| All company owners and administrators, even the | | | | seriously wrong in your business, but these are |
| smallest businesses want to keep fraud at bay. | | | | too obvious. Fraudsters that I examined retained |
| No one would invite a fraudster into his or her | | | | a parasitic relationship with their host employer |
| corporation or non-profit organization. But the | | | | and by the time the questions above came up, |
| problem is that fraudsters, particularly high level | | | | millions of dollars had gone. They feed off the |
| managers deliberately infiltrate a company or | | | | company even to the point of varying the |
| become a fraudster under severe duress. This is | | | | amounts that they are stealing if the business is |
| the result of my doctoral research (2010). In the | | | | going through a lean time. Executive fraudsters |
| cases that I looked at, not one business owner or | | | | stay until the last drop of money runs out. |
| co-worker guessed that the fraudster was who | | | | It is more than worthwhile to now examine a list |
| he or she really was. They felt safe leaving their | | | | of questions that I know will indicate something is |
| monies in the hands of their wolf under sheep's | | | | seriously wrong, and very likely a fraudster is at |
| clothing right up until the moment of discovery of | | | | the bottom of it. |
| the fraud. This is a sickening thought, that when | | | | |
| business owners felt safe, the person was | | | | 1. Are you trying to get rid of a key individual and |
| stealing many times from company bank | | | | this process is proving very difficult to implement? |
| accounts. | | | | 2. Getting all sorts of excuses about reports not |
| This is not about being complacency or being | | | | being generated from your staff? |
| negligent, these are honest owners who are | | | | 3. A key individual has had a win on the Lotto, |
| diligent and put fraud protection systems in place. | | | | pools, casino etc? |
| The problem is that senior managers can override | | | | 4. A financial executive insisting on doing lower |
| these systems or find loopholes that they exploit | | | | level work compared to their position? |
| for themselves. Not true? Think for a moment | | | | 5. One of your key personnel (i.e., has access to |
| how many banks, even today with the most up | | | | the firm's banking details and accounts) is a keen |
| to date fraud protection systems of check and | | | | gambler? |
| double check, make the news headlines with a | | | | If you have answered YES to any of the above |
| fraudster being discovered. It is not down to | | | | questions, you seriously need to fraud proof your |
| systems, it is down to people. And that was the | | | | business beyond what is currently in place, no |
| research question for me, which I wanted to | | | | matter how good and how much it cost. |
| explore further. In doing so I have found material | | | | One way to do this is to bring in the auditors, but |
| and evidence that must be passed on to those | | | | this is a costly and expensive exercise that alerts |
| who truly want to make their business fraud | | | | the fraudster(s) that suspicions have been |
| proof as best as they can. | | | | aroused. The most likely outcome from this action |
| Test how vulnerable you truly are by reading the | | | | is that a fraudster will destroy records and data |
| following 3 signs and assess how truly open you | | | | trails and leave in a hurry. This means that you, |
| are to a fraudster. | | | | or your fraud investigators, are less likely to be |
| | | | able to trace the missing company assets. |
| 1. You have a good complex systems of controls | | | | A better way is to bring in outside consultants to |
| in place. Problem: A senior manager will be able to | | | | do employee screening, and their background |
| override these controls, as mistakes can be made | | | | checking processes will generally bring to light |
| in transaction journals, reports and accounts and | | | | questionable activities and hopefully the evidence |
| these have to be corrected. | | | | of a fraud. For instance, an accountant who ripped |
| 2. The IT and Accounts Departments have | | | | off a company over a million dollars in 5 years |
| ensured password protection. Problem: Certain | | | | had very expensive brand new cars in a lock up |
| personnel will know the passwords (or have | | | | garage, but used an 'old banger' to get to work. |
| access) as well as the person who holds the | | | | This investigation has to be done discreetly and |
| 'secret' password. | | | | have none of the feel of a gumshoe private eye |
| 3. Audit trails are in place. Problem: These only tell | | | | agency. A company needs professional personnel |
| you what has happened after the fact. They do | | | | doing an effective purposeful job -executive |
| not in themselves prevent fraud. | | | | screening. This is a human resource activity and |
| 4. Clear procurement guidelines and processes. | | | | would assist senior management in analysing and |
| Problem, companies that the fraudster owns | | | | improving their performance, so the money is |
| adhere to them as well and magically get selected. | | | | never wasted in the event of not uncovering of a |
| Not feeling so comfortable? Good, every case | | | | fraud. |
| that was investigated in my research had all of | | | | Once there is flag raised to the possibility of a |
| the above systems in their business | | | | fraudster in your midst, records including PCs, |
| administration. Today, some companies spend | | | | hard drives, flash drives, laptops etc must be |
| hundreds of thousands of dollars with the top | | | | seized, and a spot audit introduced immediately. |
| accounting firms to get this happening, yet they | | | | Also HR should be alerted to handle the individual's |
| overlook what is really the cause: a person, not a | | | | reaction as a certain type of fraudster can be |
| machine and certainly not a system. Do you want | | | | suicidal or have mental health repercussions. |
| to know something that is curious? The law of | | | | Others can experience epileptic fits, catatonic |
| fraud changed from being common theft to fraud | | | | states; some of these may be real some may |
| as we know it today that is, as a white-collar | | | | not. Fraud investigators note that this is actually |
| crime, at the same time that double entry | | | | quite common in their experience, but it is not |
| bookkeeping became popular five hundred years | | | | noted in the literature. Again, exposure of a fraud |
| ago. The system changed and the fraudster from | | | | has to be done by professionals not a Sunday |
| then on was treated differently than a common | | | | afternoon meeting that many Board of Directors |
| thief. But that is what a fraudster is: very clever | | | | think is the best way to confront their fraudster. |
| but just a thief. | | | | By questioning your fraud proofing practices and |
| Let us move in further into your comfort zone | | | | pushing your comfort zone my aim is to make |
| regarding anti-fraud measures. Have you asked | | | | you aware of what can go on. So many |
| these questions recently? | | | | practitioners in this field rely on outdated theory |
| | | | and become reliant on what 'should' work, but it |
| 1. Do you find yourself asking where has all the | | | | doesn't, it fails. Remember that it is always a |
| money gone? | | | | person at the heart of the fraud, all he or she |
| 2. Project areas should be profitable but are not? | | | | does is work out a way of outwitting the |
| 3. Finance and accounting units not producing the | | | | measures put in place. The reason why most |
| information that you want? | | | | present day fraud systems work is that most |
| 4. Received a Director's Penalty Notice from the | | | | people are honest and for those who are less |
| Taxation Department and have no idea why? | | | | than that they are fired out of their job and it |
| 5. Your internal auditor or bookkeeper in smaller | | | | doesn't hit the headlines. Comfort zones feel good |
| businesses has just resigned? | | | | but are not fraud proof. |
| These are obvious signs that something is | | | | |