THE DENIAL OF FRAUD AND THE CONSEQUENCES AND
COSTS OF IGNORING ITS EXISTENCE
Why do some businesses choose to ignore the existence of potential fraud? Is it because they truly believe that fraud would never happen to them or, is it that if fraud was discovered the cost of discovery would be viewed negatively? Regardless of the reason, fraud or at least the potential to commit fraud can exist anywhere and in any organization.
 Identifying the vulnerability of an organization is one of the first steps that can be taken in order to create an action plan for the future health of the organization. Once a clear and concise plan of avoidance is set up, this can define the tone throughout the company and help prevent the risk for exposure. In an October 2007 article for the Journal of Accountancy, Joseph T. Wells and John D. Gill state that fraud can be classified into three broad categories: asset misappropriation, corruption and fraudulent financial statements. In the 2007 edition of the Fraud Examiners Manual published by the Association of Certified Fraud Examiners, there are 15 questions that every organization can ask when assessing your fraud health risks.
-
Do one or two key employees appear to dominate the company?
-
Do any key employees appear to have a close association with vendors?
-
Do any key employees have outside business interests that might conflict with their job duties?
-
Does the organization conduct pre-employment background checks to identify previous dishonest or unethical behavior?
-
Does the organization educate employees about the importance of ethics and anti-fraud programs?
-
Does the organization provide an anonymous way to report suspected violations of the ethics and anti-fraud policies?
-
Is job or assignment rotation mandatory for employees who handle cash receipts and accounting duties?
-
Has the company established positive pay controls with its bank by supplying the bank with a daily list of checks issued and authorized for payment?
-
Are refunds, voids and discounts evaluated on a routine basis to identify patterns of activity among employees, departments, shifts or merchandise?
-
Are purchasing and receiving functions separate from invoice processing, accounts payable and general ledger functions?
-
Is the employee payroll list periodically reviewed for duplicate or missing Social Security numbers?
-
Are there policies and procedures addressing the identification, classification and handling of proprietary information?
-
Do employees who have access to proprietary information sign nondisclosure agreements?
-
Is there a company policy that addresses the receipt of gifts, discounts and services offered by a supplier or customer?
-
Are the organization’s financial goals and objectives realistic?
Each day more and more cases of fraud creep into our society and are seemingly perpetrated by those individuals who we trust or rely on the most. Ignoring potential fraud can have devastating consequences. Take for example Texas billionaire Sir R. Allen Stanford who, along with five others was accused of swindling some 30,000 investors out of an estimated $7 billion. Fraud happens, and it happens when we may least expect it and from whom we least consider capable. In these devastating times, the potential for fraud can creep into our lives at any moment. Consider fraud like this – if your home had a slow water pipe leak, it could go undetected for months before you might discover the leak. By the time of detection, the damage can be catastrophic and discovering the cause of the problem can be more costly than the repairs. Creating a healthy business environment should include assessing potential risk factors as well as acknowledging that fraud can and will exist if you remain unprepared for its consequences.
For more information on
understanding and fighting fraud, the January/February
2010 issue of Fraud Magazine has an interview with Dr.
Timothy Pearson, Executive Director of the Institute for
Fraud Prevention, discussing the root causes and
business tools for fighting fraud.
Author
Judith A. Botham, MBA, CFE
Coordinated ChildCare of Pinellas, Inc.
Association of Certified Fraud Examiners
Journal of Accountancy
Fraud Magazine
|
TRAINING OPPORTUNITIES
Tampa Bay Chapter
Dinner Meeting March 9, 2010-
Crime Stoppers of Tampa Bay -
Debbie Carter
Dinner Meeting April 20, 2010-
Arson Fraud - Lt. Eric Saccasyn
11th Annual Fraud & Computer Crimes Seminar
May
11-12, 2010
Ruth Eckerd Hall
Clearwater, Florida
1111 McMullen Booth Road
Clearwater, FL 33759
Association of
Certified Fraud Examiners
21st Annual ACFE Conference
July 25-30, 2010
Washington DC
2009 - 2010
OFFICERS & DIRECTORS
PRESIDENT
Steve Hooper, CIA, CFE, CCSA, CGAP
Clerk of the Circuit Court Hillsborough County, FL
(813) 276-2029 x3703
VICE
PRESIDENT
Christine Dever, CPA/CFF, CFE
City of Tampa
(813) 274-7166
SECRETARY
Ellen Wilcox, CFE
Florida Department of Law Enforcement
(727) 298-2482
TREASURER
Laura Krueger Brock, CPA/CFF, CFE, CVA
Kirkland, Russ, Murphy & Tapp, P.A.
