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1tommyseah@gmail.com
Important Disclaimer
• A speaker’s opinions are just that – opinions
• Not offering legal advice – just discussing
princip...
3
What is FRAUD ?
ICFE CONSULTANCY GROUP PTE LTD
International Cybercrime & Forensics Examiners www-icfe-cg.com
4
Principles of Fraud
FIVE (5) ELEMENTS OF FRAUD
Mens Rea - Criminal Intent
Actus Reus - Criminal Action
Carelessness or I...
The Fraud Triangle
PerceivedPressu
Rationalization
Perceived Opportunity
Auditor’s Domain
Fraud Risk
Management
Fraud Risk...
14
Fraud Classification System
6
Internal Controls
7
8
The
Trinity
of
Controls
Internal AuditInternal Audit
CPA(CIA)CPA(CIA) CSI,CSI,
CISACISA
ComplianceCompliance
CPA,LLB,CPA...
Limitations of Internal Control
 Errors may arise from misunderstandings of
instructions, mistakes of judgment, fatigue,
...
10
What is Risk ?What is Risk ?
BB
EE
CC
DD
AAOperational
Risk
Liquidity Risk
Credit Risk
ReputationalReputational
RiskRis...
Fraud Control Principle
(the correct way in understanding
anything is to understand the principles
involved)
11
12
No organization is immune to
fraud – the next step is to
Acknowledge the need for
fraud risk management.
12
Copyright (c)2006 13
Regardless of these variables, any
Fraud Risk Management model should aim
to achieve one, or all, of ...
Copyright (c)2006 14
The first
primary objective:
_ Prevention
14
Copyright (c)2006 15
The second
primary objective:
_ Deterrence
15
Copyright (c)2006 16
The third
primary objectives:
_ Disruption
16
Copyright (c)2006 17
The fourth
primary objective:
_ Identification
17
Copyright (c)2006 18
The fifth
primary objective:
_ Civil action/criminal
prosecution
18
Copyright (c)2006 19
How to achieve the FIVE
Objectives ?
We need direction……….
19
Use the Compass to get
the right direction
in
detecting/preventing
Fraud
20
The eight points on the compass are:
1. The fraud environment
7
Compass
for Fraud
Detection
1
2
3
4
5
6
2. The types of fr...
Determination by
Area
Determination by
Scheme
Determination by
Person
The approach…….
22
23
Collusion
between employees and third parties
represents a growing number
PROCUREMENT frauds in SINGAPORE.
24
What type of individual commits
FRAUD?
It is not limited to any one type of
person.
Human element in all fraud
ICFE CON...
25
Conclusion: Fraud Perpetrators Look
Exactly Like Us!
 Optimistic
 High self-esteem
 Achieving
 Family harmony
 Soc...
26
Given the right circumstances, almost
everyone can rationalize that it is OK
to commit fraud..
26
Profile of A Person W...
27
“Red Flags”
Text
AlcoholAlcohol GamblingGambling
DrugsDrugs
SexSex
Profile of A Person
Who Commits
Fraud
Given the “rig...
28
The key, in any effective anti-fraud program, is to
strike the right balance between
oversight
and
trust
The
4
Investigative methods
29
Proving wrongdoing
Covert Investigative Methods
1.Surveillance and covert operations
2.Invigilation
3.Seizing and searching digital
evidence ...
31
The problem with proving intent is that it
requires determining a person’s state of
mind.
As a result, intent usually i...
32
Some of the ways we can help prove
intent by circumstantial evidence include:
Motive : The motive for fraud is a strong...
33
Some of the ways we can help prove
intent by circumstantial evidence include:
Repetitive acts : Should the financial st...
34
Some of the ways we can help prove
intent by circumstantial evidence include:
Witness statements : Circumstantial evide...
For those new to evidence in general,
inculpatory evidence is that which
supports a charge or accusation of wrongdoing.
In...
exculpatory evidence is that which would cast
doubt or prove innocence.
Exculpatory Evidence
36
Evidence used in Fraud Conviction:
“Tools and techniques to recover, preserve, and
examine digital evidence on or transmit...
