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Casual Articles - Fraud and Corruption - A Strategic Direction
If all other things such as project outlining, defining deviations and correction measures using the famed DMAIC, training the personnel, assessment and audit are on one side, then the project selection on the other can outweigh all of them. It doesn’t matter that the improvement project is not more than academic interest; it’s success depends entirely on the selection of the project itself.What Does It Mean To Select a Wrong Project?What does it mean to select a wrong project? Well, this question has arisen not because projects are selected wrongly by design or because the project selection teams are incompetent. This question can’t be misconstrued as something willful when especially it dawns at an advanced stage that the project is out of track and control and as a consequence, doomed to fail.Fail-Proofing the Projection ProcessIn Six Sigma, project selection is based on two foundation cornerstones that are ‘total customer satisfaction’ and ‘maximization of ROI.’ We can use the analogy that a home is only as good as its foundation.Look for projects in your annual strategy documents that have roadmaps with various business objectives defined for the ensuing years.Another place to look will be the budget and HR; HR, for one, is a major component of expenditures. Even though it is not personnel reduction, along with the budget, it accounts for a major chunk of wastage adding to Cost of Poor Quali
Commonwealth Agencies have clearly led the private sector in developing fraud and corruption control strategies. This is mainly because it is mandated under the Financial Management and Accountability Act 1997 that all budget-funded agencies, and relevant Commonwealth Authorities and Companies Act 1997 funded bodies, put in place practices and procedures for effective fraud control. The Commonwealth Fraud Control Guidelines, outlines how each Agency must have a fraud control plan.
What are the trends and issues that organisations should be aware of?
Patterns of behaviour are clearly emerging as both the cost and complexity of technology decreases and information is shared through the internet in real time. Although more traditional frauds continue to be perpetrated against organisations, there are also a number of new or increasingly prominent challenges. Some of these challenges include:
- Identity fraud and theft - Criminal syndicates follow the money and as such identity fraud and theft is fast becoming a significant problem as they target individuals and organisation
As a new business owner you must wear many hats. You will need knowledge of accounting, marketing, advertising, management, administration, inventory, sales, etc., in addition to knowledge pertaining to your industry. Since you may be very proficient in some of these areas, but not in others, reading and learning about these other areas is imperative. Of course, the question is, when do I find the time. This is where networking comes in. Your network of contacts is your support group for the areas in which you need help. Determine what areas you need help in and locate a networking group, support group or make a list of the contacts you need and make them yourself. There are also Home Business Clubs in many areas. The SBA is another source, but be careful, we've heard too many complaints about the mentors in the SBA program. However, you might find them adequate for your needs. Look at the local groups and ask before you join if the areas you need help in are represented. You can then call these individuals before a sales presentation, run the client presentation by them, and see what they think. They should be able to help you over the rough spots. Be sure to reciprocate when one of these individuals calls you about your area of expertise. Networking is not a one-way street. Many times by having contacts in companies you want to do business with, you can find out how they want proposals, bids or contracts done beforehand
In a recent survey of fraud in Australian organisations, 84 percent of respondents agreed or strongly agreed with the proposition that fraud control is a governance issue.
Corporate governance is an entire culture that sets and monitors behavioural expectations intended to deter the fraudster. As part of the establishment of sound corporate governance, it is now clearly accepted that an organisation should formulate a fraud and corruption control strategy. Through the development and implementation of the strategy, compliance with anti-fraud and corruption control practices can be promoted, maintained and instances of fraud and corruption control non-conformance identified and dealt with quickly.
What is a fraud and corruption control strategy?
It is a comprehensive summary of key elements that the organisation has introduced to prevent, identify, manage, investigate and deal with fraud and corruption specific to its own circumstances. According to the Australian Standard AS8001-2003 , although an organisation’s approach to its strategy will be dependent upon its size, diversity, geographical spread and the industry in which it operates, the Standard recommends that a strategy contain a number of elements. Several of these elements are discussed below:
- Fraud and corruption awareness – How does the organisation educate their staff and stakeholders about how fraud and corruption occurs and what to do if it is discovered? This is a key element as fraud surveys have clearly demonstrated over time that the majority of frauds are discovered by staff and that whistleblowers are also an important source of information.
- Reporting of fraud and corruption – Is there a formal reporting process? Does senior management and the Audit and Risk Management Committee get told of all incidences ? If all instances are not recorded centrally, how does management assess the size and breadth of the problem and effectively manage it ? Also importantly, if the instances if fraud and corruption are not reported to the Audit and Risk Management Committee, how do they monitor the performance of senior management in managing the risk?
