The insurance company Aflac is probably known best for its ubiquitous duck mascot. It is also consistently ranked on Ethisphere magazine’s World’s Most Ethical Company list, and Fortune’s World’s Most Admired Companies and 100 Best Workplaces for Millennials lists. But in the coming months and years, it might also become well-known for fraud and worker abuses.Read More
Fraud is always an unfortunate occurrence that shakes the confidence of its victims. They often doubt themselves and wonder how they could have missed the signs. While every type of fraud is damaging to the psyche of those fleeced, insult is added to injury when victims are defrauded by friends or loved ones. In honor of the Ides of March, the infamous day Julius Caesar was stabbed by members of the Roman Senate led by his friend Brutus, let’s look at some fraud cases where personal betrayal may have hurt more than the loss of money.Read More
Mandy Moody, CFE
ACFE Content Manager
As they say, "the truth is often stranger than fiction." This Halloween, that quote rings ever so true when reading some of latest fraud news stories to pop up on my social media feeds. While many of the tales I recently read tell of hackers sneaking in to bank accounts from overseas and outsiders stealing personal information and data, we can't forget to be just as wary of the people we DO know.
Here is just a sampling of the top news articles that left me in stitches, scared and a little creeped out this Halloween:
In stitches: A man in eastern China is suspected of fraud after he allegedly signed an IOU for a loan for 110,000 yuan ($126,135) using ink that quickly faded. The man, surnamed Ru, had borrowed more than 120,000 yuan since 2013 from his friend, surnamed Ruan, and repaid 10,000 yuan in May 2015 and requested a new receipt, which he allegedly signed using the disappearing ink. Read more.
Scared: Nearly everyone who loses money in a scam says they missed red flags that could have saved them from being taken for a ride. But those signs are sometimes hard for people to see, especially when they're dealing with someone they believe in and who promises to make them money. "They are silver-tongued devils," says Utah U.S. Attorney John Huber. "Utah fraudsters are pretty good at what they do." Read more.
Creeped out: An Arizona woman claims a fortune teller hypnotized her and talked her into leaving $1,400. The psychic denied the allegations when confronted by CBS 5 Investigates. But the situation is an example of how difficult it can be for law enforcement officials to investigate accusations of fortune teller fraud. Read more.
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Managing Partner of Martin Kenney & Co., Solicitors
When news began filtering through to our network of international fraud and asset recovery lawyers that India was in the latter stages of drafting a Bankruptcy Bill, our ears immediately pricked up.
At ICC FraudNet, we know how important bankruptcy laws can be in preventing and tackling corrupt practices. Therefore in terms of engendering confidence from both investors as well as providing remedy for financial malpractice, the importance of the Bill cannot be underestimated. While India is one of the fastest growing economies in the world, it is no secret that it has struggled to overcome historically high levels of bribery and corruption.
We studied the draft Bill and on a pro-bono basis we set about compiling our own white paper detailing suggestions that would increase the Bill’s effectiveness.
One of the amendments suggested was the addition of a chapter on cross-border insolvency cooperation. We recommended moderating some aspects of the Bill to bring it in line with current international standards. These amendments would enable Indian insolvency office holders to recover assets squirrelled away abroad, outside the Indian jurisdiction: an imperative move for justice. In fact, UNCITRAL (United Nations Commission for International Trade Law) has created an excellent Model Law on Cross-Border Insolvency (1997) and a Legislative Guide on Insolvency Law (2004). Recently, the UNCITRAL National Coordination Committee for India was established to deepen its engagement and be more receptive to views from India.
Much of India now knows the case of Kingfisher magnate Vijay Mallya, who has attracted international interest. Indian media has reported official sources stating the Central Bureau of Investigation (CBI) had filed various charges, including money laundering, and that an arrest warrant had been issued. Mallya left the subcontinent for the U.K. in March, owing about $1 billion to creditors. The Indian authorities are seeking his extradition.
Mallya sought to take advantage of the old, flawed Indian insolvency laws to delay and avoid creditor actions. In light of this case and others like it, India’s government acknowledged the need to address the failings with this new legislation.