Sources of Digital Evidence
 Computers
4 Email
4 Digital images
4 Documents
4 Spreadsheets
4 Chat logs
4 Illegally copied...
40
Thank youThank you
Contact Information:
Tommy Seah
CFE, CSI, FCPA,ACIB,MSID
Regent Emeritus
ACFE Board of Regents, Texa...
Fraud risk management   iia singapore conferenec 2013
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By downloading or viewing this, it would at at least imply that you have a measure of interests in Fraud Risk Management. This is a PPT to assist you to have a right start in FRM, If you need to know more visit www.cfe-in-practice.com

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  • 9 7
  • DC&P What underlying systems support the accounting/finance function and what is the level of integration among these systems? What level of business information is available via existing systems and how is this information reported ? (consolidated, segment, product, etc.) Is there a formal closing schedule that is adhered to by all locations? Do resource levels and/or skill-sets pose a problem? Are management and financial reports generated via accounting systems or manually? Consistency of management information versus external financial statement presentations? Does the company have skilled resources to meet SEC and other external reporting requirements?
  • The Effect of Tenure Similar to position, we found a direct correlation between the length of time a perpetrator had been employed with a victim organization and the size of the loss in the fraud scheme. This correlation most likely exists for two reasons: the longer an employee works for an organization, the more likely he or she is to advance to higher levels of authority (see position data on previous page; and 2) the longer an employee works for an organization, the greater the degree of trust he or she will tend to engender from superiors and co-workers. This second factor is significant because frauds are crimes that depend upon their victims’ trust for success. The more reliance an organization places on an employee, the more autonomy and authority an employee receives, the greater the risk of fraud. This fact highlights the peculiar dichotomy of fraud: these crimes cannot succeed without trust, but neither can business. Employers must be able to delegate authority to employees and must be able to trust that their employees will act appropriately and in their organization’s best interests, yet too much delegation, too much trust, creates an environment in which fraud can thrive. The key, in any effective anti-fraud program, is to strike the right balance between oversight and trust.
  • Copyright 2010 T. Seah
  • Copyright 2010 T. Seah
  • Transcript of "Fraud risk management iia singapore conferenec 2013"

    1. 1. 1tommyseah@gmail.com
    2. 2. Important Disclaimer • A speaker’s opinions are just that – opinions • Not offering legal advice – just discussing principles • Any questions from audience welcome, but any replies are general comments only and should not be construed as legal advice 2
    3. 3. 3 What is FRAUD ? ICFE CONSULTANCY GROUP PTE LTD International Cybercrime & Forensics Examiners www-icfe-cg.com
    4. 4. 4 Principles of Fraud FIVE (5) ELEMENTS OF FRAUD Mens Rea - Criminal Intent Actus Reus - Criminal Action Carelessness or Innocence on the part of the victim An active participation by the victim as a result of the carelessness or innocence The transaction is concealed to prevent detection.
    5. 5. The Fraud Triangle PerceivedPressu Rationalization Perceived Opportunity Auditor’s Domain Fraud Risk Management Fraud Risk Management 5
    6. 6. 14 Fraud Classification System 6
    7. 7. Internal Controls 7
    8. 8. 8 The Trinity of Controls Internal AuditInternal Audit CPA(CIA)CPA(CIA) CSI,CSI, CISACISA ComplianceCompliance CPA,LLB,CPA,LLB, CSICSI RiskRisk ManagementManagement CPA,CFACPA,CFA CSICSI Financial Control The Fraud ExaminerThe Fraud Examiner CFECFE The Certified System Investigator CSI The Existing model
    9. 9. Limitations of Internal Control  Errors may arise from misunderstandings of instructions, mistakes of judgment, fatigue, etc.  Controls that depend on the segregation of duties may be circumvented by collusion  Management may override the structure  Compliance may deteriorate over time 9
    10. 10. 10 What is Risk ?What is Risk ? BB EE CC DD AAOperational Risk Liquidity Risk Credit Risk ReputationalReputational RiskRisk Market Risk What happened to
    11. 11. Fraud Control Principle (the correct way in understanding anything is to understand the principles involved) 11
    12. 12. 12 No organization is immune to fraud – the next step is to Acknowledge the need for fraud risk management. 12
    13. 13. Copyright (c)2006 13 Regardless of these variables, any Fraud Risk Management model should aim to achieve one, or all, of the five primary objectives: 13
    14. 14. Copyright (c)2006 14 The first primary objective: _ Prevention 14
    15. 15. Copyright (c)2006 15 The second primary objective: _ Deterrence 15
    16. 16. Copyright (c)2006 16 The third primary objectives: _ Disruption 16
    17. 17. Copyright (c)2006 17 The fourth primary objective: _ Identification 17
    18. 18. Copyright (c)2006 18 The fifth primary objective: _ Civil action/criminal prosecution 18
    19. 19. Copyright (c)2006 19 How to achieve the FIVE Objectives ? We need direction………. 19
    20. 20. Use the Compass to get the right direction in detecting/preventing Fraud 20
    21. 21. The eight points on the compass are: 1. The fraud environment 7 Compass for Fraud Detection 1 2 3 4 5 6 2. The types of fraud 3. The execution of the fraud 7. Accomplice identification 4. eDiscovery 5. Preliminary evidence evaluation 6. Evidence collection 21
    22. 22. Determination by Area Determination by Scheme Determination by Person The approach……. 22
    23. 23. 23 Collusion between employees and third parties represents a growing number PROCUREMENT frauds in SINGAPORE.