- Fraud and corruption risk assessment - Identifying a couple of fraud risks in your business risk assessment or enterprise risk management process is far from adequate. An organisation should not rely on management alone to come up with all potential risks as there may be a knowledge gap, a reluctance to identify the existing weaknesses, inadequate allocation of time to discuss the issues or lack of a persistent inquisitor to ask the tough questions and follow up. So, consider having someone involved who thinks like a fraudster and has experienced a broad range of fraud and corruption issues who can add real value to the process. The insights regarding risks and process weaknesses can be invaluable.
- Whistleblowing – How does your organisation protect whistleblowers? Does it encourage anonymous reporting ? Whistleblower programs allow employees and others to report concerns–including those about corporate fraud–and can allow the management and/or the Board to take early corrective action. Whistleblowing lines are now becoming more prominent in the private sector.
- Pre-employment screening - Is there a consistent process of screening across the organisation ? How thoroughly are background checks, such as prior employment history, tertiary qualifications and memberships of professional associations, conducted ? Does it cover only full-time employees or include contractors ?
- Regular reviews of internal controls - Effective internal controls cannot be both successful and static. They should be monitored and evaluated for improvements and changes made necessary by changing conditions. The scope and frequency of evaluations of the internal control structure depend on risk assessments and the overall perceived effectiveness of internal controls. As an example, under the Sarbanes-Oxley requirements, management is charged with performing an evaluation at least annually. Anti–money-laundering procedures employed by financial institutions are a good example of a proactive process designed to deter fraudulent transactions from taking place through a financial institution.
Commonwealth Agencies have clearly led the private sector in developing fraud and corruption control strategies. This is mainly because it is mandated under the Financial Management and Accountability Act 1997 that all budget-funded agencies, and relevant Commonwealth Authorities and Companies Act 1997 funded bodies, put in place practices and procedures for effective fraud control. The Commonwealth Fraud Control Guidelines, outlines how each Agency must have a fraud control plan.
What are the trends and issues that organisations should be aware of?
Patterns of behaviour are clearly emerging as both the cost and complexity of technology decreases and information is shared through the internet in real time. Although more traditional frauds continue to be perpetrated against organisations, there are also a number of new or increasingly prominent challenges. Some of these challenges include:
- Identity fraud and theft - Criminal syndicates follow the money and as such identity fraud and theft is fast becoming a significant problem as they target individuals and organisations
It finally hit me this week what every single client, customer, person and patron truly wants -- and it's not what we're giving them. What we're giving people is details, lots of details. They come in the form of product specifications, a list of attributes, qualities, claims, guarantees, and service promises. These are all great but they don't scratch the itch... they don't satisfy the real craving that each person longs for in their day to day experience.That constant craving is for meaning.Think about it. When we are born, we are all basically blank slates -- empty notebooks upon which nothing yet is written. As we go through life we sense this blankness and we look to fill it in, write on it, doodle, draw, and color all over the pages. In doing so our little book of life begins to take on the thing we want most... meaning.How does this affect your company, products and branding? This insight provides an opportunity to connect with your customer on a much deeper level -- an emotional one. If understood, you can help them tell their story, strengthen their identity and add purpose to their existence. Take coffee for example. Busy commuters don't drink the stuff at Starbucks because it's convenient or cheap. They do so because of the affiliation it brings them, the sense of belonging, ritual, purpose, community, etc. In short it provides texture and meaning to what would otherwise be
What is a fraud and corruption control strategy?
It is a comprehensive summary of key elements that the organisation has introduced to prevent, identify, manage, investigate and deal with fraud and corruption specific to its own circumstances. According to the Australian Standard AS8001-2003 , although an organisation’s approach to its strategy will be dependent upon its size, diversity, geographical spread and the industry in which it operates, the Standard recommends that a strategy contain a number of elements. Several of these elements are discussed below:
- Fraud and corruption awareness – How does the organisation educate their staff and stakeholders about how fraud and corruption occurs and what to do if it is discovered? This is a key element as fraud surveys have clearly demonstrated over time that the majority of frauds are discovered by staff and that whistleblowers are also an important source of information.
- Reporting of fraud and corruption – Is there a formal reporting process? Does senior management and the Audit and Risk Management Committee get told of all incidences ? If all instances are not recorded centrally, how does management assess the size and breadth of the problem and effectively manage it ? Also importantly, if the instances if fraud and corruption are not reported to the Audit and Risk Management Committee, how do they monitor the performance of senior management in managing the risk?
