Fraud risk management

         A guide to good practice

The Prevention and Detection of Fraud Begins with You

​by Dominika Kovtun

Fraud is a Serious & Costly problem

the various surveys highlight...

Takeaways

• Definition of what is fraud.Pattern and causes.
• Risk management - an overview
• Fraud prevention.
• Fraud detection.
• Responding to fraud. What could you do?

The term 'fraud' commonly includes activities such as theft, corruption, conspiracy, embezzlement, money laundering, bribery, and extortion.

"Fraud is the second oldest profession. If there is money, there is money to steal."

A scale of the problem

• over 43% of international businesses were victims of fraud during the previous two years
• 48% of companies have fallen victims to fraud
• 85% had suffered from at least on fraud in the past three years
• organization lose 7% of their annual revenues to fraud
• the global cost of corruption and bribery is about of the value of the world economy

A size really doesn't matter

A member of a small family business in Australia committed a $2 million fraud costing profit, jobs, and a great deal of trust. The business owner became suspicious when they realized their son-in-law used a company diesel card to buy petrol for his car.

Fraud is often mistakenly considered a victimless crime

...fraud can have a considerable social and psychological effect on individuals, businesses, and society.

Why do people commit frauds:
 

• The motivation of potential offenders
• Conditions under which people can rationalize their crimes away
• Opportunity to commit crime(s)
• Perceived suitability of targets for fraud
• The technical ability of the fraudster
• Expected and actual risk of discovery after the fraud has been carried out
• Expectations of consequences of discovery
• Actual consequences of discovery

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Who commits fraud?

Pre-planned fraudsters:

• who start out with the beginning of being intending to commit fraud

Intermediate fraudsters:

• who start honest but turn to fraud when time gets hard

Slippery-slope fraudsters:

• who simply carry on trading even when objectively not in a position to pay depts

Fraud schemes

The typical organization loses 7% of its revenue to fraud annually

The average loss is $140,000

A typical fraud lasts 18 months before detection

81% of cases reported displayed one or more Behavioral red flags

A strategy to combat fraud

Fraud Prevention:

• The most effective way to deal with the problem is to adopt methods that will decrease motive, restrict opportunity and limit the ability of potential fraudsters to rationalize their actions

An anti-fraud strategy:

• Prevention
• ​Detection
• Deterrence
• Response

Fraud detection:

Combination of analytical and other procedures to highlight anomalies and introduction of reporting mechanisms that demonstrates the activity of suspected fraudsters

Fraud detection

Indicators and warnings!

A list of possible fraud alerts:

• A large sum of transactions.
• Unauthorized access to the system from an unusual IP address.
• Photoshopped documents instead of originals.
• Unusual, irrational, or inconsistent behavior.
• Usage of the copypasted description of the property on the public realty sites.

Fraud prevention tips

• Do not give out personal information
• Be click aware
• Pay attention to details
• Ask questions
• Slow down and read

Fraud response plan

• Clear reporting mechanism

(the fraud report should be clear and succinctly)

• A thorough investigation

(Thorough establishing an investigating team)

• Disciplining of individual responsibility.
• Modification of anti-fraud strategy to prevent similar behavior in the future

Summary

It is important that organisations have a documented plan for responding to suspected or detected cases of fraud. A fraud response plan should include a clear statement on the corporate policy with regard to dealing with fraud, and set out the roles and responsibilities of those involved in responding to suspicions

There are so many scams on the internet nowadays.

Send me $19,95, and I will tell you how to avoid them.

The end of presentation

Thank you for your attention!