(727) 572-1400
DIRECTOR
Mark Dubina, CFE
Tampa Port Authority
(813) 241-1893
DIRECTOR
Sharon M. Shaw, CFE
OAG Statewide Prosecution
Tel: (813) 287-7960
DIRECTOR
Debbie Venanzio, CFE
Branch Banking & Trust Co.
Tel: (727) 302-5498
DIRECTOR
Bill Miles, CFE
Florida Department of Law Enforcement
Tel: (863) 701-1474
DIRECTOR
Gary Chapman, CIA, CGAP, CFE
City of Tampa
Tel: (813) 274-7163
CHAPTER TRAINING
Wayne Boytim, CFE
Retired
(813) 274-7167 |
Chapter News
Totes for Hope
The
Hillsborough Association of Women Lawyers has a new spring
community service project this year called Totes for Hope. We
will be collecting new or gently used handbags, shoes, and
accessories for Dress for Success. We will also be collecting
new or gently used duffle bags and handbags for foster children
who are supported by Voices for Children.
Click here for more details. Donations can be dropped off at
our Chapter Dinner Meeting on March 9, 2010.
CFE Exam Prep
Study Group
Our CFE Exam Prep Study Group is going
strong with participants attending the weekly three-hour
session. The Group meets every Tuesday (except on dinner meeting
nights) at 6pm at the Fifth Third Bank on Kennedy Blvd, which is
close to the Westshore Blvd intersection. The Group is
facilitated by two distinguished CFE members, Pamela Ranney and
Consuelo Herrera who volunteer their time each week. If you are
interested in joining us, contact me at
hooper@hillsclerk.com
or at the chapter email address
tampacfe@tampabaycfe.org.
The session are open to anyone,
member or not, who are interested in pursuing the CFE
designation. We systematically cover all four-parts of the exam,
through presentations, discussion, and reviews of exam questions
and answers.
Second Anti Fraud and Corruption Conference in Mexico,
D.C.
I was honored to participate as one
of the speakers at the Second Anti Fraud and Corruption Second
Conference in Mexico, D.C. The ACFE president, Mr. James T.
Ratley gave an excellent presentation sharing some of the
tactics for uncovering fraud and red flags identifiers. Mr.
Ratley broke down his presentation into three main points for
detection of fraud:
With
respect to tips and complaints, he gave several examples on how
complaints have been known to be some of the best sources of
fraud and should be taken seriously. Mr. Ratley also added that
motives of the complaints may be suspicious; however, the
allegations usually have a merit that warrant further
investigation.
When he
spoke about how perpetrators turn themselves in, he mentioned
that when someone commits fraud it takes a continued effort to
keep a fraud hidden. This constant concern prevents fraudsters
for taking vacations. They don’t even allow themselves the
possibility of being sick because of the increased likelihood of
detection.
Another reason why some fraudsters turn
themselves in is because they find that they cannot deal with
the emotional expense of the fraud, eventually, they rather face
the consequences of fraud than the continuing effort of keeping
it hidden.
Mr. Ratley covered the assessment of red
flags with the following topics:
-
Employee
Fraud Indicators,
-
Accounting and analysis anomalies,
-
Weak internal
controls,
-
Extravagant
lifestyles, and
-
Unusual
behavior.
In closing, Mr. Ratley emphasized the
importance of paying attention to red flags because they
constitute warnings that something could be or is wrong.
Ignoring red flags or no properly monitoring them sends the
wrong sign to employees who are led to the conclusion that it is
okay to game the system or that they will not be caught.
According to Mr. Ratley, if a little fraud is left to grow, it
becomes a large fraud.
History of ACFE Mexican Chapter
Recognizing the achievements of the ACFE Mexico is easy because
they are many and they are tangible. A group of committed
professionals had set a precedent in the Hispanic community.
Under the leadership of its President and Vice-president, Mr.
Juan Manuel Portal Martinez and
Lic. Muna D. Buchahin, respectively,
the ACFE Mexico is devoted to grow a
strong membership that will position the CFE designation as one
of the most trusted in the Hispanic community.
What Their Numbers Say?
The ACFE-CAPÍTULO MÉXICO, A.C.
was launched in February 2008 with the purpose of serving the
community through the promotion of improvement in the detection
and dissuasion of fraud based on expanding knowledge and its
members’ interaction.
