The Impact of Fraud: A #FraudWeekChat Recap

The Impact of Fraud: A #FraudWeekChat Recap

We recently co-hosted #FraudWeekChat (a Twitter chat) with the Identity Theft Resource Center in support of International Fraud Awareness Week. Participants who joined the chat took the opportunity to discuss the impact of fraud and identity theft. So much great advice and wisdom were shared, along with countless resources. Not to mention, everyone brought their best gifs to the party.

If you didn’t get a chance to join our Twitter chat this year, here are some of the top insights shared during the chat.

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Would Your Company Pass a Fraud Prevention Check-Up?

FROM FRAUD MAGAZINE

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The ACFE developed the Fraud Prevention Check-Up several years ago as an affordable, easy-to-use way to identify gaps in your organization's fraud prevention processes. By identifying risks early, you have a chance to fix problems before losing money and becoming a victim of fraud.

Because fraud can be a catastrophic risk, taking the ACFE Fraud Prevention Check-Up can save your company from disaster. If you don't proactively identify and manage your fraud risks, they could put you out of business almost overnight. Even if you survive a major fraud, it can damage your reputation so badly that you can no longer succeed independently.

Fraud is an expensive drain on a company's financial resources; the ACFE Fraud Prevention Check-Up can pinpoint opportunities to save you money. In today's globally competitive environment, no one can afford to throw away the five percent of revenues that represents the largely hidden cost of fraud.

Those organizations that have identified their most significant fraud costs (such as insurance and credit card companies) have made great strides in attacking and reducing those costs. If your organization isn't identifying and tackling its fraud costs, it's vulnerable to competitors who lower their costs by doing so.

Fraud is now so common that its occurrence is no longer remarkable, only its scale. Any organization that fails to protect itself appropriately faces increased vulnerability to fraud.

The Check-Up’s the least expensive way to find out your company's vulnerability to fraud. Most organizations score very poorly in initial fraud prevention check-ups because they don't have appropriate anti-fraud controls in place. By finding this out early, they have a chance to fix problems before becoming victims of major frauds. It's like finding out you have seriously high blood pressure — it may be bad news, but not finding out can be a lot worse.

Read some more tips about taking advantage of your check-up by reading the full article on Fraud-Magazine.com.

Know Where You Are Going: The Value of Interviewing Fraudsters

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GUEST BLOGGER

John D. Gill, J.D., CFE
ACFE VP of Education

In the early 1980s, Dr. Joseph T. Wells, CFE, CPA, Chairman and founder of the ACFE, and Jim Ratley, CFE, ACFE President and CEO, began producing anti-fraud training videos. One of the signature elements of their videos was the inclusion of videotaped interviews with actual fraud perpetrators. Thirty years later, interviews with real-life fraudsters are still an important part of the ACFE’s training programs.

For the last few years, I have been fortunate to conduct many such interviews myself, and I freely admit that it is one of my favorite parts of my job. I’m always surprised that anyone is willing to sit down and talk on camera about their crimes. We do not pay them for interviews, but we have at least a few people each year who are willing to talk candidly about their mistakes.

Yogi Berra said, “If you don't know where you are going, you'll end up someplace else.” In the fraud examination field, if you don’t know who you are trying to catch, you’ll end up with someone else as your perpetrator. I’ve interviewed at least a dozen white-collar criminals, and without exception, they have all been articulate, congenial, nice and intelligent. Several were CPAs or lawyers, and one had a Ph.D. in science. Several had previously led Fortune 500 companies.

So if you think the individuals who are committing fraud in your organization are the low-level employees with little education, you don’t know where you are going.

Another thing I have learned is that the Fraud Triangle is alive and well. Every so often, someone argues that the triangle is no longer relevant or needs to be revised, but based on the interviews I’ve done over just the last four or five years, I think it’s just as relevant as it was back in Dr. Donald Cressey’s day. In case you are new to fraud examination, one of the core principles is the Fraud Triangle, which was based on research done by Dr. Cressey in the mid-1950s. The theory is that fraud is likely to occur if the subject has some kind of unshareable financial pressure, a perceived opportunity to relieve that pressure, and the ability to rationalize his or her conduct so that there is a lessening of guilt or a feeling of justification.

In every interview I have conducted, the circumstances followed the Fraud Triangle pattern. For example, Nathan Mueller, who is interviewed in this video made especially for International Fraud Awareness Week, was expecting his first child. His financial pressure was that he believed in order to adequately provide for his family, he needed extra money to pay off debts and purchase a bigger house. A year earlier, he found out he had check approval of up to $250,000, a mistake on the company’s part that provided his perceived opportunity. Nathan’s rationalization was that a check to him in the amount of $19,000 was of no consequence to a large insurance company. His department regularly processed payments in the millions of dollars, so the company would never miss the money.

We feature these fraudster interviews in our newsletters, our online courses, in our live seminars and for awareness campaigns like Fraud Week. I urge you to give them a close listen. These are the people you are trying to catch. Other than the fact that they made some bad choices with regard to doing the right thing, they are just like you and me. Watching these videos will give you some insight into who you are looking for so you know where you are going.

Fraud: Yes, It Can Happen to Your Business

GUEST BLOGGER

Sarah Hofmann
ACFE Public Relations Specialist

The word “fraudster” conjures up images of a suspicious looking stranger in a trench coat, or perhaps Wall Street bankers lighting cigars with flaming $100 bills. However, what a real fraudster looks like could be the person who attended your most recent birthday party. Fraud is often perpetrated by the people we least expect — from the trusted friend to the most veteran employee of an organization. One of the biggest downfalls for employers is the blind belief that fraud could never happen to them.

Roy Faust was one such owner when he hired a friend to do bookkeeping for his custom kitchen and bath company without performing a background check first. “Since we already knew each other and I trusted her, I thought it would be a great fit for our business to bring her on as my bookkeeper,” he told the ACFE in a recent video, Fraud: Yes It Can Happen to Your Business. Even after Faust caught the employee stealing after only eight months of employment, he said, “she still had me kinda convinced throughout the process that she wasn’t really capable of doing this.”

Small businesses are not the only organizations that are susceptible to fraud. Rita Crundwell served as the Comptroller and Treasurer for Dixon, Illinois, for 29 years before it was discovered that she had embezzled $53.7 million from the city beginning seven years into her tenure. 

Jeremy Clopton, CFE, CPA, ACDA, explains that although employers are aware of the risk, they maintain a willful bias when it comes to fraud. “They think that they have wonderful employees that would never steal from them and that fraud would not happen to them. Yes, they realize that it exists, yes they realize it’s going to happen to somebody, but they always think that it’s not going to be them,” he said.

One of the best ways employers can protect themselves against fraud is by making themselves more aware about how and why fraud occurs and how it can be prevented. International Fraud Awareness Week is November 15-21 and serves as a time for organizations and individuals alike to focus on fraud and the potentially devastating impact it can have. The ACFE has shared a number of free resources on Fraudweek.com including videos, infographics, press releases and more.

Organizations that have signed up for Fraud Week are raising awareness in a variety of ways, including planning seminars, movie screenings and cocktail receptions. As fraud fighters, Fraud Week is a perfect time to let those around you know that yes, fraud can happen to them.

Have you signed up as an Official Supporter of Fraud Week?