- Fraud and corruption risk assessment - Identifying a couple of fraud risks in your business risk assessment or enterprise risk management process is far from adequate. An organisation should not rely on management alone to come up with all potential risks as there may be a knowledge gap, a reluctance to identify the existing weaknesses, inadequate allocation of time to discuss the issues or lack of a persistent inquisitor to ask the tough questions and follow up. So, consider having someone involved who thinks like a fraudster and has experienced a broad range of fraud and corruption issues who can add real value to the process. The insights regarding risks and process weaknesses can be invaluable.
- Whistleblowing – How does your organisation protect whistleblowers? Does it encourage anonymous reporting ? Whistleblower programs allow employees and others to report concerns–including those about corporate fraud–and can allow the management and/or the Board to take early corrective action. Whistleblowing lines are now becoming more prominent in the private sector.
- Pre-employment screening - Is there a consistent process of screening across the organisation ? How thoroughly are background checks, such as prior employment history, tertiary qualifications and memberships of professional associations, conducted ? Does it cover only full-time employees or include contractors ?
- Regular reviews of internal controls - Effective internal controls cannot be both successful and static. They should be monitored and evaluated for improvements and changes made necessary by changing conditions. The scope and frequency of evaluations of the internal control structure depend on risk assessments and the overall perceived effectiveness of internal controls. As an example, under the Sarbanes-Oxley requirements, management is charged with performing an evaluation at least annually. Anti–money-laundering procedures employed by financial institutions are a good example of a proactive process designed to deter fraudulent transactions from taking place through a financial institution.
Commonwealth Agencies have clearly led the private sector in developing fraud and corruption control strategies. This is mainly because it is mandated under the Financial Management and Accountability Act 1997 that all budget-funded agencies, and relevant Commonwealth Authorities and Companies Act 1997 funded bodies, put in place practices and procedures for effective fraud control. The Commonwealth Fraud Control Guidelines, outlines how each Agency must have a fraud control plan.
What are the trends and issues that organisations should be aware of?
Patterns of behaviour are clearly emerging as both the cost and complexity of technology decreases and information is shared through the internet in real time. Although more traditional frauds continue to be perpetrated against organisations, there are also a number of new or increasingly prominent challenges. Some of these challenges include:
- Identity fraud and theft - Criminal syndicates follow the money and as such identity fraud and theft is fast becoming a significant problem as they target individuals and organisation
There are many great advertising campaigns and marketing strategies, which corporate America has produced. Many of these great advertising campaigns have won awards and many deserve them. One of the greatest advertising achievements was done with Avis Rent a Car. Perhaps you'll remember the; We Try Harder; advertising campaign?It is interesting because Avis Rent a Car did not bother to say they charge less, have better service or rent better cars. None of that. Hertz Rent a Car was busy telling us how quick you could get out of the airport and into a car because of their fast check-in service.Avis Rent a Car simply said; We Try Harder. To the customer this meant that they tried harder to please them and it said to the customer that Avis Rent a Car cared about the customer. If Avis Rent a Car is trying harder and trying to give better service, then that is a good reason to rent from Avis Rent a Car instead of Hertz.You see, smart marketing and smart advertising is not always what it seems. Sometimes the best advertising strategies are those, which visualize in the customer's mind and evoke a strong emotion. If you stop to think about Avis Rent a Car and the; We Try Harder Campaign it is interesting because, they never said if the fact that they try harder would ever amount to anything. Yet, the customer loved it. Please consider this in 2006.
- Fraud and corruption risk assessment - Identifying a couple of fraud risks in your business risk assessment or enterprise risk management process is far from adequate. An organisation should not rely on management alone to come up with all potential risks as there may be a knowledge gap, a reluctance to identify the existing weaknesses, inadequate allocation of time to discuss the issues or lack of a persistent inquisitor to ask the tough questions and follow up. So, consider having someone involved who thinks like a fraudster and has experienced a broad range of fraud and corruption issues who can add real value to the process. The insights regarding risks and process weaknesses can be invaluable.
- Whistleblowing – How does your organisation protect whistleblowers? Does it encourage anonymous reporting ? Whistleblower programs allow employees and others to report concerns–including those about corporate fraud–and can allow the management and/or the Board to take early corrective action. Whistleblowing lines are now becoming more prominent in the private sector.
- Pre-employment screening - Is there a consistent process of screening across the organisation ? How thoroughly are background checks, such as prior employment history, tertiary qualifications and memberships of professional associations, conducted ? Does it cover only full-time employees or include contractors ?