Their membership has sky rocked. As of the
end 2009 they reached 180 members and, with less than two years
of existence, that is remarkable. The ACFE Mexico has hosted two
national conferences, which have been a success as a result of
the devotion and hard work of the Chapter Board of Directors and
each one of its members.
The tone set by the chapter is
demonstrated by its members’ backgrounds. Several of them hold
important positions within the federal government, educational
institutions, and the private sector. The core values of the
ACFE throughout the world have been honored by the Mexican
chapter.
Congratulations to the founders and each
one of the members who have been putting many, many hours of
their own to reach these numbers that speak aloud:
| Founded: |
2008 |
| Active Members: |
180 |
|
Goals: |
Increase the chapter membership
and give back to the community and reach partnerships with other
chapters toward knowledge sharing and development.
|
| Events: |
Two national Conferences: |
2008 First Annual Conference: United
Against Fraud and Crime
-
Forensic
Accounting and Psychology of Fraud
-
Fraudulent
Financial Statements
-
Using
data analysis techniques to identify potential areas of fraud
-
Information
leakage and fraud variable: reasons and dynamics
-
How
to identify dishonesty: Potential Risks in organizations
-
Risk
factors and red flags in business
-
Cybercrime
-
Financial
transactions and fraud schemes
-
The integration of the file: Evidence needed to document fraud
-
How
to conduct an internal investigation
-
Similarities
and differences in the treatment of fraud and money laundering
-
Fraud
in public works
-
Interviewing Techniques for internal auditors and
professionals in the prevention of illicit
continuous monitoring and fraud prevention
2009
Second Annual Conference: Prevention,
Detection and Deterrence of Fraud:
A
Comprehensive Approach
-
Business
continuity
-
Learn how
to spot and stop fraud and corruption.
-
What
should know the Board and the Director General Fraud?
-
Application
of standards and policies to prevent fraud in business.
-
Application
of Data Analysis Techniques to Detect Fraud.
-
Our nation
does not support Draft Fraud.
-
Money
laundering and its connection with the fraud.
-
Fraud:
The power of lies.
-
Tracking
illicit infrastructure.
-
The Internal
Control in fraud prevention.
-
Case study of
insurance fraud related to Information Technology.
-
How to
implement a security model for your organization.
The Tampa and Mexican Chapters’ Opportunities
Opportunities for information, knowledge, and skills sharing are
just the beginning of many instances of camaraderie and possible
business opportunities for those seeking to grow their
businesses in Latin America. This initial step is just the
beginning of a strong relationship between our local Chapter and
the Mexican chapter. We are proud of the ACFE Mexico, D.C. and
extend our congratulations to its distinguished members.
Author:
Consuelo.herrera@fraudawareness.org |
Dinner Meeting Information
Our
next Dinner Meeting is scheduled for March 9, 2010
Debbie Carter will be presenting
"Crime Stoppers of Tampa Bay"
 Debbie
Carter has been employed with the Sheriff's Office for over 20
years in the Public Information Office. She currently serves as
the Public Information Officer in the Nations 12th largest media
market. She is a member of the National Information Officers
Association and the Florida Law Enforcement Public Information
Officers Association. As a member of the Public Information
Officers Associates, Ms. Carter is utilized by law enforcement
agencies throughout the state as a trainer for new Public
Information Officers. She currently serves as the Co-Chair of
the Tampa Bay Regional Domestic Security Task Force Public
Affairs Committee.
Ms. Carter is the President of
Crime Stoppers of West Central Florida, a not for profit
organization involving law enforcement, businesses and media to
publicize information about wanted criminals to the community
through television and printed media. She also serves on the
Executive Board of Directors for the Lynn Sowers Memorial
Foundation.
She is a member of the Fraternal
Order of Police, Lodge 108 and Regional Critical Incident Team.
At the inception of the Sheriff's Office Peer Support Team in
1995 Ms. Carter served as the assistant coordinator and has
served as the Team Coordinator since 1997.
The dinner meetings will be held at The
Ramada Tampa Westshore Inn & Conference Center, 1200 N. Westshore Blvd. Registration and social begin at 6:00 PM, followed by
the buffet
dinner at 6:30, and presentation at 7:00.
To make your reservation, please complete the
registration form
here. You can also make your reservation by
emailing
Gary Chapman by 1:00 PM the Friday before the meeting date.
Reservations will not be accepted after 1:00 PM on Friday. Walk-ups are always
welcome, but will only be accommodated if space is available.
