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Fraud Awareness Protecting Organizations and Their People Presenter’s Name Presenter’s Title Presenter’s Contact Info

Fraud Awareness Protecting Organizations and Their People Presenter’s Name Presenter’s Title Presenter’s Contact Info

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Fraud AwarenessProtecting Organizations and Their People

Presenter’s NamePresenter’s Title

Presenter’s Contact Info

OverviewØThe Facts

ØFraud Defined

ØWhy’d They Do It?

ØWho Did It?

ØPolicy

ØRed Flag Hotline

ØRule of Thumb

Why Me? / Why Now? Consequential Damages

Protect your jobProtect your co-workersProtect your employer

Not a witch-hunt; this is a good thing!

The Facts

Association of Certified Fraud Examiners’ 2012 Report to the Nation – Estimates 5% of revenue lost to Fraud. This equates to $3.5 trillion internationally per year.

Same report - typical fraud exists for 18 months before being detected.

Same report - median loss per fraud occurrence investigated by its members was $140,000 (over1/5th exceeded $1,000,000).

Hotline: Average loss was $100,000; No Hotline: Average loss was $180,000.

The Muskegon Chronicle• Former manager of Muskegon's Topline Hy-Lift plant

charged with stealing from company

• MUSKEGON COUNTY — The former general manager of Muskegon auto-parts manufacturer Topline Hy-Lift faces a federal wire-fraud charge for allegedly stealing and selling more than $1 million of the company’s parts and equipment.

The Economic Times• Executive Indicted in $31 Million Fraud

• WASHINGTON: A former executive of Koss Corp, accused of using her position to fraudulently obtain more than $31 million from the stereo headphone manufacturer, has been indicted on six counts of wire fraud.

Fraud Defined

Defined by the U.S. Supreme Court as :

a. A misrepresentation of a material fact, that

b. The perpetrator knew was false, and was

c. Made with the intention that the misrepresentation would be relied on, and that

d. The victim did rely on the misrepresentation and as a result, incurred a loss.

Fraud TriangleOpportunity

Pressure RationalizationFraud Triangle

All three factors are usually necessary for fraud to occur.

Why’d They Do It?

EXAMPLES OF PRESSURES:

FINANCIAL:

•New Debt

•Medical bills

•Overuse of credit cards

•Divorce

•Investment losses

PERSONAL HABITS:

•Alcohol, drug, or gambling addiction

•Expensive extramarital affair

•Family & peer-group expectations

•Sheer greed

WORK-RELATED:

•Not appreciated

•Under paid

•Lack of respect

•Treated poorly

Personal Integrity & Rationalization

Perhaps the most important factor.

Common rationalizations:

• Only borrowing the money.

• Nobody will be hurt.

• I am treated unfairly - this is owed to me.

• Good purpose.

• Only temporary.

Example of Rationalization

•Two colleagues are dining out and one of them is thinking of using the company credit card to pay the bill.

•A supplier does not wish to reveal confidential information but will lose the client and blow a big sale if she doesn't. Which Way to an Ethical Decision?

Example of Rationalization

Which Way to an Ethical Decision? Option A* "It's all right, I'm going to pay them back anyway."* "It's not breaking any laws, so it's OK."* "No one's going to get hurt."* "No one will ever know."* "It's not that I'm trying to take advantage of my position."* "What's the fuss? It's only the first time!"

Avoiding Rationalization

Option B* "Am I breaking any laws or regulations?"* "What does the Code of Conduct say?"* "Maybe I should talk to a trustworthy colleague."* "Hmm, perhaps I should take a look at my options."* "How do I feel about what I am doing?"

Avoiding Rationalization

In handling ethical dilemmas, employees either talk themselves into making bad decisions, saying the things in option A or follow the structured guide in option B to come up with an ethical decision.

Employee Fraud

Conditions that lead to opportunity:

• Inadequate segregation of duties• Company rules / consequences of violating them not communicated• Rapid employee turnover• Frequently operating under crisis conditions• Lack of mandatory vacations• Poor channels of communication.

Employee Fraud (cont.)

Source: 2012 ACFE Report to the Nation

Who Did It?Ø 53% with the company for more than 5 years

Ø Hold a management or executive position (55%)Ø 75% are in accounting, operations, sales, upper management, customer service and

purchasing

Ø Usually male (65%)

Ø Between 36-60 years old (68%)

Ø No prior convictions (87%; so 13% should have been screened!)

Ø College educated (74%)

Common Red Flags: living beyond means, financial difficulty, close relationship with vendor/customer, unwilling to share duties, family problems, “wheeler-dealer” attitude, addictions, not taking vacation, unhappy with pay, etc., etc.

Take Aways

• Fraud is prevalent in corporate America.• Fraud puts my company at risk.• Fraud puts my job at risk.• Fraud increases my expenses.• Fraud can happen at any level.• Pressure and opportunity, along with integrity flaws,

can lead to fraud.• I must take action.

“I” Must Take Action

The Parable of Responsibility:Everybody, Somebody, Anybody and Nobody were members of a

group. There was an important job to do and Everybody was asked to do it. Everybody was sure that Somebody would do it. Anybody would have done it, but Nobody did it. Somebody got angry because it was Everybody’s job. Everybody thought Anybody would do it, but Nobody realized that Anybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have done.

•100% anonymous unless you choose otherwise •Toll free number• Live 24/7 coverage• Immediate reporting

•Key benefits:• #1 way to detect fraud - communications• #1 way to prevent fraud – strong tone at

the top• Reduces damages from fraud by 60%.

Taking Action

Taking Action

Taking Action

Taking Action

Taking Action