, you’re only going to capture part of what they have to say.”

One of the earliest fraud cases that Turner worked on was for a company that had received handwritten letters with serious allegations. He was hired on retainer to see what facts in the letters, if any, were true. The letters made some outrageous claims and Turner made a mistake that many people make. “I let my bias get in the way of my investigation,” admits Turner. “I judged the letters based on their content and their style instead of giving them the credence that they really deserved.” Once the interviews began, Turner was shocked to realize that the witnesses he interviewed had seen the shocking behavior that the letters stated. “One of the things that I use in interviewing to this day is to remember that no matter how outrageous the claim or how crazy the scheme sounds at first, you always have to be open to the possibility that it’s true or is a reflection of truth.”

2. Listen
Don’t do all of the talking — provide moments of silence, pause and wait. “The No. 1 tip is listening,” says Turner. “Listen to what they’re saying, let them take you places. If people feel like they are being heard, it encourages them to speak.” By listening instead of speaking you leave the interview open for the interviewee to say something you were not expecting. “It’s astounding how many people have confessed to things that I didn’t even know they had done,” says Turner. He mentions that there is always a temptation to come into an interview and show the interviewee how much you know, all of the facts that you’ve spent time figuring out and all of the details you’ve noted. But the weakness in that is that the interviewee begins interviewing you — you are telling them what you’ve learned rather than learning any new information. “I should walk out of that interview feeling like I’ve learned everything that there was to learn and feel like the other side has learned as little as I could possibly give them,” says Turner. “I always consider my best interviews the ones where the bad guy walks away thinking, ‘I just got away with that.’”

3. Practice
Mistakes happen. Everyone, even the most skilled fraud examiners, will make mistakes. How do you minimize those mistakes? Practice, practice and more practice. Turner has two exercises that will help even the most introverted fraud examiners become interviewing professionals (if they have the guts).

Write down five things that you want to know (anything) and go into your local grocery store, walk up to a stranger and ask that person those questions. “The reason I suggest this exercise is most of what makes people nervous about interviewing is their own internal anxiety about asking the questions,” says Turner. In order to interview successfully, you have to practice asking people questions to a point where you get comfortable asking them. Why did Turner choose a grocery store for his practice site? Because “to get people to engage in a conversation with you, you will have to use your powers of persuasion.”

Ready for the next exercise? This time, time yourself and try to get someone (a stranger – in a grocery store) to talk to you for two, then four, six, eight, 10 minutes. Use this one as a listening exercise. Ask them a question, listen to their responses and let that drive you to the next question.

These exercises will allow you to develop ease when asking strangers questions while evolving your ability to think on your feet and interview effectively.

Hopefully these three pieces of information spur your interviewing skills forward. And when all else fails, “Remember that the basics work 99 percent of the time.”

Hear the complete interview with Turner at ACFE.com/podcast.

The Fraud Triangle: Do “some men just want to watch the world burn?”

GUEST BLOGGER

Chris Ekimoff, CFE, CPA
Director, Forensic & Litigation Consulting
FTI Consulting

There are a few tenets to financial fraud that any auditor, analyst or attorney can quote chapter and verse; the most notable may be the Fraud Triangle.

Theorized by Donald Cressey in his 1973 work, Other People's Money: A Study in the Social Psychology of Embezzlement, the Fraud Triangle identifies three general elements found in the cases of embezzlement that Cressey studied: financial pressure (motivation), opportunity and rationalization.

Trusted persons become trust violators when they:

• Conceive of themselves as having a financial problem which is non-shareable.
• Are aware that this problem can be secretly resolved by violation of the position of financial trust.
• And are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as users of the entrusted funds or property.

In a recent Fraud Magazine article, “Defrauding for fun not need,” Robert Kardell, J.D., CFE, CPA/CFF, Special Agent at the FBI, discusses his take on the methodology and limitations of Cressey's seminal work. In his experience, Kardell has seen multiple cases of serial fraudsters without the cliché financial pressures of unexpected medical bills, mounting gambling debts or crippling drug addictions that take their employers for a ride anyway. These cases appear to be missing one element of the Fraud Triangle: financial pressure (motivation).

Kardell wishes to warn companies and potential victims that the well-off middle manager with a country club membership and no outstanding debts still may be making off with more than his or her share. He references a case of a fraudster at a Midwestern organization with a cushy six-figure salary, company car, and enough cash to travel the world and attend major sporting events. The investigation found the fraudster was submitting personal expenses for reimbursement, reclassifying expense accounts based on his embezzlement and seeking reimbursement for mileage on his personal car (yes, even with a company car!).

