Not in My House: Companies Take a Proactive Stand Against Fraud

/

GLOBAL SPOTLIGHT

Mandy Moody, CFE
ACFE Social Media Specialist

With the changing mindset towards the subject of white-collar crime, corporations around the world are interested in making it clear to shareholders, regulators, the media and investors that they are taking proactive measures to prevent, detect and deter fraud. And it’s no wonder, as a recent COSO study found that news of an alleged fraud resulted in a 17 percent stock price decline in the two days surrounding the announcement. It is only imaginable what a fraud conviction’s effects are on a company. Think Enron, Olympus, Parmalat and WorldCom. 

Just as the effects are becoming more profound, so are the proactive steps companies are taking to prevent fraud from happening in the first place. As the ACFE’s Marketing and Business Development Director Kevin Taparauskas, CFE, said in a blog last year about the evolution of fraud over the past 15 years, “It is no longer a question of whether it is taking place within a company, but rather what are people doing about it?”

One thing companies like Raiffeisen Bank International (RBI) are doing is joining the ACFE’s Corporate Alliance program. The program, which began as a pilot program with anti-fraud teams at USAA and Walmart, provides companies wanting to take a proactive stance against fraud the opportunity to partner with the ACFE to help educate and grow their fraud-fighting teams. Benefits of the program include access to exclusive resources, training and membership pricing.

“Fraud can seriously harm a company,” Dr. Michael Wittenburg, CFE, Head of Risk Quality & Fraud Risk Management at RBI, said. “We need to fight it in every possible manner. We hope that with this alliance we will be able to significantly improve our know-how and get access to global best practices.”

RBI is based in Austria and is one of the most recent companies to join the ACFE’s Corporate Alliance program. RBI is one of the leading banking groups in Austria and Central and Eastern Europe with more than 60,000 employees servicing about 14.2 million customers. According to Wittenburg, they plan on implementing mandatory initial and continuous fraud training to employees and hosting tailor-made advanced trainings. They also plan to make the Certified Fraud Examiner (CFE) credential mandatory for staff in their fraud risk management department. 

Read the full Global Spotlight article.

Fraud No Longer a Dirty Word

/

GUEST BLOGGER

Kevin Taparauskas, CFE
ACFE Events & Marketing Director

Fraud is no longer a dirty word. Ten to 15 years ago, you couldn’t find a company executive out there who was willing to speak frankly on the subject. I suppose they thought that if they didn’t talk about it, everyone would think that it didn’t exist within their organization. Then came Enron…and Worldcom…and Madoff. Thanks in part to these high-profile scandals and publications such as the ACFE’s 2010 Report to the Nations, the prevailing opinion regarding occupational fraud has shifted. It is no longer a question of whether it is taking place within your company, but rather what are you doing about it?

Clearly, the answer to that question for many professionals was to join the ACFE and learn, develop and hone their anti-fraud skill set. Our association has grown exponentially over the past 10 years at a time when many trade groups are either treading water or shrinking in size. Throughout the course of our history, it has been largely an individual decision to become involved with the association and pursue the CFE credential. The reason for this was simple: it was about the knowledge and skills of that particular person. To that end, we built and cultivated relationships with people and not companies. And this model has proven to be successful – both for the anti-fraud professionals that have gained personally and professionally and for the ACFE, which has thrived as an association.

With the changing mindset towards the subject of white collar crime, many large organizations are now interested in making it clear to shareholders, regulators, the media and investors that they are taking proactive measures to prevent, detect and deter fraud. And it’s no wonder, as a recent study found that news of an alleged fraud resulted in a 17 percent stock price decline in the two days surrounding the announcement. Wanting to send a strong message, many members have reached out to us over the last few years seeking opportunities for their companies to become involved with the ACFE. And we have listened.

Last month, at the ACFE Annual Fraud Conference in San Diego, we rolled out the new ACFE Corporate Alliance Program to the delight of many members. This program has been in the works for several years and in pilot mode since last December with three Fortune 150 organizations. Our goal is to support anti-fraud best practices by providing large companies with access to the world-class tools, training and resources that the ACFE has come to be known for. Oh, and they will get to use a cool new logo, too.

In the coming months, the ACFE will be forging partnerships with companies choosing to join the new Corporate Alliance. I invite you to learn more about the program and find out whether it is a fit for your organization.

Found: Proof the Good Guys Finish First

/

GUEST BLOGGER

Sheila Keefe, CFE, CPA
Principal, BDR Advisors LLC

Growing evidence makes it clear that doing the wrong thing will cost companies dearly both in the marketplace and with law enforcement. Recent news shows that fraudulent business practices are bad for business. To wit,

At the same time, evidence is mounting that companies that do the right thing enjoy considerably higher returns. As reported by the Ethisphere Insitute, companies that qualified for the ‘ethics index’ outperformed the S&P 500 before, during and after the economic crisis of 2008.    

Such data provides the necessary ammunition in the fight against fraud, starting with cultivating an ethical work environment. Techniques and strategies may vary among ethical companies; there are a handful of tenets, however, common to all ethical companies. Those tenets include:

  • Free information flow to board: organizations should strive to have their top compliance officer designated as a C-suite position. Board directors should ensure that direct lines of communication exist for the top compliance officer.
  • Anonymous reporting mechanisms:  Anonymous tips are the leading detection tool for fraud, with the 2010 Report to the Nations on Occupational Fraud and Abuse reporting that 40 percent of frauds are initially detected through tips. 
  • Leadership by example: Employees watch top management very closely. When top management does not exemplify the highest ethical standards such conduct plants the seeds of rationalization for committing fraud.
  • Enforce superb ethics policies: Non-enforcement of known violations or inconsistent, seemingly surreptitious enforcement of company policies breeds confusion and possibly discontent strong enough to fuel rationalization for committing fraud.
  • Inspired training programs: Orientation and ongoing training programs educate, empower and motivate the workforce to report fraud.
  • Alignment of incentives with organizations values and goals: ‘buy-in’ mechanisms such as stock options and bonus pools can benefit organizations by reducing conflicts between personal gains and corporate success. However, incentives can illicit dysfunctional business processes and financial statement fraud. Organizations should look for ways to use incentives to reward acts of integrity as well as revenue-generating business activity.

As shown by the Ethisphere’s report that shows higher returns for ethical companies, creating a culture of shared success can help organizations reach both their economic and ethical goals. Add to that the penalties for fraudulent behavior dispensed by both law enforcement and the marketplace, it is clear that good guys do indeed finish first.

Read more of Sheila's insights on her blog, Business Done Right.