"No Show" Policy
The subject of “no shows” (that is making a reservation but failing
to attend) at dinner meetings has been discussed previously in CFE
NEWS. On the Friday prior to the meeting, we make our best guess as
to the number attending. With that said, the Board implemented the
following policy:
"No Show" is defined as not attending a meeting after making a
reservation and not canceling the reservation by noon on the day of the
dinner meeting. The first "no show" will be considered as a “grace” miss
and will not be billed. Upon a subsequent "no show" the Chapter will
bill $32.00 (actual cost to the Chapter) for both missed meetings and for any meetings missed after that.
Summary of the February 9, 2010 Dinner Meeting
At
our February 9, 2010 Dinner Meeting Steve Hooper our Chapter
President gave a lively presentation about the (Un)becoming of a
Department Manager. Steve explained how the misappropriation
started off as an attempt to help the victim organization but
may
soon
have become for personal benefit. The organizations policy
stated that any remaining funds at the end of the year had to be
returned to the county so in an effort to help the organization
the Treasurer initially used the funds to buy items for the
organization. Later this turned into using the money for
personal benefit.
The lack of controls and
accountability enabled falsified checks to be submitted for
reimbursement. The perpetrator was a nineteen year veteran
who was well liked and respected. There was a severe lack
of financial records and little oversight.
|
|
News from the ACFE
ACFE Awards - Nomination Period NOW Open
The nomination period for the ACFE Awards is now open
and ACFE members are encouraged to nominate their fellow members
for the following awards:
CFE of the Year
Educator of the
Year
Outstanding
Achievement in Outreach/Community Service
Chapter of the Year
Chapter Newsletter
of the Year
New! 2010 CFE
Exam Prep Course, U.S. Edition
Associate members get certified in 2010 with the new 2010
CFE Exam Prep Course. Featuring the updated Fraud Prevention
and Deterrence section (formerly Criminology and Ethics),
the 2010 CFE Exam Prep Course is the most comprehensive
study tool available to prepare you for the CFE Exam.
Purchase the CFE Exam Prep Course at the ACFE Bookstore and
start working toward your CFE credential today.
21St ACFE
Annual Conference
CPE Credit: 4-40
7/25/2010 - 7/30/2010
Join your fellow anti-fraud
professionals at the 21st Annual ACFE Fraud Conference &
Exhibition, to be held in Washington, D.C., July 25-30,
2010. Address the challenges and critical issues faced by
anti-fraud professionals during top-level educational
sessions and participate in unparalleled networking
opportunities with the premier practitioners and thought
leaders in the fight against fraud.
|
More Training
& Information
Free Training on Benford's Law
My name is Hyo-Jeong Kim, a PhD student at University of
Colorado Denver. My professors and I are conducting an
experimental research on the effect of advanced feature training
of generalized audit software such as ACL and IDEA. We are
providing free online training of Benford's Law in ACL and IDEA.
Click here for more information.
Expert Witness: Effective Courtroom Testimony
It’s not enough to have the right evidence: an Expert Witness
must be able to present evidence persuasively without confusing
the jury.
See the full article here
DFI News
15th Annual International Anti-Money Laundering
Conference
15th Annual Money Laundering Conference
GovSec/U.S. Law Conference
http://www.govsecinfo.com/Home.aspx
FRAUD NEWS
Daily Planet Hit by Massive Payroll Fraud
The Berkeley Daily Planet has discovered that the company that
has prepared its payroll for eight years vanished from its
Oakland office shortly after the first of this year, leaving
behind a trail of unpaid taxes and embezzlement charges. The
Planet is not the only victim of what looks like a major fraud
and a possible Ponzi scheme worthy of Bernie Madoff—the company
claimed that it had more than 100 clients. Most of them are
small businesses or nonprofits, and it seems likely that most of
them have been stung. The total take could be in the millions of
dollars.
Click here for the full article
341,956 blank EU travel documents in
criminal hands
A classified Dutch government report has
revealed that criminals stole 341,956 passports, identity cards,
visa stickers and drivers' licenses from European government
facilities since 2000.
Click here for the full article
Q4 2009
Mortgage Fraud Risk Report
Click here for the full report
BAE to Pay $446 Million to Settle U.S.,
U.K. Charges
Feb. 5 (Bloomberg) --
BAE Systems Plc,
Europe’s biggest defense company, agreed to pay almost $450
million in fines to resolve six-year-old bribery and fraud
investigations by U.K. and U.S. prosecutors.
