Examining the Bigger Picture in a Fraud Investigation

By Jamey Waters,

As an experienced corporate investigator, having investigated hundreds of various types of fraud cases, it’s really not hard to come to the conclusion that where there is smoke there is usually fire and often times in more than one place. When a client or an individual is alerted to suspicious behavior by an employee/contractor, the investigation generally must focus on the specific allegations. However, it is also important to use the initial investigation opportunity to open a broader review into the suspect for two main reasons:

  • To look for motivating factors (a motive); and
  • To determine, if he/she may be committing fraud or deviant behavior in other areas not specific to the case. After all, if the individual is involved in some form of fraud or deviant behavior that we are aware of, it is highly probable this extends to other areas as well.

According to the widely accepted Fraud Triangle model developed by Donald Cressey, “…individuals are motivated to commit fraud when three elements come together: 1) some kind of perceived pressure, 2) some perceived opportunity, and 3) some way to rationalize the fraud as not being inconsistent with one’s values.” One of the reasons for opening a broader investigation and not just focusing on the specific allegations is to look for motivating factors or pressure(s) the person may be under that might drive him/her to commit the fraud. People often say “I would never do that” but when faced with varying degrees of perceived pressure, it is difficult to determine the lengths people will actually go to in committing fraud. … Continue reading

Key Components of a Fraud Risk Prevention Policy

By Mark Lowers,

fraud prevention

Preventing organizational fraud demands systematic planning and implementation. This entire process, from inception and assessment to performance evaluation is complex, even in smaller organizations. Yet, the payoff for the effort can be huge.

In this post, we offer an overview of the elements of a fraud prevention program that would be useful in any organization. Summarized from, Managing the Business Risk of Fraud: A Practical Guide, produced by a consortium of associations, the guidelines point to specific steps managers can take to implement an effective fraud prevention program. … Continue reading

Lessons in Occupational Fraud and Fraud Prevention

By Mark Lowers,

Occupational fraud is a huge drain on organizations’ resources, costing an estimated global loss of $3.7 trillion dollars annually. And according to the Association of Certified Fraud Examiner’s (ACFE) 2014 study, just 14% of defrauded organizations are able to fully recover their losses.

Fraud is a very real threat to the bottom line of almost every organization in our economy. But it can be prevented, or at least mitigated.

There are 3 steps in setting up a fraud prevention program in your organization:

  1. Understand what fraud is and how it is likely to emerge.
  2. Identify potential sources of fraud in your organizations.
  3. Take steps to prevent fraud through processes or controls.

Ultimately, a healthy anti-fraud corporate culture that permeates from the top down will make your organization more crime resistant. This will take time to nurture, and it will take continuous effort to sustain, but in the end you can make occupational fraud an extinct disease in your workplace.

… Continue reading

How Can You Cut Your Organization’s Risk of Fraud by 50%?

By Mark Lowers,

compliance training

You’ve seen the data before: Organizational fraud is a huge annual cost. Managers want to reduce the costs, so the real questions are to learn why fraud occurs and what to do about it.

The most compelling explanation for organizational fraud is the Fraud Triangle, as summarized in our recent infographic. Frauds occur when there is opportunity, one or more employees are under perceived financial pressure (incentives exist), and they can rationalize their fraudulent behavior. These 3 factors correspond to the legs of the triangle.

Control the Opportunities to Reduce the Chances of Fraud

In our experience, organizations can reduce the probability of organizational fraud by just removing one of those legs of the triangle. There are things you can’t control, such as employees’ spending habits, but if you remove the opportunity for employees to get their hands on an asset without the potential of getting caught, then you’ve reduced that probability by 50 percent. … Continue reading

  Category: Risk Management
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7 Resolutions for Better Risk Management in 2014

By Lowers & Associates,

risk management articles

It’s that time of year when we have resolved to do better. Most business owners or managers have probably resolved to increase revenue and profits in the New Year. We urge you to include improving your risk management performance, too. By identifying and mitigating the risks you face, those bottom line resolutions you make are more likely to come true.  You need to reduce losses as well as increase revenue.

First, Have a Risk Management Plan

The first resolution has to be to have a risk management plan, and implement it. We sometimes get so immersed in our own work that we forget that there are managers and companies who do not take adequate steps to identify and manage the risks to their businesses. And others have a mistaken belief that they have a risk management plan just because they bought some insurance.

Some recent research by Chubb Group of Insurance Companies shows that both public and smaller private companies have significant gaps in risk management. A 2012 survey of public companies found that 2 out of three companies still do not have cyber insurance even though an electronic breach of data was seen as the most pressing risk. Similarly, 42% of these companies reported experiencing an employment practices liability event, yet some of them still do not have risk management tactics in place to mitigate this risk.

A related study conducted in 2013 found that smaller private companies may have invested even less in risk management despite the fact that 1/3 of them experienced a loss event in the past 3 years.  Those that do take risk mitigation steps, like background screening, often mis-use the tactics.  Some key findings from that research include:

  • Most firms believed their general liability insurance protected them from most of the risks they face, including cyber losses, fiduciary liability, and employment practices liabilities.
  • 42% of the companies had broad exclusionary policies toward criminal backgrounds, exposing them to legal action by the EEOC or other agencies.
  • 68% of companies use social media, but only 12% have usage policies for employees.
  • Many companies use cloud providers for data storage, but only half of these have plans in place for cyber breaches.

There is a lot of room for improvement. … Continue reading

  Category: Risk Management
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