- Regular reviews of internal controls - Effective internal controls cannot be both successful and static. They should be monitored and evaluated for improvements and changes made necessary by changing conditions. The scope and frequency of evaluations of the internal control structure depend on risk assessments and the overall perceived effectiveness of internal controls. As an example, under the Sarbanes-Oxley requirements, management is charged with performing an evaluation at least annually. Anti–money-laundering procedures employed by financial institutions are a good example of a proactive process designed to deter fraudulent transactions from taking place through a financial institution.
Commonwealth Agencies have clearly led the private sector in developing fraud and corruption control strategies. This is mainly because it is mandated under the Financial Management and Accountability Act 1997 that all budget-funded agencies, and relevant Commonwealth Authorities and Companies Act 1997 funded bodies, put in place practices and procedures for effective fraud control. The Commonwealth Fraud Control Guidelines, outlines how each Agency must have a fraud control plan.
What are the trends and issues that organisations should be aware of?
Patterns of behaviour are clearly emerging as both the cost and complexity of technology decreases and information is shared through the internet in real time. Although more traditional frauds continue to be perpetrated against organisations, there are also a number of new or increasingly prominent challenges. Some of these challenges include:
- Identity fraud and theft - Criminal syndicates follow the money and as such identity fraud and theft is fast becoming a significant problem as they target individuals and organisation
Many people turn a beloved hobby into a vocation. They have a gift, a talent screaming for expression. It means doing something that they love. At last, they feel empowered.However, this newfound empowerment is inside the person, not in the changing of careers. How can you feel empowered if you are already successful in your work but feel discontent? You must recognize and feel the value within you and your work every day!A colleague and I were presenting a workshop on career satisfaction to a group of health-care staff members. His segment, "Feeling Empowered in Your Career", and my following segment, "Empowerment in Words and Actions", complimented each other splendidly.A majority of the participants had indicated before the workshop that they were happy with their career choice. Their need was to feel more contentment during the workday. Many felt isolated or emotionally distant from co-workers. They felt successful but not content.They all believed that their work was highly valuable. However, as one participant said, "I don't feel connected to the people I work with or feel enough satisfaction in the value that I provide."There is a big difference between believing in something and deeply experiencing the same thing. An old expression suggests, "It will not help to believe in ladders unless you climb one." Many people are highly skilled, successful, and competent in their work. They are intellectua
- Pre-employment screening - Is there a consistent process of screening across the organisation ? How thoroughly are background checks, such as prior employment history, tertiary qualifications and memberships of professional associations, conducted ? Does it cover only full-time employees or include contractors ?
- Regular reviews of internal controls - Effective internal controls cannot be both successful and static. They should be monitored and evaluated for improvements and changes made necessary by changing conditions. The scope and frequency of evaluations of the internal control structure depend on risk assessments and the overall perceived effectiveness of internal controls. As an example, under the Sarbanes-Oxley requirements, management is charged with performing an evaluation at least annually. Anti–money-laundering procedures employed by financial institutions are a good example of a proactive process designed to deter fraudulent transactions from taking place through a financial institution.
Commonwealth Agencies have clearly led the private sector in developing fraud and corruption control strategies. This is mainly because it is mandated under the Financial Management and Accountability Act 1997 that all budget-funded agencies, and relevant Commonwealth Authorities and Companies Act 1997 funded bodies, put in place practices and procedures for effective fraud control. The Commonwealth Fraud Control Guidelines, outlines how each Agency must have a fraud control plan.
What are the trends and issues that organisations should be aware of?
Patterns of behaviour are clearly emerging as both the cost and complexity of technology decreases and information is shared through the internet in real time. Although more traditional frauds continue to be perpetrated against organisations, there are also a number of new or increasingly prominent challenges. Some of these challenges include:
- Identity fraud and theft - Criminal syndicates follow the money and as such identity fraud and theft is fast becoming a significant problem as they target individuals and organisation
Sifting through the CompetitionIn recent years, as the access to the Internet has increased significantly, the number of brick and mortar and e-commerce firms offering background checks has truly exploded. Fraud has existed for over 5,000 years, since the civizations of ancient Egypt and Mesopotamia, and it's been growing ever since.Most clients today find their background check or investigative firm via the Internet. This leads us to the question: How can one sort through the pages and pages of background checks on the web? Many of the investigative or background check sites are fraudulent themselves, i.e., false advertisments misleading website traffic, offering substandard service, and never produce any service representative of a real background check.The search is less complicated when choosing an international background check firm. Few players are successful at obtaining results on a global level. Thus, we divide our rankings into two divisions: 1) National or U.S. and 2) International or Global.* Quality Score reflects pricing, services, client service and cases** Quality Score Ranking is between 1-5 (1 = excellent, 5 = poor)National or U.S. Rankings1. Owens Online (General, National & International, QSR = 1)2. Wymoo (General, National & International, QSR = 2)3. HireRight (Employment Screening, QSR = 2)4. Intelius (Strictly U.S., Automated Reporting, QS
Commonwealth Agencies have clearly led the private sector in developing fraud and corruption control strategies. This is mainly because it is mandated under the Financial Management and Accountability Act 1997 that all budget-funded agencies, and relevant Commonwealth Authorities and Companies Act 1997 funded bodies, put in place practices and procedures for effective fraud control. The Commonwealth Fraud Control Guidelines, outlines how each Agency must have a fraud control plan.
