Fraud Presentation 9 15 09

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Lavante VP of Product Management Sherry DePew presented this definitive discussion about vendor fraud at the Arkansas IAPP chapter meeting. Hosted by Walmart. Thanks Walmart for you continued …

Lavante VP of Product Management Sherry DePew presented this definitive discussion about vendor fraud at the Arkansas IAPP chapter meeting. Hosted by Walmart. Thanks Walmart for you continued support.

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  • An individual whose personal character would not normally allow themselves to be part of fraudulent behavior can change with motive and opportunity.
  • C= Controls Be Skeptical and follow up on your hunches, if something doesn’t look or feel right, trust yourself. For most companies it’s a very good thing that it takes motive and character along with opportunity to lead to fraud.
  • C= Controls Be Skeptical and follow up on your hunches, if something doesn’t look or feel right, trust yourself. For most companies it’s a very good thing that it takes motive and character along with opportunity to lead to fraud.
  • Signed up for training, used the on-line registration as a receipt for reimbursement bud didn’t attend the class. Travel receipts submitted for reimbursement when the employee was in the office.
  • AP Customer Service person knew immediately what we were dealing with, she brought me the name and phone number of the Bank representative. In talking with the bank I was able to get a list of payments made to this account since the person was hired and quickly traced over $55,000 in payments in 10 weeks. It took me about one hour to secure enough documentation to take this to our CFO, we called Corporate Security from his office. Press Charges? She’s serving out her second sentence for embezzlement. (What I didn’t know)

Transcript

  • 1. September 15, 2009 CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved . Presents “ Fraud: Don’t Learn the Hard Way”
  • 2. About The Speaker
    • Sherry DePew, Vice President of Product Management for Lavante
    • 14 years at Boise Cascade, Director of Shared Services
    • President and founding member of Idaho IAPP Chapter
    • Treasurer: Oracle/PeopleSoft Supplier Relationship Mgmt. Product User Group
    • President: Oracle/PeopleSoft Accounts Payable Product User Group
    • Co-founder and Board member of Oracle/PeopleSoft Link Users Group
    • As VP of Product Management for Lavante, Sherry is responsible for using her experience as a former Director of Shared Services to collaborate with our customers to define Lavante’s P2P solutions
    CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 3. Presentation Outline
    • The Fraud Triangle
    • Common Types of Fraud
      • Employee Expense Reports
      • AP Fraud
      • Product Theft
    • Trends: Then and Now
    CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 4. Fraud Triangle CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Opportunity Character
  • 5. Character CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Controls Background Checks Personal and Professional References
  • 6. Opportunity CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD “ If you make it easy for people to steal from you, they will.” - Frank W. Abagnale Controls Be Skeptical Segregation of Duties
  • 7. Motive CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Controls Family or Personal Crisis Economic Impact
  • 8. Segregation of Duties
      • Persons setting up vendors cannot initiate P.O.s or process invoices.
      • Persons requesting checks cannot approve or sign them.
      • The person(s) issuing checks should not reconcile bank accounts.
      • Ensure reconciling of accounts is done by different people within cost centers.
      • Establish a separate post office box returned checks. Replace your company name and address on disbursement envelopes with a simple post office box number.
    CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved.
  • 9. Do You Know? CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD % ? ? % ? %
  • 10. Expense Report Fraud CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 11. Receipt?
  • 12. Receipt? CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 13. Receipt? CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 14. Accounts Payable Fraud CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Opportunity: An AP Team member discovered an alternate name field in the ERP system shortly after the initial install. She found that she could change the name on the check without vendor add/change access. Although the name on the check was changed, there was no change to the vendor ID or address.
  • 15. Accounts Payable Fraud CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Motive:
    • Apparently this person must of needed some major home improvements including a new kitchen, deck, pool, spa, and all new appliances.
    • Her boyfriend apparently needed a new motorcycle.
  • 16. Accounts Payable Fraud CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Character:
    • Passed Employment Background Screening
    • BA in Accounting - verified GPA & Transcripts
    • Previous employers out of business
    • Single Mother Raising Two Children
    • What I Didn’t Know (Background Checks)
  • 17. The Trail of Evidence CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD Receive Invoice Make Duplicate Invoice Pay two with different amounts using different invoice numbers Payments scheduled a week apart Funds credited to Employee account as directed on the payment
  • 18. Tipped Off CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 19. Product Theft CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
    • Boise Cascade furnishes building products to Home Depot, Lowes, 87 Lumber and many others.
    • Boise runs about 30 distribution centers to supply customers like the home improvement stores.
    • Each center sends out numerous trucks of product daily.
  • 20. Product Theft CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
    • Seven year employee
    • Average performance
    • Normal work day was from 5am to 1pm.
    • In early 2008 he experienced family financial problems.
    • Custody suit consuming financial and emotional resources.
    • By mid 2008 he decided to steal from the company to pay his bills.
    • First theft was in early September
    Motive and Character:
  • 21. Product Theft CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
    • The driver decided to come into work early and load some extra bundles of Trex decking onto his truck.
    • He then made his normal rounds and his last stop was to drop off the extra bundles at a friend’s house.
    • He returned to the distribution center on time.
    Opportunity and Character:
  • 22. Product Theft CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
    • A normal cycle count caught the shortage in the yard inventory.
    • At first it was passed off as a shipping error or clerical error.
    • As the losses increased, location managers suspected theft.
    • When another employee reported Trex material was being sold on e-Bay and that our driver was the one selling it, Corporate Security was called.
    Discovery:
  • 23. Fraud – It’s Progressive
    • THEN
    • NOW
    • Benford’s Law
    • Multiple Invoices just under approval level maximum
    • Rounded up Invoices
    • Compare Vendor/ Employee Files
    • Proper Authorization
    • ACH
    • Purchasing Card
    • Travel Card
    • Asset Management
    • BI-Business Intelligence
    • Vendor Management
    CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 24. Now What?
    • The single most important thing you can do is prevent a fraudulent vendor from being established in your vendor database.
    • Collect W8/W9 & Perform TIN Matching
    • Validate Address & Phone
    • Verify Business Legitimacy
    • Utilize 3rd Party Databases
      • Dun & Bradstreet
      • SIC or NAICS codes
      • Credit Information
      • Corporate Affiliations (Lexus-Nexus)
      • ChoicePoint, Experian, Intelius
    CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 25. Acknowledgements
    • ACFE (Association of Certified Fraud Examiners)
    • Corporate Security
      • Boise Cascade
      • Ida Corp
    • Frank Abagnale, Abagnale & Associates (www.abagnale.com)
    CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD
  • 26. Contact Information
    • [email_address] 888.331.9010
    • [email_address] 888.331.9023
    • [email_address] 888.331.9016
    • THANK YOU!
    CONFIDENTIAL Copyright © 2009 Lavante. All Rights Reserved. ON-DEMAND SOLUTIONS FOR THE P2P WORLD