Kardell believes that some fraudsters are inherently criminal, and will pursue theft and embezzlement regardless of their personal financial standing. Batman's butler Alfred may have said it best.

It’s here I believe Kardell may want to consider an alternative to adding a side to the Fraud Triangle: the inherent need to steal might not be a financial motivation to embezzle, but it is a motivation for that individual nonetheless. Without delving too deeply into criminology theory, certain individuals may seek out the "high" of stealing from their employer; whether to get the thrill of violating the rules, the feeling of power in being able to manipulate their position, or because they find themselves unchallenged and bored in their day-to-day duties.

Kardell posits that organizations currently relying on a Fraud Triangle-based model of fraud risk management should strengthen their procedures around background investigations conducted during the hiring process. Does the individual show tendencies towards occupational fraud? How do their past employers and references describe their general behavior? What additional information can be gathered regarding the individual's expense reports or other financial duties at a previous company?

In the time since the publication of Other People's Money, financial fraud and the people who commit it have increased in complexity, length and severity. So, too, has our understanding of the reasons for those events, even when they may not appear to fit the common mold. Motivation has always been a subjective element to the Fraud Triangle — a latent need to steal is still a motivator for fraud, but should carry additional consideration going forward.

Chris Ekimoff, CFE, CPA, is a director at FTI Consulting in the Forensic & Litigation practice in Washington, D.C. He can be reached through email or on Twitter (@EkimoffCPA).

Disclosure: The views expressed in this piece are those of the author and aren't necessarily the views of FTI Consulting, its management or its subsidiaries.

What to Do When the Authorities Just Aren’t Interested

GUEST BLOGGER

Mary Breslin, CFE, CIA
President, Empower Audit

Sometimes stopping a fraud and terminating an employee are all you can do. Even though those are two accomplishments in themselves, they can leave you wondering, “What do I do when the authorities are not interested in criminally prosecuting an internal fraud?”

One of the easiest fraud cases I ever worked was also one of the most frustrating. My team and I did solid work and had iron-clad evidence, but we couldn’t convince the local authorities to do anything with the information. Unfortunately, it was one of those scenarios where the executives really wanted to prosecute and make a clear example of the situation.

As the chief audit executive, I reported to the general counsel for my organization. It was a great arrangement in my opinion, and I enjoyed working for him. We were a large international organization with operations in many developing nations. My team was routinely involved in fraud investigations, often on multiple continents simultaneously. But this fraud — this fraud was close to home. Literally in the office next door. The general counsel’s paralegal had been committing expense reimbursement fraud for two years, and the general counsel took it personally. Wouldn’t you?

A perceptive accounts payable clerk noticed some issues with the paralegal’s expenses and informed us of the inconsistencies. After a little research and some data analytics, we quickly found tens of thousands of dollars in purchase card (pcard) and expense reimbursement fraud. She had two major schemes. First, she paid for things with her pcard and then listed the items for cash reimbursement on her personal expenses. She always had a receipt! The opportunity had presented itself to her when she realized the general counsel did not closely review her expenses. Second, she charged a considerable amount of personal items to her company pcard. I won’t get into details, but I do believe she had everything ever made by Victoria's Secret.

Understandably, the general counsel felt a lot of things —anger, frustration, betrayal and a little foolishness for trusting her and not reviewing her expenses in detail. As a result, he wanted her charged criminally. She was not getting special treatment — we wanted to follow our normal process to prosecute for internal fraud. However, while there was approximately $30,000 in fraud, the local authorities were not interested in prosecuting. Why? Like most things in life, it was mostly about timing. At that particular moment in time, the local authorities had bigger cases they were concerned with and did not believe they could spare the resources to deal with our fraudster.

The final outcomes of even successfully executed investigations can be very frustrating and less than satisfactory. So how can this be prevented? It is always a potential problem, but if you do the following you are less likely to run into this issue:

• Make sure your case is ready to hand over to the authorities, including ensuring that you have solid evidence that was properly handled.
• Use experts. Bring in external assistance if you do not have fraud investigation and examination experts in-house.
•  If the authorities feel they are too busy, remember you have time. Understand what the statute of limitations is for the crime. Ask the authorities if it would be acceptable to check in periodically to see if their schedules allow your case to be addressed at a later time.
• You can initiate a civil suit to recover losses.