Yes, the subject of bankruptcy is far from being chic. Yes, it is complicated and appears to be of interest to just the few specialists who work within its legislative constraints. But nothing could be further from the truth. Bankruptcy is of massive public interest and a central part of the legal infrastructure of any healthy and successful economy.
Indeed, World Bank figures suggest that in India creditors take 4.7 years to recover 25 percent of dues from a bankrupt firm, while in the U.S. they get 80 percent and without the inordinate wait. It is rumored that there are 60,000 ongoing bankruptcies in India awaiting resolution.
The new legislation will make those running companies take their liabilities seriously, and see unviable businesses wound up speedily, saving shareholders and creditors from greater loss. This natural selection process will ensure survival of the fittest and investment is available for those enterprises seeking to grow.
To take on the daunting task of writing this new legislation is a testament to those involved. To recognize that there may be scope to improve the draft is evidence of their determination to make the Bill as effective as possible, and we are honored to be able to assist.
On May 5, the Lok Sabha lower house passed the draft Bill, whereupon it moved to the upper house, Rajya Sabha. On May 11 it was passed by the Rajya Sabha and will soon be enacted. We hope that some of our suggestions will make it into one of the Bill’s subsequent amendments.
These are exciting times for the Indian business community, who will now be able to conduct their commerce safe in the knowledge that they will have the support and protection afforded by a piece of modern, fit-for-purpose legislation. A strong bankruptcy law for India, that prevents tactical bankruptcies and garners confidence within the international community, will buoy investor confidence. This is a classic example of how the private and public sectors can come together and work as one with mutually complimentary goals and ambitions.
Martin Kenney is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative & asset recovery practice focused on multi-jurisdictional fraud & grand corruption cases. He is Co-Chair of ICC FraudNet's Task Force India www.martinkenney.com | @MKSolicitors
ACFE Public Relations Specialist
“Waste, fraud and abuse” has become a pervasive soundbite in the 2016 U.S. presidential election, but just how much fraud is actually occurring in the government? In a study of 2,410 occupational fraud cases investigated by Certified Fraud Examiners (CFEs) between January 2014 and October 2015, 18.7 percent of the reported fraud instances occurred in government entities. Although the instances of reported fraud in the government occurred at an equal frequency between local, state and federal government, cases that occurred on the federal level cost a median of $194,000 each — a noticeably higher level than the median cost of fraud at the local and state government levels ($80,000 and $100,000 respectively).
The Association of Certified Fraud Examiners (ACFE) published the results of its most recent global fraud survey in its highly anticipated 2016 Report to the Nations on Occupational Fraud and Abuse. Other key findings from the 92-page report include (all values in U.S. dollars):
Fraud is incredibly costly. The total cost of the frauds reported in the study was over $6.3 billion, with 23 percent of the cases costing more than $1 million. The study respondents estimated that the typical organization loses 5 percent of its annual revenue to fraud each year. When applied to the 2014 estimated Gross World Product of $74.16 trillion, this translates to potential global fraud losses of up to $3.7 trillion.
Small businesses are especially at risk. The study found that organizations with fewer than 100 employees faced the same median cost per instance of fraud as companies with more employees. However, less than half of the smaller organizations had implemented some of the most basic anti-fraud controls like implementing a fraud hotline, and establishing a management review and code of conduct.
Hotlines are becoming an expected control in most companies. In the study, CFEs reported that 60.1 percent of the organizations they worked with had a fraud reporting hotline in place, an 8.9 percent increase from the findings reported in 2010.
Physical documents are still key components in fraud. For the first time, respondents were asked how fraudsters attempted to cover their tracks. Even in such a technologically driven world, fraudsters are still relying on creating fraudulent physical documents, altering existing physical documents or destroying those documents.
The Report to the Nations also details findings such as how fraud risks varied by industry, how the implementation of anti-fraud controls affected exposure to fraud, the breakdown of fraud statistics by geographical region and the most common behavioral traits observed among fraud perpetrators.
The 2016 Report to the Nations is available for download online at ACFE.com/RTTN.