What are the trends and issues that organisations should be aware of?
Patterns of behaviour are clearly emerging as both the cost and complexity of technology decreases and information is shared through the internet in real time. Although more traditional frauds continue to be perpetrated against organisations, there are also a number of new or increasingly prominent challenges. Some of these challenges include:
- Identity fraud and theft - Criminal syndicates follow the money and as such identity fraud and theft is fast becoming a significant problem as they target individuals and organisations. The quality of recent forgeries of identification documents such as driver’s licences, birth certificates and even passports has highlighted the need for biometric identification solutions such as fingerprints, voice patterns, retinal images, facial or hand geometry to be seriously considered by organisations.
- Cyber-crime – The role of ‘phishing’ and the use of ‘trojans’ to illegally penetrate computers to obtain confidential information, including banking details, shows no signs of abating. As an example, over 11,000 unique phishing attack websites were reported to the Anti-Phishing Working Group in May 2006.
- Cheque fraud – this continues to be one of Australia’s most prevalent frauds affecting businesses. It involves the alteration of an existing cheque to a new payee and sometimes an altered amount.
- Gambling – There is an inextricable link between gambling addiction and fraud. As the opportunity to participate in various forms of gambling grows, the incidence of fraud will also continue to grow. Refer to the breakout box for some recent Australian examples.
What can your organisation do ?
Senior management tasked with governance responsibilities should undertake a review of their approach to fraud and corruption control. It is recommended that they at least benchmark your organisation against best practice recommended by the Australian Standard AS8001-2003 – ‘Fraud and Corruption Control’ in order to determine gaps that require addressing. This will be the blue print for going forward.
Key areas of the fraud and corruption control strategy that should be emphasised and undertaken should include:
- championing a pro-active and thorough approach to fraud risk management across the organisation;
- reviewing the organisation’s whistleblowing policy and procedures and where one does not exist, seriously consider the inclusion of an anonymous reporting line to augment the reporting structure; and
- educating staff about fraud, how it is detected and importantly the organisation’s reporting procedures.
Conclusion
Emerging technological trends, the globalisation of commerce as well as the growing impact of the prevalence of gambling should be of concern to Board members and senior management in all organisations, both large and small. They all create risks that need to be constantly managed.
Those who commit fraud and corruption, whether internal or external to the organisation, are often attuned to system and control weaknesses and therefore target least points of resistance.
To deal with these fraud and corruption risks, organisations must look to how they are allocating their resources and seriously consider the need for a comprehensive strategy.
Case Study - Whistleblowing
Fraud awareness training was provided to all staff in a division. Subsequent to this training, the Financial Controller was sent an e-mail with the sender’s details disguised although indicating that they had attended one of the fraud awareness sessions. The e-mail contained detailed allegations concerning anomalies with a senior manager’s use of a company credit card.
A preliminary review was undertaken of the credit card statements that revealed personal purchases of clothes, meals, accommodation, dating services and books over an eighteen-month period that were all fraudulently misrepresented on the card statements as business related expenses. Although the card statements were countersigned by another manager, the manager later admitted trusting the senior manager’s explanations for the purchases.
The senior manager was in a key governance position within the organisation and was subsequently dismissed.
Case Study – False invoicing
A Finance Director with responsibility for the Asia-Pacific region travelled regularly. An anomaly with his expenses led to a further investigation of his activities. A link was identified between the name of an Australian based company of which he was a Director and a company based in Malaysia that had received consulting fees authorised by the Finance Director.
Further investigation revealed four companies in different Asian countries that had received consulting fees based on bogus projects. As a result of the investigation, it was proven that more than 50 invoices were prepared and subsequently signed off by the Finance Director at an Australian Dollar equivalent just below his delegation limit.
International company searches revealed he was a Director and Shareholder in each company. Over AUD2 million was recovered.
It was also revealed that the annual budget for such consulting
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