Transcript Combatting_fraud_and_corruption

fraud and corruption module
steven powell
objectives?
 fraud facts and theory including the profile of the
fraudster
 overview of corruption
 an explanation of corrupt practices, & procurement
risks highlighting the EFT fraud risk
 prevention and combating of corrupt activities act
 fraud prevention and internal controls
 the tools to identify corruption
 case studies
understanding the fraud risk
your most capable, most reliable, most trusted
employee - mr fixit!
more than 80% of all frauds involve employees,
most of whom have more than 5 years of
service
TRUST REPLACES THE CONTROLS
generally:
– older than 30, higher percentage are male, stable
family situation, above average education, first
offender - (look around)
the fraud triad - Psychology behind fraudulent conduct
the fraud recipe
fraud
rationalization
fraud pressures

living beyond means

insecurity regarding tenure of position

trigger events
 divorce
 extra marital affairs
 medical emergency

peer pressure

gambling alcohol or drug problems
opportunity
•poor control environment
•remote location
•shared passwords
•limited segregation of duties
•limited independent review
•high trust
examples of “rationalizations”
 “it was just a loan I am going to pay it back”
 “it was a spotters fee”
 “it was just a commission”
 “the company does not pay enough money
for us to survive”
 “the company has retrenched a lot of staff”
 “i should have been promoted long ago”
detection of fraud
60%
50%
40%
30%
20%
management
auditors
mistresses
accident
10%
0%
Michael J Comer
understand the risk: screen staff & suppliers
 too many organisations employ individuals
with criminal records – you can ask about and
check prior criminal history when you appoint to
positions of trust
 too many of our suppliers don’t have the skills
to do the work they sell to us
declaration of interests coupled to regular
screening is vital to identify
 moonlighting
 related party transactions (hidden)
 ghost suppliers
the symptoms of fraudulent behavior
the red flags or warning signals in respect of
the corrupt employee are always present make sure that staff report suspicious activity
fraud red flags

excessive lifestyle

gambling alcohol or drug problems

staff who constantly claim underpaid

close relationships with suppliers

sole suppliers - not shopping around

poor credit rating

poor communication and reports

indulging in affairs

not taking leave

refusal of promotion

excessive & unexplained overtime

criminal record
divisional red flags
 too much trust placed in key employees
 limited segregation of duty
 no independent checks on reconciliation and payments
 no clear lines of authority or responsibility
 proper authorization procedures not enforced
 inadequate documentation & records
 infrequent independent reviews
 inadequate disclosure of interests & investments
management override of the controls
 operating on a crisis basis
 inadequate attention to detail
©2004 Deloitte
conclusion
 be prepared
 prevention is better than cure
 people will try to tempt your staff
 promote a strong ethics culture
 review your anti-fraud controls annually
 perform control review regarding eft payments
 do not rely only on controls - only as effective as the
people enforcing
 train people to recognize the symptoms
 do not work in a vacuum - use the tools and technology &
most importantly – use the right experts
©2009 S Powell
Questions
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