WTF! What The Fraud!

Fraud insights can be gleaned for everyone regardless of the industry sector in which the fraud occurs.

A while ago I started sharing articles, posts, and media updates on the popular social media site for business, LinkedIn and I called it “WTF (What The Fraud)!” The reason why I called it WTF! (with capitals at the beginning of each word for emphasis) was that despite the obvious play on words, it seemed to resonate and become popular with LinkedIn users, probably because of the often fanciful and ridiculous nature of fraud, bribery and corruption across the globe. Even more so is the repeated nature of fraud and corruption, and how with the benefit of hindsight it could have been prevented, detected, responded to or investigated much earlier. This is no news to experienced business professionals and avid readers of RSM’s FinSights but it may be an opportune time to reflect and remind ourselves of how to mitigate these risks, especially for finance and other executives.

The following examples reveal the flavours of issues that are reported daily in the media which could all occur in many businesses. I have inserted some lessons or thought prompting questions to take into consideration and for you to ask yourself regarding your company or government department to minimise being the next victim. Fraud insights can be gleaned for everyone regardless of the industry sector in which the fraud occurs. This is because all businesses have the same basic functions of financial reporting, accounts payable, accounts receivable, payroll, assets, procurement and so on.

WTF (What The Fraud)! Careful management of whistleblowers is a key skill of every competent forensic investigator. A jury ruled that San Francisco must award a former deputy city attorney more than $2 million in damages in a lawsuit that said she was fired for exposing a long-running illegal payment scheme between municipal officials and plumbing companies.  Source

Potential Lesson: Do you have an effective avenue for reporting of suspicions of fraud or corruption, if so, do you receive many calls and if not, have you ever asked why? – Whistleblowers are the most prevalent method by which fraud and corruption are detected.

WTF (What The Fraud)! Eddie Obeid has been sentenced to a maximum of five years in jail for his secret business deals. The former Labor Minister and his middle son, Moses, will also face a committal hearing next year after both men were charged over a $30 million coal deal exposed in a separate ICAC inquiry. Source

Potential Lesson: 
Are you as focused on the ‘C’ word (corruption or conflicts of interest) as much as the ‘F’ word (fraud)? -  Does your business conduct due diligence on vendors to ensure that they are bonafide and there are no undeclared links with employees?
WTF (What The Fraud)! As the media reports, despite having no formal qualifications and a conviction for fraud, a former bankrupt who bought his PhD on the internet has been able to pass himself off as a psychologist in both Sydney and Melbourne for years. Titling himself Dr David Kaye, the 54-year-old currently runs the Sydney Trauma Clinic which offers services in the treatment and management of psychological trauma and related disorders. Source

Potential Lesson: Do you actually do background checks on new employees and on promotion or transfer to high risk areas (like finance) to ensure that people are who they say they are, and are qualified as they say they are? Check with HR and have a look at a sample as you may be surprised!

WTF (What The Fraud)! A former employee of Queensland's Department of Transport and Main Roads will spend at least six months behind bars for providing an alleged criminal syndicate with fake driver's licenses and registrations. Sheree Jane Tritton was sentenced to four years jail in the Southport District Court on Wednesday, with parole after six months. The court heard Tritton used her casual position with the department to issue or upgrade 57 driver's licences between July 1, 2012, and December 13, 2013, as well as issue or transfer 31 vehicle registrations. Source

Potential Lesson: Do you know what your fraud and corruption risks are for your business or could you get blind-sided?
WTF (What The Fraud)? Yahoo's data breach of at least 500 million user accounts stolen from Yahoo’s network in late 2014 is believed to be the biggest data breach of any private company. Yahoo believes the user account information was stolen by a state-sponsored actor. The user account information taken included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers. Source

Potential Lesson: Cyber crime is an ever-present risk which requires expertise to mitigate, such as RSM’s IT Security Services. A current trend is the “CEO email fraud scam” which still continues today and catches finance staff off guard if not prepared.
WTF (What The Fraud)! Keith Hunter, 62, a former senior technology executive at Commonwealth Bank of Australia (CBA), has been sentenced to 3.5 years in jail for fraud and corruption after he and another CBA colleague allegedly received a combined $2.9 million in bribes. The scheme was allegedly orchestrated by US technology entrepreneur Eric Pulier in return for CBA awarding $10.5 million in IT contracts to Mr Pulier's US software company, ServiceMesh. The contracts helped ServiceMesh win an additional $US98 million of payments from Computer Sciences Corporation. Source

Potential Lesson: Do you conduct deep dives into high fraud and corruption risk business process or contracts to ensure integrity?
WTF (What The Fraud)! Law enforcement and regulator action is escalating on foreign bribery. The AFP has thirty-five continuing foreign bribery matters, including four before the Commonwealth Director of Public Prosecutions and two before the courts. Source

Potential Lesson: Does your business have any dealings overseas (operations overseas,using agents or intermediaries, importing and / or exporting) and if so, have you considered foreign bribery risks and how to mitigate them?

What does this all mean?

The lessons can be simplified into the following questions which reflect some common themes of how you can check on and assist your business to mitigate fraud and corruption risks:

  1. Have you identified what are the most relevant fraud and corruption risks to your business, and have you assessed these against your existing internal control environment?

  2. Do you have an effective avenue for reporting fraud and corruption suspicions?

  3. Do you have a plan? That is, do you have a fraud and corruption control plan such as recommended in the Australian Standard AS 8001 Fraud and Corruption Control?

  4. Do you conduct periodic deep dives into areas or business processes of high fraud and corruption risk so that you are not blind-sided?

Know your red flags!

The Association of Certified Fraud Examiners (ACFE) produced the Global Fraud Study 2016 which contains a list of the most common internal fraud red flags. Some include living beyond means, financial difficulties, unusually close association with vendor / customer, control issues / unwillingness to share duties, ‘wheeler-dealer’ attitude, divorce / family problems, irritability / suspiciousness / defensiveness, addiction problems, etc.

Roger Darvall-Stevens,
National Head of Fraud & Forensic Services

Phone: 0421 056 683.

Alternatively, visit our RSM website, and download any of our recent Fraud Insights such as:

  • Fraud and corruption prevention for SMEs
  • How to combat the growing threat of foreign bribery and corruption
  • Culture is the key tom mitigating fraud, bribery and corruption
  • C-Suite’s dirty little fraud secret
  • Government entities: corruption risk management and an integrity framework

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