Click here for the full article
Federal Trade Commission links wide data breach to file sharing
The Federal Trade Commission said Monday that it has uncovered
widespread data breaches at companies, schools and local
governments whose employees are swapping music, software and
movie files over the Internet.
Click here for the full article |
President's Message
In
1998, our chapter had a membership of only 48 members. Today, we
stand as a strong 190. This, by far, is the highest and
strongest membership the Chapter has experienced. I want to
again express my gratitude by thanking all the members who are
getting the word out about our profession and to those who
invite new guests to come see for themselves what the
Association, the Chapter, and the CFE designation has to offer.
Let’s continue to grow!
The
forty something (sorry, I didn’t get the official count)
attending February’s dinner meeting were enthusiastically
entertained with an upbeat presentation titled “Behavior (UN)
Becoming of a Department Manager.” It was my pleasure to present
this small dollar ethical dilemma to you. Based on your
evaluations, you too thought of it as a fun presentation and
enjoyed it as much as I enjoyed presenting it. Of course, the
bottom line was that a basic management misunderstanding of
risks and controls was the culprit that allowed the fraud to
happen. Charles Tremper. PhD and a CIO
once said that “the
first step in the risk management process is to acknowledge the
reality of risk. Denial is a common tactic that substitutes
deliberate ignorance for thoughtful planning.”
This volunteer association did not acknowledge the reality of
the risk before them, since the perpetrator had been a 20 year
volunteer. Remember, controls are there to mitigate or reduce
risk. Plain and simple!
I would
like to acknowledge our new members:
·
Alex McCaffrey, (NEW CFE),
from Garcia & Ortiz, P.A.,
Raquel Garrido, from WellCare Health Plans
Also, I
would like to acknowledge our first time attendees:
·
Alan Bridges, from
Profit Shield
Christina Cooper from Freedom Roads/Camping World
Kathy Griffin, from First Coast Service Options
Kimberly Symonds, from Intellistaf, (Guest of Alexander
McCaffrey)
Patricia Lefort from WellCare Health Plans (Guest of Raquel
Garrido)
Janet Wagner, from First Coast Service Options (an IMA
Chapter Member)
On behalf of the chapter, I would
like to thank our new members, guest, and all first time
attendees for visiting with us. We hope to see you again at one
of our upcoming Chapter sponsored events.
Our acclaimed two day “Fraud and
Computer Crimes” seminar will be held May 11 & 12, 2010. Your
Vice President, Christine Dever and the Board are putting
together another dynamic two day event that will be held at the
Ruth Eckert Hall. Speakers and topics will be posted soon. From
what I seen so far, it will again be a world class seminar that
all of you should attend. It is the cheapest CPE hours available
(by design) for our CFE and Associate Members (or nonmembers as
far as that goes).
This is
my official reminder to the membership. During our Annual
Administrative Meeting that will be held during our regularly
scheduled dinner meeting April 20, 2010, results of our Chapter
elections will be released. The election process is governed by
our By-Laws. I will be appointing a nominations committee soon
and information on the election will be posted to our website
early March 2010.
Don’t forget the CFE study group is
still accepting participants. We have added two new participants
over the last two weeks. So if you are looking for some help in
your studies or you just like classroom study, send a chapter
email (provided on the website) and we will get you in touch
with Consuelo or Pamela. Also, as always, we are still looking
for CFEs to present topics that cover relevant elements of the
test. Please volunteer your time for this rewarding experience.
I again would like to
reiterate the call to keep this chapter moving forward. Walt
Disney once said “We
keep moving forward, opening new doors, and doing new things,
because we're curious and curiosity keeps leading us down new
paths.” So recruit a new member. Let’s reach
200 in membership before the end of this Chapter year. Also,
volunteer! I again request that you get involved by
mentoring students or assisting with our study group. Our
webmaster, who publishes this newsletter every Chapter month,
needs an assistant webmaster to help now and in the future with
article research and solicitation of our own members’ written
fraud articles. Contact me if you are interested.
Our next dinner meeting will be held
on March 9th. Debbie Carter from the Hillsborough
County Sheriff's Office will present “Crime Stoppers of Tampa
Bay.” I hope to see you there. Make your reservations early.
Thanks to all of you who makes this chapter the “best in the
world.”
Steve Hooper, CFE, CIA, CGAP, CCSA
President, Tampa Bay Chapter - ACFE |
|