    24. 24. 24 What type of individual commits FRAUD? It is not limited to any one type of person. Human element in all fraud ICFE CONSULTANCY GROUP PTE LTD International Cybercrime & Forensics Examiners www-icfe-cg.com
    25. 25. 25 Conclusion: Fraud Perpetrators Look Exactly Like Us!  Optimistic  High self-esteem  Achieving  Family harmony  Socially conforming  Self control  Kind  Sympathetic
    26. 26. 26 Given the right circumstances, almost everyone can rationalize that it is OK to commit fraud.. 26 Profile of A Person Who Commits Fraud
    27. 27. 27 “Red Flags” Text AlcoholAlcohol GamblingGambling DrugsDrugs SexSex Profile of A Person Who Commits Fraud Given the “right circumstances”, almost everyone can rationalize that it is OK to commit fraud..
    28. 28. 28 The key, in any effective anti-fraud program, is to strike the right balance between oversight and trust
    29. 29. The 4 Investigative methods 29 Proving wrongdoing
    30. 30. Covert Investigative Methods 1.Surveillance and covert operations 2.Invigilation 3.Seizing and searching digital evidence on computers 4.Physical evidence Concealment Investigative Methods 1.Document examination 2.Digital Audits 3.Electronic searches 4.Physical asset count Conversion investigative Methods 1.Searching public records 2.Online resources 3.The net worth methodInquiry Investigative Methods 1.Interviews/Profiling and interrogation 2.Honesty testing 30
    31. 31. 31 The problem with proving intent is that it requires determining a person’s state of mind. As a result, intent usually is proven circumstantially.
    32. 32. 32 Some of the ways we can help prove intent by circumstantial evidence include: Motive : The motive for fraud is a strong circumstantial element. Opportunity : Management typically has the opportunity to circumvent or override controls over financial reporting.
    33. 33. 33 Some of the ways we can help prove intent by circumstantial evidence include: Repetitive acts : Should the financial statements contain a single false journal entry, a fraudster might be able to claim it was an error.
    34. 34. 34 Some of the ways we can help prove intent by circumstantial evidence include: Witness statements : Circumstantial evidence rarely can be sufficient without the statements of witnesses.
    35. 35. For those new to evidence in general, inculpatory evidence is that which supports a charge or accusation of wrongdoing. Inculpatory Evidence 35
    36. 36. exculpatory evidence is that which would cast doubt or prove innocence. Exculpatory Evidence 36
    37. 37. Evidence used in Fraud Conviction: “Tools and techniques to recover, preserve, and examine digital evidence on or transmitted by digital devices.” PLUS data recovery
    38. 38. Sources of Digital Evidence  Computers 4 Email 4 Digital images 4 Documents 4 Spreadsheets 4 Chat logs 4 Illegally copied software or other copyrighted material 39
    39. 39. 40 Thank youThank you Contact Information: Tommy Seah CFE, CSI, FCPA,ACIB,MSID Regent Emeritus ACFE Board of Regents, Texas, USA www.cfe-in-practice.com tommyseah@rocketmail.com Phone : + (65) 9106 9872
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