Remember: Catching the fraudster and ending the fraud is a deterrent to other fraudsters, so do not allow yourself to get too frustrated. Stop fraud and carry on!

New ACFE Report: Benchmarking Your In-House Fraud Investigation Team

GUEST BLOGGER

Andi McNeal, CFE, CPA
ACFE Research Director

In an ideal world, an organization’s management would not need convincing to invest in anti-fraud initiatives. Anti-fraud teams would also use their allocated resources as effectively and efficiently as possible. However, for many companies and agencies, one or both of these areas present challenges. Additionally, fraud investigation teams are often treated like any other department — they must justify their expenditures, prove their value to the organization, and vie with other departments for allocations of financial and human resources.

One of the best ways for any team to measure and report its effectiveness is to benchmark its structure and performance against industry norms. The ACFE has received numerous requests over the years for benchmarking information related to in-house fraud investigation teams. How many people are typically on the team? To whom does the team report? What is each investigator’s average caseload? How long does it take teams to turn around a case? What metrics are teams using to assess their effectiveness? Each time we received a request of this nature, we went digging and discovered that no information like this was publicly available. So we decided to tap into the collective knowledge of the ACFE membership and compile it ourselves.

The results of our research are available in our new report, Benchmarking Your In-House Fraud Investigation Team. Some of the key findings of the report include:

• Oversight of investigation teams is fairly diverse, but the greatest percentage of fraud investigation teams (28 percent) report to the head of internal audit.
• The majority of fraud investigators have an average caseload of fewer than five cases at a time.
• Nearly 40 percent of investigation teams do not use any formal metrics to assess their team’s performance.
• The most commonly used performance metric for investigation teams is percentage of cases closed year-over-year.
• Investigation teams that use percentage of cases resulting in legal action or amount of losses recovered as performance metrics tend to also have the greatest percentage of fraud losses recovered.

If you want to learn more about how other fraud investigation teams are structured and how your investigation team measures up, you can see the full benchmarking report at on ACFE.com.  We hope this new report helps support your team’s effectiveness and highlight its success to your organization’s decision-makers. And if there are benchmarking metrics or questions you’d like to see covered in future ACFE benchmarking research, please send your ideas to Research@ACFE.com.

Think Outside the Financial Data: Visualize Employee Activities

GUEST BLOGGER

Jeremy Clopton, CFE, CPA, ACDA
Senior Managing Consultant, Forensic and Valuation Services
BKD, LLP

We have more data available to us as fraud examiners today than we ever have before. However, we have less data today than we will likely have in the future. These new data sets are new opportunities for us, but also present new challenges. What data sets do you have that you need to leverage for your next fraud examination?

I am a big fan of podcasts, especially those that really grab my attention. Two recent podcast episodes, When Your Conspiracy Theory is True from Note to Self and Eye in the Sky from Radiolab, focused on the use of surveillance in crime prevention and detection. While fascinating, these podcasts didn’t directly relate to the world of fraud prevention and detection. But I found that the same principles can still be applied because of the focus on the use of non-traditional data sets — in this case, location-based — and visualizing them in an fraud examination.

Application in Examinations
Much of the data fraud examiners focus on is in the traditional accounting system, and the data that doesn’t come from the accounting system is still likely financial in nature. As I have mentioned in previous posts, to effectively leverage an organization’s data we need to think outside the financial data. Beyond the financial information, we have great amounts of data at our disposal about our companies and related activities. Take, for instance, data regarding access: access to buildings, computers, networks, phones, access to anything that tracks the user. This information can be used to essentially track an employee throughout your organization during the day, using such details as:

• Time of first email access
• Time when the person entered the parking garage
• Time accessing the building
• Time logging on to the computer
• File access times
• Breaks during the day based on computer activity
• Print times for individual documents
• Time logging off the computer
• Time leaving the building
• Time leaving the parking garage
• Re-entry of any location
• IP address if logged in off-site

While you may not have video or pictures tracking your employees, like the technology referenced in these podcasts, you do have individual data points that allow you to track your employees’ activities during the day so you can begin to create a picture of what their activities look like. Visualizing this information may be a benefit to you in your next fraud examination. If nothing else, it may help you narrow down the list of those you want to investigate further.